CFP® Stacy Phillips explains to Casey and Jarrod the differences between an investment advisor and a financial planner, what to look for in a financial planner, and what red flags you need to check on.
Announcer:
Hello, everyone. Welcome to the Millionaire Dentist podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.
Casey Hiers:
Hello and welcome. This is Casey Hiers back at the Millionaire Dentist podcast, in studio with co-host Jarrod Bridgeman and very special guest, Stacy Phillips, CFP. You've got some other letters too, but we'll just focus on those.
Stacy Phillips:
Oh, I always tell Jarrod he can add POW to his piece of work.
Casey Hiers:
Piece of work.
Stacy Phillips:
Piece of work.
Casey Hiers:
Well, welcome. We wanted to bring you in and talk about the world of financial planning, certified financial planning. All things money seems to be a hot topic these days.
Stacy Phillips:
It's a very hot topic in the news right now. I prefer not to watch a lot of that.
Casey Hiers:
Yeah. We try not to black pill people on this, which is just being negative and sad and all that stuff. But there's certainly a lot of positivity to what we're going to be talking about today.
Jarrod Bridgeman:
Well, let's talk about something positive first. I got second place overall in the March Madness tournament we had here, which was nice. I won last year and got second place this year, and I don't follow basketball.
Casey Hiers:
What do you attribute your winning expertise to?
Jarrod Bridgeman:
My giant brain. Last year, I picked based on mascots and how funny the team name was. This year was legit just straight up guesswork.
Casey Hiers:
Well, if it was funny names, you would have picked Fairleigh Dickinson and at least got the first one.
Jarrod Bridgeman:
Yeah, I know. Whoa.
Stacy Phillips:
A hundred percent.
Jarrod Bridgeman:
I was trying to give props to Purdue. So Stacy, we often talk about financial planning here on the podcast, and of course, that's one of our specialties, our bread and butter. But if there's a dentist out there, a practice owner who has yet to find their own financial planner, I would love to talk about what kind of things should they be looking for in terms of hiring their first one on.
Stacy Phillips:
Sure. Well, and a big thing too, is to understand there's a difference between a financial planner and an investment advisor. There's a lot of investment advisors out there, your Ed Jones and Schwabs.
Casey Hiers:
Your crazy uncle.
Stacy Phillips:
Yes, absolutely, the crazy uncle that knows everything about finances. So it's important to understand the difference because a financial planner does a lot more than just investments. They're looking into many other areas of your finances, including your estate planning and insurance, and a lot of very important stuff. An investment advisor is strictly just working with your investments and returns and projecting that out over your lifetime, basically. So there's a huge difference. So I would start there, as are you looking for someone to manage your investments or are you looking for a true financial planner that's going to help you in a bunch of various ways?
Casey Hiers:
In a comprehensive way. Well, and from what we do, I'm surprised at how many practice owners do not have a financial planner or an investment advisor or a written plan. Literally, we'll ask for your most recent financial plan and they don't have them.
Stacy Phillips:
That's correct.
Casey Hiers:
As a civilian, okay, maybe some people don't have those entities. But as a practice-owning dentist or specialist that has a full team and a staff and a family and all these people that depend on them, and they're just winging it to the point where they don't even have that, that's incredible to me. So if that's you, stop it.
But let's move on from what I think is Mr. Obvious, which is you probably need some planning. But to your point, not just investing, not through a singular lens, but you need a comprehensive financial planner that understands your personal financial situation along with your practice and all of those details. Run with that a little bit, because I think that's really important. And you're not even getting into the dental-specific yet, but you're just saying know the difference between those two.
Stacy Phillips:
Absolutely. There's a huge difference, and when looking, a reason a lot of people come to us, Casey, as you know, is because they don't have a lot of direction in their current business lives or personal, for that matter, and they're looking for direction. And we can provide that via financial planning, business planning, accounting, all those different areas. And a big thing, obviously, I'll be the shameless promoter of a Certified Financial Planner. To me, that's the penultimate when you're talking about investments and financial planning. That curriculum is designed specifically to cover the main five or six areas, and that's what I would encourage somebody to look for if they really want true financial planning. If you're just looking for investments, that's a totally different conversation.
Casey Hiers:
Yeah. That's an excellent point. Beyond a lot of practice owners potentially not having these areas covered formally, why is it in dentistry that practice owners seem to have a target on their backs for some of the most hair-brained investment schemes you've ever seen or heard of? We've probably got stories of these for days, but how often do you have those conversations or have you seen those conversations with practice owners who clearly don't work with us yet, but maybe just different conversations?
Stacy Phillips:
You'd be very surprised. I'd almost say weekly there's some type of investment opportunity that comes up for one of our clients and we're happy to review those. There's a lot. Obviously, the devil's in the details. It always sounds great. The salesperson can present it in such a way that it sounds fantastic. We look into the very minute details to figure out, "How does this really work and what does it mean to the clients?" So that happens all the time. It's not just dentists, it's doctors. People with high net worth, they get approached all the time with those types of investment opportunities.
Casey Hiers:
I think with dentists, and I don't know if they know this or not, those that may be coming up with these ideas, but because most practice owners undersave for retirement, and there's papers on it, there's data on that, dentists and specialists undersave for retirement and they can have access to some cash. That's like the perfect storm for somebody coming in with, "Oh, you've got to listen to this once-in-a-lifetime opportunity." And it's almost like they know their weakness and their strength. They have some cash flows sometimes, they don't know what to do with their money, and they don't have a plan.
Jarrod Bridgeman:
Stacy, what's the worst investment opportunity you've heard, and which doctor specifically was it for?
Stacy Phillips:
No, I can't divulge that information, Jarrod, on this podcast, unfortunately.
Jarrod Bridgeman:
Okay. But you've had some where you've straight up told them either, "Don't do this" or have you ever had to say, "This seems like a scam. This smells like a bad idea."?
Stacy Phillips:
Absolutely. A lot of the times, it just doesn't make financial sense to do it. Like I said, when you start looking into the details, or a lot of times there's a lack of details, which is a huge red flag in opportunities like that. But getting kind of back on topic for this podcast, one important question that people always have is, "How do I find a financial advisor if I'm looking for one?" And that is a really good question.
I always like to start with a referral from a friend or family member. If you're looking to talk to somebody, whether it be an investment advisor or a financial planner, start there and then by all means, identify maybe three or four people you can talk to. Sit down and talk with them, and have them tell you about their background and how they approach... their philosophy, I guess, really. And you're looking for somebody that you feel comfortable with and you're kind of on the same page with it. It's a very important relationship. It should not be taken lightly, so don't just get a referral of somebody and it's one person, you go with them. You really need to meet with them and talk with them and find somebody you're comfortable with.
Casey Hiers:
That's why we have such an extensive vetting process. But I've got a buddy who owns a construction company, and when he learned about our business model, he said, "Wow. I wish there was something like that for his specific niche industry," which if you think about it, that's astute and a lot of wisdom. A lot of people should want that. But for those that go through our extensive vetting process, we actually have dozens of our clients and spouses sharing generally their experience with the firm, which is really nice.
Now, we do not provide contact information nor our clients' time, because we talk to hundreds of practice owners and only extend invitations to a select few to join the firm. And they enjoy that gated experience as a client. But to your point, it's good to have a little bit of word of mouth when looking for that person. Is there somebody specific to your industry? Well, in dental there is. There's somebody with expansive knowledge and has a Certified Financial Planner team behind it. But that comprehensive view, get into that a little bit, Stacy. You talked about you have to look at 4, 5, 6 different factors for each person when coming up with a plan, and how just a singular focus of investment returns is not the way long-term.
Stacy Phillips:
Absolutely. The CFP curriculum falls almost perfectly for what we do here at Four Quadrants, because you're looking at not just the investments. It's the insurance, it's accounting, it's estate planning, a lot of very important topics, and it all kind of molds together in the overall plan that we present to clients.
Jarrod Bridgeman:
If you're calling, as you said, you got a couple references and maybe you're poking around online, are there any surface level things you should be looking for to be like, "I should at least start talking to this person"? Or is there any surface level red flags that take them off right away?
Stacy Phillips:
Well, that brings up a good point. How do you check on somebody basically, and see if they have a history of bad reviews or something like that? There is a way to do that when you're looking for a financial advisor. It's called FINRA BrokerCheck, and you can find that online. You go on there, type the person's name in, the state they're in, it will pull up that advisor and show you if they have any history of violations or anything in the securities industry. That can be very, very helpful and I encourage everybody to utilize that tool.
This is where we kind of get in the weeds as well, because you start talking about advisors. Well, there's a lot of different types out there. Here at our firm, we happen to be a registered investment advisor. So we're registered with the SEC, and we kind of do more of a... A registered investment advisor is more or a kind of open architecture type of setup, so we don't really have any restrictions on investments or anything. So there's a big difference, because a lot of people may be with a broker-dealer setup, so they have to send all their business through this third-party broker-dealer and they do all of the compliance and everything there.
Jarrod Bridgeman:
So they're more of like a middleman?
Stacy Phillips:
Yes. So we don't have that here, being an RIA. So you have the broker-dealer, you have RIA, and then you might hear in the industry a captive agent. So that would be somebody that might be with Edward Jones or Ameriprise, so they write all of their business through that particular broker-dealer that the company uses. They may have a more finite offering as far as what they can offer investment wise. So that's something to keep in mind versus an RIA, they can basically... It's going to be an open book. So if you're a more sophisticated type of client or a large corporation, those almost traditionally go with RIAs, so there is a difference.
Jarrod Bridgeman:
To be registered with the SEC, you've got to hit a certain amount, right? Before you can even be considered.
Stacy Phillips:
That's correct.
Jarrod Bridgeman:
Okay.
Stacy Phillips:
$100 million plus, you have to be registered with the SEC.
Casey Hiers:
You're not allowed to advertise rate of return, correct?
Stacy Phillips:
That's correct.
Casey Hiers:
So if someone, "investment wiz" or "guru" is advertising their rate of return.
Stacy Phillips:
Yes, that would be a...
Casey Hiers:
It might be your sign. Yeah. There's your sign right there, that that's an absolute no-no. What did Bernie Madoff do that that got him in so much trouble? So many people, wealthy, rich people, were getting word-of-mouth advice from their friends and giving this guy millions and millions and millions of dollars, and then at some point, he turned down the wrong road. Can you summarize that?
Stacy Phillips:
Well, yes. You can summarize it as a Ponzi scheme, is exactly what he was operating. So what would happen is he would get investment dollars from a client, and he would show the investment dollars being invested on a sheet of paper because he produced his own statements. However, he was actually taking that money and using it for his own, well, I wouldn't say good, but it was on purposes. And then eventually, that catch catches up with you. People start questioning or they want their money and then he can't produce it. It's kind of like the recent deal with the SVB bank, to where there was a run on the money and they just didn't have enough funds to keep it going. So it's similar to that, really.
Casey Hiers:
Well, and I think part of what Stacy just talked about was having a custom tailored plan. As a registered investment advisor, you're able to be more custom, more options, more tailored to each person as we've talked about. Different people we work with, such different situations; some have no kids, some have six kids, some have special needs kids, some are helping family members or parents. And so having a custom tailored plan to you, I think, is as you start to dive deeper past finding somebody trustworthy, somebody who's registered, somebody who has options, who is maybe specialized, and then somebody who really cares about what your true goals are is important. That was a lot of fluff, but anyway.
Jarrod Bridgeman:
Well, any professional, I think, worth their salt are going to spend some time figuring out you personally as well, right?
Casey Hiers:
Sure.
Jarrod Bridgeman:
Not only just your goals, but as you said, if they have children, what their at home situation is, are their parents retired, all that kind of stuff, right?
Casey Hiers:
Well, the difference is any of these entities can learn it, but then who has the opportunities to custom something to help it?
Stacy Phillips:
Right. Another thing that inevitably comes up is, "What are the fees for an advisor?" And that's going to be all over the board. What I will say in that regard is, there's a phrase that always comes to mind, "Price is what you pay. Value is what you get." You'll see a lot of RIAs tend to have a higher investment fee, but I think that is warranted because it's a much more custom experience, and it's based on not just your basic investments. It's a overall picture for the client, and it's much more sophisticated.
Casey Hiers:
Well, we look at a lot of numbers, and so often we find people on the back end of their career are still in risky things that they shouldn't be. Or we saw one, it was high commission stuff, but it was also on autopilot, so there was nothing being done with it, like years and years and years it was just on this autopilot. And so, we kind of see across the board a lot of different strategies, and unfortunately, very few of them are very good.
Stacy Phillips:
Yeah, autopilot does not work well in times we're in right now.
Casey Hiers:
Volatile and unpredictable? Well, it's such an important topic. And again, the first step is if you're a practice owner, you need to have this covered. And a lot of people have a neighbor or a friend or a relative that handles these things, but it needs to be specific, it needs to be custom and tailored and have the long, comprehensive view in place. Where are we going to be talking about this next?
Jarrod Bridgeman:
We are actually, as of tomorrow, if you're in Florida in the Tampa area, we're going to be at the Top Golf in Tampa.
Casey Hiers:
We only have two spots left.
Jarrod Bridgeman:
Yeah, two spots, and that's as of time of recording. So not really tomorrow, in a couple days. But tomorrow, Friday, that is April 7th, we'll be at Top Golf in Tampa, Florida. Coming up on April 21st, we're going to be in The Colony, Texas. That's just right outside Dallas. If you're from that area, you already know that. But April 21st, we have a few spots available there as well. Guys, this is a free event. You'll learn a lot of really interesting, important things that are often overlooked. And we also include CE. So if you need some CE credits, come learn something great, get some golf in, get some food. And then, as a bonus, hey, here's a little CE for you. All right?
Casey Hiers:
Yeah. I view it as the subject matter is so underserved.
Jarrod Bridgeman:
Right.
Casey Hiers:
That's what everybody needs to hear. The other stuff is a bonus.
Jarrod Bridgeman:
What is the subject that's underserved? What is it? Tell me, what's the subject matter?
Casey Hiers:
Everything a practice-owning dentist is not trained in.
Jarrod Bridgeman:
Yeah.
Casey Hiers:
Cash flow, tax management, debt, insurance, I could go on and on. Typically, people lose their appetites by the time it's over, because they realize how much money that they've just let slip through the cracks.
Jarrod Bridgeman:
Right.
Casey Hiers:
But we do feed folks.
Jarrod Bridgeman:
Go to fourquadrantsadvisory.com/events if you want to register for either one of those events. We're going to be in a couple other places exhibiting throughout the rest of this month. And then, I will be updating very soon on where we will be in May, so check that out. And if you're interested in keeping up with where we're going to be, there is a form at the bottom of that page. You can fill that out and you'll get an email that says, "Hey, dude or lady."
Casey Hiers:
Where's Waldo?
Jarrod Bridgeman:
Where's Waldo?
Casey Hiers:
Stacy, thanks for joining us.
Stacy Phillips:
Gentlemen, it was a pleasure.
Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. And thank you to you, the listener, for tuning in. The Millionaire Dentist podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why year after year they retain over 95% of their clients. Thank you again for joining us and we'll see you next time.
