117 | Are We Going to Beat "The Market"?

Honestly, I don’t know.

And honestly, I don’t care - even though sometimes I’m tempted to care.

But the moment you tack a fee onto assets under management is the moment you’re putting yourself on the hook to make it happen - or at least begging someone to ask the question.

Of course I want the best investment returns just like every other competitive, Type A, perfectionist-leaning achiever out there, but money is about so much more than investment returns.

I’m interested in helping people engage with how much is enough, use their money for things that actually contribute to building their life, and avoid getting stuck on the perpetual pendulum of hoarding and consuming.

Beating the market is an abstract and confusing metric that doesn’t get me closer to any of those goals.

But when you’re paying for returns, it’s hard to acknowledge that reality.

Our fee is a simple, flat fee that is loosely based on complexity and ability to pay, but is never based on a percentage of assets under management.

116 | Home-building Plumbers

I'm elaborating on a good friend's riff that I read here.

Even if a plumber was the best contractor in the city, it would be weird if they said, “I’ll do the plumbing for $400,000 and, while I’m at it, I’ll build you a house for free.“

But that’s what happens every time we pay a fee for assets under management, but receive help on everything else related to money.

If it were just math, it wouldn’t matter.

But it’s not just math.

As Carl Richards would say, the way we bill tells a story.

And the plumber giving away free houses tells a story that makes the plumbing seem more important than the rest of the house.

If you want a house, you pay for the house and sub out the detailed work.

If you want help with your "money life", it probably makes the most sense to hire a contractor instead of a plumber.

Our fee is a simple, flat fee that is loosely based on complexity and ability to pay, but is never based on a percentage of assets under management.

115 | All Roads Lead to the Biggest Rollover

Everyone is susceptible to the siren call of “more”, and there aren’t many things that call an advisor louder than a big rollover check, the sale of a business, or a substantial inheritance when they’re charging a fee for assets under management.

It’s why financial advice has become so tethered to the highest net worths and the most assets.

It’s easy to say the advice is the same but behind the scenes, the highest net worths are either getting all the attention or they're overpaying.

And the lowest net worths find the attention is waning or the offering is becoming less and less relevant over time.

Once an advisor's fee is tied to assets managed, it’s hard to measure success without tallying up assets gathered, and it’s hard to look at potential clients without seeing different-sized dollar signs floating above their head.

Our fee is a simple, flat fee that is loosely based on complexity and ability to pay, but is never based on a percentage of assets under management.

114 | The Ultimate Conflict of Interest

If you're a good saver, I will encourage you to keep it up or maybe even help you slow it down.

If you need to save, I will help simplify the logistics of saving and inspire you to actually make it happen.

I don't want you to save out of fear, save to create a war chest for doomsday, save because you don't have anything better to do, or save so I can get paid more.

I want you to save because your savings rate reveals so many over critical things - your ability to live within your means, your ability to control lifestyle creep, your ability to say yes to unexpected things, your ability to pivot to something different, your ability to manage expectations, and your ability to keep living the life that you desire to live.

I want you to save...

Because that is how you experience financial well-being.

Saving is hard enough on its own.

If you saving increases my fee, are we actually pulling the rope in the same direction?

Our fee is a simple, flat fee that is loosely based on complexity and ability to pay, but is never based on a percentage of assets under management.

113 | On the Hook for The Wrong Thing

Once we’ve cared for some basic principles of investing, the amount of control that we have over investment outcomes is alarmingly less than any of us probably care to imagine.

Managing investments creates an implied assumption that we are impacting results by pulling special levers that don’t actually exist.

If we’re looking to attribute wins and losses to the correct people, then good and bad investment performance has no business being assigned to an advisor, when the overwhelming majority of investment outcomes are driven by...

Clear expectations.

Having sufficient cash on hand.

Behavior.

And patience.

We review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

112 | Your Plate Isn't Getting Any Bigger

Personal preferences, social responsibility, environmental concerns, and convictions of faith are some of the endless list of things influencing investment decisions in 2023.

Managing investments creates the unfortunate dynamic of having to sell something and disclose all the risks.

The trouble is that there are too many things to sell and too many risks to disclose.

Seth Godin would say, "The buffet line is far too long and the plates aren’t getting any bigger."

Our world is quickly changing to one where people have already been sold on their approach and just need help identifying the biggest risks.

I can’t keep tabs on all the options on the buffet line, but I can help you decide what to put on your plate.

There is no need to limit the buffet line or try to restrict everyone to Italian food when all you really need to do is help people fill their own plate with what they want while giving them a couple nutrition tips along the way.

We review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

111 | Titleist or Taylormade?

The specific investments that you use are like the brand of golf ball that someone might play.

Golf purists might appreciate the nuance of different brands or have eclectic personal preferences.

Non-golfers couldn’t be less interested or equipped to even have an opinion or distinguish between two different brands.

Either way, time spent discussing golf ball brands is either wasted or better done when shooting the breeze over a beer or coffee.

To actually be good at golf you have to be able to hit fairways, hit greens, and make putts - the brand of ball enhances these skills about as much as a couple of phone books would improve a toddler’s ability to drive a car.

Over time, the majority of investments start to feel a lot more similar than different, but for some reason once we’re managing them we can’t help but start acting like they will turn us into the financial equivalent of Tiger Woods circa 2000-2001.

We review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

110 | All You Need is a Fob

There are more than 20,000 mutual funds and ETFs in existence right now.

Anyone who thinks that someone can evaluate them all to discover the best ones is kidding themselves - we crossed that threshold a couple of decades ago.

As a result of this boom in options, we are now more overwhelmed with decision fatigue and confusion about what matters than ever before.

But there is a silver lining.

The redundancy and accessibility of options is greater than ever before. If we can’t get a specific investment, then we can easily find it’s twin brother, sister, cousin, or best friend with the click of a button.

Managing investments used to provide critical access, but now it’s an overpaid front desk clerk who’s watching everyone use a fob to get in the door.

We review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

109 | Wasting Time That We Don't Have

We can’t help it, but managing investments means that we would have to dedicate a lot of resources to investments: talking about them, reporting on them, disclosing them, administering them, and having our eyes glaze over them.

That’s not something that we want to do.

We can’t spend precious time, talking "shop" about investments when we could be extending the horizon on our income streams, refining our spending in a way that drives contentment, or setting money aside in a more intentional and accessible manner.

The behind the scenes work of administration and remaining compliant to industry regulations is substantial and better outsourced to financial technology companies that have figured out how to streamline this work and charge fees that have been trending towards $0 for decades.

The management of assets is like cutting your grass with scissors when there is a lawn company offering to mow it for free - it takes too much time, requires too many steps, risks missing a couple of blades, and gets to the same outcome.

We review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

Additional Resources

A Primordial Take on Asset Allocation by Christine Benz

108 | It Might Not Work

It seems we have forgotten the underlying tension in investing.

It might not work.

Partially because of the phenomenal returns of the past decade.

Partially because of how slick technology has made some investing look like a video game.

Partially because of the second-by-second price quotes that make it seem like the price is more important than the profit.

Partially because of the way investing and all of our investment options are marketed to us.

It's become too easy to think investment returns are a birth right or a handout from Oprah when they are actual ownership stakes in businesses.

Businesses with employees - the you and me's of the world - who are delivering goods and services for a profit - most days.

The key word in that last sentence is most, because it's not all.

Every business doesn't make it, which means every investment doesn't work.

But this isn't any different than other parts of life.

When an author is afraid that the word processor they use to save their work might not work, what do they do?

They save a second copy.

When a football team is afraid that the quarterback they have chosen as starter might not work, what do they do?

They sign a backup.

When a traveler is afraid that a new restaurant might not work, what do they do?

They find another option.

If we’re afraid an investment in a business might not work, what do we do?

We find another one, and another, and another, and another until we’re comfortable knowing that it’s OK that one might not work.

107 | A Crumbling Pillar: Detailed Plans and Projections

Borrowing from Carl Richards, "Certainty is a promise that can't be delivered."

Whether we realize it or not, detailed plans and projections are promises of certainty in disguise.

For a time, they answered the question that investment management never could, "What does all of this financial wealth mean to me?”

Over time, they've morphed into an annual exercise of attempting to calculate the uncertainty out of the future.

Inevitably, these “products” fall woefully short of contributing to real financial well being because uncertainty and change are the only guaranteed parts of your financial life.

We can all feel it in our gut, but it's hard to have the courage to say it out loud.

No one can calculate the uncertainty out of the future.

It's tough because we want a shortcut to peace, security, contentment, and freedom, but those things don't come from a spreadsheet.

The moment we begin speculating about the numbers of the future is the moment we abstract what we're actually trying to do with our money and our life.

The pillar of the industry is crumbling and we're building a new one.

We will reflect on the past, we will build habits and tweak mindsets, we will even project a couple of years into the future (as long as it is grounded in a verifiable reality), but we will not rely on a detailed, assumption-laden projection to give us a false sense of security about the future.

106 | A Crumbling Pillar: Assets-Under-Management Fees

Paying for advice based on a percentage of assets is an enormous improvement from paying commissions and sales charges when you buy specific investment products, but it still leaves a lot to be desired.

It doesn't take a PhD to see the incongruence of charging fees for one thing and delivering the value on everything else.

There is still an awkward conflict of interest when it makes sense to save more or consolidate assets.

There is still the reality that some people pay a lot more than others for the same experience.

It takes advantage of the "out-of-sight-out-of-mind" nature of deducting fees from an account that is rarely reviewed in detail.

It leads us to believe that investments must matter more than they do, because no matter how much we try to discuss everything else, the way you’re billed tells a story that is nearly impossible to re-frame.

The pillar of the industry is crumbling and we're building a new one - our fee is a simple, flat fee that is loosely based on complexity and ability to pay, but is never based on a percentage of assets under management.

105 | The Cost of Availability

As a kid, I remember friends’ parents who were doctors and carried a pager around when they were on-call.

Maybe I’m unique, but the pager did not seem cool. Maybe it was novel, but it wasn’t cool.

Any time I saw someone interact with a pager, they were being disrupted, they were annoyed, or their stress level changed pretty quickly.

The cost of this kind of availability was extremely high - missed sporting events or recitals, baseline dread of the next notification, tension in a marriage, shuffling of schedules, disappointment, miscommunication - the list could keep going if we wanted it to.

I think most people could recognize that being available around the clock, even for a day at a time, had a high intangible cost - it was obvious to see because the person had to physically leave whatever they were doing in order to “pay the bill”.

It’s funny how in a couple of decades, we’ve transitioned to every person on the planet carrying a “pager” around.

Slowly, we’ve all opted into the novel (not cool!) doctor lifestyle without realizing that the cost of availability hasn’t changed.

We don’t have to leave the space, we don’t get an invoice, and we don’t even have to swipe or tap to pay the bill, but you better believe that the vendor is getting paid in full.

104 | Homebuying Series: No Plans To Sell

Talk to any realtor, contractor, architect, mortgage broker, financial advisor, or friend about a home and the conversation will inevitably move towards resale value.

“Buy the smallest house on a good street…so you capture good resale value.”

“Renovate the kitchen or the bathrooms… because that’s where you capture the most resale value.”

“If we were to do this renovation…would it be good for resale value?”

But…

What if you had no plans of selling?

What if the resale tail didn’t wag the building-a-life dog?

The equation begins to change.

No plans of selling provides a different kind of freedom when investing in a home.

A quirky layout is no longer a flaw that you’re afraid for others to see but instead a feature that is part of the home’s DNA and your experience in it.

A bathroom renovation might be secondary priority to a play space, because the time with kids in the house is limited and a working sink, toilet, and shower are all that kids need if they’re busy having fun.

An over-budget addition might be hard to stomach in the moment, but the dollars spent will become fuzzier with time as the relationships with neighbors deepen and milestone moments in the home multiply.

Of course, this is not a rubber stamp to funnel every dollar you have into your home.

Nor is it a recommendation to cash in all your chips at once or satisfy every single one of your heart’s bougie desires.

It’s more a granting of permission to ask more than, “How will this impact resale value?” when evaluating how you want to improve your home.

What parts of your home will you remember the most as of today?

What parts of your home do you want to remember the most in a few decades?

If you’re not planning to sell and you’re using money to discover the answer to these questions, I think it’s OK to dance with the risk of over-investing in a home.

103 | Hindsight is Not 20/20

I don’t think hindsight is 20/20.

Yes, if you have a good memory, the technical facts of the story are easier to retrace once you have seen them play out.

But remembering the precise emotions, priorities, consequences, trade offs, relational dynamics, or rationale of a decision or event does not get clearer as time passes.

I think it gets infinitely fuzzier, because you can't ever fully recreate the moment right before something happened.

Whether it’s replaying the result of a game.

Or a hard conversation.

Or a job change.

Or reflecting on a big purchase.

Or reviewing past investment decisions.

Or criticizing the decisions of leaders and individuals in March 2020 or October 2008.

Considering hindsight 20/20 discredits the past self and torments the current self.

After the fact, we know what went according to plan and what created other challenges.

After the fact, we can’t recreate the moment in a way that respects the adrenaline-, emotion-, anxiety-filled decision that was made when the outcome was actually up in the air.

After the fact, we can’t objectively re-simulate the decision or event because this time we’re able to ignore the hypothetical worst-case scenarios that didn’t happen after the first take.

Hindsight makes it too easy to woulda-shoulda-coulda our way through life wondering why we, or someone else, didn’t get it more right the first time.

Once we can acknowledge that hindsight isn’t 20/20 then it becomes a little easier to extend ourselves some grace and put the what-ifs to sleep.

102 | The Cost of Convenience

Convenience used to be the cherry on top, but it’s beginning to feel more like the ice cream itself - the primary ingredient instead of a nice bonus.

I think it’s become that way because proximity and speed are easy to measure, so in a data-first world, it's only natural to calibrate the scale to measure closer and faster.

But there is a little more going on under the surface.

Every time something is more convenient than the last time, you can’t help but fall deeper into a game that can’t be won.

It can’t be won because convenience is a relative game.

Each “improvement” further closes the gap between wanting it and getting it, but it’s a gap that can’t be completely closed.

No matter how convenient life becomes (or how much our financial resources grow!), today’s desire will never be met yesterday. And this moment’s longing will never be satisfied a minute ago.

The tricky part is that there isn’t a ledger that tallies up this cost of unmet desires.

Instead, the costs reveal themselves very slowly and in ways that are hard to see.

Daily expectations that were once reasonable and dynamic are now unrealistic and unmet.

Slightly less convenient alternatives that used to be a good substitute become silly, even ridiculous, to consider.

Patience that was once a calling card is now perpetual frustration with the system.

And “throwing someone a bone” is replaced with a desire to cancel the people who can’t keep up.

Just because it’s easy to measure doesn’t mean it’s easy to optimize. And just because there isn’t a price tag doesn’t mean it’s free.

Additional Reading

The half-life of magic by Seth Godin

101 | A Crumbling Pillar: Managing Investments

Investments are a distraction.

For decades, we've tied financial advice to investments in a way that misleads, disorients, and confuses us to what actually matters when it comes to our financial well being.

There are plenty of things to discuss when it comes to investments, but the impact and importance of those things diminishes quickly once you check a few basic boxes.

How we generate sustainable income, find contentment in our spending, and ensure accessibility in our saving drives 95% of the feelings and outcomes that we experience with money, but we've tricked ourselves into believing that income, spending, and saving are stepchildren to a sexy investing strategy.

Just because investments are the easiest thing to market, deliver, and brag about doesn't mean we have to anchor our financial well being to them.

A pillar of the industry is crumbling and we're building a new one - we review investment options, we review investment performance, we give investment advice, and even help adjust your investment allocation if needed, but we do not manage investments.

100 | Good at Something I Hate

My mom will cringe when she reads that title and we try to correct our kids when they use that word, but I’m struggling to find a synonym right now.

Honestly, I strongly disliked my first professional role after college.

I enjoyed some of the people and am still grateful for those relationships. I learned valuable skills that I still use every day. I even feel pride when I tell people about my first job because of its prestige in the accounting world.

But working in cramped conference rooms until after midnight, documenting why some innocent A/P clerk kept a less-than-perfect paper trail, and missing out on plenty of evenings with my wife and friends is something that had a shelf life from the day I started.

But here is the irony - for as much as I disliked the role, I was pretty good at it. Not a Hall of Famer, but I certainly would’ve made the playoffs every year.

Pretty quickly the nagging question was, “If I’m good at this and I hate it, how good could I be doing something I love?”.

Of course, the opportunities for promotion were substantial. The income potential was seemingly infinite. The promises of paid sabbaticals were sexy on the surface. But I never envisioned myself climbing the ladder if I was grumbling and crying all the way to the top.

I worked my last day in that role in September 2013 - I don’t think it was the 13th but it would be cool if it was. I can still remember sitting across from the partner of our group in my last week as he said, “I think you’re making a big mistake.”

Depending on your definition of “mistake”, the jury may still be out on that one.

But today it is September 13, 2023 and this is Post 100. On January 1 of this year, I set a goal of 100 posts in 12 months.

I’m not claiming they are all good, but completing a 12-month goal in less than 9 months feels like something that happens when you love what you’re doing.

There’s still a long way to go, but that long runway would have made me throw up in September 2013, and now it gets me excited.

It feels like we’re starting to answer that nagging question instead of just wondering about it.

99 | Life Below the Personal Record

At some point in any athletic pursuit, we experience some level of peak performance - the first lifetime peak is usually a season where physical ability covers over most other shortcomings.

It’s different for everyone, but often the first peak coincides with a season of life characterized by youth, unrealistically high frequency of reps, and fewer competing priorities.

Over time, the memory of the peak tends to lead us one of two directions - it can inspire and remind or it can discourage and haunt.

When we are haunted, inevitably we push ourselves to injury, grumble about the good old days, or throw in the towel because it’s no fun to play if we can’t compete with a younger self.

A lifetime of investing isn’t that different from that of an athlete.

The S&P 500 reaches a new all-time high on ~5% of its trading days. All-time highs are exhilarating, confidence-instilling, and full of dopamine - much like a new personal record.

But this also means that ~95% of its trading days, the S&P 500 is the veteran athlete wishing that it could be more like it’s younger self.

That’s a lot of days longing to beat or even match a personal record.

On the investment side of things, the haunting looks like grumbling about recent performance, reaching for extra return in a reckless manner, or deciding that you might as well stop investing before it all goes to $0.

Life below the personal record can drive us crazy not because it’s that bad, but because it’s relatively worse than where we once were.

The trick is not using brute force or discovering a fountain of youth that can take us back to a previous time.

It’s more of a mental game than that.

Some blend of recognizing that you can’t set new personal records in perpetuity, so when the times are good you can actually recognize that they are in fact the good times. Thank you, Andy Bernard.

And an understanding that the only thing that allows you to set a new personal record is your mindset while you’re living below the last one.

Additional Resources

Compounding in the Stock Market is Messy by Ben Carlson

Same Return. Different Emotions. by Money Visuals

98 | My Thoughts on Investment Properties

Once you find an actual property that is available for purchase, I think it makes sense to figure out an estimate of what you could charge for rent.

If that level of rent is acceptable to you, then I think it could be quite worthwhile to pursue as an investment.

The end.

P.S. It’s also OK if generating income isn’t the primary reason for pursuing an additional property.