00:00:00:01 - 00:00:20:05
Speaker 1
Do I really need a financial advisor if I can do it myself? You know, if you just want to own this S&P 500, then no, you don't need a financial advisor. But if you need financial planning, if you need the ability to say, let me look at the whole picture. Like one of my favorite things is that people say to me, I'm really good at picking stocks, really bad at knowing when to sell them.
00:00:20:06 - 00:00:22:20
Speaker 1
Whereas advisors, we get a broader view.
00:00:22:21 - 00:00:29:09
Speaker 2
We get to see the the war stories, things going wrong. You know, when our clients take on a little bit too much risk.
00:00:29:10 - 00:00:51:03
Speaker 1
Gentleman says, I don't know what my performance was. He says, you don't know. He goes, I don't know and I don't care because we met our goals. You can still be aggressive and still be doing some things you want to do, but you've still got that objective person that says, I've got experience.
00:00:51:05 - 00:00:59:08
Speaker 2
Hi, welcome to another episode of The Financial Commute. Eric and I are sitting in for Megan and Chris as the new co-hosts of The Financial Commute.
00:00:59:09 - 00:01:01:09
Speaker 1
They just. They just don't know it. Yeah, right.
00:01:01:11 - 00:01:18:22
Speaker 2
So we're secretly getting in there. But thanks for joining us today. We're having a conversation that I think is a really popular and poignant question, which is, do I really need a financial advisor if I can do it myself? And I like to think that this is something that is generational, I like to think that it's something that's new.
00:01:19:01 - 00:01:24:21
Speaker 2
You've been around a lot longer than I have in this industry, and this is not a new phenomenon from what you've told me.
00:01:24:22 - 00:01:33:09
Speaker 1
No it's not. But in, in the in the manner in which Megan would deal with that, she'd say the answer is yes. Thank you very much. That's the end of the commute. And let's move on to the next.
00:01:33:10 - 00:01:35:10
Speaker 2
Yes, you do need a financial advisor.
00:01:35:12 - 00:01:58:02
Speaker 1
But you know, a lot depends on what you're trying to do. If you just want to own this S&P 500, then no, you don't need a financial advisor. But if you need financial planning, if you need planning help, if you need the ability to say, let me look at the whole picture. Like one of my favorite things is that people say to me, I'm really good at picking stocks, really bad at knowing when to sell them, right?
00:01:58:03 - 00:01:59:09
Speaker 2
So you have to be right twice.
00:01:59:14 - 00:02:07:22
Speaker 1
Exactly. Are right. At least that once, right? Good. So you do need somebody if, if unless this is all you do.
00:02:07:23 - 00:02:35:01
Speaker 2
Right. And this is obviously something you and I are financial advisors. We see an immense amount of value in the profession and the care that we have for our clients. But I think you hit the head on the nail of when someone asks that question, do I really need a financial advisor if I can do it myself? Their version of if I can do it myself is typically if I can just buy low expense ratio index funds and the SP 500 history tells me that I'm going to meet my goals if I do that in a systematic way.
00:02:35:01 - 00:02:47:08
Speaker 2
And there's a lot of truth to that, at least backward looking. I want to dig into how that mindset today can set you up, potentially for a little bit of disappointment, right?
00:02:47:09 - 00:03:07:18
Speaker 1
And let's pretend it's now 2008. And you said, wow, look how well I'm doing. Everything's been going great. And all of a sudden the market's down 40%. What are you going to do then? You're going to rely upon yourself. Are you going to panic or what will you do. And unfortunately, people tend to act with emotions when it comes to their financial planning.
00:03:07:18 - 00:03:18:07
Speaker 1
And the idea behind an advisor is that we're trying to be objective at it. We're looking at the big picture and trying to use all of our experience to be able to say, this is how it might fit in for you, right?
00:03:18:08 - 00:03:37:07
Speaker 2
I hear that a lot from people. It's like, okay, well, if the market crashes like it did in oh eight, which was 59% from top to bottom, then I'll just buy the dip. I think what a lot of at least younger investors don't remember is that a lot of people lost their jobs. They didn't have the income or the cash or the liquidity with which to buy the dip.
00:03:37:08 - 00:04:05:23
Speaker 2
And there's a problem innate to that of when things go really wrong. And a lot of young investors have no memory of that. Sometimes your plan goes out the window, and now you're just 50% poorer than you were before that market crash happened. And so as financial advisors, one thing we try to do is educate about the possibilities of that and design portfolios based on clients goals, not necessarily on, well, these are the total returns that you can aim for, and that's what matters the most.
00:04:06:00 - 00:04:24:10
Speaker 2
It's achieving your goals is what matters the most. And one of the things that I like to say is the amount of risk that you take should be measured by what will you lose if you are wrong? That's the determination of risk. It's not higher risk, high reward, although there's truth to that. What will you lose if you're wrong?
00:04:24:10 - 00:04:32:09
Speaker 2
And if you have to work ten extra years because you were wrong about your investment, your investment strategy, that's a lot to lose.
00:04:32:10 - 00:04:52:16
Speaker 1
That is. And, you know, you referring back to the plan, I think the fighter, Mike Tyson, is the one who said everyone has a plan til they get punched in the mouth. But, you know, you talk about the goals. Yes. When you were young, you can say, I can afford to. I can afford to make a mistake. When you were now in your 60s and 70s going like, I really don't have time to go back and make it up.
00:04:52:16 - 00:05:08:19
Speaker 1
And that's why I love to tell the story about when I first got into this business, that it was a financial planner who was going around to a retirement home, and it was during the, you know, the roaring end of the 90s, and everybody's making money. And it was going like, how much? How much? What was your performance, Lester?
00:05:08:19 - 00:05:24:05
Speaker 1
What was your performance? He finally gets to an older gentleman and the gentleman says, I don't know what my performance was. He says, you don't know. He goes, why don't you know? He goes, I don't know, and I don't care. Well, why don't you care? He said, because we met our goals as long as we met our goals.
00:05:24:06 - 00:05:27:08
Speaker 1
That's all that matters. It's a material. What the performance number was.
00:05:27:09 - 00:05:51:03
Speaker 2
That's amazing. I've known other people who did not have that story. In the late 90s and early 2000, where they were aggressively invested and they were doing the things as investors that got them very wealthy by the end of the 1990s, because it was considered kind of a new paradigm at the time. Oh, it's a new paradigm. Very aggressive investing was rewarded heavily, as I would say it is today.
00:05:51:03 - 00:06:12:20
Speaker 2
But then they lost millions and millions of dollars on the back end of that 1990s boom. And so, again, younger investors, I know the people who I talk to who are DIYers, they don't have that memory. And they and they almost don't have that belief. I find it to be even a pseudo religious approach. You know, it's like the market will always come back.
00:06:12:21 - 00:06:34:16
Speaker 2
It's it's almost like blind faith. And even though that's true. Historically, the market has always come back a ten year period where the market isn't doing what you think of coming back is a brutal amount of time to have lost purchasing power. It's underperforming inflation. And we've seen this happen between 2000 and 20 13 or 1968 and 1982.
00:06:34:16 - 00:06:38:09
Speaker 2
But a lot of investors in my age have no memory of this. It's just post 2009.
00:06:38:10 - 00:06:59:11
Speaker 1
Not only did not have any memory, they have no experience with it whatsoever. Right. And we don't know what we don't know. And that always worries me for the younger investor. And again, if you're 25 years old and you're throwing money in and saying, I've got plenty of time, I get it. But back in the late 90s again, I had clients come to us and said, yeah, everything was going so great.
00:06:59:11 - 00:07:16:07
Speaker 1
So we mortgaged our house and we put all that money into the market and now it's gone. And again, they didn't have time to make it up. So experience is wonderful, but the younger people just need to know that. You got to look at that whole time frame thing as well.
00:07:16:09 - 00:07:37:23
Speaker 2
I think that that sent a chill down my spine hearing that, because I'm like, that is such an unwise thing to do. But I know from reading certain reports that right now it's not necessarily happening a lot in the US, but a lot of foreign investors are taking on an immense amount of leverage to invest in semiconductor stocks and the Korean market.
00:07:37:23 - 00:07:53:22
Speaker 2
And, and, you know, the semiconductor market in general. And so this is happening today, even if maybe my neighbors aren't doing it, there's a lot of leverage in the system. People are borrowing a lot of money to invest in stocks. And that could set up a pretty a pretty rough reversal of that.
00:07:53:22 - 00:08:02:22
Speaker 1
It could be pretty ugly. I mean, with all that leverage and all of a sudden all the margin calls happen or however it works, and that's when things get really bad in the marketplace.
00:08:02:23 - 00:08:24:20
Speaker 2
You know, I, I think what you said you don't know what you don't know is I think the thing that I want people to take away, most of the I think about it, I compare it to personal training, personal fitness. And so I think that I know how to lift weights. I think I know how to diet, but I was lifting a couple of weeks ago and I was doing relatively something relatively aggressive.
00:08:24:20 - 00:08:42:02
Speaker 2
I was squatting and and my personal trainer was like, hey, let's stop, because I can see that you're favoring your left leg right now. And so you're a little bit off posture. I was seeing myself in the mirror. I could not tell that this was happening, but what if I didn't have that person advising me who was the expert?
00:08:42:02 - 00:09:04:12
Speaker 2
And I tweaked my back? Herniated a disc. These are these are mistakes that you really don't want to make. And is it worth it to just be that aggressive in your investing? If something is going to go a little bit wrong and turn against you, you know, since 2009, buying triple leveraged QQ ETF call options is the best thing that you could have done right.
00:09:04:13 - 00:09:16:17
Speaker 2
But that could reverse against you in a new environment. And so people have a lot of recency bias like, oh, what has worked for me in the last 15 or 20 years is automatically going to continue. It's again that blind faith.
00:09:16:18 - 00:09:33:10
Speaker 1
Right. And you got to remember the pendulum always swings too far each way. Right. So you had this wonderful run up on this time when you said you could done all the leveraged ETFs, and it's been great, but then all of a sudden things kind of swing back the other way and you kind of go like what happened?
00:09:33:11 - 00:09:34:19
Speaker 2
Yeah, it's violent.
00:09:34:21 - 00:09:57:01
Speaker 1
This this wasn't good. But that's why having an objective person as your coach, as your personal trainer and saying there's somebody here, it's like, that's why we have the modern offering at Morton Wealth. It's because you can still be aggressive. You can still be doing some things you want to do, but you've still got that objective person that says, I've got experience.
00:09:57:06 - 00:10:02:02
Speaker 1
Let me, let me help give you some of that experience so that it helps make you better for the long run, right?
00:10:02:03 - 00:10:23:13
Speaker 2
And again, you do it yourself. Is there probably making a lot of money in this time? They're probably quite successful as investors. But there's also a feedback loop problem. You know, sometimes when you're a dire, you take bigger risks than you should and you lose money. Guess what you don't do when that happens. You don't tell your friends about it.
00:10:23:15 - 00:10:33:12
Speaker 2
But when you make a lot of money, you tell all of your friends. And so when you're sitting around the, you know, the bars and the coffee shops and talking to your friends about their investment returns, you're only hearing the highlight reels.
00:10:33:12 - 00:10:47:23
Speaker 1
Well, that's a typical that's the typical gambler syndrome, right? That the gambler always tells you when they had the big winnings, but you rarely hear about them, though I do know one that is very honest about his winnings and losing. But otherwise you never hear about the losing, right?
00:10:48:00 - 00:11:10:04
Speaker 2
Whereas advisors, we get a broader view. We get to see the the war stories, things going wrong. You know, when our clients take on a little bit too much risk. And that's a big reason why, as advisors, we try to caution our clients against outsized risk. You have to take risk as an investor, but you shouldn't take more risk than you need to take in order to achieve your goals in a predictable manner.
00:11:10:04 - 00:11:11:17
Speaker 2
Why? Why would you do it right?
00:11:11:18 - 00:11:28:23
Speaker 1
I like to harken it back. My father may rest in peace, was very smart, and he always used to say, look at the downside risk. If you can live with the downside risk. If I'm 25 years old and I going all in on stocks and I can lose it now over the next 5 or 10 years, I could probably live with that risk because I've got plenty of time.
00:11:28:23 - 00:11:38:20
Speaker 1
But if I'm 60 years old or 70 years old, I don't know if I can live with that risk of losing a lot of money. So you've got to be able to look at the risk and can you live with it?
00:11:38:21 - 00:11:48:21
Speaker 2
That's right. Lorne Morton, who I never got the pleasure of meeting, but you worked closely with, he had a phrase that was also a nearly religious statement.
00:11:48:22 - 00:12:09:13
Speaker 1
Yes. It was. Yeah. His theory was thou shalt preserve capital. And he said, everybody can make some money in a good markets. That's, that's going to happen for everybody because but it's those down markets where if, if you can prevent yourself from losing money, you know, try to stay even at best, then you have that chance of doing better in the long run.
00:12:09:14 - 00:12:30:16
Speaker 2
That's exactly right. And it sounds like he's rhyming with Warren Buffett, whose number one rule of investing is don't lose money. Number two, rule of investing. Don't forget about rule number one. It's very important. And just mathematically, if you think about it, if you start with $100 and you lose 20%, 100 turns into 80, well, you need a 25% return to get back to 100, right?
00:12:30:17 - 00:13:00:19
Speaker 2
The numbers on the downside are harsher than the numbers on the upside, always. And so I think we believe quite firmly in lawns theory of thou shalt preserve capital. Downside protection is something that we encourage for if you're going to invest money, you might as well invested in a way that gives you some some sort of protection. On the downside, which is a different strategy than the typical blind faith by the stock market, low index ETFs, even though that has worked very well, we acknowledge that.
00:13:00:19 - 00:13:13:04
Speaker 2
And we do have a lot of stock exposure for our clients. We still want them to have a portion of their portfolios that's going to protect against that, that that tide going back out and going against them.
00:13:13:05 - 00:13:32:13
Speaker 1
And it gets back to our illustrious CEOs position of, you want to have a resilient portfolio, right? Want to build a better boat. Never hurts to have a little bit put on for a rainy day over here that says when the markets are really bad, these things are going to do okay. And that kind of keeps me in the game during the bad times too, right?
00:13:32:14 - 00:13:54:15
Speaker 2
And I've experienced this as an advisor. You know, 2025 was actually a pretty steep correction with the tariffs happening. I got zero phone calls from clients, which was astounding to me. Our clients weren't, at least in my experience, weren't worried, even though the markets were down 20% in six weeks. That's an amazing amount of peace to be able to offer clients.
00:13:54:15 - 00:14:19:01
Speaker 2
And I think, you know, one of the things that concerns me is that a typical portfolio, if you have, say, a target date fund in your 401, which all that is is a certain portion of your investments are in US and international stocks, and a certain portion of your investments are in US international bonds. And as you get older or closer to your retirement age, you get less stock exposure and more bond exposure.
00:14:19:07 - 00:14:41:13
Speaker 2
Those target date funds have near retirees, people who are ten years out of retirement at all time. High stock exposure, right? It's really something else. And the problem is, is that when bonds are performing so poorly, like over the last five years, US bonds have returned 0% total returns. International bonds have even been worse. They're negative over the last five years.
00:14:41:14 - 00:14:49:15
Speaker 2
The only other place for most people to go is into the stock market. And so there's this there's this heavy weighting into the stock market because that's been the only tool.
00:14:49:15 - 00:14:56:15
Speaker 1
That we've also got all those for one case where everybody just mindlessly is just putting money out of their check, and it's automatically just going into the stock market.
00:14:56:16 - 00:14:57:08
Speaker 2
That's exactly right.
00:14:57:08 - 00:15:03:15
Speaker 1
So you got to think about it. But don't fool yourself though. Nobody was calling you because they were just afraid to hear whatever the news.
00:15:03:17 - 00:15:19:23
Speaker 2
That's right. That's probably true. Now people people were hopefully at peace, hopefully. But any other war stories that you that you want to share with us from the from days gone by, I think you shared with me something about why would I invest in something that's earning 12% when I could?
00:15:20:00 - 00:15:28:10
Speaker 1
Oh, that was an absolute during the late 90s and early 2000, is that people would say, I can I can make 10% in AOL in a week.
00:15:28:11 - 00:15:28:22
Speaker 2
In a week.
00:15:28:22 - 00:15:56:02
Speaker 1
And our partner lawn, our founder was, was buying a lot of preferred rights because preferred real estate investment trusts and because they had been beaten up so much, the yields on them were 12, 14, 16% and the potential appreciation. So it wasn't just let's just keep mindlessly putting money into from my 401 into something. It was like, let's look where we can have an opportunity to make additional money.
00:15:56:02 - 00:16:02:07
Speaker 1
So we were making the the potential upside and we were making the income on it as well. It was great.
00:16:02:08 - 00:16:28:07
Speaker 2
That's that's an amazing example because if you had been in in 2000, if you had been solely in the S&P 500, then the next two years would have seen a 50% downturn for you. But instead, if you had a portion of it in this investment that you're talking about getting 12 to 16% yield plus market appreciation on it as opposed to being in a 50% downturn, what a great time to recommend that investment to clients, right?
00:16:28:07 - 00:16:45:16
Speaker 1
And again, that's why you have an advisor there looking at the whole picture. We're not just going straight down with just stocks or just stocks and bonds. We're looking at the whole world of investing. And when you've got that opportunity, you have a chance of enhancing and building a better, more resilient portfolio, right.
00:16:45:17 - 00:17:04:13
Speaker 2
And to the question of do I really need an advisor if I can do it myself? I think the truth is you can't do alternative investments yourself. Most people can't. Correct. If you're going outside of the world of stocks and bonds, doing it yourself is, I think, a pretty dangerous game to play. You really do need some history and expertise to do that.
00:17:04:13 - 00:17:10:09
Speaker 2
And so that's what we offer our clients proud of it. We're happy about it. And I think the clients are as well.
00:17:10:10 - 00:17:21:13
Speaker 1
Absolutely. And we're and as a fiduciary are a big thing is that we are looking at everything on on their behalf because we have no commission products. It makes it a lot easier to be really objective.
00:17:21:14 - 00:17:31:06
Speaker 2
Right? It's the same for us if you're invested in stocks or some private REIT or some real estate fund, it's all the same to us. It's just whatever's best for the client is what we care about.
00:17:31:07 - 00:17:35:09
Speaker 1
So listen to your own cleric. Make sure you get a financial advisor.
00:17:35:11 - 00:17:55:14
Speaker 2
Thank you for having this conversation. It really is so valuable to talk to someone who's been around the block a couple of times because, again, a lot of us, a lot of us people my age really didn't start investing until after the great financial crisis or after Covid. I didn't start investing really actively or getting to know investments until after Covid happened.
00:17:55:14 - 00:17:57:14
Speaker 2
I was completely knowledgeable before that.
00:17:57:15 - 00:18:00:03
Speaker 1
So you're saying I'm mature because I'm old?
00:18:00:04 - 00:18:02:17
Speaker 2
I'm saying you're wise because your experience.
00:18:02:19 - 00:18:05:20
Speaker 1
Well, we'll just leave it at that place.
00:18:05:21 - 00:18:14:22
Speaker 2
Thanks a lot. Thank you for joining us. I hope you had a valuable conversation with us today. And let us know in the comments if you have any questions or things to add to the conversation.
