Transcript
WEBVTT
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I also say for this like, go with your gut.
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If you feel as though that an advisor is not doing the right thing probably nine times out of 10, there's a reason why you feel that way.
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And I would always say first, like, if you have any issues, address it with the advisor, you know.
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Talk to them, say, hey, I'm feeling this way, can you walk me through this?
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Even do that you shouldn't be working with the advisor to begin with, because if you can't have that open form of communication where, if you think something's going wrong and you can't have that conversation, you shouldn't have that relationship, because I would never want to have that relationship with any of my clients.
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I would never want them to feel as though that they cannot come and talk to me about anything that they think is going on.
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Welcome to the Sugar Daddy podcast.
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I'm Jessica.
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And I'm Brandon and we're the Norwoods, a married millennial couple here to help you build wealth so you can live the life you've always dreamed of.
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Brandon is an award-winning licensed financial planner with over 10 years of experience and millions of dollars managed for his clients all over the US.
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Don't worry, we leave all the intimidating finance mumbo jumbo at the door.
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Stick with us as we demystify the realm of dollars.
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So it all makes sense.
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While giving you a glimpse into our relationship with money and each other, we are so glad you're here.
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Let's get started.
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Hey babe, what are we talking about today?
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Well, today we are talking about.
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What does bad financial advice look like?
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Obviously, the purpose of our podcast is to help you guys with your personal finance and give you good information, but at the same time, you also need to be able to recognize when you're receiving bad information, so that you don't try you know, try to apply it to your life.
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Don't try to apply the TikTok bros information to your finances.
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Depends.
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As I always say it depends, because I don't want to paint everyone you know with a broad stroke, because there is good information that you can find on TikTok and other social media sites, which is great, but there are also as much good information as you find, I see twice as much bad information.
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Okay, well, let's get into it.
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So is this just bad information in general, or is this when you're working with a financial professional?
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I think you can apply it to both.
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Now, some of the things that we go over you'll see more in a one-on-one interaction with, maybe, a financial professional, but some of the other areas can definitely apply to information that you maybe find online.
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Okay.
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So if you are out there listening and you are working with a financial planner or you have somebody maybe looking over your portfolio, but you're kind of DIYing things in the background, but you are looking for advice here and there and Brandon is not your financial planner, here are the red flags that you should look for.
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Is that what we're doing?
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Kind of yeah, a little bit of that.
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Okay, well, let's get into it.
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So what's the first thing that is a red flag in your book as a licensed planner?
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First red flag for me is if you are meeting with an advisor or planner and they don't ask you enough questions what kind of questions?
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all questions because, in all honesty, especially when you're first meeting with, you know, a potential financial planner that you're going to work with, honestly, the you as the potential client, should be talking 90% of the time.
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They really should be asking you thought provoking questions to understand what it is you're looking for.
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Of the time, they really should be asking you thought provoking questions to understand what it is you're looking for.
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You know, as far as, from a health standpoint, your goals, who you are as a person.
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A lot of it should be asking questions and if you're sitting down with a planner and the planner themselves is talking 90% of the time, to me that's a red flag, because the idea is to get to know the client, because everyone is an individual and that's the purpose of personal finance is to find out the personal aspect, and the only way I'm going to find that out is by asking a ton of questions.
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And I think.
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Correct me if I'm wrong, but I feel like your favorite question to start off with is always tell me about your goals and it's not a?
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Hey, I want a million dollars, because then you're just going to come back with well, why?
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I would say it's not a goal.
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A monetary amount is not a goal, because money itself is never the end result.
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It's what the money allows you to do with it.
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Yeah, the money is a tool.
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The money is.
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What does it allow, like you said?
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Oh, I want a million dollars.
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What does that allow you to do?
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Oh, it allowed me to retire at 55 and I can take my four vacations a year to the Caribbean, wherever.
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But the idea is that if you're meeting with someone and they're not asking you a lot of questions, if you don't feel like you came out of that meeting and you were talking more than the financial planner, more than likely maybe you need to look elsewhere.
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All right.
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So if they're not asking enough questions and they're doing more talking than you, especially in those initial meetings, red flag.
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What's another red flag?
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Now this one does apply to if you're looking for a financial planner, but then also it is a big issue just in general.
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When it comes to social media, content is ignoring individual circumstances.
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So like blanket statements.
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Correct so like blanket statements.
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Correct so like.
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Once again, like you know, if you're meeting with a planner, they're not asking you enough questions.
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The idea behind asking a lot of questions is to find out the very specific details of your individual circumstances so that when they're making recommendations, it is tailored to your specific situation and not just a generic cookie cutter plan that they're trying to put everybody into.
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Oh, that sounds terrible.
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Well, that's honestly, you know you would definitely run into that.
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And then also, you know, with on social media, I know it's a little bit harder because you're trying to like provide information to the masses and you're you know you're not talking about everyone's specific individual situation and that's part of the problem.
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When I, you know, I have with the social media aspect is that I do want to provide good information, but it's also hard to provide really good information while taking into account, you know, everyone's circumstances, because you really can't.
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But the idea that I don't like is is that I hate blanket statements.
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I cannot stand when I, if I watch a social media post and they say always never, I'm like I'm done, because that's rarely the situation, it's normally.
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This could potentially apply for this situation.
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This really doesn't apply for most people, but it could apply for this situation.
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Right, I think too.
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Didn't you recently have a meeting where somebody in our age bracket was working with their parents' financial advisor and was basically like you know, you talk about the blanket one size fits all?
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It's like oh well, we did it with your parents, so we're going to do it with you, even though you're almost 30 years younger than your parents, who are retirement age?
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Like that's not good.
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I had a new client come on and when we were looking through their portfolio I noticed a specific fund that they were in and I was just it was an, it was a target date fund and I was just trying to figure out why they were in this specific target date fund, because it was a targeted fund as if someone had already retired.
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And then this individual, when they were put into it, were in their mid-20s and I just couldn't understand.
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You know the reasoning behind it it was a retirement account so there were restrictions on when she could access it anyways.
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And I'm just like I like to try to give other advisors the benefit of the doubt when I run across those things and maybe there's a reasoning that I'm just I don't know bit of doubt when I run across those things that maybe there's a reasoning that I'm just I don't know but it really made no sense for a 25-year-old within a retirement account to be invested as if they were retired.
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Because then I mean short answer they're not aggressive enough.
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No, and this is unfortunately.
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This was eight years ago, so they've lost out on eight years of growth that they could have had if they were properly allocated from an asset standpoint, with an account into more aggressive funds.
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That would have been appropriate for someone that age, with the time horizon that they had until they would be accessing that money.
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And just shameless plug.
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If you are working with an advisor and you want a second set of eyes on what's going on in your portfolio, brandon has like a one time a la carte offering where he will look over your portfolio and point out things that you might need to be aware of.
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Like hey, you're invested as if you have been retired for five years, except you're not even 30 years old.
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Why is that Right?
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So something to think about.
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If you are DIYing it, if you're working with somebody else but want that second set of eyes, if you got a medical diagnosis that was maybe a little chilling, you'd probably go get a second opinion.
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So why not do that when it comes to your portfolio?
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I also say for this go with your gut.
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If you feel as though that an advisor is not doing the right thing probably nine times out of 10, there's a reason why you feel that way.
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And I would always say first, like, if you have any issues, address it with the advisor, you know.
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Talk to them, say, hey, I'm feeling this way, can you walk me through this?
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And if you're not willing to even do that, you shouldn't be working with the advisor to begin with, because if you can't have that open form of communication where, if you think something's going wrong and you can't have that conversation, you shouldn't have that relationship, because I would never want to have that relationship with any of my clients.
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I would never want them to feel as though that they cannot come and talk to me about anything that they think is going on, because the idea is that they could have.
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Just, you know, people sometimes just talk to their friends and their friends like, oh, I had this terrible scenario.
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And now they're thinking, oh well, maybe I have this scenario, even though there's no signs of it, but I want them to come and talk to me so I can walk them through it and show them, like, hey, what that person is going through.
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I can understand.
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It does occur, but I can show you that this is not happening here.
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Well, you kind of went skipped to the next point, which is like that lack of transparency, lack of education, not getting answers to your questions.
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If your advisor is skirting around answering questions about how they're getting paid, how much they're going to get paid off of you know something that they may be suggesting you go into, or just having a hard time answering your questions, and you're getting that feeling of was that an answer or was he skirting around?
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Or was she skirting around Like, go with your gut.
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You know that intuition, you know what that is, so listen to it.
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Because, like for me, I guess I kind of maybe leaned in the opposite direction.
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I am completely transparent and maybe provide too much information for some people Because, for example, going back to the example of the client who was in the fund, that was completely way too conservative for someone her age.
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I also said to her I was like do you understand the fees that are associated with the funds that you were in?
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And she was like no.
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I was like, did he ever sit down and talk to you about them?
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And she said no.
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One of the things that I always do, especially when it comes to an investment portfolio, is that I do explain the fees that are associated with that portfolio.
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So, to make kind of a long story short, she was in what's called A shares and that is a type of fund that it can have a specific purpose in certain some scenarios, but for her scenario it was completely unnecessary.
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It was extremely high fees on it, in addition to paying the advisory fee that was associated with her working with him.
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And I was like, did you even know this fee existed?
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Like, did you know that this was coming out of this account?
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And she had no idea.
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So, like for me, I always make sure that I go over it.
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I also send them an email showing them what it is, so that they are.
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You know, if they forget about it, they have something to reference back to.
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So I'm always about the transparency because, unfortunately, within the financial service community they have not always been transparent and it's still a work in progress, but the idea is that there should be no hesitation in the advisor answering your questions, whether that be about fees or just questions in general.
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Like you know, whatever it may be, there should be no hesitancy in regards to them wanting to answer your questions.
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Yeah, and this, it flags something else for me, which is so many people that we work with are going to be referrals from family and friends.
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And who do we?
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You know, if you have a good relationship, especially with your family or your parents, and you're at that age and you're like, hey, I'm looking for an advisor, who do you suggest?
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And they're like, oh, we've been working with Bob for years.
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Well, does Bob only work with 60 year olds?
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Because, hello, we are not 60.
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And our circumstances are very different, life is much more expensive, etc.
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Etc.
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So it's one of those things where maybe Bob can get you started.
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But again, ask those questions and then say are you working with people my age, you know what?
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What does your client spread look like?
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Because those could be red flags in themselves, right Of, hey, I only work with people who are already retired and you're 30 years from retirement, you might want to look at somebody who is more in your shoes, so to speak, and is working with people who are going to have situations more similar to you.
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Again, and if Bob is this great family friend and you trust this person, that's great, but maybe once a year you have, you know, a Brandon or somebody else.
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Look over your portfolio to make sure nothing's being missed.
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I think there is something to be said about obviously, many years in the industry and having that knowledge you know.
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Obviously, the longer you've been doing something often you know, the better, more knowledge you should have.
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However, when it comes to finances and the specific situations that individuals are facing, it matters whether or not that person can relate to what you're actually going through also.
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So if you're parents, you want to work with your parents advisor and he's 65, 70 years old.
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He probably has no idea in regards to how inflation is affecting us younger individuals when it comes to buying a home or handling student loan debt, stuff of that nature, that or even simply just dealing with the day-to-day as far as your kids and expenses with daycare and stuff like that.
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They could have had kids, but that was different in the eighties than it is now.
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So there is something to be said working with someone that can actually understand what it is that you're going through, because they're going through the same things and they're also trying to find the best way to navigate that as well.
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Absolutely.
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One of the other things I know that you really dislike going back to the TikTok and social media are the people who use guarantees and always and never, and it's like those blanket statements that I feel like boil your blood.
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Well, the thing is that there really aren't any like guarantees in life, except for one day you'll die.
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Death and taxes.
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We have a restaurant in Raleigh.
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But you don't have to pay taxes.
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You can take the consequences of it.
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Well, if you're a good citizen, yeah, but there's a restaurant here called Death and Taxes.
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The only guarantee is that one day you will die.
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Yep, because I mean well within the finance world like so, for example, when I worked at a brokerage a broker, dealer and dealer and they have a compliance department and if you were to send out an email that had any word like the word guaranteed or any synonym to that, it got flagged and you immediately got a call from compliance, because there's basically no guarantees when it comes to anything in finance.
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The one thing we know about life is that life is unpredictable.
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So to say that you can guarantee this or you can guarantee that for someone is just misleading.
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You know there's products that have a quote unquote closer to a guarantee.
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However, that guarantee is warrant upon that company being around to provide you that guarantee.
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So in my mind, it's a guarantee that's contingent.
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Upon the company staying open and lucrative and all the things.
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But when you hop on, when you're online and you hear these different financial literacy influencers that say things that it'll always do this, it'll always do that, that's misleading, it's wrong.
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That's a word that I don't use because I can't guarantee you anything.
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I can guarantee you that I will do my best to help you achieve your goals.
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That's about the only guarantee I got for you.
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Well, I think too, when you're looking through the social media aspect of finance, most people are coming from their experience.
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So maybe they got into a good fund or did something right and they got a good return.
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But now they're out here saying, oh, it'll always do this, it'll always do that, but they don't look at anybody else's finances.
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They're not an expert in the space.
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It's not that they study 40 plus hours a week.
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They haven't taken any exams and, even more important, they have no fiduciary responsibility to giving you good or bad advice.
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So if you go and make a huge mistake because somebody on TikTok told you to do X, y and Z and you did it and it screws you over, guess what?
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That TikTok person is not going to be responsible, whereas if you work with a licensed planner, they are licensed to have your best interest in mind.
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That is their job.
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I've seen some wild things on TikTok or other social media platforms, where and it has a millions of views where they're literally telling you information that equates to fraud, as in like you will go to jail.
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I don't look good in orange.
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I've seen ones I'm like you can't do that.
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You can't go apply for a loan and tell them an alternative reason for that loan.
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I was like that's fraud, you will go to jail.
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Yeah, so you have to take If it's fast, money stuff, just stay away.
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Yeah, that's a good rule of thumb.
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Just stay away.
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There really isn't fast money.
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So if you see any social media influencers, if their method is so great and so better than everyone else's that it provides them such fast and a large amount of money, they wouldn't need to be on Instagram or TikTok, yeah, like if I had-.
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Selling their $99 course.
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If I had a method that worked phenomenal and I could just make so much money and it was soundproof.
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I would just keep doing that method and I'd give away the information for free.
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I wouldn't even sell the course If I could make that much money off of it.
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I would just give you the information for free.
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I wouldn't sell you a course.
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But it goes back to the.
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If it sounds too good to be true, it probably is.
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So again, go with your gut, go with your intuition, and you know, not saying that everybody's selling a course online.
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Oh no, because there's great courses yeah isn't providing value, but it's not fast money courses.
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Yeah, you still have to.
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You still have to take the stairs right, unless you're getting a huge windfall, a huge inheritance, and even then, if you don't know what to do with it, that's a risky situation to be in.
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So you know, just stay away from the guarantees and the always and the nevers and operate somewhere in the middle, because if it sounds too good to be true, it probably is, and, like Brandon said, there's really no guarantees when it comes to our money, unfortunately, which leads into another red flag area which I know you're really passionate about, which is the education portion behind financial literacy and actually understanding what's happening with people's money.
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You're not just saying, hey, let's do this, this and this.
00:18:57.959 --> 00:19:07.423
You're asking questions along the way and making sure that they understand the intricacies and nuances of what you're doing and the why behind it.
00:19:09.029 --> 00:19:09.190
Yeah.
00:19:09.190 --> 00:19:14.403
So when it comes to money you've heard me say this before that I think people have anxiety around it for two main reasons.
00:19:14.403 --> 00:19:16.217
One, they don't have a plan in place.
00:19:16.217 --> 00:19:19.500
They don't have a plan of where they are today and how to get to where they want to be.
00:19:19.500 --> 00:19:25.472
But then, two, they also lack financial literacy.
00:19:25.472 --> 00:19:27.159
They don't have a firm understanding of finances in general.
00:19:27.159 --> 00:19:32.234
So if you just hand someone a plan, that doesn't take away the idea that they don't understand how the plan works.
00:19:32.234 --> 00:19:36.795
And if someone doesn't understand how the plan works one, I think they're less likely to stick to a plan.
00:19:36.795 --> 00:19:41.003
But then also they don't understand the other areas that could occur.
00:19:41.003 --> 00:19:42.954
That would deter that plan.
00:19:43.978 --> 00:19:47.027
So the financial education aspect is huge for me.
00:19:47.027 --> 00:19:56.553
So if you're working with an advisor that is not open to educating along the way, I honestly think that's a red flag.
00:19:56.553 --> 00:19:59.988
If you're wanting to get the education from them, now it's one thing.
00:19:59.988 --> 00:20:03.238
If you don't want the education, I think that's a misstep on your part.
00:20:03.238 --> 00:20:05.875
But if you don't, you just want to do it, that's a completely different scenario.
00:20:05.875 --> 00:20:12.490
But if you're asking to understand things and they're not taking the time to explain them to you to make sure that you do understand it.
00:20:12.490 --> 00:20:16.415
That 100% is a red flag for me, and I love that.
00:20:16.476 --> 00:20:28.950
Social media does provide, you know that financial literacy education, because there are there are tons of platforms on the various social media platforms that provide great information, and I love those because they come from an education standpoint.
00:20:28.950 --> 00:20:31.077
They're like, hey, you should understand this.
00:20:31.077 --> 00:20:41.556
They're not saying, hey, you should do this, they're saying you should understand this and once you understand it, you have a better ability to see if it is applicable to your life and if it is, then you apply it.
00:20:41.556 --> 00:20:51.453
But other times you have people that are just saying do this, but they don't know anything about your situation and they really didn't do a good job of educating you on it, and then that's where you get into trouble.
00:20:52.536 --> 00:21:02.711
Right, yeah, and even you know most of us do not want to become financial advisors or be, you know, licensed in these areas.
00:21:02.711 --> 00:21:09.136
But having a high level understanding of what's going on with your money, regardless of who is quote unquote in charge of it.
00:21:09.136 --> 00:21:18.509
So I think of women who are like, oh you know, my husband does it all and I don't really ask any questions or know about it that is also a misstep.
00:21:18.509 --> 00:21:29.282
So, even if you're not working with a planner, if you are just handing off your money and thinking that it's getting taken care of and you don't know what's going on, red flag for yourself.
00:21:29.584 --> 00:21:30.950
You need to be asking questions.
00:21:30.950 --> 00:21:38.213
You don't want to be the person ending up with, you know, binders of information that you didn't know existed.
00:21:38.213 --> 00:21:44.980
And you know your spouse passed away and, oh, you didn't know that you were living in debt and that you were completely broke.
00:21:44.980 --> 00:21:46.453
Or hey, we had millions.
00:21:46.453 --> 00:21:47.619
Why are we working so hard?
00:21:47.619 --> 00:21:59.999
I mean, you know that's not usually typically the scenario, but you just don't want to live under a rock when it comes to the finances that are keeping your lights on and keeping your kids, you know, clothed, et cetera.
00:21:59.999 --> 00:22:03.532
So, regardless, ask questions and be informed.
00:22:03.834 --> 00:22:11.724
And the thing is too is some of you people maybe don't want to hear this, but maybe the bad experience that you have with an advisor is also partially your fault.
00:22:12.688 --> 00:22:14.092
Because you weren't holding them accountable.
00:22:14.172 --> 00:22:18.931
Because you were not a pro, you were not an active participant in this process.
00:22:18.931 --> 00:22:35.864
I find it very hard to believe that if you took all the advice that we're providing to you as far as being part of the process, understanding what's going on, understand all the fees associated in asking these questions, if you were doing all that a hundred percent, that somehow they screwed you over.
00:22:35.864 --> 00:22:53.239
I find that very hard to believe, because that person ought to be really good, because normally what ends up happening is that they are targeting specific people that are not proactive in asking these questions and being part of the process, so it makes it much easier for them to do those illegal things.
00:22:53.921 --> 00:22:54.141
Right.
00:22:55.413 --> 00:23:02.143
And I'll say I don't want to blame people for that, because obviously the financial service community should hold themselves to a higher standard and they shouldn't do these things.
00:23:02.143 --> 00:23:04.271
But the reality is that it doesn't matter what it is.
00:23:04.271 --> 00:23:05.895
It could be your doctors, it could be your lawyers.
00:23:05.895 --> 00:23:16.413
Every profession has bad actors in it and you have to do your due diligence to make sure that you don't work with these bad actors.
00:23:16.413 --> 00:23:31.595
So you have to be part of the process and you know, like I said, I've never met anyone that has had a negative interaction where I'm like, after you told me the story, I'm like I'm not blaming you because I shouldn't have done that to you, but they made you made it very easy for them to do it.
00:23:32.898 --> 00:23:41.082
Yeah, so let's learn from those mistakes and be proactive in asking questions, going with our gut and our intuition on those red flag items.
