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4 Secrets Financial Advisors Don't Want You to Know

In this episode of Friends Talk Financial Planning, Bridget and I discuss four hidden secrets that investment experts don't want you to know about. From the importance of saving to the value of tax planning and the reality of predicting the future, this video will change the way you think about financial success. 


    John: The investment world can be pretty murky. On today's episode of Friends Talk Financial Planning. Learn four secrets that investment experts don't want you to know. Hi, I'm John Scherer, and I run a fee-only financial planning practice at Middleton, Wisconsin.

    Bridget: And I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois. And before we go any further, please subscribe. It helps YouTube recommend our channel to other people and helps us get our word out more. So, John, I'm really excited about this and what investment experts don't want you to know. And so, let's start with our first thing.

    John: Well, you know, before we even start, our world in general, the financial world, seems to be really built on making it more complicated than it needs to be or making it sort of like, “Oh, jeez, don't look behind the curtain. Give me your money, and I'll make you rich.” Those are the things we hear, the messages that we hear a lot in our world.

    In particular, it's saying, “Hey, investments are the key to success. And we hold the secrets.” And so, as far as we look at stuff, one of the things that’s a secret is that there are a lot of things that are way more important than investment picking regarding your financial success. And one of the big ones is how much you save. That to me is way more important than picking the exact right mutual fund or the exact right stock.

    Bridget: Right.

    John: And so, as you think about that, and that's one of the things that a lot of the investment world or the financial advice world does not provide advice on or does not help people with. If your pile of money is this big, and you get awesome investment returns, yes, it's going to grow. But if you save over time and your pile of money is this big, even lower returns, that compound interest plays a big role. The best investment strategy can't overcome not saving and not building up that nest egg.

    Bridget: Absolutely. And what exactly your investments are made up of is less important than how much you save. And it's also less important than how much you have in conservative investments versus how much you have in aggressive investments. So I'm going to say how much you have in stocks versus bonds. That's all more important than which mutual fund do you pick, or which stock do you pick.

    John: But that's not the message that so many of us hear. It's, well, did this fund beat the market? Our fund beat the market five years in a row. I was just talking to a colleague here the other day, and a client recently left them, saying, “If I get average returns, why would I even pay you to do that?” And you go, “Wait a minute, there's all these other things that go into it.” If you just get average returns, you’re successful.

    Trying to accomplish your goals. But that's not what you see in the TV ads and those sorts of things. It's all about how do I beat the market? And again, that's the big secret. Oh, I've got the key to success. There are a lot of other things, and the number one thing is if you save a lot of money things will go well. And that can be a couple of different things. One is saving out of your paychecks. Do I put money into my long-term permanent saving?

    The other thing is, do I save when I'm in my consumables? Am I saving when buying airline tickets and doing other things, and not spending frivolously? Those sorts of things. So that's one of the things that I think the people in the investment world specifically don't want the regular person to know that, hey, there's no magic wand when it comes to this. There's a lot of other things that you can control and do that are more important.

    Bridget: Yeah. And it's not as exciting and certainly not as sexy as investment returns. Investments capture the imagination of certain people. And so, I think of it as, to use a metaphor, chase scenes in cop shows. If you actually talk to somebody who's involved in this, they would tell you that a chase is kind of a bad idea. People get hurt. The person who's running away gets hurt. The person who's chasing after them gets hurt. The innocent bystanders get hurt. And, like, chases are actually a pretty bad idea, and they try to avoid chases.

    John: But a movie without a chase scene is not going to be very exciting.

    Bridget: This is going to be a whole new era of cop shows without the chase.

    John: Right. Responsibly driving down the road.

    Bridget: Our human emotions are like chase scenes. We like to be chased. That's the first thing. Saving is where it's at.

    John: I think of it like the cocktail party talk. People like to say, “I bought XYZ stock, and it tripled in value.” That's pretty sexy to talk about. But saying, “Jeez, I raised my savings from 8% to 10%. Aren't I suave?” That doesn't sell. That's not exciting. So that's one of them. One of the other big secrets that people on the investment side don't want you to know is that tax planning can really provide more value than stock picking. And we’re talking to the CPA.

    Bridget: Right.

    John: Being smart with taxes and managing tax situations, knowing what you're doing, whether it's giving money to charity or how you're managing the investments or taking your deductions on things, that stuff provides real tax bang for the buck. And it's something that you can absolutely control.

    Bridget: Right. And there're different types of accounts. There're taxable accounts, there're IRA accounts, there're Roth IRA accounts, and then there're some other ones too. But say those are the three ones. And if you have all those three, based on how you invest in all those three, you can build your investments. Our goal is to always have people have the most money to spend, so have the most money after taxes. That's our goal. And you can manipulate that with how much you have in these and how you invest it.

    Here's what they don't want you to know about this. This makes their job harder. It's easier to tell you to do portfolio with one third, one third, one third. All your accounts are going to have the same basket. That's easier. You can just have a computer do that for you. Tweaking it, which we call asset location or being tax smart, is more time consuming. It's harder. And we haven't gotten software to be able to do it yet.

    John: Right. Talking about the three different types of accounts, I was just having a conversation with a friend of mine who was in the financial world and prides himself on being a stock picker or fund picker. And we're having a conversation, and we're talking about the Roth conversions, which we've got some other episodes on that, but he said, 

“Oh, yeah, I think I've done one of those. I don't really look at that for clients.”

    Not that it makes sense for everybody, but how can that be? And he works with mostly retired folks, which is the place where you should be at least considering this stuff. And it's just not on the radar. And for the right person, for the right goal set, that can be a huge tax advantage, way more valuable than picking the best mutual funder stock.

    Bridget: Right. And so, our next one is financial planners don't know the future any better than you do.

    John: But that's not what the advertisements say. Here's what our predictions are. Give us your money, and we'll make you rich, because we know what's going to happen in the future. And we've done an episode on predictions, our predictions for 2024. In the past, we've done episodes talking about the experts’ predictions on what's going to happen in the markets and how well or not well those things work out. And the idea is that nobody knows the future, but that's not very reassuring to us as human beings.

    And so, when somebody says, “Well, here, I know. This is how it's going to work out in the future.” Boy, that sounds really good. But the reality is that nobody knows the future, even the people that are really smart at this stuff. A year ago, people were talking about are we going to go into a recession? And one of the major banks said that there was near a 100% chance of a recession in 2023. Stock market going down, all those other things.

    How did that work out? They were not saying, “Hey, we think this is going to happen.” This was a nearly 100% chance. These really smart people, and most people thought there was going to be some sort of recession, and it just didn't occur. But that's not what they want you to think; they want you to think like they've got the key, they've got the crystal balls of the future. And so that's one of those hidden secrets.

    Bridget: Well, and I think we all long for the financial parent who really knows. If you're a kid and there's so much you don't know, and so you idolize your parents and you think they know everything.

    John: Then you get to be a parent and you realize you don't know anything😊 

    Bridget: There's a sense of security about that feeling of saying, “No, they got this. They know this.” Especially about predictions and exactly what's going to happen in the world, they don't know any more than you do.

    John: That's a great analogy, because then you get to be a parent and you realize, golly, you're just kind of flying by the seat of your pants. When you were a kid, you thought your parents knew everything and you wanted that guide. And you realize that, no, they're just making stuff up, just like we do in the investment world.

    Bridget: Last one. Comprehensive planning trumps investment planning. All right, so we have some great examples of when looking at everything gave us better returns for our clients than any investment advice we ever gave. So one is we have a consultant who does Social Security analysis for clients. And I call one situation the Letterman dad, where there's an older parent who's at retirement age, and they have a dependent child who's under, I don't recall what the age is, 16 or 17, but if they filed and they can get benefits for this child, too.

    John: Minor kids get benefits if the parent is over full age.

    Bridget: Right. And this person is not retired yet, but it's like the money is rolling in, more money than we're probably ever going to get with our investments. Yeah, that was a hit.

    John: Right. Well, and you were telling a story earlier also about a client who was able to get a student loan forgiven based on various factors by doing some advanced planning based on the information we've had on our show back a while. We had our expert on our show talking about some of the student loan forgiveness. And again, our radar is up for that. And we know our clients well enough, so when this stuff comes up, we're thinking “Okay, who can this apply to?”

    And I’m also thinking about some insurance things that we've had recently with clients where they’re paying for insurance that's no longer needed. Clients retired, and they have disability insurance that they're still paying for because they just never thought about it. It comes out of their check automatically with things, or out of their checking account. They never paid attention, and there's a couple thousand dollars a year in savings just paying attention to those things. That doesn't have anything to do with investments and has a ton to do with financial success.

    Bridget: Right.

    John: So with that, that's a great place to wrap up here on the reasons why the investment world doesn't want you to know that there are other things that are more important than picking stocks. Again, I'm John Scherer. I run a fee-only financial planning practice in Middleton, Wisconsin.

    Bridget: And I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois. John and I are both members of ACP, the Alliance of Comprehensive Planners, which is a nationwide organization of focused, fee-only comprehensive financial planners. And so, if you're interested in, we're both taking clients, but if you're interested in a planner in your location, you can check out acplanners.org.


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For advisors around the U.S. visit https://www.acplanners.org.