March 2024
Stacey and Beau discuss the evolution of financial services from focusing on investment selection to providing holistic, client-centered advice, emphasizing the role of financial advisors as coaches rather than just investment managers.
They highlight structural issues within the industry, such as the limited number of clients an advisor can effectively serve, the tendency to focus on clients who have already obtained a high level of wealth while neglecting those who are still in the critical process of building their wealth, the prevalence of misleading financial advice on social media platforms like TikTok.
Modearn aims to solve these problems by leveraging technology through our app to serve more clients, especially those in wealth-building phases, encouraging advisors to foster meaningful relationships with their clients, and by providing personalized, objective financial advice through a team of experts.
Stay tuned for more Couchside Conversations episodes! We have topics coming up like…
- Protecting Your Family Using Insurance
- Keeping Up with the Joneses
- Owning a Home/Investment Property
Watch previous episodes here:
Parenting Tips for Financially Savvy Kids
Battle of the Spouses: Financial Edition
Okay, So welcome to the planning stage. I'm Stacey McKinnon. This is Beau Wirick. We're both wealth advisors here at Morton. And the name of the stage is Couchside Conversations, which is a new YouTube series that we're going to be launching over the next few weeks. And we wanted it to be called Couchside Conversations because we wanted to have discussions with each other and with you that are reflective of maybe discussions you might have with friends or family on your couches in your home.
So that's the theme of today on this stage couch conversations. So the first topic we're going to discuss is some problems and challenges that we see in the financial services industry. I go to dozens of study group meetings and conferences around the U.S. and we've noticed a few red flags that we thought would be helpful to share with all of you today.
Over the last decade, financial services and financial advisors have really changed. I think if you went to an advisor ten, 15, 20 years ago, you would have gone to them for investment selection primarily and they would have been expected to better understand the markets and then maybe have some stock picks for you. But that's really changed, which is actually a very good thing.
And we find that the best advisors across the country are the ones that are not necessarily selling their proprietary expertise or advice, but instead focusing on the client and what they need in their life and the things that are most important to them. And we think that the best advisors have moved on from investment manager to financial coach or life coaches, and that's what we and all of our advisors at Morton have really embraced our role as coach.
But the industry is still fraught with so many people who are more focused on their own smarts than the client. So I wanted to ask Beau first to maybe share with us his thoughts on this and a few things that might pain him about financial services.
Just off the top of my head. So a few things that I've noticed in our industry that they bother me and we're not trying to bash on financial advisors like we love financial advisors, but there are some things about our industry that are structural that cause financial advisors to operate in a certain way. And the first one is, I just wish I could serve more people, right?
As, as an advisor, it's a relational business. And so if you're really going to develop a strong connection where you know the client, you know what their heart is like, what you're talking about, you know, whether or not they want to spend time with their kids in their retirement or if they want to leave a big inheritance developing that relationship, you can really only have about 100 of them.
And really the sweet spot is more like 70 to 80, I would say. And because of that, you just can't develop that many relationships. I wish I could clone myself. So that's the first thing I hate about our industry is that it's limited in how many people you can serve. Second is actually a byproduct of the first since I really only have say, a hundred slots that I can fill of relationships that I can build with advisors or with clients.
It naturally makes advisors exclude those who are not already wealthy. This is just a natural byproduct of this because advisors get paid off of the assets that we manage. You're going to gravitate your time and attention towards people who already have a lot of wealth that you can manage. You become a wealth manager instead of a wealth builder.
And I hate that reality. Again, it's structural. There's nothing inherently wrong with that. It's just the way it is. But thirdly, someone's going to give people advice who are not being sought after by financial advisors. And that advice is going to come from Tick Tok or Instagram like TikTok advice. I can't stand it. It's so bad. Every week a friend texts me some Instagram reel of someone saying something like this.
Didn't you know that there's a tax free way to invest in blah, blah, blah, blah, blah? You didn’t? Well, good thing you met me. Follow me for more. And it drives us up the wall because, A, they're wrong and B) they're fearmongering or greed mongering for you to follow them and C) if you're a licensed financial advisor, you can't give personalized financial advice on social media.
So everybody who's out there is either breaking the law or not licensed.
That was a soapbox.
Off the top of my head.
Well, I agree with you on that. I mean, so many times we have friends or family or people who are like this Instagram influencer told me to do this thing. And that's what I base my entire financial plan. And I say back to them like that Instagram influencer does not know you. They do not know what you value.
They do not know the things you care about the most. And that's really tough.
But same question to you, Stacey. After my soapbox.
What are some things about the financial advising industry that gets you?
Well, I think the first one you mentioned already is just it's not that accessible. I started with Morton ten years ago, and if I wouldn't have joined this company, I would not have known how to make good financial decisions for myself or my family. And that reality, like, strikes me so hard and it makes it actually motivates me to continue educating and making financial services more and more accessible.
I would have just had to use Google advice and Google advice also doesn't know you and will just give you kind of the quantitative that I talked about on the other stage versus the qualitative. And so it's really a shame that advice isn't more accessible to more people in a personalized way. But the second thing that really pains me about financial services is there's not a very good definition of a financial advisor out there.
Generally speaking, there's two different types of financial advisors. There's a broker dealer and an aria. A broker dealer is someone who makes commissions off of the investments they recommend and are a registered investment advisor, charges a fee, and then they give objective advice. Examples of broker dealers could be like Merrill Lynch, Morgan Stanley, Edward Jones, Some of the big names out there.
And unfortunately I don't think that there's enough transparency for anyone to know that when they give you advice, they get paid on it. They're incentivized to the things that they put in a client portfolio. We don't have incentives. If you invest in one of the investments on the planning stage or the investment stage or you invest in Apple, either way we get paid the same.
And so we really can give truly objective advice than the other types of advisors that exist out there. Yeah, our insurance brokers and CPAs. And we have really good insurance and CPA partners that we work with all the time. So they don't do these things. But as an example, we do pro-bono work sometimes and I was working with a client and they were sharing with me.
I asked him the question, Do you have a financial advisor? And they're like, yeah, I have an insurance broker who set me up with a whole life policy and that's my savings account. I'm like, Well, a whole life policy is actually not a savings account. That insurance broker didn't care about that person.
They just cared about selling a product. And it was a really such a shame because this person's goals in life are to like, send their kid to college and to have a home one day and the whole life policy is like not really going to get them those things. And so that's something that pains me in our industry is that sometimes people frame themselves as financial advisors but aren't really.
And then I also had a CPA come to me more recently and they said, Stacey, will you sell all of the clients investments that are on the other stage that are making 8% returns to invest in muni bonds instead? Last year, I think they were down something around like 13% and our investments out there were up 8%.
So they wanted me to do muni bonds because it's a tax free investment. So they were willing to save 2% to lose 13. And like it, it was just such a eye opening experience to me to realize that so many people framed themselves as financial advisors, but really are not and shouldn't be giving that advice. Then the other thing that I would just share is that far too often I feel like advisors make themselves the hero of the story.
If we were a movie, we would not be the main character. You are. Our clients are the main character, we are the sidekick or the friend that comes along to help partner with you to achieve the things you want to achieve, or maybe avoid pitfalls along the way. And I just wish more advisors would not position themselves as the hero of the story and instead just really sit into the role of sidekick.
I love supporting roles in movies.
But those of you who do not know Beau was an actor before he joined us.
So how so? As a financial advisor, how do you make the client the hero of the story and not the advisor the hero of the story?
So just maybe a quick example. Let's say that a client comes to me and asked if they should max out their 401k. If they did Google advice or maybe like generic advice, it would just be yes, absolutely. Yes. You want to, you know, save on taxes, max out your 401k. But there's more questions to ask like, do you care about saving on taxes?
What else do you want to use that money for? You should find out if there's other goals in life that we should be planning for. Are they on track for retirement? And so maybe I ask these questions and the client might say to me, “Well, actually, I want to take my family on this like five day trip to Disneyland this year.”
But if I contribute to my 401k, you know, that might limit my ability to do that. So our job as advisors is to look where they are, see if they're on track or not, and if they're on track. My answer is go to Disneyland with your family, because I think sometimes it's more important to make deposits in the memory bank versus the bank account.
Whereas the CPA would probably say the opposite right. I think that's such a good perspective that most advisors aren't taking the time to look at. And so we're kind of hitting this head on with our modern offering. And so just to hit the pain points that we've talked about, we're we're trying our best with the modern offering to solve these problems.
I don't think all of them can be solved completely. But we're going to put our money where our mouth is and put our time where our mouth is.
So you talk about solving the problems. Can you share a little bit more on that?
Yeah. And so the like, the three things that I said, I wish I could serve more people. We naturally gravitate towards clients who are already wealthy and, you know, we're flooded with TikTok advice that is, you know, most of the time useless. Modearn is trying to solve all three of these. So first of all, by leveraging a little bit of technology with the Modearn app, we're going to try to streamline as much financial advice to those high earners, the people who are busy.
They don't have time for quarterly meetings. They just need a text. Give me some advice. We're going to use our app to streamline as much of that as possible. What that does is it frees up our capacity so that with the individualization of financial advice, we can serve more people who are in that thirties, forties, high earner time of life.
And so best of both worlds. We don't want to be a robo advisor, but we want to have as many clients as possible coming through our doors. So that's one. Number two, we also want to reach people who have not already built their wealth, the earners of the world, those who are growing their wealth, I think. Stacy, do you mind if I use you as an example right here?
So, you know, I feel like you're in a wealth building phase of your life, Right. And if I was a financial advisor and I looked at your balance sheet, I wouldn't take you on as a client. Yeah, Why is that?
Because you have to have $1,000,000 in assets to manage a portfolio. And I'm 37 and building my wealth. I'm not there yet. Right.
But you have real estate. You are a partial owner of your company. You are in process of becoming a wealthy person who needs financial advice. And you know, we work in this industry, but we still ask each other all the time for financial advice.
And so I think that it's horrible that there's not a place in this industry for people in your situation. So Modearn is going to solve that problem by having a flat fee component to it. And what we do is it doesn't matter if you have, you know, a $5 million in Amazon stock. It doesn't matter if you only have 500,000 in your 401(K), we are going to be your advisors.
We're going to give you quality, personalized financial advice and help you grow your wealth. And that's our goal.
It is our goal. It's something we've been working really hard on for the last two years and something the industry just hasn't embraced yet. It's a shame. Well, share a little bit more about like why it's just personally important to you. Now I want you to use yourself as an example.
Okay. So my first you mentioned that I was an actor. My first career started when I was 12. I got my first paycheck as a 12 year old. I joined a union when I was 14, and it was not until I was age 30 that I found out what an idiot I was financially, and I look back on that time and there was no one in my life.
My parents didn't know what they didn't know. I didn't know what I didn't know. But when you start an acting career, you're actually an entrepreneur. I needed someone who could actually give me complex, individual financial advice. And I wasn't on anybody's radar because I wasn't a Disney kid. So I, I calculated this example one time, and right around the time I started acting, the Roth IRA came to be, it was this brand new thing.
And if I had just maxed out a Roth IRA from age 13 to 18, which is a rare opportunity, most of the time you're not working at that age. If I had just maxed out a Roth IRA during that time, I would have $2 million of tax free money by the time I retire. But I will not have that.
Do you regret doing that calculation?
Yes. And so but the question that I do not regret is how much would I pay someone to sit down 13 year old Beau and do that math with him and be like, you need to do this? I would pay a good amount of money for $2 million tax free. Yeah.
So, so fascinating. It's so hard to even stomach some of those things.
So, Stacey, back to you. Any advisor worth their salt could have given me the advice to max out a Roth IRA. But we're different than most advisors, even those who are worth their salt. So what are we doing differently for our clients? How are we serving them in a way that adds value that most advisors are not?
Yeah, well, I'm going to just start with the work that we're doing on the investment stage. You know, when Lon founded the company 40 years ago, he started with giving objective advice, but quickly and then 1990s, he started investing in alternative investments before people even knew what an alternative investment was because he felt that investors deserved access to more opportunities that weren't necessarily correlated with the markets.
Some of you might not know this, but we actually have an eight person investment team that mostly works behind the scenes. You met Megan earlier, but there's an entire team that does due diligence research trading Portfolio Management Administration on all of our alternative investments. And most other firms don't do it because it's a lot of work as a CEO.
I can see the investment we're making into this and it's not insignificant. And so what's important to note there is that like to do what we do for our clients. We're not doing it to be cute or to be trendy. We're doing it because we think that's the best way to protect you. We we know that you worked hard for your nest egg and we want to make sure that we're honoring that by making really good decisions.
Just as a quick example, I think it was last year, the investment team reviewed 130 different investments were pitched to us. We did deep due diligence on 80. We did even deeper dives on 20 and we only approved six. So six out of 130 investments that we looked at. The reason that we do that is because we want to make sure that it's going to be in your best interest and that you're going to be taken care of.
So I think that it's just important to note that most other advisors probably want to do the work it takes to actually find the niche and not mainstream alternatives that we do. And the second thing is that we have a team of over a dozen people who have or are in the process of taking UCLA's certified financial planning program is incredibly important for us to have deep expertise in a lot of areas.
In fact, for the last five years, every Thursday at 10 a.m., if you come to the morning office, we are in an education session where we bring experts from across all different fields law, education, planning. We even have our team members present case studies to one another where we are investing in our team's education so that if you have a question whether it's investment related or not, we want to be the first person you call and we want to have confidence that we either know the answer or we know who to go to for the answer.
That's a really important part of our ethos at our company, and that's how we, I think, plan the best to protect our clients. So, Beau, as we wrap up today, will you just maybe share a few tips with the audience as they're thinking about their source of financial advice? He already said not TIkTok. So just so we're all clear.
Just know the value of the advice that you're getting and know what you're paying for. I think, you know, there's a lot of good advisors out there. There really are. But if you're working with someone who maybe calls you once a year just to remind you that they exist and charges you 1% to have you invested in just index funds that you could do yourself, maybe shop around at that point.
You know, look for someone like Morton Wealth or someone who can open you up to opportunities that you can't access yourself. That takes a ton of work from that eight person team of due diligence and research. And also there's a lot of investments that if you went into yourself, you'd have to have $1,000,000 minimum into that investment. So Morton Wealth and companies like us really do get you into opportunities that are exceptional and unique.
And then secondly, I would say to make sure that your personal values are prioritized. I love the example that you gave of Disneyland. You know, if your advisor doesn't know that, that taking your kids to see the Disneyland fireworks at Christmas time is something that you need to do. That's not a good relationship when it comes to having you reach your overall goals.
Your financial goals are just part of your life, your overall goals are what matter. And then thirdly, I would say to make sure that you have a good relationship with your advisor, you know, you want someone who knows you, who calls you often, who cares about you deeply, and who wants to see the best for you. So those are my three points.
I love that. And for like everyone in the room today, many of you are RDR clients who we have this relationship with you. But there's a lot of people out there that don't have a relationship with someone. They are relying on their CPA or their insurance broker or someone else to give them this advice. And so one of the things that we're continually trying to do is provide more content because we want it to be complimentary and free for people to even ask the right questions.
Like, I think some of this is not necessarily on somebody giving you the perfect advice. Oftentimes what's even more helpful, I've actually experienced this at doctor's offices before. Like you got to know the right questions to ask sometimes, otherwise you're not going to get the answers. So I would just definitely encourage you to continue, like checking out our content, reading our content, because, you know, we're trying to do good in the world around here and provide our clients with the best possible value.