123 - Why to break-up with your Financial Planner - Interview with Brent Sutherland

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________Here are the Show Notes________

Just got back from Korea after my first vacation for the year. I wrote an article that you can get access by signing up for the monthly newsletter or via the Hui Deal Pipeline club.

Monthly updates and what I’m doing in my own investing

Podcasts have been piling up and I realized the need to add some context to the introductions to highlight important items to look out for. Also to call out opinions I don’t really believe in.

This podcast I had Brent Southerland what is a CFP but not one of those other quacks who get paid on commision and try to stuff you in whatever is most convenient or biggest paycheck for yourself.

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Brent Sutherland is a CERTIFIED FINANCIAL PLANNER™ practitioner, with over 11 years experience in financial services.  With stops in the corporate accounting and investment world, and now the boutique financial planning arena Brent has witnessed, firsthand, how the financial services industry has fashioned itself into an overly complex machine in an effort to cause confusion, encourage mistakes, and justify fees; all to better benefit its own bottom line.  He believes there is a strong correlation between financial noise and financial mistakes which further delay one's personal financial success.

Therefore, his objective is to help individuals turn off the noise and challenge the traditional approach to financial planning and thinking.  In his experience as a financial advisor and personal finance enthusiast (+ early retirement advocate + semi-minimalist + real estate investor), Brent has found that most often the simplest solutions and some outside the box thinking will better help individuals on their way towards sitting firmly in the driver's seat of their own financial world.

Why don't financial advisors advocate for real estate investing?

Primary = Compensation conflicts of interest

Secondary = Lack of education, so pose it as a risky asset

Secondary = ERISA and how mutual funds came about with employer-sponsored 401k

How do FA make money? Similar to MLM? -- (Is this short for multi-level marketing?)

Can tie this into the first topic above (compensation conflict, which is a primary reason why FA’s don’t discuss real estate investing)

Hidden fees in even low got mutual funds?

Transaction fees, Management fees (can be tiered based on assets), Loads (front-end, back-end), 12-b1 fees

What tricks do FA use?

Use of traditional planning items related to portfolio to justify: “security”, “diversification”

Use of confusion terms related to portfolio to justify fees:  “alpha”, “sharpe ratio”

Use of graphics that show market returns (absent fees), but fail to discuss emotional impact on client and true returns normally witnessed

The importance of income diversification over portfolio diversification

Income diversification protects against big risks:  loss of job, market crash, injury

Portfolio diversification is important, but is a secondary risk.  Savings is even more important.

Why are paper assets more risky than hard assets?

Always going to be demand for hard assets, especially real estate (living, production)

Population trends are growing at an exponential rate, land and resources are not

You have more control over real estate; meanwhile the stock market is out of your hands

Why passive cash flow betters your odds of financial independence

Gets you to the point where you’re truly secure and can have peace of mind.  Not worried about your boss/job, and not worried about things going on the the world, country, state (etc) economies that are out of your control.  You become the boss of your personal economy.

Talk about your personal transition to direct ownership in Real estate and recovering from the lies?

Seeing it work for other people, educating myself (independent of my traditional “education”), and finally making the move to buy my first property (after some analysis paralysis and fear)

Proper planning techniques to access money tied up in your retirement accounts.

First know the rules involved (traditional IRA/401k versus Roth IRA/401k), as you don’t want to just hand a big chunk to Uncle Sam in form of taxes and fees.

Impact of cashing out plans

Strategies to more efficiently free up that money and keeping more in your pocket (Roth conversions, Substantially Equal Periodic Payments (IRS Code 72t))

What to look for in a FA?

Want someone who is fee-only (hourly or per service) and planning focused.  Someone who is focused solely on managing your money for a % fee is going to always have a biased interest in moving you towards a liquid/paper portfolio).

Find someone who lines up with your values and interests.  Never be afraid to interview multiple people and ask tough questions.  Advisor should have conviction in what they do.

Understand that a financial planner can be very valuable, as there is much more to financial planning than how you invest your money (insurance, estate, education needs all need to work in harmony with an investment plan to best meet a person’s financial goals), but imperative that that financial planner is on the same page as you.

brent@ntellivest.com

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