Dave Cain: Welcome to unsuitable on Rea Radio, the award-winning financial services and business advisory podcasts, that challenges your old school business practices and the traditional business suit culture. Our guests are industry professionals and experts, who will challenge you to think beyond the suit and tie, while offering you meaningful modern solutions to help you enhance your company’s growth. I’m your host Dave Cain.
Developing a plan to promote your personal short and long term financial success is downright difficult these days. For the same reason business owners should consult with their professional advisor on a regular basis to keep companies on track. Meeting with a financial planner to keep your personal finances in order is just as important. Doug Feller, a principle and financial advisor with Investment Partners will join us on today’s episode of unsuitable, to talk about what you can do now, to manage and grow your wealth over the next year.
Let’s be honest, at the end of the day, isn’t that what we all want? This isn’t Doug’s first at bat with unsuitable. He joined us about a year ago to talk about after tax investment returns and asset allocation and asset location as well, which turned out to be an incredibly interesting episode and we’re glad that he agreed to come back to share some more valuable financial tips. Welcome back to unsuitable, Doug.
Doug Feller: Thanks, it’s great to be back.
Dave: It looks like we upped your contract, the amount of your contract to bring you back. You had an option to come back, so that’s pretty good.
Doug: That’s right, my hourly rate went up.
Dave: Those that are listening can just quickly Google Investment Partners’ website and you can see Doug Feller. He’s a principal with Investment Partners. He’s the bearded guy in the team picture. Investment Partners is well known, within the state of Ohio and across the United States for wealth management and the power of planning. Doug is a certified financial planner, chartered financial analysis, accredited investment fiduciary. In addition to that, he loves to back pack and he’s almost a professional photographer.
I’ve seen some of your photographs and they are magnificent. If I could ask you before we get started, what’s one of your favorite photographs of all time that you’ve taken?
Doug: As you mentioned I back pack and I’ve been to Glacier National Park, nothing short of 10 times. My dad and I were in the most remote part of the park one evening and there was a forest fire going on. Usually if there’s not much snow and not much water, a lightning strike will create a fire. The fire had created all this smoke that lit up the sky. The sun set right into that and lit up all the smoke, orange and red. We had a silhouette of a mountain in the foreground and it’s just terrific.
Dave: Perfect and I’ve seen some of your photographs of glacier and they are just wonderful.
Doug: It’s a great place to visit, as long as you don’t get eaten by the bears.
Dave: Good, let’s talk about that back pack. You do a lot of back packing. Do you keep a flask in that backpack for snake bite?
Doug: No I don’t. When you’re carrying all the food and clothing and everything you need for seven days, you don’t want to carry any extra weight, as nice as that might be. We keep it pretty light.
Dave: Nothing to protect against that snake bite?
Doug: Nothing.
Dave: Nothing. Let’s get started. Let’s talk about … We’re going to talk about financial planning today, which there’s a lot of misconceptions in the market place about what it is and what it isn’t. I noticed in your credentials, that you’re a certified financial planner. Let’s talk about what that means. What the differences are with that designation.
Doug: Sure. I understand why it’s a confusing question, because if you look at all the designations, within the financial world, the investment world, I think at last count there was something like 89, or 90. I understand when the public is looking to work with a financial advisor, planner, the confusion that exists, because nobody knows what it really means. A lot of these designation, it doesn’t mean that people didn’t put a lot of time and effort into it.
When I think of the serious credentials within the industry, I would … Let’s see if P certified financial planner is one, along with someone that has a JD, a CPA, MBA, those significant designations that require quite a bit of time. The difference that you’re going to find with a CFP, is that they have not only committed to the study, but they’ve committed to an exam that is a rigorous exam, as well they’re committed to this financial planning process and committed to high level of ethics and integrity.
That’s why you find I think more and more of the investment world wanting to obtain that. You’re seeing a lot of younger people coming into the industry pursuing it, because it is a differentiator. There’s one in eight investment advisors that are CFP. The number is about 12 of 15% right now. Of course it doesn’t mean that they’re terrific. It does mean that they are committed to the planning profession and the process and the approach to working with clients.
Dave: If I’m looking to hire a financial planner, give me a couple tips on what am I looking for? What should I be thinking as far as the process to make that hire?
Doug: I would say the number one thing is, walk into an advisors office, or a planner’s office, with an idea of what it is you want and need to accomplish. Then begin the process of understanding if they’re going to be a good match for you. If you’re walking in and all you simply need is an insurance policy. It’s possible that all you need is an insurance agent.
If you’re looking to only find and I only need help with investment, maybe you only need an investment advisor. If you’re looking for financial planning, that’s why I think it’s important to search out an CFP and a financial planner who can help you with that exactly. It’s important to know, number one, what it is you need. Secondly, as you interview that person and I always encourage people to interview multiple advisors. Is this somebody I can trust and build trust?
That sounds I know very … but the most valuable work a planner or advisor will do for you, is keeping you, I think from making a mistake when it counts the most. If you’re not going to trust that advisor, or you can’t find yourself trusting them in the future and you’re not going to take their advice when it matters the most. All of this good that can be done, can be undone very quickly.
I would say, make sure you have a basis for trust. I would say third and finally, an important component is that, is the term we talk about in the industry called a fiduciary. What a fiduciary is, it simply means that that person is going to put your best interest ahead of their own, but not only that, they’re required to do so by law. That’s a different legal standard than what might apply to a stock broker for instance.
I think asking somebody, whether or not they’re a fiduciary, you know that you can hold accountable to that standard. I think that’s important.
Dave: Good, good and as far as annual contract with a financial planner or fees, how does that typically work in the industry? Is it across the board as far as fees? If I wanted to hire you as a financial planner, what am I looking at as far as fee wise?
Doug: It’s as scattered as you can possibly imagine. I’m probably the nerd that’s read the ADV. If anybody is every interested in knowing about a firm, the SCC will have that document on file and it will outline the fees. As you’re read those, you’ll find that there is some commonality. A lot of these services are provided for a fee for the investments that get managed. Sometimes there’s a calculation based on net worth, or a very specific formula. Then you can find advisors and financial planners that might work on a project basis, or a retainer basis.
It’s wide and varied. That’s just a great question when you’re interviewing a advisor or a financial planner, to know what options you have available to you and understand what those fees will be.
Dave: You referred to yourself as a nerd. Can you define nerd? You defined financial planner very well. How about nerd?
Doug: I can’t define that, I actually don’t know what that means.
Dave: I think you’re anything but a nerd. Financial planning, again is one of the topics that you and I talked about. It’s not really holistic. In other words, I guess I’ve just now walking in the door and say, “Doug I need a financial plan within the next hour.” I think you had a pretty good response about this holistic approach. Let’s go in that direction.
Doug: It can be holistic. Certain if … Financial planning, well let’s just take financial out of it. Planning in general. You plan for vacation. In fact you’re probably spend more time planning your next vacation, than you will your finances for the next 12 years, or next 12 months. That’s pretty common.
Dave: How do you know that?
Doug: From experience. All planning is, is understanding where you are today. In the financial planning world, that’s getting an inventory. I think investors, clients, advisors do a pretty good job of taking inventory. You know what your assets are, you know what your budget probably is, but mapping out the destination. Where it is that we want to get to. I find that to be the stumbling block for a lot of clients.
It’s difficult to project 10, 20, 30 years, what retirement might look like. Determining what point B is, tends to be where the process stumbles out of the gate. Once we have that, then it’s just a process of mapping a plan, to get from point A to point B. To me financial planning … The destination might change. Life throws you curve balls and we might be aiming from point C, D, or E at some point. That’s why financial planning is not a document.
I think there’s this concept that you’re going to walk in and talk to a financial planner. In fact is that this probably happened, you walk out with an 80 page financial plan that goes in your filing cabinet and doesn’t get implemented. Financial planning isn’t a document, it’s a process. Working with a financial planner, they’ll be able to help you navigate to those changing destinations. If we need to tack from point B to point C, a planner should be able to help you anticipate what some of those things are. Finally, ask you some of the questions that you may not even know to ask.
Dave: In an ideal world, or situation, how often should I be meeting with my financial planner? Is it once a year? Is it quarterly? Where do we go? How often do we meet?
Doug: I would say as often as necessary. Certainly within reason. We’re all caps in the service industry with the number of hours we have in there. Certainly anytime life changes, there’s some sort of life change, or your thoughts on one of your goals change, or your current financial status changes.
Those are great times to reach out to your financial planner. Give them that information and ask that question, what next?
Dave: Where do you start? Give us a starting point. I come to you. I need a financial plan. What’s the first thing we’re going to do?
Doug: This comes back to the process. I mentioned that. The very first step, if you’re walking into a planner’s office, it’s to determine how you want to engage with them. What problems do you have or perceived problems do you have or goals you want to pursue? That you need help solving.
Determine with that advisor, planner’s help, whether or not they can help you. They may not be in the expert in retirement income planning. They might be an expert in charitable giving. That level of engagement, how are we going to work together? What are the terms? What are the expectations? Understanding where we’re going to get to? How we’re going to be held accountable.
That process of engagement is step number one. If you want to take the next step beyond that, then it’s just a matter of beginning to take some inventory. Where are we? Mapping out some of those goals, where we want to get to. There’s an analysis that goes into it and some recommendations that will follow.
Dave: We talked about financial planning from the personal level. What if I have a business, I’m a business owner and have a significant amount assets within that business. Does financial planning work within the, what I’ll call the corporate structure, or the business entity structure? Call it business financial planning for lack of a better term.
Doug: Sure, absolutely. We tend to think of personal financial planning, as working with individuals, but the process. Again I keep coming back to it being a process of engagement, of inventory, of analysis, recommendations, implementation, monitoring. That process can be applied no matter which client you’re working with.
Specifically within businesses, you can sit down with the owners. The company understand what it is they need help with, where they want to get to and then putting a plan in place to make that happen.
Dave: It sounds like this also, in this process, technology plays a huge role in the financial planning aspect. Whether it’s tracking, whether it’s projections, forecast. Do you see technology on the rise in your experience as a financial planner?
Doug: Yeah, technology has I think changed the interaction with the client from my perspective and hopefully they would say the same, that it’s changed the interaction with the advisor. The reason I say that is, you think … Think about 10 years ago, the iPhone didn’t exist. How far we have come in just the last 10 years. Financial planning 10 years ago, you would walk in with all your statements. You would say this is what I want to accomplish. We’d map it all out, either on Excel or Google Pad, or something like that.
We send you out with a Word document that says, “Here’s your financial planning go to it.” That was all well and good, but the next time you came by at the end of the quarter or six months, my response to you was, “Send me all of this again. We’re going to manually crunch all of this data again and we’ll update some of these projections.”
It was a very reactive process. Technology has changed that. You’re able now, through financial planning software certainly, but something as simple as Mint, or any of these other online sites, to be able to aggregate your investment. See daily picture of your net worth. That feeds into financial planner’s software, to be able to use some of the sophisticated planning software and be able to actively plan and reach out to the client and say, “I know you didn’t see this, but I did. Here are some things we need to be thinking about. Why don’t you come into the office and let’s have a discussion.”
Dave: Earlier today we had discussions about the differences between millennials and the baby boomers. Is there a different approach for each of those groups? Let’s start with millennials.
Doug: Certainly they’re at a different stage of life, they’re needs are just simply different, than the baby boomer who are retiring, who are concerned about social security strategies and health care and retirement. How much money do I need to live off of, or can I live off of with my assets. That’s a very different question.
The millennials who really over the last couple of years have entered into a very tight labor market. They’re saddled with college debt. They’re trying to figure out how to maybe start a family, or buy a home, all these different things. The starting point with millennials is different.
Secondly, they are technology natives. They grew up with technology. They grew up with the iPhone. They grew up trusting a technological system, that baby boomers, while they may be immigrants and they may adapt and try to stay current. Don’t necessarily trust the technology to deliver a financial plan. Millennials are different that way. Millennials have no trouble going out online and interacting with algorithms and computers and getting their output from that.
Yeah, the approach is very different. I would also say the information … Google really has a corner in the information market. With a quick, very quick Google search, you can get a lot of financial planning advice. I think millennials turn a lot to the internet and not necessarily to their parent’s financial advisor.
Dave: To me that’s a little bit concerning, that getting financial planning from a certified financial planner online, without the interaction and face to face.
Doug: It comes back to what is the value that the financial planner provides. In what you’ll never get from technology ever is sophisticated as it might be is empathy. You need to … At least in my opinion as a financial planner, to be able to walk in somebody’s office and have somebody explain the various options that I have and then be able to guide me through a discussion, a nuance discussion, about do I name my children as trustees in my trust. Here are my concerns about XY and Z.
A lot of these questions that just cannot be teased out by the internet. You can get plenty of advice. Remember there’s a lot of bad advice on the internet too. Just because it’s on the internet, doesn’t mean it’s right. You have to be able to stay on top of it, if you’re going to trust the internet for things like this. I think the value of a financial planner and not unlike a physician, is to empathetically give you your options and help guide you to the right decision.
Dave: From a baby boomers perspective, what’s the number one thing you’re seeing in your financial plans, for the baby boomer group?
Doug: The number question that everybody asks is, what to do about health care and medical insurance. If there’s a gap, how to get to Medicare 65. That’s number one. Social Security, they’ve closed down some of the strategies that were available to us, but that’s a close second. When I should take social security. This dove tails into the bigger picture then of retirement income. How much income do my assets need to provide throughout my retirement?
My answer always is, financial planning and retirement income planning, becomes very easy, if you can tell me the day you’re going to pass away. If it’s five years from now, we take your assets, factor in a little growth and divide by five. If it’s going to be 30 years, which the mortality table suggest is a probability. Then we have some work to do.
The managing and helping navigate that question, year in and year out, is a tremendous value I think to baby boomers, as they’re asking themselves those questions.
Dave: Our guest today is Doug Feller. He’s a principal with Investment Partners. Certified Financial Planner. We’ve gone almost 20 minute and haven’t even discussed, or used the word investments. That’s pretty unique, pretty cool from a financial planner. You went right to the issues and I commend you on that and appreciate all your good advice. I think we need to have you come back for a third time, because we only scratched the differences. I think we can have a session on financial planning for the millennials. A financial planning for the baby boomers.
Doug: To that point, investment advisors, insurance agents, attorneys, accountants, we’re all specialists. Financial planning is broad. I think you need a financial planner to understand how all of these areas connect. It’s rare that you will find that any one consultant, advisor that you hire is going to know everything. That’s why it’s important to have a quarterback, have somebody that can get your advisors in the room.
Know what they know, but also know what they don’t know and have a conversation about your financial plan. That’s the role of a financial planner.
Dave: Good, I appreciate that. I invite our listeners to go to your website, www.invp.com and look at the various services and look at your bio, very impressive. Again I thank you for being with us today. Again that website is www.invp.com. I think you’ll enjoy Doug’s picture. Again he’s the guy with the beard that looks like it needs to start turning grey a little bit.