- (1:45) - From Big Bank to Client-Centered
- (6:30) - Planning For Retirement: Where to Start
- (15:20) - Picking the Right Advisor For Your Nest Egg
- (20:30) - Financial Fast Food: Don’t Let It Tempt You!
- (26:15) - Your Investment Journey: What To Expect Along The Ride
- (33:10) - What Does A Financial Fiduciary Do?
- (39:55) - How Emotions Get In Your Way
- (44:00) - Stress Free Money Book
- Email: Podcast@Zacks.com
- Archive: Mind Over Money
Welcome back to Mind Over Money. I'm Kevin Cook, your field guide and story teller for the fascinating arena of behavioral economics.
You know I love to talk about the psychology of trading as one of the hardest games on the planet to win. The topic allows so many angles from which to view human decision-making, biases and emotional interference. The high-speed nature of short-term trading offers us unlimited opportunities to shoot ourselves in the foot and make our money run away.
But a slower game is equally fascinating, and probably more important. And that money game is the one that should take place over decades. I'm talking of course about investing for your future security in retirement, however you define that.
While day trading might be concerned with making 4 or 5 decisions every day, or hour, long-term investing is about the handful of crucial decisions you might make in a year.
But those are the moves that can mean the difference between peace of mind and big worries a few decades from now. And since average life spans are generally extending, the planning that one does in their working years can have massive impacts on their quality of life in their 80s and 90s, if they are so fortunate.
So I was very excited to learn of a new book launching this week titled Stress Free Money: Overcome These Seven Obstacles to Find Financial Freedom.
It was written by Chad Willardson, a retirement planning specialist and the founder and president of Pacific Capital in sunny Orange County.
I met Chad through a recent Mind Over Money guest, Benjamin Hardy, who joined us in June for the launch of his latest book Personality Isn't Permanent.
Before founding Pacific Capital, Chad spent nine years working for Merrill Lynch Wealth Management and ranked in the top 2% of advisors nationally.
On his LinkedIn page, Chad says "I help entrepreneurs & families achieve goals, grow wealth & avoid regrets with money." A Certified Financial Fiduciary, he is also the Creator of The Financial Life Inspection, which I'll be asking him about.
The Big Obstacles to Financial Freedom
Stress Free Money launches September 29, but I got a preview copy ahead of our interview and found it really powerful as a short, easy to read handbook for anyone with questions about their financial journey.
In the podcast, we dive into some of the chapters that explain where most investors go wrong with major decisions and common habits that dilute, and sometimes destroy, their retirement nest eggs.
Many of the obstacles involve getting financial advice from all the wrong places. Willardson operates his firm as a certified financial fiduciary to help clients make savings and investing plans that fit their life goals. Then he charges them a flat fee for this planning and execution work.
In the interview, I ask him to explain how the fee-based advisor model differs from typical big firm wealth management. Basically, it boils down to whether or not the advisor is receiving compensation based on the financial products they sell, or if they are receiving commissions and "management" fees to use your money to make higher returns for themselves than you will ever receive.
Those models are ripe with conflicts of interest. These advisors may portray themselves as doing long-term planning work in your best interest, but if they sell you inferior investment products like variable annuities or they ship your savings off to other trading institutions with frequent and high fees, the conflicts become apparent.
A true fiduciary model is all about you, your money, and your goals. A fee-based advisor works for you alone to get the best financial outcomes according to your needs and goals.
Objective about your wealth creation and independent of conflicts, they don't lock your money up for years in products with high fees and low returns. The financial salespeople who sell such products as if they were some sort of guaranteed pension are not their friends, or yours.
A true financial fiduciary, with earned designations like CFP (Certified Financial Planner) or CRPC (Chartered Retirement Planning Counselor), makes a plan you can revisit with them as often as you like.
And if you decide that you don't like the plan, or the advisor, you can fire them any time you want and retain full control of your money, without any penalties or "surrender" fees.
I encourage you to check out Chad's powerful, 140-page handbook ASAP. As I say in our podcast, just one idea could be worth tens of thousands of dollars to you, even just a few years from now. Here's the link...
Stress Free Money Book
Chad and his team at Pacific Capital employ a proprietary process they call The Financial Life Inspection to help you discover where you are and where you're going. The book, full of real stories and jargon-free language, will give you an idea of how this becomes the foundation for your personalized financial plan and strategies.
More details on Chad's process in our interview, and coming up in this article.
Financial Fast Food
Chad's second "obstacle to financial freedom" uses this title, and when I ask him about it, we get into a great conversation about how investors get into trouble by listening too much to the financial news instead of their long-term plan.
Stock market volatility and economic storms are part of the playing field of investing for wealth appreciation. But when investors get frightened by the panics -- like 2008 or the recent Corona Crash -- they end up selling assets at fire-sale prices and then experience another private hurricane of emotions like regret, confusion, self-blame and, worst of all, more fear that makes them freeze.
In my view, market cycles and economic cycles are just detours on the most accessible and reliable wealth creation journey there is: investing for the long-term in the stocks of companies who are growing their sales and profits.
But just because investors hear that "the stock market has returned 10% annually" over the long-run, doesn't mean they use that knowledge to make better long-run decisions. In fact, it's sort of confusing to hear that truism when you just watched the market crash 30%.
The average return of 10% sounds like a "rainbows and unicorns" version of reality.
Stocks and The Long Run
But some investors can actually beat the averages over the long haul with a good plan. And one of the keys to believing you can and should aspire to that kind of wealth creation for your savings and your family is to understand how the stock market and the economy are connected, but different.
How is it that US economic growth can be only 2% and the stock market exceed that figure in many years?
First off, "the market" is often defined as the S&P 500 index. It is representative of the economy at large, but this capitalization-weighted index has grown to have a big concentration of technology companies -- think Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) , NVIDIA (NVDA - Free Report) , and Tesla (TSLA - Free Report) -- just like the Nasdaq market index.
Basically, you could say that the S&P exceeds GDP because it over-weights innovation and growth from the technology, internet and consumer sectors.
Second, I try to explain to investors how it is that investing in stocks -- with a good plan -- is almost guaranteed to grow wealth over the long-run with this simple formula:
Population Growth + Innovation + Productivity = Corporate Profit Growth and Wealth Creation
Yes, Federal Reserve monetary policy and Washington tax policy/regulations can be big tailwinds or headwinds. But over one or three economic cycles, there can be several different political administrations with changing winds of fortune.
Yet the formula above overrules those cyclical winds with the powerful secular drivers of technology innovation and population/productivity growth because tens of trillions of investment dollars are seeking to own a piece of those corporate profits.
And a good financial advisor who knows history can help you take advantage of these dynamics by harnessing them over many years.
If your financial plan can harness these long-term mega-forces, and you allow compounding to work its magic, you have a bright future ahead for your wealth creation journey.
Navigating the Storms -- And Preventable Mistakes
But we could all use a good coach, mentor, or counselor to help us navigate the occasional storms and detours. A certified financial fiduciary can often be the difference between a well-designed wealth creation plan and decades of wandering an investment wasteland, repeating the same mistakes.
Be sure to listen to the full episode with one such navigator, Chad Willardson, where we discuss a few more of his "seven obstacles." Just one of his insights -- like what families and entrepreneurs should look for when hiring a financial advisor -- could change your investing future.
Find his new book here... Stress Free Money: Overcome These Seven Obstacles to Find Financial Freedom
And if you want to explore the first steps in your journey with a certified financial fiduciary, take advantage of Pacific Capital's initial step in their process...
Your Goals Conversation
It's a free 45-minute exchange of questions, concerns, ideas, and a discussion of your financial goals.
But first, grab Chad's book and dive into a hearty meal of investing wisdom that could dramatically improve your future wealth potential... to dine anywhere you'd like.
Disclosure: I own NVDA shares for the Zacks TAZR Trader portfolio.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the Healthcare Innovators portfolio.