The Sugar Daddy Podcast
Ready to normalize talking about money? Then welcome to The Sugar Daddy Podcast, where talking about money isn't taboo, and you can leave your past money mistakes at the door! Every episode will get you one step closer to your financial goals. Whether that is learning how to invest, budget, save, retire early or simply make better money choices, Jess & Brandon have got you covered in a way that's easy to understand. Tune in as they demystify the realm of dollars, so it all makes cents, while giving you a glimpse into their relationship with money and each other.
The Norwoods are a married, millennial couple, here to help you build wealth, so you can live the life you've always dreamed of. Brandon is an award winning licensed financial planner, and owner of Oak City Financial, with over a decade of experience and millions of dollars managed for his clients all over the United States.
New episodes published the first three Wednesdays of every month.
The Sugar Daddy Podcast
50: Red Flags- How to Avoid Bad Financial Advice and Protect Your Wealth
Watch this episode in video form on YouTube: https://www.youtube.com/channel/UCP55O4Ku4dukHcK0kExhpcA
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I also say for this like, go with your gut. If you feel as though that an advisor is not doing the right thing probably nine times out of 10, there's a reason why you feel that way. And I would always say first, like, if you have any issues, address it with the advisor, you know. Talk to them, say, hey, I'm feeling this way, can you walk me through this? Even do that you shouldn't be working with the advisor to begin with, because if you can't have that open form of communication where, if you think something's going wrong and you can't have that conversation, you shouldn't have that relationship, because I would never want to have that relationship with any of my clients. I would never want them to feel as though that they cannot come and talk to me about anything that they think is going on.
Speaker 2:Welcome to the Sugar Daddy podcast. I'm Jessica.
Speaker 2:And I'm Brandon and we're the Norwoods, a married millennial couple here to help you build wealth so you can live the life you've always dreamed of. Brandon is an award-winning licensed financial planner with over 10 years of experience and millions of dollars managed for his clients all over the US. Don't worry, we leave all the intimidating finance mumbo jumbo at the door. Stick with us as we demystify the realm of dollars. So it all makes sense. While giving you a glimpse into our relationship with money and each other, we are so glad you're here. Let's get started. Hey babe, what are we talking about today?
Speaker 1:Well, today we are talking about. What does bad financial advice look like? Obviously, the purpose of our podcast is to help you guys with your personal finance and give you good information, but at the same time, you also need to be able to recognize when you're receiving bad information, so that you don't try you know, try to apply it to your life.
Speaker 2:Don't try to apply the TikTok bros information to your finances.
Speaker 1:Depends. As I always say it depends, because I don't want to paint everyone you know with a broad stroke, because there is good information that you can find on TikTok and other social media sites, which is great, but there are also as much good information as you find, I see twice as much bad information.
Speaker 2:Okay, well, let's get into it. So is this just bad information in general, or is this when you're working with a financial professional?
Speaker 1:I think you can apply it to both. Now, some of the things that we go over you'll see more in a one-on-one interaction with, maybe, a financial professional, but some of the other areas can definitely apply to information that you maybe find online.
Speaker 2:Okay. So if you are out there listening and you are working with a financial planner or you have somebody maybe looking over your portfolio, but you're kind of DIYing things in the background, but you are looking for advice here and there and Brandon is not your financial planner, here are the red flags that you should look for. Is that what we're doing?
Speaker 1:Kind of yeah, a little bit of that.
Speaker 2:Okay, well, let's get into it. So what's the first thing that is a red flag in your book as a licensed planner?
Speaker 1:First red flag for me is if you are meeting with an advisor or planner and they don't ask you enough questions what kind of questions?
Speaker 1:all questions because, in all honesty, especially when you're first meeting with, you know, a potential financial planner that you're going to work with, honestly, the you as the potential client, should be talking 90% of the time. They really should be asking you thought provoking questions to understand what it is you're looking for. Of the time, they really should be asking you thought provoking questions to understand what it is you're looking for. You know, as far as, from a health standpoint, your goals, who you are as a person. A lot of it should be asking questions and if you're sitting down with a planner and the planner themselves is talking 90% of the time, to me that's a red flag, because the idea is to get to know the client, because everyone is an individual and that's the purpose of personal finance is to find out the personal aspect, and the only way I'm going to find that out is by asking a ton of questions.
Speaker 2:And I think. Correct me if I'm wrong, but I feel like your favorite question to start off with is always tell me about your goals and it's not a? Hey, I want a million dollars, because then you're just going to come back with well, why? I would say it's not a goal.
Speaker 1:A monetary amount is not a goal, because money itself is never the end result. It's what the money allows you to do with it.
Speaker 2:Yeah, the money is a tool.
Speaker 1:The money is. What does it allow, like you said? Oh, I want a million dollars. What does that allow you to do? Oh, it allowed me to retire at 55 and I can take my four vacations a year to the Caribbean, wherever. But the idea is that if you're meeting with someone and they're not asking you a lot of questions, if you don't feel like you came out of that meeting and you were talking more than the financial planner, more than likely maybe you need to look elsewhere.
Speaker 2:All right. So if they're not asking enough questions and they're doing more talking than you, especially in those initial meetings, red flag. What's another red flag?
Speaker 1:Now this one does apply to if you're looking for a financial planner, but then also it is a big issue just in general. When it comes to social media, content is ignoring individual circumstances.
Speaker 2:So like blanket statements.
Speaker 1:Correct so like blanket statements. Correct so like. Once again, like you know, if you're meeting with a planner, they're not asking you enough questions. The idea behind asking a lot of questions is to find out the very specific details of your individual circumstances so that when they're making recommendations, it is tailored to your specific situation and not just a generic cookie cutter plan that they're trying to put everybody into.
Speaker 2:Oh, that sounds terrible.
Speaker 1:Well, that's honestly, you know you would definitely run into that. And then also, you know, with on social media, I know it's a little bit harder because you're trying to like provide information to the masses and you're you know you're not talking about everyone's specific individual situation and that's part of the problem. When I, you know, I have with the social media aspect is that I do want to provide good information, but it's also hard to provide really good information while taking into account, you know, everyone's circumstances, because you really can't. But the idea that I don't like is is that I hate blanket statements. I cannot stand when I, if I watch a social media post and they say always never, I'm like I'm done, because that's rarely the situation, it's normally. This could potentially apply for this situation. This really doesn't apply for most people, but it could apply for this situation.
Speaker 2:Right, I think too. Didn't you recently have a meeting where somebody in our age bracket was working with their parents' financial advisor and was basically like you know, you talk about the blanket one size fits all? It's like oh well, we did it with your parents, so we're going to do it with you, even though you're almost 30 years younger than your parents, who are retirement age? Like that's not good.
Speaker 1:I had a new client come on and when we were looking through their portfolio I noticed a specific fund that they were in and I was just it was an, it was a target date fund and I was just trying to figure out why they were in this specific target date fund, because it was a targeted fund as if someone had already retired. And then this individual, when they were put into it, were in their mid-20s and I just couldn't understand. You know the reasoning behind it it was a retirement account so there were restrictions on when she could access it anyways. And I'm just like I like to try to give other advisors the benefit of the doubt when I run across those things and maybe there's a reasoning that I'm just I don't know bit of doubt when I run across those things that maybe there's a reasoning that I'm just I don't know but it really made no sense for a 25-year-old within a retirement account to be invested as if they were retired.
Speaker 2:Because then I mean short answer they're not aggressive enough.
Speaker 1:No, and this is unfortunately. This was eight years ago, so they've lost out on eight years of growth that they could have had if they were properly allocated from an asset standpoint, with an account into more aggressive funds. That would have been appropriate for someone that age, with the time horizon that they had until they would be accessing that money.
Speaker 2:And just shameless plug. If you are working with an advisor and you want a second set of eyes on what's going on in your portfolio, brandon has like a one time a la carte offering where he will look over your portfolio and point out things that you might need to be aware of. Like hey, you're invested as if you have been retired for five years, except you're not even 30 years old. Why is that Right? So something to think about. If you are DIYing it, if you're working with somebody else but want that second set of eyes, if you got a medical diagnosis that was maybe a little chilling, you'd probably go get a second opinion. So why not do that when it comes to your portfolio?
Speaker 1:I also say for this go with your gut. If you feel as though that an advisor is not doing the right thing probably nine times out of 10, there's a reason why you feel that way. And I would always say first, like, if you have any issues, address it with the advisor, you know. Talk to them, say, hey, I'm feeling this way, can you walk me through this? And if you're not willing to even do that, you shouldn't be working with the advisor to begin with, because if you can't have that open form of communication where, if you think something's going wrong and you can't have that conversation, you shouldn't have that relationship, because I would never want to have that relationship with any of my clients. I would never want them to feel as though that they cannot come and talk to me about anything that they think is going on, because the idea is that they could have.
Speaker 1:Just, you know, people sometimes just talk to their friends and their friends like, oh, I had this terrible scenario. And now they're thinking, oh well, maybe I have this scenario, even though there's no signs of it, but I want them to come and talk to me so I can walk them through it and show them, like, hey, what that person is going through. I can understand. It does occur, but I can show you that this is not happening here.
Speaker 2:Well, you kind of went skipped to the next point, which is like that lack of transparency, lack of education, not getting answers to your questions. If your advisor is skirting around answering questions about how they're getting paid, how much they're going to get paid off of you know something that they may be suggesting you go into, or just having a hard time answering your questions, and you're getting that feeling of was that an answer or was he skirting around? Or was she skirting around Like, go with your gut. You know that intuition, you know what that is, so listen to it.
Speaker 1:Because, like for me, I guess I kind of maybe leaned in the opposite direction. I am completely transparent and maybe provide too much information for some people Because, for example, going back to the example of the client who was in the fund, that was completely way too conservative for someone her age. I also said to her I was like do you understand the fees that are associated with the funds that you were in? And she was like no. I was like, did he ever sit down and talk to you about them? And she said no.
Speaker 1:One of the things that I always do, especially when it comes to an investment portfolio, is that I do explain the fees that are associated with that portfolio. So, to make kind of a long story short, she was in what's called A shares and that is a type of fund that it can have a specific purpose in certain some scenarios, but for her scenario it was completely unnecessary. It was extremely high fees on it, in addition to paying the advisory fee that was associated with her working with him. And I was like, did you even know this fee existed? Like, did you know that this was coming out of this account? And she had no idea.
Speaker 1:So, like for me, I always make sure that I go over it. I also send them an email showing them what it is, so that they are. You know, if they forget about it, they have something to reference back to. So I'm always about the transparency because, unfortunately, within the financial service community they have not always been transparent and it's still a work in progress, but the idea is that there should be no hesitation in the advisor answering your questions, whether that be about fees or just questions in general. Like you know, whatever it may be, there should be no hesitancy in regards to them wanting to answer your questions.
Speaker 2:Yeah, and this, it flags something else for me, which is so many people that we work with are going to be referrals from family and friends. And who do we? You know, if you have a good relationship, especially with your family or your parents, and you're at that age and you're like, hey, I'm looking for an advisor, who do you suggest? And they're like, oh, we've been working with Bob for years. Well, does Bob only work with 60 year olds? Because, hello, we are not 60. And our circumstances are very different, life is much more expensive, etc. Etc. So it's one of those things where maybe Bob can get you started.
Speaker 2:But again, ask those questions and then say are you working with people my age, you know what? What does your client spread look like? Because those could be red flags in themselves, right Of, hey, I only work with people who are already retired and you're 30 years from retirement, you might want to look at somebody who is more in your shoes, so to speak, and is working with people who are going to have situations more similar to you. Again, and if Bob is this great family friend and you trust this person, that's great, but maybe once a year you have, you know, a Brandon or somebody else. Look over your portfolio to make sure nothing's being missed.
Speaker 1:I think there is something to be said about obviously, many years in the industry and having that knowledge you know. Obviously, the longer you've been doing something often you know, the better, more knowledge you should have. However, when it comes to finances and the specific situations that individuals are facing, it matters whether or not that person can relate to what you're actually going through also. So if you're parents, you want to work with your parents advisor and he's 65, 70 years old. He probably has no idea in regards to how inflation is affecting us younger individuals when it comes to buying a home or handling student loan debt, stuff of that nature, that or even simply just dealing with the day-to-day as far as your kids and expenses with daycare and stuff like that. They could have had kids, but that was different in the eighties than it is now. So there is something to be said working with someone that can actually understand what it is that you're going through, because they're going through the same things and they're also trying to find the best way to navigate that as well.
Speaker 2:Absolutely. One of the other things I know that you really dislike going back to the TikTok and social media are the people who use guarantees and always and never, and it's like those blanket statements that I feel like boil your blood.
Speaker 1:Well, the thing is that there really aren't any like guarantees in life, except for one day you'll die.
Speaker 2:Death and taxes. We have a restaurant in Raleigh.
Speaker 1:But you don't have to pay taxes.
Speaker 2:You can take the consequences of it. Well, if you're a good citizen, yeah, but there's a restaurant here called Death and Taxes. The only guarantee is that one day you will die.
Speaker 1:Yep, because I mean well within the finance world like so, for example, when I worked at a brokerage a broker, dealer and dealer and they have a compliance department and if you were to send out an email that had any word like the word guaranteed or any synonym to that, it got flagged and you immediately got a call from compliance, because there's basically no guarantees when it comes to anything in finance. The one thing we know about life is that life is unpredictable. So to say that you can guarantee this or you can guarantee that for someone is just misleading. You know there's products that have a quote unquote closer to a guarantee. However, that guarantee is warrant upon that company being around to provide you that guarantee. So in my mind, it's a guarantee that's contingent.
Speaker 2:Upon the company staying open and lucrative and all the things.
Speaker 1:But when you hop on, when you're online and you hear these different financial literacy influencers that say things that it'll always do this, it'll always do that, that's misleading, it's wrong. That's a word that I don't use because I can't guarantee you anything. I can guarantee you that I will do my best to help you achieve your goals. That's about the only guarantee I got for you.
Speaker 2:Well, I think too, when you're looking through the social media aspect of finance, most people are coming from their experience. So maybe they got into a good fund or did something right and they got a good return. But now they're out here saying, oh, it'll always do this, it'll always do that, but they don't look at anybody else's finances. They're not an expert in the space. It's not that they study 40 plus hours a week. They haven't taken any exams and, even more important, they have no fiduciary responsibility to giving you good or bad advice. So if you go and make a huge mistake because somebody on TikTok told you to do X, y and Z and you did it and it screws you over, guess what? That TikTok person is not going to be responsible, whereas if you work with a licensed planner, they are licensed to have your best interest in mind. That is their job.
Speaker 1:I've seen some wild things on TikTok or other social media platforms, where and it has a millions of views where they're literally telling you information that equates to fraud, as in like you will go to jail.
Speaker 2:I don't look good in orange. I've seen ones I'm like you can't do that.
Speaker 1:You can't go apply for a loan and tell them an alternative reason for that loan. I was like that's fraud, you will go to jail.
Speaker 2:Yeah, so you have to take If it's fast, money stuff, just stay away.
Speaker 1:Yeah, that's a good rule of thumb.
Speaker 2:Just stay away.
Speaker 1:There really isn't fast money. So if you see any social media influencers, if their method is so great and so better than everyone else's that it provides them such fast and a large amount of money, they wouldn't need to be on Instagram or TikTok, yeah, like if I had-.
Speaker 2:Selling their $99 course.
Speaker 1:If I had a method that worked phenomenal and I could just make so much money and it was soundproof. I would just keep doing that method and I'd give away the information for free. I wouldn't even sell the course If I could make that much money off of it. I would just give you the information for free. I wouldn't sell you a course.
Speaker 2:But it goes back to the. If it sounds too good to be true, it probably is. So again, go with your gut, go with your intuition, and you know, not saying that everybody's selling a course online.
Speaker 1:Oh no, because there's great courses yeah isn't providing value, but it's not fast money courses.
Speaker 2:Yeah, you still have to. You still have to take the stairs right, unless you're getting a huge windfall, a huge inheritance, and even then, if you don't know what to do with it, that's a risky situation to be in. So you know, just stay away from the guarantees and the always and the nevers and operate somewhere in the middle, because if it sounds too good to be true, it probably is, and, like Brandon said, there's really no guarantees when it comes to our money, unfortunately, which leads into another red flag area which I know you're really passionate about, which is the education portion behind financial literacy and actually understanding what's happening with people's money. You're not just saying, hey, let's do this, this and this. You're asking questions along the way and making sure that they understand the intricacies and nuances of what you're doing and the why behind it.
Speaker 1:Yeah. So when it comes to money you've heard me say this before that I think people have anxiety around it for two main reasons. One, they don't have a plan in place. They don't have a plan of where they are today and how to get to where they want to be. But then, two, they also lack financial literacy. They don't have a firm understanding of finances in general. So if you just hand someone a plan, that doesn't take away the idea that they don't understand how the plan works. And if someone doesn't understand how the plan works one, I think they're less likely to stick to a plan. But then also they don't understand the other areas that could occur. That would deter that plan.
Speaker 1:So the financial education aspect is huge for me. So if you're working with an advisor that is not open to educating along the way, I honestly think that's a red flag. If you're wanting to get the education from them, now it's one thing. If you don't want the education, I think that's a misstep on your part. But if you don't, you just want to do it, that's a completely different scenario. But if you're asking to understand things and they're not taking the time to explain them to you to make sure that you do understand it. That 100% is a red flag for me, and I love that.
Speaker 1:Social media does provide, you know that financial literacy education, because there are there are tons of platforms on the various social media platforms that provide great information, and I love those because they come from an education standpoint. They're like, hey, you should understand this. They're not saying, hey, you should do this, they're saying you should understand this and once you understand it, you have a better ability to see if it is applicable to your life and if it is, then you apply it. But other times you have people that are just saying do this, but they don't know anything about your situation and they really didn't do a good job of educating you on it, and then that's where you get into trouble.
Speaker 2:Right, yeah, and even you know most of us do not want to become financial advisors or be, you know, licensed in these areas. But having a high level understanding of what's going on with your money, regardless of who is quote unquote in charge of it. So I think of women who are like, oh you know, my husband does it all and I don't really ask any questions or know about it that is also a misstep. So, even if you're not working with a planner, if you are just handing off your money and thinking that it's getting taken care of and you don't know what's going on, red flag for yourself.
Speaker 2:You need to be asking questions. You don't want to be the person ending up with, you know, binders of information that you didn't know existed. And you know your spouse passed away and, oh, you didn't know that you were living in debt and that you were completely broke. Or hey, we had millions. Why are we working so hard? I mean, you know that's not usually typically the scenario, but you just don't want to live under a rock when it comes to the finances that are keeping your lights on and keeping your kids, you know, clothed, et cetera. So, regardless, ask questions and be informed.
Speaker 1:And the thing is too is some of you people maybe don't want to hear this, but maybe the bad experience that you have with an advisor is also partially your fault.
Speaker 2:Because you weren't holding them accountable.
Speaker 1:Because you were not a pro, you were not an active participant in this process. I find it very hard to believe that if you took all the advice that we're providing to you as far as being part of the process, understanding what's going on, understand all the fees associated in asking these questions, if you were doing all that a hundred percent, that somehow they screwed you over. I find that very hard to believe, because that person ought to be really good, because normally what ends up happening is that they are targeting specific people that are not proactive in asking these questions and being part of the process, so it makes it much easier for them to do those illegal things.
Speaker 2:Right.
Speaker 1:And I'll say I don't want to blame people for that, because obviously the financial service community should hold themselves to a higher standard and they shouldn't do these things. But the reality is that it doesn't matter what it is. It could be your doctors, it could be your lawyers. Every profession has bad actors in it and you have to do your due diligence to make sure that you don't work with these bad actors. So you have to be part of the process and you know, like I said, I've never met anyone that has had a negative interaction where I'm like, after you told me the story, I'm like I'm not blaming you because I shouldn't have done that to you, but they made you made it very easy for them to do it.
Speaker 2:Yeah, so let's learn from those mistakes and be proactive in asking questions, going with our gut and our intuition on those red flag items. You have two more kind of overarching themes that you want to talk about. One of them is ignoring emergency funds and adequate insurance. Tell us about that.
Speaker 1:I think it's a very an area that's often overlooked and often misunderstood. If people like to go to the sexy parts of finance, especially on social media, like to talk about the you know, sexy investing and stuff like that, and often they skip over the basic stuff which is needed, so one emergency fund if you can't get through an emergency tomorrow or next week, it doesn't matter how much you're investing for for 20 years on the lot, plain and simple. So working on having an adequate emergency fund is definitely one of the first steps that you should have, and that could be, you know, anywhere from three, six to two years worth of expenses saved up in a high yield savings account for, in case an emergency happens. Your personal situation Do you have a family? Are you married? Do you have kids? Is your job a profession that has possibly of high turnover? So all those factors do come into play, but you do need to have some form of an emergency fund.
Speaker 1:Now, when it comes to the insurance aspect, you hear so much stuff about life insurance, disability insurance. It's a scam. Blah, blah, blah, blah, blah online, and I could tell you that one thing I've never had is that anyone that I've delivered a life insurance check to telling me it was a scam. Now, are there scammers out there? Yes, there are, 100% are scammers out there, but you do need to understand the different types of life insurance that are available to you and the ones that fit the specific need of what you're trying to accomplish. So one thing I would say to someone, if you're meeting with a financial advisor or an insurance agent is is that they should be asking you questions once again to understand what goal are you trying to achieve with the life insurance policy? What problem are you trying to prevent with that life insurance policy? Because, depending on what you're trying to do, it's going to make a big difference in the type of life insurance product that should be recommended to you.
Speaker 1:You always hear that whole life is a scam. Whole life is a scam. Whole life is not a scam. Whole life is only not. People have a negative view of whole life because it's used improperly and it's used in the wrong situations.
Speaker 2:That's what it is. Can we make a blanket statement even though we just said not to? But can we make a blanket statement that is, everybody should have a term life insurance before they get a whole life insurance policy?
Speaker 1:No, because I'm not going to make that blanket statement, because it really depends on your circumstances. If you're someone that, for example, say you come from money and you just have a ton of money because you inherited a ton of money, you don't need a term insurance policy. Like you wouldn't need one in that scenario. So I'm not going to make that blank. Once again, I don't make blank statements because there are scenarios.
Speaker 2:Well, I'm not the licensed advisor, so I can say what I want. There are scenarios where certain things make sense.
Speaker 1:So, like when people say that, like a product is a terrible product, to me that means that that product is never good for anyone's circumstances. And if I put product A next to product B, I would choose product A all day. But I can guarantee you, you know, if you were to take a whole life policy and put it right next to a term policy, and you have the exact same, cost exact same cost.
Speaker 1:You would choose whole life all day because the additional benefits are beneficial. But in real life there is an additional cost to having that and it doesn't necessarily fit a lot of people's needs when they're actually looking for a life insurance policy. A majority of people would probably be better suited with a term policy, and that's where the negative views towards whole life come into play. Whole life's not bad. Bad people are. I shouldn't say bad people. I should say not good advisors are using it in scenarios where they shouldn't be using it, and that's the issue.
Speaker 2:Okay, but let's say most people. I mean, if you're a bajillionaire, you're probably not listening to the sugar daddy podcast but if you're awesome, if you are it.
Speaker 2:Yes, Colorado, slide in our DMs Um but if you're awesome, if you are it, yes, colorado slide in our dns um, but if you're a normal working person, maybe you have a family, maybe you have a partner and no kids, yet maybe you have kids. If you're, you know one of us, let's just say you would likely be best served for now with a term life insurance policy yes, more than likely. That is this scenario which you should have, because everybody needs life insurance.
Speaker 1:Yeah, Because at the end of the day also, if you're like I'm single, I don't have kids, I don't plan on having kids, it's the best time to get it you need something to bury you in the ground, so it could be just simply a policy for the event that you are no longer alive. The people that are left behind handling your estate have enough money to bury you.
Speaker 2:Yeah, so look into or cremate you whatever your choice is. A policy, adequate insurance. Talk to us about what is adequate insurance.
Speaker 1:So adequate is based upon the needs that you have to cover with a life insurance policy. Are they being met? So let's just say, let's use our example right here between Jess and I. So let's just say, like you know, let's use our example right here between Justin and I we I'm 41. She's just turned 39 and we have two children. All right, a hundred thousand dollar term policy is not an adequate policy for us. No reason being is is that for our scenario. The main reason for the term policy is that if one of us passes away prematurely, the income that we otherwise would have had coming in is taken care of with the life insurance policy. So if something happened to Jess tomorrow and she only has $100,000, that's going to be a big problem for our family.
Speaker 2:Yeah, because we currently live off of more than that.
Speaker 1:Yeah, so that'd be a big issue. So the idea is that you want to have a policy that has enough coverage as far as, like, in the event of someone passing, the dollar amount that the beneficiary will receive is enough to cover the need.
Speaker 2:Yeah, and you want to look into the future, because one of the things that you have said often is your biggest asset is your availability to work. I feel like you always say it better than that.
Speaker 1:Your best asset is your potential income.
Speaker 2:Yes. So being able to bring in an income is your best asset and that is how your insurance quote unquote worth is determined. So if we are already living off of more than $100,000 a year in mortgage, car costs, daycare, et cetera, et cetera, well then $100,000 policy is not going to go very far.
Speaker 1:Well, think about it this way you make more than $100,000 in one year.
Speaker 2:Right.
Speaker 1:So $100,000 policy wouldn't even cover a full year of your income.
Speaker 2:Well, that was the other point I was going to make is we have young children. The idea is get them to adulthood with that life insurance, right? So our oldest is six, let's say she moves out at 18. We've still got 12 years of having her at home and we are just going on a tangent. We are not of the mindset of like you're 18, you got to get out of my house, right. So we want to make sure that our children are ready and able to comfortably move out when they want to, when they are able to be, you know, productive citizens of society, etc. Etc. But I mean, if you were looking at, hey, a tragedy happened tomorrow. Yeah, $100,000 policy is not going to cover very many of our expenses, especially not for, you know, more than a year.
Speaker 1:So then you're, back to struggling.
Speaker 1:Yeah, the idea is that you want to have the basics in place. As far as when it comes to financial planning, you want to have the boring vanilla basics in place, and two of those big pillars are an emergency fund and proper insurance, not just life insurance, disability insurance as well, because you have a much higher probability of experiencing some form of disability during your prime earning years than you do of actually passing away. And then also, you think about this, like not to be too blunt, but when you die, you're gone. You're gone, you're no longer quote, unquote an expense per se, expense per se, but if you experience an extreme disability, you're still here, you're not working and now you have way more medical bills to deal with.
Speaker 2:Yeah, In-home care and all sorts of things that are going to be a continuous. You're going to have to pay for it month over month.
Speaker 1:So if you're working with a planner that does not look over that information or address that in any form or fashion, red flag.
Speaker 2:Yeah, all right, let's zoom in on the last red flag, which is more based on what does your portfolio look like?
Speaker 1:Yeah. So these are some of the things that you could just take a look at real quick, like making high risk recommendations without having a thorough conversation with you. So one thing that I always do is I always do a risk tolerance questionnaire, and the purpose of the risk tolerance questionnaire is to get a basis of how you deal with risk, so that we can start the conversation in regards to constructing the portfolio. Now, if that's not occurring and they're just simply recommending high risk and in reality, too is I'm not even just talking about just stocks. I'll talk about even more what's called speculative investments, and in reality, too, I'm not even just talking about just stocks. I'm talking about even more. You know what's called speculative investments. We're like oh, you should put 50% of your portfolio into Bitcoin or any other cryptocurrency.
Speaker 2:Or into a business. Yeah, that's like starting up.
Speaker 1:Yeah, or you know, contribute money to a startup company Like those are high risk and you need to make sure that you have a lot of other things in place, taken care of before you even venture into that area.
Speaker 2:Would you say? I feel like I've heard you say before that, if your portfolio is in a good place, not more than 5% of your money. Right, because the risk is high? And what if it was gone tomorrow? That 5% or less should not affect your overall portfolio.
Speaker 1:If you're going to do those risky types of investments, yeah, because, mathematically, if 95% of your portfolio is sound in regards to your investments, obviously there's always a chance of losing. But over the course of a 20-year period, 30-year period, you're going to be up Having 5% of your portfolio invested in speculative investments, whether that be cryptocurrency, startups, whatever it may be. If that went to zero, mathematically it's really not going to affect the rest of your portfolio. And they do that for a reason because the 5% is not going to affect, from a negative standpoint, the portfolio. But if they do hit and they go well, it can exponentially grow it.
Speaker 2:Yeah, so the wins are great, but the losses are probably more likely. Yeah, yeah. What about the diversification? I know people are always like you have to diversify, diversify and it's like, well, what does that actually mean?
Speaker 1:I mean, I'm going to make it as simple as possible. You know, warren Buffett is a big proponent of ETFs, one of the smartest, most well-known financial minds ever, and he is like, for the basic person, he doesn't necessarily do all this because obviously he-.
Speaker 2:Is Warren Buffett. He's Warren Buffett.
Speaker 1:But he says when he passes away, what does he want his wife to do with the money? She said put it in an index ETF, and it's a very easy way to divers with the money, she said. He said put it in an index ETF and it's a very easy way to diversify your portfolio. It's basically you have a bucket full of all different types of stocks and other types of business and bonds or whatever it may be, whatever the construction of the ETF is, but it's a very easy way to diversify your portfolio. And if you're not doing that and you're extremely concentrated in one area, chances are you might want to re-examine that.
Speaker 2:I mean that also goes for people who maybe their retirement portfolio is only real estate, right? Like, oh well, I don't actually have a 401k or IRA or ETFs, but I have a bunch of property and it's like that's my strategy. That's risky.
Speaker 1:It's extremely risky. I would just like I mean, like you see them online, like you know you're like you know you'd be like your finance bros that are like going to the cryptocurrency or the stock market, that you have your finance bros Like I don't do any stock market stuff, I just stick to real estate. I say, do a little bit of everything. That way, if one is up, one is down, chances are some other areas are up and vice versa. I mean I don't think anyone who has done a good job of diversifying their portfolio has ever said dang, I really wish I didn't diversify, yeah.
Speaker 2:I've never heard that before.
Speaker 1:Not really a. Thing.
Speaker 2:Not a thing. What about you know? You hear stories of people saying, oh well, we bought this, and now my advisor is saying to do this, and it looks like we're constantly jumping back and forth. What do you say about that?
Speaker 1:That's an industry term called churning. Now, if your advisor is switching you in and out of funds without really explaining what is going on and explaining the fees, if any, associated with that fund, then more than likely they might be switching you out of these funds in order to generate more income for themselves.
Speaker 2:I feel like I should have bought a red flag to wave every time I hear something that's like ooh, that doesn't sound good. Now there are reasons.
Speaker 1:For example, there are reasons to sell off stocks or sell off ETFs and your advisor should explain to you in detail the reasoning for that. But, for example, kind of taking a few steps back to the individual who was an A. The younger person who I met was in an A share fund. That was completely not aggressive enough If they were switching from A share to A share to A share. That is 100. Not aggressive enough If they were switching from A-share to A-share to A-share. That is 100% churning.
Speaker 1:Because, without going into a bunch of details, that fund is meant to go into and stay in for a long period of time.
Speaker 2:But the advisor gets a new kickback every time they move the money. So just understand what's.
Speaker 1:Once again, it boils down to understanding what is going on with your account, you know, and asking those questions. And if it's, it boils down to understanding what is going on with your account and asking those questions. And it could be 100% harmless and the advisor could have told you this a thousand times beforehand, but if you forgot, ask. I'm much more than a client. I could have told a client something a thousand times and if they forgot, I'm much more than ask me rather than come up with some craziness in their mind.
Speaker 2:Right? Well, that goes into one of the last two kind of red flags, which is not talking about those fees and costs of where you are invested, because pretty much nothing is free. There is a cost associated and these accounts have fees. If you're working with an advisor, you're going to be paying. You know your advisor in some way.
Speaker 1:So let's talk about that and even when it comes to like commission products, like I always. Like you know, I'm a fee-based advisor, but I do have a very good understanding of life insurance, so I prefer to keep that in-house and do it myself. But I also explain to them exactly how I get paid on it yeah you know. But the idea is, like I said, is being aware of the fees, and your advisor should be completely transparent with you about it and, if they're're not, once again red flag.
Speaker 2:Wave the red flag.
Speaker 1:And also the last one just kind of sorry diving into it is just a failure to have tax planning involved in it as well. I'm really big on involving if they have a CPA and if they don't have a CPA and I feel as though they might need one getting them in touch with one, because one of the biggest things within the financial, one of the biggest things that you final finance, one of the biggest things you need to take into account with financial planning, is the taxes on anything that you are doing, Because, at the end of the day, it's not a matter of how much you make, it's how much you keep, and there's definitely strategies that can be put into place to help you keep more.
Speaker 2:Right, so tax planning.
Speaker 1:Yeah, and it's okay if your advisor doesn't do the tax planning, they should be putting you. They say, hey, this is important, I don't necessarily handle this area.
Speaker 2:Let's get you in contact with someone who does Right. So lots of red flags today. I think the long and short of it is if something feels off, go with your gut. You should always feel comfortable asking questions about why the strategy is what it is, what your diversification is, what fees you're paying and if anybody's telling you that there's a guarantee or to always do this or to never do this also red flags, because there are so little guarantees in the finance space. So go with your gut, listen to your intuition. And again, if you need eyes on your portfolio, you want a second opinion. You can always reach out to Brandon and do a one-hour portfolio review and make sure that you feel good about what's happening within your portfolio instead of just hoping and wishing that everything is sound. So it's okay to ask questions and it's okay to get a second opinion.
Speaker 1:Yeah, and if you have just small one-off questions, obviously you know contact us, you know through our DMs on our social media pages, and we can maybe be able to answer those one-off questions. If you're feeling some sort of way about you know your interaction with your advisor.
Speaker 2:Yeah, absolutely. We're always happy to answer your questions, even on the podcast, so go ahead and submit them and we'll get them answered for you Until next time. Stay alert, don't forget. Benjamin Franklin said an investment in knowledge pays the best interest. You just got paid. Until next time. Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review and share this episode with your friends, family and extended network. Don't forget to connect with us on social media at the sugar daddy podcast. You can also email us your questions you want us to answer for our past the sugar segments at the sugar daddy podcast at gmailcom, or leave usa voicemail through our Instagram.
