Our Answers to “9 Questions to Ask a Financial Advisor” – Episode 214

We told listeners about nine good questions to ask any financial advisor. You told us to answer them!

On a recent podcast, Reese and Ryan offered Dentist Money™ Show listeners nine good questions to ask financial advisors. Many listeners then turned the tables and said, “OK guys, how about giving us your answers!”

Don’t miss this episode as Reese and Ryan answer questions about their investment philosophy; about their investment allocation strategies; about why they put a focus on dentists. Plus, they explain the Dentist Advisors fee model structure and all of the services that are included with it.

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Podcast Transcript

Ryan Isaac:
Hey Dentist Money Show listeners. Thanks for being here. We’ve got a great show for you today. A few weeks ago, Reese and I gave you a list of questions to ask your current or potential financial advisor. It’s about nine questions that happened in episode 212 if you want to check that out. Then after it came out, someone posted in our Facebook group, which by the way shout out to the Facebook group, “Hey guys, how about you answer these questions on behalf of Dentist Advisors? We’d really love to know what your answers are.” That’s what Reese and I did for this episode. A lot of good stuff here, a lot of content, really hope you enjoy this episode. If it brings up other questions or things you want to chat about in more detail, as always just go to our website, dentistadvisors.com, click on the book free consultation link, and let’s have a chat. Guys, thanks for tuning in. We really appreciate all the support, all the love. Enjoy the show.

Announcer:
Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host, Reese Harper.

Reese Harper:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions. I’m your host Reese Harper, here with my trusty old cohost sir Ryan Issac.

Ryan Isaac:
Yeah. I think this time deserves when you say here with my trusty old co, I think you should describe-

Reese Harper:
We’re physically together in, I don’t want to say it’s a bad hotel room.

Ryan Isaac:
You’re not going to say CD. We’re not sponsored by them, so you can be honest.

Reese Harper:
Yeah. I can be honest though. I’m evaluating it as a customer. It’s like the Hyatt down here in Arizona.

Ryan Isaac:
It’s the Hyatt Place franchise.

Reese Harper:
Tomorrow I’m actually going to be speaking here at Jumpstart 2020 where all dental speakers unite.

Ryan Isaac:
It’s like the Avengers of dental speakers.

Reese Harper:
I don’t know how I got to the point to where I’m being asked how to be a good dental speaker and giving a presentation on it.

Ryan Isaac:
Still a [inaudible 00:02:07] to you?

Reese Harper:
My wife’s like, you’re one of the worst speakers of all time.

Ryan Isaac:
That’s harsh.

Reese Harper:
I said, “Well, I’m not the worst.”

Ryan Isaac:
You’re like, just because I spend two weeks building a deck and then change it five minutes before and we improv this thing, we go live.

Reese Harper:
Going live.

Ryan Isaac:
Going live with this thing.

Reese Harper:
Look, some people speak with a lot of grace and poise, style, dignity. Other people just get up there and do their best.

Ryan Isaac:
Improv’s a thing.

Reese Harper:
We do our best.

Ryan Isaac:
We’re sitting here. I’m at a coffee table that I scooted over that I might’ve maybe not have broken a leg. It wasn’t already functioning.

Reese Harper:
Tipped.

Ryan Isaac:
You’re in the corner of a couch and we have pillows between us. Like a good marriage.

Reese Harper:
It’s comfortable. It’s comfortable.

Ryan Isaac:
All right well.

Reese Harper:
We still haven’t had dinner, so we’ll get that soon.

Ryan Isaac:
Or this might get on. Okay. So it’s a bit of a follow up. In episode 212, recent one titled Why There’s More ROI Than You Think, we listed about nine or 10 questions to ask an advisor, to ask a firm that you’re working with to just get a deeper dive into someone’s process and their philosophy. I think this was spurred from a question of like, a lot of people ask what’s your firm’s returns?

Reese Harper:
We get that question a lot. A lot of financial advisors do.

Ryan Isaac:
Pretty common from potential clients. Episode 212 was just about while that’s a fair question to ask, you can get a lot deeper than that. So we list all these questions and then one of our dear clients listened to the episode, went to the Facebook group, which by the way you should totally join if you’re not in there. That’s dentistadvisors.com/group and he said, “Great episode. Here’s the nine questions you pose in there. Would you mind answering them for yourself as dentist advisors?” Typically this kind of content is a little bit more down in the weeds, a little bit more self-promoting than we ever put on a podcast, right? This is more maybe a webinar kind of content.

Reese Harper:
The marketing team would call it bottom of the funnel.

Ryan Isaac:
Bottom of funnel and we’re not allowed to use bottom of funnels here.

Reese Harper:
The podcast is generally really top of funnel. It’s really the educational, really high level, but there was a handful of people that said you need to answer that in detail so that not only can we tell people how we manage investments and how we feel like things should be done properly, but it can kind of help give concrete examples for the rest of you to think about with your own advisory firm. So in a sense, I think this is right. It’s a combination of top of funnel and bottom of the funnel. If you want to know about how we do it, you’re going to learn how we do it and if you want to know how some examples that you could be taking to your current firm, then you’ll have that too.

Ryan Isaac:
Yeah. This is probably why we’re hiding in a hotel recording this because marketing won’t let us do this otherwise.

Reese Harper:
Yeah.

Ryan Isaac:
In studio. Okay. So we’re just going to jump to these. If you want a refresher on these questions, that’s episode 212. Here we go. Number one, man some of these we’ll have to keep it moving here. Number one, what is your firm’s investment policy? That’s the first question we threw out there.

Reese Harper:
Policy or philosophy?

Ryan Isaac:
Policy is the way it was written in the Facebook forum. I don’t know what we actually posed in the podcast.

Reese Harper:
Is philosophy a question or is policy only a question? Like are we going to hit philosophy or is it kind of only policy?

Ryan Isaac:
Let’s see here. Philosophy is not listed in any, no. Okay. No. Question eight is what are your investment philosophy? Oh, what are your investment philosophy mentors and is that uniform across your advisors? So number eight’s like who do you follow? Who do you listen to? Number one is more, I would take that as what is your firm’s investment? It says policy, but I think philosophy is what we were trying to have someone get at if they’re going to ask a firm about that.

Reese Harper:
Well I’ll take a stab at it and then you can add to it.

Ryan Isaac:
Okay.

Reese Harper:
I would say that broadly speaking, most firms don’t have a very consistent investment philosophy. They have what’s called a, “Yeah we can buy that,” kind of philosophy.

Ryan Isaac:
Like an order? Like taking order.

Reese Harper:
It’s more of an order taking philosophy which is fine if that’s-

Ryan Isaac:
The business model.

Reese Harper:
If you’re just a broker selling investments. If you’re going to a financial advisor, one of the things you really want to know is what do they actually believe about a market? What do they believe about how to invest money? What they believe is going to drive their decision making through both good and bad markets. It’s really scary to have your money managed by a financial advisor who changes their opinion on how to manage your money mid cycle. Meaning if the world’s imploding, do they change their mind? Or when things are going really good and going in a positive direction, do they change their mind? It’s really important to have your advisor have a strong philosophy about how they want to manage money because you don’t want to be with someone who they’re so malleable that they kind of do whatever you tell them to do or they move when you say something or when they hear something or when Jim Kramer says something on CNBC, they move.

Ryan Isaac:
Right.

Reese Harper:
You want to know what their philosophy is.

Ryan Isaac:
I would describe it like, out of the different asset classes, the different places you could put money to invest it. Let’s just keep them simple and say you’ve got public markets which are stocks and bonds, mutual funds. You’ve got real estate and you’ve got privately held businesses like a dental practice or some other business you start. I would say that people who are optimizing for I want the highest possible return out of any asset class regardless of risk, you don’t go to the public stock market to do that and you don’t go to some rentals to do that. You build a private business to optimize for the highest possible return which does come with the highest amount of risk as well.

Reese Harper:
Yeah.

Ryan Isaac:
I would say we’ve used stock market as here’s a place that low barrier to entry, very low cost, very transparent, completely liquid, completely outsourceable for reasonable cost that you can systematically put money away that steadily grows over long periods of time while you focus on a private business. That’s how you should view a stock market, but right now what can we get the average dentist to do who’s busy with the practice and life and just repeat and stick to for 20 to 30 years, you know? Well I can get that person to have a healthy savings rate into a low cost, globally diversified portfolio that they don’t worry about for 20 years. I think that’s the healthy way to view it. 20 years from now are the six mutual funds we put in the portfolio the optimal, highest returning funds? Well they likely won’t be because there’s no way to know that for 20 more years, but that’s not the point.

Ryan Isaac:
The point is what can I get you to do? What can I get you to stick to for 20, 30 years? I think that’s what kills investors. That’s what studies show is people just jump around too much. They don’t stick to something so.

Reese Harper:
Which leads me to the other pillar of our investment philosophy we’ll call it which is we recommend clients use low cost indexed type mutual funds or ETFs that track a broad range of securities at a low cost as opposed to picking investments that are going to outperform because over the long run, exposing your money to a group of companies like the entire market if there’s 13,000 plus stocks in the world, you’d want to expose your money to all of that growth as opposed to selectively one or two or three. That’s probably the biggest difference between us and maybe another firm or another difference maybe between us and another firm is we really do feel like for the most part it’s important to just expose your money to a market and not try to pick the highest performing sector, country, or market.

Ryan Isaac:
As if you can. I mean as if that’s a thing that you can do for three decades.

Reese Harper:
Yeah. When you pick stocks or you pick mutual funds that are trying to outperform, the reason we don’t like to do that isn’t because it’s not possible. It happens and that’s why in many cases people continue to do that for a living. It’s just that on average it doesn’t outperform indexes and the broad market picking stocks or picking actively managed mutual funds doesn’t outperform a broad market index. It also just convinces clients to continue down this path of picking things that could be winners or losers. We don’t want to encourage them to change things because what ends up happening is you pay taxes through capital gains transactions when you buy and sell a lot. The tax waits, the tax costs of selling and buying securities it can be very expensive.

Ryan Isaac:
Yeah.

Reese Harper:
That’s our general philosophy though I think.

Ryan Isaac:
I mean that’s a big topic. So just call us. I mean if you want to dive into that more, just go to our website, schedule a call with one of our advisors, Dentistadvisors.com, and we’ll go into more detail about that, but I think that’s pretty good. Hey Matt, what do you like to drink or snack on when we do our webinars every month?

Matt Mulcock:
Yeah that’s a good question. I’m usually hitting a Red Bull, but it’s hard because it’s an evening webinar you know?

Ryan Isaac:
Yeah. These evening webinars taking place 6:30 PM mountain standard time.

Matt Mulcock:
Mountain time.

Ryan Isaac:
Once a month.

Matt Mulcock:
Where do you find it?

Ryan Isaac:
Well if you’d like to find the webinar or you’d like to register for it, you go to Dentistadvisors.com/webinar or just go to the website and click on webinars under the education tab.

Matt Mulcock:
It’s a good time.

Ryan Isaac:
It’s a great time. What kind of things do we cover in our webinar Matt?

Matt Mulcock:
So each month we’re going to hit an element, right? So it’s going to be some component of your financial life. We’re going to dive a little bit deeper than we would on the Dentist Money show, right? We get to draw pictures. There’s live polls. You can ask questions.

Ryan Isaac:
Yeah. It’s a great time.

Matt Mulcock:
Yeah it’s a good time.

Ryan Isaac:
Well we love to see you in attendance at one of our fantastic webinars. Just go to Dentistadvisors.com. Sign up today for the next one. Thank you very much. Number two, this will be quick. What type of clients do you typically work with? So we’re called Dentist Advisors. Not to be confused with Dennis Advisors. I do have a friend in my life named Dennis. I am not his advisor. Have you ever gotten that where people are like Dennis Advisor? Have you ever heard of that before?

Reese Harper:
No.

Ryan Isaac:
People have asked me that before. So we work with dentists. I think right now our average client age is I think it’s early 40s, 42, 43. Typically as of right now practice owners and people who are in a phase of their career where they’re starting to feel pretty busy and there’s leftover cashflow and they’re trying to make big decisions and they’re just getting busier and busier.

Reese Harper:
That’s definitely a bulk of our clients.

Ryan Isaac:
Yeah.

Reese Harper::
We used to also have a pretty big chunk of associates coming on right now.

Ryan Isaac:
Yep.

Reese Harper:
I would say the average is definitely right in there, but we do have like quite a few clients I would say 50 to 60% are the ones you described.

Ryan Isaac:
Yeah.

Reese Harper:
Then we’ve got 20%, 30% that are associates and young practice owners and then maybe 10 to 15% that are retiring.

Ryan Isaac:
Like retiring.

Reese Harper:
Older.

Ryan Isaac:
Yeah that’s probably good. We’ve deliberately probably been narrowing down our focus of who are we servicing and what are we doing?

Reese Harper:
That’s a great question to ask when you’re interviewing your advisor though because why does that matter from an investment perspective? Especially when you’re a dentist, you have a lot of one time expenses and cashflow events that are triggered by your career. Meaning you bring on an associate, you buy a building, you buy equipment, you acquire a second location. All of these transactions plus the selling of a practice or the selling of a partial selling of your practice, a selling of a building. All these cashflow events are things that are sometimes difficult for a financial advisor to understand unless they know dentistry and the industry fairly well.

Ryan Isaac:
Or have seen it.

Reese Harper:
Or have seen it a lot. So a lot of times their investment plan for you will not be structured in a way that maximizes your risk taking ability or maximizes your return because they’re not anticipating these different cashflow events. They’re either going to be too aggressive or they’re going to be too conservative in the way that they invest your money if they don’t understand. A lot of times the client, yourself, may not understand exactly how your future cashflow needs are going to affect your current investment portfolio meaning you might be able to invest longer or shorter than you thought based on these events in your life and it’s important that your financial advisor has good knowledge of that. Plus, their knowledge of your taxes and your tax situation, how to interpret the nuances of cashflow around your overhead-

Ryan Isaac:
Your debt and your spending.

Reese Harper:
And debt. Just a lot of factors that go into knowing your clients. So it’s important to have a financial advisor who specializes in your occupation.

Ryan Isaac:
So I’m going to piggyback off of that. I’m going to skip two questions because there’s one that goes right into what you’re saying. The next few questions was what is your process for helping me allocate different strategies for different accounts that have different goals? So that’s kind of what you’re saying, right? Is if you looked across all of our clients, you’d see that the average dentist has I don’t know half a dozen different types of accounts. You’ve got some pre-tax money or qualified accounts in the forms of IRAs or 401Ks, profit sharing. Usually some IRAs from the early years and then usually a couple, a handful of brokerage accounts, after tax accounts. One might be short term this is my building down payment in three years kind of fund. Emergency fund, might be a brokerage account that’s 40 year money. There might be a brokerage account for kids’ future expenses that they just want to keep in the name of the parents. So you look across the average client and there’s probably half a dozen or more account types. That’s separate from the way it’s invested, but account types that are based on those goals.

Ryan Isaac:
When does the money have to be used and what is it for? How much time do we have? How do we help allocate across these different things? Well I guess backing up one thing I’d say is we don’t make any decisions for anybody. We don’t give any advice for any new clients until we’ve spent our whole upfront onboarding process is spending a good four plus weeks depending on complexity, just organizing someone’s situation. We don’t make recommendations until we have a full balance sheet. We know what all of your assets are valued at even in liquid stuff, businesses and real estate. What all your debts are, amortization schedules, what you paid in taxes, what you and your family are spending every month, what your profitability numbers are. We don’t do anything until we know all of these things. So I think one of the foundational answers to that is we end up collecting more data and tracking and benchmarking more things and know more about our clients than probably anyone else in their life including CPAs and spouses, or previous advisors before we make any decisions.

Reese Harper:
That’s because a lot of the CPAs they don’t see the personal side very often. They see a lot of the business side obviously and they’re excellent at that. They don’t get to see the entire picture. So we’re probably in a position to be able to make more informed decisions than anybody else just because we can see the entire picture and often that’s why clients feel so comfortable asking us some of the most difficult questions that they’ll have to make in their life.

Ryan Isaac:
Yeah.

Reese Harper:
About what to do with their money and what big strategic decisions to make.

Ryan Isaac:
So as far as the process, that’s the process we do to begin the whole thing, but we basically maintain that process on a monthly basis of gathering and updating new data and reporting and tracking and benchmarking certain pieces. If you go to our website, dentistadvisors.com and click on the elements tab, that’s how we organize our structure of like when we do certain things just to kind of do things in smaller chunks throughout the whole year instead of once per year. As far as the process for helping someone know how to allocate and invest, it’s like this constant just knowing the whole picture and having all of the most updated data, just tracking and benchmarking things pretty meticulously.

Reese Harper:
Another dimension to that question that I think was kind of implied and the question was how are you guys managing the money specific to a goal of different types of accounts and I think one thing to understand about the way we manage our businesses are our business is manged by, we have dozens probably I wouldn’t say more than 45 to 50, but we dozens we’ll call it of portfolio types. So we might have really, really safe that our is to get three percent and not have it have a lot of volatility. Or we might have a portfolio that our goal is to get the maximum return possible with as much risk as possible and as much volatility as the market will offer. We might have a bunch in between. We might have some for 401Ks and some for after tax accounts, but each of our clients has a personal portfolio that’s custom and specific to them, but we assign it to one of these models that we manage and then each client has little customization differences that we make to each portfolio.

Reese Harper:
So even though you might be in one of our safe portfolios, before any trades are made that would create a tax consequence or before you make withdrawals, your financial advisor’s looking at your individual account and saying, “Well is there a tax here? Is this a good time to be pulling money out of this account or should I use a different account?” Each account is managed to a very specific level of risk that makes up this portfolio type like I said, safe, growth, really volatile with highest growth possible, very conservative for inside of a 401K, that kind of a thing. That way we’re able to be very accurate with for how we try to manage money and control the risk that each portfolio has.

Ryan Isaac:
Yeah. Well and let me just throw these two. There were two more questions actually. You might just want to add on here. One question is how does your firm trade client accounts? So maybe the trading weird balancing process and then another one was is that trading automated or customized for each individual? So you may want to just finish your thought because you’re basically right there.

Reese Harper:
Yeah okay. So like for trading every day our firm runs an analysis across every account. We have thousands of accounts now across, we don’t have thousands of clients, but we have thousands of accounts and those accounts, a household might have maybe two accounts or four accounts or three accounts. Each of those accounts we have to evaluate and determine if there’s new money that has come in and been deposited that day through-

Ryan Isaac:
Dividends.

Reese Harper:
…a dividend or a physical deposit that someone’s made. So every day there’s interest payments coming in from bonds and there’s dividends that come in from stocks and there’s deposits that come in from people’s ACH drafts out of their bank account. When new cash hits an account and we run our analysis in the morning, then suggestions are made through our software that we managed. It’s called iRebal and iRebal is a piece of software that helps us manage a lot of-

Ryan Isaac:
It’s through TD Ameritrade.

Reese Harper:
It’s a type of rebalancing software and that rebalancing software kicks the trades to each account and then we have to approve each trade individually and decide if we want to let it go through. So basically we run all the clients through this system every day and each advisor is given a chance if there are exceptions to what seems normal, meaning if there’s a withdrawal that’s coming out of an account or if there’s a transfer that’s coming in. Or if there’s a taxable event that will occur if a client requests money, then the advisor has to approve or is reviewing whether that makes sense for that particular client before we just create a taxable transaction. Sometimes that happens at the investment portfolio management level, like we are getting pretty big and so sometimes some of those transactions can be evaluated by our centralized team. Then most of the time as of right now, we’re still small enough to where each advisor is approving almost any taxable or unusual trade that comes across their desk.

Ryan Isaac:
Every morning.

Reese Harper:
Every morning and so that allows us to have a higher level of customization that we feel comfortable with and that’s probably different from how a lot of firms manage it just because it’s quite complex to engage in that level of customization, but it helps you avoid a lot of dumb decisions that would otherwise be made and sometimes create unnecessary taxable events.

Ryan Isaac:
Let’s talk about fees here. So first of all, our fee schedule is on our website. It’s dentistadvisor.com.

Reese Harper:
What was it? This is a question, it was just like what are your fees? That’s their question?

Ryan Isaac:
No, they’re specific. Yeah.

Reese Harper:
Oh.

Ryan Isaac:
Yeah. His fee section.

Reese Harper:
Yeah.

Ryan Isaac:
Yeah, so it’s pretty simple and it’s right on our website if you don’t-

Reese Harper:
Where are your fees? That’s the question you should ask your advisor.

Ryan Isaac:
This is very specific. These are good. Okay, because this is question six part A, B, C, and D.

Reese Harper:
Oh okay.

Ryan Isaac:
It’s all fees. Six is fees. There’s part A, B, C, and D.

Reese Harper:
We suggested these questions.

Ryan Isaac:
We did.

Reese Harper:
I’m glad we’re getting a chance to answer them.

Ryan Isaac:
T ball them. Okay so yeah what are your different levels of fees? So A, I guess that was the first question. What are your different levels of fees that I will be paying? Again, it’s right on the website, but we charge a standard percentage of the money that we manage for people which is pretty typical in a fee only fiduciary investment advisory role. Our percentage starts at a point and then goes lower as the accounts get bigger. So that’s also pretty industry standard. That’s a pretty normal way to change in a fiduciary fee only investment advisor role. What’s a little different about our firm is instead of requiring a dentist to have a minimum amount of money in order to work with us, which would exclude a lot of people in the early part of their careers, we also have a monthly fee to support working with clients with really small account balances in the beginning.

Ryan Isaac:
So our monthly fees vary by, there’s flat monthly fees that vary by the complexity of clients and those are all just sitting on our website. Then eventually when we manage enough money for a client, our monthly fees go away. They drop. So that’s all right there on the website too. There’s a little calculator you can go and punch in like oh if you managed whatever my portfolio is, would I have a monthly fee? Those are the only two ways we get paid. That’s it.

Reese Harper:
Yeah in our business the way we decided to try to create some consistency among our clients was a lot of firms get paid through a variety of commissions through different products that they might sell. You might see some will get paid for annuities or life insurance or disability insurance or other commission based products. On top of that, they might get paid a percentage for getting to manage the money and then sometimes they might actually charge you fixed fees or flat fees or something for doing a financial plan. The way we wanted to set up our fee structure was we don’t want to get paid for selling clients anything or have an incentive to sell anything to them. We just want to be like getting the same amount of money for a complexity based on the person. So we built this complexity calculator that lets us see how complex someone is and they’re either going to be paying 195 a month, 495 a month, 695 a month, or a custom quoted fee based on someone that’s maybe larger that we can say look you’re kind of an abnormal case. Those are our minimum.

Ryan Isaac:
They’re still special, not abnormal. Like you’re a normal person.

Reese Harper:
You’re a normal person.

Ryan Isaac:
We like it.

Reese Harper:
A complicated person.

Ryan Isaac:
Yeah you’re a complicated person.

Reese Harper:
So that is the minimum amount we need to make to be able to service someone and as someone’s investment balances get larger, we don’t need to charge them that fee anymore and that calculator’s on our website and you can see it. So yeah just to point out the exact fee structure on the investment side, it starts at 1.5 and it goes down to .5 depending on how big your balance is.

Ryan Isaac:
Okay part B was who else gets paid by me as a client? That’s what the client’s asking. Who else do I pay?

Reese Harper:
Yeah and that’s a question that you want to ask because sometimes when financial advisors manage your money, there’s like another third party or another person that’s getting paid to manage the money. There should be at least one, possibly one other person that gets paid which is the actual index fund or mutual fund that your money’s going into. That should be some kind of-

Ryan Isaac:
That was part C. What are the underlying costs of investments? So you can tackle that too.

Reese Harper:
Oh okay. Well there may be another person besides your financial advisor who’s getting paid to manage money. Sometimes that’s called a third party overlay manager. In our firm’s case, there is no other manager that’s getting paid. It’s just our fee and then of course, there are other costs from the underlying index funds or mutual funds that we are purchasing.

Ryan Isaac:
That’s the expense ratio.

Reese Harper:
Yeah and that is called an expense ratio. In our case, it depends on the portfolio, but that might be as low as .05 or .06 for a portfolio that has really low cost ETFs. There’s a lot of ETFs with very, very low expense ratios or they might be as high in the .2 ish range or high .1 something range. We’re using indexes that are relatively inexpensive. We don’t always use the cheapest indexes because the cheapest indexes don’t always target the market or target the particular segment of the world that we’re trying to go after in as accurate of a way. Sometimes cheaper is not always better when it comes to indexes, or when it comes to mutual funds or ETFs.

Ryan Isaac:
Yeah. Other people you could pay is if you have a 401K or a profit sharing or a pension plan, you’ll also pay what’s called a third party administrator and those are the people who file the tax returns, make sure your retirement plans at the office are compliant, and filing all the right stuff, and notifying employees. That’s not revenue shared by us. That doesn’t come to us. There are some mutual funds that do have trading costs. Five bucks, seven bucks, so there’s a few portfolios that’ll have mutual funds that are preferred to hold that the mutual fund company charges a trading cost per trade.

Reese Harper:
[crosstalk 00:30:44] consideration when we’re looking at which fund or what to use.

Ryan Isaac:
What makes the most sense.

Reese Harper:
Luckily in the last year most trades of ETFs and stocks don’t really have trading costs anymore. Thank you to a lot of the online platforms that are trading for free. That’s happened, but it’s sort of a thank you and a nod because these custodians are going to make their money someway.

Ryan Isaac:
They’ll get it somewhere else yeah.

Reese Harper:
What you’re just seeing right now across the industry is even if trading costs are going away, all it does is make your money market rates and your cash rates go to absolutely zero and then that’s how you get free trading.

Ryan Isaac:
Yeah. Worldwide banks are not giving up revenue.

Reese Harper:
Yeah. They’ll find a way to get their money. So don’t be too excited just because you don’t pay trading costs anymore.

Ryan Isaac:
Yeah.

Reese Harper:
Banks will find a way to get paid.

Ryan Isaac:
We wanted to take a break for just a second to remind you how easy it is to book a free consultation.

Reese Harper:
Yep.

Ryan Isaac:
With one of our dental specific advisors. What you do is go to dentistadvisors.com ad you’ll see a big gree button that says book free consultation.

Reese Harper:
Can’t miss it.

Ryan Isaac:
Click that button and book a time that works for you or yu can just call us at 833-DDS-PLAN. Let’s start a conversation about how we can help you with your finances. Part D of this question though. Here’s the one that could go four hours is most importantly, what do you do for that fee?

Reese Harper:
Yeah.

Ryan Isaac:
We’ve only got limited time.

Reese Harper:
I think we should recommend that people for that go listen to our episodes called What is Financial Planning Anyway I think?

Ryan Isaac:
Yeah. Go to our dentistadvisors.com, type in the search bar financial planning. There’s a couple on there.

Reese Harper:
Yeah go to the topics and the education library. In the education library there’s a topic in there about financial planning and you can look at a lot of podcast episodes on-

Ryan Isaac:
Yeah 201 by the way, Why in the World Would I Hire a Financial Advisor? That was fairly recent. We covered a lot.

Reese Harper:
Yeah, episode 201.

Ryan Isaac:
Depth.

Reese Harper:
Solid.

Ryan Isaac:
I think the title’s actually like, What the Heck Does a Financial Planner Even Do?

Reese Harper:
I think it’s like What the Heck is Financial Planning Anyways?

Ryan Isaac:
Yeah that’s it. In the 180s or something. Yeah I mean there’s a couple hours that’ll answer that question.

Reese Harper:
Probably won’t go into detail on that one.

Ryan Isaac:
We’ll just say a lot.

Reese Harper:
Yes.

Ryan Isaac:
A lot and highly likely more than anyone else you might be working with if I’m going to pat myself on the back a little bit, pat us on the back.

Reese Harper:
You are biased.

Ryan Isaac:
I am highly, yeah take everything with a grain of salt. You asked for this. You wanted to answer your own questions. All right. We’ve got a few more here. How do you track what your employees are working on and how much time are you spending on me to justify the fees? So this kind of goes back to if you go listen to those podcasts from the previous question, that will answer how much time we’re spending as a team on every client that we bring on.

Reese Harper:
Yeah.

Ryan Isaac:
Which is very significant. It’s many multiples times higher than the average advisor spending on the average client in the industry by a long shot. I like this first part of this question that wouldn’t be in those other podcasts. How do you track what your employees are spending time on and working on? I mean we just went through a project of probably two years to figure out what’s optimal pricing and where are we spending time, which team members, what types of clients and personalities in situations drive up our time cost? I mean do you want to like-

Reese Harper:
Yeah just a brief thing just so people don’t get bored by this.

Ryan Isaac:
Shout out to Justin.

Reese Harper:
Justin and our operations team does a great job at trying to make sure that we’re offering as much possible value as we can for the cost of our service and Ryan’s job and my job is to make sure that when we call something financial planning, we feel like it’s thorough, it’s comprehensive, and that it’s actually covering all the areas that it needs to in your life.

Ryan Isaac:
It’s a repeatable system and process behind it.

Reese Harper:
What we found is we did this research project was a very specific number of hours that our associates spend, those are our support level staff. Then we have hours that our investment team spends. Then we have ours that our admin team spends and then hours that our financial advisors spend both in proactive planning work that they do each month for clients and then reactive planning work that comes in through phone calls as clients have questions throughout the year.

Reese Harper:
We just have to add all that up and then average it across the number of clients we have to determine the number of hours on a minimum level that we think are being allocated to each client and that’s kind of how we’ve been able to figure it out and then we just try to every three months, we try to do good employment reviews with each person and try to keep track of how much volume they’re handling and making sure that they have not too full of a clientele allotment and then we make sure and cap our advisors and our associates at reasonable client levels so that we make sure to keep our service high and make sure that we keep allocating the same number of hours to each client that we feel like everyone should be allocated for what they’re paying.

Ryan Isaac:
Yeah. I think that’s worth mentioning a little bit. Capping our advisor’s client base to a reasonable number in the industry would be laughable because I was just talking to one of our other advisors that came from a really large firm a couple years ago and he was in charge of I think 700 households. Might’ve been six or 700 households. I mean how much time are you spending with 700 people in a given year, you know? It’s like every other year you have a phone call or something.

Reese Harper:
Well think about it, even if you’re working full time, you’ve got about 2000 hours a year. So if you’ve got 700 people you’re responsible for, all of them are going to get between two and three hours per year.

Ryan Isaac:
Of total time.

Reese Harper:
Yeah total time.

Ryan Isaac:
Reading an email, reading a text, looking at a report, reviewing statistics or data, I mean it’s like no time. That’s literally like no time. Our clients are getting that almost on a monthly basis per client between our whole team.

Reese Harper:
Right now you won’t find anyone in our firm who has more than 100 clients, between 100, 150 clients. That’ll probably be the maximum you’d see. We hope that over time we can continue to reduce the number of clients that each advisor serves while maintaining our price and [inaudible 00:37:20] our technology, continue to drive down some of the routine monotonous kind of stuff that computers could probably do better than humans and we think that that’s going to really be the right place for the future so.

Ryan Isaac:
Cool. We got two more. Let’s maybe wrap this up in the next few minutes. Second to last one is who are your investment philosophy mentors? Is that uniform across your advisors?

Reese Harper:
I think all of our advisors have different mentors that they like to listen to. I mean in the contemporary financial world. I would say philosophically though, there’s some roots that we kind of all are agreeing on or feel strongly towards. I think some of the people that are inspirational to us or influential in our lives are people like David Booth, who founded a company that focuses on academic research for behavioral science and financial advisors and consumers. People like John Bogle that started Vanguard, Eugene Fama, and Kenneth French, University of Chicago professor and University of Dartmouth professor. I think those types of people that are more academic and a little bit more research focused tends to be where the roots of our firm is at and a little less stock picker-esque. So a little bit more Eugene Fama and a little less-

Ryan Isaac:
Kramer. Jim Kramer. It’s been a while since we mentioned Jim Kramer.

Reese Harper:
Yeah.

Ryan Isaac:
He’s a swell guy.

Reese Harper:
We tend to lean more towards proven methodologies that can work and help change behavior and help people actually have sustainable financial growth and not be surprised at their retirement accounts or going up in smoke.

Ryan Isaac:
Yeah I would just echo that. I think foundationally everyone’s like solidly on the same page. I think the variation comes in the form of favorite financial writers or authors or flavor.

Reese Harper:
Yeah contemporary authors.

Ryan Isaac:
Yeah.

Reese Harper:
Even those authors will largely-

Ryan Isaac:
Same message.

Reese Harper:
…be very aligned with some of the roots in our philosophy.

Ryan Isaac:
Okay. Last question which I thought was really cool, but I guess I can’t say that because we invented the question a few podcasts ago, but I forgot and I think it’s a good question. What is your process of continually educating me and tracking and disclosing my progress in ROI? Well there’s like three questions in there. Go with the first one. What’s your process of continuing educating me? I guess I would just say by the way.

Reese Harper:
You hit that.

Ryan Isaac:
Yeah I mean I understand people hire us because they’re hitting a point in their lives where they’re getting busy and they don’t want to deal with stuff. They want to make sure things are done correctly, methodically, and that nothing’s going to be missed, nothing’s going to be this problem that doesn’t get worked on for years and years and then blows up like a bad tooth. At the same time, I love when clients want to learn at least something. They want to know the why behind some things and I think that we’re really accommodating of that. Most of our business has been built on free content and teaching and education and the byproduct of our podcast has been growth and that was really cool, but the reason we started was just a way to teach people.

Ryan Isaac:
We wanted a bigger audience to teach. Not knowing what that would turn out to be in terms of marketing or growth, but so I think my answer would be we’re constantly trying to put out as much content as possible. Our 2020 calendar is even more aggressive with writing and webinars and speaking events and of course the podcast, but anything you’d want to add to that on how we’re trying to continually educate? Well I guess I would say too real fast is any advisor in our firm loves the opportunity when a client gets on the calendar and says teach me about this. I mean I love seeing that. Like hey, I just want to understand this thing about what you said in the last elements report. Can we spend 30 minutes? Can you just teach me why you’re doing it? Any advisor, we love that.

Reese Harper:
Yeah.

Ryan Isaac:
That’s kind of our culture we built though.

Reese Harper:
Yeah I think the only thing I would add to the second part of that question is how do you report back to me?

Ryan Isaac:
Track it-

Reese Harper:
Yeah. Specifically as it relates to investments, we have a financial planning process that reports back different financial planning metrics like net worth growth and all of our element scores. Those are all of our financial planning metrics and those reports are delivered monthly and conversations are happening regularly around that information. On a quarterly basis, we compile through an investment performance calculations software from Morningstar. It’s called Morningstar office. It takes all the accounts from all the custodians and then calculates performance very accurately through this software and then creates a consolidated report and then individual account level reports. Then we take those for each client and then put them into a quarterly investment newsletter and send them out. So for those of you who are clients or for those of you who are wondering about this maybe your clients haven’t noticed it, it’s coming out to you every three months.

Reese Harper:
January, April, July, October and in that report it’ll say here’s your quarterly investment performance and it contains all of your returns on an account level, at a household level, and then it also contains monthly returns, annual historical last 12 months returns and it shows you what you’ve put into your account, like how much you’ve put it and then what it’s worth today. It also shows you how you’re diversified and what the holdings are and then what the individual holding level returns have been. It’s a pretty complex document so a lot of people see it a few times and then they kind of go well I don’t need [inaudible 00:43:20] every three months. Especially when I’m doing this for 10 years.

Ryan Isaac:
But it’s there.

Reese Harper:
But it’s there and then a lot of times once every three years, once every five years people will want to go through a really deep dive and we can run customer reports to go through all investment performance to any given moment and all those reports as well, all the fees are disclosed that we ever got paid as well and they’re all disclosed on a quarterly basis too. So clients can see exactly what their management costs are or their financial planning costs are.

Ryan Isaac:
Cool. That’s the list.

Reese Harper:
Big list. It was a great set of questions.

Ryan Isaac:
Yeah. It was a great set.

Reese Harper:
Thanks for sending them in right?

Ryan Isaac:
Whoever invented that great list of questions?

Reese Harper:
Thanks for asking them.

Ryan Isaac:
Yeah thanks for tuning in and indulging us a little bit in some bottom of funnel, self promoting content, but I think this is helpful hopefully and transparent and again, there’s so much more we could dive into. So if you just want to chat about any of this stuff in more detail, just give us a call. You can call us 833-DDS-PLAN, try to get someone on the phone or schedule something over the phone or just go to our website, dentistadvisors.com and schedule an appointment at your convenience with one of our advisors and join our Facebook group because you can post awesome questions like these and we will either answer them in the group or we’ll turn them into an episode. We love it, it makes for a great content that people are engaged with it. So thanks for joining us in our remote location for this episode. We really appreciate everyone tuning in as always and we’ll talk to you next time.

Reese Harper:
Carry on.

Advisors