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With no hidden fees and a 100% purchase guarantee, you can feel confident when you book your premium LA tickets with Sweet Hop. Visit Swithop.com today. Did you know that there are two classes of listeners for Radical Personal Finance? There are listeners of the show and then there are listeners with benefits.

For details on those benefits, go to RadicalPersonalFinance.com/patron. One of the benefits is the fact that I answer your question and we're continuing that today with answering patron questions. Today I'm going to cover five questions with you. What are Joshua's thoughts on real estate investing and different aspects of real estate investing?

What is Joshua's financial planning process with an actual client? How to plan for special needs kids or at least one? Should I start a podcast on a subject that is interesting to me but for which I might enter into controversy? How do I handle the college money for my 15-year-old son?

Finally, Joshua, you recently said there are some changes in your perspective of how you are engaging with public securities markets. What are your actual plans for your investment strategy? Here we go. Welcome to the Radical Personal Finance podcast. My name is Joshua Sheets and I'm your host. Today, you're question and answer man.

Continuing with a little bit of a Q&A blitz, I've had so many questions pile up including a bunch of questions from patrons. I want to give you good answers. So I've selected these five. I think they're going to be some fun ones. Importantly, I will give an apology today for something I've recently said.

It will be in the middle but it's a sincere apology. So stay tuned. I do enjoy doing these Q&A shows because you guys bring up far more interesting topics than I can bring up. Also, it is kind of fun. I'm gratifying from an ego perspective because I get to talk about what I think.

Sometimes I feel bad doing that on a lot of shows unless there's an actual question. But if it's a question and someone says, "Joshua, what do you think?" How's that for a question that's teed up for me? So let's kick it off with a voicemail question from Kyle on real estate.

Hi, Josh. My name is Kyle. I just had a question about what your thoughts were on real estate in general. I know you had an episode with John Shaw which was excellent. But I don't know if I ever caught what your actual thoughts on it was in terms of if people should do it, what your experience with it is, what percentage of your portfolio that you would make it, your thoughts on wholesaling, your thoughts on flipping, your thoughts on rental properties.

But if you can give any information about that, I'd really appreciate it. I'd love to know what your opinion is of it. I know everyone's different. Everyone's situation is different. Everyone's experience is different. But I love hearing your opinion. So if you could shed some light on that, I'd appreciate it.

Thanks so much. Like I said, how do you tee that one up any better for someone who likes to talk than just to say, "Joshua, what's your opinion?" So fun question, Kyle. I'll give you my thoughts. Let me start with the question that you asked about what is my experience with real estate.

My personal experience with real estate is nothing except academic and anecdotal. So keep that in mind. I do not have a history of working as a real estate investor. I do not have a history or a portfolio of properties that I've been engaged in managing. My experience is primarily academic, observational, and anecdotal.

It doesn't necessarily make it wrong. Sometimes the best people -- it's one of the fallacies of thinking that I often see is just because somebody doesn't have any specific experience in the subject doesn't necessarily mean that they're a bad observer of it. Sometimes the best coaches are not the best players.

Sometimes the best coaches are those who wanted to be a good player and just simply worked really hard at it but weren't able to do it. So I don't think it necessarily disqualifies me from my opinions, but I do like to put that up front so that you can filter what I have to share through that.

I have in the past been extremely interested in getting rich with real estate. And in the future, I am probably going to be incorporating a lot of real estate into my own future plans. I'll be covering that in the final question of this show, so I'm not going to talk much about that.

But when I was young, one of the first things that I got interested in was I started going to get-rich-quick seminars in real estate. And this would have been in the late '90s and early 2000s. And at that time, the real estate market was booming. I was reading all these books about how to become a millionaire with nothing down in real estate.

I started to get sucked into the real estate seminar scene, which thankfully I escaped from the skin of my teeth due to good parenting from my father who was wise enough to steer me clear of spending $30,000 on a real estate coaching program. But that really was a challenge for me getting started.

I bought hook, line and sinker into the idea that all I needed to do was go out and buy a bunch of properties and put them all on credit cards and I would be rich. From that time period of my life, I had the unique observation or the unique vantage point of being able to observe some close friends of mine who were going down the same track who went into that business.

Two people in specific that I think of, one of them – well, both of them borrowed a tremendous amount of money, bought a lot of real estate property. They lived high on the hog with lots of income for a short period of time and got completely wiped out in the 2008-2009 real estate crash.

One of them ultimately never recovered, declared bankruptcy and left the real estate business. One of them recovered, fought through it, and today is rich again with real estate. But it's been interesting to have a very close perspective to some people who have gone through it. I have some friends who actively work as flippers, flipping real estate right here where I live in South Florida.

I've worked with some clients who were longtime real estate investors. I have people in my family who have been long-term real estate investors and who have achieved financial independence in a very short period of time exclusively through the use of real estate and didn't start off wealthy, got to middle age.

I've been trying to get some of them to be willing to come on the show and share their story, but it's hard for a lot of people to be willing to share any kind of personal details publicly. I've read a lot of books and like I said, I'm moving into real estate in that direction.

And so that is really a big – I'm moving into real estate and so I've reconsidered the whole thing. So let me answer – so with that as my background as far as what my actual experience is with real estate, let's work through your questions. Should people invest in real estate?

Yes. Carefully. I think the biggest thing for people to recognize with real estate is it is like any other investment with certain attributes. And depending on your situation, these attributes can be advantages or disadvantages. If you start looking at anything you can do with money, any investment opportunity, buying this stock, purchasing this mutual fund, buying this house, buying this vehicle to buy and sell, investing in this option swap trade that you've worked out, buying a life insurance policy, a cash value like permanent whole life insurance policy, investing in an international private business.

If you just start looking at things and try to understand what the attributes of this investment opportunity is and then once you understand those attributes, then figure out for me are these attributes advantages or disadvantages, then I think you'd be able to make better financial decisions. So for some people, the attributes of real estate are a real advantage for them.

And for other people, the attributes of real estate are a real disadvantage for them. Let me give you an example. One of the things that has primarily turned me off to the idea of investing in local private real estate, just don't think of any complicated strategy here. I'm not talking about tax liens or anything weird and esoteric, just buying the house next door and renting it out, is simply this.

I do not particularly enjoy working hands-on with real estate. I don't particularly love working on my honey-do list. This afternoon I need to finish painting a hallway in my house. I don't like painting. But it makes my wife happy and it makes her feel loved and so even though sometimes I'm far too slow at it, I go ahead and paint.

And I try to make it into a good experience and listen to something and learn something and try to make it fun. But I don't like painting. Well, many real estate investors are very hands-on with their properties. It doesn't mean you have to be. But many real estate investors, they're skilled at painting.

So one attribute of real estate doesn't have to be, could be hired out. But one attribute that often happens is the landlord or the owner of the property will often be involved in working on the property to some extent. For me, that's a disadvantage of real estate. But I have somebody who's close to me for whom that's a real advantage of real estate.

This person built a real estate portfolio after a long corporate career, multiple divorces, basically wound up in his middle age, completely broke and needed to start over again. Left the career of working as a truck driver, got remarried and needed to start his life over again. Well, this person, starting with nothing, a little bit of savings, worked their way into being financially independent with real estate in under a decade.

But a major benefit for this person was the ability to find cheap, distressed properties, fix them up himself. This person is incredibly skillful with their hands. I am just in awe of his ability. It's really incredible. So for him, the attributes of real estate, being able to buy these junky properties and fix them up and make them look beautiful, being able to do that with his own skill and with his own hands, being able to do that with a very – in a very tax-efficient way because the appreciation that you force into a piece of real estate with your own effort is going to be either tax-deferred or tax-free depending on how you structure it and pull your money out of the deal.

This person, it was a real benefit, but that scares me off of real estate. Now, I'm convinced that I could be a successful and effective real estate investor if I went ahead and just hired the work out, but I'm slower to do that than some other people are. Or another thing, one of the most important skills of successful real estate investment is to find the deal.

That requires a lot of upfront work. It requires a system and it requires a lot of upfront work. I personally oftentimes like the idea of stocks where I can just go and at any time have a perfect number, so to speak, where I can go and I can pull up and say, "How much is Coca-Cola trading for today?" I know the number immediately.

I know I can buy at least some shares of Coca-Cola at that specific price. But some of the other aspects of real estate don't really appeal to me because I don't necessarily like getting down and dirty on the ground and trudging around and finding the deal. But to other people, they do.

I think that there are many strategies that one could use in real estate. So you figure out what are the attributes of different strategies. Some people are drawn to certain strategies because of their makeup. So I think that, yes, people should consider investing in real estate but they should do so carefully and understand their own interest as an investor.

Not everybody should invest in real estate. I'll give you an example. My father should not invest in real estate. He does not like any aspect of real estate investing. He's too much of a softy, too kind-hearted to stick to his guns and view it and work it as a business.

So in real estate, it's easy for him to get taken advantage of. That's not very good for a real estate investor to get taken advantage of when your entire business is based upon your property. So my dad has learned the hard way and I've worked with him through some of it as to why he should not be a real estate investor.

But that's different for different people. Now the next question you asked is what percentage of your portfolio? In my mind, this is one of those good examples of where you would have to understand what aspect of asset allocation are we talking about. So the answer to the question of what percentage of your portfolio would depend on your approach.

If you are running your portfolio, let's say that you're using something like modern portfolio theory. So you are a financial advisor running a portfolio of assets for a client, running their account, and you're trying to get the maximum risk-adjusted return with a minimum volatility. Well, in that case, real estate can fill the function in your portfolio of a partially non-correlating asset class.

The major focus of modern portfolio theory, the way that most investment portfolios are managed, is as a – you want to buy a bunch of assets that all move in different directions at different times. And if you could have a perfect non-correlating asset class, every time this asset class goes up, this asset class goes down, and every time asset class A goes down, then asset class B goes up, that is a real benefit to you because you can get a higher long-term return with a lower overall risk.

So real estate fills that. So what you'll often see depending on who is the portfolio designer, you'll see maybe 5% invested in real estate. Usually this would be invested through publicly traded real estate investment trusts. But let's flip it around and let's say that you put 100% of your money into real estate.

Well, many people have actually done this. Many people have gone out and they don't have a large portfolio of investments, but they've gone and purchased a home and maybe they've put 10 or 20% down. And they're 100% invested into real estate, their own personal house or maybe almost 100% invested in real estate because they've got $2,000 in a checking account and $20,000 in a car.

Well, they probably have $3,000 in car equity. The car is worth $20,000 and they owe $17,000 on it. Well, in this case, people have put 100% of their investment into real estate. So what are the advantages and disadvantages of doing that? Well, in a personal situation, most people aren't even aware of it.

But the disadvantage, if they lose their job, they lose their investment because they lose their house. And that's often what you see. But let's assume we're not going with just an individual but we're looking at an investor. Let's say that I as an investor invest 100% of my money into real estate.

Well, that may or may not be a risky venture depending on what I'm doing. As an example, let's say that all of my money is invested into one individual property and I don't carry any property insurance on this property and then my tenant burns it down. Well, in this case, it was very risky to be 100% exposed to that property and to not have that risk of my property being burned down covered with insurance.

But in the same scenario, I could have 10 properties and I could make the choice to self-insure against the risk of fire on my properties. And then if one of my 10 properties burns down, I might not be so heavily affected by that. And so what's actually unsafe about having 100% of my investment in real estate?

It depends on the makeup of the portfolio is what I'm illustrating. If I have one property and have one tenant, then the tenant moves out, my cash flow is substantially affected. That could be a big deal. But if I have 10 tenants and it's all in real estate and one tenant moves out, my cash flow is going to be minimally affected.

So, having all of my investments in real estate is not necessarily perfectly safe but it's also not necessarily perfectly unsafe. Rather, I would need to look at what are my individual risks and how could they impact me. Let's say that I go out and I buy 10 rental houses around Palm Beach County and I'm living on these rental houses.

I'm subject to some risks of South Florida real estate. Let's say, for example, that the Florida economy starts to decline. We go into a major recession. Property values fall because interest rates rise. Therefore, fewer people are taking mortgages and my property values fall. Does that necessarily affect me? Well, if I'm just simply living on the rents and the rents are minimally impacted by that, then it's not necessarily a big risk.

But if I'm living in a place where perhaps I'm living under a jurisdiction where there is some sort of rent control law that's passed and now all of a sudden, not only the value of my property is affected but my ability to pool and increase the rental income changes, now I could be very affected by that.

So, with every risk that you look through, there are strategies to be able to manage it and mitigate it. And it's not necessarily – I'm not convinced it's necessarily risky to have all of my money in real estate. What does that mean? It's all single-family rental houses, all commercial houses.

But I'm also not convinced that it's necessarily not risky. A lot of real estate investors were seriously hurt with a lot of the legal changes. It was in the '80s, the mid-'80s, seriously hurt. And things can happen again. So, you're subject to the vagaries of political change. So I don't want to keep going back and forth and hedging, but the answer of what percentage of your portfolio I think would depend heavily on what your goals are.

And I would be uncomfortable ever getting too much of my wealth fully concentrated in one area or in any one thing unless I were doing it with a specific plan in mind and a reason for it on a relatively short-term basis. I might have all of my wealth concentrated in one single-family house as part of a plan that I'm going to move on to something else or because it's filling a need that I have.

But if all of my money is concentrated, whether it's all in real estate or whether it's all in one piece of real estate, I still need to be conscious of my risks and mitigate them to the best extent possible. That's where, again, something as simple as a property and casualty insurance policy.

Next question, you asked, "What are Joshua's thoughts on wholesaling?" I don't know anything about it other than the fact that I know some friends who have been able to – one component of their real estate investment business is they're very good at finding deals. And they'll flip those deals to other investors who prefer to take a little bit – who have more cash and less time to find deals.

But I don't know anything specific about it. As far as flipping the question, what are my thoughts on flipping, I'm not convinced that it's a business that I want to be in. But I wouldn't make a blanket statement of always flip or never flip. I think that there are times and you should look at individual properties.

Every long-season, grizzled veteran of real estate that I've looked at, sometimes you look and say, "Man, I could get a lot of money for this property. I'm going to go ahead and flip it." And sometimes you look at it and say, "This is a property that works well into my portfolio as it is." And you probably do a combination of both, trading properties that you don't want to own out to other people and keeping the properties that you want to own.

Whether that's because they're desirable for your type of portfolio, whether they're well and easily rented, whatever the nature of the property is, I don't think flipping is an all-or-nothing game. Flipping as a business model is one of those things where it's a combination of real estate investing and it's a combination of a construction management business essentially.

It can be a way – certainly can be a way to make some good short-term money. And it's hard if all you're doing is just buying rentals and living on the rental income. It's hard to be full-time in the real estate business if you're not doing some flipping. My concern here in my local area with a lot of the friends I know who do a lot of flips is, A, you need deep pockets or you need investors backing you to have deep pockets.

So you got to be careful with that. But B, I don't love the business model of – based upon the quality of the work that actually gets done to some of these houses. And I think unfortunately, at least here in my local market, there doesn't seem to be a lot of consumer demand for super high-quality flips.

I wouldn't particularly want to buy a flipped house, at least a lot of the flipped houses that I see because what happens is many times the investors come in and they slap a really beautiful coat of paint over some not so high-quality aspects of work, not so high-quality bits of construction work.

I think that I can understand the appeal of that. I never understood until I actually bought my first house, which I live in. I've always been kind of a completely cheap guy. Give me the deal. I'll take the deal. Give me the house at the discount that I have to fix up.

But now I understand the different mindset where it's actually far easier to buy a nicer house as a consumer. It's far easier to buy a nicer house, just pay an extra $100 mortgage payment. When somebody else has already done all the work, they've put in the fence, they've painted the house, they've spruced up the landscaping, than it is to buy the house, save the $100 mortgage payment, and then do things one-off for yourself.

So there's a big benefit with flipping for them from that perspective. But I just wouldn't feel super great about the quality of the work that a lot of people do, and I'm not convinced that the consumer demand is there to gain the higher price for higher-quality work. Something my brother and I talk about a lot, my brother's in the real estate business, and it's his complaint as well.

He would rather do a higher-quality workmanship on the property, but in the market where everything is driven by comps and appraisals and financing, and in the markets where these types of flips work, it's very hard to find somebody who's willing or able to pay for a higher-quality workmanship, for a house that's going to last longer with lower cost versus a house that's pretty and cheaper.

So those are some thoughts that I have. Now as far as other thoughts, I do think that in my future there's going to be more real estate investment and more ownership of rental properties. I'll talk about that in the final question that I answer in today's show. Thanks so much for asking, man.

Next question here comes from Rick. Rick actually has two different messages. One of them is a short compliment. It's under 30 seconds. I'm going to play this real quick just because it gives me an opportunity to mention something that I want to mention to you, some compliments from him.

Hi, Joshua. This is Rick Komarich, and today is truly a sad day. I finished listening to every episode in the Radical Personal Finance Archive. Seriously, though, great job. You truly have built a world-class podcast, though. I would say you're achieving that goal 100%. I would absolutely encourage any of your subscribers that listen to you on a regular basis to go ahead and sign up as a patron.

It's definitely worth it. Thank you, Joshua, for all the good work that you're doing. Keep it up. Rick, thank you for the compliment. The reason I played that is just simply from time to time I do like to drop a little note for new listeners that I'm doing my best to make this show a cumulative collection.

And so if you've jumped in recently or are listening to just a few recent episodes, my hope is to have episodes that all work together and dovetail together, and I try not to repeat very many topics. I try not to go into too much detail if I've gone into something before.

It does happen as far as overlap on Q&A, but for the most part I do recommend if you are a recent listener to the show, try to go back to the beginning and listen from the beginning. There are some rough episodes. I've learned and gotten better as I got through, so if you get to something and you're just like, "This is not working," just hit fast forward.

But if you do what Rick did, you'll get the most comprehensive approach to radical personal finance. Let's get to Rick's actual question here, though. Hi, Joshua. This is Rick Komarik, one of your Patreon members, and I would love to hear you walk us through your financial planning process. I've heard you say things before like you would ask clients if they had $10 million, what would they do, what would their life look like, so I know that you go through the goals.

However, I think it would be interesting to hear you just walk us through maybe an average or a typical case. I mean, do you start with disability insurance or life insurance or a retirement plan? So what does that process look like for you? Get us inside the mind of Joshua Sheets on initial client interview and conversation all the way to when you deliver the plan.

Thanks so much, and we'll talk to you soon. Rick, it's a fun question, and this would very much be, as always, one that varies based upon what the introduction is. One of the things about financial planning is the very first – well, one of the first steps is to outline – if you look through the way the CFP board teaches financial planners to structure things, is you clarify what they call the scope of the engagement.

So depending on what the scope of the engagement is, that would impact what the financial planning process looks like. So if somebody says, "I'd like to do a review of my investment portfolio and figure out what are some good investment decisions," it may be as simple as a 20-minute discussion of specifically looking at account statements and trying to figure out if there is a way that they could adjust something.

If somebody says, "I'm focused on getting out of debt," then what would – that would be a specific focus thing. It could also be a very large financial planning engagement but very limited in scope. The best example here would be, let's say you're doing complex estate planning. Somebody comes in.

I've got a portfolio of – I've got $100 million. Now I'm working with a team of advisors. I'm working with my tax accountant. Most often the point man or woman on this is an estate planning attorney, but perhaps the financial planner is involved or perhaps you're working as an insurance consultant.

It just depends on it. So you've got to clarify the scope of the engagement. I'll answer this question in line with what I've done kind of the most, which would mean that in the world of retail financial advice where you're going out and you're trying to find clients and they're not necessarily finding you because of the brilliance of radical personal finance – joking, but thank you for your earlier compliment.

They're not necessarily finding me with an introduction, but rather I'm being introduced to them by a friend. Well, in this case, the fact-finding process is relatively to some degree shallow depending on the type of client because it takes time for a client to really have a confidence and trust in their planner.

But then it also is very broad in scope. And then as a planner, you're kind of trying to judge where do you go deep. So what I've done the most of is what we call a fact-finding engagement. And so pretend that, Rick, your brother introduces you to me. Your brother is a client of mine.

Your brother says, "Joshua, you've got to meet Rick. Rick is a good guy. I think you'll really enjoy him. He's a leader in his industry, blah, blah, blah." He sends you an email to give you a heads up. "Rick, I gave your name and number to Joshua. I call you up on the phone and say, 'Hey, Rick.

I want to come out and meet you and introduce myself and share with you the different areas I work in.'" It's as simple as that. Even in modern 2015, that's still one of the most effective ways to get connected to people. And I say, "Let me come by and talk about financial planning with you." Well, when you get there as a financial planner on that basis, it is a very – there's a high degree of skill required.

And this is why they pay financial planners and salespeople a significant amount of money because I've shown up with – under that scenario, just a little bit of an introduction from your brother. So there's a tiny little bit of imputed trust that your brother thinks I'm a good guy.

And so you're willing to at least listen to me. But there's a lot of defensiveness and a lot of lack of willingness to really dig into things. And so I have to quickly be able to put you at ease with a discussion of who I am and what I do.

I have to share with you in a direct way the different areas in which I have competency without necessarily assuming that you actually understand any of those areas. Because most people don't have a clue about any aspect of finance. And I have to figure out a way to build trust and find a personal way to help you.

And what you learn when you've been doing this a little while is I need to within a very short period of time, depending on the scenario, maybe I've got 10 minutes. Maybe I've got 30 minutes. Maybe I've got 60 minutes. But I've got to figure out a way to put you at ease and convince you that I can save you money.

This is a skill set that I think some of it can be taught, but I think a lot of it is just learned and it's largely learned through failure. And so depending on the type of person that you are, for example, I'll pick on attorneys. I have some clients of mine who are attorneys.

But any of you who are attorneys who are litigators, what you find over time is litigators, people who are used to suing people and whether they're – I defend the consumer type of person or whatever. You guys are like blustery and to the point and it's like you hardly sit down.

What do you got? It's kind of that type of response. The type of personality who's drawn to litigation in the legal field is a very direct type of thing. So in that scenario, what you learn, what I've learned as a financial planner, if I get referred or introduced to a litigator, then I've got to be very direct and basically almost – you basically have to match somebody where they're at.

That's where a lot of the skill of this is, is not so much in technical financial planning skill, which is one of the dark problems of the financial advice industry, is the primary skills of being successful in financial advice are not necessarily technical or technical core competencies. Because many times the people who are the most effective technical people are going to be a back office planner or an estate attorney where there's somebody else out selling the case.

Accountants are often very technical and often don't have the interpersonal skills of salesmanship to be able to engage with the client or be able to understand who the client is. So these are not necessarily technical skills but rather they're sales skills. They're personal relationship skills and the ability to meet somebody where they are.

But some people – so that might be a litigator would be an example. Some people would be an engineer. Engineers are notoriously challenging for financial advisors to work with because those of us who are financial advisors are usually a little bit creative, a little bit free-spirited. We like people.

Some of us are numbers people. Some of us aren't. Engineers often are very, very calculating, very, very careful. They want every single detail. So what you find over time is a certain type of planner will be drawn to the engineer. A certain type of planner won't be drawn to the person.

Business people, they do differently. I like maybe a salesperson that's a little bit different. So in a quick introduction, usually what I would do is just give a quick two-minute overview of kind of who I am, what I do, the different areas that I work in. And the key is as quickly as possible to build a little bit of trust and then turn around and find out what the person is interested in.

And the challenge of doing this is it's a real challenge from a sales perspective because as a financial advisor, you can't do anything unless you get personal information from a prospective client. So I can't do anything unless I know how much money you have, what you want to do with the money that you do have, how much money you make, things like that.

But in the U.S. American culture, we're very uncomfortable talking about those things. So what I learned is to always talk about goals and depending on the type of person, some people are quick to share about their goals. Many people are not. And so the surface discussion of goals usually is not going to be an in-depth discussion.

I learned to lead with Dan – what's his name? Dan, the business consultant, the strategic coach. Dan Sullivan. Dan Sullivan, I learned to lead with his magic question, which was very simple. But basically after a quick introduction and a layout of the areas that I'm competent in, I would just simply say, "If we were sitting here three years from today, what has to have happened for you personally, professionally, and financially for you to really feel happy about your progress?" And then as an advisor, you just sit down and shut up and you just take out a pen and you start writing.

And there's a little bit of a sales skill there to be able to just wait. The old saying goes, "I don't think these techniques really are very useful anymore." But if you study the old-fashioned sales techniques from the '70s, there's still I think in sales a little bit of an area where you want to apply them.

But basically the first person to talk loses. In our modern world, people are usually a little bit more familiar with this than they used to be I think. So you can't be too obvious about it. But if you ask a question well and then you just simply shut up, usually the person will answer it.

And it's a very small number of people that say, "What gives you the right to ask me about those types of things?" That type of person is generally – you learn from experience. It's not going to be a good fit personality-wise. It's not that that type of person can't be a good client for financial advisors, but they're going to need to find a financial advisor through some other format.

And that's one of the other keys is many financial advisors are reaching their clients in different ways. So I don't have experience in all the different ways. I've never done a seminar. I've never done – I've never written articles or written books. So I only have experience in what I – how I built my business, which was the model that I'm describing to you, which is technically called referred lead prospecting.

And I have a little bit of experience now in having done this with Radical Personal Finance, which is largely a marketing effort. So the people that I've talked to as a result of this show, it's a very different type of conversation. But let me continue on and just with – to answer your process as far as what the overall process works like.

If somebody shares with you some surface goals – and usually in the beginning of a relationship, there's very little trust. So the goals are going to be fairly surface and more technical. The other aspect of these goals is that most people don't actually have goals. It's hard to understand for those of us who are used to sitting down and writing out goals, but most people don't have goals.

And they certainly aren't accustomed to clarifying the goals that they do have. And if they're accustomed to clarifying the goals that they do have, they're likely to be short-term goals. So – or they're likely to be simply goals that society says they should have. So for example, usually people will say, "I want to retire." Okay.

But no one knows what that means. So there's part of the skill of not going too deep too quick but getting a starting point of a conversation. Then depending on what you do and depending on how you structure your conversation, if you are working from a comprehensive planning perspective, if you're not being called in on one specific type of planning – I'm trying to build out a group benefits system for my clients – excuse me, the employees of my company.

That would be a different type of prospect or appointment than personal financial planning. But you'll usually go through and I'll talk about saving strategies, ask questions. When have you been the best saver in your life? Do you have a philosophy about saving, a percentage of income that you want to save?

Then I try to quickly get into retirement and education goals. I try to get to accumulation goals quickly and I try to clarify those. But there's a real balance here because unlike on this show where this very nonthreatening for you to listen to me and I can't jump out of your phone and jump out of your earbuds and attack you somehow, in a personal relationship, you've got to be careful about how deep to go.

So I wouldn't necessarily in the beginning get contentious with the client who says, "I want to retire at 65," and I give my normal thing that I would give on the show, "Why 65?" You say, "Okay, start with that." So I want to retire at 65 and you try to stick with fairly simple questions.

I mean do you want to live the same kind of lifestyle that you're living currently? That's an easier question for most people who don't budget, who don't track their money and don't have any clue how much they're spending. That's an easier question than is how much do you want to spend every month.

So you learn to ask these easier questions. And once you have some accumulation goals set out, then you need to transition into the numbers because all of your financial planning recommendations are going to be based upon the numbers. You usually can't lead off with this unless you have a basis of a prior relationship.

So for example, if I were doing financial planning now that I have the basis of radical personal finance, I would never speak with a client until they've submitted a balance sheet, until they've submitted an income statement and they've clarified what they're coming to. "Never" is probably too strong of a word.

I would try not to speak with a client because that's different than in the past where I didn't have any basis with a client and so I need to get this information, but I got to build a little bit of trust first. So you get some numbers and you find out what they have and where it is.

If somebody doesn't have any money, that tells you one thing. Or if somebody has a lot of credit card debt, you know you've got to work on the credit card debt first. Or if somebody has a million dollars or they have a lot of money in the business, that's going to guide the rest of the discussion.

And then you want to move on and gather some information as far as their approach to insurance and risk management because in essence there are a few short-term needs, which are primarily insurance needs that would come first in financial planning. There are longer-term accumulation needs and then there are shorter-term investment decisions.

The place that you want to start is usually with risk management as far as from a planning perspective because if you compare the impact of saying we're going to increase your 401(k) contribution by 10 percent, but you don't have any life insurance, unless you sell life insurance first, what does it matter if the person dies and their 401(k) contribution wasn't changed?

It really doesn't matter. So you would always start with insurance because if the person has to retire a year earlier or a year later, if you're working with a 30-year-old, that's no big deal. You've got 35 years and you have no way to predict what's going to happen over time.

So what I learned – and this was a firm philosophy that I learned from the firm. It's not something I made up, but it just makes sense to me – is you always start with risk management. That means for me, always start with disability income insurance. It's the most likely thing that will happen and it also has the biggest effects, life insurance, health insurance.

Long-term care insurance is slightly unique because usually people that are in the phase where long-term care insurance is appropriate, you're going to be dealing with that at a different stage. Then also if you have the ability to work with it in this area, property and casualty insurance, you would want to do a review of those things.

Then you move on toward an investment scenario – discussion. In an investment discussion, you need to decide, "Am I going to look at something like – if the person has debt, then you need to look through the debt and credit card debt is always going to be an important thing to discuss versus investments." A lot of this is very subjective because you have to read the client.

You might have a client who says, "I've got this credit card debt and it's from a simple acute scene where something happened. My son was sick. I didn't have the money to make my co-pays and then all of a sudden my car broke and I got laid off. So now I have $20,000 of credit card debt and the interest rates are starting to go up." Well, in that scenario, it's very easy to counsel that client to say, "We're going to go ahead and let's start with the credit card debt and let's knock this out," and that's going to be the best financial decision for the associated rates of interest and you're going to get a better return on investment by paying off the credit cards than by putting money into, say, their retirement plan at work.

Now, on the flip side, you might have clients who just always seem to have a comfort level with a certain amount of credit card debt and most of us have this number. For some people, it's zero. For some people, it's $5,000. For some people, it's $50,000. But you'll meet people from time to time who just seem to always carry a certain amount of debt and maybe at, say, 10% interest rate.

And what you find, at least what I learned the hard way, was if you start with debt, they're just comfortable with a certain amount of debt. So sometimes you need to start with saying, "Let's set aside money toward a savings purpose," and sometimes you might not start with credit card debt even though that's the optimal technical answer.

This client has maintained this debt for 10 years and they're just always comfortable doing it. So you've really got to read the client and start with the client's philosophy. Over time, to me, if you start with understanding who the client is and how they think and then as an advisor, you've got to pick what's going to be the thing that's going to make the biggest impact for them.

Sometimes it's a discussion of saving money and teaching the concept of pay yourself first. Sometimes it's somebody who's saved lots of money and they're 55 years old and they're looking at retirement distribution strategies. And so there you're talking through their various retirement distribution strategies. Sometimes it's – I mean it's – the financial planning process is as varied as people, which is essentially infinite because we all have an infinite variety of personal scenario.

And it's an interesting client-advisor relationship dynamic because over time, you're doing a combination of affecting how they think and just simply looking through their eyes. You always need to start as an advisor with no preconceived ideas. You need to start by looking through your client's eyes and looking at the world the way they look at the world.

It took me a few years to learn this because when I started, I was very dogmatic about this is the way that everybody should do things. This is the way – this is the plan that you should follow. And I learned that that was helpful to a few people, but I only had a limited exposure and experience in life.

And so even though that was what I liked, it wasn't helpful to someone else who had a different philosophy. And so I started to get a lot better and have much better relationships when I learned to set aside my philosophy, my worldview, my perspective on what should be done and try to just set all that aside and look through the client's worldview, look through the client's goals, and then just try to give them the ideas that are most helpful to them in that perspective.

Two other things come to mind that I'd like to mention in answering this question as well. And the first is depending on what the actual services are of the advisor. So what I just described to you is what I have personal experience in, which is the function of financial planning.

That's different than the function of somebody whose expertise is in the topic of portfolio management. I separate those two things myself. Some financial planners try to work in both areas, both portfolio management and financial planning. Some people exclusively work in the areas of portfolio management. Some people exclusively work in financial planning.

I won't say that one is right or one is wrong. I've never been comfortable with advisors practicing in both areas because I don't think it's possible to do both things well. I think you need to either choose I'm a portfolio manager or you need to choose I'm a financial planner.

The distinction is that the portfolio manager is largely selling their investment capability and their investment expertise, sometimes as applied to a specific situation. So what I just described to you would be the process of a financial planner trying to understand the goals of a client and then how they can move forward with those goals in a relatively straightforward way.

The portfolio manager would be discussing here is what makes me different. Here's my investment strategy and my philosophy. Here are my – potentially my historical rates of return. Here is where I think I add value. Here is where I think I don't add value. Here are my mechanisms that I'm using in my portfolio.

That's almost a different – that's more of a sales process and it might be a consultative selling process. I've got – Joshua, I've got this $5 million portfolio. I'm primarily interested in hiring you to run this portfolio and here is my goal for it. So maybe a consultative selling process but it's different than the financial planning process.

The challenge – and this is often where the misconception comes in in the media if you look at how financial planners face. I believe the fundamental value of the financial planner is in the relationship over time and it has little to do with a specific product and it has much more to do with a way of thinking.

Oftentimes, financial advisors get accused of touting their investment expertise when they shouldn't and I like – I accuse myself. I accuse financial advisors of doing that when they shouldn't. The financial planning process is a transformative process that doesn't happen at one time. Once there's a basis of trust and relationship, then essentially what can happen is the advisor can start to pick off areas that are the highest priority for the client.

This is why I wish that all financial – almost all financial planning engagements were paid over time, specifically for services rendered based upon time invested and not connected to products. Financial planning is often done with life transitions and you might go years and change nothing. Then all of a sudden, you might change a bunch of things all in a short period of time.

In the beginning of a financial planning client relationship, if you're just meeting a planner and you've never worked with a planner, that planner might have multiple things that would need to be addressed. It wouldn't be unusual if somebody needs a few or even a half dozen insurance policies. They might need some life – additional life insurance policies.

They might need some disability insurance, might need to readjust your umbrella liability policy, take a look through and a planner might point out to you the fact that you're not covered for your waverunners on your homeowners policy. So you need to add a separate policy for covering your waverunners.

So if your 16-year-old son or daughter runs over somebody on the waverunner, that you're covered for that. I mean there's all kinds of little things that you've got to catch. So there might be a bunch of work up front and it can be fairly tedious. It can be a series of meetings.

But then there might not be any changes for a very long period of time. Once some basic things are established and some basic habits are put in place, there might be no changes. Depending on the type of investment philosophy that is being pursued or the investment strategy, many times the best thing to do with investing is nothing.

So oftentimes the best thing that a financial advisor can do for a client is just to simply keep them from doing anything. I've personally never participated in the active supervision of portfolios. I've always hired that done and I've focused on the financial planning side which is where I feel I can add the most value.

But one of the points of value that I often worked on was just simply to prepare somebody for future changes, which basically means when the markets are down, work to give somebody hope that the markets are going to come back. And when the markets are up, work to give somebody preparation that markets are going to go down.

And then to account for fluctuations with different cash management strategies. So as an example, okay, you're concerned about the market. But if you focus over here and we divert your attention to the fact that you've got $200,000 in cash sitting here, which is going to cover all of your cash flow needs for the next four years, can you be less worried about the fluctuations in your portfolio over there over the short term?

Or at least let's agree to push it off another six months and see. So those are the types of techniques that a financial planner can use without specifically saying, "I'm going to be involved in putting a collar on these 11 stocks such that when they fluctuate down by 11%, then they're going to be automatically sold." I don't have any problem with that if that's the arrangement that you have with a client-advisor relationship, just saying, "I don't have any experience with that." So the relationship often has a lot of things up front and then nothing for a very long period of time.

And then there might be some transition, which will all of a sudden bring a bunch of changes. Transition would be client changes their job and they go from one company to another company and they also – a company is a geographic move. All of a sudden, we've got to reassess a whole bunch of things.

They're losing these group benefits. They're adding these group benefits. They're changing this property insurance. They're selling this house. They're refinancing this thing over there. Or they might be just going through a life transition. Son and daughter are going off to college. I'm getting 10 years from retirement. My parents – my dad was just diagnosed with dementia.

How am I going to handle that? So it comes and fits and spurts. But the major value is always for a good planner, I believe, in the relationship and in the ability to have an overall game plan, an overall focus. And have specific things, but those specific things are often addressed in a cyclical manner.

My concern with upfront planning in exchange for a fee with regard to here, client, you can come into my office and pay me $3,000 for a written financial plan. I think that has its place. But it has its place if the project or engagement is very limited in scope.

I always go back to the estate planning example. Joshua, I've got a $10 million estate. I've sold the business. Now I don't have to deal with what's going to be the growth of this business. Is it going to grow from $10 million to $100 million? What are the details there?

I've gone ahead and established this. Let's just do an estate plan. That might be a very reasonable engagement of limited scope. But what most people are thinking about, which is a lifetime of financial advice, it can't be a one-time thing. It's rather a constant adjustment. We're focusing on these goals.

Let's take an incremental step. Let's make an adjustment here. Let's work on some calculations there. And the real value is in the relationship. And so those questions about goals and planning, that comes out as the relationship matures. And it comes out as you start to go through some life events with your clients.

You start to go over for dinner and they start to have you over for dinner and you go to the kids' birthday parties. And that's very different, but it takes time for those things to happen. So the $10 million question can be useful as a hook sometimes, but I've almost never asked the $10 million question to somebody that's a fresh prospective client.

Rather, that's something where over time, clients stressing out about retirement, you say, "Well, listen. What would you do if you had $10 million in the bank?" And all of a sudden, you can figure out that the reality is your client is working as a litigator, but they don't feel like what they're doing matters.

But if they sold the expensive house and bought the mainstream house and changed to working for the nonprofit as an in-house general counsel or set up an independent practice representing a dozen nonprofits as part-time general counsel, then maybe that's a better quality of life for them. Unfortunately, few advisors seem to take that approach, and I wish more would.

But unfortunately, too much of the financial advice business is structured around products and too much of the fact-finding is structured around how can I sell this specific financial product into this sale. And unfortunately, too much of the compensation is based upon management of portfolios where the primary goal is control of the assets, and there's too much of an incentive to just simply focus on the things that are necessary just to retain control of the assets.

So these are some of the problems with the financial advice business. Good thing is advisors are changing. Advisors are shaking up. There's more of a spotlight that's coming to bear on the business, on the industry. There are more solutions that are being offered. Prices are coming down. Communication is going up.

There are lots of problems so far, but the industry is changing, and I'm trying to do my little bit of it to change it on the consumer side because as a consumer, you are primarily in power. The things that you demand are the things that ultimately the market will find a way to deliver.

So Rick, that's my answer to you, and thank you for the compliments and thank you for the excellent questions. We're at 54 minutes. I'm going to go ahead and quit there for today, and I will answer the other three questions that I have lined up tomorrow, and depending on how long it takes me to answer those three questions, I'll go ahead and add on.

I might add another one or two on. I didn't expect these to go that long, but hopefully the answers were beneficial for you and helpful for you. But at least tomorrow I'm going to do a quick answer on special needs planning because that's a short answer and also a lengthy one, discuss about how to handle college money for a 15-year-old son, and also some feedback on the idea of starting a podcast but dealing with controversy.

And then also some questions on – I had a lot of questions from when I said that I no longer own any publicly traded mutual funds. So what's my plan and why? So I'll explain a little bit more about that on tomorrow's show. Thank you all so much for listening.

If this is useful for you and if you would like me to get priority answers to your questions, please go to RadicalPersonalFinance.com/patron. That's where a lot of my interaction comes from. Both of those questions today were for patrons and my other three questions are from patrons as well. So I've got too many questions that I can answer, but I do always give priority to patrons of the show.

RadicalPersonalFinance.com/patron for details. Thank you all so much for listening. I appreciate you. Go out and work and find a good financial planner. And if you know of a good one, help them spread their business. And if you want to become one, go become one. We need more and more of you good ones in the business.

We'll be back with you tomorrow. Thank you for listening to today's show. Please subscribe to the podcast with our free mobile app so you don't miss a single episode. Just search the App Store on your device for Radical Personal Finance and you'll find our free app. If you have received value from the content of this show, please consider becoming a patron.

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This show is intended to provide entertainment, education, and financial enlightenment. But your situation is unique and I cannot deliver any actionable advice without knowing anything about you. Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy and consult them because they are the ones who can understand your specific needs, your specific goals, and provide specific answers to your questions.

I've done my absolute best to be clear and accurate in today's show, but I'm one person and I make mistakes. If you spot a mistake in something I've said, please come by the show page and comment so we can all learn together. Until tomorrow, thanks for being here. Sweet Hop is an online marketplace curating the best in premium seating at stadiums, arenas, and amphitheaters nationwide.

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