Five Signs Your Financial Advisor Might Not Be Great SB1900

The Stacking Benjamins Show

Hosts Joe Salcihai and OG discuss five specific red flags that indicate a financial advisor may not be providing optimal value. The episode

Key takeaways

• An advisor who focuses solely on portfolio metrics like alpha and standard deviation without knowing your personal life goals is a major warning sign.
• Avoid advisors heavily affiliated with product companies, as their training often creates an inherent bias toward selling specific insurance or annuity products.

Main topics

• Financial Advisor Red Flags
• Specialization vs. Generalization

Notable quotes

Show me the compensation and I'll show you the bias.

Conclusion

Finding a great advisor requires looking beyond performance numbers to

Transcript preview

Speaker 4 (0:00) Maybe it's time we talked. Kiplinger calls it the trillion dollar talk, a conversation about inheritance, estate planning, wills, and the questions families should be asking before those decisions become urgent. Because knowing what your family wants and having a plan for it can be one of the most important financial conversations you will ever have. Ready to start yours? Visit Kiplinger.com to learn more about the trillion dollar talk. and what this historic wealth transfer could mean for your family. Speaker 4 (0:32) In business, there's no room for guesswork. Every shipment matters. Every deadline counts. When you're trying to keep operations running smoothly, the last thing you need is uncertainty. That's why reliability is at the core of USPS Ground Advantage. Every package moves through a secure nationwide network, tracked from door to door with affordable upfront pricing and delivery you can depend on. Because knowing your logistics are handled lets you focus on everything else. Visit USPS.com slash Ground Advantage to start shipping with confidence. USPS Ground Advantage. We mean business. Speaker 2 (1:17) Filthy job. Could be worse. How? Could be rainy. Speaker 3 (1:31) Live from Joe's mom's basement, it's The Stacking Benjamin Show. Speaker 3 (1:46) I'm Joe's mom's neighbor, Doug, and we've talked a lot about having good help in your corner. But when do you know that the help in your corner isn't really helping? That's right. Today, Joe and O.G. tackle their top five clues that your advisor might not be the best fit. And if it's Monday, you know what that means. Anna and O.G. are back with some money basics. What are they covering? You'll have to listen to find out. But I won't leave you hanging on this. Yes, there will be another dose of my incredible shareable trivia today. You'll want to slice, and that's halfway through today's show. And now, to you guys who can never stop halfway when it comes to a bowl of ice cream, it's Joe and O-J-J-J-J Speaker 4 (2:30) -G. Speaker 4 (2:34) Have you ever tried that, Doug? You ever tried to have some self-control and stop halfway through? You're like, maybe this is too much. Speaker 3 (2:40) I'm not even a huge dessert guy. In fact, I don't really like desserts that much. I'll always have another steak and potato. But you can't walk away from ice cream. You can't. It's Speaker 4 (2:49) in the Speaker 3 (2:49) bowl. It's as good as finished. Yeah, you've already claimed it anyway. Nobody's going to use that after it's been in your bowl. You can't put it back. Actually, that's my theory on everything in the cupboard. I bought it. It's eventually going in my stomach. It might as well all go in there now. It's now got my name. It's going to go there sooner or later. It doesn't even have to Speaker 4 (3:07) be in the bowl. It can still be in the box in the cupboard. Who needs a fork? Nobody. Welcome to the etiquette show. I'm Joe Salcihai talking etiquette and pantry management today. Actually, we got a great show for you. So happy that you're here with us. Sit back and relax. Grab something to take notes because today, my other good friend across the card table, OG and I, we're talking about top five signs. Your advisor might not be all you would hope. How are you, OG? Speaker 5 (3:36) Excited to be here. Speaker 4 (3:37) I'm excited that you're here too, because I was just at a Camp Fi. For people who don't know what Camp Fi is, it's a wonderful retreat with, we have 50 people out at this retreat center in Minnesota, and you spend the weekend talking about, what do I really value? Am I going toward that stuff? Am I not going toward it? The big question I got all weekend was this one. How do I know? It's time to fire my visor. Or how do I know that it's time to really lean in? My visor's great, and I should probably be, you know, leaning on them more than I am. We're going to talk about that today. So super happy that you're all here with us. We have a couple sponsors who help us keep on keeping on. We're going to hear from a couple now and a couple in the middle of Doug's trivia at the halfway point of today's show. We're going to hear from them, and then OG and I diving into our top five signs your visor might not be great. I'm loving the early emails I'm getting about the field kit. And for those of you that have already tried it, you know what I'm talking about. You can get your budget in order, your net worth, your privacy, your credit. It's all in one place. StackyBenjamins.com slash field kit. And by the way, field kit users and people wondering how the field kit works, we're going to be doing some webinars in the next couple of weeks. So if you get the 201 newsletter. you'll get an email about the field kit. StackyBenjamins.com slash 201 tells you when we are going live on YouTube with a webinar so you can ask all your field kit questions. That's coming up. StackyBenjamins.com slash 201. Speaker 5 (5:07) I think everybody eventually realizes there are two categories of clothes in their closet. There are the clothes that you own, and then there are the clothes that you actually wear. I'm talking about the shirt you grab without even thinking about it, the sweater that works with everything, the pants that fit just right, so you end up wearing them constantly. This is what I like about Quince. They focus on high-quality wardrobe staples made with premium materials, things like 100 % Mongolian cashmere or kind of cotton merino wool. And they're timeless, versatile pieces that are actually designed to become the stuff you reach for all the time. And the pricing is kind of the point. Their 100 % Mongolian cashmere sweaters start at $60. Quint says everything they sell is 50 % to 80 % less than similar brands because they work directly with ethical factories and cut out the middlemen. I've got Quint's pieces that have become exactly that kind of thing for me. The stuff I grab because I already know it fits, it feels good, and it looks good. The quality is what surprised me. It feels like something that should cost considerably more than it does. I use Quince and I think you should too. Find your next fall favorites at Quince. Download Quince app for app exclusive offers or go to quince.com slash SB. Get free shipping on your order and 365 day returns now available in Canada and the UK too. That's Q-U-I-N-C-E dot com slash SB. Speaker 4 (6:29) There is a financial conversation that's coming to millions of American families, and there's a pretty good chance nobody wants to be the person who starts it. Inheritance. And here's why that matters. An estimated $124 trillion to heirs and charity is expected to be transferred by Americans over the next 20 years. It's an extraordinary amount of money. But Kiplinger's research found that 51 % of adults and their parents, get this, never talk about. And there's a pretty big disconnect. 47 % of parents expect to leave a meaningful inheritance, while only 24 % of adult children expect to actually receive one. Nearly 30 % of parents don't even have a will in place. Maybe it's time we talked. Kiplinger calls it the trillion dollar talk, a conversation about inheritance, estate planning, wills, and the questions families should be asking before. Those decisions become urgent because knowing what your family wants and having a plan for it can be one of the most important financial conversations you will ever have. Ready to start yours? Visit Kiplinger.com to learn more about the trillion dollar talk and what this historic wealth transfer could mean for your family. Speaker 4 (7:54) You know, it's so hard, OG, when we get the question, how do I know that my advisor is really a good advisor? Like I'm really getting quality advice. And it's hard, right? Because there's a certain level of knowledge that you have to have about financial planning in general to know that, okay, this is a good thing. But if you're somebody just really starting out, you have this person in your corner and they're telling you about some... exotic strategy and you're not really sure how it works. You're like, what do I, what do I know? So I think this is a really important topic for a lot of people. Speaker 5 (8:29) Yeah. I'll be interested to see how we get through this conversation. Cause I've got a few that popped into my mind. I'm kind of curious to hear what you experienced when you were up North. I Speaker 4 (8:38) want to talk about one OG though, that didn't make my list and maybe it did make your list. The way the advisor charges did not make my list. And I think that's going to surprise a lot of people. And that is simply because there are some advisors who only get paid commissions. That is the thing that when you go onto online forums, people like do not hire somebody that just does commissions. I know some of these people, OG, who are just fantastic advisors. They actually sell stuff when it's needed. They don't sell stuff when it's not needed. So for me, it's very difficult to isolate a good advisor based on their fee schedule. Well, Speaker 5 (9:17) the problem with anything money related is what's the phrase, show me the compensation and I'll show you the bias or something like that. You totally made that up. When you introduce a compensation structure that is differed based on products and not complexity, then you introduce automatic biases. There's no way for a normal human being. to say that they don't have a bias. If you've got option A and option B, and they're markedly similar, but option A pays you more money than option B does, that you're not going to just kind of maybe tilt a little bit toward option A, even if it's a 51, 49 % tilt. It's just not possible as a human to do that. So, or not do that, I should say. Speaker 4 (10:05) Yeah, and that's 100 % why I brought it up, because I do think it's important to know. how the advisor is paid. But before we got into our list and people like, how come you didn't put how they're paid? It is a bias. I want to know. I just wanted a list of five ways that I know my advisor's probably not great. And that isn't one. It certainly could be one, but it's not always one. So it didn't make my list. Let's do this. Steve's got our British guy ready. Let's do number five. Speaker 3 (10:36) Number five. Speaker 4 (10:37) All right, OG, you want to go first with your number five? Speaker 5 (10:39) I can, sure. So my first one is that they know your portfolio better than they know who you are as a person. Speaker 2 (10:48) So Speaker 5 (10:48) your advisor can recite facts and figures about alpha and standard deviation and what the performance is and, you know, the fund manager and the tenure and all this great stuff about your investment portfolio. but doesn't really know or hasn't paid attention to the fact that you're really stressed about the fact that you got to take care of mom all of a sudden. And that's a thing. But hold on, let me tell you how great your portfolio is doing. I think, you know, portfolio serves the plan. Your investments serve, you know, the overall financial plan. And there's a time and a place to be talking about those numbers. But if that's the vast majority of your conversation. Speaker 2 (11:28) Yeah. Speaker 5 (11:28) Michaela's not impressed for those of you who get that meme reference. I Speaker 3 (11:33) don't. Do you, Speaker 4 (11:34) Doug? Speaker 3 (11:35) Vaguely. Speaker 5 (11:36) Don't know that Michaela's not impressed meme? Speaker 3 (11:38) It's Speaker 5 (11:39) a couple years old, isn't it? Oh, a couple. Probably 15 now. It goes back to the Summer Olympics when Michaela Maroney did an amazing job at whatever thing she was doing in the gymnastics for the Team USA. and that didn't score as high as someone else, despite the fact that it was clear, like everybody and their brother was like, oh, that's way better than this other person. And she's got this like pouty face where she's just like got her arms crossed and her lips are pursed and like off to the side. And it's just a snapshot of like that. Just not impressed with the judging. Michaela's not impressed. Yeah. Guess it was a old one. Speaker 4 (12:14) My talk at Camp Fi was about what are we really solving for? And a lot of the professors online. We'll tell you, well, duh, you're obviously solving for more money. And yet a statistic that I uncovered recently was that 40 % of millionaires are still afraid they're going to run out of money, 40%. And the study also went on to show that by adding more money to the pile, it didn't make that fear go away. What made the fear go away was knowing what you were chasing. And so to your point, if your advisor knows what the portfolio is up to and all the intricacies of the portfolio, but they don't know what you're chasing. it's still going to cause a lot of consternation because you're not sure what the money's for. Yeah. Speaker 5 (12:54) Yep. Speaker 4 (12:55) My number five is, and I try to put these in order from most important to the least. You can certainly have a decent advisor who's a generalist, but I think that a generalist is the first sign that you could probably do better. Somebody who just works with anybody, they have some solid criteria, which is that you can breathe. If you can breathe, they're going to be a client for them. I really want an advisor who works with people like me. I want them to, you know, for me, it'd be somebody who is self-employed, somebody who's in their fifties. Like I want some criteria that makes sure that they're, you know, middle fifties, middle-ish fifties. Okay. I truly, I truly want somebody who spends their time doing the thing. I don't, you know, and no offense to generalists, like one of my best friends. happens to be my doctor. If I need heart surgery, I'm not going to Troy for that. I'm going to Troy when I have a cold because he handles everything. But man, I want a heart surgeon to do the heart surgery. And Speaker 5 (13:58) Troy, in your example, and Troy probably knows a really good heart surgeon. So you might go to him and say, hey, you know what? I've got this real big complication. And because he's a great advisor, he would say, This isn't my specialty, but I know a guy, I know a gal who I should send you. In fact, let me make the introduction and make sure you get great care along the way. Speaker 4 (14:22) And that's the sign of a great advisor to me. Speaker 5 (14:25) I Speaker 4 (14:25) think so, yeah. Yeah, not that they know everything, but they are a hub of great information. And if they, I don't like the one-stop shop where the advisor tells me, hey, in-house, I can do this, I can do this, I can do, you know, a few things, fine. But I really, really want somebody who is connected in my community and connect me to the right people to do the thing for me. Yeah, but that's number five. I really look askance when I've got somebody who just works with anybody. Did you just, hold on, did you just say askance? Dropping a line from Hamilton? What's Speaker 3 (14:54) that? I look askance? Are we that podcast now? He's quoting lines from Hamilton. I've got good words. I've got good words. Speaker 4 (15:02) There's a Speaker 3 (15:03) lot of good words. Somebody's in the show Speaker 5 (15:04) tunes. Just Speaker 4 (15:06) because I was singing show tunes just before we hit record. You know, I get number Speaker 3 (15:11) four, number Speaker 4 (15:12) four. Are we going to do the snake draft thing? Oh, gee, where we go back and forth. Are we going to, okay. My number four, a big sign for me that your advisor might not be best. And again, this one also is number four on my list because it could be a good advisor, but it, there's a lot of yellow, orange, and red flags here. If your advisor is affiliated with a product company. Hmm. There's probably a good chance that the sales training that they get, and it is sales training, the sales training there they have is going to align whatever your problem is with products that that company sells. And I mentioned that, you know, the fee structure didn't hit my top five, but man, when somebody tells me that they have an advisor who works for an insurance company, I immediately some. maybe not red flags, but deep, deep yellow and orange flags start to go off. Speaker 5 (16:11) Yeah, this isn't on my list, but because I was thinking more big picture than this, but I would, I would, again, back to the incentive thing, whether it's because of their training or it's because of that's just where their knowledge level is, or if it's literally where their bread is buttered from when. everything, what's the phrase when all you've got is a hammer, everything's a nail. We've been on record over many years of the show saying there aren't bad products. There's just bad applications of products. Speaker 2 (16:45) And Speaker 5 (16:46) you can look at a product and go like, this one's better than that one in that genre. And I agree that there's some of those, but I'm saying like just generically speaking, whole life insurance, annuity, term, whatever, mutual funds. It's not that the product is bad. it's the application of Speaker 4 (17:02) the product usually is the not so good thing. Speaker 5 (17:05) I'm dealing with something right now where the client just happened to bring it up. His mom had passed away and had two annuities. One was an IRA, one was a non-IRA. But basically led the family to believe that they are required to distribute the non-IRA over 10 years. And, oh, by the way, we just signed this paperwork and we'll give you this money over 10 years. And because the traditional IRA, that is the case. But he also led the people to believe that... It has to stay with their company to do that. I said, well, it's an IRA. You can have that wherever you want. No, no, no. He said that it's got to stay with them to get the 10-year deal. Otherwise, I have to take it all out right now. It's like, not true. Speaker 5 (17:47) Slimy AF is what I would say. Speaker 4 (17:50) That's horrible. Speaker 5 (17:50) By the way, not over like a $200 million annuity contract either where this dude's going to make some money. Like literally a $70,000 account that is a $3,000 commission probably. I get it. It's not zero. He's probably putting some food on the table with it. But you're hosing five family members for the next 10 years for three grand? Come on, man. So not impressed. I know we weren't going to talk about pay, but this is a product situation. Speaker 4 (18:16) That's 100 % a product situation. And when somebody works for a product company, I think the chance that that might come up, let's put it this way, Doug, I may look askance at that. I may look askance. Speaker 5 (18:27) Nope, definitely can't use it twice. I had to. It's called a callback. My number four is you're the project manager of your own financial life. And what I mean by that is you're the one that's sending emails going, should we be doing Roth conversions? hey, do you need to look at my estate planning documents? Can I get an analysis on my kids' college funding and where we're at on this? Every so often, if there's some kind of one-off thing that you haven't seen in a while from your advisor