Lies From Broker School

A lot of financial professionals say things that just aren’t true. And it’s not that they’re intentionally trying to mislead, it’s just that they’ve been trained to use certain talking points, which they might even believe to be true themselves. Let’s talk about the statements you should be cautious of if you hear them from a financial advisor.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome in to Playing With the Tax Man. Thanks so much for tuning into our podcast this week as we talk about investing, finance and retirement. As usual with Tony Mauro. Tony, buddy, what's going on? How are you?

Tony Mauro: Not too bad. Cold up here where I'm at right now.

Speaker 1: You a little chilly, just a bit?

Tony Mauro: A little chilly. Yes. Yes. It is winter in Iowa.

Speaker 1: That is true. It was 22 degrees this morning where I'm at, if that helps. So it was chilling.

Tony Mauro: That's not bad.

Speaker 1: Yeah, we don't do 22 too well down here.

Tony Mauro: That low for us, generally most of [inaudible 00:00:33] is about, I don't know, zero and below is when we start really complaining.

Speaker 1: No, I'm with you. I used to live in Michigan and the in the Chicago area for a long time when I was younger and I got tired of negative 12 and six feet of snow. So I certainly understand that. But yes, the power of the internet allows us to do this show and I get to host it from different places. And so you know, we can always jump on here and do our program, but yeah, very cool to always talk with Tony and have some fun with different things. Hopefully we impart some useful wisdom along the way and you pick out a useful nugget or two on the program.

Speaker 1: This week is kind of a funny title for our topic, the show notes here: "Lies We Learn in Broker School." I was like, that's kind of interesting one, so a lot of financial professionals say things, Tony, that just really aren't necessarily always accurate. We'll go with that and I don't know that it's even intentional trying to mislead. Sometimes there's a lot of training involved where you're just kind of, especially if you come through some of these big brokerage houses where you're just kind of sold on talking points and you just naturally gravitate to them.

Speaker 1: For example, I always start the show by saying we're going to talk about investing finance and retirement because it's what we talk about, but I've gotten into a groove and it rolls off the tongue really well. So the same kind of thing sometimes can happen and sometimes maybe just these brokers kind of believe this information themselves. So I got a collection of statements that I think folks should be cautious of if we hear these from some financial advisors or experts or whatever you want to call them from time to time. And I think we've all probably heard these, but I'm going to let you break them down as to why they might be a quote unquote lie we picked up in broker school.

Tony Mauro: Okay.

Speaker 1: All right. So when you see things on print or online or you hear "Well, we have experts who can accurately predict market movement to have you in the best investments." What do you think about that?

Tony Mauro: I think if people are telling you that, and I just battled this actually last week with a client of mine who's been with me for five years and he was out at a, I can't remember, some work function. Somebody cornered him and said, "Hey, you know you should come over here because you know we can promise you this much in return." And I just looked at him and said, if they're telling you that, and this goes for everybody, in my opinion, they're not telling you the truth because none of us can predict the market. The best minds in the world can't predict the market. They might be able to do a little bit better job, but I think people get confused with that and certainly I wouldn't fall for it. What you need to do is find somebody that's going to get you to your goals, whatever that is, with the least amount of risk involved.

Tony Mauro: And if they're promising you this return or that return, you better take a strong look at it because there's going to be a lot of risk you're taking and in good times, like we've had the last four or five years, anybody can basically pick something.

Speaker 1: We're all geniuses the last 10 years, right?

Tony Mauro: Yeah. It's going to be what happens when the market goes down per se. And we have another downturn, which you know, is at some point, again, nobody can really predict that with true accuracy, what's going to happen to your money then? And I think that's what you got to look at, focus more on.

Speaker 1: Okay. All right. So, and that one, I think a lot of us have definitely heard that and it's pretty funny that you actually had a pretty similar scenario just recently pop up. So a funny thing is we didn't even talk about that ahead of time. So just kind of random. And I think we've seen this one too, and we've heard this one. "Well, if you look at our past investment returns, you can see that we have a system that works well in all markets." And this one cracks me up because what's also the thing that everyone says, past performance does not indicate future results, but yet they'll still turn around and say this is the exact opposite thing.

Tony Mauro: They say that. And you know, nothing really works well in every market. Especially if you're heavily concentrated, which is why most advisors advise you might want to give up a little bit of return to be more diversified and have more of a consistent return because no asset class is going to work well in all markets. And if you look at it and what we talked about in our last show about having too much cash, cash doesn't work well right now because you're just not earning anything on it. If you really look at, you're losing money if you factor in taxes and inflation. So that's just totally, in my mind, an untrue statement. And I think the rebuttal or the solution for that is diversification. And then, of course, deciding with your advisor what return is good for you based on the risk, in yours, that you want to take in your situation.

Speaker 1: Right? Yeah. No, and I agree with you and to me it's kind of like, the funny thing about, you're talking about cash is not necessarily great right now or whatever, somebody will be like with a gold, and you'll see these commercials "Buy gold" and it's like, we want to buy them with your dollars. But the dollar is devaluing, so you should buy gold. And it's like, yeah, but you still want to get paid with money. You're not going to get paid with bread, are you?

Speaker 1: All right, so lies we learned at broker school. This one is actually, I think really, really common. And again, I think this is one that I don't necessarily think is intended to be necessarily false information. I think we just, I don't know if it's become urban legend or if it's just, I don't know what, but basically we all kind of feel as though it would make sense to say, "Well, our tax rate should be much lower in retirement than it is when we're working because we're quote unquote making less money." But that's definitely not always the case. Matter of fact, a lot of times it can be the same or even more.

Tony Mauro: It's quite the opposite today. I think that this is a true statement, but maybe just a little outdated because back when people were just retiring, had a little social security, a little bit of a pension, a little bit of savings and that was basically it. Versus today where more people are investing early, developing larger nest eggs and whatnot and continuing to work even though they're quote retired that, you add all that in and the taxability of social security. And some of that stuff that's never been taxed. You very well could be in a little bit higher bracket. It's sometimes not a lot higher. I've seen that too, where people retire, our tax clients, they retire. They're much better off than when they were working and they have to really plan for taxes just so they're not short.

Speaker 1: Yeah. And that's a good point and I think that's probably a fair statement is that, it definitely probably made sense once upon a time, but it just doesn't seem to be the case now. This is my final one and I love this one because somebody gave me a great response to this and it was like we definitely hear and we really haven't had a problem just yet because the market obviously overall has been trucking along pretty good. But if you want an example of this, go back to December of 18, right there around Christmas time, when the market had a huge fall, and of course it rebounded in January of 19 but for a bit there it had a pretty, what was it like the second or maybe even the single largest fall in a month I think in like 20 years, the December fall of 18 but you'll hear things like, "Well it's just a paper loss. Hang in there, you'll be fine." And that always kind of struck me as weird because isn't it all just paper loss or gain until you do something with it?

Tony Mauro: Until you do something with it, yes. However, if you hang in there and you'll be fine, I'd think that the next part of that sentence is until you're not fine. Because if you have a prolonged downturn, it's going to take you a long, long time to recover. And what I think people don't realize is if you, and I use this example a lot with clients, if you have a thousand dollar investment, you lose 10%, so you've lost $100 and your investment's worth 900 and if you've got your advisor saying, hang in there, you'll be fine. And he says, all we got to do is earn 10% next year, that's not true. You've actually got to earn 11.1% just to get back to even. And so the more you have that paper loss, the longer and or more return you're going to have to have to get back to even. And I think people discount that time period a lot, which is why you don't want to see huge paper losses even though, yes, they are just on paper. But you don't want to see that for prolonged periods because you may run out of time before you recoup.

Tony Mauro: Hopefully though, if you're working with an advisor, you've got a strategy in place that says, depending on your aggressiveness that we are, if certain things happen, we're out and we're going to something else and it's not a bad thing to realize a loss either. Some people say, well I want to hang in there. I don't want to take a loss. Like psychologically like you've been beaten and sometimes, you take a little loss, it's better and reinvest than a big loss.

Speaker 1: Well and a lot of times we'll have this conversation where people are like, the market continues to do well. Like we said, it's hitting all time highs seems like every other day, who would've thought we would've seen a jump from 28 into 29 in just basically a month of December of 19 and yet at the same time, depending on your time horizon and your age, you may still want to consider looking at that and saying, okay, from a paper loss standpoint or not, if we do have a downturn, I stand to lose X number of dollars.

Speaker 1: Maybe it is time to start doing the whole Vegas thing and taking a little off the table and preserving some of this. Again, time horizon based, based on your age, but certainly be worth having the conversation I should say. Because even if green gets a hold of you and says like, yeah, but what if it makes it to 30,000 on the DOW, well it's probably going to get to 30,000 but again, at the same time, are you being responsible with your risk allocation and your risk tolerance for whatever age you happen to be?

Tony Mauro: Yes. I mean there's no doubt about it and especially for the retiree crowd, you don't have time to make up losses, you know? And so there's no sense in, I always tell my retiree your crowd, forget about, I know you're inundated with news every in every device.

Tony Mauro: It's always in front of us, but you're not really worried about the returns on the market so much anymore. You're at the end game. Now it's important for you to keep generating income and preserve your principle.

Speaker 1: Yeah, absolutely. Well, that's our main topic this week folks. So again, a lot of times we hear these kinds of statements and they definitely have some ring of well that kind of makes sense but at the same time when you do a little bit more investigating, especially for some of these things, they're just probably not true. So always, always, always, always do your homework and do your own due diligence to make sure that you're not falling for some of these old tropes that happened to exist out there. And if you have questions or concerns is always, well you can tune into the podcast and hopefully we're going to shed some light on those for you.

Speaker 1: Tony is an EA and a CFP of 23 plus years in the industry and so a great resource for you to tap into here in the Des Moines area, central Iowa area really and you can go to yourplanningpros.com and send an email question to the show, learn more about Tony and what he does, and the team and all that good stuff. You can also subscribe to the podcast from there while you are on the site as well. So it's Google, Apple, iHeart, whatever. And if you're on one of those sites and you're checking out other podcasts and maybe you're subscribing to whatever new one that you're interested in about cooking or a book of the month or something like that, just type in Plan With the Tax Man and you can search that out and subscribe to it that way as well.

Speaker 1: All right Tony. So got a couple of emails questions. Actually I got one email question and I'm going to do something fun and a little getting to know you time here on the show. So let's see what Lisa's got for ya. Lisa, where was Lisa? Urban Dale and she says, "Tony, I would really like to meet a financial advisor, but my husband says we've been fine handling things on our own, our investments and so he doesn't really want to do this. Do you think it's okay to continue on without help?"

Tony Mauro: I would say you certainly could do it. It's out there and especially with today with the technology, you certainly can continue without any help. Do I advise it? Of course I'm a little biased because I am an advisor. I would say no or at least maybe pay for some advice to see if you are on the right track and maybe you can handle it yourself.

Tony Mauro: But what I find with most is generally they lack a complete type of plan. They lack the discipline to hold themselves accountable and to make the tough decisions and that's where the advisor's going to come in. It's not really about picking the right investments, it's about helping you get to your goals, and making sure that the plan is always there and it's being followed and somebody else to bounce things off of. You certainly though could choose your own investments from that plan if you see so fit. But I would definitely at least one time solicit some advice.

Speaker 1: We get these questions sort of in different formats from time to time. We don't know what your age is, Lisa, but I always say the same thing is that, and we even mentioned this earlier in this podcast, that just about everybody looks like a genius over the last 10 years for the most part because of the way the market has gone.

Speaker 1: But if you were accumulating, it's definitely easier in my opinion, but if you are talking about preservation and distribution for retirement, man, there is so many components. I didn't realize half of what there is until I started being a host of radio and podcast talking about this subject. There's a lot of moving parts.

Tony Mauro: There is a lot of moving parts. Yes. And a lot of different laws that could trip you up and even in the end potentially cost your errors a lot of money if things aren't done right. So I think you need a team, not only an advisor but your accountant and or attorney so you can make sure that you know you've got all the bases covered.

Speaker 1: Yeah, well and there's definitely a lot going on and actually coming up on a future podcast here, we're going to discuss some of the changes that actually happened for this year, so we'll get into some of those things as well.

Speaker 1: So yeah. Lisa, great question. As Tony mentioned, get him to come in and just have a conversation, do a one off where you pay for some advice for the session or whatever the case is and see how you feel from there. But getting a plan put together, certainly going to go a long way towards helping you I think achieve and attain your goals and you can always reach out to Tony at (844)707-7381 to talk with him. (844) 707-7381 and go to yourplanningpros.com.

Speaker 1: All right, my friend, a little getting to know you as we depart this week just to change it up, what's your day start like? Like, what's your routine for you to kind of get things rocking and rolling?

Tony Mauro: In the mornings?

Speaker 1: Sure. Yeah, let's go with that.

Tony Mauro: Well, I'm an early riser so I like to get up, and I never used to be, but I like to get up now and I like to try to get some exercise in and do a little light reading in the morning, and then get into work early. I don't know, I seem to just kind of flow better. I like to have that kind of dangling over me so I can feel like I can end my day a little earlier and go out and do other things. But I tend to, I used to be for years I would try to say, "Well, I'm going to do this, this and this after I get off work."

Tony Mauro: And then, for most of us, I don't know, you're kind of worn out when you get off. And then a lot of that times that stuff doesn't get done. So I like to exercise. I do some light reading, get a light breakfast in and then I like to get into work.

Speaker 1: Okay. All right.

Tony Mauro: So yeah, that's me.

Speaker 1: So you kind of wake up the body with the exercise and wake up the mind with the reading, huh?

Tony Mauro: Some light reading, you know, just something easy. I tend to not really focus on news too much because I think too much of it is negative. We get enough of that during the day. Just something positive to read, you know? And there's all kinds of little things you can do just for five, 10 minutes a day.

Speaker 1: Yeah, no, I'm with you there. Boy, reading the news every morning. Back in the day, you can get up and my dad would get the paper and he'd sit there and he'd read the paper and have a cup of coffee or whatever before he got his day rocking and rolling and it's like now man, it was probably even the same way then a little bit. But it just seems like now you're just asking to have your day start off on a bad note to me, because everything's doom and gloom constantly, so I'm with you. Something a little bit more uplifting or positive would be a good way to start the day. All right, well, there you go. That's our podcast for this week. You guys have yourself a great one. Tony, you have a good one as well. I'll see you in a couple of weeks here on the program and we'll talk more about that investing, finance and retirement strategies that we like to share here on Playing With the Tax Man.