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What Smart Dentists and UPS Drivers Have in Common – Episode 84

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In the early 2000s, UPS unveiled a new way to navigate its routes. The idea seemed too simple to be effective, but it drastically improved productivity and saved the company millions of dollars. In this episode of Dentist Money™, Reese & Ryan compare the attributes of a well-run shipping company to those of a good financial plan and explain what it means to have an efficient investment portfolio.

Podcast Transcript:

Speaker: Consultant advisor or conduct your own due diligence when making financial decisions. General principles discuss 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, Isaac and Q in the studio.

Ryan Isaac: Q in the studio.

Reese Harper: Q is here. Q came back for episode two. Even after we got some … We got some feedback from our Facebook friends online about what they liked from this last video format that we released. I was told that I needed to smile a little bit more.

Ryan Isaac: Really?

Reese Harper: And be a little bit nicer to the camera.

Ryan Isaac: Like friendlier? Just smile.

Reese Harper: I read into that like change your face.

Ryan Isaac: Yeah. Can you just replace your head?

Reese Harper: Yeah. I don’t know-

Ryan Isaac: You look really bad.

Reese Harper: There’s some things I just can’t change.

Ryan Isaac: There’s no shiny baldhead comments like, “Does this light not shine?”

Reese Harper: I didn’t want to bring that up.

Ryan Isaac: All right.

Reese Harper: I mean, that’s a sensitive area.

Ryan Isaac: Not really.

Reese Harper: Yeah, it is. It’s very sensitive to sun.

Ryan Isaac: Yeah, that’s actually true. It is a sensitive area. Literally. It’s a sensitive area. You can nick it while shaving. You can burn it in the sun.

Reese Harper: There’s a lot of things that we will-

Ryan Isaac: That’s not what we’re talking about today, but we’re going to jump right into a good story and I want you to tell the story. You’ve been dying to bring it into light for a year.

Reese Harper: Yeah.

Ryan Isaac: I’ve heard about this for a year.

Reese Harper: Can I please share my story?

Ryan Isaac: You’re finally bringing it to light people.

Reese Harper: Yeah.

Ryan Isaac: What is it?

Reese Harper: Well, it’s about UPS. Who doesn’t love UPS? When you see that guy stop at your door, are you not excited? It’s like an ice cream truck.

Ryan Isaac: The men in brown. Isn’t that what they call them? The guys in brown or the men in brown?

Reese Harper: What can brown do for you?

Ryan Isaac: There’s always an Amazon box in hand.

Reese Harper: Yeah. It just feels great. Anyway, the story is about UPS. The story about UPS is how they deliver their packages these days.

Ryan Isaac: And it’s cardboard.

Reese Harper: And it’s cardboard. That’s how they do it. So in the early 2000s, they were looking for ways to be more efficient, to deliver more, to do it faster, to be more on time, even cut routes down, save on gas, things like that. For years they had tried to just put in their map software, just the quickest point between where they’re leaving and then the delivery route. Just the fastest way there.

Reese Harper: But what they found, and this actually goes back to someone who kind of thought through this theory in the ’50s, but what they found was if they only … If they eliminated left turns as much as possible, it’s not entirely possible, but as much as possible they would actually get there faster and save a lot in gas and fuel costs. They would be safer and they would be able to be more efficient and deliver more.

Reese Harper: So this started in their early 2000s. Then they developed software in 2004 to track this stuff and actually plan and then monitor their progress in it, which is really cool. What they did is, after they implemented this, they ended up saving millions of gallons of gas every year. The emissions that they cut out from idling in left hand turn lanes is the equivalent to like 21,000 passenger cars every year on the road.

Ryan Isaac: Crazy.

Reese Harper: Yeah.

Ryan Isaac: So not turning … For those of us who don’t know why it matters-

Reese Harper: Amby turners. If you’re not an ambi turner.

Ryan Isaac: See, I can turn both ways. Wasn’t that a Zoolander thing?

Reese Harper: It’s exactly-

Ryan Isaac: He can’t turn left.

Reese Harper: Yeah, he can’t. He’s an ambi turner.

Ryan Isaac: Maybe that’s where UPS got the idea.

Reese Harper: You know that was about the same time as the movie. Yeah, I think he’s onto something.

Ryan Isaac: He’s onto something. You can always count on Q to come with a movie reference. Okay. Yeah, that’s true. So going left saves me time or going left does not save me time. Going left is bad because I idle and I sit there and wait for cars to have to come. Unless there’s a go left green arrow and I don’t have to wait.

Reese Harper: No. So I’ll recap it here. So speed. So they actually ended up shortening everyone’s routes by six to eight miles, even though oftentimes they end up driving longer routes to get there because they’re only taking right hand turns, but scaled across their whole force.

Ryan Isaac: Okay.

Reese Harper: On average they saved six to eight miles per route.

Reese Harper: Wow. Which no one thought they would do. They thought they’d for sure drive longer. So they got there faster. 10 million gallons of fuel every year saved. 350,000 more packages delivered. They’re a lot safer. They’ve had their accident rates go way down. So like a quarter of all accidents involve being in a left turn situation.

Ryan Isaac: Interesting.

Reese Harper: Like one, 1% of accidents are right turn. So they’re safer. Then emissions were equivalent to taking like 21,000 cars off the road.

Ryan Isaac: Wow.

Reese Harper: So that’s the outcome of what happened to UPS only turning right.

Ryan Isaac: So they got faster.

Reese Harper: That’s it. That’s all I wanted to tell. I just wanted to really tell that story. It’s so cool.

Ryan Isaac: Podcast over.

Reese Harper: Yeah.

Ryan Isaac: There’s no lesson here for the live ones to learn.

Reese Harper: We don’t need to relate this to anything. Speed. Efficiency. Safety. Health. Technology.

Ryan Isaac: Okay. Let’s go back to this. We have speed you talked about, you talked about efficiency. Safety.

Reese Harper: Yep.

Ryan Isaac: So can they text and drive now that they don’t have to turn …?

Reese Harper: It’ll be automated pretty soon. How far away are we from that?

Ryan Isaac: How are you gonna put doors on those cars?

Reese Harper: That’s actually-

Ryan Isaac: That’s what I wonder. Does the other 75% of accidents come from people having falling out of the doors? Making right hand turns and then they just bailed.

Reese Harper: You could just add a door.

Ryan Isaac: You could add a door.

Reese Harper: It’s too much time opening and closing doors. So cleaner and healthier and their technology ends up saving all of us millions of dollars on our-

Ryan Isaac: Yeah. It’s really cool. The tech they built was just custom in-house technology they built to track it and then to plan their routes but then they could actually monitor the outcomes of all this. So it was kind of like tested in theory, but when they had the software then they knew they had the data. It was really cool.

Reese Harper: So tell us how you got this idea to relate UPS truck driving to dentists.

Ryan Isaac: Yeah, to dentists.

Reese Harper: And their money.

Ryan Isaac: And their money. I heard this story and I thought what a small, tiny thing that almost seemed like not only insignificant but kind of a pain to do that they implemented and it changed like their whole business. It affects all of their customers, all the people that they don’t crash into now apparently.

Reese Harper: Yeah.

Ryan Isaac: It’s just this tiny little change. And it’s funny because I was reading some press statements from the president of the company when they announced it and he was laughing when he was announcing this new policy. He’s like, “I know no one believes me.” He’s like, “I brought data, here’s the data. I know you’re all laughing. You think you’re just going to be driving for hours and hours everyday turning right.” But it was really cool. So I just thought how can a small, tiny change and just affect the outcome in so many broad ways and deliver such big results.

Reese Harper: Yeah.

Ryan Isaac: That’s we’re going to talk about today.

Reese Harper: Well, let’s jump into the first area that you talked about. You talked about speed being affected by this minor adjustment.

Ryan Isaac: So I thought, we talk about this a lot, how can we get a dentist to get to the point where work is optional, faster? We’ve cited the statistics that have been updated now by the ADA that dentists on average are retiring at age 69 and the average American is retiring at age 63. Was it 63?

Reese Harper: Yeah.

Ryan Isaac: It used to be 67 ,so now it’s 69. We talk about this speed factor. How can we get somebody to retire? Even two years would be a meaningful difference, if it was two years earlier. What if it’s five or seven? So that’s kind of the first topic. Let’s just chat about that for a minute. How can we get someone to just retire sooner?

Ryan Isaac: Well, one of the first things that comes to mind to me, that increases the speed at which someone retires is the percentage of their income that they put away. We call it their savings rate.

Reese Harper: Yeah.

Ryan Isaac: If the percentage of someone’s income … Right now, the average, I think the statistical average that we’re measuring right now for the across all clients is somewhere in the roughly 19% range.

Reese Harper: That’s cool, yeah.

Ryan Isaac: Some years it’ll push a little bit higher. If someone can push towards four or five percentage points higher than the average, they’re going to be accelerating their net worth growth in a really significant way. So 25% savings rate as opposed to maybe an 18 or a 19, it’s going to make a huge difference. For most people listening to this probably, if you really look at your savings rate, when we say savings rate, we’re actually taking it not from your adjusted gross income. We’re taking it from your true cashflow, which comes from adding back amortization and depreciation and your salary and everything.

Ryan Isaac: When we calculate income, we’re taking someone’s salary plus the business net income, which is what shows up on your tax return for a business return. We’re adding back anything that you really probably got that was written off like amortization, depreciation from buying a building or equipment. Once you take that gross income, if you can try to target 23 to 25% savings on that as opposed to where most people are at … The national average savings rate is in the single digits, low single digits.

Reese Harper: Yeah. The high side on average is like five among 55 to 65 year olds.

Ryan Isaac: Yeah. If you can push that savings rate higher, because dentists earn a lot more, they just have more discretionary income available to save. If your savings rate though is the same as the national average, you’re going to be in big trouble because your lifestyle expenses are twice as much as the national average lifestyle expenses.

Reese Harper: And taxes are a lot higher.

Ryan Isaac: So you have to save more in order to make work optional at an earlier age. Man, nothing really accelerates people’s growth quite as quickly as an increased savings rate?

Reese Harper: Yeah. So what would, if that’s our tip number one to increase the speed of your net worth growing, what do we consider savings? What would you tell someone is savings every year?

Ryan Isaac: It’s just the leftover money that you have. An easy way to think about it-

Reese Harper: Everyone’s like, “What leftover money?”

Ryan Isaac: Yeah. What leftover? If your business checking account, let’s say, one January to the next January, your business checking went up by $50,000, technically you have $50,000 of savings that you’ve been left with over that course of the year.

Reese Harper: That’s not tax money. It’s not for a debt, like a minimum payment. It’s not for your personal spending. It’s just there, sitting.

Ryan Isaac: Well if you threw … I would say it comes in four groups. You probably have extra money that you just let it pile up in checking accounts. That would be savings. You can have money you put towards retirement accounts or investment accounts. Even kids’ education accounts. We consider those savings because they really will help. That’s a future expense you’re going have.

Reese Harper: Yeah.

Ryan Isaac: Then we consider extra money towards debt, like if you threw an extra 50 grand towards debt or-

Reese Harper: $1000 bucks a month or something.

Ryan Isaac: Yeah. Anything you throw at extra debt payments is also considered savings.

Reese Harper: Take those categories and just divide it by your true gross income from the practice. Yeah. And if you don’t know how to calculate that, you call Ryan and he’ll do it for free.

Ryan Isaac: Call me eight, three, three DDS plan. That’s the one.

Reese Harper: Nice work.

Ryan Isaac: Can we get a screenshot of that? Is that from marketing? Do we need that?

Reese Harper: I like it.

Ryan Isaac: Anyways, so number one would be speed and growing your net worth faster by having a high enough savings rate.

Reese Harper: Okay.

Ryan Isaac: If you just calculate that annually, for someone listening.

Reese Harper: Once a year would be enough.

Ryan Isaac: Yeah, that’s probably the only time you really can calculate it. I think you’d be interesting to look at those numbers too.

Reese Harper: If you’re saving more than 40% of your income, I’d say take a vacation.

Ryan Isaac: You’re either behind on your taxes.

Reese Harper: Or enjoy life a little bit more. Yeah mostly, you probably enjoy it. Most people would never get to that high of a savings rate without being a little OCD on savings, but try to enjoy life along the way. I’d say a good number is to be right in that … I’d say be in that 25% range, it would be awesome.

Ryan Isaac: That’d be great. Okay, let’s go to number two then. Efficiency. Okay. So UPS increased their efficiency a lot. They delivered more packages by just making some small changes. So I thought about efficiency in terms of portfolios. We talk about this all the time with clients or people who call in. Let’s talk about building an efficient portfolio.

Ryan Isaac: Some things that make a portfolio inefficient, I guess would be, we see people who have portfolios with a ton of positions in them. They overlap multiple funds that do the same thing from different fund families.

Reese Harper: Yeah. I saw that this week in a case where there was seven investment accounts from this new client that we just onboarded and we were trying to make their portfolio a lot more efficient.

Reese Harper: You can do a lot of analysis on mutual fund holdings that show you what the overlap is between different mutual funds.

Ryan Isaac: Should we define overlap?

Reese Harper: Yeah. So like there’s-

Ryan Isaac: Q?

Justin Copier: I think that’s a good idea. I’m sitting here wondering myself.

Ryan Isaac: The common man.

Justin Copier: Yeah. I’m the voice of the audience.

Reese Harper: Yeah. So there’s probably 13,000 plus stocks in the world and there’s many more bonds than that. But let’s just talk about stocks for a minute. Of all of those stocks, some mutual funds own similar stocks. So let’s take a United States mutual fund that you might have. You might have one that has the same stocks in it. In the United States there’s only about 4000 stock, just under 4000. In the United States, you might have two mutual funds with different names that own like the exact same thing. And so what you want to do is you want to look at your mutual fund and determine what stocks it owns and make sure that your other funds don’t own the same thing unless there’s a reason you want that to happen.

Reese Harper: We generally say that’s, that’s inefficient because you’re going to just increase the complexity of your portfolio. You’ll increase transaction costs, you’ll make it more difficult to manage your taxes by having multiple positions with deferred capital gains and make it harder to harvest those gains and rebalance your portfolio.

Reese Harper: So I saw a portfolio this week that had seven different accounts and literally the same mutual fund was being … There were two mutual funds in each portfolio that were like identical and those were the only two mutual funds in the portfolios.

Ryan Isaac: Oh really?

Reese Harper: The two ticker symbols were very different and the names were different, but they were from the same fund family and they were there just basically almost pure duplicates of each other. One fund emphasized a part of the market a little bit differently than another, but it had almost identical holdings and it was just making it really … It’s just inefficient to manage money that way because you’re not getting more diversification by owning two mutual funds with the same stocks in them.

Reese Harper: You want to have fewer positions with more diversification. By having multiple United States mutual funds or multiple Europe mutual funds or multiple Brazil mutual funds or you just end up with inefficiency in a lot of ways.

Ryan Isaac: Okay. To that point, I think sometimes when we see those portfolios, having overlap can also increase risk that you didn’t need to take. You’ll see someone maybe with a broad US index fund and then some really specific technology funds where they might already own the technology companies in the big broad index fund, but then they own multiple really specific ones, because they thought they wanted to target those not knowing they kind of already are in a different way.

Ryan Isaac: That might be the point. They might be doing that on purpose, but they might not be either.

Reese Harper: It’s important to know that.

Ryan Isaac: Just taking more risk than they-

Reese Harper: Just know what you own and know if you’re doubling up everywhere or if you actually have a really diversified portfolio.

Ryan Isaac: Okay, well let’s take a commercial break so we don’t overlap.

Reese Harper: I like that.

Reese Harper: I don’t even know if that makes any sense, but let’s do it anyway. When we come back, we’ll talk about the the next two things, safety and your overall financial health.

Reese Harper: Hi, this is Reese Harper. I’m the host of the Dentist Money Show and CEO of I want to take just a minute and explain why is different than your average team of financial advisors. We help you plan, invest and retire better using a unique set of tools you won’t find anywhere else.

Reese Harper: First, we use our proprietary methodology called Elements to assess your financial health. The Elements framework enables us to give you data driven objective advice based on a comprehensive picture of your personal and practice finances. We maintain that picture in a custom dashboard that tracks all your assets, debts, and accounts so you know what you’re worth anytime and anywhere.

Reese Harper: And because we work with dentists and specialists, we can leverage our industry expertise to weigh your progress against your peers. We are the premiere wealth management firm for dentists and specialists and we’re ready to put you on a more predictable path to financial independence. Start now by booking your free consultation today at

Reese Harper: Thanks again for listening. Now let’s get back to the show.

Ryan Isaac: We’re back from break.

Reese Harper: Yes.

Ryan Isaac: Refreshed. Kirkland purified water bottle in hand.

Reese Harper: Unofficial sponsor?

Ryan Isaac: Unofficial sponsor.

Reese Harper: That would be cool if someone-

Ryan Isaac: Costco could be the official sponsor. We’re waiting to hear from Costco.

Reese Harper: Yeah, we’re going to edit all that out because it’s not true.

Ryan Isaac: And I had to go to Costco during the commercial break to get it.

Reese Harper: Costco. Okay, the third point that we’re going to talk about is safety. So when UPS made these small changes, they also increased the safety in their drivers. A lot less accidents. It probably also saved them a lot of money in insurance costs.

Ryan Isaac: Yeah, I’ll bet.

Reese Harper: Anyway, there’s a few things we could talk about how to make your balance sheet or your net worth, your portfolio, your financial life safer.

Reese Harper: I thought one thing we’ve been seeing a lot or it’s just really common is the amount of risks someone takes, since we’re talking about portfolio, the amount of risk someone takes in a portfolio. You’ll see really young people taking not enough risk. They’re just not sure how to do it or what that means or what to expect. You’ll see older people taking way too much risk or people who have some short term goals or a project coming up that they don’t have money appropriately set aside for. They might want to buy a building, but it’s sitting in some equity mutual funds.

Reese Harper: So when we talk about the risk of a portfolio and kind of how to gauge that depending on timeline and goals and age.

Ryan Isaac: I think what we’ve always called it is your investment DNA. Know what your DNA is. The reason we’ve called it that is that everyone I think inherently has a certain level of volatility that they are comfortable with and when their investments start to become more volatile or more risky than what they inherently are comfortable with, they just start calling us a lot and being worried. So you know when you’ve reached your level of volatility based on how you feel about investments and your perspective on risk changes as you learn more and as you get more education.

Ryan Isaac: I have a lot of clients that have the most optimal risky portfolio, meaning the most volatile portfolio they could possibly build and it doesn’t bother them at all. They’re just wired to want.

Reese Harper: What’s funny about that is some of those people, I can think of specific examples, didn’t start that way. They started very apprehensive. Funny enough, even as they went through downturns in markets and they became more educated, they asked a lot more questions and learned about how things work and not only how they work, but just how it relates in context to their own retirement plan and the trajectory that they’re on, you know?

Reese Harper: They would increase the the riskiness that they’d take appropriately. But it’s kind of interesting, too.

Ryan Isaac: Yep. I think that when you look at risk in a portfolio, what you want to kind of understand is not a subjective, weird feeling about it. You want to know exactly what you should be expecting from your portfolio and what it’s going do. You have $100,000 and it could go down to $70,000 quickly.

Reese Harper: There’s a lot of different ways to look at risk. If I just told you you have a downside of 30%. Ryan, your portfolio is going to go down 30% or I told you your $100,000 dollars is going to go down to $70,000, that’s a possibility. To the listeners paying attention to this, does one feel worse to you than another? Does it feel worse to have a $100,000 go to $70,000 or does it feel worse to have your portfolio go down 30%?

Ryan Isaac: Yeah, it’s the dollar amount. Yeah. Usually it is. It starts to get more tangible when I can only stand to lose $5,000 now.

Reese Harper: Yeah. When I tell you that … What about if I say you’re never going to lose any money, but your portfolio is going to change in value just like your house does or just like your practice does and the value change that you can expect in your portfolio is to have it go from $100,000 to $70,000 or up as much as $140,000 in this first year? That’s the value change you could expect.

Ryan Isaac: But you won’t lose anything.

Reese Harper: You’re not going to be losing any money unless you go and sell it and sell it to someone-

Ryan Isaac: Which seems really basic. Of course that’s how investments work. But that’s a new revelation for some people when they hear it and think about it that way. They’re like, “Oh yeah, you’re right. If I don’t sell it, I’m good.” Take my house.

Reese Harper: Yeah. It’s like if I told you before buying a house, imagine when you go to buy a house, if at the closing table, the mortgage broker, he sits you down and he says, “Now before you buy this security,” because it’s an investment and it’s going to be very volatile, he’s like, “You could expect a change in value in this property anywhere from in negative 60% if you live in the Phoenix market. They go from $100,000 down to $40 grand. That could possibly happen.”

Ryan Isaac: Shout out to AZ.

Reese Harper: Shout out to our friends in the desert right now.

Ryan Isaac: You picked up some hot property.

Reese Harper: Or you know, you could expect to maybe have a positive increase of 70% or 80%.

Ryan Isaac: For our Seattle friends.

Reese Harper: Well in Arizona, maybe. It could recover.

Ryan Isaac: Yeah. It could recover.

Reese Harper: So if that was the way that your mortgage broker talked to you right before closing, you’d probably be … It would make you sit back a little bit and think about it.

Ryan Isaac: Oh, by the way, we’re going to post a little ticker sign right above your front door.

Reese Harper: Yeah. On your front door instead of an address label, We’re going to put-

Ryan Isaac: How cool would that be?

Reese Harper: We’re going to put the price of your house and it’s going to go up and down every day and it’ll just be electronic. Actually every minute. As properties sell throughout your neighborhood-

Ryan Isaac: It just updates.

Reese Harper: As the housing market changes and as unemployment changes and as minimum wage raises, all these things that happen …

Ryan Isaac: The city passes a new law.

Reese Harper: New taxes in the city. It’s going to change the values of your house.

Ryan Isaac: There’s a shooting down the street.

Reese Harper: But just for your benefit, we’re going to put it on the door.

Ryan Isaac: We’re just going to let you know. We know you don’t have to actually sell this thing for probably a few decades.

Reese Harper: In addition to that electronic ticker, we’re also going to install an app on your phone and your watch and your computer and in your car, and then everyone around the whole country on every radio station and TV program, at the bottom of their TV channel, it’s going to run the price of your house along the bottom of that screen.

Ryan Isaac: Yeah. But don’t worry about it.

Reese Harper: Just don’t let it affect you.

Ryan Isaac: Just don’t because it’s a great investment. Yeah.

Reese Harper: I mean just think how that would feel. That’s, as you can tell from my lengthy analogy here, that’s what the stock market is. That’s how stock market prices are given to us. That’s how stock prices are reflected to us.

Ryan Isaac: Yeah. So what are a few basic principles someone should think about when trying to understand what kind of risks to take in a portfolio?

Reese Harper: I would say first, remember that everyone has a tendency to be really conservative and most of you probably don’t have a lot of money. I think if your portfolio is diversified properly, it’s probably important for you to be uncomfortable, a little bit uncomfortable with the level of volatility that you’re going to experience. It will be a little bit uncomfortable.

Ryan Isaac: Especially if you’re towards the younger side of your career.

Reese Harper: Yeah. Even for people with the older side of their career-

Ryan Isaac: A little bit of discomfort.

Reese Harper: You’ve got to have a little bit of discomfort. If it’s really, really a no brainer feeling, you better be completely independently wealthy and have the option to not have any of that.

Ryan Isaac: Yeah. No risk at all.

Reese Harper: I think there’s a right and wrong amount of risk, but there probably is a level of discomfort that should feel normal and no one should … You shouldn’t like to see your account go up and down. The problem is if you don’t have enough investments that appreciate or move up and down, you’re not going to be able to outpace inflation. As gas costs more and food costs more and your life costs more, you need growth from your portfolio to be able to offset the cost of inflation. And so I’d say that’s one thing. I don’t want to meet that be a reason why people take unnecessary risk.

Reese Harper: So I’d probably say the way you know this is by having your financial advisors show you the worst one year return in dollars that you could expect from your portfolio. Then have them show you the worst three years.

Ryan Isaac: Okay.

Reese Harper: So he shows you the worst one year and then the worst three year. And in most cases, if you have a diversified portfolio-

Ryan Isaac: Going out five doesn’t really-

Reese Harper: You probably won’t have a lot of-

Ryan Isaac: You could have a boring five.

Reese Harper: You could have a really boring five, but you probably won’t have a really kind of bad feeling five if it’s diversified well. Then you could show the one year, the best one year and the best three year. That’ll give you a sense of the range of what you should expect.

Ryan Isaac: And how long the crappy feeling can last. Yes, this is terrible.

Reese Harper: Yeah. And then you can look at the average returns over over history, over different periods of history. So I would look at different 10 year rolling periods of returns. Find periods of time, and our advisor should be able to show you if you were to retire at 1930 or 1935 or 1940 or 1970, 1950, what would these have felt like? It’s really important that your advisor can give you that kind of … Paint that picture of here’s what you should expect. Because if you know what your DNA is and you’re comfortable with that, nothing’s really going to derail you.

Ryan Isaac: So what’s your sense for how often advisors in the industry are actually having this conversation with their clients?

Reese Harper: In my experience, I’d say it probably doesn’t happen that often. For a lot of people it won’t ever happen because they’re going to be in a position where they can’t really supply their clients with this kind of data because their investment philosophy is driven by which investments they feel like are going to be doing good at the time and they’re constantly trying to buy good investments rather than give people exposure to capital markets in a really diversified way.

Reese Harper: So a financial advisor who’s exposing their clients in a diversified way to all capital markets can show their clients really good risk numbers because you can see what history would’ve been like and forecast it pretty well. But when you’re picking stocks or you’re picking things that have done well recently or things you expect to do well in the near future, there’s no really easy way to model that. And so that’s a lot of times the reason why financial advisors can’t supply their clients with that information. Does that make sense?

Ryan Isaac: Yeah. And you dropped your wand, so you might not be able to ring your bell unless I help you out here.

Reese Harper: Shoot. Thank you. See for [inaudible 00:28:48]. Let me get that wand real quick to clear the air.

Ryan Isaac: Is it okay?

Reese Harper: Just real quick. Oops. What is this? Okay. An inexperienced chimer. Just a three chi.

Ryan Isaac: Let me ask you this question since we’re just kind of spent a little bit time on risk here. How do you know when it’s time to change the risks you’re taking in your portfolio? Like what kinds of things come up? We get that question when we’re going to manage someone’s investments. What kind of changes do you make? How often are we changing things up? You know?

Reese Harper: Well, changing the allocation within a portfolio, it’d be a very different decision than changing the risk.

Ryan Isaac: Just stay on risk.

Reese Harper: Okay, so how do I know if I should take less risk? When your advisor starts with you and he or she looks at where you’re going to be in the future, let’s say at age 50 at age 55 at age 60, that your advisor should be forecasting what we call a withdrawal rate. And that that means that based on how you’re saving right now and how much money you’re putting away-

Ryan Isaac: And what you spend.

Reese Harper: And what you spend, what would you have to be taking out of your portfolio at these different ages in the future in order to be able to make work optional, to kind of quit, to stop working. Those percentages are gonna really tell you if you’re going to be wealthy enough, because if you have to take 10% a year out of your portfolio, you’re probably not ready to retire. It’s too much. It’s too high of a percentage to withdraw.

Ryan Isaac: You could have the expectation that it’s going to draw down really quick.

Reese Harper: And if you’re taking 3% or 4% of your portfolio out per year, it’s pretty conservative. You’re going to be withdrawing. It’s a very reasonable withdrawal rate, which means that you’re not going to be putting a lot of pressure on your portfolio. So technically, no matter how your portfolio is invested, if it’s really aggressive or really conservative, if you’re only withdrawing three to 4% of it, you’re not going to go into … You’re not gonna be putting the portfolio in a high pressure situation. You’re not going to be stressing it out.

Reese Harper: Can you think of a Crossfit analogy that would make sense here?

Ryan Isaac: Well, you just get too high of a percentage of your one rep max and you might hurt yourself. You might drop something.

Reese Harper: There you go.

Ryan Isaac: You’re stressing everything out.

Reese Harper: See that’s the perfect analogy. I’m sure everyone understood that.

Ryan Isaac: I’ve got 110% of my back squat, one rep max on my back right now. What will happen? You’ll see.

Reese Harper: You might die.

Ryan Isaac: How do the knees feel? What’s going to happen to the lumbar? I don’t know.

Reese Harper: Yeah. You don’t want to put … Withdrawing a high percentage of your portfolio is like putting a ton of weight on your back when you’re not used to it.

Ryan Isaac: Yeah.

Reese Harper: Be like me.

Ryan Isaac: Don’t have good expectations for it.

Reese Harper: It’d be like me trying to run.

Ryan Isaac: Maybe like me trying to follow up a mountain on a mountain bike for my first time ever.

Reese Harper: I like it.

Ryan Isaac: Just dying. Okay.

Reese Harper: I would say that’s how you kind of if you should take less risks. If you can forecast it and say, “Man, even at age 65 at your current rate, your withdrawal rates is going to be super high.”

Ryan Isaac: That’s a pretty complex question though too, because maybe maybe you shouldn’t take more risks to achieve that goal. Maybe you need to reduce your spending somehow or get some more income or interest savings.

Reese Harper: It provides an opportunity to have a conversation. Right? So if your withdrawal rate is going to be really high, you need to be doing a better job of planning. That might not mean changing your investment risk, but it might mean spending less. It might mean figuring out how you’re going to earn more, save more.

Reese Harper: But I think that’s the guide that I would use to change your risk. I would not use how I feel when I wake up after-

Ryan Isaac: So that’s really common.

Reese Harper: Yeah. So if you looked back and say the morning of Trump’s election this year, there was a lot of phone calls that we got to change people’s risk level in their portfolio. Yeah.

Ryan Isaac: What hour where some of those texts?

Reese Harper: Some were coming in at night because the dow futures were forecasted to be down 1000 points by market because of the previous day.

Ryan Isaac: I remember sitting on my couch watching that kind of stuff on Twitter and I was like, “Oh, it’s going to be a busy day tomorrow.”

Reese Harper: I just feel like that’s the wrong time to make a decision. You don’t make a portfolio risk adjustment-

Ryan Isaac: As it’s rising or falling.

Reese Harper: As something’s falling, especially. If the market’s climbing a lot and you’re in a strong financial position and it makes sense for you to start to take less risk, that to me seems more rational than anytime you make big risk adjustments as things are falling.

Reese Harper: You shouldn’t be in a position to where a decline in the stock market-

Ryan Isaac: Would change your retirement date.

Reese Harper: Would change your retirement date right now.

Ryan Isaac: Which was very common over the last two crashes in the 2000s.

Reese Harper: I mean the problem is most people will set up a plan in their late 40s or their mid 40s based on how they felt about risk at the time. How many times do you look at an account and be like, do you know what you’re invested in? This might have worked when you were 27 or 35 but …

Ryan Isaac: Most of the time they know it too. They’re like, “I just haven’t gotten around to changing it. I’m sure it’s wrong.”

Reese Harper: Yeah. Last week I was doing a review of two kids college plans that we had received.

Ryan Isaac: How old were they?

Reese Harper: The kids are in college.

Ryan Isaac: It’s like quadruple leveraged.

Reese Harper: They’re in college and they’re in emerging markets equity, 100% and small cap value. These are very aggressive investment types or they’re very volatile investment types. Sorry. Kids. Parents are like, “Oh, okay great, let’s make some changes.” I’m like, “Well, it’s lucky we’ve been on a 10 year bull market because you know –

Ryan Isaac: Kids’ college is going to end early.

Reese Harper: I’m glad we’re not in ’09 right now. We have enough for you to go for two years. Yeah, yeah.

Ryan Isaac: Okay. Well let’s go to the the fourth one here. When UPS made their changes, they increased, I called it their overall health cleanliness because they reduced emissions by the amount of 21,000 cars on the road every year. So I thought how could we relate that to someone’s overall financial health? I think we’ve talked about this before, it’s just measuring the balance in someone’s assets.

Ryan Isaac: Justin, you put it such a good way last time.

Justin Copier: Do I have the right mix of assets?

Ryan Isaac: Why can I never remember that?

Justin Copier: That’s why I’m here.

Ryan Isaac: I always think balance on your balance sheet.

Justin Copier: You’re not the producer of the show.

Ryan Isaac: I don’t have the words.

Justin Copier: You’re the talent.

Ryan Isaac: You have the greatest words. You have all the words. Yeah. Do I have the right mix of assets? Am I financially just … Overall am I healthy? And so I thought someone could measure that.

Ryan Isaac: You could measure, am I imbalanced in a certain category? Am I going to retire and have to go get all my money out of one asset? Am I gonna have to pay taxes on all my stuff? I thought a little bit of balance. The other thing I thought was interesting is the UPS, story didn’t actually start working really well until it was implemented with technology, until it was mapped, designed and monitored with technology.

Ryan Isaac: I thought that’s another tip that people could use is use. Use some simple technologies to monitor this stuff. There’s free apps and websites. You can track how much you spend. It’ll keep track of your net worth. You’ve got to go in and put a value for your house or your practice, right? Put in your debts. But you can keep track of where all your money’s going.

Justin Copier: What the mix of your assets look like.

Ryan Isaac: What the mix is. Yeah.

Reese Harper: I think those are great. I mean ultimately I think there’s a healthy place to be with your overall net worth for a given age and there is an overall healthy place to be with spending. A good financial advisor can help you understand what you’re spending makes sense for your income level, whether the amount of real estate equity you have is appropriate for the phase in your career and your age and income level.

Reese Harper: If you have too much or too little practice equity or too much or too little in retirement accounts, It’s really important to be able to measure the overall health of your balance sheet. Using technology makes it possible, and much more efficient. I think until you know whether your overall financial picture is healthy, you really don’t know what to prioritize and what to tackle next.

Ryan Isaac: You don’t know. Should I dump more money into the 401k profit sharing plan or do I need more liquidity? Is it okay to buy that property or will it be too imbalanced?

Reese Harper: Well let’s, let’s get people to give you a call, Ryan, instead of trying to figure out how to track their own technology.

Ryan Isaac: Yeah. Don’t do it on your own. Just call us at 8-3-3 DDS plan. That’s such a great phone number: 8-3-3-DDS plan. You can leave questions or comments about these episodes by going to You can find the list of episodes. You can find it on iTunes. Search for Dentistsmoney on iTunes. I appreciate you listening and schedule a time to speak with us anytime. Also on our website there’s a link to the calendar at the top and you can schedule a time to talk with us.

Reese Harper: New website coming soon. Before the years’ end you’re going to have a cool, new resource library and education center. Cool courses. So I look forward to it. Thank you very much. Carry on.


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