TRAP: The Real Adviser Podcast

42 - Clients or Customers?

• Alan Smith; Andy Hart; Carl Widger; Nick Lincoln • Episode 42

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TRAP LIVE IS HAPPENING ON 9th MAY 2024. BUY TICKETS HERE: www.therealadviserpodcast.com

In this latest pile of TRAP, the Trap Pack discuss

  • Topical issues, including Finish fables, JISA joys, Leffler love, cheap online tax-returns, total returns mean dividends, FCA thematic review #1,242, True Potential CEO says the quiet part out loud
  • Meat and Potatoes: Clients or Customers?
  • Questions posted by our beloved Steven S www.twitter.com/passivevanguard
  • Culture Corner

Links referred to in the show:

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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, dear Travis, welcome back to what many people are calling episode 42 of the real advisor podcast EP trap. My name is Lincoln Lincoln and joining me as ever, in the digital studio of doom are the three other Horsemen of the Apocalypse. And the hearts called deliver che the voice switcher. Hello, Alan absolutely brimming to the to the rim with stories Smith. Now gentlemen, we have a show packed full of app salutely nothing so let's start packing it straightaway. With some more high energy review reads read out on my good friend the Right Honourable Mr. Andrew Hart. Thank

Andy Hart:

you Nick. Okay, so first up is a review from Sean lowson. entitled A must listen for ifs five stars brilliant podcast, especially for those relatively new professionals such as myself. The host always cut through any nonsense in the profession and make good points based on solid facts and examples. I must listen for any IFA six out of five stars Sean Lowe, some of Waverton wealth in Edinburgh. final review from Paul Bradley slightly longer this one great value, adding show from for great value adding show for for clearly great financial advisors and great friends. So this is a review from Paul Bradley at Chilton Hills financial planning. He's been asked many times by his colleagues if he listens his trap, the answer is always a resounding yes. This is a high quality conversation for real financial planners who are not only at the top of their game, but also clearly great friends. And he adds so much to the profession content podcasts training conferences, Alan is one of the best financial services content creators I've ever heard. Nick says something Nick says something I didn't think was smart. don't quite get that call the voice call the voice comes across as everything that's good about Ireland. The best part of the show is the edgy banter that you get between friends and the ability to laugh with and at each other central listening for any financial planners or would be financial planners. Sorry, sometimes the grammar in these reviews is horrendous. So that was

Nick Lincoln:

that we got through them and nobody noticed nobody. Yeah, thank you. Great. Thank you very much for reviews. Thank you for those they live in Las Vegas, please do keep them coming. We all get five stars on iTunes, like and subscribe to us on YouTube. If you can stop talking under me. That'd be great. We're only a minute and I'm gonna kill some of these short topical tidbits. Now, Alan, I know you're starting up a separate podcast holiday recollections. But for the moment, crack on and tell us your recent adventure.

Alan Smith:

Pour yourself a drink a very long drink. I've I've been anyway, I've been told to be very brief about this switch. So I will be as we mentioned in the last episode, I set off an adventure to call the Arctic Circle rat race which is long story short, you fly from London to Tromso, Northern Norway, you then get an A coach and drive three hours north of that into Finland. And then you begin a what is effectively a three day adventure crossing this snow and doing about 80 kilometers on foot day one is by something called a fat bike which I've never been on before supposedly designed to cycle across snow. Well it doesn't. It gives us nose to thick and the bike weighs a tiny wind up pushing it up snow and through the wind for for a long, long, long time. That was tough. Day two is on cross country skis, which I've never been on before in my life and they're harder than the look and that is just traversing across the snow for a great distances. And day three which I thought would be the easiest was arguably the hardest which is with snow shoes, which are these you know specially designed shoes for walking across snow. And the trouble is, every so often you fall through the snow. There's great big buddy holes in it and you fall down to a waist deep and it takes every effort under the sun to raise the natural and climb back up again. You can't bloody breathe and so why the hell did I do it? And it's quite an honor. I thought many a time and I was I was going through, or like, you know, kilometer 15, or something I'm nearly halfway through and day one. Why the hell do I do it. But I've done a few of these kinds of adventures before climb Kilimanjaro a few years ago. And that was tough, or they certainly last the summit of Kilimanjaro is really tough because it's at altitudes, it's hard to breathe. And it's really steep and it's icing. It's pitch black. This was much harder. I like to say this is much harder for me anyway than climbing Kilimanjaro. In fact, some of the quite a lot of people on this trip are kind of people who do a lot of extreme things. I don't do many, but some people do this all the time. There was a guy who's just done three marathons in three days, which is quite a quite a push. And he said this was harder. This was quite a bit harder than doing the three marathons so it was physically challenging. Obviously, it was mentally tough, didn't drop out. Well, they make it no one drops out completely, but they do make it they allow you to the smart snowmobiles driving around support and if you feel you can't go on they'll pick you up during the drive to the next station or to take you home or something. And a few people did that or they sort of missed parts of it but it was all done very subtly didn't really know what I did because I was looking at the only few people who were behind me and I thought there's no one behind me anymore at certain times so they're like this support you completely to do it. I did all that was required because I'm kind of obstinate that way I certainly wasn't the fastest but wasn't the slowest either. But I think for me anyway, I do these things from time to time because I like being liked having some sort of goals to work towards I did sort of up my training regime a bit in the in the months leading up to it I was doing more exercise more sort of Hill sprinting and stuff like that trying to get fit. I mean, just going to a gym or something with no real goal or ambition I think is a bit it's a bit like financial planning, actually, you need to have a goal to head towards otherwise you're just saving in a vacuum. I think it builds resilience to the sort of things that proves how strong you can be. I think a lot of our speak for myself, I think we I live a fairly cosseted life it's it's not too tough. Thankfully, most of it on this show this was this was tough. Because of the conditions it makes it just absolutely bloody freezing. As long as you are moving, it's fine but you stop moving, you stop for a break. Use you get cold really quickly your hands get my hands get really super cold. So I think it helps build strength and resilience and I've definitely had a sense of achievement you crossed the finishing line. Because the finishing line is a sense of achievement. So it was a bucket list item is ticked off. It's done. It's great. I wanted to do it. Finally Nick finally Nick there is a brief shout out you like this I think it was I went with resilience 25 or so on the on the on the group of which three others of which I knew they're close personal friends of mine. Keith Charles, who's a colleague of mine here and Paul are working, or work in financial services. Keith made me laugh. You some of you guys will know Keith from from iEX currently works at a large national advice firm. And he was talking to him about trap. And he says I love a love trap. If I gave him a gift to them, I had the trap famous trap. And he was very delighted with it. He said he often he goes running along and he says he listens to trap in his headphones whilst he's running along. And he said and often these days I'm running along through the park and I'm bursting out laughing laughing I'm just laughing my head off at various comments that people are making and everyone's looking at me say God, that guy must really enjoy running. laughing his head off of us. So shout out to key thanks for being a loyal TRAPPIST and a colleague on this Arctic adventure. That was great.

Carl Widger:

He also took the greatest photo I have ever seen that photo you shared with the northern knights. It was amazing. You sent some amazing pics from it. Yeah, well done. Like fair. Yeah, seriously. Fantastic. Not

Nick Lincoln:

sure I could do that. So that's that's that is a.

Andy Hart:

Nick do want to just briefly mention the McDonald's.

Alan Smith:

McDonald's for the most northern McDonald's in the world. Yeah.

Andy Hart:

You start there before the first day.

Alan Smith:

Yeah, yeah, I didn't actually go into the McDonald's went to Burger King instead. Must be must be a car makers are

Nick Lincoln:

more North northern discerning palates. Exactly. Yeah.

Alan Smith:

You guys should go next year.

Nick Lincoln:

No chance. Absolutely. zero chance. All right. Okay, moving on. So I run this thing called the IFA forum. This this Google group and it's got you don't

Andy Hart:

do an IC o never mentioned

Nick Lincoln:

tiny.cc/ifa forum. Anyway, there was about Genesis Junior ISIS. I'm not sure clearly what the equivalent in in your novel, we don't know. Okay, you know what they are, the money reverts absolutely to the kids at 18. There's just another cretinous example of what how civil servants shouldn't be allowed anywhere near personal finance. And it just there's just a thread about this, how all these advisors and the other clients Some of these advisors are just trying to hide ISIS from their children and the things we're getting up to. And some ifas in the in the chat saying you aren't doing the same thing, you know, logging into into into the platforms and changing the password and not telling the kids it's just just you know, what are they are they are completely ridiculous product and

Andy Hart:

examples of it working very well Nick and getting children to invest early to understand how investing works and become a team responsible for money, their learning and money lesson. It's not all bad news. So it's

Nick Lincoln:

nice that you can do that nice. And the clients name is Charles

Alan Smith:

River, you're automatically cuz I haven't paid much attention to this already convert to a full ICER and then begin to write to the child or the moment,

Andy Hart:

the clients 17 and a half and they want to Yeah, anyway, so by the time they're 18, Transact, say, yeah, it just turns to a nice automatic, they become a client, we send them a login details and remove it from the parents. But does

Alan Smith:

that tell you a lot about the mother child or the parenting if he can't be trusted? Well,

Andy Hart:

because on the IFA forum, a lady was concerned with the behavior, the child is now gonna receive the data. So it's an anecdote, obviously, it's a bad story,

Alan Smith:

your child who's gonna have a bit wayward? Yeah, exactly. Exactly. 1000 quid in their hand, he, he might,

Nick Lincoln:

yeah, I wouldn't have been a disaster with 18 or whatever, whatever, at 18 If I'd been given a lump sum of money, without a doubt, I mean, now you see a mature successful businessman in front of you. But back then I was not quite as polished. Moving on ultra online tax returns.

Andy Hart:

Yeah, some of your clients or people you come across might need to be get caught up in having to file tax returns now because of the changes in tax legislation, etc, etc. There is a website called Tax spelt T A xd dot Coda UK, that's doing tax returns for super cheap. Check it out, it might be useful for us a little bit like this sort of low charging, will writing services, you know, suitable for some people, not for others. So again, you might come across someone that needs to return or you know, file a tax return to their accountant saying, Yeah, we could do it for 900 quid for you to declare 90 pounds. It doesn't make any sense. So yeah, maybe check it out. There's a link in the so called Show Notes back to Unit

Nick Lincoln:

and I think about it because, you know, my lovely therapy, she's a head teacher says she's a 40% tax payer. And she's never done a self assessment, and I just don't trust HMRC to get anything, right. And I'm always thinking, should she do a self assessment? You know, are they taking note of her contributions to her final salary pension scheme? Is that coming off her, her taxable income? And I'm always on the cusp of doing it. But then once you're in that MSG system was that we had to get out of it as well. You're doing it every year? I don't know. You'd like to have faith and just think everything's been done. Right, wouldn't you? I mean, she's, you know, cleanser whistle Pay as You weren't, you know, other than comes our assets. I suppose for

Andy Hart:

UK advisors listening to this, there might be situations where their clients triggered the CDT bill. Yeah, that's why in order to do it, simply, this might be a potential solution. So check it out. TXD dot credit UK.

Nick Lincoln:

Okay. superb voice Metis charity run?

Carl Widger:

Yep. So I just thought I'd mentioned this in terms of potential ideas for advisory firms to run events. So this one is I can take no credit for Ron and clearly my colleague here. He's big into his park runs and that kind of stuff and said, How could we introduce something like this to Mattis, and maybe, you know, help some charity help a charity out. So basically, what we're doing is in Limerick city on the 11th of April 5k Fun Run, and it's 20 quid to register. All the money goes to cleaners Foundation, who I've mentioned before, they're a charity who help families with sick kids. Generally, it's, we're hoping to get kind of 100 people at it, which would be really cool. It's rolling and won't say this of course, right. But it's pretty easy to organize right? And it's pretty cost effective. We're giving kind of T shirts to people matters are covering all the costs, all the money will go to the charity. And then afterwards we're hoping to kind of get a lot of the business community from from Limerick city there afterwards will sponsor you know, a by teas and a few drinks and that kind of stuff. So really simple. And it's a little bit different from your just your game of golf or you're going to a match. And just to change things up a little bit. And obviously, there'll be all types of serious runners and people who just walk and as well welcome. Would you

Andy Hart:

want a famous extreme sportsman to potentially rock up as a special guest I think Alan's free that weekend. No.

Carl Widger:

We would of course love Alan Smith.

Nick Lincoln:

For Alan is is nothing Yes, it's yeah, he would he turned that down. It's not it's not. Exactly, exactly. Okay. Great. Great, great effort. The team and Metis well done Mr. Smith total returns.

Alan Smith:

I thought this is quite an interesting article actually sort of just confirming something that we probably all know. But it was explained quite well on a blog post on the timeline website written by Robin Powell with some other data points within it. And it just made me think about it was about the footsie footsie 100 specifically as an index. So many commentators and social media, we know who they are, we know the names often reference the footsie 100 as having effectively gone nowhere for best part of 20 years, the index still sits around whatever it is 7700 or so, right now. And yeah, it's gone nowhere. But of course, like most indices, which are quoted, it is surprised only index, so whatever the number is, or the price and it goes up by that price over time. So it looks like it's can stay fairly static. And of course, it ignores one of the biggest most important aspects of any index or any sort of equity type investment, which is the dividend returns, footsie 100 is known to be a fairly highly paying dividend index, three and a half 4% 2.8. I think 3.7 3.8. And if you ignore those sorts of returns three and a half to 4%, compounded yearly. Yeah, it's got the, the information, quote is fairly going to be misleading. They actually quote a numbers if the focus is around about seven, seven, if you quote going back over 30 years, if you quote, If the dividends were included in that, guess what the index would be as a number included as a compound over the period of time, I put you out your misery 30 32,477. So gone from ever it was over 25 years, it would be compounded return including the dividends over 32,000 as an index, and it's the same for the s&p. And most other I think the German and the Brazilian one are including dividend paying.

Andy Hart:

I've always wondered that about the banks because the DAX does outperform the footsie and the CAC, that's why

Alan Smith:

Yeah, so yeah, it's an so it does put to the US faces, footsie footsie 100 would have been a relatively underperforming index compared to course, the s&p with all the sort of tech companies over the last 2030 years. But nevertheless, it's very misleading just to say it's gone nowhere.

Andy Hart:

I think I think I think the period that we're referring to was 38 years just to put right on just just quoting the article of junk.

Nick Lincoln:

Okay, that's interesting. Thank you. So 21st of March 1924, an X pots and pans traveling salesman in the US came up with a marvelous creation that has transformed the lives of millions of people around the world. And he gave us in the financial planning profession. It's really our oxygen it was so immersed in what this man invented that we don't really see it we just take it for granted. Edward Leffler the pots and pans traveling salesman somehow. And the details on this a scant, and I'll explain why in a minute, he came up with the idea of a mutual fund of investors pooling their money together. And a firm buying underlying securities with that pool of money and unitizing it and creating units and then selling units when clients wanted to get out and sell. Edward Leffler the mutual fund, I think about what we do everything that we do, everything that we do in terms of planning for our clients and investments is via mutual funds, be that in ISIS be that in pensions, be that in life assurance bonds, and this guy, Edward Leffler, who no one's heard of created 100 years ago, there's an excellent article in the FT which I'll put a link to in the so called show notes, talking about it talking about the rise of $63 trillion globally or in this man's creation and no one's heard of him. I went on his Wikipedia page it's like a paragraph there's not even his date of birth or date of death and I don't know it's just just just staggering but it this guy is not more better than I also staggering that as far as I'm aware, the Financial Services press didn't cover this at all. Now you could say you know well, okay he created it for somebody else would have done it they Yeah, absolutely. Right. You know, you said the same thing about Merrill Lynch and the first ever index tracking fund and then John Bogle you know, on the back of that they the first people that make these first things are the ones are the are the people we look up to, and want to thank you but left LA, I don't know when you were born, my friend, I'm your your long dead. But so thank you, your gift keeps on going. And now you know, our clients can buy the great companies of the world through a couple of funds for peanuts on the pound. It's just remarkable. It's magic. Even 40 years ago, you'd have to go to a stockbroker and they'd put together a portfolio of underlying shares for you, you know that there were unit trusts 5040 years ago, but they were very limited. And now it's just an absolute gift. You can buy world capitalism for nothing. Thanks for Thanks for being able Leffler. So wherever you are my friend, hopefully you're up there your North not south. Thank you and we all we all swim in your, in your ocean. You've given us that that Get okay. Any thoughts about that? Should I move on?

Andy Hart:

There should be a statue of him in the City of London. We go there every year. It's

Nick Lincoln:

incredible.

Andy Hart:

Thank you.

Alan Smith:

I don't think he was mentioned. We talked before but the robin Wigglesworth book where the whole history I mean, that was That's the history of indexing, I think. But he does track it back to I can't remember there's a French mathematician that came up with this is probably the yeah, there's probably a few people that were sort of contributed to the idea over time, and there was one individual who just did it, it sort of built upon it, but no, I'd never heard of him before. And I don't the only

Nick Lincoln:

thing that pre predated him with it in this country, they we had to Investment Trust, which started in about the 1870s. But there was their their closed ended funds. And then right Mr. Leffler came up the idea for these open ended funds, you know, you could redeem units when he needed to sell and it's him. It's him. I mean, we're just all immersed in his world. And he's enriched millions of people who have been able to access global capitalism, easily, quickly with liquidity. And in today's world at almost no cost. It's a bloody gift. And sometimes we just don't see it because we're so immersed in it. So there we go. Right. Yes, Mr. Hart cashflow, modelling that thing that we talk about, which I think so few actually do? Yeah. So

Andy Hart:

cash flow modeling is something that's been going on for for decades, I suppose in various different guises. But now it's coming to the fore, and the regulator is taking a keener eye are keen to look in and look at it. And they came out of a recent article entitled undertaking cash flow modeling to demonstrate suitability of retirement related advice. Long story short, to be fair, to them, it's quite a decent article really the way they've gone through it. I mean, to start off with, I mean, I think it was, as a result of a lot of DB transfer work, where people were using cash flow modeling or financial forecasting, to demonstrate the suitability of transferring from a dbx world to a DC world. So they obviously wanted to take a closer, closer look at it. But then they start off the article with many firms use cash flow modeling, I mean, please tell me how on earth you can advise, you know, an individual or a couple about their retirement without using some sort of forecasting spreadsheet calculator or thing? Oh, yeah, you're going to be fine into retirement, or I think it should say more of your time. There's no context to it. So I think there needs to be a bit more forceful with the language I use around this. But anyway, moving on from that, and then it's got examples of good practice, bad practice. And it's just split into various different sections. It's not that long, it'll take you about 10 minutes to read it, I reckon it's worth you having a look, experienced financial planners who have been financial forecasting with their clients for years, we're very aware of the limitations. We're very aware of the pros of using it. And we know the impact that it has, I've been building financial plans now for 14 years with my clients. And often in client meetings. Now I'll go back 10 years ago, and I'll say 10 years ago, this is where we said you're going to be in 2014. Do you want to play an IC?

Alan Smith:

O, we've had this before

Unknown:

the the UltraGrip a Darren Andy knows about everything. Andy can be told anything, his name is Andrew Hart.

Andy Hart:

So yeah, to summarize, it's a decent article, those of us who've been doing this for a while know, you know how useful this type of software technology is to implement in your real financial planning business. And it's scary, how accurate I've been telling clients where they're going to be 2020. Again, I'm not playing. You know, as we know, a lot of the problems in this industry exist on fictitious spreadsheets and in the brains of consultants, you know, real planners, in real people, you know, experienced things in a completely different way. But yes, worth checking out the article over to you or as they

Alan Smith:

talked to, they talk about this, I think a skim read, it's the differences kind of what's it called, like, linear projections versus is it deterministic projections versus the limitations of avoidant or similar with just assuming the same compound growth year by year versus Abraham's

Nick Lincoln:

got bee in his bonnet about this, you can look at bloody Monte Carlo and your time and that's all based on past performance. You've got to make some assumptions. Oh, it's we keep saying is, I think I think a lot of the max think this is a science and you can rationalize this down to the nth degree. You can't you can only get well, yeah, you

Alan Smith:

can look a lot of the variability of the assumptions. You can look at sequence risk, you can look at more things with a with a more stochastic type model. What if we had the I mean, you could do invoice as well, you could you'd have to just be very specific around about the I guess you call it a scenario plan where you had negative returns for five years. What if, what if that specific

Andy Hart:

reply to your question, Alan, no, this article doesn't mention the limitations. pros cons of linear versus stochastic. And again, something like sequence risk, obviously, predominantly exists in spreadsheets and in the minds of consultants, you know, show me a real client has had an impact of sequence sequence risk. I mean, yes, I had loads of clients that retired in 2020. Where's the real impact? I know, but I'm gonna show you a spreadsheet of a fake client who invested in the perfect day to end up ravaging their portfolio in retirement. It's like, that's almost spreadsheet. Where's the real people? That's what stresses me out with that, anyway.

Carl Widger:

Yeah. And I think to your point on the on that, like, it's, it's, that's what the review process is all about

Andy Hart:

iteration is having a safety net cash.

Carl Widger:

year on year on year, you know, sequencing

Andy Hart:

risks ravages every portfolio on a spreadsheet. And the

Carl Widger:

other thing about the other thing about the advice that we do give our clients is, you know, it's it's take the complexity out of it for them, as opposed to adding complexity in and making Memorial all the time. We had a client recently who we brought on board eight years ago, and this is exactly what you're saying, Andy? They're now transitioning into that third act, right? Yep. And the comments the couple made was, it is actually amazing that this plan has transpired as we thought and as well,

Andy Hart:

yeah, honestly, that's scary. Accurate.

Carl Widger:

Yeah. And for sure, it's a little bit different. Because it there's been tweaks along the way and, you know, they've, they've maybe some goals have changed. But we've, we've brought them on the journey, and they're now transitioning into the third act. And they were like, you know, super, I suppose chilled out about the whole thing, because they knew 234 years ago, this was gonna happen, and it did happen. And that's why I don't believe in all those, you know, Monte Carlo and all that stuff. It's like, let's view this as a process and just keep reviewing, reviewing, reviewing, Nick, thank

Nick Lincoln:

you. As I read an article from a Georgia Atlanta based advisor with Russ Thornton, a good guy in the States. And he said, you know, what we always say it's, it's the planning, not the plan. Clients want the verb they don't want the noun. That's what I like. They want the verb not the noun. It's the planning, right? You're adjusting. you're adjusting the flight path all through the years to get the clients to the financial nirvana. Slam is stillborn the plan is dead in the water. The moment the meetings over the planning the verb is where the action is daddio. Right. Good call. Thank you for agreeing even though you're muted. I can see your lips moving. I think that was a positive, positive commendation, okay. For the 89th time Metis Ireland, are you hiring?

Carl Widger:

We are. So I put this in because we are hiring at the moment. So we will have a couple of jobs going up and have a look at our website. And the reason I put it in because I know there are tons and tons of younger and very young advisors are people starting out in their career as financial planners. So look, if you are Irish, you are listening. Please keep an eye out. We'd love to hear from you. That's it. Metis

Alan Smith:

Ireland, keeping the Irish economy afloat with another couple of hires. That's quite a few hires you'd be making the last year or so our heart.

Carl Widger:

And then also, they'll also see that I was deeply uncomfortable with the content of some of today's going to the Irish versus UK cultural differences.

Nick Lincoln:

Every time I play that we get demonetized by YouTube.

Unknown:

So I don't even know that mu is. All right. Not sure why but that's totally

Carl Widger:

fine to me. But it reminded me about the rugby. Thanks very much for reminding me about we won the championship again. And

Nick Lincoln:

let's be honest, you scraped?

Carl Widger:

It was a little bit muted, because frankly, we're devastated. We didn't do the Grand Slam very, very disappointed.

Andy Hart:

Do you not do the Grand Slam who beat you? Can't remember.

Nick Lincoln:

Okay, Corrales like jersey. This back I'm corralling it back. Okay, we mentioned how cash flow to others to us. And I think a lot of the trapeze is just, you know, it's integral it's baked into us and to do our job without cash flow is to how do you do it? Certainly how to provide an ongoing financial planning service without doing annual update to the financial plan. And the cash flow. I do not know but I think a lot of advisors and I think you know, we the last episode, we talked about this a little bit with randoms in James's place. If you think St. James's place are the only people who are going to suffer from this burgeoning story about people paying for advice, ongoing advice. I'm not getting it. I've got a bridge to sell you. And Mr. Smith, the thematic review of our regulator fees for no service. Well,

Alan Smith:

that is not specifically about that, but the reference so let me just start at the beginning. There is a new thematic review, which was issued last week by the FCA on the subjects of retirement planning retirement income advice. It's about 56 pages. I've read them all have highlighted parts It's a worthwhile read all of it is right at the sort of sharp end of where I think all of us are operate. So in line with the style that FCA have got used to doing now for many years, and I think they do a pretty well, in all fairness, the they have a theme that their various themes that they are focusing on the see this the quote some incredible numbers. Incidentally, the future, the future for financial planners worldwide in the UK is just highly positive. The number of people that are reaching age 65 Over the next 1020 years is just fast, but I think by 2050, a quarter of the UK population will be over age 65 All of them will need some sort of guidance advice, you know, varying levels levels. very simplistically, they'll need some nudges and guidance. So along to the right isn't the right decision to us.

Andy Hart:

10,000 people a day aged 65 is obviously 1000. A day in the UK. Yeah, the baby

Alan Smith:

boomer generation or sort of reaching retirement age over the next however many 1020 years extra. Now baby boomers, these are all Gen X no Gen X. So anyway is people labels, stupid labels. Yeah. But people hitting that you know that that pivotal age when they are going into his car refers to the third acts, the numbers are huge. The regulator rightly sees this as an area of focus, because they want to ensure that the public gets good quality advice. And so what they tend to do is they go out and they choose randomly. In this case, in this case, 977 Lucky firms were selected. And they asked them to complete a very detailed data submission. The link to it is in the paper. So you can see had you had been one of the ones what they would have asked you to provide. And I think it's worthwhile everyone taking a look at that and seeing how confident they would be with providing the data. They then went on to conduct deskspace reviews of files of 24 firms that was selected. The Reading isn't particularly great. In all honesty, bear in mind this were files that were you know, I think I've wanted you know, to you submit your best possible file knowing the regulator according to pull them apart and give you their views on them. Of the 24 firms a third were found to be unsuitable. Either the advice was wrong. Yeah, or it was bad or there was missing information. So you could say, you know, glass half full or glass half empty, two thirds were good, well, fine, or passed, and about a third thirds pretty high, I would say that weren't good. Interestingly, they're quite they do bang on about you better get ready for that jingle at that drop. Again, they do bang on quite a lot about capacity for loss, and have you making sure that you have managed there, but again, it's never prescriptive, which is right, you can talk about capacity for loss grasp capacity for volatility, we all do this, we might not specific specifically refer to it as that.

Andy Hart:

But sorry, Alan, we have a real life example, march 2020, the market declined by minus 35%. In 30 days, everyone apparently is capacity philosophies triggered what happened, almost nothing for advise clients, most portfolios are down 1015 2025 30%, during that 30 year decline, everyone's capacity for loss was triggered according to some survey that the field in what happens with real clients, almost nothing. Whereas the people that are banging on about capacity for loss, what they say and in hindsight, about March 2020, nothing, no articles been written.

Alan Smith:

All I would say to you, and anyone else listen to this is just make sure that is document a, your view is documented, you put that referencing some some data or whatever, on your client file, or you've got a generic company style approach. This is how we do it. They do talk about interestingly about those who use model portfolios, be it in house constructed ones, or external Have you got different ones for the decumulation and they use the word decumulation, which is interesting, because it wasn't really a word in the past, but it's now an official regulatory term. decumulation shouldn't be anybody, any regulators, and you're either in your saving phase or you're spending fees, but have you got a different portfolio, but again, so we don't we don't have a specifically different one, but we will have reasons as to why we don't have a different one. 10% the most recent data is 2022 Because I think we were asked this and we talked about this in the past as well. I couldn't find any recent data for how many people annuitized because I think that was relating to the lifestyle lifestyle profiling funds. 10% of outlets now advertising market 2022 bought an annuity with their funds. So it's obviously it's a very minor part of the market, but it's not nothing is 10%. So is that good?

Nick Lincoln:

Is that the advice? That's good advice? No,

Alan Smith:

I think it's, I think it's all retail and must be products. So, they within the report, as I say it's worth reading goes straight to the bits about examples of good practice. And I'm definitely you know, I'm sort of asked few colleagues around here what they thought of it, we're generally comfortable with sort of nodding our head saying you would do that we do that we do that there's a couple of things, well, we could probably tighten up a little bit, we could be slightly better. Everything should be about, you know, small improvements as time goes on. So have a look at the examples of good practice, you'll see some of the, I mean, some examples of bad practice or, frankly, embarrassing for a profession. I mean, some firms apparently, just don't even have a register of the work they've done, the clients that they've, you know, the products that they recommended, and they can't, they can't provide any data around it without going into individual files one at a time and seeing what they did for the client at the time, no centralized data source, which is just, you know, it's frankly, ridiculous. But um, you know, going back to your point at the top of this particular section, Nick, the the do talk through it is not is definitely not the core of this report. But they do talk about how they identified a number of areas where clients had been paying for ongoing advice and hadn't been receiving it. And that I think, is the canary in the coal mine here talks about it before we talked about the SJP case where they've had to effectively write down half a billion pounds. This is huge. Again, anecdotally, I think all of us, I certainly have been involved with conversations with just advisors around the block for the last month or so about this. And I think it's huge. I think this whole thing is huge. And I just took that back of an envelope calculations. So let's just see the SGP number. You know, they're a big institutionalized company they've got access to now that's one of the reasons they discovered this, that people weren't getting systems. And they estimate 5% of their clients hadn't been getting review and had been paying for it. Hence, they've allocated half a billion pounds to effectively repay them for the fees, they paid for something that they never received. apply that across to every firm or to a lot of firms in the country, justify percent, which I think is pretty modest. Actually. I think that's a low assumption. Take the average advice, just say the average advisor has got I mean, the numbers vary quite a lot. I mean, some are ridiculously high, be fair, but average visor has got about 100 clients. Let's say they've been paying three grand a year, as a fee. Say, for example, that's 15,000 pounds, but that's going to go back, certainly post RDR. Let's call it 10 years, as 15,000 pounds. times 10 was at 150,000 pounds per advisor, compensation to be paid. You got a firm with 10 advisors, you got one and a half million pounds of fees. The numbers could be quite staggering, the impact that this could have in the advice section sector. do say so this is this is not a thematic review, but it's something has come out as a result through the SGP thing. And there are firms with more clients than SGP. I mean, I think call you might be mentioning something later on about another big firm that's been public about some stuff as well. So I think this is just you know, there's an underlying I mean, I again, I've heard from a couple of people that the legal profession of sort of licking their lips at the prospect of future revenue stream that they might get, how easy would it be to see to clients have you been contacted? Have you heard a full review full detailed review from what she'd been paying for? We didn't really forgot that you were paying for it. Or we can get your fees back for the last 10 years. For you. You know, that's a nice slap PPI style windfall, here's 10 or 15,000 pounds.

Andy Hart:

Where did the FM's fall into this island? Let's say they're charging one and a half 2% a year to create a bag of spanners investment portfolio and extracts wealth, and they can't prove that their funds are outperforming you know, straightforward index that's different, that's

Alan Smith:

there's no guarantee they are gonna outperform this, there's a large expectation they will underperform. But that's not what they are guaranteed. So everything comes down to your terms of business, or the terms the client signed. And I think it's all a bit vague, because oftentimes businesses will say, we'll be as minimalist as possible, we'll give you an annual review, we'll say something about what is in what the body of the annual review looks like, is vastly different. And I've talked about this in the past, looking at how much effort it takes for us as a firm and we've done some some analysis on it and the amount of time it takes for us to do an annual planning meeting. And it's a lot because it's a you know, it's a complex piece of work that research needs to go into the meeting has to be held the follow ups as a bare minimum, you've got to you've got to reconfirm the suitability of the advice that you gave Todd months before 24 110 years ago, whatever it is going to annually reconfirm the suitability, in order to reconfirm the suitability, you need to know the client's circumstances the situation and you need to update everything is updated everything so there is no question about it that there is a there are 1000s of people across the country who've been paying for advice, and I've been receiving either nothing or very sort of scant information. Nick

Nick Lincoln:

Yes, I totally agree with that, that there is also an element of the fee. However, that means that clients can phone us up and contact us at any time. It's like a retainer, isn't it? So we're not running the clock whenever they we write to them or email or when they phone us in. So some

Andy Hart:

clients may or may not know that, Nick, what is your ego? And

Alan Smith:

if you're saying it, yeah, yeah, I mean, that would be pointless assess, I guess as a small part of it, we're on call whenever you want. It's not it's not what people say I wouldn't have expected. So

Andy Hart:

that's what we say to clients when we take them on board. People that don't operate this ongoing proper full fat financial planning type business model might not say that they might say, Done, your eyes is done your pensions, goodbye. And there's still taking a fee on it. I mean, there's, there's so many, you know,

Alan Smith:

what's quite interesting as well. And again, this came out just the stuff about SGP, but applies to many, many others. And other conversations I've had, it's interesting, because we don't we often, we don't take much of an onboarding fee and upfront initial costs, unless we take we take zero, as long as it's relatively small, the default model is 3%. Let's say you take 3% of assets. And also there is a huge incentive to onboard clients and take 3% of their wealth as an initial provide no service fee. And then that's it. And, again, the SJP thing was all about incentives. And people were getting rewarded. And people were having, you know, big celebration days and things like that, for it was just, it's as somebody referred to it. And there's lots of big organizations like this is institutional asset gathering where all the incentives are onboarding assets. And then, and then you just want to keep them on board. And we're doing as little as possible commercially, you wanna do as little as possible, because there's more profit in doing that. But legally, you're expected to do something, Nick, it's

Nick Lincoln:

funny, but it's, I mean, our business models here, I like you, like I don't charge for the initial financial plan, I don't charge for the onboarding, because the value to be blunt, the value to me is and the ongoing relationship with the client for which they are paying me for which I provide an ongoing service. So that's the bit that I absolutely focus on, it's completely inverted to the asset gathering.

Carl Widger:

But that's why Nick, the scaling of financial planning firm is bloody hard. Yeah, that's why we have to hire more staff, because we've committed to proper real full financial planning. So you got to deliver the service. So like, these the SJ peas of this world who are trying to reinvent themselves to offer this, it ain't gonna be easy, it is not going to be easy.

Alan Smith:

Hit hugely as a result, because bottom line, you need more time, more people, just more resources to deliver this stuff.

Carl Widger:

Yeah, lots of expertise.

Alan Smith:

Must have been a gravy train for some of these companies, if you can onboard clients and take half percent or 1% a year of their generally growing assets, and send out an annual valuation statement or something that that whatever was being done or not

Carl Widger:

talked about in a second.

Nick Lincoln:

I'm just conscious that we're gonna have an hour on this, but apparently call them in some people don't even need advice anyway. Do they? Yeah.

Carl Widger:

So this is an article that I came across during the week. So the true I'm actually not that familiar with this firm. It's a UK based firm, true potential. I have heard of them. But you guys will be a lot more familiar. But their CEO was interviewed. And he said, most clients don't need advice. Right? Just straight out that he was quoted saying, it's very rare. Our clients need advice. That's exactly what he said. And so then when you kind of read out of the article, it says, you know, they use their inverted commas in house technology to deliver the service to the clients, they 1.4 million clients. They charge point 5% for ongoing, an ongoing advice fee, where they've already said there is no ongoing advice that I drew actually did read this right. So um, we were laughing about this earlier on, you know, they're the most frequent inquiry they get is what are my login details?

Andy Hart:

For retirement, yeah,

Carl Widger:

like, like why this is an incredible thing for anybody to say. And he goes on then to lament RDR and that it was very bad and you know, it was great to have all these Commission's and there's 8000 Less advisors in the UK when I read that last bit, but this dude should come to Ireland either. Absolutely love it here.

Nick Lincoln:

As Alan said, we were discussing just hitting the record button. It's like a Gerald Ratner moment isn't this guy. This guy said the quiet part out loud.

Andy Hart:

Yeah, I can't believe he said this.

Carl Widger:

He probably said I was like, This is no look, we gotta we gotta kind of understand and appreciate that. There are different business models, and that is a very different business model. But for me, when somebody was 1.4 million clients or something like that, I go where Want to be around for an awful long time to come? Like our advice fee, our ongoing advice fee for our top level of clients is point 5%. He's his firm do absolutely nothing for that money. Absolutely not. To give them login details. That's what he said that they don't need advice and to give login.

Andy Hart:

And also, I think they charge for their platform as well. They're very integrated, integrated firms, they charge for funds as well. So it's not just the point five that's quoted, again, I don't know the numbers well enough, but I believe,

Alan Smith:

I think he may be getting or his advisers may be getting a few letters next few weeks from the ombudsman, or whoever else, by the way on this, they also learned that, imagine you did have and you realize there was, I don't know, 100, or whatever, 1000 clients for whom you actually owed them to be repaid, because they didn't get any advice for years. That's not it, that's not a PII claim, you can't claim that through your insurance, that's something you're gonna have to find the funds for yourself, that is just an omission of professional services, which you have to find, to

Carl Widger:

be fair to this firm. And this this article I refer to, right, they're very clear on what they do. Right? So I don't think there'll be any ambiguity, I don't think they'll have much of a problem saying,

Alan Smith:

online portal,

Carl Widger:

we told you exactly what you were getting for this money. I'm telling you again, I'm just gonna remind everyone, this is what you're getting, which is, which is pretty much no, he does say in the article. If people do want advice, of course, we do have advisors. But it's very rare. Our clients need advice. 1.4 million, they

Nick Lincoln:

are very, they are the NSM advisor with TP and that system is very slick in terms of it's all very tech driven. They do have to go through a compliance, you know, everything. You can't go to the next stage of a Client Onboarding to the Donald's baba, baba, boom, everything's done. So in terms of getting clients on board, they are probably, you know, as good as any other firm out there. But yeah, interesting. Wow. Okay, listen, guys. Yeah, 47 minutes for the love of God shall move on to the meat and potatoes. Yeah, and this kind of this this kind of ties in with the overall theme of this show about ongoing service and being careful about what you're promising people and the kind of people that you take on and convert from being prospects to being clients. I saw a LinkedIn post from a young IFA owns his own financial planning business, he founded it Walker wealth, that guy's name is Tom Morgan, gonna read it out. So just just bear with me. Tom says last week, I had three separate conversations with new prospects. And I didn't convert any of them. Am I the worst closer in the world? The problem is they want to one off transactional style advice, their inquiries all went along the same lines and all started with, I just want this. And I'm here to offer a full fat financial planning service. And I'll give you everything, I've got to drive the most value to you. But you need to be open minded and wholeheartedly engaged in it. Otherwise, it's not a good fit for either of us. And then some closes by saying, well, maybe I didn't do a good enough job of pitching the massive benefits proper financial planning delivers. Or maybe I dodged a square peg round hole client relationship that wouldn't have worked for anybody. What do you think anyone here in a sales role have a similar experience? And interest in a whole range of comments? It's quite a, quite a lot of participation in that in that 90 and comments in that, on that piece from from Tom Morgan. And some people were saying, yeah, just stick to what you're doing. You're actually right. Other people were other extreme, say, No, you you adapt your service to the clients. And if clients want something, you can give it to them, just make sure you cost it on an hourly basis, you know, like accountants or lawyers. And I just want to I just think it's pretty much surprised trapeze to where it surprised the trackpad, I think this guy is totally right to do what he's doing. And you absolutely you do not tailor your service to the clients. It's like, I think David Hearn who's a friend of the show, said in a comment, you know, you don't go to a fantastic restaurant with that I can't menu and then just demand fish and chips that's not on there, and go into the kitchen to start knocking out fish and chips just because you want it it doesn't work like that. And I think Tom Morgan, I think you're absolutely right to stick to the full fat financial planning, transactional, you know, it's all very well to say you're gonna do transactional advice, you're gonna time cost it for somebody, okay? So I've got 100 Grand i want to invest in I want you to tell me how to invest it. Now, the four of us here and many of our listeners would say, Oh, that's interesting. You've got 100 grand to invest, how can you work out? How come it's 100 grand you need to invest in what's what returns you need to get on that? Can you show me the financial plan that tells me you need to invest 100k Because then I can maybe work out the appropriate asset mix for that for your portfolio to get the return you need in the classroom. Now I don't need all that. I don't need it just one investor 100 100 grand already at that first point you've you've hit a massive, massive pothole in the road. And then if you're charging on a time basis, okay, all right. We're not gonna do the financial plan. I'm just going to recommend an investment for you. I know it's going to be it's going to be this is not advice anyone listening. It's going to be Vanguard global all share. There you go. And my fee for that is 12,000 pounds. pounds or whatever, 5000 pounds. Why? And they're gonna go? Well, that took me 15 seconds to recommend that yeah, because it's taking me 30 years to work out exactly what you need. And that's my expertise you're paying for if you want to do one. So what I'm trying to say is one of transactional advice and also that you can bet your bottom dollar if he gives one off transactional investment advice to that client, no matter how many disclaimers, you say saying I'm never going to contact you again. If that fund has a temporary decline, and the client sells out, because you're not on their shoulder, given them with a coaching advice, and they sell and turn a paper loss into a real one, they will try and come back to you and they will try it on. So I'm absolutely against this thing about doing transactional stuff and adapting your service world on time, stick to what you do, stick to your knitting, take on those clients that fit your model. There's more than enough for everybody out there have an abundance mindset. And do not be just you've turned away three people, it just means to be three people next week, or can they'll just be perfect for you? Because that's kind of the way the universe works, I think. Any thoughts on that? Gents? Alan?

Alan Smith:

Yep. Couple of things. Interesting. I was contacted by a journalist a couple of days ago for my comments on a situation that he came across whereby a potential client had contacted an advisor, and advisor was making a recommendation advisor recommended a portfolio of active investment funds. The client said no, no, no, I want passive or index funds. And advisors. And we don't really do that. This is what we've got. And so apparently went back and forward. And the and the advisors final recommendation was Well, I'll tell you what we'll do 50% active 50% passive. Alan, what do you think about that? And I said, it's a nonsense. I said it's released love it. It's like me going to a doctor and say I've got some sort of ailment. And the doctor prescribes something, and I say, No, no, no, no, I don't want that I want something else. Give me something else, doctor, because I've got a preference doesn't matter. That too passive is a sideshow to this is just if you're if you're an experienced professional, you don't get dictated to by your client, you're a client who wants to dictate the outcome of it, then you find that advisor who will has got the same philosophy as you. So I think if you have the same set of circumstances, if I would, if I was the advisor, no situations are so well, that fundamentally, challenges are underlying investment philosophy. I'd like to explain to you why I'd maybe articulate that and it could be for active versus passive, or whatever the story was, I'll explain that. And if you still fundamentally disagree, then we're not the right firm for you. I think that's the thing. The other thing, though, broaden, broaden out the conversation that came up on LinkedIn. One of the challenges genuinely is that financial planning is is not It's experiential, right? You don't really know what it is until you experience it. No one does the smartest people that don't really know even if you've sometimes we do get clients coming to us and talking about a financial plan, because I've read an article or something about it, then that sounds like a good thing to have. But unless you've done it, and had it done with you for you proactively, collaboratively, with an experienced professional doing it, you already know the benefits. And not no one really, ever comes in and ask for that experience. Because they don't know what it's like. So how do you win people across, you can talk to transactional people, we don't do transactional work, what we do, is we do quite a lot of work potentially, if it looks like it's a potential not a complete, just tire, kicker type person. But if it looks like somebody that we could potentially work with, we're convinced we could add a lot of value to them, we'll do a fair amount of work speculatively, on the basis that let's let them experience it, we will do a financial plan a fair fairly basic, it won't be deep in the weeds of the detail. But it will be personalized to them or show their circumstances today, it will show a few, you know, forward forecasts maybe a couple of scenarios that may or may not be in there sort of future life. And then we you know, after that sort of one, maybe two meetings, we say this is the sort of work we do in great detail. And almost always they become clients. There's only a handful. And that's the reason that we have commercially afford to do that to do work. For free up front. It's because we, I use the example of it's like if you're going to buy a car, you want to take it for a test drive, if you're going to buy a house, you got to look at the house, you got to look at a few times you imagine yourself living in that house, you're just looking at a house and a website and say that will do do for me. So you got to meet your potential clients somewhat. You can't just say we don't do transactional work by where you can. But that's not necessarily a worthwhile thing. The use of case studies can be helpful as well, if you've got a range of case studies, and you can see this client is potential guy or girl is a bit like this person we worked with before. Here's an example of the work we did here is the impact and this is what happens, you can encourage them to do that. And the last thing that we well we've got kind of up our sleeve, rarely use it but if you think this could be very worthwhile towards the client doesn't quite get it yet. We offer a fee a Fee Guarantee. If within six months of us working with you, you feel that we've delivered zero value to you or refund all the fees or fees. We've taken our fees that we've taken from you. Therefore that is is now a zero risk decision for the clients. And frankly, some of my colleagues were a bit worried about doing that at one point, but I thought, you know, what, if someone's told us that we've delivered no value to them having worked with us for six months, they are trouble. And I'd rather get them out of our life early, because they're gonna be because there's no way you can see we've added no value, you just you just couldn't if we delivered on our sort of normal services. So all of a sudden, you've moved that from being, I want this, or we don't do this to saying, hang on a minute, let's let's test it out. Let's run it for a bit. Let's build you a plan. Let's get it let's get you to really feel an experience and understand what we do. And then let's get you on board. And if you think it's a waste of time, I'll give you all your money back. You've Wait, you've, you've wasted nothing other than perhaps a bit of time, but you've certainly learned a lot. And I'd love to hear you know why you felt it was of no value. That's never happened. Not one single time. But as I say, it directs a situation for the clients. But back to the original point I wholeheartedly agree with with Tom, who said we don't we don't do this. But as I say, there's probably a bit of a middle ground between a biologist we don't do it and something else.

Carl Widger:

Can I couldn't draw me to go Nick, just because

Nick Lincoln:

second mentor says where's everybody on board clashes for one of Transact this so expensive. The onboarding, the time you spend the fact finding the suitability letter, I've just from one off, you can never charge enough to make that anything other than vomiting. Juicy, sorry, car crack on? Yeah,

Carl Widger:

no. Fair point. I'm kind of I'm with Alan on this, though. Right? I would be a little bit more commercial maybe about it right. And I suppose my main feeling on this is go and meet the clients where they're at. Okay. So you know, I know you don't agree, Nick. But but but hear me out, right. So if we have someone referred into us who wants you know, who, who has been told by somebody else, oh, they do this financial planning thing. It's awesome, right? Or a center of influence. They do this financial planning thing, you need to go through the process. That's easy peasy. But then we do get people who you know, come in straight up and go, I've got a pension. And I want to know what pension funds should go into. So we'll meet them where they're at. But we'll do exactly what Ivan says we'll do have a basic financial plan. Good example client come in have three years to go to retirement, or want to invest in a tracker bond that's going to give me a guaranteed return of 8%. I know I'm making up that number, right? And it's like, wow, we're definitely not doing that. But can we just explain and show you exactly where we would see this going, and what you need to do and explain that actually, in your head, you're going to retire at 60 and take your lump sum. But if we do financial planning, I can demonstrate that actually are a 40 year investor. So it's to meet them where they're at with their particular pain point. And then, and then try and almost slowly flip it on its head to show exactly why you need the financial plan. And I think that's really important, as opposed to being perhaps sneaked away, you're doing it which is not not not doing it. Like we would have no interest whatsoever in transactional business, we will turn it away. If it's absolutely clear that it's just going to be transaction, no, not happening. But but we will exactly as Alan said, you will try and bring them on the journey. And I look, I think this is the biggest challenge for all of us doing real financial planning, which is it's, it's an experience that you need to go through and the wow moment, are they the aha moments come at the end, right? When you have overlaid all of the income and assets and all of that kind of stuff on your plan. And the Read is either there. And then you do what if scenarios, that that's when you go Oh, wow. And you know, it's difficult to get that feeling to give that feeling to a potential client who's not familiar financial planning, you know, by just explaining kind of what you do, you need to go through the process. So I think using the particular pain point that client has, and using that as the key or the core or the main theme of your financial plan. I think that's how you bring it all around. And that's how you explain this is this is quite a holistic view. And overall helicopter view is required. So maybe not as draconian and no, it's not happening for that guy who's who said he turned away three clients. I don't obviously know the particulars of the three cases, but maybe if he was a little bit softer, and took a little bit of extra time now maybe Ireland's firm and our firm, maybe we've you know, we can afford to do as I don't call it speculative work, and maybe do a couple of meetings before we kind of bring people around. Maybe that's the case. But yeah, there that's generally speaking my views on it.

Andy Hart:

Okay, I'll finish off. Really good point. That is the reality, isn't it? As Carl alluded to people seek advice when money's in flow. You know, they've received an inheritance divorce sold a business retirements happening, they very rarely saw any lifestyle financial planners and financial forecasts and I needed to be more strategic thinking about the next 25 years. That's what's going to happen, hopefully. But they obviously don't come to us seeking that. Back to Basics, it depends on what firm you work for depends if you're an employee and a firm and you have a certain way of working be that transaction or ongoing or mixer to, if you run your own business. Again, it's the beauty of running your own business, you can create your own business diviner, wherever that is for you. I generally I do no pension and investment transactional work for all the reasons that Nick mentioned, I believe, I believe my value is in the ongoing work. Therefore, I work with clients on an ongoing basis, you know, you don't get fit, go and see a personal trainer once. I think it takes a couple of years to get people's financial house fully in order. I mean, yes, there's about five or six big, big things we need to do in the next three months. But then there's 35, tiny things we need to do in the next three years. So again, I'm not going to achieve that. Just by doing transactional work. As the CEO of True Potential says there's only 20,000, financial 20,000, good financial advisors less there's clients falling out the trees. So you know, back to Tom's point, it basically is just next, you know, next client next client next client, you declined three clients, but they don't fit your service. Hopefully three come around the next week. The only one off work I do do I do do insurance one off life insurance, income protection, critical illness, if it's a client or friend or person I know somewhat well, because I'm, I'm a fan, and people have the right insurance in place. On I also do care annuities as one of work. That's a bit of a niche that I do, but everything else is is ongoing. So yeah, good luck to you, Tom, and finding clients that want to work with people on an ongoing basis. I like the points that you guys mentioned about, you know, basically a loss leader, which is basically what you're saying you you invest a small amount just to show them the service, etc. So I can imagine a lot more people doing that.

Alan Smith:

Yeah, that's a you see that thing is I get, I'm remembering a couple of examples where we have, you know, had that early stage conversation with potential clients. And I'm just doing the same thing, people who are the thought that didn't really need our services, or speculative, maybe one off type things. And I remember a guy seemed to me a couple of years ago, once we done we've done a sort of deep dive discovery meeting, ask them all, you know, all the details, you would ask him about all the soft facts and stuff. And then we build this outline financial plan, and I'll never forget it. He said, he said to me, are you guys he's all curious, you guys. ifas? I said, Well, yeah, that's the kind of generic term because well, I had an IV before I need to do my ICER. So there's an assumption that that's what ifas do pensions and ISIS recommendations, and the experience he had with us was just so different to that. And it would be the same any of you guys, and any real financial planner out there was so different that he couldn't join the dots between the two. So he thought he was coming speaking to us, and he had just had a significant liquidity events around selling a business. So oh, I didn't know that ifas did this stuff, because this stuff I want, but didn't know what it was. Because I thought if he's just investment recommendations, so that was, that was quite interesting. The other point about this, of course, is that a good ongoing relationship is all about kind of looking over the horizon and what's coming down and being proactive, and organizing and optimizing for circumstances. There's, there's always something changing. As you know, the capital gains tax rules in the UK, have changed recently are changing. There's numerous things, the pension rules change all the bloody time, et cetera, et so you want to have someone on your side who's kind of looking proactively that next year, this is going to happen, or this, this rule will change, et cetera. And making those changes practically, other than as, as opposed to always happen is too late. You can't do that anymore.

Andy Hart:

I think also client demographic has something to do with it. I could be assuming here, but Tom might have been speaking to younger clients that are not motivated, like older clients approaching retirement. You know, our perfect sweet spot for clients is early 50s. approaching retirement, they're motivated, they want to fix their retirement problem, their retirement income problem, they know they can't do it themselves. And they're going to seek an advisor, when you try and pitch proper financial planning to people in their late 30s, early 40s. Again, they're not really motivated to do it. So are perfect clients or clients on the approach to retirement, ideally, business owners. So again, it's the client demographic that you're also pitching to I think it's quite important.

Nick Lincoln:

I just read the article on LinkedIn was reading the comments below I trying to work out where Tom got these prospects from. The important point to make here is and if you're if you're, if your business is mature, and you're in your development, you're, you get new prospects from referrals. I imagine it's very Rare that you're gonna get people coming to you for transactional stuff because the people that are referring you your existing clients are the ones you're doing the full financial planning for and so you're likely to get more of those I imagined maybe Tom got these from an unbiased or what have you as well which I get as well you know when you're starting off when you're young you'll get business from whatever source you can so Alright, I've been given that dad with thrashing we're comfortable with that. Yes Carl is Carl is nodding and it's kind of like defer to and all these matters. And with perfect timing actually, I'm gonna be we've drawn into the meat and potatoes because at the front door of my of Lincoln Lodge is posted and she's sacked and she's dragged the bulging sack up my drive of TRAPPIST questions. There TRAPPIST once, once, once an episode we answer typically Now one question from our Trappists sent in via the pin link at the top of our Twitter profile at advisor podcast. We are getting to them slowly and surely. And this one is from now who's this one from here, let's just open up the letter. This is from Steven s who's on X or Twitter, whatever you wanna call it, as at passive Vanguard, da musketeers, I want to take a moment to express my gratitude for the invaluable insights and discussions on track. It's become a ritual for me to pour a very long drink and settle into listen to your engaging conversation on personal finance onto my query Christ for that, in a general investment account, I've come across varying views regarding the choice between distribution slash income funds and accumulation funds. Some say that distributing option may be preferable for those seeking income without triggering capital gains, assuming one never sells I'm curious about your perspective on this do you generally advise clients to opt for distribution slash income funds or accumulation funds in such scenarios? Apologies in advance for the technical question. Thanks again for your time and for the knowledge you share on the podcast. Thank you, Steven, Andy's gonna go first. Should we tell him he muted

Carl Widger:

Andrew, you're muted.

Andy Hart:

Rookie, rookie rookie. All of my portfolios are income portfolios. Yet, for the point you've mentioned on the general investment account, so I don't have to trigger a CGT. If we're taking a certain amount of income, but it's reviewed every year with clients. The fees are taken from the income as distributors, there's certain amount of cash in the cash account in all of the portfolios. And every year I do a rebalance, I wash some of the cash into the worst performing funds. So yeah, I use income units and GA's. I think you do the same, don't you? Nick, over to you.

Nick Lincoln:

Yeah, so there's just muted. Oh, get lost? Yeah, I use that income funds in, in GIS for that reason. But as Alan looted the capital gains allowance has gone from 12,100. It's going down to 3000 pounds, isn't it from? Well, a couple of weeks time, you know, it's like an 80% decline in the amount so it's definitely become more front of mind. And I use income funds, Steven in dia just so we have cash coming in, I don't think sell funds down to pay for the ongoing fees. That's, that's, that's the reason why, but I do then just do monthly sales off of, of the units to generate a defacto income but obviously, I have to keep an eye on that going forward. And maybe, maybe we'll we'll change how we look at GIS to try and keep the CGT manageable at least the rates of CDT are still very benign, really on the 18th and 20% or 10 and 10% 18% is that it's not 20 it's not yet significant issue, but it's something I will be looking at. That's quite a technical explanation and then if Carl or Alexandre to add to that, no, okay, fine. Sorry, Steven. We kind of fudged our answers there between myself and Andrew. Okay, let's move on no further ado to what many people call culture corner

Andy Hart:

call your first meet with

Carl Widger:

okay, I know what this one is. I think what's the podcast called again too long so I came across like a long term investing podcast or something like that over heater Lazaroff but it's it's a particular episode he does a card Richards we're actually card Richards talks through our explains his most famous sketches. It's really really good and then I went through this show a little bit more and he's like got some really good short episodes. Explaining a lot of the concepts we talked about a lot so definitely well worth for any younger advisors coming in. I think this one will be really brilliant. But But there was one particular episode not the one I've shared the Carl Richards one is really good, but I think it's a five reasons you need a financial plan that have nothing to do with money. I think it's 11 minutes long. And I shared it with the private line managers here. It's just really really good stuff. And you know, it's really short really sharp. So yeah, it's a really good find this podcast. But I've only listened to I think four episodes so the longer one the current Rich's one and then some some shorter ones, which I thought were really good. So yeah, big, big recommendation that one for me. Great stuff.

Alan Smith:

Very good. As you guys know, Paul Richards is our close personal first interview. Did you Did you see that clip that I shared with you keeps his cars and he talks about one of his favorite human beings on the planet.

Carl Widger:

Only cost Ireland seven and a half grand. Yeah.

Alan Smith:

absolute bargain. No. That's that's a good podcast and call and Kitces show that they just chewed the fat. Repeat all weekend? It is yeah. It's all my friends four minutes or seven? Gotta four minutes or seven.

Carl Widger:

YouTube shorts. Yeah,

Alan Smith:

it's good. My contribution this week is an app called mentor wrist. link in the show notes. I've dabbled in the past with book summary apps like Blinkist and others which are okay. Don't love it, it will. Okay. There are some books that I not sure whether I should sort of invested time and energy to get into them. So book summary can be quite useful sort of cut to the chase and get to the point. And if you think actually, this is really really good or interesting, by all means go and read the full book but mentor estate's a slightly different take on it. I've often thought about, you know, you read these nonfiction books, and there's often some good ideas. And yes, your Nick and I use something called Read wise, and it sort of resurfaces all the highlights that you've you've highlighted in the past and but there isn't necessarily any follow up or any specific actions that you might choose to do. I try to do things sort of myself, but mentor is what it does. All the best books you've ever heard all the best sort of nonfiction books are listed there. But part of the process is it will give you a task or a project or a thing to do. If you like the key ideas that came from reading that book, it will say here's something to go and do now. And then next week, which will help you sort of understand embed and learn the key points of this book. The app is actually free provided you don't do like loads of them. But for me more if I was doing one a week that would be more than enough for me to do so it's free. And if you pay for the full thing, it's only 1499 which is a lot cheaper than Blinky a switch things at least 70 or 90 pounds per year. That's per year, as you say 1499 for annual things. So many interest if you like personal development and learning and acting on some of these great books that are out there and executing on some of the key learns from them. Check it out. That's it.

Nick Lincoln:

Okie dokie I am reading a book I haven't finished yet but I am actually reading it. So I am consuming. I'm about halfway through on Kindle. I've fallen back in love with Kindle. I've put it on my audible subscription lapse actually. It's a book called The fund the fund and it's about Ray Dalio and Bridgewater. It's an unauthorized account of Bridgewater and Ray Dalio. My brother in law gave me a book a few years ago called them principles for dealing with the changing world order. Why nations succeed and fail by Ray Dalio. And I got about a chapter in and thought this is just garbage and it's unreadable, but it hit him prognosticating about what's going to happen next, based on trends and so forth. I just thought, you know, the sunken cost fallacy, I'm quite strict now with books if I'm not enjoying it off of what I've put the book down and go on to the next book. I used to plow through thinking I've got to commit to this there must be something in this and then you've wasted years of your life getting through a book you never really enjoy. So I send it back to my brother in law. The fund is a really interesting read and listen, Bridgewater at in times past has superb performance, you know, to funds that do something Alpha Fund and the All Weather Fund and the two main funds, but a lot of that past performance is in the past. It's not been so clever recently. And I know he's having some trouble with some pension funds in the US are pulling out of Bridgewater but he's a highly successful guy. He's probably the most well known hedge fund manager in the world. He's had massive remuneration from from Bridgewater, certainly as he earns three or 4 billion US dollars. That's his income from Bridgewater, but this book is is revealing he has these principles. You know, I think it's just it's just hubris. This is a guy who had you know, grew up it has grown a magnificent firm, based on performance, which is pretty in the past and he's just it doesn't come across, particularly likeable. It's a very it's a very much a culty kind of place and it's he just dominates it. You know, he has all this with a P codifies it and there's rules called Principles, how people will behave If and it's not just a work it's a whole thing for life and you have any he has this grading everyone's grading each other all the time Aboriginals all the staff have these scorecards and you go around compiling them and it's just really micromanaging the nth degree and he's not very happy about this we're being patient and we should do that for each other what do you think? Oh my god can you imagine well we know cut to the chase we were rubbish minus

Carl Widger:

numbers please

Nick Lincoln:

said the finest is an interesting story is his his his life story. So it's interesting the fun I'm going through a great link so if you're interested in that kind of thing. The fund about Ray Dalio I recommend you get

Andy Hart:

that I did enjoy principles is the first book I think you're talking about maybe the second one that came out Yeah, it's not that one. Yeah, got quite a nice voice easy to listen to an audible from I'm a bit of a fan. I

Carl Widger:

really did enjoy principles and interested in Nick a client of mine rocked into his his review with that book and give me a hard copy of it but I haven't read it yet. So well the fun

Nick Lincoln:

Yeah. Oh, well. That means that it's getting the message

Carl Widger:

is getting through that we should be doing indexing and look here's here's the reason we're not doing active management or whatever seems really good. Now he's

Nick Lincoln:

the performance wise that they have they have they have struggle, they have struggle and just struggling you know reading the book him He He's famous for getting certain bets, right? But he's made so many bets wrong, but he just keeps on making the next bet and then suddenly, like a stop clock is right, you know, and then it gives them back on it sort of thing. So interesting. Okay, we have one more culture corner.

Andy Hart:

This is a blog post on the website. quizlet.com is entitled The seven laws of pessimism. If life is better than ever before, why does the world seem so depressing? I recommend you read it. It's got seven key points in it. Share it with a few your clients if you wish to. That's it back to your boss.

Nick Lincoln:

Very good Irish listen to the Quizlet podcast is quite it's decent poker Canadian guy called Jonathan Cain Monza comes from a sort of centrist leftist position, but he's, he's switched on and it's an eclectic mix of people from around the world on the quality Lincoln seal of approval. So there you go. Nothing better. And that's that is the golden picture for that kind of thing. Okay, listen, we're at we're at 77 minutes I don't think the Tech has collapsed Alan's she left the recording a comeback. I think she's probably about that, but I'm sure it's gonna be fine. So do TRAPPIST that is a wrap for episode 4242 The answer to life, the universe and everything can be found in this episode of trap. Thank you for your time. Please do give us a review. Don't just give us a review though. Make sure you subscribe to the podcast and that way every other week every Thursday morning it arrives on your phone freshly cooked like and subscribe on YouTube tick that annoying bell so we can just pop up continually on the screen we're at 670 Something now subscribers on YouTube only 330 away from the magic 1000 Until then trap pack is an EOS from us and Trappists you take care out there and we will be with you in two weeks time goodbye and get out of my computer Go on YouTube.

Carl Widger:

Bye everybody 10

Andy Hart:

tickets left for trap live so grab one of the final tickets

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details including a link to the purchase tickets for

Nick Lincoln:

the lovely TLP decrepit says yeah, I'll chatter first she was out of the house this morning at 2:30am to be at

her school for 3:

30am to get a coach down to Dover. She's in Normandy with the regrets looking at the battlefield features of World War Two. So I've got the house to myself. Goodbye. Everybody else has stopped recording now before I get myself in trouble. I love you. And that's the end

People on this episode

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Nick Lincoln

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Alan Smith

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Andy Hart

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Carl Widger

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