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Can you trust decisions about your financial future to an app?
Good financial planning requires careful thought around hundreds of jobs. On this episode of the Dentist Money™ Show, Reese and Ryan talk about which of those jobs can be accomplished by apps and/or computers, and which still require the human brain.
As Dentist Advisors prepares to launch an app of its own, you’ll be fascinated to hear about the multi-year development process and important insights gained through hundreds of user feedback sessions. You’ll also learn where technology excels—and where it doesn’t.
Computer or the human brain? To discover the role of each in good planning.
Reese Harper:: Hey, Dentist Money Show listeners. Thanks for tuning in. Sir Ryan Isaac and I today have an excellent show planned for you. We’re going to be talking about Terminator and the Rise of the Machines. It’s sort of about that. We’re going to be talking about how computers do some things really well and humans do some things even better. Especially as it comes to money and finance, you want to make sure you get your computers doing certain jobs and your humans doing other jobs. It’ll help bring the cost down of your overall service and put you in a position to make much better financial decisions.
Speaker: 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, our 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 co-host, Sir Ryan Isaac.
Ryan Isaac:: Here I am. It’s good to be here.
Reese Harper:: For those of you who don’t know, Ryan is recording this live in studio with me today, the land of milk and honey, Salt Lake City, Utah.
Ryan Isaac:: It’s green this year.
Reese Harper:: It’s green.
Ryan Isaac:: It’s really green this year. I live in a relatively brown place, so maybe it’s just context.
Reese Harper:: Hey, we all love where we live. You love the desert.
Ryan Isaac:: I do.
Reese Harper:: You love being a desert rat.
Ryan Isaac:: I love the desert.
Reese Harper:: Eating scorpions and surviving on-
Ryan Isaac:: I keep finding them, in my pool, in my porch.
Reese Harper:: What’s the other desert animal besides a scorpion?
Ryan Isaac:: I saw this picture the other day that someone took on a 40-foot saguaro cactus, those really tall crazy ones and a bobcat sitting on the top, perched, just staring.
Jenni: Didn’t you-
Reese Harper:: This is the type of wildlife.
Jenni: Didn’t you pull a bug out of your pocket when we were in LA two weeks ago or is that …
Ryan Isaac:: No, I went on a walk a couple weeks ago. It was like 9:00 at night. It’s dusk. It’s hot. I’m walking my dog. I have just gym shorts on and I’m upright on cement for 30 minutes. I don’t go in bushes. I don’t climb trees and I’d come home to pull my keys out and there’s a giant beetle in my pocket.
Reese Harper:: No way.
Ryan Isaac:: Like giant. I thought it was a gum wrapper and I started squeezing it and pulling it. I flipped out.
Reese Harper:: I could see that’s scaring you in a significant way.
Ryan Isaac:: I freaked out. Fine, it registers, it’s like, “It’s just a beetle,” but if it was a scorpion, it could have been bad news.
Reese Harper:: Totally.
Ryan Isaac:: The bigger question is, I was just walking on a sidewalk. It’s a closed-ish pocket.
Reese Harper:: How did it get in there?
Ryan Isaac:: Exactly.
Reese Harper:: That’s the question.
Ryan Isaac:: Desert is trying to kill you at all times. That’s the point.
Reese Harper:: They’re coming down from above. They’re raining down, like a plague from the Old Testament.
Ryan Isaac:: It’s probably true. Today, what we have for the good listeners of the show is we’re going to talk about the financial planning process. There’s four steps to how we describe the process of financial planning and we’ll go through those. We’re going to talk about in the context of having human beings do some parts of those process and then having machines do other parts, having computers work on other parts of the financial planning process.
Reese Harper:: Big picture I think too here what we’re seeing in the marketplace is, “Hey, computers can do a lot of things.”
Ryan Isaac:: Awesome.
Reese Harper:: “Why don’t we just get rid of those humans? They’re pesky.”
Ryan Isaac:: “And expensive.”
Reese Harper:: “They’re expensive. These computers can do things cheaper.” It’ll be a fun exploration of, “What parts of things in our lives should computers do? What should humans do?” You have a lot of options available to you about how you can get your planning done. You have a lot of technology, IOS apps. You have bots and robots and machine learning and AI. The questions is, where’s the financial planning industry going? Are you in the right place? Do you have the right tools in your toolbelts? We want to help you understand our perspective on what works and what doesn’t as we’ve seen inside of our firm but across other businesses too.
Ryan Isaac:: How it is evolving. To start off, a few things have been in my thoughts on this. One, we’ve been talking about this for a couple years in the business and we’re building technology to augment some of the jobs humans are doing to make it faster and cheaper and probably better. I listened to a couple of podcasts recently. They weren’t directly tied to each other, but they were talking about the history of human chess players getting beat by computers. This started decades ago and some chess nut out there is going to correct me on everything I say. I don’t even really know how to play chess, but just the concept is fascinating.
Reese Harper:: Really or you don’t know how?
Ryan Isaac:: Let’s just say I don’t really know how to play chess.
Reese Harper:: I’m pretty sure your chess skills are at the level of like-
Ryan Isaac:: Let’s just say I’m fine at checkers. If you ask me which way a knight or a bishop moves, I don’t know.
Reese Harper:: It’s safe to say that.
Ryan Isaac:: I know that those are pieces and the rook is two, right?
Reese Harper:: Yeah.
Ryan Isaac:: That’s all I got. The king and queen.
Reese Harper:: That’s good enough.
Ryan Isaac:: All right.
Reese Harper:: If on your iPhone you download the app of chess and you push, “Play for me computer,” then you can hold your phone.
Ryan Isaac:: I like when it highlights which squares I can move to. That’s really helpful for me. That’s the extent of my chess-playing knowledge. What’s been interesting is I’ve heard a couple of people retell these stories of the history of human chess players and then getting slowly beat by machines. Then what’s the latest thing in the last couple of years, I guess diehard chess people would say, “That’s not true chess. That’s like a different genre of chess,” but they call it Advanced Chess or Centaur Chess. Centaur is that animal, the human-animal horse guy.
Reese Harper:: Legs.
Ryan Isaac:: Centaur.
Reese Harper:: Those are pretty tough.
Ryan Isaac:: You fought once in Idaho and you were on a walkabout.
Reese Harper:: They’re tough. They appear out of the sagebrush.
Ryan Isaac:: They do.
Reese Harper:: “Oh, Centaur sighting again.”
Ryan Isaac:: It’s a combination of … They take inexperience chess player humans and team them up with really basic computers. Those are currently the reigning champions of chess right now, our human-computer teams.
Reese Harper:: Hybrids.
Ryan Isaac:: Hybrids, centaurs.
Reese Harper:: Cyborgs if you will.
Ryan Isaac:: They do actually call them like Cyborg Chess.
Reese Harper:: Oh really?
Ryan Isaac:: Yeah.
Reese Harper:: I was thinking of Terminator.
Ryan Isaac:: I started actually making a list of all of the movies that were human versus machines that were really cool.
Reese Harper:: You did?
Ryan Isaac:: You thought Terminator.
Reese Harper:: Yeah, I’m thinking like-
Ryan Isaac:: Or humans versus AI like the Matrix.
Reese Harper:: I thought of Matrix. I think of Terminator. I actually thought of Jurassic Park for a minute because I’m that’s off in the wrong tangent, but genetically modified dinosaurs or dino-like machines.
Ryan Isaac:: They’re using technology. Dinosaurs versus [inaudible 00:07:10]
Reese Harper:: If you rode a genetically-modified raptor to fight a large genetically-modified triceratops-tyrannosaurus combo, you’d be more prepared in just the raptor fighting it on its own. If you could carry weapons-
Ryan Isaac:: Human-
Reese Harper:: … and you could fight differently, you see my analogy?
Ryan Isaac:: I get where you’re going. No. Let’s tie this in with something that I think is real is I got on the phone today with our local friendly developer, Dave Weiss. You want to say anything about Dave?
Reese Harper:: Just shout out to David Weiss, one of the best human beings.
Ryan Isaac:: Who’s Dave? What’s Dave doing here as we say this? No one knows Dave.
Reese Harper:: David Weiss is currently-
Ryan Isaac:: You’ll never see him at a trade show or a booth or ever talk to him on the phone.
Reese Harper:: You need to know him, you need to know Todd Reynolds and you need to know Jason Smith.
Ryan Isaac:: Shout out to the team.
Reese Harper:: The dev team right now is currently building … As of today, they’re figuring out what machine should do and what things humans should do as it relates to financial planning because there’s a lot of machine stuff that needs just to get built. We have two years of development runway ahead of us of plans. It takes a week to design a chart and build it, a month sometimes.
Ryan Isaac:: A week. I was talking to Dave. It’s fun. That’s exactly what he said. He said “This all boils down to,” I guess a little more background on Dave, what’s cool is this isn’t like a financial planning or investment guy. He’s not a guy from our industry. He’s just been developing some really globally-used pieces of software for a long time and is really, really smart.
Reese Harper:: He’s approaching this from solving this problem in many other industries.
Ryan Isaac:: From a different perspective. That’s what he said. He said, “But the whole point is that we got to find out what are machines uniquely suited to do and have them do that and then what are humans uniquely suited to do and just have humans work on that problem.” He was saying some interesting things though. It sounds like, “What’s the difference? How could you categorize this?” He’s like, “Honestly, coming from someone who’s only worked with machines his whole life,” talking about himself, he says, “It’s actually surprising at how dumb computers can be sometimes,” which is the opposite of what I thought a computer person would say.
Let me give you an example, he said, “If you try to teach a computer what a dog is, you have to feed it images of dogs and things that are not dogs like thousands and tens of thousands of times over and over again. Like, ‘This is a dog. This is a dog. This is not a dog. That is a giraffe. That’s cow. This is a dog.’ Like thousands and thousands of iterations.” Now, eventually they’ll probably be able to store and sort and recall things about dogs better than a human would a lot faster which is what computers are good at. He says, “Compare that to,” He said kilowatts of energy, power being used by the computer, “Compare to the human brain,” which he said, I don’t know if this is true. This is what Dave said, “Like the human brain is 60 kilowatts.” Then what did say about computer’s gigawatts. He said that thing from Back to the Future.
Reese Harper:: This is not a conversation I had with David and I can’t offer any insight.
Ryan Isaac:: Anyway, he’s just saying computers require insane amounts of input to learn something and crazy amounts of power to do it. The human brain, he’s like, “Compare that with a kid. How long does it take to teach a kid what a dog is?” The human brain runs on like-
Reese Harper:: Much less power.
Ryan Isaac:: Much less power and it’s because humans just have different skills of reasoning than a computer does. Computers are really good when there’s extremely defined sets of rules. Humans are good when things are messy.
Reese Harper:: I have four kids that are older now, five and up. I was with my one-year-old niece yesterday. Shout out to Penny.
Ryan Isaac:: Penny.
Reese Harper:: She tells me, “That’s Nelson the Dog and this is the cat,” in two seconds. “That’s the dog and the cat.”
Ryan Isaac:: She knows that?
Reese Harper:: I’m like, “Where’s your dog?” “That’s the dog.”
Ryan Isaac:: I’ve never thought about that before.
Reese Harper:: “There’s a new dog. That’s the dog. Dogs and cats.”
Ryan Isaac:: You’re just intuitively, “I get what that is,” but what Dave was explaining-
Reese Harper:: I was thinking yesterday too. Over lunch today, I had a meeting with a client and I’m trying to solve a problem. The problem is, “I have this extra money.” The question was, “I’m thinking about putting the money into this building or thinking about putting it at the stock market. Which one should I do?” That was the questions presented to me.
Ryan Isaac:: Which is one of the areas of financial planning that we’re going to talk about.
Reese Harper:: Then, if I was a computer, I would have evaluated the data points based on what they gave me and then presented the best option quantitively based on the two choices and if there are ROIs.
Ryan Isaac:: What does Dave call it? He says, “Brutally rational.” That’s what Dave said about computers.
Reese Harper:: As a human, I’m looking at them, telling me this and I’m thinking, “What are they not telling me? What are they not telling me that might be better than what they’re telling me?” I’m a human. I see facial expressions. I see emotion. I see stress. I see-
Ryan Isaac:: You can go, “You’re holding something from me. There’s more to the story there.”
Reese Harper:: I go, “What else is not in your question set that your …?” I’m like, “What about the business? Why not put it back in the company? Why not put it back in the business? Why not do the stock market and not do the real estate, but do the business?” That was a really interesting question. They’re like, “Because we don’t need it in the business.” I’m like, “Why? Why don’t you need it in the business? Do you guys don’t want to grow anymore?” We walked through a couple of variables. I’m like, “There’s this associate who’s still got ownership in the practice that wants to get bought out. I’ve been kicking that can down the road for a long time. We’re just hoping that it goes that eventually we don’t have to buy him out.
Bottom line is if we take the same amount of money instead putting towards real estate, instead putting towards stock market, we use it to buy the associate out. Then our income goes up.”
Ryan Isaac:: Net income is different.
Reese Harper:: “We actually get 18% return on our cash as opposed to putting it in a building. We would have got 7% or maybe the stock market 10% different …” That was just not a solution that a computer would have computed, but it involved making a decision, a tough decision to make. Anyway, I just want to say, I’m sure you’ll go into this later, but sometimes humans don’t just do what they’re told.
Ryan Isaac:: Which is also the downside to humans. That’s the other thing Dave said is, “We’re not consistent creatures. We’re not reliably consistent.”
Reese Harper:: No. We don’t follow things repetitively very well.
Ryan Isaac:: No, we do not.
Reese Harper:: We get bored quickly and we slow down.
Ryan Isaac:: We’re not brutally rational. We’ll come back to that story then. Let’s list out the four areas of financial planning and then talk about each one in terms of how to interact, what’s better suited for that area, human or computer, a piece of tech. When we say computer, it’s meaning like, you should use an app for that or spreadsheet or something. The first one-
Reese Harper:: I think we should think about financial planning. When you go to get your certified financial planner credential, it’s a multi-year and multi-day testing process that tests you on all these different technical skills. One of the skills they test you on though is the financial planning process generally. Inside of that process, sometimes, depending on the way people describe the process, there could be four steps, there could be five steps, there could be six steps, but these steps usually correspond to categories that we’ve talked about before on the podcast.
The first category of steps, the types of things you do in financial planning, the first one is something to do with gathering things up or organizing things.
Ryan Isaac:: Organizing.
Reese Harper:: Putting them into a coherent set of numbers like putting things into a spreadsheet, collecting information, organizing the information, finding the information, retrieving information, aggregating-
Ryan Isaac:: Especially aggregating and retrieving.
Reese Harper:: That is a very, very hard thing to do and that was one of the first pain points that I felt in 2007 when I started the business. You would go meet with a client and you’d bring me all of their papers and it would be hundreds of papers. I’m just thinking like, “Dude, there’s got to be a better way. Can’t all of these numbers just appear? Can’t they just show up somewhere?. I have to like PDF, paper.data.”
Ryan Isaac:: Create your own report out of it.
Reese Harper:: I’m like, “I just need all of this information into sheet and these numbers to be added up and these ones to be subtracted.” No, it wasn’t that simple. The first piece of technology, we started working on was how do we store and organize data and information.
Ryan Isaac:: Surprisingly, it’s a really time-consuming job. I was just thinking even with the help of computers and programs, it’s really time consuming to your story though because I would say most of the time, the job of organizing is best done by computers. Spending tracker or a spreadsheet that does something with your net worth or something that tells you what your taxes, your income has been.
Reese Harper:: Pulling data from another source like aggregating data. There’s a whole industry of data aggregation right now.
Ryan Isaac:: Which has exploded in the last five years.
Reese Harper:: You can go online and look at these companies right now like, “I’m trying to evaluate a new data aggression provider for our platform.” This data aggression industry is just exploding because everyone needs data organized. Everyone needs data consolidated, data visualized. It’s a huge, huge process that computers are uniquely suited for.
Ryan Isaac:: Now what the human element in organizing data though is the experience you just had with this new client. If you were just a computer programming taking inputs, you would have stopped with, “I have money. I have two options. Which option is best?” This isn’t even to analyze or deciding part. It’s just the inputs. You would have stopped with two inputs or three, the money and then, “I can put it in real estate or stock market.”
Reese Harper:: I’m not sure exactly if that’s an organize or a gather task or not. It is. None of these categories are exclusively computer jobs. I would say there might not be four. There might only be three main categories. There’s organize crap. There’s analyze it. Then there’s decide what to do and do it. You could say decide and act or separate. You could also just combine them.
Ryan Isaac:: Decide and act.
Reese Harper:: Sometimes the decision you’re making is the same. I always opt for simplicity. For today’s discussion, I’m fine with saying three. You could say we’ve got to decide and act and then we’ve got analyze it. The meeting I had today I was analyzing the decision or analyzing the information that they were giving me. I was performing a task that is difficult for a computer to do. I had to decide if the data was complete. Was the data giving-
Ryan Isaac:: Based on the tone of some of the voice or their facial expression or something you knew uniquely about their profession?
Reese Harper:: Yeah. It was not a complete set of data. It was interesting because actually there’s three people. There’s two partners and a spouse that came. The spouse that was brought to the meeting was expecting me to talk about the benefits of commercial real estate investing. We got done with only a 45-minute meeting. The spouse said, “This was really, really helpful. I agree with everything you’re saying and I’m really glad. I thought we’re going to be buying a building, but I know that that’s not the right thing to do right now.” It wasn’t because buying a building is not the right thing to do. It was the wrong priority.
Ryan Isaac:: Order of choices.
Reese Harper:: No one even add that third option on the radar. The third option wasn’t even something that was being contemplated as one of the inputs.
Ryan Isaac:: You wondered, is that something a machine could have known in a meeting?
Reese Harper:: A machine could never know that. In 20 years, it might be able to, but it takes so many-
Ryan Isaac:: You got to feed a million pictures of dogs before it knows what a dog is.
Reese Harper:: When I started this app project that I’m working on a year ago, I was hopeful that I could find a way to give a computer enough inputs to where kids ask more thorough and more in-depth questions. It’s just really hard to do. We will be able to get it there at some point down the road, but man, anytime I see two data points, I can always think of a third thing I need or a fourth thing I need to make even a better piece of advice based on what that person might have said or asking one more question reveals a different answer. Computers are slow at learning how to provide nuance. Communication nuance is just really-
Ryan Isaac:: In the app, we just maybe build in Apple’s Face ID and then as the person’s putting in data, it’s like, “We detect a grimace. What are you not telling us?” something like that.
Reese Harper:: It’s crazy, man. It’s not just their expression, but it’s mostly the things they don’t know to ask. It’s the things they don’t know.
Ryan Isaac:: What would the invitation then? Let’s just button this up around the subject though, if we’re saying there’s different ways to begin the financial planning process around organizing data. I just know internally from our own business over 11 years that it takes 20 hours plus just to keep data organized per year. I guess some of that’s reporting on it too, but-
Reese Harper:: I was just listening into an associate call, an advisor call today with a new oral surgeon and I was surprised that this person was 40, maybe 45 years old. They were trying to describe what they thought they needed from us as it was a discovery call, like a new call. It was amazing to see the things that they were describing that they needed we’ve already built. One of the main things was like … Anytime we would ask a question, they didn’t know the answer. “I don’t know where that is.” “Do you know what your house is worth?” “I don’t know.”
Ryan Isaac:: “What did you make last year?”
Reese Harper:: “What’s your mortgage?” “I don’t know.” “Do you have any practice debt?” “Yeah, I’m not sure what’s the balance is.” “Do you have student loans?” “Yeah, but I got to check what they are.” “Do you have any investments?” “Yeah, but I think they’re Fidelity. I do have a Fidelity account, but I don’t know what it’s got in there.” I think they’ve got an account in Vanguard.
Ryan Isaac:: It’s a huge job.
Reese Harper:: Just gathering up information is a huge job. I just don’t think people think of that as a job in financial planning sometimes and it’s a job that … Unless someone has a good system, a good computer system, a good organization system, supported by computers, it’s a cluster. It’s a mess. I’ve seen financial advisor’s back office when they’re trying to figure out their CRM system, their data aggression, how do they track stuff on a customer level. You either have a good organization system or it’s an absolute mess.
Ryan Isaac:: Well, you’re also speaking to the set of tools that’s even available in our industry as a financial advisor and they don’t talk to each other and they don’t relate a lot of times and archaic which is why we’re working on the project we’re working on anyway. Reese, before we get to the next point, let’s go ahead and take a quick break and go to a quick commercial and we’ll be right back.
Reese Harper:: Financial planning is really about getting a lot of jobs done. Some of those jobs are just a pain and they take a lot of time. I recommend getting a buddy involved. One of my favorites from back in ’90s is My Buddy. I’m going to sing it to you now. (singing) That is what happens when you hire a dentist advisor. Go to dentistadvisors.com. Click the book free consultation button and get a buddy.
I was saying is that maybe a financial advisor could take four times the amount of your time communicating with you just to know what they should know to make a decision. You have to think about how insufficient that might be to spend the rest of your life talking to someone who doesn’t have enough information to get passed the organized state.
Ryan Isaac:: Here’s the invitation then. If you find yourself meeting with your financial person on that annual meeting or whatever and it begins with, “Catch me up. Give me the data I’m missing,” more than just small talk. If you’re finding that all your interactions are you providing data every time. Someone has to make a decision for you.
Reese Harper:: If they don’t have data and they’re somehow giving you advice.
Ryan Isaac:: You’re getting advice and no one knows anything about you, run.
Reese Harper:: You need to understand what information does your advisor have on you to qualify them to give you the advice they’re giving.
Ryan Isaac:: What process they’re using to keep up on that information.
Reese Harper:: How outdated is it.
Ryan Isaac:: Step two in this process you mentioned is the analyze stuff which I was asking Dave about this. This is definitely a human and software computer tag team, Centaur Dream Team. I wish someone could actually do little cartoon illustrations of me and Reese as centaurs.
Reese Harper:: That may or may not happen.
Jenni: We could probably make that happen.
Ryan Isaac:: On t-shirts.
Reese Harper:: Budget might not be there for that to be honest with you.
Ryan Isaac:: I will do it in my own dime. What’s interesting Dave was saying how we know computers are extremely fast. These are things that get out there, “They’re extremely fast and they can spit out,” what did he say, “They can expose options really well that people just might not know about.” Take organized information that’s stored somewhere and then just spit out options that people forget about. “Oh, I guess I could do this or I could do that,” if the computer knew about it in the first place. They can present various scenarios really fast.
That’s what a computer can do to help analyze something, but where it completely ends is back to your experience with the, “Where should I put money, the stock market or real estate?” Neither. That’s where it ended. A computer couldn’t have solved that issue. This whole analyze phase, we use it on our business. We have a lot of reporting and dashboards and tools that are helpful for a quick analysis. If someone saved $100,000 last year, I don’t know if that’s a good or bad until I know what they made. If I know what they made in that represented 30% of gross income, then it’s like, “Oh geez. That was really great.” Technology and data systems, computers, those are really helpful for analysis, but where does the human element come in with analysis?
Reese Harper:: I think the human element in analysis is only as good as the computer system that delivers the data and the analysis. The computer system is not very helpful without the human side of it. That’s why people think financial planning is just investing. Sometimes, they think like, “If I sign up for an app that invest money for me-
Ryan Isaac:: Builds a portfolio-
Reese Harper:: … then I’ve solved financial planning,” I don’t know if they really think that or not. Financial planning is hundreds of decisions and investing money is only two. As long as the decision that you make is constrained to the options that you’re giving the computer, then you get a good answer from the computer. For example, if you knew for sure that you should be investing money into a particular type of account and you know for sure, then the computer will be able to tell you how to invest and how to allocate it and how to put it into bright ideas.
Ryan Isaac:: That’s Betterment, Wealthfront or whatever.
Reese Harper:: You could do that with personal capital, Wealthfront, Betterment, probably Vanguard Advisory is cheapest, I think. There are a lot of cheap ways that you can get computer to invest the money. The question is more like, should that money go in that account type?
Ryan Isaac:: In the first place?
Reese Harper:: Is it the right timing?
Ryan Isaac:: The right amount?
Reese Harper:: Is there an alternative that’s better? Is this the right thing to do with your money right now in this time of your life? It’s really, really hard to get a computer to get enough inputs to be able to give you that kind of feedback. Anyway, the analysis that we’re talking about here I just think that there’s a lot of things that humans can ask and think about that it’s very hard for computers to do.
Ryan Isaac:: Facilitated by the analysis. If you’re helping a client decide between two or three different options, having analysis from extreme organization and good software programs, that speeds it up.
Reese Harper:: Today, when I was sitting down over lunch, I needed some data points to be able to give that piece of advice. I just pulled up these two clients’ profiles in their element scores in their app. I was like, “Oh, one of the issues that I had that made me going to give their recommendation that they weren’t thinking about was, “This is a pretty significant amount of liquidity that’s going to be required if we do the real estate deal. What you have on hand right now, it was X hundred thousands of dollars for the down.”
Ryan Isaac:: It would rob them completely like blind.
Reese Harper:: Then it would be like you’d have two little liquidity and there’s still this business problem with it that we need to …
Ryan Isaac:: It didn’t go away.
Reese Harper:: Now, if you just punt the can down, kick the can down the road in another year and a half before we have the same amount of liquidity again to be able to tackle this problem. If I wouldn’t have their data really quickly and they wouldn’t have trusted it that it was accurate, they wouldn’t even take my advice. Independently, when I was done with meeting, all three of those people all texted me back and said I was so helpful, so efficient. “We got so much value out of that.”
It was because I combined computer data and some computer analysis with human input that I saved them a ton of time and anxiety. I could see without me in there today, if I don’t do that meeting today, they’re probably 25 hours into back and forth with real estate agents and brokers and the developer trying to decide if it’s a good thing. They’re analyzing the entirely wrong factors. “What’s the TI allowance going to be? What’s the rent? Should we charge?” They didn’t even ask the question of like, “Should we even do it?”
They’re only analyzing the variables of like, “If we made this choice,” but they’re not going, “Is this even right thing to work on?” I’m just saying like sometimes it’s so critical to have someone to give you the answer of, “That is not even the thing to worry about now.”
Ryan Isaac:: Let’s just go right in to the decide part then. That’s the one factor and a lot of things specifically in financial planning that’s hard for an app to do for you is to decide what to do. I think there’s been some interesting case studies with some of those robo advisors they call Betterment and WealthVest. Wealth Front. What’s WealthVest? That’s another one too, isn’t it?
Reese Harper:: It’s LearnVest.
Ryan Isaac:: It’s LearnVest that is owned by an insurance company.
Reese Harper:: Alexa von Tobel by Northwestern Mutual.
Ryan Isaac:: That’s right, Wealthfront and LearnVest and then Betterment. What’s interesting about those business models was that during times of volatility, the humans acted crazy. They did have well-built low-cost portfolios, but when markets got volatile, then people still did what people always do at their portfolios which was sell them.
Reese Harper:: When you have a little bit of layer between you and your portfolio, like you do with an advisor, if you have to have a conversation with someone before you sell or before you buy, it’s very different than if you just can click a button.
Ryan Isaac:: I think people hear that sometimes and wonder like, “Oh, I don’t want to meet advisor like keeping me from my money.” Here’s my experience. In the last couple of years, especially maybe the last 12 months, the recession-is-coming talk is getting more prevalent, anytime you get deep into a good market cycle, I want to just eventually start talking about when it’s going to stop. The last 12 months, let’s say it’s picked up a lot. I could probably go find a dozen conversations right now at the top of my head on email inbox. Well, they’re archives. It’s not my inbox anymore, where people start a conversation about like, “I think we got to make a move. We should probably …” Those are young people too. “We should probably sell our stocks and get out and wait for a while based on X, Y and Z.”
How many times just a few extra questions that layer? I’m not telling anyone like, “No, you may not.” It’s their money. Here I am this extra layer and with a few questions or maybe a piece of feedback. None of those have actually done it in all these conversations. That extra layer, it does. Even if that extra layer all it does is just ask a few extra questions or clarify something.
Reese Harper:: It’s just a little bit of-
Ryan Isaac:: Just a little bit.
Reese Harper:: … objective mirror that get shined back at you and you go, “Oh, I didn’t realize I had brownie on my face. Oh, I didn’t realize I had some ice cream on my beard.” That’s how it feels.
Ryan Isaac:: That’s pretty close. Those are two common. Very personal.
Reese Harper:: For you.
Ryan Isaac:: Very specific. Those are very specific mirror reflection. This deciding piece, this is the uniquely human piece. That’s the thing I kept reading in articles. I was trying to just fascinating concept about humans and machines and I think Dave kept telling me today it was that humans excel in a situation when there’s just messiness. Computers excel when there’s really, really specific and just detailed rules to follow. When it gets messy which is what … Everyone thinks money is this like unemotional, it’s just like a thing, it’s a tool, but money is just incredibly emotionally. Where there’s emotion, there’s mess and that’s why humans can always help other humans make better decisions.
Reese Harper:: Like today in this example I was sharing you, it’s the decide portion of this is everyone is looking at me and going. I could have presented, “Well, this is the pro and con of real estate. Here’s the pro and con of the stock market.”
Ryan Isaac:: Well, that’s the analysis part.
Reese Harper:: I brought up a new thing that wasn’t there in the analysis. Then we got to make a decision and it’s still like, “What would you do?” I’m like, “How much do you really care about tackling this buyout right now? How much does this lack of liquidity really bother you?”
Ryan Isaac:: What would you do on a computer programming? Are you like, “Rate this from one to 10”?
Reese Harper:: It’s just-
Ryan Isaac:: It really wouldn’t get to the heart of it.
Reese Harper:: It just takes too long for people. They don’t trust that they’ll get the right answer. We’re not there yet in our computing power. The interesting thing part about it for me is I’m learning about the available options in finance way faster than I would assume a computer is learning about them right now because every time a new product gets released, every time a new investment category gets released, or anytime a new strategy is deployed, like how is a computer going to learn about the viability of that option in a short period of time?
Every time tax returns get reshuffled and you have new forms because the tax forms look different, then all the data in the tax returns are organized in a different. You now have to reprocess your whole matrix of choices and you have to decide. If you’re programming every time there’s a new option that comes into the marketplace, a new investment, a new ETF, a new mutual fund, a new real estate investment trust, you have to program all these attributes about it for the computer to be able to analyze if it’s a good thing or not or you just got to have a human say whether this applies to this situation or not.
Ryan Isaac:: I’ve seen it apply or not. You’re the three-year-old that knows what a dog and a cat is.
Reese Harper:: I think computers really struggle at the process like choice among a growing set of options that don’t have finite inputs.
Ryan Isaac:: That’s what I was just going to say is I was just reading this, unrestricted problem solving is where humans. When you say growing list of-
Reese Harper:: Growing set of solutions to problems-
Ryan Isaac:: Dynamically growing too. You pick one path and here’s two more.
Reese Harper:: For example, TD Ameritrade was a really good retirement custodian. They have a really big retirement plan business. We’re talking about brokers, not broker accounts here. We’re talking about a trust that comes, 401(k)s-
Ryan Isaac:: 401(k)s.
Reese Harper:: … hold the money. A lot of your 401(k) plans right now, whoever you’re with right now, a lot of the money was probably at TD Ameritrade or had a good size of the market. They just sold off their business to Matrix and Now Matrix is going to take over that whole design. Well, as a consumer, I still had to make a decision today or yesterday or a month ago which 401(k) platform actually is the best place for my money to get held so I have the most investment options, if you really cared. Most of you are just probably just like, “I don’t know. It’s just 401(k), whatever.”
I’m encouraging you to know more about that because it matters where the money is sitting. It matters what investments you could pick from. It does matter with the costs and fees and it matters how easy it to use and what the marching formula is like. 401(k) really matters. If we program the computer to think that TD Ameritrade was the right option giving a few variables and inputs and then all of a sudden they disappear, is Matrix really the best option just because they both TD Ameritrade? Well, I want to know more about this like, “Why did they buy them? What was going on? Are the fees going to change? What’s the management of Matrix like? Who’s at the top of that pyramid?”
Ryan Isaac:: “What’s their plan?”
Reese Harper:: “What’s their business model? Are they going to sell too?” In order to give a good piece of advice or good recommendation, I’ve got to know all this information. I can’t program the computer and go figure it out because it’s too many moving pieces, too many moving variables. This happens all the time, like companies merge, stocks merge, business models change, solutions change, providers change. You can think about in every industry how many of the solutions just change dynamically.
I think humans really, really excel at taking prior knowledge and then applying it to future decision making and going like, “Well, this is what I learned before. In about five minutes, I could probably analyze whether that new solution is good or not and if I would recommend it or not.” In financial planning specifically, I think it’s really important.
Ryan Isaac:: The takeaway is there are just things that a financial advisor should be helping a client do like tracking spending and automating the tracking of how your net worth is growing.
Reese Harper:: They shouldn’t?
Ryan Isaac:: Should.
Reese Harper:: There’s things that an advisor should be doing?
Ryan Isaac:: Yeah, like an advisor should have these tools.
Reese Harper:: The computer is doing that.
Ryan Isaac:: It’s doing. That it’s doing it.
Reese Harper:: Those examples you’re sharing are ones that you’re saying, “An advisor needs to have an access to those stuff.”
Ryan Isaac:: Has those tools.
Reese Harper:: That’s a computer’s job, right?
Ryan Isaac:: Yeah, which is again, there’s a surprising lack of good tools, intuitive tools in our industry, but you said this earlier the reason you can combine deciding on something and then acting on something, but I always like to think of acting on something is the longevity of it. Who cares if you made a great portfolio if you didn’t stick to it, if you stop saving money when it got stressful? Dave was telling me, he’s like, “Automating savings outside of a business account for monthly savings is really great. Computers are better at that than a human having to call and make the money move.”
It’s great. It’s simple technology and it’s really great, but what a computer can’t do is know when that month got a little tight. The human wants to stop saving money because all you do is just tell a computer to stop saving money and you stop saving money. Don’t draft it. That’s where humans come in when it gets emotional, when it gets messy, when humans-
Reese Harper:: It’s like, “Should you stop draft? Is it a good pressure? Is it enough?”
Ryan Isaac:: “I had a big tax bill. We had a landscaping issue.” How do you make those decisions? How do stick to that? That’s where humans are uniquely suited to come in to the picture and keep people accountable for long periods of time. That’s where progress is made.
Reese Harper:: I think that’s a good summary, man, of the ultimate. I think some of the takeaways you want people to have are as you’re looking for solutions in the marketplace and you’re trying to pick from different financial planning providers, look at the technology they’re using. See if they know what they’re using technology for. How good are they at letting technology do their things that’s meant for to bring down the cost of their service? That’s what technology can do if you bring down the cost and all of that, like data and organization. How good are they at focusing on these decide and analyze jobs and doing them at a high volume and frequently in a lot of the core areas of your life?
Ryan Isaac:: We’ll close with the quote that you have been saying lately, the invitation for today which is, “Finance is better with a buddy.”
Reese Harper:: It really is.
Ryan Isaac:: It’s better with a buddy.
Reese Harper:: So much easier.
Ryan Isaac:: So much easier. Here’s two things that we would invite you to do. One would be, come join our Facebook Group. It’s dentistadvisors.com/group. Go in there. We’ll go and personally answer questions, so go post a question, participate in the polls that we put in there. The other one would be to give us a call or just go on our website and schedule a free consultation with one of our financial advisors, so dentistadvisors.com. Click on the book free consultation and let’s talk about these steps of your own finances,Tracking Progress