61 - Best of 2024

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It's Christmas. There's no way we're getting anything done, so here's a lazy rehash of some juicy bits from 2024.

Have a good one, TRAPists - the TRAP Pack look forward to catching up with you in 2025.

Show links: http://tiny.cc/traplinks

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Transcript

Unknown: 0:05

Music, welcome to the real advisor podcast, T, R, A, P, trap. Please follow us and join in the conversation on Twitter at advisor podcast, where you can suggest ideas and themes you'd like the trap 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 pile of trap.

Nick Lincoln: 0:40

How have I designed the ideal financial planning practice? I have mentioned this before, by the way, does not sound ideal, and I know we're talking from the position of having mature businesses, so maybe we're projecting that onto our comments here. I know that it's very hard to go out on your own at the moment with the FCA, and they're getting through their their vetting process way harder than it was. And then myself and Andy went out on our own. What a decade, a decade and a bit ago. SJP is a route. Of course, there are quite a few SJP people. You

Unknown: 1:14

underestimate the power of the dark side.

Nick Lincoln: 1:18

Quite a few SJP people here today. They're going back to Coruscant tomorrow. The Emperors call them. This has been something with their charges. He's not happy. Powerful team having a rage. What would I do? What's pretty much what I did, to be honest with you. So I set out in 2008 and I you know Stephen COVID, right? The Seven Habits of Highly Successful I didn't know one, which is why I'm sort of moderately successful. The other six I couldn't be asked with, but the one he had that resonates with me was begin with the end in mind. And when I set out in 2008 I began with the end in mind. I just did the metrics. And I'm amazed more people don't do this. I worked out what lifestyle I wanted, how much I needed to earn gross to get that lifestyle, because nobody lives off net. We live off nobody lives off gross. We all live off net, right? We live off net. I've worked out, well, we had to get gross netted that down, tapped at the tax stuff. Okay? That will support my income. To get that level of my lifestyle, to get that level of gross income, I need x number of clients generating y fee that gives me z turnover. I'm going to build backwards to build a business to give me that turnover. So I did that, that'd be the first thing. I just get the metrics down. Have a plan of where you're going right begin with the end in mind, and then I work out your why. Okay, for me, it's giving people money peace of mind. Okay, it sounds trite, maybe it is trite, but that's what I do for people. I don't want mass I don't want high net worth. Generally, they're a pain in the ass. They're never happy. They'll never give you the whole slice of the cakes. They've got a retinue of advisors. By the way, you mentioned Chris, Emma is an offshore I've got mentioned Richard Holmes as well, again, because I've got a commission share with both of them, but only if I mentioned them both. But the high net worth guys that they've got a retinue of advisors, you'll never get all the cake. I want mass affluent people who are never sure if they've got enough. That's my target market, home counties coming into retirement. And just want someone to say, Nick, are we going to be all right? Know your target market. Know your why metrics first, then know your why. And the third thing, this has become more important to me, and again, maybe it's with the benefit of having a mature business. But just learn the not for me principle when you are talking to prospects, they think they're vetting you. That's rubbish. You're vetting them. You are vetting them. If you bring these people onto your bus, you are driving them to financial nirvana for the next 30 or 40 years. And if they're a pain in the ass, it's hard to kick them off the bus once they're on it and you're traveling down that road to you. Road to to salvation, trust your gut instincts and turn away as many referrals as you're taking on, which kind of ties in with what Alan said about I'm not interested in how someone's got an Australian superannuation pension that he wants to use to pay off his Swiss, his Swiss mortgage, setting his company in their in their facial Yeah, I'll give it a full clear worth. Yeah, no, just just be really again, the art and the science of our thing. And people think, well, human intuition, that's That's rubbish. There's no such thing as I'm telling you. It's strong. If you don't like somebody within the first 510, seconds of meeting them, you probably aren't going to like them. I don't like them, and I don't like most people. I've really honed it down. I Yeah, so have a have a be totally comfortable with turning people away. And then the end you will get a client bank. Sorry to use these pejorative terms, the temperature, but they're human beings. But you know what I mean? You'll get a client bank of people that like you, you like them, and they'll start referring people that they mix with, because like mixes with like. And if you've got clients you like, the chances are you're going to like their friends and they're going to like you in return, and you get the referrals off that have a scarcity mentality. Don't be worried about. Say no to people, because the door will open and someone else will come in to have a really good I've got a lifestyle business. I only to a degree as a lifestyle business. We're solo advice. I really am a solo it's just me. I outsource everything. It's just me. It's a lifestyle business. I only want to work with people. I never want my phone to go and think, ah, Christ, on a bike. Him again. Her again, divert, because we've all been through I'm sure we've all worked in companies that are like that, right? You can create a business in your own fashion where all of your clients, you like, most of them, become friends, and most of your friends will eventually, as well, become clients. And that's why I say, know your metrics, know your why, and turn people away. Sounds counterintuitive. That's what they're saying to the younger advisors who are here. Think about doing it, because they won't be told that it'll be about sales cultures. You may be buying in leads Christ on a bike. God help you. It's not gonna it's gonna end in tears.

Unknown: 5:55

There is billions and billions and billions in default funds at workplace pensions. Back to your point, Nick your real life client example, that is what I call a six figure tick box. Had he ticked the right box at age 29 as you said, he would have been hundreds of 1000s of pounds better off. That's a six figure tick box to tick one box. It's insane. He got no help at that time. So now you've come into his life and obviously nudged him to invest in the right fund at work, which is going to create another load of six figures in the future, because he's invested in the right fund, because you've spoken to him like a grown up and explained that returns all come from global equities. But

Alan Smith: 6:32

imagine, imagine if the tick box said, Do you want a high return fund or a lower return fund? Which one? Yeah,

Unknown: 6:39

that's a starting point.

Alan Smith: 6:41

So you go the hybrid language, and then the next thing you see, it's slightly more volatile. It goes up and down. You're not touching it for 20 years, but it's a little bit knowledgeable as you go through. I'll give you the actual

Unknown: 6:53

data on this. Yeah, the last 10 years 100% global equity fund versus a 20% global equity fund. If you started off with 10,000 pounds in the 100% global x rays versus 20% global percent global ect. If you start off with 10,000 pounds today, you'd have 25,000 pounds in your 100% global equity portfolio. In your 20% global equity portfolio, you have 13,000 the gain of 100% global equities is 15,000 from a starter of 10. The gain from 20% global equities is 3000 from a starter of 10, the returns are five times as much. That's real data from 100% global equities versus 20% global equities. There's real money that people are leaving on the table, and it requires no change of their behavior or lifestyle. They don't need to do and it'll pay more money in it's a temperamental thing where they have to be calmer, having a higher allocation to global equities, the money is there, and you're right, creating money for the sake of it is no is not cool, but then you have more freedom, more opportunity, and you can do stuff with it. So that is an absolute travesty. That is a great point. And you know what I think, the more I think about this is these tools and templates and regulations have been devised by institutions who are so far removed from the end customer, they think they're doing them a favor, because what you just call us some numbers there, and it just, you know, there's some numbers, and they are around the level you could, you know, you might expect, if you were, you Know, an informed person in this sector. Oh, sorry. To

Alan Smith: 8:24

the point of it is the point of it is, is how that impacts on your life. So we are the ones who are in the inner circle of the family's life, and that's the point. So the people that created these questionnaires are not so we're seeing the impacts of that between having three times the return three times the amount. That is the difference between having, you know, an extra holiday, helping your grandchildren, paying the extra VA to your grandkids school fees, and being barely able to afford to live yourself. That's the real life impact for real families.

Unknown: 8:54

Oh, sorry, these investing illiterates that create these things, as I mentioned, the 100% global equity portfolio versus the 20% global equity portfolio. The ridiculousness is, they call the 100% global equity portfolio. They call that high risk. All it does is create wealth. They call this one low risk. It's totally Matt. In my world, that's high risk, the one that produces no returns, that's the real risk, low returns. That's the problem. That's what I'm trying to

Nick Lincoln: 9:21

fight. Yes, it's, it's semester. I do appreciate as well, if you work like Carl says, you know, he's got, he's got quite a big, a big team. Now, it's growing all the time. And if you're working, if you're an IFA, working within a firm where you're a trap is listening to this, and you work with an IFA firm, you might be told what to do, but as much as you humanly can make the risk assessment question that if you have to use just the starting point for an informed conversation, where you begin the process, and it's a never ending process, it never finishes. Of educating the clients about how markets work, most

Unknown: 9:48

advisors follow the result verbatim. Yeah, exactly

Alan Smith: 9:52

insane. And by the way, I think regardless of what's what sort of size you are as a business, it's reasonable, because you got, you've got to have a framework to a. You know, to follow these things. But it doesn't mean that's the key thing that you've that the advisor, regardless of whether there's 135, 10, 1000 advisors in the company, has to then just say, right? You're a six out of 10. I'll give you a six out of 10. You've had zero value then through that conversation. So you need to starting point your framework. And now let's have a grown up conversation.

Unknown: 10:22

It's the financial plan. The financial plan all the time where the money should go. I don't have the data from other large asset managers or DFMS, but I have read the St James's place annual report, and as a big firm, close to 200 billion, I think the global equity allocation is around about 70% that is impressive, considering how large they are. I don't know what other asset managers and DFMS what their percentages are. Again, it's another term that is used by the used to trap the wealthy. Wealth preservation. Why on earth would you want to preserve your money? You want to grow it? But again, it's another honey trap for the wealthy, illiterate wealth preservation.

Alan Smith: 11:07

We're all quite, I suppose, shaken up by because we trusted the this is still called x we, you know, it's well documented. I've talked about, spoken about it in the past. You know, outsourced a lot of investment management to mix friends that what they call posh, DFM, or the equip, or the equivalent, and but the point is, it's like a lot of things in life. It's, you've got to do the work, if you think you can. I didn't know, read a couple of articles and or even go on the DFA foundation course. And you think you found the salvation and solution you can there's no shortcut to this. You have to. I do feel now, one of the few things I do feel very confident about in my life. If I sat down with a prospective client and he asked me to justify our thought process and why we do what we do, I would be able to confidently articulate and even share the journey that we've been on, why we've done it. And I'm just saying to anyone listening to this, podcast, this episode is not a quick fix. This episode should encourage you to go and learn more. Do you further? Do anything in life? You can't, you can't borrow someone else's experience. You're going to have to do it yourself.

Unknown: 12:15

I think, yeah, like another, another way of pulling this right is you've you've looked, you've done the evidence based research, you've looked at what's the best for your clients going forward. And anybody say our Morgan Stanley friend who said, prepare for a 10% just correction in the market. Are your floating rate, no bonds or whatever. Right? So take your own life savings, and you have three options, A, B and C, you're going to go into long term, buy the whole market. You're going to put your life savings with Mr. Morgan Stanley, because he said it's going to go down 10% where you're going to put it into a floating rate, no bond, right? And and I'd ask Mr. Morgan Stanley man, which option he would go for. And I know it wouldn't be the gamble that between now and the next three months, I would

Alan Smith: 13:10

which, which is, which is the yeah thing as well, which everyone needs to be wary of, and our clients need to be reminded of, is that all these people with their forecasts, they got a different agenda, then they're not worth listening to. It the best attack. They don't understand you your circumstances. And also get that that clearly has achieved column inches. We know for a fact, if you say and if you predict anything particularly doom and gloom and negative, you are likely to be picked up by the press. You get and eventually some of this stuff, that's the point. It will be right. Oh, Mr. Morgan Stanley, pretty. Stanley predicted 10% and 10% sure he came along. If you are, if he says it every, you know often enough that will, that will happen. But it's entirely different. It's correctly called 10 of the last three, but it's entirely different thought process and agenda. And one thing that I will see as well as it refers to an investment philosophy. We continue to have investment committee meetings and the agenda. We got an agenda over we have, you know, third party support comes in and helps us and guides us through this agenda. Item number one on every investment committee meeting is, does this stuff still work? Is there any new evidence which has come to light, which which makes us pause for reflection, makes us explore a bit more. Whatever your deeply held beliefs are, you should always be open to challenging them or looking for new evidence to come to light in the in the all the years we've been doing it, despite the fact that's on the agenda. Every now and again, something does come up. To be fair, there's a paper written by someone. Is it interesting? Let's explore further. And without exception, so far has been, well, it's a six year data set. It's not long enough to or, you know, whatever, or it's or it's, they've got confused by something. There's never been sufficient independent, you know, research or data to make us change, in any way, our investment philosophy. But I think that's important to do. Don't just continually, just say My way is the best way, or. Rest of you are stupid. Be prepared to challenge your current thinking. Now the quoted the just as the past, past historical returns a 1000 pound investment in the iShares, 100 so that the footsie basically, which hasn't exactly been established over the last decade, but even 1000 pounds invested in the FTSE 10 years ago would now be worth 1851 pounds, compared to 1130 1137 pounds generated by the average cash ISA not quite double, but heading towards that in a decade. And that's just compared with the FTSE 100 which had you compared to maybe a global equity market would be significantly different. So as I titled that LinkedIn post, it's that slow motion wealth destruction in real time. There's a fundamental issue at heart in the UK. I think it was a few people from Ireland also commented Carl to say, it's exactly the same over here. And I'm just, I thought it was a good point, because this is the stuff we all try to do. We try to educate our clients. We try to sort of translate this information and and explain that it's not about risk, and there's a different set of risks that you are exposing yourself to if you keep high cash balances. But seeing those numbers was actually quite startling, and the post got a lot of engagement from other people. So who wants to go next in terms of your actual thoughts on on the subject? I'll

Unknown: 16:28

go just to kind of segue into the Irish experience is even more solid, I would say, because at least there were some kind of deposit returns coming via the UK cash accounts, whereas here the pillar banks were, you know, giving the pillar banks, being Bank of Ireland and AIB, all the other banks left. So we're left with those two and permanentsb and there basically were not giving any returns at all, to the extent that their latest profit numbers that they announced during the summer, they admitted that basically, yes, we have some term deposit rates, but people aren't transferring over to them. So you have this general apathy to go and do stuff. Yeah, because they were given zero returns. You know, incentives drive behavior. Did that not then have a knock on effect people saying, well, I'm getting bugger all returning my cash. What else can I do? Oh, is this thing called the stock market I'm going to invest? Or did it have, like, no impact? I would say zero impact. And that's proven in the numbers. So the amount that's quite telling. Even when it's most extreme, there's no change in behavior. So yeah, hence we have a fundamental problem. Yeah, yeah. So there's, there's a couple of reasons for that right. Number one is, you guys have no idea what the financial crisis did to Ireland, right? And we were just all loaded up with masses and masses and masses of debt. So there has been a massive cultural shift that if we have a financial crisis or recessions or whatever coming down, we're going to be in much better shape, because people have gone don't think that that thing, you know, it's, it's very recent history. There's a number of people in business who were affected by it and will never make the mistakes again, me included. So I think that that's one of the reasons for it. And then another reason is, well, okay, I can access better returns in cash. So I'll get on to the investing piece in a sec, but I can via European banks, because we're all part of the EU, right? But Jesus, if I haven't heard of the bank, if I don't know the name of the bank, I'm not going to do it so that that's kind of led to the money just sitting there. But I think we've a long road to go to educate people in terms of investing and investing for the long term. And I know my kids are interested in this, but they do not do anything about it in school at all, at all, at all. So this goes back to the curriculums at school, first and foremost, and try and generate. And I know Alan you've spoken about, you know, talking to your kids about, well, what do you use? You use, you know, you have an Apple iPhone. So like, why don't we invest in Apple stuff like that is really, really good to get engagement and to look at kind of investing in over the long term. And of course, we have this massive problem here that the younger folks can't get on the property ladder. So if we can, you know, start this culture of investing, as opposed to the culture of saving, well, then that. But we need to take a very long term view on this, right? That's a 1015, 20 years down the line. We would, of course, you know, see the the fruits of the labor, in terms of the education, if we could get people to invest, we don't have, you mentioned Elisa earlier on. Andy, I never actually heard of that, but, you know, we have nothing like that. But we did before it was called the ssia. You put in 200 quid and the government topped it up by 25% passes Ali, yeah, the whole country has. Had an ssia. Now, you could have an investing one, or you could have a cash one, but I think the vast majority were investing ones. I was a broker consultant for an insurance company back in those days, and I was literally going around with wheelbarrows, like saying, Yeah, load them up there. Let's go and I and it did help people, but it was for us a particular period of time, and then it stopped, and we didn't go back. Probably financial crisis kind of put an end to a lot of that potentially reoccurring. But now, when we're awash with money, and the banks have so much money in on deposit, like we're talking I would say the per per head numbers are higher here in terms of cash being held, that this is the time now to strike, and this is the time to introduce it. And I had advocated for something like this a couple of times pre budget. It didn't get much traction, because these are longer term measures, but this is the kind of stuff that we need to introduce. And you know, I hearing about the Hargreaves Lansdown cash management tool, etc. These are the kind of innovations that we need. And unfortunately, the big problem we have here is, if there's very little innovation and very little competition, well, there's not much incentive for the people who are here at the moment to make any changes, because they're making shed loads of money. The pillar banks just call it straight. They're making absolutely tons and tons of money in terms of profits by not encouraging anybody to do anything at all. So yeah, we've lots to do. Obviously, the exit tax that we spoke about earlier on, that's also a big problem. So I think there's, there's really quick wins to have a really serious long term impact and make this a better country for everybody in the long term.

Nick Lincoln: 21:57

Let's move on to the meat and potatoes of episode 53 of the real advisor podcast. For those of you watching us on YouTube, you can see I'm now struggling with my I struggled by fours. I'm now struggling with my fives on the high tech digital whiteboard behind me, the meat and potatoes today was inspired by a guy called Robin Wigglesworth, who's a writer for The Financial Times, and he had an interview recently with Dr Eugene farmer. Gene farmer, the architect, really, of something called the efficient market hypothesis. Interesting article. It is behind a paywall, but there are sites that enable you to go behind paywalls. I'm not sure whether I should be boosting them or not, because I'm a bit genius about the ethic. How ethical that is, because that is some company's IP. Anyway, it's an ft article. He interviews Eugene farmer, who, you know is 85 years old. Won't be around forever more. He's still as touchy and as driven as he ever, ever. Was an interesting guy. And of course, farmer is famous for the efficient EMH, the efficient market hypothesis, for his work with with Ken French on the three factor model the site the size and value premium. And I know that we are all big fans of a and they hate this phrase, but I'm going to use as a catch all passive investing index, investing and the dimensional approach to it, and the work they do in terms of education for us as advisors, and then stuff that we can give on to our clients, they just throw it at us. Everything is ultra transparent, but the efficient market hypothesis is one of those lightning rod subjects that seems to agitate as many people as it excites or convinces and Robin Wigglesworth, I put a link to it at the circle show notes. He put a LinkedIn post referring to his articles, his interview, 112 comments the last time I checked on on this, and a lot of them are slating the efficient market hypothesis. I'm going to read a couple of these ads. Some of these people are right in the weeds, and they probably don't have a big circle of friends. It's not a theory. It's a hypothesis, as farm himself points out, it was disproved in the three factor paper cap and beta has a T squiggle, stat of squiggle, point eight and only squiggle 1.2 when combined with size that is far below the t start of two required blah, blah, blah, blah, blah. These people go on and off. Somebody else says EMH had a lot of assumptions that have to perfectly align, like the stars for it to come out through in real life. It never works out for individual stocks. Now, I think there might be a disconnect between what I certainly understand EMH to be, and what its detractors say it is. And I so I want to quickly go through and then we'll just bounce this around the room, because in my business, and then in what I do for my clients, and then thing of ours, all for all four members of the trackpad, DFA have played a major part in our progression, and I think they had a lot of value, and it's obviously built around the work of pharma and French. So what is, what is the image? And in my simple mind, I try to keep things simple, right? Because I'm not, you know, I've got a P shaped brain. This is my definition of Eugene farmer. Wrote this paper back in 1965 the random walk of stock prices, long story short, and he's very mathematical. And if you ever see photographs of him in front of his Blackboard, it looks like something, you know, it's just like a. Word vomit with some brackets thrown in, just incredible formulas. My understanding of it is that basically what farmers said all those years ago, and he's won the Nobel Prize in Economics for it as well, is that it's really hard, all the aggregate aggregation of all the players in the marketplace, all the Now, certainly, but back in 1965 but now with the computing power, the algorithms, the analysts, it's very, very, very hard to find a security, a slice of equity in a company that is not appropriately valued. You know, everyone else is, everyone's going through balance sheets all the time. That's that's, to me, that's what it is, the efficient market hypothesis. And on the back of that, of course, that very simple statement, you've had this rise of the index funds, which kind of proves of proves that, well, something is right here, because it's very, very hard to beat the market in aggregate. And you know, we every year, we see these reports, and they're coming from standard pause and so forth, that just show how many active funds, especially in the very developed markets like the US and the UK and Japan, it's really, really, really hard for these active fund managers now to outperform over any sustained period of time, which, to me, indicates the efficient market is, is very, very efficient. I think, where people get confused or or maybe I'm wrong on this, but the tractors of the EMH say, well, it's not efficient. Because you get things like the tech bubble and you get these booms and bursts in the markets, therefore they're not efficient. And I don't think you, by the way, in the interview, Gene farmer's very honest, he said, There's only ever a hypothesis, you know, I It's an evolving work in practice, but I don't think Gene farmer ever said that markets are rational. The EMH is not about that, to me, the efficient market hypothesis, and which underpins all of DFA stuff, fundamentally underpins how Vanguard has done so well, and the other the index trackers, is that markets are ruthlessly efficient. You can't find these missed price securities. You're better off buying the market in aggregate. And then if you want to stick a bow on it. You can then delve down into the size and value Premier. Now that's a bit more debatable, because those premier disappear for long periods of time, as we all know, but certainly the The EMH, in terms of of finding an undervalued security, to me, to me works.

Alan Smith: 27:17

What are the demographics I understand? Because, as you were saying earlier, you would old gates like me were thinking, this is all the youth, the youngsters who are on YouTube. But not necessarily. You get a lot of, you know, of a certain demographic which are very interested in financial planning, and even give us a sort of rough idea in terms of numbers, I know, you get a you get a lot of leads, a lot of inquiries through this, if you can just share some of your data.

James Shackell: 27:42

So yeah, I'm just opening my analytics now, but just, I guess starting off with YouTube again. I when I started out on this journey, I thought very much like you. I thought that if you're making finance content on YouTube, you're just going to get a load of teenagers looking for crypto advice, but actually my audience over the last, over the last 28 days, so it's 90% male. YouTube is very much a male dominated platform. The average age of a viewer is about 40, about 50 years old. So 50% of my audience, 50% my views, come from people that are very young. I have 15% of my audience are older than 65 and the thing is, is that there's, if you make, if you make retirement planning content, there is enough older people on YouTube that you can get in front of millions of people, right? There is obviously a ceiling, perhaps in the UK, and I'm perhaps touching on that in terms of the people that are actually interested in this content, because they have to be interested in it, in searching it out, or the album needs to think that they're going to be interested enough to serve them up that content. So yeah, it's very much an older demographic. But then again, it's a sense that I the people that I know how to help the most are typically people that are wealthier, that are closer towards retirement, but also those are the clients that we're also typically looking for. So these things just marry up, then in terms of how, what effect this has had from a lead generation perspective. So this has been going pretty exponential for the last three years, but at the moment, run rate, where, and just to sort of give, give listeners a little bit of a context, but I have a link in the bottom of my videos, and I would encourage people to go and check it out, just so they can see what I'm see what I'm using. I'm using a fantastic bit of software called Video ask, which is basically like a form, an online form, but instead it's me, a little short video of me, where I ask someone a question, find out a little bit more about them, in terms of a whether they're based in the UK, how much money they're earning, what that. Sets are explained a little bit about our business and how we do things. See if they're looking for one off advice or ongoing advice, and if they ultimately qualify in the lead. And if they qualify, then they can book some time in one of our advisors diaries for initial call. I used to do those initial calls myself, a lot of them myself, but I've now stopped doing that. They now go straight on to the other advisors here at Nova, and we typically get about 120 of those calls booked into our advisors diaries a month, and which we end up with about 60 initial meetings. That's initial meetings. And then from we end up signing, wow, probably between 20 and 25 initial clients come aboard every month. And average asset size is about 700 grand. That's pretty much it. So, yeah, it's, it's

Unknown: 31:01

phenomenal, yeah,

Alan Smith: 31:06

just shows you, but ultimately, all credit to you, James, because you know, if you go back four years and you've got, you know, two, two viewers, and you keep going, and you keep going and you keep going, and it just shows you once again, what we all know, the power of persistence. Just keep going. It's incredible. Really, really, amazing.

James Shackell: 31:25

Thank you. Well, it's one of those things I think that a lot of people look up to, people in my position, being a YouTuber or an influencer, whatever, thinking I'd love to be that that would be fantastic to have that job. But what you often forget is sacrifices that have to have been made, and how, just like you guys, run your own businesses, I have been working for six days a week for 12 hours a day for the last four four years, up until I had my son last year, and now I work seven days a week, including him. So again, it's like he has to sacrifice a lot, like my wife has put up with a lot, my family has put up with a lot, with me being so obsessed about this goal and this ambition of putting in all this effort. So yeah, it's been great to see the

Nick Lincoln: 32:13

holidays. Amazing. It's paid off the trouble

Alan Smith: 32:17

with all these, and I am going to play devil's advocate throughout this, the trouble with these. And don't get me wrong, there's a load of value that advisors add. The trouble with these is it depends on the club. What if the client comes to you and he's got and he's 100% Vanguard life strategy, Vanguard 100 or something? Yep. So rebalanced done automatically. It's in the right asset allocation. So so far, you've had a zero, and depending on where he ends up, there might be negative alpha if he moves into one of these discretionary fund managers, because he wants to have a, you know, someone with a double barreled name, giving, giving advice. But the point, the point being that these are very broad and generic. And yes, I get it, but I'm not, I'm not buying the rebalancing, get it, get it as a significant value. Add the Yeah, asset allocation generally is, but, you know, we get clients coming to us who, you know, buy into the equity thing that, generally, they just need a bit of help. I think we carry on. Because I think the bigger, yeah, I'll carry a bigger value. Isn't all the other things, yeah, but there is one that we're all going to agree on. It's coming up. Wait for it, it's coming up. The suspense is killing me. This one now, cost effective implementation. Oh no. In the old days, I think maybe if there was a higher barrier to entry, I think some advisors obviously

Unknown: 33:37

detract because they correct charge high fees to implement. But anyway, let's just go with

Nick Lincoln: 33:41

this one. I don't even know that me. Kind of mean, yeah.

Alan Smith: 33:45

I mean, so advisors are charging again, look at whatever the data is, between one and 3% of investment portfolios.

Unknown: 33:51

I think typically, I actually don't get it Alan. It's about sort of 2.4% right? I can go, I can go on most platforms directly now for free, right? So let's move on to one that we potentially agree on, behavioral coaching. Behavioral coaching, according to Vanguard, they haven't even got a range. I said this adds at least 1.5% a year. Yeah, I'm in massively in agreeance with that you're getting the clients to do the get the clients to avoid doing the wrong thing at the wrong time for the wrong reasons, you know, continually promoting great financial behavior, removing financial anxiety. Get them to do the right things, to stick with the plan. So behavioral coaching, I'm a massive yes to at least one and a half percent a year. Under no circumstances call it that. Nobody wants to hear that. Oh, you're going to behavior my behavior coach me, you know, so I get okay with coaching. I'm okay with coaching. Use the word coach, like, if you know the world,

Alan Smith: 34:50

yeah. I mean, this obviously is based on, and there is plenty of data, although it is also questioned. What do you call that survey? DALBAR Dao by that is. Certainly been questioned by some experts. Yeah, man, again, that but, but it is true. There is a lot of correlation. You can see data with fund flows after this great you know, market sell offs. People sell their equities, having said that, so do a lot of professional advisors and investors. A lot of this, this money that's leaving portfolios is advised. So this is back to my point about it depends on the advisor.

Nick Lincoln: 35:29

Okay, so Ultra the next thing on the top of the tit bits, yes, the JP Morgan Guide to Retirement. I'm

Unknown: 35:35

not sure if this has cropped off the show before. It probably has, but it comes out every year. They the famous JP Morgan guide to the markets comes out quarterly, US, UK, Europe versions. I believe the JP Morgan Guide to Retirement is again, retirement planning information overload, so it's worth scrolling through. It's 53 pages long. So there's a few pages that will take your eye. The one that sort of hits me quite between the eyes. And all my clients we look after, really is a typical 65 year old couple, couple today, non smokers and in excellent health, the chance of one of them getting to 90 is 73% again, this needs to be factored in when you're having ground up conversations about attitude to investment risk when you're 65 the money does not stop being invested. It's still got multi decades ahead of itself. It still needs to be invested accordingly. So, yeah, there's various bits of information in this JP Morgan Guide to Retirement, as I say, it's annually at the moment, and the 2024, one might have come out a few months ago, but I just came across it recently, and it's worth a few minutes for you to scroll through any points on that. Yeah,

Alan Smith: 36:44

it is. It is very good. They put out a lot of good material, great use of imagery, graphics. You can grab the you know what the point is. They're trying to make really quickly. Could use it with client materials, I think quite well. I always think, and again, I did pick this up from the right honorable Nicholas Lincoln, some years ago, that these averages of life expectancy and so on, you can assume that your clients will, on average, live, let's say, five years more than these, which are national averages. Our clients tend to be more affluent, tend to live in better areas, look past themselves. So the percentages or the expectations or the life expectancy. I like it to be sold

Unknown: 37:23

that. Sorry, just a hammer at home. The studies picked up on that point. So a 65 year old couple, typically, one of them's getting to 90, it's 43% but however, if they're non smokers and in excellent health, most of our clients, let's just assume that it's 73% so they've factored that in. That's why I sort of highlighted that point. But it's a good point, and good point. Okay,

Nick Lincoln: 37:44

thank you. Okay, next one is me. So Well, Sam, you might, you might even know this story, um, but you'll certainly know about what Powerball is, which is the sort of state funded lottery. Oh, yeah, yes. And this was an article that appeared in The Wall Street Journal, which is, I do subscribe to it really good. It's $14 a month or something. And I put a link to in the so called show notes. And I think that, I think you can access it because I give you a free link to share every few days. And that's the should be an open link anyway. This couple, Minnesotan couple, Lutheran, Lutheran, so religious people. They won 60,000,006 zero on the on the power. Are you familiar with the story? Sam, you might haven't. I actually haven't heard it yet. No, okay, so they won 60 million, and they lost a grandchild to some horrible disease, and they thought, You know what, we're going to put some of our winnings towards a foundation to look into research into this. They gave an advisor, a local advisor, just some Mom and Pop sort of shop guy working for an insurance company 2626 or 28 million of their 60 million winnings to set up a trust fund to do research into the anyway, this guy and so resonate more with you, perhaps Sam, than with us. He bought a series of variable annuities way back when, with big ongoing fees, big upfront commissions, an absolute show. Long story short, years later, that $28 million was worth 26 million it actually declined in the face of a soaring bull market, soaring S and P the wife, she's passed away. It's just an absolute name of just a story of incentives and conflicts. And this guy was a fee based advisor. He was getting paid through the variable annuities to recommend this tripe, and it's a charity as well. Sounds. My understanding is that variable annuities aren't even that good from a tax point of view. For charities, you don't get that.

Samantha Russell: 39:36

It's very interesting that they would fund anything for a foundation with a variable annuity.

Nick Lincoln: 39:43

Yeah, it's horrible. And, you know, just to compare, not, you know, the advisor concerns taking his own life. So he's not here to defend the advice he gave. So it's just a 60 million they gave half of it to. And this advisor conflict of interest. We always think the world we're living in is, is, is, is, is good. People, good intention. People, there are conflicts all the time, but we need, you just need to minimize the conflicts to be able to give good advice. But they're always going to be conflicts. We think that most of us do that really well, but there are still a large swathe, a large cadre of advisors out there who are doing things the old way and doing it, doing it badly. And I

Samantha Russell: 40:16

think you hit on the thing, though, like where the it's so I think one of the things that's so confusing for consumers is there's so many different people with so many models of business, but they're all called financial advisor, and so does the consumer. How do you tell the difference?

Unknown: 40:33

I think your story, Anna, might be quite typical of firms. I think when they're in their early stages, they're a bit more gung ho can be asked to fill in 100 page form. Got no clients, got load of time. When you get busy successful and have clients, you don't want to be pissing around spending hours and hours doing admin for some obscure publication. So I think that's probably quite a typical route a lot of people go. I mean, the awards we see now are ridiculous. It's like wealth management, administration awards and back office, front office awards, and they're just making them up for the sake of it. There's almost like, more people at the award show than there is in the whole industry that they're trying to award. I think that's the point. Isn't the head around it, that that's the point. I mean, one of the awards that did go to and when they've got awards for funds, and if you do like, you know, European emerging markets, small cap, blah, blah, blah fund of the year, and by the time is that you like, the 72 awards. And the one I was like, the second last award on so you'd like dying, you know. And there's always a comedian that's, you know, semi famous, doing the old host, which is normally quite funny. I don't know if you saw the other day, but, like, I'm gonna name them, because it was a public tweet. Scottish Widows got awarded for something. And some bloke on Twitter said, Yeah, I've already put in three complaints to them this week. You can imagine the best administration award. And they've got like, 46,000 complaints or something. He just couldn't Ross sharp at that on Twitter, because he's got an ongoing beef with widows at the minute. Oh, fair. No, it was Elliot. Elliot, someone who's a listener. I think he was okay in Edinburgh. You know that dude. Anyway, No, I've never really entered awards. I don't think I ever really will. I find them quite painful. I see them online all the time. Obviously, it's quite a marketing thing. I sort of understand why people do it. And, you know, firms at a certain stage in their development. I mean, yeah, there's a lot of pay to play tables cost a lot of money, but I think people are impressed by them, like a family member of ours won an award recently that was just like, but all the whole family were just like, Isn't it amazing, wonderful. Have you heard the news? So if a firm wins an award within a family that don't quite they're not insiders. They they're impressed by this stuff. I was just, I couldn't think of anything worse, but I played the game and congratulated but inside, I'm thinking, it's the total waste of waste of time. What does that not talk to the point about clients might think that that's exactly that, Carl, that's what I'm saying. So being receiving a family member won, like a marketing award. It was like the biggest news ever in our family. So the same would apply on the financial advisor side. Sorry, yeah, I think, like to Allen's point about you know, nobody, no, we've never won one client. Well, maybe not, but maybe the social proof of you winning the various awards, helped you get clients across the line. I know Alan when I met you, you had just won the financial planning firm of the Year Award, and I thought, Wow, that's amazing, or whatever, right? So, and we have entered awards before, and we've been delighted when we won them. And I think Andy's point is really well made, that, you know, if you're a kind of firm starting out, entering these things, I don't think is a bad idea at all, and giving your best shot to get a couple of them under your belt, so that you can say that my peers have voted us the best in whatever we don't have the amount of awards at all that you have over there. And I do see all of the ones that are over there, and it's like, as you're saying, what you know, we can, we'll niche down all the awards. So basically, there's one for everybody in the audience. With full disclosure, we've just applied for the Irish Times, great places to work award. And I would really like to know that's a proper application. And we're, I think we're into phase two of that at the moment, might go nowhere. So if you hear nothing from me about that, again, we didn't get it right. But, uh, but that one would matter to me, and I would really, really like to get some acknowledgement that we're looking after our team and we're trying to as best as we possibly can create a great culture and a great place to work. Most of the clients I take on now, I'm pretty sure not really going to run out of money, just sort of the level I am the clients I take on. I've got a historical client bank that there's a few people that are quite close to the line. The old took up Darren Andy. He knows about everything, and he can't be told anything. His name is Andrew Hart, and drew Hart. You drew. Yeah, my final point is, I'm sure there's lots of people listening to this who are who are at a certain point in their career, that the new clients they take on are probably wealthier and unlikely to run out of money, but they've got a historical client bank of clients that are close to the line. But we feel an obligation to look after these people, because they, you know, came with us when we started our businesses, you know, originally. So they're the clients that we have to have a, you know, a louder word in their ear. Anyway. That's my final point.

Alan Smith: 45:53

There's one thing about this, this group, the four of us in our private WhatsApp chat, there's a radical panda going on in there, I can tell you, there's no beating about the bush in that particular group. Telling the truth really important to me and my company and colleagues, so much so that it's one of our five core values, five C's, which includes collaboration and creativity and candor. And actually, it works both externally and internally, telling the truth to your colleagues as well, even when you've got a point you disagree with. I think it's really important. There's books written on this subject. There's so many businesses that struggle because people aren't prepared to confront leaders, colleagues or anything else. They've got a different view, different different opinion, but they think, Oh, just keep it to myself. I don't need to add any aggro in my life. I just think it's really important we do our best in my business to try to always tell the truth. Do it professionally, do it politely, but tell the truth to each other, and of course, that applies to our relationships with clients. When we when I knew we're going to talk about this, I sort of reflected back on where we'd had challenges with clients, and some have worked by telling the truth and some haven't. It was a client we were speaking with a few years ago who was exactly in that thing, absolutely on track to run out of money relatively early, and would not stop his spending habits. Used to bring his wife into the meetings, and all of a sudden she stopped appearing. And there's a dilemma there as well for us, that's the family. Does the couple? Does the other half know that they are heading for financial catastrophe 10 years from now, if they carry on like this, and it was really awkward, and to the extent that we had a kind of just a fight, a meeting saying we can't, in all you know, good conscious, carry on and advise you, we're telling you you're heading for a slow motion car crash. Every year we engage, we update. And by the way, this was in the back of fantastic investment markets and investment returns. Had he gone through, which could have done, at any time, a real significant market correction, which is, you know, not only possible, but not only probable, but guaranteed, it would have been much, much worse. So I was constantly thinking, this is a real problem for us. And we said at one point, it was a kind of ultimatum, we are going to have to resign from managing your account. We got all sorts of alternatives and solutions and things in terms of how we could, you know, manage the situation. And at the point of us just stepping away so we can't carry on, he said, No, fine. And it took that for him to change his spending habits. It was a lot of extra expense in terms of, you know, quite expensive holidays, changing cars quite more regularly than needed to do. And he's still a client now, and he's pretty much back on back on track. Yeah, he downgraded his lifestyle. Moved to North

Unknown: 49:00

Watford, new Toyota. He wasn't a great compromise on that, that sort of lifestyle, I don't know who would Oh, go on. Then Nick, go come. Was my turn now. Thanks. I heard um something recently. You know that it was just said by an influencer, right? So someone who people would say, would know their stuff, saying, you know, if you want to retire early, then pick your date at age 50, and just do a Vanguard target date fund there, right? So it was nearly really good advice, but actually it was terrible advice, and it will, you know, get more conservative as you approach, and that'll protect your money and blah, blah and again, just to say, I appreciate there are, there are some specific scenarios where it might be appropriate. Right? But that's the beauty of financial planning and cash flow modeling, where you actually do the specific planning and the specific modeling. So, you know, it's just, it's driving me insane. You guys know it's driving me insane because I've told you all in our in our WhatsApp group, it's, it's, it's actually quite difficult to we know. And I suppose the reason I know is because I grew up in the world where I was taught how to do it the wrong way. So I worked for one of the big banks. I, you know, I was a product seller. I have made all the mistakes. So I'm not saying that I haven't been there and done Poor things, because I was also affected by the brainwashing. And I suppose in in a in the product selling words, you've got the provider, number one, the insurance company, you've got the broker, the intermediary, number two, and then you've got the client is way, way further down. And that's why we set up matters Ireland, which was to flip it and put the client at the top all the time, but, but it's difficult when you're out there on your own, saying Not, not on not on our own. There are plenty of other really good firms doing it, but you've got these massive brands who who are just trying to cream massive fees of high net worth individuals. And these high net worth individuals, number one, don't know what they're paying. And number two, believe that they're being offered the best possible advice. And I'm beginning to feel that sometimes, perhaps people know that this is not the best thing for their clients.

Nick Lincoln: 51:38

That's a buzz without Daniel. And I'm Yeah, no, no, no, no. It's amazing. What a mammal believers. I wonder. I wonder also, whatever they call,

Alan Smith: 51:45

how much of this, this stuff that it's they're kind of effectively locked in, or there's big tax consequences. I wonder how much of that is done intentionally, just to make these assets sticky, just to make as many barriers as possible. You know, how much of it is a core part of their investment philosophy? We believe in all the private equities thing. And I'm actually say yeah, but no one can get out of this for five years or whatever. I think there's floating rate notes and stuff. They're locked in. It's yeah, structure, structure from us, we come up against all the time. I've got this for another three years, and if I can't take it out now, is huge penalties and take it out. So let's just leave that in for the and it's just they would say we believe in this. You

Unknown: 52:21

call them, you call them something, you call them something much sexier than just to call them auto callable. Yeah, no, I'm in a complex investment product, and I think it's a really good idea, yeah, whereas, you know, go back to keeping it simple, stupid, it's like,

Nick Lincoln: 52:37

that's that.

Unknown: 52:38

That's the rub. This whole thing, complexity, weirdly, is easy to sell. Simplicity is incredibly hard to sell in this business. Just think about a thought experiment. Someone just sold the business. 10 million pounds. 20 million pounds. I go and see a private bank. They literally do a three hour presentation of complete guff create a multi asset mess. Sounds amazing. 28 different lines, items like you can't see the wood for the trees. They leave and go, yeah, that seems like it's okay, darling. They go and see one of us, and we go, here's the solution. Put your 10 million pound in that one fund. It's super cheap. He's going to do everything you want over the next 50 years. And it's a two minute pitch. Complexity is weirdly easy to sell in this business. Simplicity is very hard to sell. 100% the multi asset thing crops up a lot. I call them a multi asset mess. People call them a multi Asset Fund. They're multi asset mess. The longer you're in this business, the more you understand how Investment Management works. And basically you try and simplify, simplify, simplify. So I believe the only two asset classes a client should have is global equities and global bonds, ideally way more global equities. Yeah, we see it all the time, the DFMS, the people that have these, but that's all they that's their whole remit. They don't do any financial planning. They don't do any behavioral coaching. So all you are paying them for is investment management. So by default, they're going to create something that is very convoluted and obviously has high charging fees applied to it. And yeah, the stickier it is to the firm, the better. Back to Alan's point. So it's hard of them to move clients. It's the IKEA effect. They did the thinking and chose the person. Then they want to stick to them. You rock up and say, That was a terrible mistake. They've just absolutely hammered your wealth for the last five years. The portfolio they've created is just full of low returns. You know, again, they don't want to feel feel silly. Again, that's the point that you're mentioning. Carl, you find it hard to basically say what these jokers have created is just a load of crap, and now we need to try and unravel it. So, yeah, there's many moving parts of it. The good news is a lot of these one fund solutions that we know very well and talk about and lot of our clients, potentially, are in them on the risk scale. They're now fives out of seven. We know the whole risk scale is total BS, but at least finally, they're realizing that 100% global equity portfolio is not an 11 out of 10. You know, it's not. Of 10 out of 10. It's not far up there. It's way further down. So yeah, it is slowly turning. And some bond funds during the madness of 2022 turn into six out of seven. So it's

Alan Smith: 55:13

just re reassess their bond fund and went from super low risk to being high, the highest one of all but sevens, yeah, but that was after that was

Unknown: 55:27

interesting. Yeah, exactly.

Nick Lincoln: 55:28

It's ridiculous trying to put a good tooth back in the tube. Ridiculous. Okay, another scam this time. It's non Irish one. So we're going to bring it up with some more UK based. It seems

Unknown: 55:39

like these UK scams are few and far between these days doing their job. Okay? So this one Brace yourselves was an art investment stroke fraud, a company called Smith and partner come very, very fancy. So the article was about a 31 year old gold trader. He was the person that got scammed, he was looking for 64.6% in the first 12 months. So clearly, this gold trader isn't investing illiterate. But anyway, he went ahead and surprise, surprise, it went belly up. I mean, it's not nice that people create these scams to obviously defraud people. But for me, fraud and scams fall into two different categories. There's a deception fraud, which someone is like, rung up and told that their banks closed it down they need to move money, and someone's been deceived into taking action, but they haven't gone into it with the intention to make money. The different type of fraud is called agreed fraud. You've gone into that fraud in the intention of making money. It's turned out that you've been defrauded, and then you've gone crying to someone. So this is a greed fraud. The worst part of this story the guy, this 31 year old gold traders tried to go after HSBC, his bank, to claim the money back after this investment, which is not an investment speculation blew up. It's mad. I mean, it's not sort of poor old banks, but my God, having to deal with these types of people investing, illiterates that just throw the money here, there and everywhere, and then going after the banks and them having to have a compliance department and a complaints department to deal with all this sort of stuff. Apparently, there's another company dealing with all the victims of this fraud. They've submitted 12 claims, sorry, 40 claims to 12 banks for 2.1 million pounds. They're all going after the banks that facilitated the move around their own money. Anyway, these things. So what's the complaint against the bank that the bank you hit the client, the person the investor, instructed the bank to move money to this account, to get into this thing, just just like normal transfers. You know, the bank shouldn't allow it. The bank should have known it was

Nick Lincoln: 58:02

a scam, I think, is the just gist of it.

Unknown: 58:05

I mean, this guy might as well sue his parents for lack of financial education. Don't go after the banks. Go after your mom and dad. You know, again, the good we do, the harm we help our clients avoid, yeah, again, all these people that caught up in this, in this scam. But I can't remember. I think, okay, here it is. It's 13 point 8 million was invested by 1000 people. So each person was 14 grand in, you know, nobody with real money is gonna be doing a 14 grand pump. These are all, you know, not affluent individuals. So again, investing in financial illiterate anyway, it's it pulls my blood that this guy is going after HSBC, well,

Alan Smith: 58:48

he's desperate. He's looking for anyone at all that could possibly help Foz as well. Alan, it's

Unknown: 58:53

gone to a false I mean, obviously it's an unregulated investment, so false, then it's nothing to do with us. I mean, it could have landed on all apps. Is that right? Potentially,

Alan Smith: 59:02

I'm trying to send money, as I you know, if you just I bank with NatWest, even if you try and send money to yourself, Alan, these days, they ask 49 questions, exactly, got affiliates, exactly, you know, to somebody, it's like, do you know this person? Is it a friend? And you say, it's a friend, you say, do you know that? You do have to ask. There's a lot of barriers to encourage people to think twice before they say, then

Unknown: 59:25

at the end they go, aren't you Sure? Yeah, sure. Sometimes I've said to someone, no, no, silly, 100 quid. I've sent you a 50 quid. No, you haven't. I said yes, I have yes because I didn't hit the ninth. Yes. Definitely. That old. Yesterday, you didn't scroll up 44 pages to click the final agree. Anyway, back to you. Nick you.

Nick Lincoln: 1:00:00

This isn't our final episode of the year, is it? Oh, that's gonna put together

Unknown: 1:00:07

shorts. Just do

Alan Smith: 1:00:09

the YouTube shorts get make AI, do it. Come on. No, I'm not doing I'm not doing anything. I'm not doing anything. Are you closing shot for the year now? Well, I'm not doing that. Two weeks ago,

Unknown: 1:00:18

this is giving everybody a good insight as to whether demonetized again. Nick, monetized again.

Nick Lincoln: 1:00:29

Sorry for that lady who drives in the car with the children.

Unknown: 1:00:33

Chris, score holidays now she must. So you're saying the show that we're going to put out the second of January is going to be the best of great. Okay, get some chop up the best off. That's hopefully going to be the case. Yeah, why don't we just talk about this once before everybody you.