If I knew then what I know now...

At any point in life it seems we can look back and wish we knew back then what we know now.  If knew back in high school what I know now, I would have done some things differently.  If I knew in college what I know now, I would have altered a few decisions.  My first job, if only I’d known.  My first failed business endeavor, I would have, could have, and should have…  Life is full of lessons and experiences, and in most cases the lessons come after we’re given the test.  It’s backward from what we’re taught in school.  With school, we’re taught the material, then given an exam on how well we retained and regurgitated it.  Just so you know, this is rarely the case in life.

In speaking with people early in their careers, those that have recently graduated, and really most people, there are a few common themes.  Debt accumulated during and after college is scary.  Finding a job with decent income is far more challenging than expected.  For those that are starting to make money, they aren’t entirely sure where to put it.  And it’s very difficult to find an advisor you can relate to and trust.  Good news, you aren’t alone.  The challenge, it takes effort to overcome these unknowns. 

Here’s a little food for thought:  There are two major flaws in what and how we’re selling the future to our young adults.  (A few more than two really, but I’ll just share these two or you won’t read the entire article.  We can revisit the others later…) 

This first flaw is setting the expectation that with a college degree you will graduate and get a well-paying job, maybe one that you like.  The reality is that your diploma may get you in the door for a few interviews you wouldn’t otherwise get, may even get you hired somewhere when all else is equal, but it provides no guarantee of success, longevity, a baseline of income, or much of anything else.  It does, however, provide an opportunity for you to get to know a bit about yourself – how you learn, who you interact well with, who you don’t, how you respond to authority, the types of people you attract – all of which are very valuable outcomes.  A recent grad shared that her college experience, and life to this point, had felt like a long conveyor belt.  She had ridden along, moved from one thing to the next, but after college, the belt ended, there was a grand drop and neither landing spot nor new belt in sight; just a free fall to a concrete slab.  That’s pretty scary!  How are we preparing students for what’s next?  When do they learn how to add value to an organization?  And if they do happen to land that first “real” job and start making a little money, how do we prepare them for the money decisions.  We don’t, and therein lies flaw #2.

In over 25 years of formal education, not once did anyone broach the subject of making intelligent financial decisions.  Not once did someone sit me down and explain a few core principles or truths that would have greatly impacted my early financial decision making.  And what’s interesting is that it’s no secret that this is a problem; there are thousands of “financial literacy” programs out there designed to solve this, but they obviously aren’t working.  Why aren’t they working?  I have a few theories:

One: People would rather talk about politics, religion, or sex than have a conversation about their money, what they make, challenges, or debt.  These are taboo subjects that we just don’t talk about.  I think this will change in an upcoming generation that values transparency, but we have a ways to go.

Two: Financial concepts are boring, dull, and rarely seem to apply to real life.  If I ask a room full of people how many would like me to teach them how to read and understand a tax return and the US tax code, I don’t get a lot of hands in the air.

Three: When you first start making money and need advice the most, the only advisors you have access to are those that are new in the business and lack the experience to give good advice.  Most of these folks are trained by financial institutions, which are product manufacturing companies, on how to sell their products.  The products are not necessarily bad, but for the most part advisors are paid to sell stuff, not provide sage financial advice. 

So, if no one will talk about money, those that do we don’t want to listen to because it’s not exciting, and the ones that we think we can trust for advice are really just commissioned sales people, what the heck are you supposed to do? 

What if… 

What if it’s really not all that complicated?  What there are just a few core principles that you can follow without having to have a degree in finance?  What if you didn’t have to do the math on the number of lattes you buy each week or stop doing fun things to be able to pay off your debt?  What if you could tap into the things that have been working for wealth creators for years? 

None of this is complicated, but it does require discipline.  None of this is rocket science, but it does require you to start.  One of the grand lessons you’ll learn is that most things in life are not about a destination where you’ll arrive; it’s about the journey you’re on today.  If you want to become wealthy, you need to learn the principles that wealthy people live by and begin living them today.

So I’ve already written more than you’ll read, and you don’t even have any of the solutions.  Want to hear them?  Great!  I’ll be sharing several of these core principles in future articles and upcoming webcasts.  Want to get in the loop?  Simple, follow our community at

www.MasteryInitiative.com

or 

Mastery Initiative on Facebook

Final thought: 

Is there anything you know now that you wish you’d known ten years ago?  Is there?  I bet there is.  (If not, you’ve wasted ten years of your life learning nothing – ha!)  Life truly is short, and decisions do matter.  As anyone approaching the latter half of life will attest to, your greatest asset when you’re young is time.  It also becomes a bit of a liability as you age.  If you’re not leveraging your greatest asset, you’re missing the boat.  Like the rest of us, you’ll come to your senses some number of years from now and wish you’d paid more attention.  Well, now is your chance to pay attention.  Learn a few basics, your small decisions will bear fruit.  I know mine would have!     

Cheers!

2 Truths and 7 Tips about the Financial Industry

The world of financial advice and investment management is a wildly misunderstood industry.  Many of us are under the assumption that their role is to help you make money and create wealth.  Sorry to break it to you, but it’s just not the case.  It took me over a decade of being undercover in the industry to even recognize what it’s really about, and another decade to figure out what to do about it.  (Yes, I’m slow.)  Maybe these cliff notes will come in handy for one or two of you. 

In the early stages of my career in financial services, I was fortunate to move quickly through a large banking institution into their Private Bank where we specialized in working with the bank’s highest net worth clients.  Sitting across from someone with ten, twenty, or over 100 million dollars, I was insatiably curious to understand how they got there.  Saving a portion of my paycheck, contributing to my 401(k), even with the company match and exceptional investment returns, I couldn’t make the math work to my achieving anything close to their levels of financial success.  So, to satisfy my curiosity, I began asking questions.  It didn’t take long to realize that their path was vastly different from the one I was on. 

Within a few months, it became obvious that with very few exceptions, all of our financially successful clients had accumulated their wealth in one of three ways. 

1. They had built, owned, and monetized Businesses
2. Many had found success through Real Estate, or
3. They had Inherited from previous generations. 

Then I began to observe the work we were doing with clients.  We were supposed to be the most qualified financial experts, working at the most qualified institution, with the most qualified clients.  Yet we did essentially nothing to help business owners grow, monetize, or successfully exit their businesses.  For real estate investors, we would occasionally lend them money if they didn’t really need it; but once they did, or they had accumulated too many properties, we quickly lost interest.  And for those that had inherited their wealth, what I saw was money transferring to kids, kids blowing the money and ultimately hating each other.  I couldn’t help but wonder what business we were actually in; it clearly wasn’t to help families continue to create wealth.  My conclusion?

Financial and investment advisors aren’t in the business of helping families create or accumulate wealth at all;they simply move assets you’ve made out of accumulation vehicles and spread it around to protect long term purchasing power.   

Lots of fancy math is used to show statistical evidence of risk reduction, and as long as your life and the rest of the world operates within the bell curve, there’s a statistically decent chance you’ll end up somewhere close to what was projected.  Not many times have I seen that happen, but nonetheless, it’s possible.

My second awakening came when I began looking at what made clients actually implement our recommendations.  We created impressive spreadsheets, graphs, statistics, and all sorts of complex math to show them how they could get better returns, take less risk, out-perform their friends, save on taxes, and who knows what else to improve their financial positions.  However, it seemed that more often than not, the couples we met with wanted to go home and think about it; code for thanks, but no thanks.  What was this all about?

 

A business coach at the time challenged me to try something new with my next client engagement.  Meeting with a prospective family, I stood in front of a large flip chart with a Sharpie pen and asked them what was most important to them in life.  They looked at me blankly, I smiled back.  It was awkward for a few moments, they looked at each other, then began speaking.  As they spoke, I wrote on the chart.  They shared what was most important, we prioritized them from most to least important, and discussed why each of these were on the list.  After about 30 minutes, we had a comprehensive list, all of seven items.  As we reviewed each item, something became immediately clear.  Not once did they mention the standard deviations, alpha, beta, outperforming a benchmark, rates on loans, or anything else I typically talked about all day.  On their list, they had shared about their family, their faith, stability, giving, relationships, making a difference, ensuring their kids wouldn’t be entitled; and things vastly more important than money.  It was at this moment that it became clear to me that money and financial resources were merely the tool, the engine that could be designed to propel their life goals, dreams, visions, and ultimate purpose.  My role changed that day. 

Over the coming months, I had more meaningful conversations with individuals, couples, and families than in the entire previous decade.  They were sharing things with me about their business challenges, issues with heirs taking over responsibility of family real estate holdings, not enjoying the philanthropic work they were doing, their dreams, fears, visions, and what kept them awake at night.  These families were less concerned about the return on their investments, and far more concerned about the impact their success would have on their kids, their relationships, and their communities.  There was an itch that no financial solution, advisor, or spreadsheet had solved.  As families opened up, my ability to serve them grew.  When the solutions designed were aligned with what was most important, they also began to take action on the recommendations.  With the added opportunity to serve, I needed access to a team that could address their business needs, assist in aligning family interests, and breathe life and clarity into their dreams. 

As I presented my findings and new engagement process to the leadership team at the bank, I quickly became aware of another disappointing reality of the financial industry.  It was made very clear that the extra several hours I was spending with new clients getting to know them were not adding shareholder value.  (At the time, every activity we did had to be accounted for as a metric of “shareholder value added – a topic for another article.”)  I was instructed that if a product was not sold by our second meeting, my process was ineffective.  Silly and naïve little me; I was under the impression we were in the business of designing financial solutions to improve peoples’ lives.  It was at that moment that the financial industry became extremely simple, and clearly not about the families we were meeting with. 

Financial institutions are product manufacturing companies.Financial advisors are distribution channels of these products.

   

Nothing complex about it; couldn’t be more simple.  And once we all realize this simple truth, getting financial advice becomes much easier.  You simply need to understand the motivations of the sales person across from you. 

Now, are all advisors and firms built this way?  Of course not.  There are many that d0 approach their clients from a client-centric, solution-based perspective.  However, in most cases, it seems it takes years for these advisors to get to this point in their careers.  Nearly everyone that enters the financial industry begins their careers with an institution – a bank, insurance company, wire house, brokerage firm, investment company, etc.  The inherent reality is that they are thereby trained by manufacturing companies to sell their products.  There’s no real problem with this; that’s how the industry earns profit and continues to create and deliver products, many of which are great for investors.  However, as a consumer, it’s imperative you understand that it’s not about you. 

For me, I left the institutional world shortly after my awakening and assembled a team to be able to effectively engage families looking to continue creating wealth, live with greater impact, and maintain family continuity throughout the process.  It’s been a process to re-educate the world on this strange new perspective, but the results couldn’t be more rewarding for our team and the families we serve. 

I expect this isn’t any break-through knowledge for many of you, but perhaps puts what you knew or suspected into words.  So, what can you do about it?  What do you need to know? 

Here are a few tips I have shared with others that may come in handy:

7 Tips on Finding your Financial Advisor

1. Be clear on your purpose for hiring an advisor in the first place.  What are you really looking for?  What’s missing in your life that you need fulfilled?  Do you simply have a rock in your shoe that needs to be removed, or are you looking for someone to assess how the rock got in there in the first place?   
2. Find someone that is intently curious about you, you family, your dreams, your fears, and understands how your financial resources play into this. 
3. Look for someone that asks the right questions.  Coming up with intelligent sounding answers is easy.  Coming up with the right answers is a direct result of asking the right questions.  Most of the time, the right question is “why?”
4. Look for someone that can and has effectively partnered with other advisors in their own and other industries.  Comprehensive solutions rarely come entirely from a single discipline.  Your real estate solution will affect your tax and legal strategies.  Your investments may need to be positioned to off-set the risk of your closely-held business with exposure to a specific sector. 
5. Seek a leading advisor that has a broad knowledge and mastery of multiple disciplines so they can identify the overall risks and opportunities.  Supplement them with technicians and experts in individual fields.  You shouldn’t be on your own to determine how it all fits together.
6. Have absolute clarity on how everyone gets compensated.  To the extent you can, ensure that solutions are completely objective and not influenced by the need to sell a product. 
7. If family is important to you, look for an advisor or team that asks about and understands the implications of your wealth on your kids and other family members.  The natural outcome of wealth in families is conflict and destruction, but it doesn’t have to be that way. 

There are, of course, plenty of other things to look for, but these seem to be ones that are less often discussed.  The world of financial, estate, tax, real estate, investment, and insurance planning is not a simple one.  We’re never really taught these things in school, and even if we were, most would rather have a root canal than sit in a class on the US tax code, calculating bond yields, or transferring risk through insurance.  So in all fairness, it’s a tough world to navigate, and has massive implications.  Making intelligent financial decisions can have a significant impact on life, relationships, and overall well-being.   Don’t take it too lightly, surround yourself with the right people with the right perspective.  In doing so, you’ll find your way to financial confidence and overall peace of mind.  The good news is that there are nerds like us that cherish relationships and love this stuff!  Cheers!