Epi 14 Lawyers and Wealth Mastery: Strategic Insights for Financial Management
Apr 16, 2024
Todd Whatley and Ian Weiner
Unlock the keys to mastering your financial future and avoiding common wealth management traps with our latest discussion, tailored specifically for attorneys. Ian joins me to dissect the vital reasons why complete financial transparency, right down to sharing tax returns with your planner, is not just beneficial but essential in creating a solid financial strategy. We expose the pitfalls of confusing actual financial planning with mere product selling, and the dire consequences this confusion can have on your practice and personal wealth. You'll gain invaluable insights into how a detailed understanding of your financial landscape, from hidden assets to surprise income, can prevent malpractice issues and secure your economic well-being.
The conversation takes a deep dive into the strategies that can optimize financial management and investments, emphasizing the importance of aligning your financial portfolio with future aspirations, not just past achievements. We don't just talk about the smart use of debt as a wealth-building tool; Ian sheds light on the often-misunderstood concepts of leverage through responsible mortgage planning and the power of non-direct recognition assets, like real estate, to supercharge your return on investment. Prepare to have your perspective on managing cash flow, investments, taxes, and debt revolutionized, especially when faced with unexpected income scenarios, as we guide you through creating a financial process that can withstand the surprises of life and the legal profession.
Unlock the keys to mastering your financial future and avoiding common wealth management traps with our latest discussion, tailored specifically for attorneys. Ian joins me to dissect the vital reasons why complete financial transparency, right down to sharing tax returns with your planner, is not just beneficial but essential in creating a solid financial strategy. We expose the pitfalls of confusing actual financial planning with mere product selling, and the dire consequences this confusion can have on your practice and personal wealth. You'll gain invaluable insights into how a detailed understanding of your financial landscape, from hidden assets to surprise income, can prevent malpractice issues and secure your economic well-being.
The conversation takes a deep dive into the strategies that can optimize financial management and investments, emphasizing the importance of aligning your financial portfolio with future aspirations, not just past achievements. We don't just talk about the smart use of debt as a wealth-building tool; Ian sheds light on the often-misunderstood concepts of leverage through responsible mortgage planning and the power of non-direct recognition assets, like real estate, to supercharge your return on investment. Prepare to have your perspective on managing cash flow, investments, taxes, and debt revolutionized, especially when faced with unexpected income scenarios, as we guide you through creating a financial process that can withstand the surprises of life and the legal profession.
Speaker 1:
Welcome to the Lawyer's Money Show with your hosts, todd Whatley and Ian Weiner, where finance meets the legal profession. Here we dive deep into the economics of law practice, from managing your firm's finances to optimizing personal wealth strategies for legal professionals. Every episode we bring you insights, strategies and stories from leading experts to help you navigate the financial landscape of the legal world. Stories from leading experts to help you navigate the financial landscape of the legal world. Stay tuned as we uncover the tools and tactics needed to help lawyers make the right money moves so they can grow their career, manage their practice and optimize their wealth so they can focus on enjoying the life they've worked so hard to build. For more resources, visit us at wwwlawyerstotalplancom.
Speaker 2:
Hey, welcome back. This is the Lawyer's Money Show, and I am here with my co-host, Ian Weinerman.
Speaker 3:
Hey, how are you, Todd, doing? Well, I'm excited about this one. This is going to be a good show. I'm going to kind of I'm going to surprise everybody, I think Okay well, this is right up his alley.
Speaker 2:
So we're explaining to you what our services are Basically. Why should you hire us? In our last episode, we introduced what we're calling the 90-day sprint. We talked about not every service, but we quickly went through a lot of our services, and so this podcast I wanted to focus on the wealth management financial strategy thing that we talk about, and we as attorneys, we're out there billing by the hour or billing flat fees, and our goal is just bring in as much as we can pay the bills, and then, not real sure what to do. Hopefully there's some left over. And then now what? And Ian has opened my eyes as an attorney, to some of the incredible, interesting financial products that are out there. And so let's kind of start at the beginning, ian, and talk about what we're going to do in the 90-day sprint. One of the first things we're going to do is get their financial stuff. What does that include?
Speaker 3:
There are so many pieces to this, sure, so this may be surprising to some folks. So technically I'm a financial planner. I'm a certified financial planner. Sometimes I'm called a financial advisor. You don't like that word, I don't love that word, because anybody can say they're a financial advisor, just about, and hopefully soon. Financial planner is a protected title. My industry is working to get that done. We met a gentleman at the office yesterday for Todd's estate planning firm who works for a large, well-known insurance company, who described himself as a financial planner. And I doubt that he's a financial planner. He sells insurance products.
Speaker 3:
That kind of makes me you tone that down greatly. It makes me a little bit frustrated. Sure, in my world it's the equivalent of someone taking a business law class in college and then saying that they're like a corporate counsel, yeah, and it's like okay. Okay, that they're like a corporate council, yeah, and it's like OK, we're in different leagues here, you know. And so there's some misrepresentation issues at some point and that's a different issue. But I just want to say, if I'm saying all of that, to say if this sounds like a lot of information, I want you to keep that thought in your head. Why does this sound like so much. And I'm going to tell you why that's really important, because I don't know a time where I've ever worked with someone and they've been like wait, this is just the normal information to give to a financial advisor, like I'm going to ask for a lot of stuff, but it's because I can't even begin to do my job if I don't have it.
Speaker 2:
And one thing that surprised me that you said if a financial advisor doesn't ask for this one thing, they purely emphatically are not doing their job, right? Yeah, and that's a tax return, yep.
Speaker 3:
So, before you turn this off, let's just take a deep breath. Okay, take a deep breath, but I want you to think that you know, if you have a financial advisor, investment person, have they asked for your tax return? I want you to think about it. I'm going to. I told you I might make people a little mad on this one, that's okay. Odds are probably not Now the reason that this is important in my world in order to give investment advice.
Speaker 3:
If I'm giving investment advice, it is done under what is called a fiduciary standard, meaning I have to do what's in your best interest. If I don't understand all of the different pieces in your financial world, how can I possibly do what's in your best interest? It's actually impossible. It can't be done. And one of those critical pieces is the tax return and what we find on the tax return. There's a handful of things we find. Typically, I'm going to find places that you're getting interest, whether it's bank CDs. A lot of times with some of our older clients, it's bank CDs, bank accounts that they didn't tell me about investments. If you have private investments and get a K-1. But all of those things can. If there's foreign investment income, all of these things can get really messy with investments. And if I don't know that and we put something in your portfolio and I don't understand the entire picture, the entire portfolio, it doesn't mean that I have to have every single dollar in my under my purview, but it means that I've got to know about it and know where they are, because if I don't, then we could be doubling up something, we could be missing something, and that's a malpractice issue in my opinion.
Speaker 3:
So tax returns are something that's critical. I've got to see it and there may be nothing to find there. I mean, there's not like secrets there, I just need to see the pieces that you have, and a lot of times people forget about them. Like, oh yeah, I got a hundred grand over here that they forget about and it's like, oh yeah, okay, well, you're paying this much in taxes because of that. What if we just, you know, simplified it Like, oh okay, so typically. So, besides, just it's bare minimum to be able to do the job. I'm also going to find opportunities in there and you may or may not know this. Sometimes tax preparers are kind of lazy. They're like don't want to do stuff that's like a little bit outside the box, which is 100% legal but a little bit outside the box and we can find those things Okay. So that's a bare minimum, but of course we've got to see investment statements. I want to see, I want to know what, if you have. I want to see the latest mortgage statement that you have.
Speaker 2:
Hold on there. What's a very common thing that you're finding when you look at investment statements, particularly from some of the most well-known green logo investment?
Speaker 3:
people, yeah, so there's a pretty good chance that if you have X, Y or Z firm, I can pretty well guess what's in your portfolio if I know what firm you have, and I don't want to make you mad with that. But the idea is there's a difference between a financial advisor, an investment advisor who sells investments, and a financial planner.
Speaker 3:
And, most of the time, what you're going to have if you've got, let's say, fidelity. My uncle worked at Fidelity for a long time, so I'll beat them up. They're the big green machine. Odds are you're going to have Fidelity funds. That's not necessarily a bad thing. However, there may be some other tools or some other products that you should have in your portfolio that, because it doesn't have their name on it, they're not going to sell you, and a lot of times, there's not transparency about what you're actually paying and what the fees are for that service.
Speaker 2:
Have our listeners looked at your mutual funds to see what stocks are in your mutual fund? If not, that's always thrilling. Look at that and then look at your other mutual fund that your guy recommended that you have, and there's a very good chance you're going to have a lot of duplication there. Why?
Speaker 3:
Yes. Well, the main reason is this is very common in almost every portfolio that I see the last 10, 12 years in the United States, large cap growth tech companies particularly have done well Historically. It's somewhat of an anomaly, which is interesting. We can talk about that another time. But investing somewhat happens, is a little bit cyclical. But there are certain things that over time can tend towards higher expected returns. But the last 10 or 12 years what's happened is large cap growth US stocks these tend to be tech stocks have done really, really well, and so what's interesting is most portfolios are overweight large cap US growth stocks in the tech industry. Now here's what I want to ask you Common sense, don't be trying to think like this isn't a trick question. Do you think what happened in the last 10 years is likely to repeat itself in the last 10 years? Is likely to repeat itself in the next 10 years? No, what are the odds? Yeah, very small.
Speaker 3:
Now why might the portfolio look like the last 10 years? Because when the investment person is either selling you new stuff or trying to show that what they did was valuable selling you new stuff or trying to show that what they did was valuable, they're looking back at past performance, and past performance isn't always indicative of future returns. And so this is just a really funny, interesting thing Most people that sell investments, what they're selling is past performance, which is really kind of interesting when you think about it. I'm kind of telling you that a lot of the investing stuff the charts and the graphs and the numbers are kind of can I say BS. Okay, it's kind of tricky.
Speaker 3:
So what ends up happening is you get a handful of funds that look exactly the same, because that's what's done well in the past.
Speaker 3:
Now we're going to talk about there are certain principles, certain things that we can do that historically have done well, that we can expect reasonably to happen in the future. Look, the future is not going to be exactly like the past. Sure, and I think that's what's important If we align ourselves with the principles of good financial management and don't try to time the markets and time everything we can do really well, but the reason that the portfolio looks like everyone else's portfolio is because that's what's done really well in the past 10, 12 years, and so what happens is you'll have five or 10 different funds I see this all the time that have essentially the same stocks in each one. They're just called something a little bit different, and so when I pull all of the stocks in your portfolio and the ownership percentage is out, you're owning essentially the same thing five or six times over, but you're just paying additional fees for it, and it feels like diversification, because you've got a lot of stuff in there, but you're really just paying for the same thing over and over.
Speaker 1:
Yeah, so there's fees with those.
Speaker 3:
And there's fees with them, and so what I'm telling you is that's suboptimal, but it's that way, because what they show you, what they have to show you to try to justify their value, is what past performances look like. That's not always going to be what's going to be in the future.
Speaker 2:
And so it's a tricky thing. Yeah, I just found that interesting and that's what you have seen numerous times, and so we're going to look at that and see are you duplicating, Are you paying excessive fees? I know one thing that you looked at mine was you're paying a lot of fees for things that aren't particularly doing that great.
Speaker 3:
That's always an exciting one.
Speaker 2:
Yeah, that's always a fun meeting.
Speaker 3:
And look, our business is charging fees. Let's be abundantly transparent about it. We charge fees to provide service. But if we're going to charge a fee, there has to be a good reason to pay that fee. Yeah, show the benefit. So there has to be a good reason to pay that fee. Yeah, show the benefit. And in investment management, there are fees that make sense and there are fees that don't make sense. So in a lot of cases, you're going to have fees that were put into place in the 1940s that maybe don't need to be there today, and that's not an exaggeration. A lot of the fees that people pay are what were put in place in the 1940s, so we can bring you into the late 20th, early 21st century in terms of investing and probably save you money.
Speaker 2:
Well, and what was done back in the 40s was done manually, and so, yeah, that costs more money and there were more fees. Now a lot of it can be done electronically for way less money, and so we can help to do those things.
Speaker 3:
And so the big thing to think about when we talk about investments is we'll look at your portfolio and we'll show it to you in a way that you've probably never seen before. It'll be a third-party, objective view of the portfolio. What do you own? How does it work? What are some of the technical details about it? I'll give you enough to be comfortable, but maybe not dangerous, and explain it to you in a way that I think will be a lot simpler than you've ever heard before. But the question is going to be if you were buying that portfolio again today, would you Right? And is that the right portfolio for you to own into the future? Okay, and if those things aren't aligned, then that's when we rebalance. That's really all it is Sure.
Speaker 2:
So when you go to the doctor, they're going to look at a number of different things, and so what we're going to do is we're going to assess your financial health let's say and so that's income streams, expenses, savings, investments and debts yes, okay. Income streams, expenses, savings, investments and debts yes, okay. So we're going to go through those and look at each one individually and try to figure out exactly what your goals are, what the objectives are, so talk about debt. I was surprised.
Speaker 2:
And do some benchmarking there Let me put it that way Okay, yeah, so benchmarking to say here's what in general should be happening and here's how you compare to the benchmark. I think one thing I was surprised that you brought to the table in my situation was you have relationships with companies who loan money. Okay companies who loan money. You don't just deal with the money that you have now, but you have relationships with people who are doing some pretty innovative debt things. What's that called?
Speaker 3:
Yeah, so we have a service that we work with that they do essentially debt management as a service for financial advisors, which is really interesting, and it's something that I pay for. I don't actually make money on doing this. I have a lot of technology that I pay a lot of money for to help optimize these things, but I think debt is something that's really interesting because it's a tool and, like any tool, it can be used well or it can be used poorly. It can be used for destruction or it can be used productively for construction, and so we have to just understand that Some people have different tolerances for using debt, or leverage is another way to say it.
Speaker 3:
The D word is a bad word for you, but debt is not or leverage is not inherently a bad thing. We want to use it responsibly, and if it's used responsibly, it can enable massive growth. It can enable you to be able to do a lot of really cool things, but if we're not looking at it and addressing it, it could be a big part of your life In some cases. I mean, you might have a fairly big piece of debt attached to maybe your largest asset, which is your home.
Speaker 2:
Well, and I was raised in the day of get everything paid off and I listened to Dave Ramsey a lot and his big thing is pay off all your debt. But if you think about it and I'm going through this process selling one home, buying another through this process, selling one home, buying another and appropriately using debt means I'll get to live in, say, a $700,000 house for $100,000. That's a pretty good deal. Let a bank or some mortgage company hold the rest of it, but I get to live in a really nice house for just a little bit of money. It's oh okay, that's one way to think about it.
Speaker 3:
This is what's great about our system? You don't have to buy the house. You know, one bit at a time, yeah, in cash. You know you can capitalize things. You get to live in all of the house. It's massive, well, and this is something where we need to have a whole show on this.
Speaker 3:
But there are certain things, certain assets, that are called direct recognition assets. So a direct recognition asset would be like your checking account. There's $100,000 in it and you get 2% interest on it. You get $102,000 at the end of that period and if you take $2,000 out of it, well, now you have $98,000 if you started with $100,000. That is a direct recognition asset. What happens is what happens. Your home is not that way, your home. There are other assets, certain investment vehicles that are called non-direct recognition assets. So if you let's say in your case, you know let's make the math a little easier for me, I'm doing it on the fly here but let's say the home is $500,000 home, okay, you got $100,000 in it that you put into it. Your down payment was $100,000. Your investment is $100,000. Sure, okay, you got $500,000 house, $100,000 in cash, and let's say that it appreciates at 10% in that year. Well, did you make $10,000?
Speaker 2:
No, no, I made $50,000.
Speaker 3:
You made $50,000. Which is a what I mean. That's technically, that's a 50% growth of my money, 50% return on the equity, not 5%, not 5%. Yeah, interesting. So a home is a non-direct recognition asset, and so here's a simple way that we can think through this. Now, let's say you've got half a million dollars and you want to buy investment property. You could buy one of those homes for $500,000. And if it goes up by 10%, well, you made 10%. Or if you bought five of those properties again, I'm oversimplifying this for the sake of the podcast. Please don't email me and say that there are different. I know there's complexities here, but you take $100,000 and put it into five houses and they each go up by 10% on average. How much did you make? Way more than 10%. So so the same 10 on the same, you know, five hundred thousand dollars.
Speaker 2:
Yeah, it provides leverage the bank doesn't benefit in that they, they agreed we're going to make this interest rate from this payment and that's all they get.
Speaker 3:
You get everything else so this is an example of that's a direct versus non-direct recognition aspect, very interesting and so when people hear that, they're like, oh my gosh, that's magnificent. There's other things that can do that. We can talk about these things, but what I need you to understand is that doesn't have to be bad. It is bad if it's used improperly Like a hammer can be used improperly and it can be a very bad thing. A lot of murders have occurred with a hammer. Okay, yes, but when they're used properly, it's a very efficient tool.
Speaker 2:
It can build a beautiful house. It can build a beautiful house, yeah.
Speaker 3:
Or five, you know, if you understand direct and non-direct recognition assets, you know that's true. So, but we want to understand the use of debt that you're comfortable with and how to create a process for that moving forward when it comes to managing your finances, managing wealth. We want to have processes Because if you're a human, even if you're a lawyer, you have emotions. I don't know how else to say this. I feel like lawyers won't get mad at me if I tell them the truth here, but humans are not rational creatures. No, we're emotional creatures. Most lawyers know that we have rational moments, but primarily, we are having emotional, emotional, uh experiences, and so if we build systems that are built to help facilitate better decision-making when emotions are high, the outcome tends to be a lot better.
Speaker 3:
So, in order to do that, we've got to look at all the pieces. So investments matter, taxes matter, debt matters, cashflow matters, and what we need to do is we need to create a process and an order of operations here. When this thing happens, we're going to do this when you get a process and an order of operations here, when this thing happens, we're going to do this when you get a bonus or when you get a big, great case that comes in. Where's that excess money going to come in, above and beyond the other things, where's it going to go? And if you've pre-decided where that's going to go, maybe it's paying down the mortgage, maybe it's invested in something else, maybe it's reinvested in the practice, you're not going to you and that really, really helps to help you to be able to take advantage of opportunities and not mess up and make big mistakes, and we can do it in a relatively clinical way, okay.
Speaker 2:
Yeah, beautiful. So if you want a taste of this okay, we are talking about the 90-day sprint and we'll talk about the price of this in just a second. But if you want some of the cash management tools also known as budgeting or a robo-advisor, things like that I highly recommend that you look into our basic plan, which is the Lawyers Money Membership, and it's $79 a month. Okay, if you pay a year up front, it's $99 a month. If you do per month, you know by the month. And part of that membership is you get some time with Ian. He will sit down and go through this with you and make sure that you get the best use out of those tools.
Speaker 2:
Think of it as like a financial checkup, wellness check. It's a lot of do-it-yourself, but it's tools that you would pay for elsewhere. This is all included in this fee that will get you introduced to us, but our goal is, if you do the sprint, at the end of that, it's going to basically give you an analysis of where you are right now and what you can do in the future. So it's hopefully the beginning of a transformation in your life to say, okay, I'm going to be purposeful with every dollar that comes in every dollar that goes out. I'm going to look at this and I'm going to do this with purpose from this point forward, and so that is one part of our 90-day sprint. You just grabbed your book. Are you going to say something profound now? I don't know.
Speaker 3:
I kind of like it. Okay, we want to come in and act as your personal CFO, chief financial officer. We're going to help you simplify your wealth, to amplify your life, simplify your wealth to amplify your life.
Speaker 3:
I didn't tell you I was going to do that, you didn't. I like the way that comes across, though, at least to me, that language matters, because when we can simplify this decision-making process and feel comfortable about the way that you and your family use money, you really can amplify your life and spend your time where it matters. Yeah, yeah.
Speaker 2:
I encourage you to go to our website LawyersTotalPlancom and go under the blogs we have written. I'm sitting here going through this blog for notes to make sure that we discuss this. But yeah, in some spare time, go to our website, look at the blog. This one is called the Financial Overhaul Transforming your Wealth Strategy in 90 Days. So on this sprint, our fee after the first five is going to be $12,000. Starts at $12,000. Starts at $12,000.
Speaker 2:
If you have a big firm, we're going to negotiate that some, because it's going to be a whole lot more work and it may go to 120 days. Whole lot more work and it may go to 120 days, or you know we'll. But basically the 90 day sprint for a normal, you know, five lawyer or less firm looking at this is going to be $12,000. But we're offering, until we do the first five, for $3,000, 75% discount. So if you call us or email us very quickly and you're one of the first five, we're going to do this for $3,000, which I had to basically tell Ian we were doing that. He did not easily agree to that.
Speaker 2:
We are basically pretty much losing money at that, but we want to get some folks in, get stories, get some experience, hear from you how we can improve this. So you're kind of a guinea pig, okay, but for $3,000, I think we will definitely make a difference in your life and we will definitely save you five times. I think we'll still save you five times 12 or $60,000 worth of savings and you get it for three, 3000 bucks. But we are absolutely serious. We're just doing this for the first five people. Yeah, this isn't one of those promo things. This is not a promo.
Speaker 2:
Let's get started. Bring you in, yeah. Trust mean is not going to do that yeah, you did not want to do the first five, but we're going to. Okay, so call us, email us, ian. What's that information?
Speaker 3:
so the phone number is 479-485-1911, or ian at lawyers total plancom, or todd at lawyers Plan dot com. That's really us. We're real humans. We are Even though we sound like we are a highly trained, curated AI to voice machine. Yeah.
Speaker 1:
I bet they're thinking that.
Speaker 3:
This is actually.
Speaker 2:
They're onto us. I don't think that's a problem. We are real people and so thank you so much for listening and honestly, we would love to talk to you If you want to. Just, you know, dip your toe in, see what it's like. Do the basic plan, the lawyer's money management.
Speaker 3:
Get some stuff you know organized, feel a little bit better and go. You know what it's time to. It's time to really just finish this stuff up.
Speaker 2:
Let's really sprint, get this thing done. So thank you for listening, Please subscribe, please share with your friends and we will see you next time. See you next time.
Speaker 1:
Thank you for joining us on the Lawyer's Money Show. We hope today's episode has provided you with valuable insights and actionable advice to enhance your financial well-being. For more information, to access show notes or to explore further, please visit our website at wwwlawyerstotalplancom. We look forward to guiding you through your financial journey. You can give us a call at 479-485-1911. Until next time, keep striving for excellence in both law and finance.