October 14, 2025 • 21 mins
"Hey Mike, I don’t want any risk and currently have all my money in money market. If I gave it to an advisor, could they grow it better without any downside risk?"
Discover the problem you may run into if you only focus on avoiding market risk.
Text your questions to 913-363-1234.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice and getinto the nitty gritty. As
always, text your questions to(913) 363-1234. Again, (913)
363-1234. And remember, thisshow is just a show.
It's not financial advice, somake sure you do your research.
David, what do we got today?
David (00:27):
Hey, Mike. I don't want any risk and currently have all
my money in a money market. If Igave it to an adviser, could
they grow it better without anyrisk?
Mike (00:37):
This is a very perplexing question, and here's why.
David (00:40):
Okay.
Mike (00:41):
What is risk? Let me ask you, David. What is risk? Yeah.
I guess It's not existential.
David (00:46):
When you're talking about risk, there's some sort of
danger. Right? Yeah. Like, oh,if I'm riding a bike, I have
risk of falling over and hittingmy head, so I put on a helmet.
Mike (00:53):
In finance, it'd be loss of money. Yes. There's a pain or
something negative that canhappen, a negative consequence.
David (01:00):
Okay. Yeah. That sounds well defined.
Mike (01:02):
So if you're afraid of risk and you put your money in
the market, you're scared ofmarket risk. And then you're
either not scared of or ignorantof inflation risk.
David (01:14):
Yeah.
Mike (01:16):
So you have to understand there is no such thing as a
perfect investment product orstrategy. There is no such thing
as a riskless retirement. Youneed to accept that in life,
there's all gonna be risk.There's going to be something
that you have to address.There's gonna be demons ahead of
you that you'll need to face inorder to create a healthy plan.
(01:38):
So let's take our example here.He's got what all of his assets,
like a money market or some
David (01:43):
Everything's in money market.
Mike (01:45):
Okay. So this question brings me back to an example. So
someone I know, years and years,like, over a decade ago, said,
hey. I want low risk. I don'twant any risk.
Tells the adviser, don't wantany risk. What do you have for
me? And this adviser, based onif you look at the details, his
(02:06):
job is to put you in some sortof fund. So what does he do? He
does the best that he can.
He's gotta get paid, but he doesthe best that he can, and he
puts this person into very lowrisk bond funds. But when
interest rates go up, bond fundslose money.
David (02:21):
And how is that? Just, like, really quick sidebar.
Yeah.
Mike (02:24):
So if interest rates go up, right, new debt issuance,
so, like, new bonds are paying ahigher coupon rate than your old
bonds.
David (02:34):
Oh, right.
Mike (02:34):
Right. So think of it this way. This is my chicken analogy.
If you bought a chicken for athousand bucks and give you
three eggs a week, you knowexactly what you're expecting.
Let's say foxes can't get to itsafe, it's secure, whatever.
And then next week, they'reselling chickens for a thousand
dollars. They're gonna give youfive eggs every single week.
Which chicken do you want more?Well, if it's the same price for
the chicken, but one gives youtwo eggs more every single week,
(02:56):
you're going to naturally want ahigher yield. So when interest
rates go up, basically, it's newchickens laying more eggs.
So all the people that bought achicken that's laying three
eggs, they're gonna have to sellit at a discount to compensate
for the lost eggs that theywould have gotten if they just
bought a new chicken.
David (03:15):
So that's the risk in investing in bond funds?
Mike (03:17):
In bond funds. Okay. Yeah. They're actively trading bonds.
So because of that, if interestrates go up, they're selling old
chickens, trying to buy newchickens, and that creates a
loss.
So this person wanted no risk.They went into a low risk. It
went down. They panicked. Theydidn't like it.
They didn't understand it. Theydidn't have experience in the
(03:39):
market. It was not explainedwell to them, and so then they
went back and just stuckeverything in the high yield
savings account. And that's allthey've done ever since.
David (03:47):
Yeah. And what's the risk in that?
Mike (03:49):
Inflation risk. If your funds are not in a qualified
account, such a retirementaccount, like IRA or Roth, your
growth is taxes, income tax.That's line two b of the tax
code or not tax code, but yourten forty. Sure. Two b is
taxable interest.
So every like, let's say you gota 4% interest every year. What's
(04:10):
your effective tax rate? That'skind of what you're paying on
that interest rate. But the cruxof this question, there's two
problems that need to beaddressed. Let's do the first
one, the expectation of anadviser.
Okay? When you have an adviserand you ask them, hey. Can you
get more money from a high yieldsavings account? The adviser who
(04:32):
is sales focused, their job isto acquire more assets, will
probably say, absolutely. Wecould probably do that, but you
can't guarantee results.
I'm not saying any advisor wouldsay, we can guarantee results,
because no one really does that.And if they do that, let someone
know Yeah. That's illegal topromise returns. Uh-huh. Even to
suggest or infer that, yeah,we're going to get around here.
You can say, historically, thisis what we have done, but we
(04:54):
can't promise you futureperformance. We don't know what
the future market has. Our jobis to be an adviser and manage
it to the best of our abilities,to give you the best return
based on your risk suitability.That's like saying, hey, I want
medication with only benefitsand no side effects. Well, that
doesn't exist.
Right? So there's always sideeffects. There's always risks
associated with it. So if youask an adviser saying, hey, I've
(05:17):
got it in a high yield savingsaccount or a low risk bond fund.
I want more money, but I want norisk.
The adviser is absolutelycompromised, and the reason is
twofold. One is if the adviserputs it in the market, there's
risk, and the person has said, Idon't want any risk. That's
compromised. The wholesituation's now is gone off the
rails because you can't put itin the stock market, in ETFs, in
(05:40):
bond funds, or any of thesethings, and still do what the
client asked. The adviser iscompromised.
And the person might say, well,can you give me a more realistic
like, just paint the picture. Inten years, what would it be
like? That's anoversimplification of their
emotional state, because it'snot in ten years people aren't
actually emotionally resolved.They're emotional. People are
(06:01):
emotional.
So in the first year, themarkets tanked. Well, we had the
conversation in ten years, itshould be up. That could be a
true statement. It probably is atrue statement. But along the
journey, they might get pissed.
Maybe it wasn't totally suitablefor them. So the advisers
absolutely compromise, becauseif you do try to grow it,
there's risk. Now you might say,well, Mike, there's other things
you could grow without risk.Yes. If you want a CD, maybe you
(06:23):
could put it into a CD, or let'ssay you could do a treasury, any
bond instrument depending on thecredit rating of it, so like a
corporate bond if you want.
You could do a fixed annuity. Alot of people don't realize that
a fixed annuity is a CD from aninsurance company as long as
you're 60 years old or older.
David (06:39):
Okay.
Mike (06:39):
Like, it's just a CD from an insurance company. You don't
need to turn on income. Right?There's no fees. It's just put
it in here for a certain amountof years, and it grows at that
fixed rate.
That's it. Okay. Really boring.Yeah. Doesn't pay much of the
commission, so I don't thinkthey're talked about a lot
either.
But if you put your money into afixed investment or product as
such, why would you pay anadviser fees?
David (07:01):
Oh, I heard.
Mike (07:01):
Therein lies the complicated bit. Yeah. If you
put something into a indexedproduct, so a buffered ETF, so
it has buffered protection. Sowhether it's some of the
downsides protected or most orall or certain thresholds
protected, you've got limitedupside. There needs to be a
realistic expectation that someyears you'll make some money,
(07:22):
some years you might not.
It just depends on the market.But what are you paying the
adviser for at that point? Mhmm.Because you just let it sit
there. Yeah.
So the idea of asking an adviserto make you more money with no
risk, all the things that youcould offer that have no risk,
do not rationalize any sort ofongoing fee. It would be a one
time service. Here's somerecommendations. Here's what you
(07:44):
could do. Now there's reallynothing I can do at this point.
David (07:47):
Because it's it's fixed. The adviser isn't managing
anything. Or she is not movingmoney
Mike (07:52):
you actively trade it, you're creating risk.
David (07:54):
So they wouldn't it wouldn't be suitable for someone
who is risk averse.
Mike (07:57):
Now if you pose this question to an insurance agent,
or maybe they're duly licensed,so they have securities license
and an insurance license, It'sgot annuity sales all over it,
which may or may not be rightfor this person. I don't wanna
suggest anything, but bydefinition, an annuity is
transferring longevity risk toan insurance company, and maybe
this person's going, hey. I justwant stable income. Great. Maybe
(08:20):
the annuity is right for you aslong as you're okay taking
inflation risk and tax risk.
Because if taxes go up, yourincome goes down. Right? It's
all about net income. Mhmm. Butif they're already keeping their
money in a high yield savingsaccount, that's it.
Maybe they're already okay withthose risks, or maybe they
didn't even realize it. Now isthat extensive of a conversation
(08:41):
going to happen? Probably not.That's the sad truth. But you
need to be aware of that.
In addition to that, you mightbe like, well, a fixed index
annuity, you've got more upsidepotential. No downside risk, and
you can pull out 10% wheneveryou want. That is true. Make
sure there's liquidity risk. Yougot to address liquidity risk.
So what if you need more than10%? What are the other needs?
(09:03):
So when someone asks a questionlike that, it sets up the
adviser to either give you aproduct pitch without doing a
full suitability review. I knowwe're supposed to. I just
understand that it's not.
We wanna live in a utopicsociety, but the reality is I
don't think there's propervetting of these products before
they're placed, because thepeople come into my office, and
(09:23):
they complain about, I didn'tknow x y z, or I didn't realize
this was a risk. I didn'trealize it could go this way. So
because of my anecdotalexperience of having to clean up
other people's messes, I'm notso optimistic about it. Then why
would you pay adviser fees forthe ongoing service? That's on
the adviser side.
(09:43):
Now if this person ends up in anannuity and the proper
conversations there, maybethat's appropriate for them.
Maybe they split some funds.Maybe they do a hybrid. Don't
know. There's many ways thatcould be done, but ongoing
management fees in thatsituation, I don't see it making
sense.
David (10:01):
So did we answer the question then? Nope. We haven't.
Okay.
Mike (10:04):
Now let's get to the real stuff here. Yeah. This is where
it's important, and I hopeeveryone listening, whether it's
on YouTube, podcast, this is thepart where we're ten minutes or
so into the show. This is whereyou bookmark it, and you listen
to this over and over again.This is your unofficial therapy
for the day.
Ugh. K? Not a therapist. Butalmost without exception, when
(10:26):
someone asks me this question, Isay, what happened historically
that caused you to fear themarket so much?
David (10:32):
Oh, good question.
Mike (10:33):
And almost unanimously, it says, when I started investing,
the markets kept going down, andI have avoided it ever since.
David (10:40):
Oh, right. They have that sort of past trauma of they just
have those memories of, oh, Ijust watch my balance go down or
stay flat. Unresolved trauma.Yes.
Mike (10:48):
And if you do not resolve your trauma, whether it's
related to investments, whetherit's related to relationships,
whether it's related to selfdoubt, maybe someone bullied you
in your childhood, and these aredemons. These are traumatic
experiences that weigh on youfor the rest of your life unless
they're addressed. Here's myframework. It's rather simple.
Your history, your pastexperiences, and how you've
(11:12):
perceived them shape yourhabits.
Your habits are behavioralsystems that basically predict
what you're going to do in anygiven moment. So if someone
aggressively speaks to you, yourhabit will be either to shut
down or to try and speak louder.That is a habit. It's a
behavioral reaction to thesituation. Those who are happy,
(11:34):
those who have amassed extrawealth, those who have healthy
relationships, they have healthyhabits that have created a very
happy habitat, just a generallifestyle.
Those who have had a history,trauma that was unresolved,
created habits that has causedthem to infinitely live a lower
(11:57):
quality of life, comparative toif had they resolved them. There
are some horrible things thathappen. I am not minimizing
trauma. I'm not minimizing thatsome people have had some very
messed up experiences in theirlife, and I can't explain why it
happens. All I can say is thingshappen, and it is our individual
responsibility to address them.
(12:18):
Why am I saying this? Becauseeveryone that comes to my office
has a bias. And every time thatbias is traced back to a
historical moment or series ofmoments that has either
distorted their perception ofsomething where they've then
compounded this idea, and thenthey're walking to my office not
defining things as they are, butas they want them to be, and
(12:41):
it's leading them to a riskierretirement than they realize.
Your history, your past,dictates your habits, your
ability to make decisions, yourbehavior, or your systems that
then dictate your outcome. Andtoo often, people are not
addressing their trauma.
They're not addressing theirpast that's distorting their
reality. It's easier to say, Idon't care. I just want this, as
(13:04):
opposed to healing and becominga better version of yourself.
And so when you understand whata healthy portfolio looks like,
what healthy conversationsaround your finances looks like,
when you have that baseline, alot of people become
uncomfortable because you'rebeing asked to heal. You're
being asked to be a betterversion of yourself, and that
means giving up some of your,let's say, biased addictions.
(13:28):
The addiction to perceive thingsin a certain way. You ever met
someone that's like, the world'salways out to get me?
David (13:33):
True. Yeah.
Mike (13:34):
You ever met someone that's just the world's my
always everything always worksout? Yeah. Those are polar
opposites. Yeah. And thatjuxtaposition, they're both so
imbalanced that whether theyrealize it or not, it's hurting
them.
David (13:47):
And so have you seen in your career someone who maybe
they take your advice, they getthe healthy portfolio, they have
some discomfort at first, buthave they sort of worked with
you and get to the other side?How did their life get better?
Mike (13:58):
They have now permission to live. Some of my wealthiest
clients, and even some familymembers that have done well for
themselves, are so frugal.They're so uncomfortable
spending money that they'll takethe red solo cup, and they'll
wash it. Yep. And we've gotpeople at the office now
laughing about this because theyknow even the family members
(14:19):
that do this.
Uh-huh. K? But it's funnybecause there are many clients
that we have that are so frugal.They don't wanna waste anything.
Now they have multiple millionsof dollars.
They can't spend all theirmoney, but they're so
uncomfortable even going on avacation because it might be a
bad steward of their money. It'san unhealthy relationship with
(14:41):
money. And so a lot of thetimes, we have to work through
then how do you budget, not toprevent you from overspending,
but to force you to spend andcreate meaning to your money.
You don't need to spend it onyourself, but you need to spend
it in some way. Maybe that'screating an endowment that in
perpetuity is spending money fortechnical schools, college
(15:04):
educations, professionaltrainings, whatever it is.
Maybe it's saying, hey, here's$50,000 you're supposed to spend
every year, and you're beingforced to spend it. What do you
wanna do? It's like, well, Idon't really know. And then we
explore those options, And maybeit's like, hey, there's a couple
of families that are really inneed, or maybe it's we're gonna
do a family vacation and createa memory that they'll remember
(15:24):
forever. Yeah.
When people think budgets,sometimes a budget is
restriction. The other times,it's forcing you to do
something. Think about it thisway. Many of us struggle eating
healthy. I'll I'll admit, I havemy bouts where I'm a bit
gluttonous, and as we go intothe holiday season right now
David (15:42):
Oh, yeah.
Mike (15:43):
I'm gonna help me. Goodness. When you're trying to
be healthy, there's really twooptions. One is you wanna lean
down, so you wanna shed the fat.And another one might be, and
this includes the retirees,gaining muscle mass.
So I think it's like midthirties is when you start
actually losing your muscle massunless you deliberately try to
(16:05):
trigger your muscle mass. So youmight be in your fifties or
sixties saying, gosh, I'm morefrail than I want to. I need to
build muscle mass. Mhmm. Youcannot have the same diet and
accomplish both those goals.
You either have a caloriedeficit to shed the weight, or
you have a calorie surplus togain muscle mass.
David (16:25):
And so we're transposing that onto, like, in a budget
situation?
Mike (16:28):
But notice yeah. There's a difference on the intake of
calories. There's a differenceon how you're spending money.
But notice it's all based onprinciples. It's all based on
precepts, frameworks.
Yeah. What does it look like tohave a healthy relationship with
money? What does theconversation need to be? And
then you need to add to that,can you define things as they
(16:52):
are? If I show you a hammer, youcan most people can define what
a hammer is.
Mhmm. A hammer is a device toput nails into walls or to pull
nails out. Right. A hammer wasnot invented to hit your thumb.
And I'm I'm doing this a littlebit in a joking manner Sure.
To just illustrate a point.Maybe you have a horrible time
hitting nails, and you keephitting your thumbs. That's not
(17:14):
what was intended. Define thingsas they are, and then you can
have a healthier conversation ofwhat do you actually want. At
the end of it, we typically askfor a certain result for the
conditions that we need toaccept to get that result.
We all want growth, protection,and liquidity. No investment
offers at all. So how muchshould be in growth and
(17:36):
protection? How much giving upliquidity? How much should be
protection and liquids?
You know, like your emergencyfund. And how much is growth and
liquid, but has risk? It's notprotected. And then are you okay
with those mini portfolios,knowing that some of it has
certain detriments? Knowing thatsome of it has certain
timelines.
But then you start doingexercises, and we have clients
(17:56):
actually come in not fortherapy, because we're not
therapists, but for coaching,where they walk through and they
reiterate and rearticulate theirplan, and we start doing
exercises to say, well, what ifthis were to happen? Because
they're scared to death of thenext market crash. And I say,
okay. If the markets were tohere's your list of accounts.
Now where are gonna pull yourincome?
We can liquidity. The protocol
David (18:16):
Yeah. To follow. The playbook.
Mike (18:18):
Yeah. And as they start to learn it, as they start to
envision it, what they're doingis they're changing their
behavior, their habits, so thatwhen something happens, they're
not going back to previoushabits based on traumatic
experiences. They've redefined.They've got new neurological
pathways in their head. Theyknow what to do in that moment,
(18:40):
and they're comfortable withthat.
Yeah. It takes work to do. Butwhat that person asked is
basically saying, hey, I want anunhealthy relationship with my
adviser, who is either gonnatake advantage of me or sell a
product, and I also want aportfolio that is not healthy,
because I'm only concerned aboutone risk, and I'm completely
ignorant to all the other risks.Advisor, take advantage of my
(19:00):
situation. And I don't know asingle advisor in the country,
and I coached advisors all overthe country.
I've been on many panelsspeaking. I've been the keynote
speaker of different events. Idon't know a single adviser that
would say what I just said inthe country. You have to push
back when it comes to yourmoney. And if you don't push
back, that's when people end upin crappy situations with
(19:22):
illiquid assets that aren'tserving their needs, when their
lifestyle and legacy goals arenot properly aligned with their
plan and portfolio, when peopleare getting into tough spots,
and sometimes you might notrealize you're heading that
direction until ten or thirtyyears later, and then you're
kinda stuck.
If you have an emotionalresistance towards anything
financially related, what if youcould become neutral and define
(19:44):
it as it is? That doesn't meanyou need it. That means you can
define the investment or productas is. What if instead of you
saying, well, this is what mywork income is, I'm just gonna
make everything work in life.What if you deliberately
designed your next phase oflife, figured out how much that
would cost, and then startedputting your plan together, then
(20:05):
you started putting togetheryour strategies, and then you
looked at the investments orproducts that would fulfill your
plan and your strategies.
There's a certain sequence thathas to be done for this to work,
and too often, it's in the firstor second visit. Here's
something that just helps yougrow your money. You've made
enough. Don't worry about it.You're fine.
Now go live your life, whateveryou want. We'll just figure it
(20:27):
out along the way. That's agreat way to live in chaos and
uncertainty, which creates a lotof emotional distress,
especially for someone that'shad a traumatic experience no
matter how big or small it iswhen it comes to their money. We
need to work through thesethings, and the financial
advisers need to do people aservice in slowing down and
having more deliberateconversations like this. That's
(20:51):
all the time we've got for theshow today.
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(21:11):
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Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice and getinto the nitty gritty. As
always, text your questions to(913) 363-1234. Again, (913)
363-1234. And remember, thisshow is just a show.
It's not financial advice, somake sure you do your research.
David, what do we got today?
David (00:27):
Hey, Mike. I don't want any risk and currently have all
my money in a money market. If Igave it to an adviser, could
they grow it better without anyrisk?
Mike (00:37):
This is a very perplexing question, and here's why.
David (00:40):
Okay.
Mike (00:41):
What is risk? Let me ask you, David. What is risk? Yeah.
I guess It's not existential.
David (00:46):
When you're talking about risk, there's some sort of
danger. Right? Yeah. Like, oh,if I'm riding a bike, I have
risk of falling over and hittingmy head, so I put on a helmet.
Mike (00:53):
In finance, it'd be loss of money. Yes. There's a pain or
something negative that canhappen, a negative consequence.
David (01:00):
Okay. Yeah. That sounds well defined.
Mike (01:02):
So if you're afraid of risk and you put your money in
the market, you're scared ofmarket risk. And then you're
either not scared of or ignorantof inflation risk.
David (01:14):
Yeah.
Mike (01:16):
So you have to understand there is no such thing as a
perfect investment product orstrategy. There is no such thing
as a riskless retirement. Youneed to accept that in life,
there's all gonna be risk.There's going to be something
that you have to address.There's gonna be demons ahead of
you that you'll need to face inorder to create a healthy plan.
(01:38):
So let's take our example here.He's got what all of his assets,
like a money market or some
David (01:43):
Everything's in money market.
Mike (01:45):
Okay. So this question brings me back to an example. So
someone I know, years and years,like, over a decade ago, said,
hey. I want low risk. I don'twant any risk.
Tells the adviser, don't wantany risk. What do you have for
me? And this adviser, based onif you look at the details, his
(02:06):
job is to put you in some sortof fund. So what does he do? He
does the best that he can.
He's gotta get paid, but he doesthe best that he can, and he
puts this person into very lowrisk bond funds. But when
interest rates go up, bond fundslose money.
David (02:21):
And how is that? Just, like, really quick sidebar.
Yeah.
Mike (02:24):
So if interest rates go up, right, new debt issuance,
so, like, new bonds are paying ahigher coupon rate than your old
bonds.
David (02:34):
Oh, right.
Mike (02:34):
Right. So think of it this way. This is my chicken analogy.
If you bought a chicken for athousand bucks and give you
three eggs a week, you knowexactly what you're expecting.
Let's say foxes can't get to itsafe, it's secure, whatever.
And then next week, they'reselling chickens for a thousand
dollars. They're gonna give youfive eggs every single week.
Which chicken do you want more?Well, if it's the same price for
the chicken, but one gives youtwo eggs more every single week,
(02:56):
you're going to naturally want ahigher yield. So when interest
rates go up, basically, it's newchickens laying more eggs.
So all the people that bought achicken that's laying three
eggs, they're gonna have to sellit at a discount to compensate
for the lost eggs that theywould have gotten if they just
bought a new chicken.
David (03:15):
So that's the risk in investing in bond funds?
Mike (03:17):
In bond funds. Okay. Yeah. They're actively trading bonds.
So because of that, if interestrates go up, they're selling old
chickens, trying to buy newchickens, and that creates a
loss.
So this person wanted no risk.They went into a low risk. It
went down. They panicked. Theydidn't like it.
They didn't understand it. Theydidn't have experience in the
(03:39):
market. It was not explainedwell to them, and so then they
went back and just stuckeverything in the high yield
savings account. And that's allthey've done ever since.
David (03:47):
Yeah. And what's the risk in that?
Mike (03:49):
Inflation risk. If your funds are not in a qualified
account, such a retirementaccount, like IRA or Roth, your
growth is taxes, income tax.That's line two b of the tax
code or not tax code, but yourten forty. Sure. Two b is
taxable interest.
So every like, let's say you gota 4% interest every year. What's
(04:10):
your effective tax rate? That'skind of what you're paying on
that interest rate. But the cruxof this question, there's two
problems that need to beaddressed. Let's do the first
one, the expectation of anadviser.
Okay? When you have an adviserand you ask them, hey. Can you
get more money from a high yieldsavings account? The adviser who
(04:32):
is sales focused, their job isto acquire more assets, will
probably say, absolutely. Wecould probably do that, but you
can't guarantee results.
I'm not saying any advisor wouldsay, we can guarantee results,
because no one really does that.And if they do that, let someone
know Yeah. That's illegal topromise returns. Uh-huh. Even to
suggest or infer that, yeah,we're going to get around here.
You can say, historically, thisis what we have done, but we
(04:54):
can't promise you futureperformance. We don't know what
the future market has. Our jobis to be an adviser and manage
it to the best of our abilities,to give you the best return
based on your risk suitability.That's like saying, hey, I want
medication with only benefitsand no side effects. Well, that
doesn't exist.
Right? So there's always sideeffects. There's always risks
associated with it. So if youask an adviser saying, hey, I've
(05:17):
got it in a high yield savingsaccount or a low risk bond fund.
I want more money, but I want norisk.
The adviser is absolutelycompromised, and the reason is
twofold. One is if the adviserputs it in the market, there's
risk, and the person has said, Idon't want any risk. That's
compromised. The wholesituation's now is gone off the
rails because you can't put itin the stock market, in ETFs, in
(05:40):
bond funds, or any of thesethings, and still do what the
client asked. The adviser iscompromised.
And the person might say, well,can you give me a more realistic
like, just paint the picture. Inten years, what would it be
like? That's anoversimplification of their
emotional state, because it'snot in ten years people aren't
actually emotionally resolved.They're emotional. People are
(06:01):
emotional.
So in the first year, themarkets tanked. Well, we had the
conversation in ten years, itshould be up. That could be a
true statement. It probably is atrue statement. But along the
journey, they might get pissed.
Maybe it wasn't totally suitablefor them. So the advisers
absolutely compromise, becauseif you do try to grow it,
there's risk. Now you might say,well, Mike, there's other things
you could grow without risk.Yes. If you want a CD, maybe you
(06:23):
could put it into a CD, or let'ssay you could do a treasury, any
bond instrument depending on thecredit rating of it, so like a
corporate bond if you want.
You could do a fixed annuity. Alot of people don't realize that
a fixed annuity is a CD from aninsurance company as long as
you're 60 years old or older.
David (06:39):
Okay.
Mike (06:39):
Like, it's just a CD from an insurance company. You don't
need to turn on income. Right?There's no fees. It's just put
it in here for a certain amountof years, and it grows at that
fixed rate.
That's it. Okay. Really boring.Yeah. Doesn't pay much of the
commission, so I don't thinkthey're talked about a lot
either.
But if you put your money into afixed investment or product as
such, why would you pay anadviser fees?
David (07:01):
Oh, I heard.
Mike (07:01):
Therein lies the complicated bit. Yeah. If you
put something into a indexedproduct, so a buffered ETF, so
it has buffered protection. Sowhether it's some of the
downsides protected or most orall or certain thresholds
protected, you've got limitedupside. There needs to be a
realistic expectation that someyears you'll make some money,
(07:22):
some years you might not.
It just depends on the market.But what are you paying the
adviser for at that point? Mhmm.Because you just let it sit
there. Yeah.
So the idea of asking an adviserto make you more money with no
risk, all the things that youcould offer that have no risk,
do not rationalize any sort ofongoing fee. It would be a one
time service. Here's somerecommendations. Here's what you
(07:44):
could do. Now there's reallynothing I can do at this point.
David (07:47):
Because it's it's fixed. The adviser isn't managing
anything. Or she is not movingmoney
Mike (07:52):
you actively trade it, you're creating risk.
David (07:54):
So they wouldn't it wouldn't be suitable for someone
who is risk averse.
Mike (07:57):
Now if you pose this question to an insurance agent,
or maybe they're duly licensed,so they have securities license
and an insurance license, It'sgot annuity sales all over it,
which may or may not be rightfor this person. I don't wanna
suggest anything, but bydefinition, an annuity is
transferring longevity risk toan insurance company, and maybe
this person's going, hey. I justwant stable income. Great. Maybe
(08:20):
the annuity is right for you aslong as you're okay taking
inflation risk and tax risk.
Because if taxes go up, yourincome goes down. Right? It's
all about net income. Mhmm. Butif they're already keeping their
money in a high yield savingsaccount, that's it.
Maybe they're already okay withthose risks, or maybe they
didn't even realize it. Now isthat extensive of a conversation
(08:41):
going to happen? Probably not.That's the sad truth. But you
need to be aware of that.
In addition to that, you mightbe like, well, a fixed index
annuity, you've got more upsidepotential. No downside risk, and
you can pull out 10% wheneveryou want. That is true. Make
sure there's liquidity risk. Yougot to address liquidity risk.
So what if you need more than10%? What are the other needs?
(09:03):
So when someone asks a questionlike that, it sets up the
adviser to either give you aproduct pitch without doing a
full suitability review. I knowwe're supposed to. I just
understand that it's not.
We wanna live in a utopicsociety, but the reality is I
don't think there's propervetting of these products before
they're placed, because thepeople come into my office, and
(09:23):
they complain about, I didn'tknow x y z, or I didn't realize
this was a risk. I didn'trealize it could go this way. So
because of my anecdotalexperience of having to clean up
other people's messes, I'm notso optimistic about it. Then why
would you pay adviser fees forthe ongoing service? That's on
the adviser side.
(09:43):
Now if this person ends up in anannuity and the proper
conversations there, maybethat's appropriate for them.
Maybe they split some funds.Maybe they do a hybrid. Don't
know. There's many ways thatcould be done, but ongoing
management fees in thatsituation, I don't see it making
sense.
David (10:01):
So did we answer the question then? Nope. We haven't.
Okay.
Mike (10:04):
Now let's get to the real stuff here. Yeah. This is where
it's important, and I hopeeveryone listening, whether it's
on YouTube, podcast, this is thepart where we're ten minutes or
so into the show. This is whereyou bookmark it, and you listen
to this over and over again.This is your unofficial therapy
for the day.
Ugh. K? Not a therapist. Butalmost without exception, when
(10:26):
someone asks me this question, Isay, what happened historically
that caused you to fear themarket so much?
David (10:32):
Oh, good question.
Mike (10:33):
And almost unanimously, it says, when I started investing,
the markets kept going down, andI have avoided it ever since.
David (10:40):
Oh, right. They have that sort of past trauma of they just
have those memories of, oh, Ijust watch my balance go down or
stay flat. Unresolved trauma.Yes.
Mike (10:48):
And if you do not resolve your trauma, whether it's
related to investments, whetherit's related to relationships,
whether it's related to selfdoubt, maybe someone bullied you
in your childhood, and these aredemons. These are traumatic
experiences that weigh on youfor the rest of your life unless
they're addressed. Here's myframework. It's rather simple.
Your history, your pastexperiences, and how you've
(11:12):
perceived them shape yourhabits.
Your habits are behavioralsystems that basically predict
what you're going to do in anygiven moment. So if someone
aggressively speaks to you, yourhabit will be either to shut
down or to try and speak louder.That is a habit. It's a
behavioral reaction to thesituation. Those who are happy,
(11:34):
those who have amassed extrawealth, those who have healthy
relationships, they have healthyhabits that have created a very
happy habitat, just a generallifestyle.
Those who have had a history,trauma that was unresolved,
created habits that has causedthem to infinitely live a lower
(11:57):
quality of life, comparative toif had they resolved them. There
are some horrible things thathappen. I am not minimizing
trauma. I'm not minimizing thatsome people have had some very
messed up experiences in theirlife, and I can't explain why it
happens. All I can say is thingshappen, and it is our individual
responsibility to address them.
(12:18):
Why am I saying this? Becauseeveryone that comes to my office
has a bias. And every time thatbias is traced back to a
historical moment or series ofmoments that has either
distorted their perception ofsomething where they've then
compounded this idea, and thenthey're walking to my office not
defining things as they are, butas they want them to be, and
(12:41):
it's leading them to a riskierretirement than they realize.
Your history, your past,dictates your habits, your
ability to make decisions, yourbehavior, or your systems that
then dictate your outcome. Andtoo often, people are not
addressing their trauma.
They're not addressing theirpast that's distorting their
reality. It's easier to say, Idon't care. I just want this, as
(13:04):
opposed to healing and becominga better version of yourself.
And so when you understand whata healthy portfolio looks like,
what healthy conversationsaround your finances looks like,
when you have that baseline, alot of people become
uncomfortable because you'rebeing asked to heal. You're
being asked to be a betterversion of yourself, and that
means giving up some of your,let's say, biased addictions.
(13:28):
The addiction to perceive thingsin a certain way. You ever met
someone that's like, the world'salways out to get me?
David (13:33):
True. Yeah.
Mike (13:34):
You ever met someone that's just the world's my
always everything always worksout? Yeah. Those are polar
opposites. Yeah. And thatjuxtaposition, they're both so
imbalanced that whether theyrealize it or not, it's hurting
them.
David (13:47):
And so have you seen in your career someone who maybe
they take your advice, they getthe healthy portfolio, they have
some discomfort at first, buthave they sort of worked with
you and get to the other side?How did their life get better?
Mike (13:58):
They have now permission to live. Some of my wealthiest
clients, and even some familymembers that have done well for
themselves, are so frugal.They're so uncomfortable
spending money that they'll takethe red solo cup, and they'll
wash it. Yep. And we've gotpeople at the office now
laughing about this because theyknow even the family members
(14:19):
that do this.
Uh-huh. K? But it's funnybecause there are many clients
that we have that are so frugal.They don't wanna waste anything.
Now they have multiple millionsof dollars.
They can't spend all theirmoney, but they're so
uncomfortable even going on avacation because it might be a
bad steward of their money. It'san unhealthy relationship with
(14:41):
money. And so a lot of thetimes, we have to work through
then how do you budget, not toprevent you from overspending,
but to force you to spend andcreate meaning to your money.
You don't need to spend it onyourself, but you need to spend
it in some way. Maybe that'screating an endowment that in
perpetuity is spending money fortechnical schools, college
(15:04):
educations, professionaltrainings, whatever it is.
Maybe it's saying, hey, here's$50,000 you're supposed to spend
every year, and you're beingforced to spend it. What do you
wanna do? It's like, well, Idon't really know. And then we
explore those options, And maybeit's like, hey, there's a couple
of families that are really inneed, or maybe it's we're gonna
do a family vacation and createa memory that they'll remember
(15:24):
forever. Yeah.
When people think budgets,sometimes a budget is
restriction. The other times,it's forcing you to do
something. Think about it thisway. Many of us struggle eating
healthy. I'll I'll admit, I havemy bouts where I'm a bit
gluttonous, and as we go intothe holiday season right now
David (15:42):
Oh, yeah.
Mike (15:43):
I'm gonna help me. Goodness. When you're trying to
be healthy, there's really twooptions. One is you wanna lean
down, so you wanna shed the fat.And another one might be, and
this includes the retirees,gaining muscle mass.
So I think it's like midthirties is when you start
actually losing your muscle massunless you deliberately try to
(16:05):
trigger your muscle mass. So youmight be in your fifties or
sixties saying, gosh, I'm morefrail than I want to. I need to
build muscle mass. Mhmm. Youcannot have the same diet and
accomplish both those goals.
You either have a caloriedeficit to shed the weight, or
you have a calorie surplus togain muscle mass.
David (16:25):
And so we're transposing that onto, like, in a budget
situation?
Mike (16:28):
But notice yeah. There's a difference on the intake of
calories. There's a differenceon how you're spending money.
But notice it's all based onprinciples. It's all based on
precepts, frameworks.
Yeah. What does it look like tohave a healthy relationship with
money? What does theconversation need to be? And
then you need to add to that,can you define things as they
(16:52):
are? If I show you a hammer, youcan most people can define what
a hammer is.
Mhmm. A hammer is a device toput nails into walls or to pull
nails out. Right. A hammer wasnot invented to hit your thumb.
And I'm I'm doing this a littlebit in a joking manner Sure.
To just illustrate a point.Maybe you have a horrible time
hitting nails, and you keephitting your thumbs. That's not
(17:14):
what was intended. Define thingsas they are, and then you can
have a healthier conversation ofwhat do you actually want. At
the end of it, we typically askfor a certain result for the
conditions that we need toaccept to get that result.
We all want growth, protection,and liquidity. No investment
offers at all. So how muchshould be in growth and
(17:36):
protection? How much giving upliquidity? How much should be
protection and liquids?
You know, like your emergencyfund. And how much is growth and
liquid, but has risk? It's notprotected. And then are you okay
with those mini portfolios,knowing that some of it has
certain detriments? Knowing thatsome of it has certain
timelines.
But then you start doingexercises, and we have clients
(17:56):
actually come in not fortherapy, because we're not
therapists, but for coaching,where they walk through and they
reiterate and rearticulate theirplan, and we start doing
exercises to say, well, what ifthis were to happen? Because
they're scared to death of thenext market crash. And I say,
okay. If the markets were tohere's your list of accounts.
Now where are gonna pull yourincome?
We can liquidity. The protocol
David (18:16):
Yeah. To follow. The playbook.
Mike (18:18):
Yeah. And as they start to learn it, as they start to
envision it, what they're doingis they're changing their
behavior, their habits, so thatwhen something happens, they're
not going back to previoushabits based on traumatic
experiences. They've redefined.They've got new neurological
pathways in their head. Theyknow what to do in that moment,
(18:40):
and they're comfortable withthat.
Yeah. It takes work to do. Butwhat that person asked is
basically saying, hey, I want anunhealthy relationship with my
adviser, who is either gonnatake advantage of me or sell a
product, and I also want aportfolio that is not healthy,
because I'm only concerned aboutone risk, and I'm completely
ignorant to all the other risks.Advisor, take advantage of my
(19:00):
situation. And I don't know asingle advisor in the country,
and I coached advisors all overthe country.
I've been on many panelsspeaking. I've been the keynote
speaker of different events. Idon't know a single adviser that
would say what I just said inthe country. You have to push
back when it comes to yourmoney. And if you don't push
back, that's when people end upin crappy situations with
(19:22):
illiquid assets that aren'tserving their needs, when their
lifestyle and legacy goals arenot properly aligned with their
plan and portfolio, when peopleare getting into tough spots,
and sometimes you might notrealize you're heading that
direction until ten or thirtyyears later, and then you're
kinda stuck.
If you have an emotionalresistance towards anything
financially related, what if youcould become neutral and define
(19:44):
it as it is? That doesn't meanyou need it. That means you can
define the investment or productas is. What if instead of you
saying, well, this is what mywork income is, I'm just gonna
make everything work in life.What if you deliberately
designed your next phase oflife, figured out how much that
would cost, and then startedputting your plan together, then
(20:05):
you started putting togetheryour strategies, and then you
looked at the investments orproducts that would fulfill your
plan and your strategies.
There's a certain sequence thathas to be done for this to work,
and too often, it's in the firstor second visit. Here's
something that just helps yougrow your money. You've made
enough. Don't worry about it.You're fine.
Now go live your life, whateveryou want. We'll just figure it
(20:27):
out along the way. That's agreat way to live in chaos and
uncertainty, which creates a lotof emotional distress,
especially for someone that'shad a traumatic experience no
matter how big or small it iswhen it comes to their money. We
need to work through thesethings, and the financial
advisers need to do people aservice in slowing down and
having more deliberateconversations like this. That's
(20:51):
all the time we've got for theshow today.
If you enjoyed the show,consider subscribing to it
wherever you get your podcasts.Just search for how to retire on
time. Discover if your portfoliois built to weather flat market
cycles or if you're missingminimization opportunities that
you may not even know exist.Explore strategies that may be
able to help you lower youroverall risk while potentially
(21:11):
increasing your overall growthand lifestyle flexibility. This
is not your ordinary financialanalysis.
Learn more about Your WealthAnalysis and what it could do
for you regardless of your age,asset, or target retirement
date, go towww.yourwealthanalysis.com today
to learn more and get started.
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