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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much discuss it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my colleague, mister David Fransen. David, thanks for being here.
David:Yes. Happy to be here. Thank you.
Mike:So David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in by either texting us to 913-363-1234. That's 913-363-1234, or email them to hey mike@howtoretyme.com. Let's begin.
David:Hey, Mike. Every time I've entertained working with an adviser, they recommend funds that I could have gotten on my own. Is there any difference between what advisers can offer and what we can get on our own?
Mike:Yeah. Let me put an analogy together on what this person's probably experiencing. K? So imagine feeling sick, going to a doctor, and saying, can you help me get better? And all the doctor can do is prescribe you Advil, Tylenol, and NyQuil.
Mike:And that's kind of it. And you're kind of wondering, well, I could have bought that on my own. Right. So many times, different advisers are I mean, basically, they're they're using tools that are publicly available, but they're just doing their research for you, and that's kind of what you're paying for. I have a growing opinion on how I think that's kind of a bad deal, to put it lightly.
David:Justify, but
Mike:I mean, the reality is if you wanted a portfolio that would be similar to what they would probably do, go to chat GPT and put together say, hey. Can you recommend a a 6040 stock bond fund portfolio that would be good in today's economy? And you're not supposed to get chat GPT to give you financial advice, but so many people are doing it. And then they do their own due diligence, then they end up just using that. Yeah.
Mike:Let's be very real about what people are doing today. That's just kind of an interesting situation, but it's a reality. So here's what we need to understand about, in my opinion, again, the purpose of a financial professional is to give advice. Got it. Okay.
Mike:The insurance agent for insurance contracts, a banker for banker products and all that. If I had to distill the financial services space to a very simple explanation, it is as follows. There are 4 marketplaces that you could shop for investments or products and put your money. That's it. There's 4 of them.
Mike:The first one is the bank marketplace. You want a CD? You're probably going to go to a bank. Mhmm.
David:You
Mike:want a checking savings account? You're gonna go to a bank. Like banks have their place and they're wonderful. K. Then you have your insurance marketplace.
Mike:So insurance is not an investment. It's, basically transferring risk to an insurance company. That's it. So you buy term life insurance. You're transferring the risk of death to an insurance company.
Mike:They don't think you're gonna die. You don't think you're gonna die. But just in case, it's there. Yeah. You with me so far?
David:I am.
Mike:Then you have the securities marketplace. Now securities, that's a fancy word of basically investments.
David:Okay.
Mike:You're buying into a corporation or an entity that is intended to make money or grow for profit. As a shareholder or a part owner, you get some of the proceeds. That's the idea. So that's a security. In the securities marketplace, there are 2 marketplaces.
Mike:There are the what I would call over the counter drugs. So the public marketplace, anyone can get it. Anyone can buy a Nvidia stock. Anyone can buy shares in Microsoft. I mean, it's really not that limited, especially when you have these companies where you can buy fractional shares.
Mike:So, like, maybe you can't afford a share of company x y z, but you could afford half a share.
David:Okay.
Mike:You can do that. So that's the public marketplace or the over the counter marketplace. Then you have the restricted marketplace. The restricted marketplace, what you're really dealing with are the more sophisticated or complicated products or investments. For example, like, categories under these regulation d, which basically mean like, hey, They're a bit complicated.
Mike:There may not be full liquidity. We want you to go through a financial professional to make sure that you know what you're doing. And the financial professional is supposed to make sure this is suitable for you, that it makes sense to put your money in here. Right?
David:So kinda like a doctor can only have access to stronger drugs instead of just Ibuprofen.
Mike:Yeah. A good doctor is going to be able to prescribe you more effective pain medication, But the good doctor, assuming it's a good doctor, is gonna make it so maybe you don't get addicted to the pain medication
David:Uh-huh.
Mike:And that you create a bad habit or dependency on the pain medication. Right? I've never actually had surgery. But if I were to go into surgery, any procedure, I want anesthesia. Yeah.
Mike:I can't buy anesthesia on my own.
David:No.
Mike:When I got my wisdom teeth out, I I was prescribed Lortap. I don't know anything about Lortap. The doctor did. I took it for a couple of days. Once I didn't need it anymore, I threw the rest away.
Mike:Yeah. You know, there's a reason why there's a gatekeeper behind things like privately traded REITs, private equity, private debt, Delaware statutory trust, qualified opportunity zones, oil and gas partnerships, structured notes. And this list goes on and on and on. And there's even the institutional investments. So these are basically funds that don't want to work directly with the public.
Mike:There might be some liquidity restrictions or they just might not want to have the volatility or the emotions that the retail or what the industry has dubbed dumb money, which I think is a very kind of stupid expression to call retail investors. But that's what Wall Street will call your average person, which is very condescending. But Mhmm. But there's a reason for it. It's because people can get very emotional with their money.
Mike:And some institutional funds, they wanna restrict access to anyone so that they have more stability. That's the idea behind it. A lot of opinions around it, but you get the idea. So when people tell me, well, I don't wanna work with a financial adviser because, you know, I could do it on my own. They probably were working with an adviser that only work with stuff in the public marketplace.
Mike:They were probably letting it just sit there, watching it grow with you and collecting a, you know, a participation award or a 1% fee or whatever it was. I get why people are frustrated with this industry. I get why people have become jaded to it. But the reality is when you start working with a professional that can help you explore in an appropriate fashion the more sophisticated things, the things that you would have to go through a licensed professional, or the insurance marketplace in an appropriate standpoint. I mean, it's half of what you could put in your portfolio is restricted in that sense, the restricted marketplace, the insurance marketplace.
Mike:You have to go through someone. Mhmm. It is especially tricky if you work with someone that only is insurance licensed because they will have an inherent bias or someone that's only securities licensed because they will have inherent bias. If you have someone that, is licensed in both, hopefully, that bias is less, but we're humans. And so that's that's kind of how it all breaks down.
Mike:Is this making sense, David?
David:Yeah. It really does. I mean, it I like the, the analogy with with the physicians and you can't get access to certain things because you don't have the experience or the knowledge. And kind of the same way here, it seems you might not have the experience or the stomach for or
Mike:Yeah. It's it's what you don't know that can hurt you. Yeah. And so we need to understand, hey. Now I can do better than my past financial adviser.
Mike:That may be true. Probably is. My personal belief is the bar is kind of low overall, but that doesn't mean that another adviser might actually be willing to explore the more restricted space. But they're they're comfortable because they understand the complexities of the various investments, products, or strategies. The reality is there is no such thing as a perfect investment product or strategy.
Mike:It's the appropriate blending of the strategies. It's the appropriate understanding of, hey, if the markets were to go up or if the markets were to go down, we can adjust your portfolio in these situations. Hey. If interest rates go down, here's what would happen, and here's how it would affect your plan, and here's how we would react. I've if I've said it once, I've said it a 1000000 times.
Mike:You first put together your plan, then you explore your strategies. So, basically, how to get more out of your money. We wanna we wanna seek efficiency within the plan, and then you explore the portfolio. It's really frustrating when the consumer starts to realize that maybe they've been doing their grocery shopping at a 711. Uh-huh.
Mike:Because of how restricted they are.
David:Right.
Mike:But you don't know until you start to realize this and put the pieces together. And here's another example real quick. You might have a a portfolio, for example, of publicly traded stocks. If the publicly traded stocks you can access, you might say, well, I could do that. Fine.
Mike:If you're just buying and holding it. But if there was an underlining model of telling that was telling you what to buy, when to buy, and when to sell, that's a different situation. That's a proprietary or a sophisticated methodology that might give you a more competitive advantage. True story. I know a guy who runs a model that's done very, very well since the mid 2000.
Mike:I mean, he's been around for a long, long time. This trend manager. So he he follows trends with his model. All he does is he trades one position, r y a n x. You can look it up.
Mike:R y a n x. K? He he's either in or he's in cash using the inverse. So it's like shorting the market, but you're not actually shorting the market. He does the inverse very, very rarely, but his entire business, his entire model focused on growth is not ryanx.
Mike:He has nothing to do with ryanx. It's about when to get in and when to get out based on the trends and behavior of that specific fund. It's not just the fund itself. Oh, I could buy that. It's it's also understanding how to use that.
Mike:So for us, we buy positions for a predetermined period of time, which has historically given us a very competitive advantage of seeing that trends were kind of in the right way. We were in, we were in for 30 days, 90 days, 60 days, and then we got out, and then we looked for another opportunity. It's a different way to invest, but you're not gonna do this on your own. It takes years, decades to dial something like this in, but not available in the public marketplace. So my my point being is just because someone listening in might think I've worked with a financial professional, they didn't really do anything for me.
Mike:So that must be what all financial professionals are. That's a cognitive distortion. Specifically, what I'm talking about is it's over generalizing what's out there. What I would encourage you to do for all those listening then, because at the end of the day, it's about growing your money
David:Yeah.
Mike:Is to compare yourself and find a financial professional that might have a compelling argument or access to compelling funds or has a compelling model like what we do here, and put some money with them and see who does better. Give it 12 months. I mean, what do you really have to lose? You're doing it yourself. You're you're seeking what is right.
Mike:If you find someone that does your job better than you, why not?
David:Right.
Mike:End of the day, the reason why you would hire a financial professional, if we're being totally honest, is that you can get more growth than you would on your own. You can get 2, 3, 4 percent more net of fees through a finance professional than you would on your own. Why wouldn't you? It's just there's been such a low bar and such a a lowering of standards, in my opinion, in the industry that it most people have just said, yeah, I'm just gonna buy the s and p 500 and call it good. There's just there's a lot more that could be out there if you know where to look and what to do.
Mike:That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility.
Mike:This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.