"Have a plan. Have goals. But, don’t just have goals and a plan, have a system that works for you. That might be creating an investment plan to begin with and following that investment plan. It might be automating your investments somehow through a robo-advisor, that might require you to hire an advisor. I think any of those options work as long as you have a plan and a system in place." - Daniel Lee
In this episode of GET READY!, I spoke with Daniel Lee, a fiduciary financial planner who is the head of Plancorp’s San Francisco office about the benefits of having an investment plan. Daniel discussed the components of an investment plan and what to keep in mind when reviewing your investment portfolio. We also discussed how people can incorporate socially and environmentally responsible investing into their strategy.
Bio: Daniel Lee, CFA®, CFP®, is a fiduciary financial planner dedicated to helping busy people make intelligent financial decisions. He is the head of Plancorp’s San Francisco office, a full-service wealth management company, and consults for BrightPlan, the first digital financial wellness solution certified for fiduciary excellence. Daniel is an award-winning personal finance instructor at UC Berkeley Extension and is a member of the CFA Society of San Francisco and the National Association of Personal Financial Advisors.
"Have a plan. Have goals. But, don’t just have goals and a plan, have a system that works for you. That might be creating an investment plan to begin with and following that investment plan. It might be automating your investments somehow through a robo-advisor, that might require you to hire an advisor. I think any of those options work as long as you have a plan and a system in place." - Daniel Lee
In this episode of GET READY!, I spoke with Daniel Lee, a fiduciary financial planner who is the head of Plancorp’s San Francisco office about the benefits of having an investment plan. Daniel discussed the components of an investment plan and what to keep in mind when reviewing your investment portfolio. We also discussed how people can incorporate socially and environmentally responsible investing into their strategy.
Bio: Daniel Lee, CFA®, CFP®, is a fiduciary financial planner dedicated to helping busy people make intelligent financial decisions. He is the head of Plancorp’s San Francisco office, a full-service wealth management company, and consults for BrightPlan, the first digital financial wellness solution certified for fiduciary excellence. Daniel is an award-winning personal finance instructor at UC Berkeley Extension and is a member of the CFA Society of San Francisco and the National Association of Personal Financial Advisors.
Welcome to the get ready with Tony Stewart podcast today. I'm pleased to be having Daniel Lee. Join me. Good morning, Daniel morning, Tony. So today we'll be discussing the get ready August financial to-do item, uh, re viewing your investment policy statement. Uh, let me tell you a little bit about Daniel before we get started. Daniel Lee is both a CFA charter financial analyst and chartered financial planner. When a fairy few people have both designations, uh, Daniel is a fiduciary financial planner dedicated to helping busy people make intelligent financial decisions. He is the head of plant core San Francisco office. Uh, plant core is a full service wealth management company and Daniel also consults for bright plan. The first digital financial wellness solution certified for fiduciary excellence. Uh, on top of that, Daniel is an award-winning personal finance instructor at UC Berkeley extension and as a member of the CFA society of San Francisco and in national association of personal financial advisors. So Daniel, um, can you tell us a little bit about what you do?
Speaker 2:Uh, yeah. Thank you for that introduction. I think you gave a pretty good outline, right? Uh, I, as you can see, I wear a few hats. I teach I'm a personal finance instructor at UC Berkeley extension. Um, I'm not currently a financial planner advisor with plank work. So I work with individual clients helping to manage their financial plan and investments, and then, um, consult for break plan, which is essentially doing what I do for my individual clients. Uh, but they're using technology to really be able to scale that and to provide great financial advice to, uh, not just a handful, but to hopefully tens and thousands of employees, hundreds of thousands of employees.
Speaker 1:Well, that's really exciting. And, and the technology I've seen from bright plan is, um, really next level. And I think you hit on a good point is, and part of why I've picked this topic is that most people don't have access to financial planning advice for a multitude or reason. So I'm really glad you're getting out and doing this work and teaching and everything, um, cause that's what we need. Um, so let's get into the questions. Um, first question is what are the main benefits of having an investment plan or financial plan?
Speaker 2:Um, so let's say the, the main benefit is that what, uh, what an investment plan does is it organizes your investments. Um, so that it's part of a overall cohesive strategy, um, that can help you achieve your goals and objectives. I'm a, I'm a big fan of architecture and high rises in general. And so I feel like an investment policy statement or investment plan. When you build a high rise, you want to make sure you have all the, I guess, the dimensions in place, you don't just start building one floor by one floor, hoping you get a good building at the end. And I think that kind of translates to what our investment policy statement does because most or naturally most, a lot of new investors, especially just start buying stocks and ETFs and mutual funds here and there without really thinking about how that fits into their, um, strategy, how that fits into their goals and objectives.
Speaker 1:Yeah. Well, I think that's an excellent summary and that's, you know, that's what I think is well, is that, you know, it's having a coherent organization of your goals and, you know, just your investments, um, you hear about Robin hood and, you know, often people trading Willy nilly, so it's definitely a necessary thing. Um, so when you kick a look at it, what are the components of an investment strategy?
Speaker 2:Um, so each investment strategy, I think looks a little different, but they have, uh, some, some core kind of components to it. One of them is that it should outline your goals. Uh, it might be one goal in particular, such as retirement. It might be several goals. It might be, you know, whatever. Um, but the, the, to have a goal is probably the most important part of the investment policy statement. Uh, you wouldn't believe how many people don't have a goal set. Um, and then that typically leads to the next component, which is your target asset allocation, um, and your kind of risk tolerance and the amount of risks that you can take. Uh, and so an example of an asset allocation might be the broadest sense percentage to stocks and a percentage to bonds that might look like 50% each, or you might have a little bit more in stocks, a little bit more in bonds, uh, and you can dig a little bit deeper there into real estate or alternatives, but I would, you know, initially I will keep it high level to just stocks and bonds. Um, and then it should also outline your investment strategy. So are you going to be in index funds? Are you going to do it yourself? Uh, you're going to use a robo advisor. If you hire a professional, they absolutely should give you an investment policy statement and that if you're in a IPS in that sense, they should also outline what your responsibilities are, what the advisor's responsibilities are. Um, and they should, they should align with this, uh, uh, but yeah, they should align. And the last two that I would say is it should have an investment selection criteria if you're going to be using in that spins. But if you're going to be using whatever funds, how are you going to select those funds to be able to kind of build out your portfolio? Um, it might, it might say that you're going to be in a diversified portfolio, or it might say that your maximum expense ratio should be something maybe you want dividend paying stocks, or you want something that's liquid. That's something that could easily be converted, uh, and last but not least you should specify the monitoring parameters. So do you want to be looking at this monthly, quarterly annually, but it should have some type of a cadence, um, so that you're not, you're not kind of, I guess you're dictating when you're Revere your portfolio. Not CMDC
Speaker 1:Definitely. Well, and I think, you know, the key word that is coming through is the word planning. Um, you know, when you talked about the high rise and the architects and the financial plan is the thread that I'm getting is that it's all about plan. And I mean, it's even in the name financial planner, um, that you have a plan, you execute the plan, uh, you know, so that that's great. Um, so how often do you recommend that people review their investments?
Speaker 2:Um, that's a tough question just because, uh, I guess there's no right answer into how often you want to review your investments. Uh, we at planet Corp, uh, like to look at our client's portfolios at least once a month, um, there might be certain, uh, situations where you need to look at it more often, but we typically tell them you don't want to be checking your, your investments on a daily level. Cause it's, it's probably, you know, money is very emotional and the more you look at it, the more you tinker with it, the less likely that you'll achieve your goals. Um, but at the same time, you don't want to kind of set it and totally forget it because there might be some adjustments that you need to make. And so if I had the choice, we tend to say, look at it daily and don't look at it for 10 years. I'd probably go with, don't look at it for 10 years. Um, but you, there should be a, you can probably find a good middle ground there.
Speaker 1:Definitely. Well, and I think the key takeaway is that day-to-day monitoring of your investments. It's just, you know, it's like watching a roller coaster if you watched the market. Um, you know, my dad, I don't know if you may recall if it was Benjamin Graham or Burt, what did them, you know about the market moves like a drunken sailor, um, you know, stumbling around, you know, trying to get that next step that they're going to take. If you heard that,
Speaker 2:Uh, you know, I've heard something similar where they said, uh, the markets are like, uh, you know, when you're walking a dog, the markets are like a dog where it's kind of blending zigzagging back and forth. And, uh, the human walk dog walkers, the financial plan where they're going to a specific destination. And I think it's similar, not the same or similar
Speaker 1:Definitely. Well, they probably had to update it cause that's probably not, uh, as acceptable as it was when I went to college, some dating myself a little bit here,
Speaker 2:There was a study, I believe it was fidelity that did a study and they looked at the accounts that had done relatively well. Um, and to, to try to look at, you know, what those, uh, account owners did to perform better than the rest. And I believe that what they found was on a lot of the account owners had actually forgotten that they had the account or that they were actually dead. And so I realized that the less you tinker with your accounts, uh, the better you do
Speaker 1:Well, I'm assuming that's not a, um, an endorsement for dead financial plan, but I think the key takeaway is all kidding aside is that, you know, you want to monitor it, but you know, you don't want to dwell on it every day. And I think that's such an important point. Um, so what are some of the issues that people should look for when reviewing their investment portfolio?
Speaker 2:Um, I would say the number one driver of kind of what they should look for is if that investment plan still aligns with your goals and objectives and their situation, uh, part of what makes financial planning fun, but also challenging is that your life is changing year to year. Uh, and I, I tend to work with a lot of kind of gen X and millennial clients who, um, who are getting married, having kids. There's just so many changes, especially I think at that life stage that you just, you just want to make sure that everything is still aligned. Um, yeah. And so that might lead to changes in your stock bond allocation, your asset allocation. It might lead you to change in time horizon, um, might change in your risk profile where you were more willing to take risks as a single person, and then you get married and have kids, and maybe you want to dial that risk down a little bit. Uh, and so there's, there's lots of changes, um, that could happen in your life might be Judah. And those are the things that you want to take a look at when you're reviewing your investment plan.
Speaker 1:Okay. Definitely. And that gets back to the importance of reviewing, uh, your investment plan is that it's all dynamic, uh, life changes, um, outside there's outside impact. So it's really important to remember that, you know, planning is not a one-time event, that planning is an ongoing thing. So that's, that's a great point. Um, so I know one of the things you talk about is, uh, socially and environmentally responsible investing, and that's become a much more big part of the general investment conversation. So how can people incorporate socially and environmentally responsible investing into their strategy?
Speaker 2:Great question. I, so I, I, a lot of my clients, especially out in California that are younger, tend to want some sort of, uh, the social, environmental responsible kind of strategy incorporated into their plan. Uh, it, the only recommendation I would give them, well, one, I think it's a great thing. If you can align your values with your portfolio, um, the only risk there is that you have the risk of making your portfolio overly complex. So that's what you want to avoid. And so if you want to incorporate this called ESG environmental and social, environmental, social, and governance, investing ESG, uh, you want to have your investment objectives, kind of your investment plan, lead your portfolio, um, and then incorporate ESG into, uh, in there so that it fits with your overall goals and objectives. Uh, what I fear clients doing is a, they lead with their ESG hat. And so they, they start to kind of move away from what they actually wanted to do with their investments, uh, and start going down this path that might not help them achieve their goals. So one example there would be, you know, your original intent was to have a very broadly diversified portfolio. That's very liquid and meaning you can, you can sell it and convert to cash quickly, uh, with low expense. And then they start going down this road of ESG. And all of a sudden it's very concentrated in 10 stocks. It's very expensive. Um, and it's not readily available to be converted to cash it's illiquid. Um, if you start kind of converting your portfolio that way, then, then you want to, I guess it's okay. Just be like, understand that your portfolio characteristic is changing quite a bit. So you just want to be mindful of that.
Speaker 1:Well, definitely. And I think that gets back to, you know, what we were about earlier is having that plan, uh, your architectural outline of where you want to go in there keeps you from getting into that situation. If you're doing that document at the very beginning and coming up with your general investment philosophy and strategy, um, instead of leading with a particular emphasis or goal that may not fit in with a general plan. So I think that's a wonderful point. Um, definitely. Um, so Daniel, what's your number one tip on being financially prepared?
Speaker 2:Um, I think you just said it beautifully, Tony have a plan, have a plan, uh, but don't just have goals and the plan, uh, have a system that works for you, uh, that might be, that might be creating an investment plan to begin with. And following that investment plan, it might be automating your investments on, out through a robo-advisor that might require you to hire an advisor. Um, I think any of those options work as long as you have a plan and you have a system that works
Speaker 1:Definitely, um, you know, just recalling, I think this may be, uh, going back a few years, but it was in her website at one point by CFP, there was like, make a plan or something like that.
Speaker 2:I think it was, yeah, CFP there. It might've been one of their taglines as like make a plan. Um, plan Corp has a, uh, start my plan.com. Oh,
Speaker 1:Okay. Maybe that's where I've seen it
Speaker 2:At something like that too.
Speaker 1:Definitely. So where can people learn more about you and what you're doing?
Speaker 2:Uh, the best place to find me is that my personal website at hello, good place.com. Uh, you can find more about what I'm working on. Some of the links to my blog articles and published pieces, uh, and hopefully I'm trying to start a newsletter, so you could sign up for my newsletter there as well.
Speaker 1:Fantastic. Well, great. Well, Daniel, thank you so much for joining me today. This has been an amazing conversation.
Speaker 2:Absolutely. Thank you for having me on Tony.
Speaker 1:Definitely. And thank you for everybody, uh, for listening and watching the get ready podcast. Um, please remember to subscribe until next time.