What the Heck Does “Financial Planning” Even Mean? – Episode 148

You need financial advice, but how can you judge whether you’re getting real value from your “advisor?” In this episode of Dentist Money™ Reese and Ryan discuss how financial planning services are still in their infancy, and why so many advisors misuse the word “planning.” They also discuss the building blocks of a comprehensive plan. And, since financial planning isn’t a term either of them care for, you’ll finally hear why every Dentist Advisors podcast opens with “helping dentists make smart financial decisions.”

Podcast Transcript:

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: Okay! Good morning. Thank you.

Reese Harper: It never gets old welcoming the sir to the show!

Ryan Isaac: It never gets old. We have some new employees that we need to give nicknames, too.

Reese Harper: Uh, it’s going to happen slowly and organically. I was not prepared for this.

Ryan Isaac: Well, we won’t force the issue. Okay.

Reese Harper: No. Dr. Aloha is here in the studio with us still!

Tad: Glad to be with you!

Ryan Isaac: Oh, Dr. Aloha. That came naturally. A couple guys in the Midwest, right?

Reese Harper: Yes. Steely! I think we could go with Steely.

Ryan Isaac: I think Steely would be great! Yeah, I think it would be good.

Reese Harper: (laughs) shout out to Steely out there.

Ryan Isaac: Shout out to Cody in Stillwater, Oklahoma.

Reese Harper: I don’t yet know how to label Chris Jolovich, who is running wild in the middle of Omaha. So…

Ryan Isaac: We can call him the Oracle.

Reese Harper: (laughs) yes! I like that.

Ryan Isaac: I kind of like that! Chris “the Oracle” Jolovich.

Reese Harper: He is in charge of all partnerships, so he may be—

Ryan Isaac: If you hear from him, shake his hand!

Reese Harper: Well that name is fitting! He’s trying to navigate and understand the best way to bring two people together.

Ryan Isaac: Okay. And then a financial advisor out in Oklahoma. Steely.

Reese Harper: Cody Murray, living the dream.

Ryan Isaac: If you’re listening in Oklahoma City or Tulsa right now, or any small town, he’ll drive and come see you! He’s a local boy.

Reese Harper: Running wild.

Ryan Isaac: On his steed. He doesn’t drive a car to appointments. He herds cattle (laughs).

Reese Harper: And he does support—I mean, it’s hard for me to say this, but even though he is Steely, which is Oklahoma State fan, he will also support you and discuss life with you if you’re a Boomer Sooner.

Ryan Isaac: It’s okay. He’ll boom with you. He’ll boom with some soons. We have no idea what we’re talking about. Today, though, let’s get into a little history. Today, we are going to talk about, what is financial planning? What does it even mean to do it as a company? We’re going to give a little perspective on what it means to deliver financial planning from our end, and how should someone pay for it? What kind of expectations should they have around that? What should they get from it? That’s what we’re going to talk about today.

Reese Harper: Yeah. Also, I think maybe something that will be very applicable to anyone listening, even if you’re not interested in what is financial planning, I think you are interested in something else, which is, how can I make smart financial decisions? I think you’re probably interested in that. How can you make smart financial decisions and grow your wealth as fast as possible? And not just make generic smart financial decisions, but how can you make smart financial decisions in all areas of your financial life? How are you going to look at everything and say, “I’m gonna make smart financial decisions in all of these areas?”

Ryan Isaac: That sounds like a financial plan (laughs).

Reese Harper: Yeah. But no one wants to call it that. It sounded boring. Like, “let’s do financial planning!” And everyone’s like, “dude, I have no interest in that.”

Ryan Isaac: “Let’s budget!”

Reese Harper: “I have no interest in that.”

Ryan Isaac: “Let’s get on a diet!” Things that suck (laughs).

Reese Harper: We know that people do not like to do financial planning, but we know they like to make smart decisions, and grow their wealth.

Ryan Isaac: We know that. Yeah, that’s fair. Well, to give a little context, let’s go back in time a little bit, and let’s talk about the history of a few service industries. We’re going to talk about where the accounting profession began, where the legal profession began—

Reese Harper: So, here’s why this happened, though! I was writing this piece because I’m trying to publish an article with Dr. Aloha— him and I are collaborating on this article so we can figure out how to explain to people what financial planning really is. And it kind of struck me as I was trying to explain it, I was like, “why is this so hard?”

Ryan Isaac: Why is there no definition? Why is this not a universal thing that people know?

Reese Harper: Like, “why do I even feel a need to do this?” number one, because I don’t have to explain what tax returns are, or like, filing taxes. I don’t have to explain what legal documentation is, so I thought, let’s go back in time and figure out like, how old is the financial planning industry exactly?

Ryan Isaac: Well let’s give some context and let’s start with a couple other ones. So, let’s start with the oldest on record that we can figure out, which is the accounting industry. Do you want to give a little— you’re writing on this.

Reese Harper: I mean, the accounting industry is the oldest. I was pretty sure that the legal industry would be the oldest. It surprised me! So I started with the legal industry, and I started going back and figuring out—

Ryan Isaac: How far back did you get? How far back did you find?

Reese Harper: It seemed like it really started coming together in like, the 2nd century, 3rd century. That was the time where there were actually people advocating for other people and doing things on their behalf, and sort of— but it dates back further. It dates back to ancient— I mean, Rome was pretty vibrant in the 2nd and 3rd centuries. But it predates that, and it’s even BC where there are attorneys. They weren’t called attorneys…

Ryan Isaac: They weren’t, and they weren’t allowed to get paid until one of the leaders in ancient Rome made it legal for them to get paid for their services to advocate on behalf of other people. Kind of interesting.

Tad: And they’ve been paid really well ever since.

Ryan Isaac: (laughs) you know, I liked that there was quite a bit of history in the legal profession back to the medieval times. I like to think that there was probably a Sir Ryan Isaac back then as an attorney. A full knight, like, an actual full knight, you know? At the round table? He was an advocate for— I don’t know, Lancelot? Maybe there was a Sir Ryan back then.

Reese Harper: But anyway, I felt like it wasn’t near as dated as the accounting industry. I mean, it was really ancient Mesopotamia! You’re talking— what year approximately are we talking about?

Ryan Isaac: This is like 7,000 years ago. That’s a long time ago!

Reese Harper: Like, when people first started having any kind of counting— when counting became a thing, okay? When you started adding stuff up, or—

Ryan Isaac: Like, “there’s two of those!” And that was a novel idea. “Wait, what? What’s a two?”

Reese Harper: That’s when accounting began! Accounting predated legal. Which I thought was pretty enlightening. I was like, well yeah, I guess if you had six rocks, then you need to count them up!

Ryan Isaac: (laughs) geez, they had like corn and— it wasn’t just rocks. They didn’t eat rocks!

Reese Harper: Well 7,000 years ago was like, a long time! Now, they did have food back then (laughs).

Ryan Isaac: 7,000 years ago, there was no food. (laughs) people just ate dirt and sticks and rocks. Yeah, there were lists of expenditures and goods received and traded, which probably includes rocks. That’s okay.

Reese Harper: Yeah, gold. It was currency. They started having— I mean, as soon as counting— it was honestly before money. It was before currency. And so, anyway, these are very old professions, okay? These are thousands of years! And the point is—

Ryan Isaac: Now we come to the history of financial planning. What century did that start in? (laughs)

Reese Harper: Which dates back to the ancient city of Chicago in the 1960s, and then the ancient city of Denver, Colorado in the 70s.

Tad: So you realize it’s not history if I was alive at the time (laughs).

Ryan Isaac: Aloha is like, “wait.” That’s actually like my kids. They ask me all the time now about old music and old movies from the 80s all the time. They’re like, “is that from the 80s?” Oh no!

Reese Harper: So, tell us a little bit about— well, let me give you some context. The reason financial planning became a thing was because the modern financial market, just all the products and all of the complexity of our modern financial system, it just started to evolve to the point to where to average person really wasn’t going to be able to assimilate all of this information. Between all the investment products, all the insurance products, all the tax laws, all the legal laws, it got to a point to where it was like— this wasn’t as complicated in the 30s, and it wasn’t as complicated in the 40s, as the stock market really first started traded, and people started exchanging securities. There wasn’t a lot of sophistication in people’s personal financial statement and people’s overall wealth. It didn’t vary dramatically person to person, and it just started to get more and more and more complex.

Ryan Isaac: Yeah, I was just going to say, most of the 1900s up until that point was just a little bit of regulation around securities and insurance. I mean, that was it.

Reese Harper: I mean— the insurance industry goes way back further than the investment industry.

Ryan Isaac: Shout out to the insurance!

Reese Harper: A little shout out to them. But I think it’s important to articulate this, because it plays into the financial services landscape today. If the insurance industry really— like, whole life and cash value life insurance, and life insurance in general… I mean, it started in London in the late 1700s? Mid 1700s? And then it made its way over to the United States as the US was settled. But really, the United States’ insurance market didn’t start to become a thing until the mid 1800s or early 1800s in a few isolated cases. But it definitely predated the mutual fund industry, and it predates the stock market. And most people were actually using insurance policies much before they were using mutual funds or stocks. So, you can kind of see today how there are probably more insurance agents that— you’ll meet as many insurance agents selling life insurance and cash value life insurance as you will investment advisors, or a similar amount. And a lot of it is because you have just a massive amount of— it’s a very large industry! It has been around forever, and there’s a big need for these agents.

Ryan Isaac: I like to imagine that the first insurance guy was a little bit like Paul Revere when he came over, you know? Just on horseback, shouting. Shouting about being your own bank (laughs).

Reese Harper: (laughs) yeah, “infinite banking! Bank on yourself! Leap!”

Ryan Isaac: “The stock market is falling!”

Reese Harper: “The leap system!”

Ryan Isaac: Okay. What’s interesting is, when you think of some of the classic Wall Street financial movies, what are some of the classics that come to mind when you think of this stuff?

Reese Harper: Boiler Room?

Ryan Isaac: Yeah, Boiler Room, The Wolf of Wall Street… what was the feel-good one?

Reese Harper: Notice that they’re all very violent and—

Ryan Isaac: The Pursuit of Happyness! That one with Will Smith. But the whole premise behind those are very like— it’s the stock trading floor, it’s the room, it’s the high-pressure phone sales… I mean, even in the 1970s when financial planning got its start, that was still the prominent thing, you know? Sales over the phone from a broker. That’s how trades got placed. That’s how information was disseminated: from a guy in a room doing trades.

Reese Harper: Yeah, on a phone!

Ryan Isaac: Selling ideas on a phone. On a landline.

Reese Harper: And you can see how when— let’s talk about how the industry of financial planning got started though.

Ryan Isaac: Yeah. So actually, in 1963, there was this company called the Financial Services Corporation. Very very specific. A guy named John Keeble and Richard Felder, they created the first financial plan. And they were doing hundreds of these financial plans. That was in ‘63. In ‘69, there was a society formed called the Society for Financial Counseling Ethics. And then in ‘70, it became— there was another college that became the college for financial planning. The International College for Financial Counseling.

Reese Harper: Yeah. And then it became the College for Financial Planning.

Ryan Isaac: And then 1970 was also the year when the CFP formed. Certified Financial Planner. That’s when the curriculum started. So, the 1970s was when it kind of got started, but it was also the time of these classic Wall Street movies where it was all about the broker on Wall Street, and the phone, and the sales, and the pitching, and the ideas—

Tad: And greed. Greed is good.

Ryan Isaac: And greed! Yeah, Gordon Gekko.

Reese Harper: So, the thing that I wanted to highlight here that I think is relevant is, it takes quite a while for a profession to establish its code of ethics. Think about education standards. Think about, like— to develop a college… if the College for Financial Planning didn’t really start until the 70s, would the first graduating class, or even the first generation, be the same as maybe the second or third or fourth generation? No! Imagine if your dad was a fee-only financial advisor. No one even has a parent yet! No financial advisor has a parent who was in the industry. I mean, how many dentists are practicing today because their dad or mom was a dentist, right? And so, I think it’s a big deal, because the society and the profession doesn’t have a chance to really shape the career of someone.

Ryan Isaac: Man, you were just saying this fee-only stuff and I’m thinking, even though CFP and financial planning kind of as an idea started in the 1970s, it was still just commission-driven product sales! I mean, a lot of it was still driven by that, right? I mean, when did the fee-only kind of bigger picture organization, planning— when did that even begin? I mean, that’s only a couple decades ago.

Reese Harper: Yeah, that wasn’t even until the 90s that it was really getting to be mainstream. And until now… I mean, we’re in a smaller state, right? We’re in Salt Lake City, Utah, which is probably the 20th largest metro market. So it’s not like a huge city, but it’s definitely not small. I’d say we’re just kind of in the median of states.

Ryan Isaac: Well you look at the traffic nowadays, and we’re not small anymore.

Reese Harper: But like, when I started in 2007 and opened my doors for the first time, I felt like I was one of five people that I knew in the whole state. Like, I tried to network and find more people who were doing financial planning for a fee, but it was not common, and I could count on one hand the number of people that I knew who were doing it. And now, ten years later, or twelve years later, it’s starting to become more heard of. Like, the public is aware of it at least to some degree. I mean, there are still some people who are listening to this podcast that are like, “I still don’t really know the difference.”

Ryan Isaac: Yeah, well the whole point of this— what you’re saying is, the industry is so new that there is still a huge lack of definition around what it means to have a financial plan, or someone to be your advisor— even the term advice. What does it mean to get financial advice from somebody?

Reese Harper: Well like, right now, probably only a third of the population would say they want an advisor or know why they would hire one. Still, two thirds of the population is still going, “why do I need one? What do they do? If they just sell me investments, then I can do that online.”

Ryan Isaac: There’s a great app now. There’s 100 great apps that—

Reese Harper: There’s still a really big gap between knowing what a financial advisor does and then what the public thinks. And that will change over time. I think over time, you’ll see— like, when the first accountants were around in ancient Mesopotamia and they were saying, “hey, we’re the guys that count the rocks!” And everyone was like, “we don’t need no rock-counters! Rocks can count themselves!” You know? I mean, “we can count them ourselves!”

Ryan Isaac: (laughs repeatedly)

Reese Harper: And the guy didn’t really offer a lot of value when his role was just like, “I’ll count your rocks!” But eventually, once they realized that there were a lot more things to count— or, there is taxes too, and like, “I have to pay—”

Ryan Isaac: “6% of my rocks have to go over here!”
Reese Harper: Or carve of a shard of rock to pay the government, you know?

Ryan Isaac: Shard of rock? Is that a thing?

Reese Harper: (laughs) yeah! So you know, it takes time for these professions to actually figure out— like, we know this is a thing. We know accounting is a thing, and we know legal is a thing. But when it first started, it wasn’t really clear. I mean, they weren’t even letting them get paid. We’re looking back and just going, okay. This profession now, it really is a thing when a third of the population is saying, “I think I need something here in this area.” But I think the reason it became necessary or is necessary today is because the financial marketplace and our modern economy is becoming so complex so quickly. It’s like, an app will launch and say, “we do financial planning,” and within six months, it’s missing like five essential jobs, or— you know, it’s like, “well Bitcoin is now there, what’s Bitcoin? How do I think about cryptocurrency? How do I think about—” let’s take credit default swaps, or adjustable rate mortgages. You see all these things just changing. And it’s going to keep getting more complex, and it’s hard for one person who might have a liberal arts degree or who might have—

Ryan Isaac: Shout out to liberal arts degrees.

Reese Harper: That was my background before I did finance, right? And if you don’t have a background in money, and you have to navigate all this stuff— especially if you’re like a dentist who gets out of school and ten years of clinical… it’s just not possible to assimilate all the information. And then also, this behavioral side to it, which we talk about a lot, is really a big deal—

Ryan Isaac: And how new is that? I mean, how new is the side of behavioral finance, and the psychology behind behavioral finance? Infancy, all this stuff. So, I guess the point of this is, what we have tried to do for ten years is define what financial planning specifically for a dentist actually means, you know? What are the steps? Who is involved? What does it cost? How much time does it take? So, how about we talk for a minute about, how would you define planning? What is planning? What does it mean to have a plan, or to get planning from somebody?

Reese Harper: I don’t like the word, so I just fundamentally disagree with the premise (laughs).

Ryan Isaac: What does it mean to make better financial decisions and to help someone make better financial decisions, and grow their net worth faster with fewer mistakes along the way? Planning’s quicker.

Reese Harper: (laughs) yeah. Well, that’s the only word we have for it right now, right?

Ryan Isaac: Well it’s like getting healthy and calling it dieting. It’s like, “this sucks. I don’t want to diet! I want to get healthy. I want to get strong. I want to get lean. I want to build muscle.” Whatever.

Reese Harper: Yeah. I think how we describe this is going to be a big deal in the industry. Like, we need to be able to describe this in a way that’s motivating to people to see how it can help them.

Ryan Isaac: Are we going to change all of our marketing? We don’t do financial planning for dentists now.

Reese Harper: Well, I don’t think we have said that for a while, so…

Ryan Isaac: We don’t even say that! We help dentists make smart financial decisions.

Reese Harper: I mean, if you have listened to this podcast, what have I been saying for 150+ episodes? I’ve been saying, “we help dentists make smart financial decisions.”

Ryan Isaac: You’re right!

Reese Harper: I think ultimately, if I could describe— like, let’s just go back a little bit. There is somebody I respect a lot— his name is Clayton Christensen, and he teaches at Harvard, and he has a big research project that he has been running for a long time, and some terminology that he has coined. And he also has a colleague named Anthony Ulwick who runs a consulting agency in Northern California. Both of these guys kind of have worked together over the years, and have been in and out of adding to this theory called “jobs to be done”–

Ryan Isaac: It’s a book, right?

Reese Harper: Well Anthony Ulwick wrote a book— he has written several books on this, but so has Clayton Christensen. They both are attacking it from kind of different angles. Anthony Ulwick and Clayton Christensen both agree that people buy solutions, they don’t buy products. They’re not buying a drill bit, they’re buying the whole in the wall that it’s going to create, right? That’s what they want. And in financial planning, people aren’t buying a plan. That’s like, not motivating at all. If you think about a binder and paper, and like, charts and graphs and everything, that’s not motivating at all. But they might buy something or might be interested in working on something that creates financial peace of mind or relieves their anxiety with money or helps them feel like they’re making progress towards more financial security so that they don’t have to work as hard or that work becomes optional at some point, or—

Ryan Isaac: Or the big mess that they feel like is everywhere. Their whole financial life is now just organized. They know what’s going on.

Reese Harper: Yeah. In the last few months, we have been doing a lot of research on anecdotally talking to people and then some formal kind of small group surveying to try to figure out what it is that people really feel like they are lacking. Like, why do they feel financial anxiety? It’s funny, because I’ve done a lot of polling on our forum dentistadvisors.com/group, I’ve done some polling on the Dental Success Network, and when I ask people, “these are the twelve or fifteen things that you could be struggling with,” they tend to gravitate towards— the answer that they’ll respond to, if I give like ten or twelve options of very granular kind of topical issues that they could be struggling with— like debt or insurance or investments or legal or something granular like that— and I also include one that just says, “I don’t know where to get started,” or “I don’t know, I just feel like I don’t have a plan,” they’re always picking that one. Like, “I just don’t know where to get started.”

Ryan Isaac: We did an episode on this, probably ten episodes ago, about a poll you did like that. The most common response was the general one. Like, “I have no idea where to begin.”

Reese Harper: Yeah. And I think that’s where financial planning really can help when it’s done well. I think that’s what we’re doing well here, and I think a lot of advisors are starting to figure out that financial planning is not a binder, it’s not graphs, it’s not forecasting, it’s not inflation measurements—

Ryan Isaac: It’s not insurance policy, it’s not a 401k—

Reese Harper: It’s not products, right? But it’s actually— like, if we were to define it today, or the way I’m feeling— so, Clayton Christensen said that every service or every product has to have what’s called a core functional job. It has to have a main thing that people are trying to get or trying to do. Sorry, Anthony Ulwick said this in his book; he said this core functional job idea. Anyway, if you want to read it, it’s a really good book. Just google Anthony Ulwick. It will help in your dental practice and in any business.

Ryan Isaac: Jobs to Be Done.

Reese Harper: Yeah. It will help in any business or in any service industry.

Ryan Isaac: In an Amazon near you.

Reese Harper: Yes. Anyway, the thing that I have kind of concluded for us, at least internally, is that I really think it has to do with helping people— you know, if you said, “what is the job that someone’s trying to do?” I think everyone’s trying to make the smartest financial decisions they can make in all areas of their financial life as quickly as possible. So they’re trying to like— they want to make these smart decisions in all these areas as quickly as possible, you know? And they don’t want to leave anything out. That’s why I’m saying all areas. They don’t want to just make smart financial decisions, right? The job to be done isn’t like, “invest my money” necessarily. That’s what Ulwick will call a related job. And there are actually hundreds of related jobs in financial planning; that’s the scary part about it. And that’s why people are saying, “man, I just don’t know where to begin.” If you go download— the last couple of weeks, I have downloaded probably like fifteen financial planning apps and become customers of all these apps. So, from Betterment to Wealthfront to Robinhood to Acorns… I’m a customer to Personal Capital… like, I’m just trying to understand how these tools are approaching the marketplace and how they are trying to—

Ryan Isaac: How they view the main problem that people want to have solved. Yeah.

Reese Harper: Mhmm. And what I’m finding is that they’re tackling a lot of related jobs, right? They’re tackling how to invest money in a cheap index fund, or there apps like Policygenius that are trying to tackle which life insurance policy to pick and how to track it. There are a lot of apps that are trying to tackle one of these related jobs. And the problem, still, becomes, look. You end up putting the core functional job of making smart financial decisions, in all areas, you’re putting that back on the client! And it’s hard to be that person to say, “well I’m supposed to be the one that handles all the related jobs. I’ve gotta handle the legal, the tax, the life insurance, the investments. I’ve gotta handle my budgeting and my tax forecasting. I’ve gotta look at my kids’ college plans. I’ve gotta look at my disability insurance.” There are literally hundreds of related jobs. And the jobs aren’t just the ones you’d think they might be. I mean, it’s not just debt and insurance and retirement plans.

Ryan Isaac: Well I mean, even if you just took, “help me figure out my debt.” I mean, how many jobs—

Reese Harper: Well like, jobs are as granular as, “what are my interest rates,” right? That’s a job!

Ryan Isaac: “Is there a prepayment penalty on that loan?”

Reese Harper: Yeah, each of my loans, I have to figure out if there are prepayment penalties on them.

Ryan Isaac: “Is there a balloon payment at the end? Is it a variable or fixed?”

Reese Harper: Yeah! So if you think about the things that Ryan is describing here, the things you’re asking about, they’re more data collection. And all of these jobs, they don’t follow perfectly this framework, but they’re close, okay? They follow this kind of general framework. The first frame of the job map is like, organization. So it’s like, collecting data. Gathering information.

Ryan Isaac: Which, in and of itself is just a time-consuming— and the one issue that every successful dentist will have in common is a lack of time eventually. And if you’re saying that’s the foundation for hundreds of jobs that I have to get done, and then that’s the one problem successful dentists have in common is time (laughs)…

Reese Harper: Yeah. And it really is time-consuming. And it’s not only time-consuming, but it actually requires some specialty knowledge to know what data to collect. So if you want, just say like, my loans— okay. To give you some context, we have to collect the data and organize it, and then we have to analyze the data—

Ryan Isaac: And just by the way, collecting the data, that could be like hours worth of phone calls to a bank, or email exchanges.

Reese Harper: And the reason we’re collecting it is because we’re going to analyze it, okay? But if you don’t have the right data collected, you can’t analyze it. So it’s like, if I don’t have the in-force ledger on the cash value life insurance policy with surrender values, and three possible outcomes for what I might want to do once I want to start analyzing it, then the whole process of calling and getting the in-force ledger was a waste of time, because I have to go back to them and get it again! And so, it makes people just quit. If I was just going to simplify it for you, I’d be like organize, analyze, decide, and then act, or implement.

Ryan Isaac: Okay. Four steps.

Reese Harper: There’s actually a few granular steps in there, but that would be big picture. Most jobs could follow those steps.

Ryan Isaac: Organize, analyze, decide what to do with it, then act on it.

Reese Harper: And all of those require different stuff. Like, collection of the data requires a lot of time and some specialty expertise, because you’re collecting information of, let’s say, profitability of the practice, or retirement accounts. I mean, I’m going to just list some of the jobs, okay? Here are just some of the jobs.

Ryan Isaac: Okay. I’ll just drink Red Bull while you talk.

Reese Harper: What retirement plan should I have this year? How much pre-tax or post-tax money should I save into different investment accounts? Which type of international developed markets index is best for this year? What percentage of my Roth IRA needs to go towards emerging countries this year given the change in the market? What amount of money should I save as a percentage of my income? Are my taxes too high for my level of income? Do I have to much debt for my income level? How much debt— like, these are the jobs that have to be done. What you want is these things Ulwick calls desired outcome statements. That’s what you want. So it’s like, “pay down my debt faster. Lower my interest rates.”

Ryan Isaac: There’s a hundred jobs in that (laughs).

Reese Harper: Yeah. Well, there’s like five jobs we have to do to make that desired outcome happen. And so in general, what you have in financial planning is not what you’re actually— what you’re getting right now from your current financial advisor is not this, because they’re not probably thinking about it this way.

Ryan Isaac: Okay, can I jump in? I want to say— because I think about this all the time— there are a lot of really smart people in our industry, a lot of smart advisors, and a lot of well-intentioned people, but it’s business model. Because you can have a really well-educated, experienced, well-intentioned person working in a bad business model. And the business model of our industry that is very young is not set up to do hundreds of little jobs and allocate expenses to that, because they don’t allocate revenue to that. There are no employees dedicated to those. There are no processes for that. Their entire revenue models are allocated towards product and a few ancillary things, right?

Reese Harper: It would be like if in a dental practice, there were no assistants, and there was no hygiene, and there was no front desk, and there was no—

Ryan Isaac: And you went around saying, “yeah, you’ll get hygiene, and you’ll get some x-rays,” and if you remembered to do it—

Reese Harper: Well, yeah. But really, the business is the dentist and one assistant, but you’re promising everything. You’re promising all of these jobs, right? You’re promising the x-rays. You’re promising a comprehensive oral health system. You’re saying, “I’m gonna give you comprehensive oral health.” That’s the core functional job. But it’s like, you’re not staffed up for that.

Ryan Isaac: “And I’ll make sure you stick to this routine,” but you don’t have any coordinators or front desk people.

Reese Harper: You have no front office, right? And that’s kind of what our industry looks like, you know? There really is like— we define a job as something very small. So like, it could be, “reach out to accountant and give accountant all the capital gains tax information this year for our client’s investment accounts.” Like, that’s a small job, but it’s one job that needs to be done.

Ryan Isaac: That an employee is actually dedicated and assigned to.

Reese Harper: I’m not saying this lightly. We have a spreadsheet right now of jobs that I really believe need to be done in today’s economy of like, what you have to do to address a financial plan, and we’re pushing 400 individual jobs right now on a spreadsheet. Now, we’re not currently servicing all of those jobs. We’re not currently able to service all of those jobs well, because we’re not staffed up to service all of them properly. Some of them might be things that we think other providers should be doing, you know, like things the accountant should do. Things the attorney should do. Things that the life insurance agent should be doing. Things that the homeowner’s agent should be doing.

Ryan Isaac: Which, we rely on them having the business models and processes to do it.

Reese Harper: Yeah. And we’re not saying that we need to handle all of those jobs, but these jobs— most of the time, the other service providers are not aware that they are jobs that they should be doing. They’re just kind of doing what you ask them to do.
Ryan Isaac: So these are all the 400 that flow into, “make better financial decisions and build net worth faster.”

Reese Harper: Yeah, I don’t think people care about that anymore, building their net worth faster. I mean they do, but—

Ryan Isaac: That’s not the outcome. The outcome is…

Reese Harper: They want to know that they’re making smart financial decisions, and I don’t think they relate to the word net worth, but we do. But wealth, I think they do. I think they do of, “have more money,” or “have more wealth.” We call it net worth, you know… anyway. I think my point was that these third parties that we’re interacting with, if you don’t have an advisor who’s aware of those jobs, then at least following up with all your other providers and your service providers and making sure all of those jobs are completed, then it falls on your plate. So, if your financial advisor is— let’s say he is only aware and responsible for like ten or twenty of the jobs, and they’re all related to your 401k or your investment accounts, and that’s the extent of the jobs that he’s owning, then you as the dentist are responsible for 380 of them. And that’s how it feels to people! That’s why they answer the question that way, like, “I don’t know where to go. I don’t know how to get started.” It’s because there are so many jobs on their plate that no one’s willing to take responsibility for and own that they’re just overwhelmed and like, “who could I possibly hire,” or “how can I possibly do all this stuff? Like, I don’t have the time and I don’t know what to do.” And I think that’s just because the industry is so young and so much in its infancy that I literally feel like for the first time, we’re defining in our own firm— like, there’s not precedent for this, so we’re defining what we think financial planning really should be.

Ryan Isaac: If there was, you’d probably save a little bit of payroll and your own time out of diving into this project (laughs).

Reese Harper: Well, opportunity is very big, and so it’s motivating as a business owner. Because you can see like, “no one has solved this problem yet.” And so, I think it’s just important to remember that if you’re not— like, these jobs are on your plate unless someone else is owning them, right? And there are a lot of them. We don’t have time to go through all of them today, but there are literally hundreds, and that’s why it feels stressful. That’s why it feels overwhelming. And some of them are really small, right? Like, “estimate the value of my practice,” right? Or “estimate the value of my real estate.”

Ryan Isaac: Or “check to make sure I’m max funded at a certain retirement plan. That I hit the limit.”

Reese Harper: Yep. “Increase my HSA contribution. Check my tax rate, and make sure I got all my deductions.” I mean, there’s a lot of little jobs, and they’re hard to get done. And I’m not saying we’re doing them perfectly. I just think we’re aware of the problem, which is the first step, and most financial advisors actually— and this is why it goes back to what I was saying with this research on these apps. Like, I’m going to Betterment and Wealthfront, and I’m reading their value proposition as I’m signing up as a customer. It’s like, “finally a financial plan plan that handles your life at a low cost. No commissions and fees” or something like that. And I’m just like, you guys are handling like four of the related jobs, and you’re calling it a financial plan! (laughs) it’s like, holy Hannah! And Policygenius is doing the same thing! You know? Tax software is doing the same thing, and Acorns is doing the same thing.

Ryan Isaac: “Finally! A financial plan under one roof in one app!”

Reese Harper: (laughs) it’s like, “finally! See all your accounts in one place.” And I’m like, but you’re missing like 80% of the accounts! There’s no real estate here. There’s no business values. There’s no debts. There’s no business accounts. There’s no— I can’t put anything manual in! So, if it’s not a live link, then it’s not a real thing? And they’re calculating my net worth for me sometimes!

Ryan Isaac: This goes back to the issue that there is no defined problem.

Reese Harper: Well it’s because they’re basing it off their customers’ feedback, the ones who are giving them feedback. I’m just saying, a dentist specifically has a much much more complex— like, the reason there are 400 jobs in our firm for a dentist is very— I mean, there’s not 400 jobs for everyone. But dentists are one of the more complicated consumers in the economy, and they have a lot more related jobs that they’re dealing with, and so consequently, their plan becomes much more complex. It doesn’t mean that the average American won’t get to the point to where they feel some of the related pain or most of the related pain, but they would have to be in a later stage in their life.

Ryan Isaac: There’s no way. If you’re telling me in the process that we’re trying to organize for people that there are 400 related jobs, how many related jobs exist by owning a dental practice? Is it like 4,000? I mean, running a business with 30 people in it?

Reese Harper: Yeah, owning a business does change the scope of it, and every occupation has a few jobs that are very specific to it. So, that’s kind of my final point. You can’t really solve the financial planning problem generically. There are too many jobs that are specific to an occupation that really are unique. And the job map of how you would solve that job that is unique to that occupation, it won’t be the same for a general contractor as it would be for a dentist. Even the same job! Like, even if you’re saying, “well, both of these people want to have an updated revocable trust or an updated estate plan for their family.” Well the job map for how you’d accomplish that for a dentist versus a general contractor would be very different! And that’s just because of their schedule, their lifestyle, their asset mix, of—

Ryan Isaac: The entity structure, and the ownership of things—

Reese Harper: Their average net worth, the asset ownership, and the liability that they carry at different entity levels… it just would be different. And so, when you go in to build these job maps, you can’t actually build job maps generically.

Ryan Isaac: And I know for a fact that a job map will change between— let’s take two dentists that earn the exact same amount of money, maybe even have the same net worth, but one is an employee of a DSO and one owns the DSO or is a partial owner in a practice or whatever. Those are different.

Reese Harper: They’re different people. And so in our firm, we effectively service a few different types of people, mostly because associates and employees end up sometimes becoming owners or wanting to be owners, and so they graduate from an associate model to an owner’s model, and some owners go from owning one or two locations to owning ten or more. Or going from a negative net worth to a very high positive net worth. And so, because we know the occupations in that spectrum, we can kind of build personas, build service models to each of those occupations that have different jobs and job maps and figure out how to accomplish that. But I’m just saying, there’s an academic theory behind this that supports how you would build a real business and a real service model, and in most cases what’s happening is, people are expecting to get something from their financial planner that they’re just not going to get.

Ryan Isaac: Well, okay. And on that note, I think this is what is typically happening. I see this a lot when a new client hires us, and they’re leaving another person. It could be an insurance agent that they’ve just worked closely with. It could be a 401k provider. It could be an independent financial advisor at another firm. The client leaves, and then they get the email when they say, “well, we can do all the stuff that you want done too. It can happen. We can do planning too.”

Reese Harper: So you mean, a client comes over to us and then their current advisor says, “well we can do all of that?”

Ryan Isaac: Yeah. “I checked out the company you’re hiring, and we can do that stuff too. And we don’t even charge for it.”

Reese Harper: (laughs) yeah, I get that a lot.

Ryan Isaac: I hear that all the time. And it’s crazy to think that— how? How is it possible that someone’s now going to— I mean, I just always think, well, it should have been being done already if it could be done, and you can’t say you don’t charge for it!

Reese Harper: What happens here— this is a whole different podcast episode, but when firms bill on assets under management, when they charge a percentage against your money, what that does is it— I’m not saying it’s a bad thing. We charge that way. That’s a whole other discussion. But most firms that charge that way, they don’t actually have different service models for different types of people. So, for example, you could have $100,000 with a firm, or you could have $1,000,000, and the deliverable that you’re going to get is the same. Like, “it doesn’t matter what amount of money you have, we’re going to do the same thing for you. We’re gonna meet, we’re gonna talk, I’ll give you reviews—”

Ryan Isaac: “Once a year, we’ll meet and I’ll give you an economic forecast, talk about your—”

Reese Harper: Yeah, I mean, that would be the worst case. Those are the ones you and me hate to see. But the best case would be, they’re going to commit to doing some financial planning! They’re going to do it on a quarterly basis, or— it will be sit down and talk and react and sort of make a plan.

Ryan Isaac: Work gets done when we meet.

Reese Harper: And then, that’s kind of what we’ll do: we’ll meet, and talk, and work through things. And they’ll commit to this same thing, whether someone has a hundred thousand, or a million, or two million, or three. And the truth is that each of these clients are paying a very different amount of money. I mean, someone with $1,000,000 is paying $10,000 a year, and someone with $100,000 is paying $1,000 a year! But the firm is kind of going, “well, we’re just going to commit to the same service to everyone, and it will kind of work its way out.” Well the problem with that is the people with a lot of money don’t get the service they’re paying for, and the people who don’t have a lot of money end up getting promised things that they don’t end up getting. Because the firm will end up gravitating and end up spending its time with the people with the most money, and then not working with the people who are starting out who don’t have a lot. I mean that’s just the nature of it, because they’ll look at how much money they’re making at some point and they’ll be like, “man. Okay, I have two people to call back. One is paying me four times the amount of money as the other person.” And so, what you have to kind of do in order to service people properly, if you’re going to be in an assets under management model is you have to say, “we’re going to commit to these levels of service for people based on how much they have.” That’s not how we do it. We actually charge a monthly fee that allows us to sort of deliver the appropriate level of service to each client and not feel like we’re— and then we drop that monthly fee as people hit a certain amount of money. And so, that way we can have the revenue we need to dedicate the time we need to each person, and no one feels like they’re getting short changed or they’re not getting as much attention. And it’s because they’re paying for the attention! Like, they’re paying for the service.

Ryan Isaac: Well that’s my point. And maybe that’s kind of a good place to recap is, we hear this a lot in the industry where— it’s kind of like you said. The dentist promising this comprehensive oral health plan, but they don’t actually have a hygienist, or any assistants, or any coordinators or front desk, you know?

Reese Harper: Or they only get paid when they’re doing crowns.

Ryan Isaac: Or they don’t have the technology in the office to even deliver it, you know? And you hear that a lot from advisors in our industry. And what it is is it’s probably a smart person who has good intentions, but it’s a process in someone’s head where their just thinking, “well look. Let’s just have more meetings, and we’ll do some stuff in the meetings.” But it’s just like any business. If there is not process, if there are no employees dedicated to specific jobs in the process, if there’s not revenue dedicated to those specific jobs in the process and expenses allocated at all, it’s not going to happen. It’s just not.

Reese Harper: Yeah. It will happen for like a year for them to save the relationship, and then you’ll notice that the service will just decline.

Ryan Isaac: Like any business, it’s not going to continue.

Reese Harper: I think it’s really important to know where you fit in your financial advisor’s business model. Just know where you fit! Like, do they have a model for you? Do they have a service model for you?

Ryan Isaac: And are you both on the same page about what it even means to do a plan or give advice?

Reese Harper: Anyway, lots to think about there. But I think the critical takeaway that I would like to leave people with is, financial planning is a bunch of little jobs that have job maps that have to be followed to get them done, and your financial advisor should be doing a lot of those behind the scenes. Not bothering you, not having to come to you for everything.

Ryan Isaac: Not during a meeting. Most of those should happen outside of a meeting.

Reese Harper: Most of those, they should be doing on their own, independent of you, getting stuff done without you having to micromanage it. And it that’s happening, you’re getting a tremendous amount of value. I mean, what you’re getting for what you’re paying for is like, night and day different. If you could see the number of hours we dedicate to each client doing these small jobs and not bothering our clients with half of the stuff that we’re doing, it just really is a big value. Because it frees up a ton of time, and it relieves financial anxiety, and it helps people know that they’re making smart financial decisions in all areas of their financial life.

Ryan Isaac: Man, you’re bringing up another really good point, too. You’re talking about all the proactive work that’s getting done, you know? Dozens and dozens of hours, and multiple people working on hundreds of jobs. There’s an entire reactive side to giving financial advice that can only be done effectively if the proactive stuff is being done. So I always think, how many questions in a year will a dentist have for a financial advisor? From little stuff like, “hey, remind me what the HSA max is again?” to we need to go research something for five hours and report back, because it’s a bigger project, and there are multiple phone calls. I mean, there’s probably like a dozen of those a year? I mean, how many questions do you think?

Reese Harper: Yeah, at least like twelve to fifteen a year.

Ryan Isaac: It just seems like once a month, someone’s going to have a small to large question. And the only way to really help in those scenarios to do that reactive work but to do it effectively is if you have a lot of organization and a lot of data that has been proactively collected and analyzed and decided upon throughout the whole year, you know? And that’s like the entire other side of delivering financial advice that gets overlooked. The proactive process doesn’t happen for most people in a lot of business models. But the reactive side, which typically does happen, is only really valuable if the other stuff has been done correctly. Well, the takeaway then is that we are in a baby industry. We’re still learning how to walk and crawl and say words. Is that fair? Feed ourselves and not mess ourselves.

Reese Harper: Yes! Since the 70s. We’ve only had like— we haven’t even had one generation.

Ryan Isaac: We’re working on it. If you have some questions, we would love to chat with you. You can get your questions answered in a few different ways. One thing that has been really cool lately is our new Facebook group. You just go to dentistadvisors.com/group, and we have this Facebook group with a lot of great questions, Q&A, surveys, and a lot of good discussions happening there. Go in and post a question for us! We’ll answer it usually the same day, and it’s kind of fun to have that discussion. You can call us at 833-DDSPLAN, you can text us on that number if you have any questions, or you can just go to our website and schedule a visit on our calendar— schedule a consultation over the phone on our calendar— any time that works for you. So dentistadvisors.com, there’s a big button that says “Book Free Consultation”, and we’d love to talk to you! So, thanks again for listening.

Reese Harper: Carry on!

Advisors, Getting Organized