Why There’s More to ROI Than You Think – Episode 212

How should a holistic financial advisor answer the question “What are your returns?”

“What are your returns?” It’s one of the first questions most people looking for a financial advisor ask. But is it the right question? In this episode of the Dentist Money™ Show, Reese and Ryan talk about what other questions may prove more insightful. 

The role of today’s financial advisor is more about pairing strategies with your goals and matching the proper risk to the time frame needed for that investment.

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Podcast Transcript

Ryan Isaac:
Hello, everybody. This is Ryan. You are listening to the Dentist Money Show today. Got a great episode for you. Reese and I dissect one of the most common questions we get from new clients, or people checking out our business for the first time, or a fairly common question to ask a financial advisor in general. The question is, what are your returns? Reese and I break down that question into five or six more helpful questions to give you more context and more education before you decide on hiring a financial advisor, hopefully help you make a better decision. Thanks for tuning in. Be sure to check out the website, dentistadvisors.com., click on the free consultation link, set up a time to chat with one of our advisors. We’d love to help give you some answers to the point you in the right direction. Thanks for listening, for tuning in. As always, we really appreciate it. 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:
We’re here and we’re back. We’re live. We’re excited.

Reese Harper:
It’s been well over the episode number 200 now.

Ryan Isaac:
Yeah.

Reese Harper:
I thought it would be appropriate to play a song to our audience that I feel tells the story of the future of our podcast and my relationship with Sir Ryan Issac on the show.

Ryan Isaac:
Okay. (singing)

Reese Harper:
Yeah, did you hear that?

Ryan Isaac:
Yeah, I heard that.

Reese Harper:
We’ve only just begun.

Ryan Isaac:
We’ve only just begun, and that’s what people are thinking as they’re listening. You’re like, “This is going to be a long show,” and this is just only just begun.

Reese Harper:
Now we don’t have the legal rights to that song, but I’m assuming, I think, if you play it for less than five seconds, you can do that or something. Isn’t that how the-

Ryan Isaac:
Yeah, that was only-

Reese Harper:
Yeah, that was a little over five seconds, but [crosstalk 00:02:17].

Ryan Isaac:
The Carpenters will have to forgive us there.

Reese Harper:
They’ll be okay.

Ryan Isaac:
We’ve only just begun. Today we got a cool show that’s spurred by a question. It gets asked a lot to our advisors, and I’m sure that you’ve been asked this question a bunch of times in your career as well, but it’s funny. I was trying to think of examples like this. I know we do this in our everyday lives in other areas. It’s a question that I think is a very rational question. It’s a good question, but it’s a question we’ve been conditioned to ask because we think it’s the important question, even though it’s really the important question. We think it is. We’ve just been conditioned asked this either by the industry, or just how society thinks about money, or what the general perception of what a financial advisor is, and how they work and what their main value is to people. But it’s just interesting because it’s a very common question. I think we’re conditioned to ask this, but it’s not a helpful question. It’s not really the question you want to be asking. That’s a lot about the question, but I just wanted to set that up because it’s really fascinating. Any guesses?

Reese Harper:
I’m dying to know what this question is now.

Ryan Isaac:
You want to know what the question is. Okay, so it’s really common, and it’s really common when people are interviewing financial advisors. The question is, what are your firm’s average returns? What kind of returns do you get? That usually comes early in conversations. I know what people are getting at. That’s why I’m saying I think it’s a question we’ve been conditioned to think is the value, and that’s the perception, right? That’s why you hire a financial advisor, to get your good returns. That’s what the perception is for a lot of people. We get that question quite often, and instead of a simple answer, the people are expecting a number. It ends up usually as a really great conversation with a lot more context, and I think becomes a lot more helpful. But before we get anything though, what are your thoughts on that question? You’ve heard it probably a million times.

Reese Harper:
Mm-mm (affirmative).

Ryan Isaac:
What goes through your head when you hear people ask that?

Reese Harper:
First, that’s not a question I would have. I think a natural question I’d have like, what do you guys-

Ryan Isaac:
Natural.

Reese Harper:
What are your returns? What do you get?

Ryan Isaac:
What do you get?

Reese Harper:
What are you going to do for me?

Ryan Isaac:
What’d you going to do for me? What you get? Go get it. Go get some. What you getting?

Reese Harper:
I can’t blame people because that is part of why you hire a financial advisor. It is okay to expect them to deliver you investment performance that meets what you’re expecting.

Ryan Isaac:
Yes.

Reese Harper:
It’s reasonable. Whatever you’re expecting, they should be able to deliver on that.

Ryan Isaac:
Yes.

Reese Harper:
They should help you have the appropriate expectations for whatever investment you’re about to do. I think that it’s really critical. The reason people ask that question a lot of times is because historically the industry has used that as the primary…

Ryan Isaac:
It’s in marketing.

Reese Harper:
Way to add a value, the value proposition. If you think about it, think about Warren Buffett’s first early years of investing, right? [crosstalk 00:05:44] No, he wasn’t. We’re not going back that far. When there was no ticker tape…

Ryan Isaac:
Right.

Reese Harper:
No electronic ticker tape. He’s literally getting his investment data and stock prices from the newspaper.

Ryan Isaac:
Or driving to the company headquarters and taking the owner out for a steak.

Reese Harper:
Yeah. There wasn’t electronic information being passed around and circulated. There was a time, this is prior to really the growth of mutual funds. It’s prior to the growth of exchange traded funds, which are like mutual funds, but you have this whole industry that started based on stock brokers being able to give you a nice return on your money. That’s why you would give a broker a dollar. Like a boiler room, Vin Diesel is interviewing a doctor over the phone, and he’s manipulating the doctor in boiler room to…

Ryan Isaac:
Buy more.

Reese Harper:
Put a trade in. I think he said, “Letting our customers get in on a small order of 5,000 shares.” The doctor’s like, “Five thousand? Five thousand shares? I wasn’t thinking of anything near that large.”

Ryan Isaac:
Yep.

Reese Harper:
Vin Diesel’s like, “Well, like I told you, Doc, I don’t have all day, and I’ve got to get this trade placed before 2:00 PM.” He pressures the doctor and the whole context there is, look, this thing’s going to pop. You’re going to get a nice return. I think that’s where it started. It started from a point in time where there was no such thing as financial planning. There was just managing money for people. People were like, “Well, if you’re just managing my money, the only value then is increasing my returns.” But as the industry started growing and the internet came around, and now getting an investment became more of a commodity, right? Now having access to getting returns became a little bit more commoditized with Vanguard really started it in the 70s, and Charles Schwab, probably the first brokerage firm to really offer a direct to consumer option with an index fund. The access to returns just became very prolific and so it [crosstalk 00:08:12] was a different market.

Ryan Isaac:
Yeah, different market. I was going to say too, investing in the broad market index funds, that wasn’t really a thing either. People were hiring brokers to pick individual companies, or a really small group of individual companies. The brokers and the companies that were being hired, they had their own proprietary trading styles or investment selection methods. Everyone operated like their own fund.

Reese Harper:
Yeah. [crosstalk 00:08:49] That’s an appropriate question [crosstalk 00:08:48]. It wasn’t even til 1975. It’s debatable who had the first index fund, but Vanguard will claim having the first index [crosstalk 00:08:58] fund in 1975.

Ryan Isaac:
That’s fine.

Reese Harper:
Most of your parents, those of you listening to this podcast, the average age is probably in your forties, and many of you had parents that talked to you about money and gave you money messages. Those money messages were often around things that they grew up assuming were good. When they grew up in the ’70s and ’60s, that was a time where they would say things like, “Our guy’s done really well for us. Look at our returns; look at how well Tom’s done for us in our account. He’s really… ”

Ryan Isaac:
Old Tom.

Reese Harper:
Then it permeates, and one of the messages you get from your parents is, “Well, old Mike’s really done great for us. He’s got us great returns. Look at the returns he’s gotten us.” The science about investing wasn’t really that common until the last 15 to 18, I don’t know, 20 years. I guess for people who don’t know though, I think it’s important to say investment returns are critical, and the difference between today and before I think is now those returns are just accessible in a way that they weren’t accessible before. The value of your financial advisor probably shouldn’t be exclusively based on what returns their firm offers. That’s a very complicated question, which I’m sure you’re going to go into.

Ryan Isaac:
Yeah, and I think the different parts I want to hit are how has the operation of a firm and the services of a firm changed since those days, where a firm 30, 40 years ago acted like their own fund. They had their own proprietary trading, and a lot of people still do, and it’s still a thing in the industry. How has that changed? What are some ways we can give insight to people when people ask that? What are your firm’s returns? Part of the explanation is let me tell you about all the different kinds of people we work with, the different phases in life they’re in. For every one person that we work with, each of them probably has three to six different investment accounts, all with different goals and timeframes and strategies.

Ryan Isaac:
Let’s give some context around the clients and how clients invest. Then I think last week it probably hit, what’s a better question that we could give listeners when they’re interviewing financial advisors? What’s a better question to ask about investment process philosophy returns? Like you said, you still want to align your expectation with what’s going to actually happen, so we can hit those. Let’s take a quick break and then we’ll hit some of those questions and some of those points when we come back. 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.

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:
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:
Each month we’re going to hit an element, right? 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:
We’d 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. Okay, we’re back and let’s jump back into a good way to answer this question. This is the first place I begin when someone asks that question. I always want to acknowledge I think it’s a rational thing to ask, and I know why people are asking, but it’s a lot more complicated of an answer when you’re talking about a firm that does a lot more than just deliver some proprietary trading strategy. Maybe let’s just start with what are some of the contextual responses you’ll give to a client, Reese, when that question gets asked? What do you want them to know to better answer the question and even give them better questions?

Reese Harper:
I just think that what that reflects is people sometimes don’t have a good understanding of how you earn returns. Professional money managers, whether you’re Warren Buffett, or whether you’re an index fund or a hedge fund, there are certain sectors in the economy, and certain styles of companies that affect returns more than anything. When you say, “What are your returns,” you could ask that. That would be a fair question to ask to a hedge fund, or [crosstalk 00:14:09] an investment company-

Ryan Isaac:
Or a mutual fund.

Reese Harper:
That is in the business of just giving the highest return possible. If that’s the business that someone’s in, it’s fair to ask them that question that maybe not the highest return possible, but-

Ryan Isaac:
Or for their strategy.

Reese Harper:
[crosstalk 00:14:23] providing a return for their particular strategy. That’s a fair question. When you’re asking a financial advisor that question, the role of today’s financial advisor I think is more about pairing strategies with your goals and timeframes than it is delivering returns, because as a financial advisor, you’re going to ask me a question about what should I do with this money? I have this goal. I have this amount of money to save, or this is my income. How much should I save? Where should I put it? I’m going to say, “Well, it can go a lot of different places. Here’s what I would recommend given this type of goal.” You’re talking to me about you’re going to buy a building. If you’re going to buy a building, it’s this goal. If you’re going to put your money towards retirement at age 60, it’s this goal. If you’re going to save for kids’ college, it’s this goal. Each of these goals has different timeframes and different amounts of ambiguity that you’re willing to deal with for uncertainty.

Reese Harper:
I might get 9%, but I’m okay if I only get eight. But if I could have a chance at getting 12, I’d rather just have a little bit less certainty. If I could maybe have a chance of getting a higher return, I’ll take a little bit more uncertainty to get that return, uncertainty meaning every year I’m going to have a little bit more up and down movement in my account. I think most people don’t realize that as an investor, you control the returns by selecting the investment that pairs up with the return you want. The higher the return that you want, the more uncertainty you’re going to have over short periods of time. The higher the return, if you want 12% you’re going to have a very uncertain next 12 months. [crosstalk 00:16:17] The return you will gain over the next 12 is very uncertain. If you want 5%, you’ll have more certainty over the next 12 months.

Ryan Isaac:
That’s the trade off, right.

Reese Harper:
You just have to decide for each goal in your life how much return do you want to achieve and then how much uncertainty over short periods are you willing to deal with?

Ryan Isaac:
Yeah, I was just barely before this on the phone with a client allocating four or $500,000 of cash, and this was the exact conversation. The primary concerns were not temporary dips in the market, but they were can I have access to this money if I really needed it. But I don’t think I do for a good 15, 20 years. You don’t plan on that, so then the conversation’s like, okay, it can be invested in a way where we’re planning on not touching it for 15, 20 years, but it’s going to be in the type of account that if you had to get some money, you can get some of that money penalty free. It can get back out to you in two to three business days. I think that’s one of the first places I would begin when I get that question.

Ryan Isaac:
What are your returns? I just want to paint the picture that as of today, 2019 when we’re recording this, we’re a firm of hundreds of clients. Every client has a handful of accounts just depending on what it’s for. Many, many of our clients have a short term really conservative fund that we would consider an emergency fund, or a temporary place to stash money and that money’s invested. The purpose of that money is for short term money. We hopefully want it to grow a little bit more than a checking or savings account, but it’s invested very conservative and very liquid for that purpose. That’s different than their profit sharing plan, and that’s different than their brokerage account they don’t plan on touching for 20 years. That’s different than their Roth.

Ryan Isaac:
When you’re talking about hundreds of people and everyone’s got multiple types of accounts and they’re all different tax consequences, and they’re all different goals and timeframes, that’s what you want people to know is here’s the context of what’s happening inside of a firm nowadays. Then what you’re alluding to and what you’re talking about is just an investment philosophy. I think that’s a good question though. You want to ask a firm what is your investment philosophy. Do you guys have a proprietary thing that it’s your own secret way of picking stocks and that’s how you’re doing it?

Reese Harper:
Let’s stop on that first point you’re making.

Ryan Isaac:
Great.

Reese Harper:
Which is we asked this question. Who’s this question best for? That question that you’re asking is best for someone who’s in the business of just generating a specific return for their clients.

Ryan Isaac:
For a specific strategy [crosstalk 00:18:57].

Reese Harper:
A financial advisor’s generally in the business of providing a more comprehensive or holistic set of advice to a customer, and then matching up dozens of different investment strategies to put together a really good broad based plan. Each of those strategies will have a different return, a different set of risk parameters. Asking what are your returns, [crosstalk 00:19:25] it’s very complicated for us to answer that question easily because, again, it depends on the individual client and which individual account we’re talking about. If you’re talking about a very longterm account that’s inside of a 401K that we’re trying to grow and we’re not going to touch it till we’re 70 years old, then that account would be very, very aggressive. We could say this is the return that this particular strategy and account would be expecting to earn in the future, and here’s what it’s done historically.

Ryan Isaac:
Exactly.

Reese Harper:
That’s easier to do, but asking what are your returns [crosstalk 00:20:03] generally…

Ryan Isaac:
There’s too many strategies.

Reese Harper:
Too many strategies, and there’s too many people with different objectives for their-

Ryan Isaac:
That’s a good point; I like that. Point number one is, that’s a great question if you’re interviewing a mutual fund or a hedge fund or a private fund where they have a single strategy.

Reese Harper:
Now onto your better questions, which is where you were going. What are better questions to ask, right? What are some of the questions you think are better to ask?

Ryan Isaac:
I think one of them would be what clients do you work with? Before we’re talking about what are your strategies. I think you want to know who does this financial advisor typically work with. Basically what we’ll do at this point in the podcast is take one question, what are your returns, and let’s boil that down into three or four or five different questions that’ll give you better, more specific answers. One of them in my mind would be who do you work with? Do they look me? Do they act like me? Do they have the same kind of goals as me? I think, Reese, we probably have a couple of articles on the website. If you go to a dentistadvisors.com and click on the education library, we have a couple of articles and a couple podcasts of questions to ask a financial advisor, don’t we? I know we did four of them or something.

Reese Harper:
Yeah, there’s 10 questions to ask. There’s seven questions to ask, a few different articles on the site. If you just hit education library, you’ll be able to go to the dropdown. There’s one section of topics called advisors, and if you just click that topic area-

Ryan Isaac:
Okay, cool.

Reese Harper:
It’ll bring up why in the world would I hire a financial advisor, 10 questions that dentists need to ask before hiring an advisor. There’s seven questions to ask when hiring a financial advisor. Some of these articles are just a slightly different length and more in depth than the other, but yeah.

Ryan Isaac:
Cool. Yeah, but let’s split it out this one then. Instead of what are your returns-

Reese Harper:
I’m going to guess at some of these questions to ask. I want you to say one. You said one, which is what types of clients do you work with. I’m going to answer one now. If I was going to ask someone about investing, right, we’re not going to do broad financial planning here, but if you’re going to talk to someone about investing, what are the questions you’d want to ask about investing. For me, I would dive, just because as a business owner, I’m very picky about the things that I know have been very hard for me to operate on. I would like to know how the business actually trades its accounts, how it trades its securities-

Ryan Isaac:
That’s a rare question.

Reese Harper:
The process it follows to go about buying securities. Do you put in all your orders at the same time? If a client calls in and asks for you to do something, or if you wake up in the morning, do you trade your accounts individually? Do you trade them as a group? What kind of groups? How do you trade groups? Who goes first? Who goes second? What order?

Ryan Isaac:
[crosstalk 00:23:12] the order of trades [inaudible 00:23:15].

Reese Harper:
I just want to know that they thought through this. Here’s what you’re trying to figure out is do they really have a process that tries as good as possible that equitably trade and execute the investment management of all of their clients. Do they even do this in house? Do they outsource this completely? Is someone else not even in their office doing this for them? You’ll be able to tell right away. I don’t know. I don’t even do this job.Just ask them. Say, “How do you guys buy and sell your stocks and bonds and mutual funds? How does it happen?” If you get the sense that it’s a very distant place away from them that does that job, you should at least start asking some more questions because what that’s going to tell you is that there’s definitely going to be some more layers of costs in your portfolio that your financial advisor is probably not bearing. If they don’t have an employee or someone in their firm that’s doing this job, then they’re passing that cost along to someone else, and you’re probably paying for it through your portfolio somehow.

Ryan Isaac:
Right.

Reese Harper:
They may not be executing things in the same way that they would if they were a little bit closer to the management of the account. I’m not saying that it’s bad to have someone else do the trading job. It might be being done very well, and some online platforms right now do a very good job of trading in a very efficient way, but it won’t be as customized and it won’t be as well informed about your individual circumstances if it’s extremely automated. If they’re not doing it in house, they might not know exactly even how it’s being done, and therefore neglecting some important customization that you might need in your account as they become larger especially.

Ryan Isaac:
[crosstalk 00:25:20] That’d be a cool question to get asked. I don’t know. What would that be like for a patient talking to a dentist? If I went in and I asked the dentist something so specific about [crosstalk 00:25:30].

Reese Harper:
Yeah, tell me a little bit more about the process for how you selected your lab, or tell me a little bit more about [crosstalk 00:25:41] why you chose to use an [E4D 00:25:43]? Why did you choose this particular device, right? It would just be an interesting question because then you get to see do they have an opinion about the technical nuances of their job, or are they just like, “Eh, they’re just up the street.” [crosstalk 00:25:59] I don’t know. I actually don’t know. Hey, if you’re like, “Hey, Tom, up at the front, who do we use for our lab these days?” I don’t know. I actually don’t know. It’s not a great sign if you’re the patient. You don’t even care?

Ryan Isaac:
And why.

Reese Harper:
I just think [crosstalk 00:26:19] that’s going to be an interesting question. Yeah. Am I the only one that might ask that? I hope not. [crosstalk 00:26:23] What’s another one you’d ask [crosstalk 00:26:26]?

Ryan Isaac:
This is good. Yeah, we’re just trying to expand on the question, what are your returns? I would say once it’s been established that a financial advising firm, not a hedge fund, is going to have a lot of different clients, and everyone’s going to have different goals with different buckets of money. I would want to know what’s the process for helping me select that. If I’ve got a short term goal, a medium term goal and a longterm goal, and I’ve got after tax accounts and pretax accounts, what is your process for helping me arrive at those conclusions? What’s your process for helping me pick risk an account that I’m not going to touch for 20 years?

Reese Harper:
You’re saying what’s the process of helping me decide what kind of returns I want in each of my accounts.

Ryan Isaac:
Yeah. Yeah, for sure.

Reese Harper:
You’re saying a lot of what you see is just random portfolio building with no actual defined goal.

Ryan Isaac:
You mean in other firms?

Reese Harper:
Yeah. You see that in a lot of other firms.

Ryan Isaac:
Oh, geez. Yeah.

Reese Harper:
It’s like why do you to have this account [crosstalk 00:27:23]?

Ryan Isaac:
It’s been an interesting week for that unfortunately.

Reese Harper:
Yeah. Why? Why has it been an interesting week? Tell me this example.

Ryan Isaac:
Yeah, we were talking about this on a couple of cases this week. To me, it goes against maybe this myth or belief that people with a lot of money and a lot of liquidity are probably making really great decisions with their investments, or they’re hiring people who are making really great decisions with their investments.

Reese Harper:
[crosstalk 00:27:50] you say it’s a myth.

Ryan Isaac:
[crosstalk 00:27:51] I think it’s a myth.

Reese Harper:
It’s a myth that rich people have better portfolios.

Ryan Isaac:
Yes, exactly. I think that’s a myth. I think it’s a real myth that it’s a belief in the back of our mind sometimes. But this week we worked on a couple of cases, two of them, where we’re talking about multiple seven figure portfolios that have been outsourced to money managers that have… Man, it just makes you scratch your head. The clients are wondering 10 years into it. I don’t know what this thing is and why is this [crosstalk 00:28:22].

Reese Harper:
You’re saying rich people sometimes don’t have the best investments either.

Ryan Isaac:
Have you been enjoying our Dentist Money Show podcast?

Reese Harper:
I think so.

Ryan Isaac:
I hope so. Let’s set up a consultation so you can find out how our services can help you. It’s easy to do, and Reese, it’s completely free.

Reese Harper:
Really?

Ryan Isaac:
Did you know that?

Reese Harper:
Not for me. I’m paying these guys to answer the phones every day.

Ryan Isaac:
All you do is go to the website dentistadvisors.com, and click the huge green button you cannot miss called Book Free Consultation, or call us or text us at 833-DDS-PLAN.

Reese Harper:
Here’s another. We’re going to keep hotlining this. Here’s another one that I would say. [crosstalk 00:29:05] I think that’s a great one that you brought up. I would want to know, what are your different levels of investment fees that I’ll be paying? I would want to know, what do you get paid as an advisor? I would want to know, do you have a manager or some other person that’s getting paid anything beyond what you get paid? Then I would want to know, what is the cost of the investments that I’m going to be putting my money in? Every layer of possible fees I could possibly pay, then I would want to know, what are the trading costs that I pay? How much do I pay per trade? Do you pay that? Do I pay that? These are all questions I would want to know. Then I would want, but more than just the fees.

Reese Harper:
Once I see those fees, okay, I’m not done yet. That’s one thing. Then I would want to just ask the person, “What do you do for that fee?” Just because one person’s more expensive than another, we have a higher investment fee percentage than, let’s say, Vanguard Advisors Direct. You could go direct to Vanguard right now, hire a financial advisor, and their investment percentage fee is lower than our firm’s investment percentage fee that the advisor gets paid, right? [crosstalk 00:30:24] Why is that the case? Because that person, number one, isn’t compensated as highly as our advisors, right? They’re not as specialized. They don’t have the depth of experience in dentistry. They’re also not delivering the same service. Vanguard Advisors Direct might do a great job at answering your phone calls when you call in and asking questions about basic financial questions. As long as you’re comfortable getting advice from someone who’s maybe less experienced and isn’t going to be able to answer [crosstalk 00:30:56] questions.

Ryan Isaac:
[crosstalk 00:30:57] about you, other than account balance. Yeah.

Reese Harper:
Yeah. It’s hard for them to get to know you when they have lots and lots [crosstalk 00:31:04] of clients, right?

Ryan Isaac:
To be fair to them, [crosstalk 00:31:08].

Reese Harper:
I don’t know what their ratio is on how few clients [crosstalk 00:31:14] they pair with an advisor, but I know it’s significantly higher than ours. They have a tolerance for volume that’s much higher than we do because we’re trying to create something that’s a little bit higher quality. Comparing our fee to Vanguard’s fee, you’re going to see like, “Oh, I’ll pay a higher percentage to Dentist Advisors.” Is that worth it? Not if you don’t need what we offer, but if you need a little bit better service experience, and if you need better advice around all areas in your financial life, we’ll call it a little bit more holistic view, then paying our fee might actually be a good value to consider. That’s all I’m saying.

Ryan Isaac:
Okay.

Reese Harper:
Now, don’t stop just by comparing two fees and then picking the cheapest one, like you just made a smart decision. I’ve done that many times in my life. That is what these cheaper firms want you to think. They want you to think that this whole financial planning thing is a complete commodity, and that as long as you just cut your fees, you’re going to be in great shape. But it’s my experience that the lower fees, in almost everything in my life, the lower cost objects, the lower cost items, whether it’s a chair I sit in, or it’s a CPA I hire, lower cost will generally mean less service and lower quality, as a general rule, especially once they get busier. Sometimes it feels good to have somebody be cheap and then all of a sudden five years later the person that’s cheap is no longer answering your calls and you’re like…

Ryan Isaac:
It goes back to process.

Reese Harper:
Yeah. I’m like, “Well, that’s kind of how it happens.” If you’re really, really cheap and sometimes the service providers don’t do their math right. They end up committing to something they can’t sustain and it felt great when you were one of two clients, but once they had 50 clients…

Ryan Isaac:
Different story.

Reese Harper:
It’s a different story

Ryan Isaac:
Yeah, [crosstalk 00:33:17] dentists have gone through that too with number of patients. You can answer your own phones and do your own hygiene for a while until it’s hundreds of people. On that I then, I want to go to a nitpicky [crosstalk 00:33:27] detail one that I think would be really cool to be asked in this same questioning would be, when you’re asking someone about their process, how do they know what their employees are working on and how much time they spend on it? How do they know what kind of clients will increase or decrease the amount of human hours that have to be spent on a case? That’d be really cool to know. How do you know that? In our business when people hire us, they’re getting assigned at least two dedicated full time people to their case, an associate advisor, a full time senior financial advisor. Between that team, not even including other admin time, between just that team, we’re tracking anywhere from 30 to 50 hours a week of service per year of service work per client.

Reese Harper:
[inaudible 00:34:11] to say per week? No, that’s not.

Ryan Isaac:
You have to charge a little bit more for that.

Reese Harper:
Annually, [crosstalk 00:34:16] it depends on the year. I wouldn’t say it’s 50 in every year.

Ryan Isaac:
No.

Reese Harper:
But it can be much higher than that in some years. But yeah, there’s a lot of hours that go into it. That is another question. You’re just basically saying-

Ryan Isaac:
It would be fascinating to know how [crosstalk 00:34:36] much someone actually tracked though, because I watched what it took. What was that? A two year process in our business [crosstalk 00:34:41] to figure out that question?

Reese Harper:
Yeah, even simpler, just ask them, how many hours do you think you spend on a client’s case per year for what you get paid?

Ryan Isaac:
How did you arrive at that conclusion?

Reese Harper:
This is my point that you’re highlighting is once you ask them the fee question and you understand what they get paid, then you ask Ryan’s question. Ryan’s question is basically the same as what I was saying was the second part of mine, which is how much time are you guys spending? How do you decide on that? Do you just randomly [crosstalk 00:35:16]? Do you just pick up my phone call or is it do you do stuff for me proactively?

Ryan Isaac:
What makes you spend more time? What makes it a 30 hour year versus a 50 hour year?

Reese Harper:
Yeah.

Ryan Isaac:
We know these things on spreadsheets with 200 columns. [crosstalk 00:35:32] That was a two year project, but nobody answers.

Reese Harper:
All right. Another question, it would be, who are the people you listen to or believe in for investment philosophy and advice?

Ryan Isaac:
Oh, cool.

Reese Harper:
I would want to know who are the people that have inspired you and that you listen to for investment advice on how to build your portfolios, right, on how you give advice to clients? Who’s influenced you? We both have our own experiences in life that will cause us to see the world slightly differently, but from an investment philosophy perspective, our whole firm has very similar views on who our main influences are in investing. Sometimes within a firm you’ll have people that are all over the board. No one’s very consistent. Even though you think you might be, it’s just important to really know who’s influencing you.

Ryan Isaac:
That’s a good question. People have asked that a lot actually. I think that’s a great question. Is my advice experience going to dramatically change depending on who I’m assigned to in a firm? In a lot of firms the answer’s yes because everyone operates independently just under one company name.

Reese Harper:
Yeah, what’s your last question that you were thinking of?

Ryan Isaac:
The last question was, you were alluding to this earlier, what’s the process to educating me as a client? At some level people are outsourcing because they don’t want to have to deal with it and they don’t want to have to know everything. But a lot of people want to have some basic levels of education around why things are happening with their money and their accounts. I’d love to know, as a client, what’s the process for spending enough time with me to teach me about this stuff along the way, so I’m not totally clueless about it?

Reese Harper:
Yeah. I would throw one more there just to throw in is, show me an example of how you’ll disclose my returns to me.

Ryan Isaac:
Oh, cool.

Reese Harper:
Show me an example of how you track and disclose my actual returns net with after all your fees and everything.

Ryan Isaac:
Cool.

Reese Harper:
What’s an example of a report or some log in or some data that I could see to show me how you’re going to disclose that to me? If you have any concerns or questions about your accounts, you can talk to someone else and get a second opinion, and make sure that you’re feeling comfortable with it.

Ryan Isaac:
Cool.

Reese Harper:
Sometimes some advisors don’t really have good ways to disclose the way they’re managing the money.

Ryan Isaac:
That’s a whole other discussion on is there a third party custodian that’s reporting on this independently of your firm, or is it you guys? Shout out to Bernie Madoff I guess. [crosstalk 00:38:24] All right, let’s wrap it up there. I think the point of that was hopefully to give some context around asking a financial advisor about their investment process, and aligning expectations and taking one question that’s suitable for a hedge fund, which is what are your returns, and then turning that into maybe half a dozen different questions that’ll give you a much deeper understanding about process and set better expectations for the future. Thanks for tuning in. Couple of reminders here, like I was saying earlier, it’s been an interesting week of looking at portfolios. If you’ve got questions about what’s going on in your portfolio from something you’ve done or another advisor’s done, book a consultation and let’s have a chat about what’s going on and give you a little education around it.

Ryan Isaac:
You can book a consultation on our website at dentistadvisors.com, just click the big green button there that says, “Book free consultation,” and just pick a time on the calendar that works for you. Join our Facebook group. We pull a lot of these questions from the Facebook group every single week. Reese and I go in there and answer the questions ourselves. That’s at dentistadvisors.com/group. Got a lot of events going on. We have a monthly webinar where we dive really deep into each element that we work on per month, and a lot of live events around the country. That’s at dentistadvisors.com/events, and if you’re an old school caller, longtime listener, first time caller, you can just call us at 833-DDS-PLAN. We’ll pick up the phone and we’ll chat with you, but thanks for tuning in and listening. We really appreciate it. Until next time.

Reese Harper:
Carry on.

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