Jeff Bezos in 1999 on the Importance of Diversification

Jeff Bezos in 1999 on the Importance of Diversification

There are no guarantees. There is always uncertainty.

Even when you have an unbelievable vision.

I love this clip of Jeff Bezos (scroll down). It shows his foresight about the future of retail and customer service. What stood out to me was his humility to recognize the uncertainty of who the expected winners of the ‘internet revolution’ would be.

“Long term I believe that it is very easy to predict that there are going to be lots of successful companies born of the internet. I also believe that today, where we sit, it’s very hard to predict who those companies are going to be.”

In hindsight, it’s easy to look back at Jeff Bezos and his vision to ‘know’ that Amazon would be a massive success. Even Jeff Bezos recognized the uncertainty he faced along the way.

For long term investors, it’s not about predicting the exact winners, it’s about making sure you have exposure to those winners.

As long as you’re saving enough on an ongoing basis, a long term investor can afford to own companies that will not be winners to the magnitude of Amazon.

What the long term investor cannot afford, is completely missing ‘the next Amazon’ altogether. The best way to do that is through diversification.

Starting Points For Wealth Builders

Starting Points For Wealth Builders

For the majority of us, the wealth building process does not happen overnight! Here are five starting points for the modern wealth builder:

1. Understand where your money goes

What are your fixed monthly expenses? How much wiggle room do you have for discretionary spending? In order to grow your net worth, you must first understand how much money you can afford to put towards your savings and investments on a consistent basis. Even if you’re not sticking to your budget on a monthly basis, being able to review what you actually spent is important for projecting out savings goals.

2. Have a dedicated cash cushion

Responsible wealth builders have a dedicated cash reserve at all times. This is so they are not dependent on their investments to pay for life’s unexpected expenses. Having a cash cushion also allows the modern wealth builder to invest with confidence and stay disciplined to their investment strategy.

3. Take advantage of employer benefits

Modern wealth builders take advantage of employer benefits and don’t leave free money on the table. This includes taking advantage of an employer match through a workplace retirement plan and making the most of other pre-tax benefits.

4. Have a hierarchy for investing accounts

Modern wealth builders have a hierarchy for investing in the different types of tax-deferred retirement accounts.  Making sure to utilize tax advantageous accounts first will help improve a wealth builder’s bottom line net worth.

5. Invest based on goals and controllable factors

Modern wealth builders are concerned with investing based on the goals they are trying to accomplish. They focus on the factors that are within their control and tune out the noise of financial media.

When Should you Break up With Your Parent’s Financial Advisor?

When Should you Break up With Your Parent’s Financial Advisor?

It’s not uncommon for a young professional’s first interaction with a financial advisor to be through their parent’s advisor. However, just because that advisor was a good fit for your parents, does not necessarily mean they are a good fit for you.

So, when should you break up with your parent’s financial advisor?

    1. You’re not receiving personalized advice
    2. The relationship is investment centric
    3. You feel like an afterthought
    4. They don’t understand the challenges you face
    5. They’re not easily accessible

Since most advisors are compensated based on the size of a person’s investment assets, a young professional who is early in a career most likely won’t have the assets to incentivize that advisor to spend the time needed to help them make smart decisions with their money. The reality, however, is that an advisor can add a tremendous amount of value to the future financial health of a young professional before they’ve accumulated an investment portfolio large enough to be “profitable” for a traditional financial advisor.

Luckily, hundreds of advisors specialize in working with young professionals. A great place to start your search is the XY Planning Network. The XY Planning Network is a network of independent advisors who are required to put your interests before their own and strictly operate on a fee-only basis, meaning they never sell products with commissions.

Also, many advisors in the network (including myself) utilize a subscription fee for their services — meaning regardless of your age or asset size, you can work with someone who is going to provide you the attention you deserve.

Options for High Earners after Maxing Retirement Accounts

Options for High Earners after Maxing Retirement Accounts

You’re doing everything right — living below your means, have a sufficient cash reserve, and are taking advantage of your tax-deferred retirement accounts to the full extent. So what’s next when you still have discretionary cash flow left over?

First of all, this is a good problem to have and you should congratulate yourself for not falling victim to lifestyle creep!

When deciding on how to allocate additional cash flow towards a worthwhile goal, consider the following:

  1. Is there a shorter-term goal you have outside of investing for financial freedom (retirement)?
  2. Do you have a business idea you’d like to pursue? Investing in yourself is often the best return on investment.
  3. Real Estate – consider adding a rental property to your portfolio for income generation.
  4. Taxable Investing – keep it simple by continuing to build up your investment portfolio with tax-efficient investing.
  5. Enjoy life in the present more — travel more, go out to dinner more and invest in experiences!

From an investment standpoint, continuing to do more of the same is often a great option! Sometimes, as our net worth and incomes rise, we believe adding complexity to our investments is a natural form of progression.

This is not the case!

If you’re looking to use your money to enjoy life more in the present, consider what your money dials are.

Think about the things in your life that you can outsource, because you:

  1. Don’t enjoy doing them.
  2. Want to free up your time for things you do enjoy.
  3. Want increased convenience.

Time is our most valuable commodity, freeing it up is a form of wealth on its own!

Why the Flat Retainer Fee Model is the Future of Financial Advisory Compensation

Why the Flat Retainer Fee Model is the Future of Financial Advisory Compensation

Choosing an appropriate fee structure as a fee-only financial advisor is one of the hardest parts of the business. Especially when clients can have such unique needs, it can be difficult to charge appropriately without knowing ahead of time the level of service someone is going to require.

This is (partly) why I have chosen to take the route of charging a flat fee based on what my time and expertise is (currently) worth. Let me be clear — I do not care how much other financial advisors charge their clients, as long as they are transparent about what their time and services are worth. If a client is willing to pay $3,000 a quarter for your services — great that’s called free market capitalism.

However, I don’t believe the standard 1% assets under management (aum) fee is an equitable way of charging fees. It also still leaves potential conflicts of interest open, even for the fee-only financial advisor.

I think any advisor that’s honest with themselves would admit, there’s incremental (if any) additional work required to manage a $500,000 portfolio vs. a $5,000,000 portfolio. So why should we be entitled to a 10x fee ($5,000 vs. $50,000 annually), when we’re not doing 10x the work?

With the increased efficiencies that technology has provided the financial advisory community, there is no reason someone cannot create a profitable practice (IMO) charging an appropriate $5,000 annual fee regardless of assets under management (for example). Again, if your time and expertise is worth more — charge more.

Since I tend to work with high earning young professionals, I can also tell you that the next-gen of consumers are not going to sit back and pay 1% on a million dollar portfolio to meet with someone once a year. In my (brief) experience, the next-gen of investors I’ve worked with are considerably more informed compared to previous generations that are used to “doing business” a certain way.

This has led them to demand a higher level of transparency and service that aligns with an appropriate value proposition.

5 Questions To Ask Your Financial Advisor

5 Questions To Ask Your Financial Advisor

1. How is the advisor compensated?

Arguably the most important question you can ask your advisor. Incentives are a powerful motivator, and even the best advisor can be compromised when given incentives that do not align with the client’s best interest. A quick way, (although not foolproof) is to ask if your advisor is considered a “fiduciary”. Being a fiduciary means the person is legally required to do what’s in the best interest of the client. If the advisor is considered a fiduciary and does not do what’s in the best interest of the client (i.e. selling a product solely for the benefit of the advisor), then they’re leaving themselves open for lawsuits. Consider working with a fee-only advisor since their business model by default dictates they act as a fiduciary. If the advisor works based on commission, be very skeptical, since products can offer a wide variety of commissions to the advisor. The advisor may be incentivized to sell higher commission products that are deemed “suitable” for the client, but not necessarily what’s in the client’s best interest.

2. What is the advisor’s investment philosophy?

Does the advisor have a passive or active approach to investing, or maybe a combination of both? How does the advisor determine an appropriate asset allocation for a client? What factors warrant changes to client’s investments; for example, changes to a client’s circumstance versus changes in market environments. There is no perfect answer, as a wide variety of investment philosophies can drive long term success. However, you should look for an advisor who has a disciplined process, and one that can be reasonably/easily explained in plain English. Some of the best investment strategies can be very simple, but require behavioral coaching to make sure the client sticks to the chosen strategy. Don’t be sold on complicated investment strategies that you can’t understand; the finance industry has developed jargon over the years to keep consumers from asking important questions.

3. How does the advisor select investments and products; are there any proprietary products?


This goes along with question 1 and how an advisor is compensated. Again, if an advisor works for an overarching corporation, that does not necessarily mean they’re bad, however, they often have incentives from the corporation which may or may not align with the client’s best interest. The corporations are concerned with driving profits and appeasing shareholders, which can sometimes trickle down to the clients being taken advantage of. An example of this abuse can come from proprietary products. Many large broker-dealers and investment firms own mutual fund subsidiaries, whose funds their advisors can recommend to clients. Advisors may be incentivized to use a particular fund family because they are owned by the overarching corporation, regardless of the fund is the best one for the client. Proprietary products are not necessarily the number one thing to be wary of, it’s just better to have an advisor who you know has no incentive to recommend one investment over another.

4. What value does the advisor provide beyond investment returns?

With fee margin compression and investment automation, investment returns should not be the sole value provided by your financial advisor. Does your advisor provide advice on other financial aspects of your life? For example, budgeting and cash flow, protection planning, education planning, estate planning, and tax planning. You should look for an advisor who provides holistic advice, meaning they’re looking at how each aspect of your financial life is connected. The investment returns are only a piece of the pie.

5. What are the advisor’s expectations of you?

What does the advisor expect from your relationship? How often are you expected to meet and review your financial situation? Ask the advisor what their ideal client relationship looks like so that you can both properly set expectations. Setting expectations for both the client and advisor is crucial in creating a successful partnership. Discussing finances can be emotional, therefore it’s important to work with someone who you can trust and be open with.