TRAP: The Real Adviser Podcast

14 - Top Tips For Newbies

• Alan Smith; Andy Hart; Carl Widger; Nick Lincoln • Episode 14

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In this latest pile of TRAP, the Trap Pack discuss

  • Three glowing reviews of the podcast, read by Andy in his inimitable style
  • Topical issues, including positive feedback on the previous episode 13; the ridiculousness of fund risk ratings
  • Meat and Potatoes: Why ambiguity is such an inherent part of real financial planning. And the Trap Pack’s top tips for newbies to this mighty profession.
  • Questions posted by our beloved Trappists @joshgerstler @dirkgroeneveld @ComradesNic
  • Culture Corner

Links referred to in the show:

IFA Forum: http://www.tiny.cc/ifaforum

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Take part in the conversation! We want YOU to suggest topics and questions you’d like the Trap Pack to answer. The best way to do this is to ask them here.

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Unknown:

Welcome to The Real advisor podcast, t r a p twerp please follow us and join in the conversation on Twitter at advisor podcast where you can suggest ideas and themes you'd like the track team to discuss. Also remember to like and subscribe to our YouTube channel and leave a six out of five star review on iTunes. Doing all this really really helps us which means we can do more to help you. Now let's head over to the studio for the latest pilot trap

Nick Lincoln:

yes indeed good practice. Welcome back to Episode 14 of the real advisor podcast t r a p My name is Nick Lincoln and joining me as ever are the three other Horsemen of the Apocalypse. Call the voice Witcher Allah and the storyteller Smith and and the heart. Gentlemen, we have a show packed full of absolutely nothing. So Andy with your normal energy and verve and bigger give us give us three of the latest reviews we've had on Apple please my friend.

Andy Hart:

Sure, no problem. The first reviews from Dawn 1987. Entitled totally worth your time five stars very enjoyable, great content and relaxed vibe. Next up we have Liu F CLK entitled insightful five stars. Great job so far really insightful and topical episodes. The meaty review for today is from Jimmy Floyd 1982, entitled, coffee break chat in a podcast form. The main body of his review is having gone from advising and a medium sized firm to work in the loan earlier this year. This podcast is one of the ways of replacing some of the invaluable Coffee Break chats I had daily with my former colleagues, light hearted and easy listening yet informative with some of with some honest debate and topics of the day in our profession. That's it over to you, Nick.

Nick Lincoln:

Brilliant. Thanks, Andy. Good stuff. Nick.

Alan Smith:

Nick, may I just briefly interject there on that last comment, which I thought was very relevant and insightful? Because what we know is post COVID, the world's kind of moved away from all being in an office all the time. And all those I've always talked about the kind of the watercooler moment as the Americans call it the coffee, what did he say the coffee, run the coffee machine or whatever, though, and I think maybe that's part of our success is that these are kind of chats like you would have just sort of bumping into a colleague having a conversation. So I thought I didn't consider that before. But it's kind of well said, Actually, thank you to the reviewer.

Nick Lincoln:

Very good. So topical tidbits to give this episode episode 14 a time stamp the last episode, we kind of opened up a little bit and talks about the struggles that we all have, we all have struggles, and some are more obvious than others. Some are external, and some are internal. But for advisors, there's a lot of pressure that comes with our job. And Carl, you had some very good feedback. I think, Carl, on the way you opened up in the last episode.

Carl Widger:

Yes, well, look, Episode 13 was about, I suppose the challenges that some of our clients may face when they're coming to that transition into the third act from selling a business and what do I do now. And then we kind of did discuss a little bit about the challenges that us as advisors have, and maybe it was a little bit uncomfortable to be vulnerable. But that's what happened. And that's how the, the chat transpired. A couple of people have reached out to me, since obviously, I won't be disclosing who are the nature of those conversations, because they are private, but all I'd say is, look, you know, to all advisors out there, but But literally to everybody, you know, keep doing the stuff that you need to do in order to keep yourself at, you know, peak mental and physical fitness. It's so so important. And that's uh, you know, that's something you just got to be so consistent that at. And then my kind of overriding feeling, and we did have a chat about this off air is you never know what people are going through. And I think you know, if you kind of have that in the back of your head all the time, I think we can all just be maybe a tad little bit nicer to each other. And I think that makes all of the difference. Except, of course, if you're the chairman of a podcast and you're making a bags of the technology like you did this morning. You deserved everything you got make this one.

Nick Lincoln:

That's right, Cody, you continue to be nice, my friend. Thank you for that. Mr. Hart, you've got you want to talk to us about Vanguard fund ratings.

Andy Hart:

Yeah, well, I'll introduce this this is something that somewhat was my blood so I'm trying to tread carefully. Various different fund managers and fund houses do this and they obviously rate the different funds that they're offering to clients and obviously we've got a somewhat navigate this from a sort of compliance regulatory real life growing up investor point of view. So Vanguard on their risk scale, so they call them risk ratings, which again, what risk? Are you trying to, you know, define clarify. That's the first thing that's always very unclear. It's generally usually sorry, it's usually around volatility, which is one flavor of risk. There's many other flavors of risks are far more dangerous for our clients and volatility. But anyway, the whole fund management industry seems to be fixated on risk being volatility. So they've got a scale of, I think, one to seven. So they categorize all of their different funds from one to seven. And it's any fund managers, I'm just going to focus on Vanguard cuz it's a company I'm, you know, think highly of and use their funds. So that on the four out of seven rescale, they've got their 20% global equity funds, 40% global equity funds and 60% global equity funds. So they're 2040 60 global equities advisors, listen to this. Now what I'm talking about, they've grouped them between for four out of seven, the five out of seven funds are the 80% global equities and 100% global equities fund. The reason why they sort of got flagged to me, I think, Alan Smith, you you highlighted this, didn't you the UK index link gilt fund with Vanguard is now a six out of seven on their risk rating, which is incredibly high. So it does show to the event, it wasn't six months ago, or to the event exactly, it would, it would have been one or two out of seven on the scale prior to something that's never happened happening. That's Welcome to the world of investing. We've never seen that before until we've seen it. So yeah, that's what that I mean, to me, also, one of the biggest risks is low returns, this is something we don't talk about ever, I think this needs to come to the fore, there is a huge risk of low returns, you know, investing is freedom, freedom is opportunity. We are in the wealth creation business for our clients, you can do a lot of good with with your wealth, either that's for your family, or causes you care about. So anyway, back to the fund ratings. Yeah. So it's interesting that the fund that has historically been super low risk, where people put almost cash like money in that type of fund over the years, and now it's a six out of seven on the risk scale, risk, according to them, I believe is volatility and all the other flavors of risk that we can unpack. So yeah, I just thought I'd, I'd highlight it. Also advisors still live in this world where they think 100% globally, or some advisors think 100% global equities portfolio is a 10 out of 10. On the risk scale, it is not, you know, 10 out of 10 on the risk scale, in my opinion is, you know, crypto things that are working now, you know, individual stocks, you know, there's so many way higher risk asset classes than 100% global equity, global equity portfolios. But it's interesting that Vanguard have put their 100% global portfolios of five out of seven and not seven out of seven, which is great. So sort of got that, right. So again, it's just having that conversation about where returns come from, what asset classes you put your money in, and then obviously having a conversation about being comfortable market cycles. So that's my bid on that. Who's,

Nick Lincoln:

who's done you had your hand raised on it? Yeah,

Alan Smith:

just as you very kindly acknowledged me there. Andy, I'll acknowledge you for something I think you said or wrote about a while ago, which was, and it was kind of about, you know, words, the weapons, how you describe things are really important. If he said, Vanguard, or anyone said, you want a high return fund or a low return fund, What one do you choose, or what the hybrid everyone would say, what the high return and then you say, Great, we can deliver that to you. It's a bit more volatile in terms of short term volatility than the other ones. But you can expect no guarantees you can expect over the longer term or higher return. What again, what once you watch this, how you describe things. Yep, it's really

Andy Hart:

important, just to me immediately jump in there. The real life returns for these funds that I'm talking about with Vanguard over the last 10 years of real life returns. The Vanguard lifestrategy 20 fund over the last 10 years, if you invested 10,000 pounds 10 years later, you would have 13,000 pounds in that fund. So over 10 years, it's gone from 10,000 to 13,000. The same investing journey but chosen via a different fund, the Vanguard life strategy 100 fund has turned 10,000 pounds into 25,000 pounds. And the journey of the 20% fund from 10 to 13. And the other one from 10 to 25. Yes, obviously, the the result is very different. The volatility along the way is not that extreme if you see these two charts. So for me, the biggest risk in that fund, the 20% fund is the low returns, why do we not talk about the risk of low returns? You know, there's the risk of capital losses, the risk of inflation, there's a risk of volatility, and the biggest risk in my world is the risk of low returns. We don't speak about this enough. Obviously, you know, people like ourselves, real advisors, work with real clients. And and also we deal with people I don't know in their 70s 80s 90s that are a little bit short of money now. And it would be great if they had a bit more, had one of us rocked up 3020 10 years ago, told them the truth about investing where the returns are going to come from. And they followed that. They'd have more wealth now, and they could do better, more things with it, you know, more opportunities, etc. Anyway, I've sort of spoken a bit about this. Nick, any thoughts on that?

Nick Lincoln:

No, I think you can with that. Well, are we ready to move on?

Carl Widger:

Yep. Yeah, it's taken 14 episodes. But Andy, that was really, really good. Well done. Thanks.

Alan Smith:

Following up from your episode, last week, we're all been kind to each other. I'm feeling very uncomfortable right now.

Nick Lincoln:

Shout out. Shut up. Thank you. Thank you got this better. You've got a conference you want to tell us about?

Alan Smith:

Yes. Advisor 3.0, which people may have learned about heard about run by the incomparable Abraham, aka Sonya and his team at timeline. One, one thing is very interesting to me is one of the keynotes, there is Seth Godin. And Seth is I know that not everyone loves him. I'm a big fan. I think he's, I think he's a marketing genius. I think the way he describes things and articulates things we can all learn from his speaking at the conference, that we all know, there are a handful of conferences, in my opinion, which are worth attending, obviously, humans under management would be at or close to the top of that list. But I think I think this is obviously the first time that Abraham's team are running advisor 3.0. I think there's something for everyone, I'm even doing a little bit there as well. But don't let that put you off. It's in may calm the date, we put a link in the show notes, if anyone's interested. It looks good. The content just looks really good. I personally, like show up to maybe three conferences during the year. This will be one that obviously I'm attending as well as humans under management, and maybe one more. That's it, thanks.

Nick Lincoln:

Okay, great stuff. And thank you for that. So I mentioned VC T's I think in the last episode, briefly, venture capital trusts, and this kind of fear that I have that I'm not, I'm not the complete IFA, I should be or could be because I don't recommend VCTs to my clients. And interestingly, on a group that I'm a member of that we'll talk a bit about later on, actually the IFA Forum, which has about 200 ifas in it. And somebody else started the thread about VCTs. And it's amazing how many ifas came back and said I would not touch these, I would not touch these products with a bargepole. So one guy won't give any names, but one knife and he said, always remember that the person on the other side of the trade is eyeing you up as their exit slash escape plan. Plus, all the truly good stuff gets picked off by the boys in the city. The rest then that reaches retail clients out in the provinces you generally wouldn't touch with a 10 foot pole. And then somebody else said about BCTs and this is a guy who's had a business for 30 years. You succinctly put into words the reason why I've never ever sold a VCT so just just interesting that I'd you know, we feel compelled to talk about products that we know are probably not suitable for the end investor. I don't think that doesn't mean we're independent and financial advisors maybe from a regulatory strict regulatory interpretation it probably does but I'm no longer quite so worried about about that just before we go unless you want anyone who's got any points on that the Six Nations rugby that is it's been a brilliant tournament this today I mean that this last batch of games might have been the weakest slate of the day but there were still still pretty pretty good games generally can go on your your your you're enjoying your moment in the sun talk us through your thoughts

Carl Widger:

we're only three games in we've couple of games to go so I

Unknown:

lost humility listen to I just hold

Carl Widger:

fire but very very impressed Ireland with their second string team out to to conquer Italy who I taught in fertility are massively improved this year from previous years. Yeah, I didn't watch Scotland and France Well, I did watch the other game and it was pretty boring.

Nick Lincoln:

We tend to put Italy away properly so far I've been England that's just telling I think there's a World Cup gets nearer and nearer I

Carl Widger:

think I had the same discord the same amount of points as Ireland. Yeah. Anyway, Scotland France

Nick Lincoln:

game was fantastic because see the same amount of points. It does

Andy Hart:

look like it's going to come down to the last game of the tournament which is Ireland against England in Dublin. That's three bonus points and snatch the championship.

Carl Widger:

Three bonus points. You get one for four tries. And how do you get a losing bonus? But that surely wouldn't be good enough. No,

Alan Smith:

you missed a good game call in all honesty, the Scotland as Scotland fan Yeah, the loss but well, it was just entertaining. This is the an all my years of watching Scotland is the most positive I've ever been really about. Just love the entertaining rugby team in the world right now. But you just don't know where you can see you see genius and chaos. same time

Carl Widger:

was to two red cards. I believe the French one was ridiculous. It was.

Nick Lincoln:

Yeah, the guy was I mean, when when the Scottish guy, they were both they were both parties sending off when the Scottish guy got sent off I thought, Oh God, this is that's the end of the match. And then about two seconds later the, this French into goes in with his head to head. Like, where did that come from? And then I mean, there was a great Finn Russell, which also definitely knows brilliant, but then he had a horrendous long passage just wasn't on. But it was brilliant. I was obviously you know, I was rooting for Scotland and they nearly did it. And it was, yeah, the valiant loser thing. It can be an annoying tag but in years gone by. They would have been humped at school. I would

Alan Smith:

19 Kneel down they were early on. Yeah, yeah. Which

Andy Hart:

that didn't reflect the runner play at all, like France got some sort of like Lucky early point. Yeah.

Nick Lincoln:

So there's four passes, they both are good to me. And pass. Yeah, exactly. Shall we now move on to the meat and potatoes of the show? We've got to two topics here. And they're both I think one one is very topical. Should I go with my own first guys, if you're okay with that, and then I'm gonna go on to UCSD. Okay, cool. So the role of the role of ambiguity in financial planning over the years, and this started with people like William bangun. And then Wade Pfau, I think so you say a surname and Michael Kitsis has kind of joined into it this whole safe withdrawal rate, and having guide rails, and you do this, and you do that and talking almost in the abstract about how you can get a sustainable rate of income from a portfolio, which seems to discount any kind of human element whatsoever. And I think there's a little bit of a, just a little bit of a push, but I think we certainly embrace the idea that financial planning involves a heck of a lot of ambiguity. Okay? It's not what's your tolerance for, for capacity philosophy? What's your tolerance for ambiguity? Right? You have to understand that what we do we try and make really, really informed guesses for our clients, best guesses for our clients for the 3040 year retirement, but there are no guarantees. And this paper came out from a guy called I think it's David Blanchett, another US guy. In that in that same field, as there's other chaps I mentioned as a link to in the so called shownotes in which he goes through research 1500 people in that retirement 50, age 50 to age 70. How would they feel if in retirement, they had to cut back on their spending? Because their portfolio returns were down or the markets were down? or what have you. And guess what, it turns out that adults are quite capable of making quite rational decisions. And they can they will cut back on their spending if their portfolios suffer a prolonged downturn. And quite a quite a degree, I'm gonna put my glasses on to read this. Now, I made some as I made some notes. Yeah. And I just think we, we have this condescending approach. And I'm not I don't want to sound like I'm berating the regulator. However, the regulator does force us to have a condescending approach to our clients and not treat them as adults. So we give them these mumbo jumbo questionnaires. We give them the endless key features documents, we bombard them with risk warnings, we give them as Andy alluded to, at the top of the show with Vanguard is meaningless fund risk ratings that can just change based on what's happened in the last year or so sudden, suddenly a relatively safe indexing Gill fund goes to being a high risk fund, just because the fundamental says it can't touch it. And this research is really interested people, you know, people are adults, as long as you've got your essential spending cupboard in retirement, people are quite willing, and they will trim back for a year or two if if on the on the non essentials on the discretionary spending, I think and they're way more willing to do that, than we perhaps perceive it to be the case. And I think if we just have these conversations with clients, they'll be responsive to it if they if we enter a prolonged down period and their and their portfolios are suffering people will be adolescent. Yeah, we'll just cut back for you till we get it. You know, what I don't understand. For me, the thing is, when you're working, so you're working three to four decades, you've got no certainty of income in that period whatsoever, you're going to change jobs. If you're running a business, you've got no certainty, you know, you might go out of business. I've got a client who had an annual planning meeting with this week and she works at Tesco. She has been there now for just over a decade. And this is her fifth time where her job is up for appraiser when they're looking at the systems and the staffing and everything fifth, as you've been through it five times and always got through it. This time, it's looking a bit dodgy. And people change jobs what over the course of a four decade working period eight nine times nowadays, so there's no certainty ever of income when you're in the employment stage of your life and you've got mortgages to pay. So why do we suddenly leading us to absolute certainty in retirement, you know, there has to be a degree of ambiguity and I think the important thing is that we as real financial advisors tell you know, explain to our clients this fact you know that nothing is guaranteed if you want guarantee if you want guarantee with your money die today. Alright, that's the safest way you can assure you never no money just dropped dead. So aside from that, all bets are off. So I thought that was a I think this this this just highlighting how ambiguity is important and being again, it's always about being honest and transparent with people, isn't it? We cannot we cannot get Give you black and white answers, you can monte-carlo yourself down a black hole if you want to. It ain't it doesn't mean anything at the end of the day. Guys, any thoughts?

Alan Smith:

I can, I'll just I'll just jump in here this stage. So 100% agree with you Nicholas, this is this is a version of extrapolation, isn't it, we assume something's just happened or something's recent isn't exactly always going to happen, it's going to get worse or better or whatever. It works the other way as well. The danger of straight line cash flow forecasting is we assume it's always going to be the or potentially could be, could be good. If you have if you're on a cash flow model, and it looks, you're absolutely fine with the rest of your life, it might not be the case. So there are no guarantees here. The other thing that's never factored in is the rate. You mentioned, one net, which is job security, for example, there's a whole load of other variables that are never factored in. So you've got health, health as well, this is assuming you're always going to be healthy enough to work or create an income or whatever. There is political things, tax rates, you assume something's going to happen and the tax rate doubles, what can outside of your control. God forbid, what if you got divorced, all of a sudden, all your things on track, you've suddenly you know, walked away from you'll put it this way, your personal finance, your wealth is significantly different to what it was before. So the multiple just life associated variables of which there are no guarantees. And this just demand or expectation for absolute guarantee, and a 4% withdrawal rate will keep you safe and all that wrong. So your point is well made, Nick is about being grown up. It's about being you know, essentially human having the kind of right brain skills to advise consult, really go deep with your clients, what's important to them, and it's just it's a, it's a compass, it's not a specific, it's not a map, it's not just telling you exactly where you must go, it's just telling you the broad direction of where you are today, and where you need to be 135 10 years from now, that's all this can be so completely agree with you all the academics that are demanding precise science behind it. It's not true, as we know, you know, good quality outcomes are more of a human and a personal sort of issue than the art scientific or a maths one. That's my thoughts. What do you think, Mr. widget from Ireland?

Carl Widger:

Yeah, I think I think Nick kind of hit the nail on the head there when he said, You know, it's, it's when you're planning for people who are somewhere between 50 and 70, you're doing a 50 year plan. If you're doing a 50 year plan for someone, there's only one thing absolutely sure is that that plan is wrong. Because you you just there, we've you just said, Alan, there are too many variables. So I think the point is that people, however, do like to have some semblance of a plan. And I think that's why financial planning and being real financial planners. And it's so important that we impress on every single person that comes through our doors, that it's a process, it's not a one off. So you're gonna have a beautiful document saying, Here's your financial plan, and good luck and good night, and we think you should go into X, Y and Z. Well, that's what the private banks do, right? That's not what real financial planners do. They map out a rough plan over a long period of time. But where you can get specific, is the first few years of the plan. So on the one hand, we're trying to say, trying to encourage people to look to the long term or whatever. But then on the other hand, as financial planners, we can look to, well, how much money are we going to need to spend over the next couple of years? And we don't have that money in the market? So we do have that money available? And, you know, it's it's so, so important that you stress that to the clients. And I think, you know, we've all been through it over many, many years now with with certain clients. And you know, that yeah, the best, the best meetings for me in terms of financial planning are when the clients are standing up, and they're, they're looking at their their plan, and they're saying, what have we put this in here? And why do we put that in there? So they get engaged in the plan, but but they understand the short term, you know, focus, but also the long term focus. And I think, you know, to summarize islands point is the famous Mitch Antony phrase, you know, when life goes in transition, money moves, and you don't know what that transition might look like, and it can be good, it can be bad, and it can be bloody ugly. So you know, we're trying to give, you know, guidance over a long period of time, but that's all we're trying to give and trying to be precise or I agree with you Nick this guardrails and all that stuff. They're just useless financial products that are not required, in my opinion.

Alan Smith:

Call which, once again, showing the wisdom of the Irish, amazing

Nick Lincoln:

no matter cartels, No matter no matter that cause iray is boyband days call you okay, I've got a restraining order. Yes. Yes indeed. We know Carl is one of the leading lights in the new in the in the Irish financial services world and Metis. Ireland is definitely that and these we met in Norway but then they realize they're based in Ireland and translate into Metis. Ireland is a very serious man in this field. However, what you might not know dear trappers is his torturous artistic bat life. And for the last two decades or so Carl's had a running feud with legendary boy band manager Louis Walsh. Carl was of course, a founding member of Boyzone in the late 1990s, and then got thrown out by Mr. Walsh, just as they are on the verge of mega stardom, and eternal riches. And at the time, Mr. Walter Carr's a lovely guy, but he's got all the musical talent of a newt.

Alan Smith:

I just have to interject that car without doubt, is the most popular member of this little grouping that wherever I go bump into people who say I listened to him last year. All right, Alan, Nick, and Andy. Oh, god, they're awful. But that guy call he's seems a really lovely guy.

Carl Widger:

Yeah, true. I have no idea. That's because they know the three of you and they don't know me. It's like, that's, like, tallest of the Seven Dwarfs. Right? Can I just point out that that little interlude from Nick was a total surprise to me and it will be happening again. So your four band

Andy Hart:

days really are over? Okay, back to me to close up.

Alan Smith:

Right? What do you think Andy? About what? To close up? There's

Andy Hart:

nothing? Yeah. Okay. Where are we going with this? Yeah, financial planning of retirement leading up to retirement in retirement. Yeah, this is my space, I get really excited about this. I sort of straddle both camps, I can do the sort of science of it, but I understand how important the art of it is. It is all about Yeah, progress, not perfection. In a, I mean, so yeah, I build up Voya financial planners, one of my clients, you know, deep in this space, I am a fan of the 4% rule, I think it's a good rule of thumb, not in terms of, you know, agonizing over sort of, you know, sticking to it. But I quite like reverse engineering, the 4% rule, when someone says how much you want to spend per month, let's say they say I want to spend 1000 pounds per month, you times it by 300. That's how you basically achieve the 4% rule. So if someone says I want to spend 3000 pounds a month for the rest of my life, you times it by 300, to get 900,000 golden coins, that's how much you need if you're applying the 4% rule. So I'm a fan of that. I also get what people say about straight line projections. That's why we call them forecasts, not really financial plans, and I am cautious and all of my assumptions. So I'm getting I'm killing them at 100, which means the money probably needs to last longer than they need it for. So that's my first cautious assumption. My investment returns are a lot lower than what I have been able to achieve them long term. And I probably overestimate their expenses. So yeah, I'm happy with it being you know, straight line projections. And I understand the limitations around them. I have got software that allows me to throw in, you know, endless multicolored scenario. The good thing about that sort of modeling is it usually says All roads lead to global equities, which is also something else else that we bang on about quite a lot. So yeah, that's my final point. Now,

Nick Lincoln:

we're kind of in a kind of agree, agreed our way through this episode so far. It's interesting, isn't it? Things? Things things. Things definitely change all the time. I mean, the straight line. Abraham has a beef about this isn't the straight line project. Well, what else you're going to use? Matt, you're just you know, you got to ya had to start some

Andy Hart:

call no

Unknown:

fluey. To Karla, no

Andy Hart:

forgetting to you, right. It's just it's everything. But also just it's just a guide, no one said it was guaranteed god sake. But I've been building real life plans for my clients for the last 12 years. So where I told a client 12 years ago, let's say in 2011, where they actually are in 2023. It's not miles off where I predicted weather be in 2011. Because the software stores all of the plans so I could get a client up who I'm seeing next week. And so right, let me go back 10 years ago, and I'll show you the plan from from 10 years ago where I thought you're going to be today. And it's scary. How accurate is this? Is their expenses, this the liquid assets? This is their non liquid assets? Again, I know that from being you know, a real planner and building these plans.

Alan Smith:

Yeah. And so to assume that a client will just carry on living their life when the world has changed beyond all recognition. I mean, those of us who were advising real life clients real life, real life families, real life human beings in 2008 as I was building having built real financial plans and forecasts and all the rest of it, and then the market, as we all know it, I mean, it's apps literally created regardless of what portfolio you were in, you were underwater by a significant way. And I was having client meetings, and I was always coming in and saying, you know, what's the damage? What does it look like? And the great thing about a 3040 50 year plan is that even the worst case scenario, you know, you've lost everything, you know, and you've got to assume there'll be a recovery at some point, because there always is using history as our guide. And therefore I never forget, having this is not story, at least just an anecdote, but I'm not 111 client. I could actually, I could tell you an anecdote about story. But now that's a different one. I had one, one client who I was advising then a lovely guy who was saying, and he used to travel to the Caribbean on holiday, every year. And he said, he looked at it, he thought, Okay, we looks like we're going to have to go cattle class this year, I'm still going to have I'm still going to Barbados, but I'm going to have to downgrade my lifestyle for a year or two rather. And that obviously, that's an extreme example, just to make a point. But that's the thing, people generally have got certain amount of discretionary expenditure that they enjoy spending. But that might be through lots of circumstances beyond everyone's control at a time when we're going to have to tighten our belt for a year or two, you know, and that's so your income expectation goes down during that period of time, it doesn't continue to go up in line with inflation or whatever. So I think the bottom line here is how you as you started it, Nick is treating our clients like adults like grownups and having sensible, mature pragmatic conversations. That's that's the sort of beginning and ending of this whole whole debate. Very

Nick Lincoln:

good. I think we can draw a line under that. And just just just I think Carl's point is very well made, the plan is still born, it's the planning. And if you're a young advisor, and you're coming into this profession, and you're thinking God, how do these people make these forecasts for clients? That isn't the pressure on the weather factors, we're, you know, hopefully you understand that we we do it we're we're kind of just doing it wading through the reeds with the clients on a year on year basis and adapting and changing things as it goes along. There are no certainties. The important thing is just to convey that message to clients. Okay, we've done that one to death. The next meat and potatoes subject is something that Mr. Smith pulled into our agenda. And that's sort of a back to basics thing for early career financial planners to what what things could could would add real value to people starting off on their journey as real financial planners, Mr. Smith, if you want to start with that one.

Alan Smith:

Yeah, I'll just I'll just open this up with my thoughts. Because I know that I have been contacted, and I'm sure I think I know that all you guys have as well, to one degree or another various, various, sorry, through social media, or through various other means. In certainly since trap launched, and probably before from people, early stage career, it could be could be financial planners could be doing different roles within financial services generally. And the kind of classic Can I pick your brains conversation? So I think rather than me necessarily go back to one or two people, if we just sort of a one to many, and it's just an open conversation, if I was, I didn't know 2325, in my 20s, or even my 30s and I was early stage career in financial planning, what are the things knowing what I know, as a veteran? What would I What would I like to do? What should I do in order to maximize and further my career. And as I've reflected on this, inevitably, there's going to be an element of sort of restating or reconfirming things that we've talked about in the past, because, you know, there are some basic rules of the game. And so you end up repeating them because it's true, and they work. So I have, you know, the other thing is, it's not, there isn't a silver bullet, there's not just one or three things that you must always do. It's a combination of lots of things and different things to different people. But if I were younger, and I was early stage career, and particularly for wanting to build a build a client base, you know, become a financial planner, and grow my audience and grab attention and all that sort of stuff. This The starting point is to go back to the question of what sort of people do I prefer to deal with? Who are the type of clients the type of profile and so it's that magic word, Mr. Lincoln niche? What are the sort of people I'd like to and enjoy advising speaking and spending time with so I'd say what do you know now you wish you could go back and tell you from 10 years ago as you're getting started niching is important.

Unknown:

I wish I'd committed sooner I wish I would have known the benefits of niching you know, I think if you have a niche with a good looking website and you really focus on

Alan Smith:

is that Morgan household speaking kids or do you? You're you're muted Nicholas.

Nick Lincoln:

But that was that was a guy just an American Financial Planner who's been interviewed by Michael Kitsis. It was actually quite a good interview. But it was one of the one of the 3000 episodes from the Kitsis gets his channel.

Alan Smith:

But he's He's true despite him, abusing the pronunciation of the word is true. So if I was starting again, if I was, if I was that way, I would just try to get known as being the go to advisor for a community and the narrower the better. So business owners is not a niche. female founders of tech businesses between two and 10 million pounds turnover is a niche. And I would, I would understand that I would spend time with that niche, I would ask meaningful questions of that niche, such as what are your biggest financially related personal finance related challenges? Because I think that our industry, and the and I use that word deliberately, in relation to this point creates products that to some parts of the community aren't relevant. Because a lot of some people may not have, you know, half a million pounds in a pension or whatever, where the product exists. So I would, I would speak with the niche, have spent time with them, I'd work out where they hang out both digitally online and in real life. And I would ask them questions, and I would use those questions and those complexities and as misunderstood areas to create content, I would write a weekly newsletter 52 weeks later, you've got a book effectively, and then the ability to repurpose the content is highly, highly valuable. So in summary, that's something I do identify a niche, find out what their pain points are, create regular content, don't just write a blog once every six months or something every week be consistent. You know, this is this is obviously not rocket science. But almost It's incredible because that if you do that, and you show up weekly, I promise you within two or three years, you will absolutely succeed in this industry. And the other thing I would say that's just about starting point, you guys will have lots of other sort of thoughts and comments. But the other thing that's an obvious one, a less obvious one is if I'm young and I don't have a spouse, you know, kids, pets, all that all that sort of thing about sort of points in your career where you're more mobile, more options, more choices. I've moved to a city I'd moved to an obvious I would say move to London, but if you if London's too much move to Bristol move to Edinburgh move to Birmingham move to I think proximity is really important. Where you operate from if you are using an example of an expat is who moved to London all those years ago, the opportunities that have existed for me are far greater than if I'd stayed where I'm from. Just in terms of the people, you'll network with the events which are on your doorstep that you can show up, speak to engage, learn, listen, as well as the potential client base, as well. So some people might think that's a bridge too far for them to actually move. But if you're serious about building a long term career, you don't have to stay in the city forever. But spending three years or more in a larger city with greater opportunities is something I would definitely recommend to someone at that stage in their career. Back to about you, Andy, what are your thoughts? I'm sure you've thought about this for the younger generation, or No, I that's part of

Andy Hart:

I concur with your last point. Yeah, move to a major city move to a major city move to a major city. That's the advice to young people. Yeah, the amount of people you're gonna be surrounded with all the collisions, you're gonna have all the sort of thought leadership you're going to have around you the network events, you can go to yada yada, yada, it's going to be be endless. I mean, I think people new to this profession now they're drowning in information. Now. There's so many YouTube channels that share information about personal finance lots of podcasts. I'd start with Pete Matthews podcast meaningful money in terms of the for information. I listen to my podcast meaningful money, which is a sorry, moving money, which is slightly different. I would join mastermind groups which I think's the key thing I mean, next gen are doing great work for people new to this profession. Again, it's the mastermind element to it. There's hundreds of people going through similar sort of journey and people are willing to share their time. Things like Twitter and LinkedIn are also going to be quite useful. Me personally, I went on the dimensional fund advisors courses early on in my career, completely opened my mind to asset class investing index investing, and met loads of other great people on that on that on the similar sort of journey. Couple of books to mention, I think Carl Richards behavior gap is superb. Definitely read that got some great pictures, pulls everything to life. It's an easy read as well. I used to give that to quite a few people. If you're a financial advisor and very, very serious about this business, which anyone listening to this would be the Nick Murray books are fantastic. The excellent Investment Advisor and the behavioral investment counseling, I recommend you start with those to probably start with behavioral investment counseling, if you can find it was very hard to get the excellent investment advisors a little bit easier to find a bit of a heavy read. But again, fantastic. So just surround yourself with your peers. As I say, you're drowning in information entering in entering this mighty profession. Now, you've got the PFS, that also do quite a lot of online courses, live courses. You've got the CI and the ci si. Again, they've got local branch meeting, just get yourself out there and meet people long story short. Yeah, over to you, Carl.

Carl Widger:

Thanks, Andy. Yeah, I kind of came at this maybe slightly differently. And that maybe I thought about this from a little bit earlier. So you're kind of coming out of college. And I suppose what I was thinking about was, okay, what would I tell my kids to do? So I would say, you know, you got to build your, your network, online and offline. So, you know, build up that LinkedIn, Twitter, and I'm sure tick tock, and whatever else is, is Instagram, you know that that's probably where it will be out in a few years? Or are there might be new platforms? Who knows. So make sure you're building your network there with people, you know, who you want to try and do business with down the line. And I don't agree with you guys on the niching thing, I think you know, that maybe that's because Ireland is that much smaller. We do have several niches here in Mattis. But if we had only one, our two, we wouldn't have a successful business, I believe, I'm open to the fact that I might be a little bit old fashioned on that, right. But that's just my belief. So I, I think, you know, certainly in early career, being more, more of a generalist I think will help you, I think you should be trying to get into a real financial planning firm. You know, rather than maybe you could spend a year or two to get your exams in a private bank, or a stock broking firm or whatever, right. But you need to get into a real financial planning firm. And you need to do that as early as you possibly can. And then when you do get in there soon, and you kind of progress through your exams, paraplanning will be massive, because, you know, I think I mentioned our pod system here and met us before. So we have our private client managers. And then we have our financial planners, which you guys would know, as power planners, they sit in, in the meetings, you know, and if it's too early for you to be a power planner, and to justifiably be sitting in a meetings, you can always sit in the meetings and be a note taker, because, you know, learning on the job from people who you respect who you believe are real financial planners, that you can, you can't underestimate that experience that you're going to get, I think that's absolutely massive. You know, so I think, however you can, the most important things for me would be for my kids, if they want to go into this business is to get into a real financial planning firm, and then get into the meetings as fast as you can, you know, and see if, you know, maybe you could get into meetings that two or three different people are leading and see, see different styles, and maybe you can kind of match yourself up to some of those styles. And then the last thing is, and this is I suppose, aimed at maybe the the younger kids coming through is a famous phrase that I keep on saying here, keep the main thing, the main thing, and that's to keep the focus on you know, this is my my goal, ultimately, to be a real financial planner. So don't don't get distracted and God knows when you're in your 20s There are so many distractions and I like one of them might be a private bank comes along and gives you a shitload of money to act as a as an advisor with them. That's not keeping the main thing to maintain. If this is something you really want to do. You got to you know, formulate your plan, and then you got to stick with the plan. So that's my take on it.

Nick Lincoln:

Yeah, I think we've covered a lot of stuff there. I mean, I would say you use the tech as well I don't want to sound like I just drone on about it. But there are so many online resources now you made the the podcast Andy for sure. The next gen stuff as well. But you know, this, this this thing that I set up, you know, this is a forum, which was a replacement for the fin surf list that used to go in the UK back in the early 1990s and 2000s, I think, and the IFA forum, you know, it's been we've got over 200 people on it. Now, it's just a Google group, but they're all They're all practicing advisors and or power planners. So they're all people involved in the advice chain. There are quite a few young people on the group and you just, you know, you you can just ask the group there any question you want, and somebody in the group will come back to you with an answer because there's a steep learning curve when you're starting off and you're sometimes a little bit, you know, but you're just just asking I don't I can't speak for other professions. I don't know what solicitors and accountants are like, but I, you know, my experience, your experience, and the fact we're doing this, it's a very giving profession, people are very willing to share stuff up. So the IFA forum, I think, just joined that you'll you'll you'll get the emails and you know, you can opt in or opt out, take as many or as few emails as you want, do something like that. Generally used, you know, if you're young, this is a bit of a stereotype. But if you're young, you're probably quite good with tech anyway. But if you're not good with tech, make yourself good with tech. Because going forward, you've got to, you've got to, you've just got to be good with the kind of stuff that is that is about cash flow modeling software, using that the whole diary management systems and so forth. Especially if you ever want to go out on your own, you've just, you just cannot ignore it anymore. You really can't. And if you have a local peer group and like a physical peer group, sure, I know that Carl, there are ones that taking a foot in Ireland, because he talked about that before, if you have a legitimate maybe two or three other ifas or paraplanners, have a similar agent profile to you and Outlook, meet up with them from different firms and just chew the fat and just do it on a quarterly basis. But just do it again, because you'll just learn something from those kinds of things. And the final thing is ever as an auntie would Allah definitely agree with this, just just read Dale Carnegie, right? Just just just read in and internalize the lessons from Dale Carnegie, they have to give you one book. That will be where I would start. So

Andy Hart:

got a couple of final points on this question, please, Nicholas. All right. I just we talked we talked about content a lot people setting up blogs and podcasts, YouTube channels. Something that was said to me many years ago as part of the Content Marketing Academy, which is set by a good friend of mine in Scotland anyway, it's disbanded now. Any content project you take on you should think I've got committed to this for 30 months, which is two and a half years. So 30 months is what was bandied about with in the in the content space. So if you're going to do a podcast or blog, do something, do anything in the content relation space. Everyone else gives up too soon is the long story short of that. So if you're going to do a content project, then you should think 13 months in your head, you know, you're going to be talking to an empty room, you know, doing videos to nobody, you know, for months on months on end. But if you can stick it and go through it, tweak, learn, get better, or whatever you're doing, then hopefully there'll be something rewards for you poster poster. I mean, it might be quicker than 30 months. But that's what you should think going into it embarking into it think that is a long journey. It is not a quick fix. Pushing back on a point that Carl said about joining a good firm totally agree, you want to end up that good firm, what I do see issues with advisors, they're so new to the business and they end up too good firm too soon. And then they end up at a too good firm too soon, and they stay there for a year or two. And then obviously, the grass is always greener, they want to go somewhere else. And I say if you don't know what's out there, this is a good firm, you want to stay here. So yeah, you definitely want to end up at a good firm that's doing real financial planning. I'd started off, you know, somewhat gotta be careful not proper, real financial planning firm. But Jesus did. I learned a lot. So when I ended up somewhere decent, I was like, Wow, if I just ended up with that somewhat decent first of all, maybe me would be like, there's got to be like, way better out there No, like this. Is it this this? Is it. Like it's nothing better out there. That's

Alan Smith:

really that's really insightful, actually. Because you're right, if you if you are new, let's say your 20s or early 30s. I mean, the statistics are people just Nick sort of suggested earlier on, which is true people move jobs quite regularly. So natural things they a year, a couple of years, two or three years, you're bound to move on. Yeah. But you don't realize if you are a good firm, you assume everyone's a good fit. So I think this is quite good. But I've got another opportunity down the road or pay me a bit more money. So I'm just going to go there and I will No, you weren't a really good firm. There are very few reality harsh reality right now. There aren't that many, what we call real financial planning firms who do it consistently for a job anywhere in time on the job now that's that's insightful.

Andy Hart:

And also if you go to not so well established firm, you'll be in a client meeting straightaway. Like it's people at the door like guns. What me if like a good firm will be like now you've got to go through your process and you know, you're

Alan Smith:

frustrated. today. Yeah, like, yeah, short term versus long term.

Andy Hart:

I would say in anyone. Yeah, you're at the practice overpayments stage, you'll just want to like do it, you know, rather than worry about doing it the best place anyway. Yeah.

Alan Smith:

The other thing that you said there was right, you commit to 30 months completely agree with that fun fact, there are, I think in the order of 4 million podcasts in the world, and something like 30% don't have more than three episodes. And if you do true, and if you do if you produce more than I think 20 or 21 episodes, you're in the top 5% of podcasts in the world. We're not quite there yet boys, but will soon be in the top 5%

Andy Hart:

How many podcasts edible? How many podcast created the mind?

Nick Lincoln:

There's more depth than a puddle.

Alan Smith:

Only what only one in the world history. podcasts, there's only been one they got to Nike stopped Island who he is number

Nick Lincoln:

one. Okay, that's

Alan Smith:

money. Nick, just what just one quick. Okay, the things that I'll add before we wrap wrap this up. And we have talked a lot about digital, which is absolutely nailed on. It's precise. But there's, in this world of digital overwhelm, I think it's quite good to go back to some basics and do the opposite of what everyone else does. And one thing that I learned something, a mentor of mine very early on, told me to do something which I do do or don't do as often as I probably should do to this day, which is write handwritten thank you cards, and thank you notes. The impact of that is just incredible, versus an email or anything else like that. So getting invest in some high quality, thank you cards, pay the money for it, get your pen out and write a note that's meaningful to the person whether it's a client connection and a colleague, friend, whatever it might be, write a card, put a stamp on it, pop it in the post it is and people will not forget you if you do if you do that. That's it. I'm gonna

Nick Lincoln:

be comfortable with that. Okay, well listen, we're 52 minutes in the time absolutely does seem to I don't know how quiet it does, but it does seem to race by so I guess. Without any further ado, we can move on to our trapeze questions normally posted here by now. I can't have my magic she's appeared at the door. And yes, Carl, you know where her hands are. Voting soccer trapeze questions even here. The TRAPPIST have been stirring. They've been knocking out the questions over the last two weeks and if you want to knock one out as well go to the link in the pinned tweet at advisor podcast or even easier click on the link in the so called show notes. Your name your question, you will get out so we're going through them gradually. Now without any further ado, first one on the hit list of doom is his Yeah, is Josh. I think it's this envelope is really gummy. I've got to get the air we go Josh Gerstner JLaw, who is a young IFA posted me in WD six in Boerum wood. And Josh is on Twitter as at Tesla

Andy Hart:

is not exactly young Nick, he might be a little younger than you. I think he's

Nick Lincoln:

Joshua, the eighth to me, trust me with with with a young person who's on Twitter. As at Josh Gerstner. He's also on LinkedIn. And Josh says, What are your thoughts on back office systems? What do you use and why? And PS, a shout out to Nick and the WD crew, thank you for that Josh. Maybe I'll just go with this. And then we'll go through backup assistant, I think they're kind of something people feel they have to have. And I just think I'm not, I'm not sure you need them anymore. And I know, it's easy for me to say I'm a one man band, blah, blah, blah. But if you've got a decent platform, you've got a decent task management system that can have multiple users and people updating tasks, you know, various powerplants admins, you can see an audit trail on the task management, you've got a calendar system that everyone can join into. I'm not sure you need these great big, clunky, very expensive backup systems that were never built for financial services. They've always been built for other professions. And they've been trying to shoehorn into financial services. There are some interesting things going on in this area, some more fluid cloud based kind of properly financial planning orientated back office style systems. I'll wait and see what happens. But I've survived without one for for a decade and a half. So that's my thought on backup systems. But maybe if we asked Andy, I think you're all in agreement with that. So unless you've got something to add to that,

Andy Hart:

yeah, pretty much in agreement there. Yeah. I mean, I don't use the traditional backup system, but I use loads of different tech solutions that, you know, inadvertently speak to each other. So I'm really good at using my current setup and mean the team don't need a traditional bank. I throw in there zero as well, Nick, I think use fresh books creating. Yeah, so again, I've got a good yeah, I've got a good counts management system that tie up everything with my reporting requirements. So but the Okay, not traditional one, but again, I'm a one person and yeah, so the biggest boys

Nick Lincoln:

in the room in terms of the size of your firms and the number of our eyes and staff and so forth. Maybe, Carl, what are you do you imagine? I'm gonna assume you use a backup system? If you do. Is it one that we would understand and recognize in the UK?

Carl Widger:

Oh, God, no, it's very sophisticated. You can tear me up like that. Not to take advantage. Yeah, we have. We transitioned late last year, I think it was 10 new boys to Microsoft Office 365. The transition was a bit of a pain but we really are definitely reaping the rewards and the benefits of that now. So really, really good. We use tissue and twitches a CRM system designed by an Irish guy here which is really good and Then we use loads of other really, really good stuff that I've no idea what they're even called. Other than I have some fantastic people in the team here who know how to run them. So really I'm not I'm not the tech guy. Yeah, I'm

Nick Lincoln:

sorry, I shouldn't I shouldn't put you on the spot and ask software support your business, given that you're the MD Alan

Alan Smith:

boyband. Oh, interesting. Interesting that you refer to Microsoft Office 365 as a back office system or CRM? No, he didn't.

Nick Lincoln:

He just mentioned he mentioned CRM.

Alan Smith:

Alright, okay. Like you mentioned both that fine. Well, let's let that slide. Yeah. So there's been a bit there's been way too much agreement on this episode, a song and a disagree vehemently with you, Lincoln. Although, yeah, we are in different different styles and differences. They were in different leaves.

Nick Lincoln:

To shoot shoot.

Alan Smith:

Yeah, that will that as well. Yeah, we use we've we've had different you know, financial planning, IFA, what do you want to call it industry focused? Programs software program CRMs. Over the years, we are currently and have been for quite a number of years Intelligent Office uses IO, which is, as I understand it, hands down the most popular of all the all the systems out there. And it works for us. And what's interesting is over the years, I speak to different advisors and are, for example, in our mastermind group called Ideas exchange, and three of us in the UK are members or people often raise this. And everyone's very frustrated, and usually, you know, angry and pissed off about the systems not being perfect. So the here's some news, none of the systems are ever going to be perfect. In my humble opinion, I think a lot of advisors just get frustrated early on and don't use the systems to their full ability. I've got a fantastic team here, who've really sort of unpacked and understood and spent a lot of time in training and learning to maximize the efficiency of our our use of Intelligent Office. Is it perfect? No. Is it good enough? Yes, it's good enough now where we've got things like workflows, and something a leads to B leads to C leads to D, and you've got a number of different people involved doing different things along the way. I think workflow process management is really important, and you can't really well you, it'd be much harder to do that via, you know, I don't know, Google reminder systems, or whatever it might be, you've got lots of ways of creating robust audit trails, there's data information is available to us for our various reports that we have to do has a whole list of things and a bit like Carl, I am far from an expert, but the my, it is something because it's expensive. And every now and again, when I look at our invoice, I say, Do we really need this? And the answer loud and clear is yes, we absolutely do. It's the backbone to our our setup or operation. And I think the future is more about not looking for the ideal, you know, one off system that is so so good. It's about increasingly these things are all connected. So you can you can have in the past you would have they would all some of these systems had a cash flow model, it had a risk profile and a number of different things. And they were all pretty much suboptimal. So what you want to do is have one course that a backbone system that operates and have I've heard the phrases API's. I don't even I don't really know what it means, but it's connected to so choose your best of breed software for all the various functions and have the whole thing be connected and run well. So that's all of you. Overtake I

Nick Lincoln:

think that's given that a a good thrashing. We'll move on to the next one. So that is from Who is this one from Nick de Lhasa? This is another poor solder here. He's NIC. Who does that to your children to Lhasa? He's on Twitter.

Alan Smith:

Your parents told us why suffer Nicholas

Nick Lincoln:

Richard Lincoln with the burdens that we carry. He's on Twitter as at comrades, Nick and I see basic questions. So apologies for simplicity. But Andy often talks about only needing to use three products for wealth building, namely pensions, ISIS and unwraps investment accounts, unit trust. So I'm curious whether or not any of you guys always rarely or never use investment bonds either onshore or offshore in your planning with clients. And if so, in what scenario is really great down in the weeds question. And Andy, we'll start off with you please.

Andy Hart:

Yeah, generally only inside trust but yeah, for most clients, generally try and avoid it even with the new CDT changes coming in. But I've had a look at it, and will continue to monitor but yeah, I'm sticking with the higher vanilla products.

Nick Lincoln:

Yeah, that's a fair point. I likewise, the CGT regime in the UK is getting less enlisted still seems pretty generous if handled correctly the tax rates in general. And I just don't want to be back in the world of investment bonds and life insurance contracts and life insurance companies and that bloody awful tax calculation. So I use them occasionally for trusts. And that's it. Alan. Was the investment bond concept onshore and offshore?

Alan Smith:

Yeah, I'm not. I'm certainly no deep expert on this. But I don't think we've ever used an onshore bond product and receive advantage offshore bond wrappers. Yeah, from time to time, we would use that there are some advantages, there are things that you can do like. I mean, the tax deferred, you know, withdrawal is can be an opportunity. Assigning segments of bonds to non taxpayers to propre and catchments, things like that there are a few, it is kind of niche and a bit specific. But an army is not a mainstream product wrapper for us at all. But there are some particularly, yeah, wealthy clients. And yeah, I've used all your CGT allowances and a few other things. So just gives you a few more options. I think we've got the ability to time when you pay tax, you have a more of a an option to mitigate or minimize it as well, as well as all the other thing. Again, this is a bit like the VCT conversation, assuming you've done everything else and max that every other sort of non mainstream legit tax structure, I think there can be a place for offshore bond wrappers from Yeah, that's a

Nick Lincoln:

good answer. It's funny how incentive dry things when I came in as an IFA in 2001 investment bonds were like they were the standard. That was the kind of you do the pension, you do a PAP as it was then and then you do an investment bond, you'd never do a DIA funding investment bonds paid commission of up to 678 9%. And when we had our RDR in this country, the sale of investment bonds fell off a cliff strange that call in your world where there is still commissions and so forth. Investment bonds, are they are they regular go to product?

Carl Widger:

Yeah, 100%. So they are, it's hopefully the industry is changing. But until it does, it's still an industry. It's not a profession. You can invest clearly on platforms, and then you don't have to pay like a government Levy and that kind of stuff. So hopefully, the the investment business here in Ireland matures a little bit over the next while but

Nick Lincoln:

you keep fighting with my good friend,

Andy Hart:

maybe Nick, maybe Nick Anala. might know the answer this question, Carl, maybe? I mean, what's the history of investment bonds on an offshore bonds? I mean, they wouldn't be invented today. Why are they invented before? Why why they caught between this murky world of being an insurance contract versus an investment contract.

Alan Smith:

Yeah, so whole of life, non qualifying life insurance policy. It I mean, it, it tracks its origins back, I think the beginning of life insurance 750 years ago. Yeah.

Nick Lincoln:

You know, it was a way for the insurance companies to get into the the investment management business, wasn't it? But we thought, okay, we can have 5% the original capital back over 20 years, and it's tax deferred all these who sat down one day,

Andy Hart:

and you can have 1000 segments Yeah. 1000 segments bank? And is it Are you are you doing a partial across all segments or individual cigars? And it's like, oh, that's

Alan Smith:

a whole other story. You don't want to go that the complexity level because we rock in that one wrong. big tax bill.

Andy Hart:

We do no other advisors are massively pro offshore bonds. I mean, they deal with Yeah, let's call them high net worth clients super high net worth wherever you want to flavor the day sort of description term is. But yeah, they're very, very pro them. Yeah. And I know a lot of advisors that are very pro offshore bonds. And these are clued up advisors so they're not doing it for commission or anything like that is CJ same

Alan Smith:

advisors. Doing a lot of this what we recommend a lot of VCTs as well, that these notes are short, I think there's a place for them. There aren't they are niche, but they I wouldn't rule them out completely offshore bonds. I'm sure I can't remember I might miss something. But I can't really see the benefit of this onshore structure. We don't have the same Well, mate. Well, anyway. Hold that question. Sherman was a

Nick Lincoln:

final question that we've got I think is this Scott to South African stamp on it. Looking at the envelope so this will be from our good friend Lunch Club dirt. grill on a valve which I guess is a Dutch heritage is again, it's a car crash of a spelling. I'm not gonna read out but we love you duck. Duck you're on. You're on Twitter as at dirt grown a belt. Now that helps anybody really Lunch Club Turkey when it comes to building a business by bringing in younger planters. What is the best way to remunerate them and also allow enable them to buy equity in the business without simply the founder supplying the funding. What red flags should one look out for through this process? Right and in is sitting this out Allen Andy Carlyle, they're gonna have a stab.

Alan Smith:

I mean, this is, uh, this the big this, this could be a meat and potatoes subject in and of itself. So both for the time limitation we've got. Yeah, so it's really tricky. First of all, this thing about buying equity in the business. So what's happened over the last dozen or 20 or so years is huge amounts of value have been created in financial planning businesses, and then now worth even sort of mediocre businesses are worth hundreds of 1000s if not millions of pounds. And the opportunity for an advisor or a sort of junior or a younger person in your team to purchase it at fair value, even with a discount, or a significant discount, I just think is out with the realms of reasonable possibility. So so someone could buy, let's say, 2% 5% of a business, but it's gonna cost them? I don't know, just make up a number of 50. I haven't done the math but 50,000 100,000 pounds? I mean, really, are you going to allocate that from your, you know, we've referred to already about the early stage, financial planners and early career people, most haven't got access to that money or capital, obviously, most would be reluctant, I think, to borrow it, to say I now I'm the proud owner of 3% of a small, privately owned, you've got a tiny minority stake, I don't really see that working successfully, either. For anyone, the alternative is giving, giving them shares. I don't think that's reasonable fair, not reasonable to the founder of the business, and it does certainly in UK create some significant tax implications if you do so. I do however, believe in God aligned goals and incentives, there are a number of different kind of options type structures that you can create, I don't have the time to go into it now. But things like growth shares, there's a number of different strategies with that without overcomplicating it as well. There's a good I can't I forgotten the name of them now there's, there's a company does all this stuff got a good online website, we can put a we'll put a link to it begins with Vive, not Virtus but someone else. But they do a lot of this stuff in the UK. And you can create schemes using digital and we want to help Dirk in South Africa. But there might be an equivalent over there where you can be a little bit more creative about creating equity ownership in a business rather than somebody have to literally write a big check for it they can't afford and don't really want to take on debt to do so. The other question he raises how to compensate people. And again, that's how long is a piece of string? Ultimately, every business has to run profitably, what value does the person add to the business? Um, you know, what are the what are the what's the competitive marketplace out there, but what are their skills worth out there. So my advice to the advisor in this situation is just make yourself irreplaceable, which comes back to being able to build and grow a client bank, and be able to engage with human beings be able to do all the right things such that your employer will pay you kind of higher than higher higher than market rate. When I started all those years ago, there was there was a rule of thumb, which was kind of a third, a third, a third, which the adviser received a third of the total revenue attached to the clients who looked after the company who owned the business, or the owner got a third of the gross revenue to cover the overheads. And the third was used to pay the overheads, you know, all this sort of operational stuff that goes on, that remains not a million miles bad rule of thumb is probably a bit generous, because there's a lot more costs now than it used to be in terms of compliance and all this sort of infrastructure that applies. But that's a place to start really, for some is running a book of business, whether you know, 200,000 of ongoing or revenue of any description, then maybe 20 to 30% of that might be a starting point for the discussion in terms of in terms of comp, of course, it depends on what what all the other benefits are, that the employer provides. So not a crystal clear answer, but it's not it's not okay. It is

Nick Lincoln:

called Do you have any input?

Carl Widger:

Or do you know what this is? This is it's impossible to answer. Because there are so many answers. Even talking, Alan was talking about, you know, growth shares or whatever. There are so many tax implications around all of that. Yeah, I don't know if I can succinctly give an answer here that will actually benefit I. I'd be very happy to talk to Dirk directly on this one. But I assure you, I've tried pretty much everything over my long and very career.

Nick Lincoln:

It seems to be recording. I don't think we're gonna you're gonna say something. Yeah.

Andy Hart:

I'm a fan of own 100% of the best Keep It Simple just pay them really well. Next

Nick Lincoln:

Yeah and also with Dirk, of course, as as Alan alluded to and carta degree you've got this the different tax situations you know there's different tax situations in the UK to Ireland as there is to South Africa so it's really is a really is a deep deep conversation. Okay, so there's three more quest three more trappers questions that we've we've cleared out of the sack so please do submit your TRAPPIST questions if you have one that link in the so called Show Notes or the link at the pinned tweet at advisor podcast. Without any further ado, let's move on to culture corner. And we've got four here, I'll go first just get out of the way. So there's another Money Money podcast out there this this is one of the pretty awful ones the FT money Show podcast. But I just have it there because now and again the someone on who's vaguely interesting and they have someone on who was vaguely interesting Stuart Kirk, the ex head of sustainable investing at HSBC who got Well, I think he got he got sacked. He made a speech last year in in which he made that he made some sort of offhand sort of risque comments for someone in his field. But actually what he was saying was pretty common sense that they were the one thing that he talks about the podcast was the quote he made in his speech was saying, Well, who cares if Miami's underwatering in 60 years or 100 years, because we'll find a way around it. Amsterdam has been underwater on a lower than the level of the ocean for hundreds of years. And human ingenuity gets us through these things. But that didn't go that's not what the audience wants to hear. And that's not what the zeitgeist wants to hear. So he got sad, but he was quite good on this podcast, just very transparent. The guy is very, very honest about his situation. He's been divorced. And he's got a column now in the FT where he just talks about his investment decisions through his sip and all he has got in the world is his sip. And he's and he talks about his own money situation in a way that British people don't generally do. And I imagined Irish people don't generally do as well. And he says, all I've got as my sip, it's worth 471,000 pounds. That is my worth after my divorce. And this is what I'm doing with it. So it's quite engaging, guys. There's a link to that in the so called show notes. Mr. widger, you have a culture corner item for us.

Carl Widger:

Yeah, I actually think I might have put this one up before, but it cropped up this week, because Stephanie bulgan put out a tweet. Everybody should follow Stephanie. She's very interesting and follow life and has been there done that in terms of real financial planning and bought and sold firms before. Share swap book, would you recommend to a business looking to grow or expand? I said Cameron Herald vivid vision. It's a short book, it's really impactful. And if you are looking to grow a kind of business, like ours, I think is a really, really good starting point for everybody. So that's why I recommend Cameron highroad.

Nick Lincoln:

You have Morgan Housel, though the guy who just can't get enough lunches with you and Mr. Hart

Alan Smith:

here, not again, Morgan, come on. Just before I do, I've just remembered the name of that website back to Dirk is called vested v s. T. D. On if he wants to know about share schemes and so on. So that's just an extra culture corner for you for those in that game. Yes, mine was, I am a fan of I know you might not be in it. I'm a fan of Professor Scott Galloway, and all the stuff that he puts out. He's, yeah, he's a he's a professor of marketing, I think in New York stone University. He's recently become a neighbor of mine who've moved has moved into my neighborhood. He's moved from the states to London. And I know, he's, he's, yeah, I'm hot. Yeah, I'm stalking him. I'm walking around Regent's Park have a morning to see if I can bump into him cuz he walks his dog there regularly, according to his Twitter profile. Anyway, he has got a really good podcast, I think and the interview is really interesting people. And his most recent one, though, he does he interviews Morgan Housel. Most people listening to this podcast will at least be aware of Morgan Housel. He has written in my opinion, one of the one of the best books on personal finance called the psychology of money. And yeah, that's the most recent episode of the prof. G. Professor Galloway podcast. Really good, really insightful. Definitely worth you know, 50 minutes of your time to tune in great stuff. Yeah,

Nick Lincoln:

I got away I kind of like administers it. Another one has got Trump derangement syndrome. And he just goes off on one hand, it's like Sam Harris. They've just lost their bearings a little bit when they get into that area. Mr. Hart you have the final culture corner item I think.

Andy Hart:

Yeah, Prof. G. I read his blog every Friday quite religiously. I think it I think it's decent. I also went on one of his courses a couple of years back so yeah, big fan of his work, mainly his written work and he's got great graphs and charts in his in his two emails that he issues every week, so I recommend you subscribe to them. My recommendation

Carl Widger:

invoice the two boys applying for lunch days with what profit.

Andy Hart:

Island goes in the morning and I go at lunchtime. So we've got the whole day covered in in Regent's Park. One day we'll see him one day, one day, we'll grab him. Just like I ran into Terry Smith. And that went successfully. Well,

Alan Smith:

I'll share that another time. So,

Andy Hart:

so my recommendation is Charlie Munger. I'm a huge fan of Charlie Munger and Warren Buffett, obviously, they work together. But Charlie also is the chairman of another company called the daily journal. And every year, he sits down with the shareholders of the daily journal and answers questions like he does with this, the Warren Buffett for Berkshire Hathaway, but he does it on his own. With the current manager of the daily journal. A couple of weeks ago, it came out the 2022 meeting, published in 2023. So search YouTube, and you can find it there. The interesting thing, they ask questions on the fly to Charlie Munger, and one of the questions came in from one of the shareholders base somewhere around the world, but the shareholder use chat GPT, to ask a question of Charlie Munger. And the question was, you know, what's the number one mental bias that people struggle to overcome? And chat, GBT came up with this question. And Charlie Munger says, After a little bit of thought around that he said, I think the number one, but mental bias for people to overcome is denial. And then he went on to talk about denial in some detail. But he made he made specific reference to the wealth management industry, where the whole business of wealth management, investment management specifically, and you know, the destruction of wealth versus just leaving it in the market and obviously, charging heavily, you know, that's obviously why, you know, you're never going to beat the index over a meaningful period of time, because, you know, helpers help themselves to fees. That's what they all say. But he goes on and on and on about extreme denial in the wealth management business where a widow comes to someone with 500,000 pounds, and they're going to charge on 1% a year. You know, the person does what's good for them, not for the client. And him and Buffett have got a real real thing about this at the moment. But yeah, I thought that was quite interesting. So my recommendation is Charlie Munger daily journal 2022 meeting. But I thought that was interesting that they use chat GBT to ask a question that he thought was a very good question. Then he answered it by saying the biggest mental bias to overcome is denial. That's it. Nick, over to you.

Alan Smith:

Just before you take off, Nick, it for those who the vast majority of people consume this podcast on audio, a few a few watch, on YouTube, a growing number. If you watch on YouTube, you just look at Nick's face. When people mentioned certain words or phrases to to judge his views on it, Andy mentioned chat GPT is faces. Look what his face is just so fairly, the owners said Yeah, exactly. There was another one. Hilarious.

Carl Widger:

And then also, they'll also see that I was deeply uncomfortable with the content of some of today's blog he has, always to the Irish versus UK cultural differences, which are enormous, which I'm always trying to tell you by the domain. I'd like to apologize. I would like to apologize.

Nick Lincoln:

The domain is a boy band. It's a credit card. It's not a debit.

Carl Widger:

Okay, we're up wrap it up.

Alan Smith:

I think we do. We should say just before we finished we should do a shout out to the Irish community who are fantastic. We also have spent plenty time over there. Because guess what last time we looked this podcast against all the odds was number eight and the top 10 podcasts in Ireland with all with Prof. G and Tim Ferriss, and all this sort of Steven Bartlett, the top podcast. It might not be after this episode goes out. Currently, we're a top 10 pod in Ireland so incredible. Thank you. Thank you, Ireland,

Carl Widger:

except has gone from eg easy.

Nick Lincoln:

Okay. Thank you Travis for your precious time and your input into the show. raters leave a six and a five star review on iTunes like and subscribe on the You Tube until the next time from the trap pack. It's an EOS and take care out there folks. Goodbye.

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Nick Lincoln

Host
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Alan Smith

Co-host
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Andy Hart

Co-host
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Carl Widger

Co-host

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