Our Financial Advising Process

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Transcript

Mike:

Beware the financial advisor that only wants investment statements

Mike:

Beware that person. Why, why do you think I say that, Zach?

Zach:

Welcome to retirement today under cohost, Zach Holcomb, and alongside me, we have Michael Reese. He’s a certified financial planner, retirement planning expert, and founder and president of Centennial Advisors located right here in Austin, Texas. Mike, how are you this evening?

Mike:

Doing fantastic. And Hey, for those of you that are listening, you might want to check this out because we are now turning this radio show also into a podcast.

Zach:

Super exciting. Yeah. We’ve got the camera in our face right here.

Mike:

I know it’s, I’m a little nervous because now we’re being recorded while we’re talking. But anyway, if you prefer to watch us on YouTube or if you miss anything. Yeah. That’s where we are. We’re going to be on YouTube and you can check us out. It’s under retirement today, I think. Or Centennial Advisors, what it under, what is it under Zach?

Zach:

You can find it under both.

Mike:

Under both. Fantastic. And when you go there, you know, you know the work you like, you subscribe and all that good stuff, right?

Zach:

Yeah. Happy to have you listening or watching alongside us.

Mike:

Fantastic. So Zach, let’s make sure that we both smile really well for the camera.

Zach:

I know I’ve got to show off my pearly whites. Alright, so on today’s show. I’m really happy about this topic that you’ve decided that we’re going to share with our listeners and viewers. It’s all about the importance of a process when you meet with a financial advisor or planner. And we’re going to talk a little bit about the process that we have. Yeah.

Mike:

Is I think a really important topic because yeah. We’d like to have a lot of fun, but at the end of the day, you know, if you are looking to make smart choices with your financial planning, you know, it’s important that when you’re talking to a financial advisor, that you’re going through a process that is uncovering what we would call a complete retirement plan or a complete financial plan, you know, depending on where you are in life if you’re getting close to retirement, you want a complete retirement plan. If you’re a little bit younger, you might want to complete financial plan, but they both have, you know, a lot of the same components and to make certain that you’re really covering all of the bases, you gotta make sure that you’re also then taking it one step at a time. And that when you talk to that financial advisor with that financial planner, that they’re truly bringing all components to them.

Zach:

Okay. So one step at a time. Well, what’s that initial step that we’re taking?

Mike:

Yeah. So the first thing in the financial planning world of the first step, and this is going to be, or should be about the same with anyone you talk to. And that is we call it a discovery meeting. Other people or other advisors may call it something else. But for us, it’s a discovery meeting. And the purpose of that meeting. There’s only one purpose. Well, I might say two, we need to get to understand you. You know, I talk about it here in the radio show. I talk about it. When record for television, I talk about it whenever we’re doing an online masterclass, if we’re doing an in-person event, anytime we’re delivering content. I like to say that we, our goal is to deliver information, but it’s not advice. Right? Because in order to deliver advice, I mean, we’re fiduciaries. If we’re going to deliver advice to you, we have to understand your unique situation.

Mike:

We need to know where are you today? What are your goals? What are you trying to accomplish? And what’s getting in the way of you accomplishing those objectives. Right? So normally that first means just designed to be a discovery where I can learn those things. So if, if you and I were to sit down together, whether in person or via zoom, in fact, pretty much all of our first meetings are done by zoom these days, our discovery meetings what happens is I’m going to ask you questions, like, you know, tell me a little bit about where you’re at right now with your planning. What are you doing really well? What areas of concern do you have? You know, kind of like if you were a business, you’d want to do what they call a SWOT analysis, what are your strengths, weaknesses, opportunities, and threats.

Mike:

We do something very similar to that, but on a personal level, now step two in that meeting is trying to determine, well, where do you want to be? Right. What are your goals? And you know, if you’re younger, you might have a goal of, Hey, I want to pay for college for my children. Maybe you want work to be optional at some point, maybe you want to buy a house, you know, whatever it is. Maybe if you’re a little further along in life or in your career, you’re looking at making a career change, you’re trying to figure out, Hey, does that make sense? And then what about if you’re closer to retirement now your goals might be, I want to be able to retire comfortably. Right? I want to make sure my money lasts as long as I do. I want to make sure this is a fun one, Zach, that I don’t give the IRS too much money.

Zach:

Nobody’s ever said that I don’t think,

Mike:

Oh, that’s right. Nobody, everybody says, yes, let’s give the IRS a bunch of money. No, we don’t. We don’t really do it. So there’s, so what are your goals and objectives? You know, paint me a picture of what the ideal future looks like for you. The next step is what we call analysis. And it’s really nothing more than getting your financial documents in order. So we want to gather your financial documents so we can really identify clearly where you are and what is the road you’re on? Like where are you heading with your planning? Because the first thing we want to know is can we help you? And do you want our help? So can we help you? Do you want our help? Part of that is checking out the road you’re on now. So we want to know where are you heading with your current planning? Because if that is already bringing you down a path of success, well, then we’re done. What do you need to pay us for? Right on a good path. Typically, we’re going to need to collect things like your investment statements, maybe your insurance statements. We want a copy of your tax return, your most recent tax return and a copy of any estate planning documents. Beware the financial advisor that only wants investment statements, beware that person. Why, why do you think I say that Zach?

Zach:

Because in a lot of cases, there are a lot of financial advisors who only focus on investments. They’re not looking at your tax picture. They’re not looking at your state plan. They’re focused on the one area that they work with. And that’s generally just investments.

Mike:

That is 100% wrong. No, I’m kidding. That was perfect. That was great answer.

Zach:

You gave me the most serious face too. It’s like, how could I be wrong?

Mike:

No, that is a perfect answer. When you are going to see a financial advisor, you want to have a complete plan put together, whether it’s a complete financial plan, complete retirement plan, depending on where you are in life. So when you see that person, if they’re not looking at your tax return and they’re not looking at your estate planning documents, and it’s okay to say, I don’t have any estate planning documents, right. That happens sometimes. But if they’re not looking for those things and asking about them, if they’re not asking about your insurances, like your life insurance or disability or long-term care insurance, you gotta ask yourself, Hey, if you’re not asking about these documents, why not? There must be a reason. And the reason is they don’t work in that area. So you’re not going to get a complete plan. You’re going to end up with an incomplete plan.

Mike:

So we don’t like that. Taxes. You could have make the most money in the world and it’s fantastic. But then you turn around and you have to give all that back to the IRS. That’s never any fun, right? So we gather documents, investment statements, insurance statements tax, you know, your tax returns estate planning documents. And our goal is we gather all of that and we start plugging it into the financial planning system so we can identify, where are you going now? Like, where are you heading? What road are you on? And then we get together and we review that. And our purpose is simply to say, all right for example, on the investment side, let’s look at the three circles of growth, risk, and income. How much growth potential should you expect to receive on your money? The way that you have an invested now, is that a number that you’re happy with?

Mike:

What about the risk side? How much money could you lose if the markets turned South, are you comfortable with that? If you’re getting close to retirement, how much income is your portfolio generating? Is that a number that you’re happy with? And invariably, Zach, it’s pretty rare that we find someone where they’re in great shape and all those areas. So usually there’s, you know, the growth might be okay, but, Oh my goodness. I didn’t know. I could lose that much money if the market went South, it’s been so long. I mean, it’s been since 2008 that we’ve had a real market crash. You know, if we had another one of those, how much could you lose? It’s important to know if you’re getting close to retirement, the income piece. Oh my goodness. People are getting close to retirement. They got a million dollars, but it’s only generating 17,000 of income that doesn’t cut it.

Mike:

So, you know the goal here, let’s find out the road you’re on. Is that risk comfortable or does it need to be worked on, is the income enough or does it need to be worked on, is the growth enough or does it need to be worked on, in other words, let’s find out where you’re at. Let’s find out what you’ve done. Well, and then let’s find out what areas need a little work,

Zach:

But now we’re putting together a first draft to present to you.

Mike:

Yeah. Actually it’s the entire planning process. We could call step three here. Right? So here’s how this all works. So after that second meeting, right, everything’s free up to that point. But what we’re identifying is do you need our help, right? That’s what we’re doing by the end of that second meeting, you know, at that point, you it’s your turn to determine whether or not you want our help.

Mike:

Like we’ve identified, let’s imagine we’ve gone through the process and we say, Oh, look, here’s what you’ve done. Well, here’s some areas that you need some help with. Now you have to determine, you can do it yourself. You’re going to use your current advisor or do you want to use us now if you use us, typically there is some kind of a fee, right? It might be a fee for a plan. It might be a fee for money management or something like that. But we always share with you, look, if you work with us, basically, this what it’s going to cost and you determine at that point, okay, great. I want to do that. Or I don’t want to do that. It’s not that complicated. Right? It’s pretty simple. So let’s imagine you say yes, your fee is reasonable. Yes. We want to work with you.

Mike:

Okay. Our next step then is putting all the planning together. It’s saying, okay, we need no where you are. We know where you’re going. Now it’s time to take a fork in the road, right? It’s time to say, what are the forks we could take? Like, what are the different directions we could go to either a get your investments up to speed the way you want them B make sure that your money lasts as long as you do see, you know, save a boatload of money from the IRA. I always like to save a boatload of possible.

Zach:

Boatloads are great.

Mike:

Boatloads of savings, boatloads of money from the IRS is always good. Provided that you’re doing it legally because there may be other ways to do it. We don’t talk about that. And we did not, no boatloads of money from the IRS. We want to save that.

Mike:

You know, then next how I don’t even remember if I was doing one, two, three, a, B, C. All I know is let’s make sure your investments are up to snuff. Income’s going to last make sure your taxes in great shape both today and tomorrow. Let’s make sure that if you, if you become sick, if you need to use the healthcare system in, in significant ways that you can pay for it, and let’s make sure that you’re leaving your family in great shape after you’re gone. So we have to build a plan that allows you to successfully navigate all of those different angles. Right? Right. Now, here’s the question, though. You have to do it all in one fell swoop. You don’t know. In fact, our process is typically, we like to kind of chunk it down because, you know, one thing I could do, and I, this is what I used to do.

Mike:

I used to put together plans for people where we covered all of that stuff. Just ridiculous detail. And I would spend two, sometimes three hours hours going over these plants in detail with these poor poor families.

Zach:

I feel like that could be a little overwhelming for some people.

Mike:

It was more than a little, I was excited. I thought it was really super cool. The problem is that only about 10% of the people I spoke to also thought it was super cool because you know what I learned, I learned that 90% of people, they just want an executive summary. You have to start somewhere. And normally we start with what is most urgent for most people. The portion that is most urgent is getting their investments in order. Then making sure their income set up, especially if they’re going to retire soon. And then once we get those two knocked out, then throughout the rest of the year and usually in the first 12 months.

Mike:

So it’s like a 12 month onboarding. So we don’t try to do it all at once. Then what we do is we say let’s set up a separate meeting to tackle the tax issues. Let’s set up a separate meeting to tackle the healthcare planning. Let’s set up another separate meeting to tackle the estate planning. So normally we handle the income and the investments first, and then the other three are just done in the order of whichever is highest priority. Sure. Which one do you think is most normally highest priority between the last three? Yeah. Between taxes, healthcare, state planning. There’s one that normally is highest priority.

Zach:

I think taxes is going to stand out.

Mike:

Taxes! It is you’re right. Normally that’s where we go next, because that’s what people care about. And then usually once that’s accomplished, then we dive into the estate planning and the health care, but we got to hit them all.

Mike:

If you, now, if you’re not hitting them all, you’re not getting a complete retirement plan. Here is the worst thing you can do as a client. It’s procrastination. If you’re the kind of person that has to, you know, if I, if I’m your advisor, if you pay me to be your advisor, I give you my recommendations. And then you have to sit and go to Google and research every recommendation to double check my work and to make sure that you’re comfortable with it. Guess what? We aren’t working together because I don’t have time for that. And you’re telling me you don’t trust me. Right? Right. Look, if you’re going to hire a financial advisor, trust them to do what, they’re let them do their job. Don’t be second guessing all the time. You’re going to create a headache for you. And for them, if you want us to just double check what you’re doing, make sure all your bases are covered.

Mike:

Hey, it may go nowhere. It might just be a good double check, right? A second opinion. It might be all it is. And we may say, Hey, you’re in great shape. Hey, it was worth your time. If that’s all you get out of it, I’ll bet you get way more free to go through the process. Number five one, two eight, eight, six 58 50. Just give us a call here. We are. We’ve gotten to the point where, okay, we’ve got some planning put together for you. Well, now you have to actually implement it. We have to make it happen. Now for most of our clients, we do that for them. Right. Well, what does that mean? It means we’re opening up accounts for them at fidelity or TD Ameritrade, and we’re transitioning assets over so we can sell what they have and reposition it to what they should have. If, if they need different insurance planning, we’re helping them get that all set up. But we generally do most of the work and it’s, you know, on the client’s side, you know, if you’re the client, it’s basically a lot of DocuSign. Sure. You know, it used to be, you could, you know, come in and actually sign your name like 35 different times and get writer’s cramp. Almost sure. Buying a house or something.

Zach:

It’s like iSpy, find all the sign tabs on the document.

Mike:

My gosh. But you know, the, I’ll tell you what the financial world, they love their paperwork, don’t they indeed. But thank you so much. COVID because of COVID the financial world has finally shifted full steam ahead to the DocuSign electronic signature system. And ah, thank goodness for that. So anyway so on your side, you’re basically doing the DocuSign, so we’re setting everything up and then boom. We’re off and running. Right. Anything. Okay, great. I got my plan in place. Yay. What’s next? Well, what’s next is we’re doing visiting again, maybe for the tax planning and then we’re visiting again for the estate planning, revisiting again for healthcare planning. But anyway, let’s say that first year we’ve got, we visited several times. Yeah. Which yes, it is a bit of a time investment. You have to invest some time to make sure that you’re getting a complete plan.

Mike:

I mean, that’s part of the deal. And so we visited several times. Everything’s set up, it’s looking marvelous. It’s beautiful. It’s exciting. And life is fantastic. And then it happens the tax laws change, maybe the market changes, maybe your situation changes, your health changes. You get a new job, you have a new grandchild or a new child. Your spouse gets a job. You lose a job. Something changes. It’s called life. Sure. Life happens. Right. And so it can’t just build this beautiful plan and then just step back and say, Oh, let’s admire. I’m going to admire that. This is so beautiful. Right? I’m going to admire this beautiful plan. And I’m just going to, I’m just probably going to sit back. I’m going to take a nice glass of Cabernet in my, in one hand, I’m going to take a very fine cigar in the other hand.

Mike:

And I’m just going to admire my plan is though I’m done. No, you’re not done. You’ve started. You’re not done. You’ve started. That’s just the beginning because what happens then is as life changes as tax laws change or state laws change is a health thing. You know, the health, the health laws could change or your health insurance changes. Things change. You need to modify, you need to update your planning to reflect that things have changed. Hey, you want to know something to changed last year? That was a good change for most of our clients. I mean, we’re talking about COVID was a crazy year, right? Yeah. But something happened last year. That was a positive for most of our clients. You know what? It was two things. First, number one for almost all of our clients, we’ve made more money than we planned on.

Zach:

That’s great.

Mike:

Their accounts were bigger than we expected. That’s a positive change. So we want to update planning to reflect that, Hey, for a lot of clients who are already retired or nearing retirement, guess what? Because of COVID, they didn’t travel as much as they used to.

Zach:

Save some money,

Mike:

They ended up saving. They didn’t spend the money. They thought they would spend, they had extra money. They said, Hey, can we add this extra money into our investments? That’s a positive change. Some clients had some negative changes, their health, they got hit with COVID maybe right. And their health was, you know, really jeopardized. And that would be a negative change, but things change. So are you updating your planning regularly? That’s one of the things like, you know, these, these investment people are always saying, well, the S&P did this and you did that.

Mike:

Who freaking cares. That’s not planning. Planning is your benchmark rate of return is 5%, 6%. Did you beat it last year or not? It’s that simple? Yes, you did great. Okay. We’re done talking about investments. What else is there? Talk about sure. You had a goal. You beat your goal. Great job. Now let’s keep going. Do we need to adjust the goal? Are we still good with that goal for next year? You don’t need it really. Most time is spent on, Hey, how are we doing the tax planning? Is that moving in the direction we want you, your returns are high enough. So that means your income is going to last as long, you know, as your income still looking good. Okay, you’re getting the growth you need. Great. How’s the risk level, you know, it’s the risk level still where we want it or is it there’s that getting a little bit out of whack that might need to be adjusted, right?

Mike:

That’s where we should probably spend some time. If you did not get the returns you needed. Oh, what happened there? Now it’s time to really focus on the returns. What happened? Do we expect that’s going to continue or is that more of a short-term type of thing? Right? So that’s what we need to look at. So review meetings, and, and when you’re updating your discussion should not be just about investments. And if it is, then you probably don’t have a complete plan. You probably have an incomplete plan yet. Don’t I’m telling you this right now. Especially if you’re getting close to retirement, if you’re in retirement, you don’t want to be going into retirement with an incomplete plan. Because one of the areas that you’re not planning on will step up and bite you and bite you hard. It could collapse your financial security. If you ignore it taxes.

Mike:

I see this all the time. People getting slammed with taxes on their 401k, that they never expected. I see people just surviving spouses. It’s do not be that person, right? Don’t be that person entering retirement with an in complete plan. And here’s what I want you to do. I want you to pick up the phone. I want you to call us. I want you to reach out to us and let’s have a conversation. And I want you to get a complete retirement plan, review, a complete financial planning review, wherever you are in life. If you’re a little younger, you want to financial planning, review, low, older retirement planning review, but let’s help you get that complete review so that you make sure your bases are covered. You do not want to make a mistake here because oftentimes we can see something help you fix it, where it’s just a little fix. And man, it makes such big differences. Even if we don’t work together, let’s help you make those great decisions. So Zach, what’s the number?

Zach:

Give us a call at 512-886-5850. Again, that number is 512-886-5850. And it all starts with a simple 15 minute phone call. So we can briefly learn a little bit about what’s important to you, what your concerns are. And we can see if we can assist you. If you enjoyed today’s discussion, remember to subscribe to our channel so you can get notified about all of our latest content that we post. Also remember to like comment. If you have any questions or concerns for more than happy to help get those answered for you, stick around and we’ll see you next time.

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