Ep 21: Are you a Fake Fiduciary with Tom Hegna (Ep 21)

Episode 21 of Rethink Financial Advice, co-hosted by Derek Notman, CFP® (Founder & CEO, Couplr AI) and H. Adam Holt, CFP® (Founder & CEO, Asset-Map). (37:28)

Episode 21 of Rethink Financial Advice, co-hosted by Derek Notman, CFP® (Founder & CEO, Couplr AI) and H. Adam Holt, CFP® (Founder & CEO, Asset-Map). Listen on Apple Podcasts, Spotify, YouTube, or Acast.

Episode Summary

Tom Hegna joins Adam Holt and Derek Notman to argue that fiduciary has become a word advisors claim more often than a standard they can demonstrate. Hegna’s practical test is competence rather than compensation structure: know your own products and your closest competitor’s products in detail, including what is guaranteed, what is not, and exactly what the fees are. His contention is that a meaningful number of professionals misrepresent products every day simply because they do not understand them well enough. The most useful moment in the episode is Notman’s account of a client who considered cancelling a permanent life policy after a friend claimed the commission had been large. Notman pulled his own compensation ledger and showed the client every dollar he had been paid, including renewals. Seeing a smaller number than he had assumed, the client kept the contract.

What this episode covers

• Why claiming a fiduciary standard is easier than demonstrating one
• Product competence treated as a client protection issue rather than a sales issue
• What happened when an advisor disclosed his exact compensation to a doubting client
• How advice standards in several other countries compare with the United States
• The connection between compensation structure and early-career advisor turnover

Full Transcript

Machine-generated transcript of this episode.

Welcome to Rethink, the financial advisor podcast. My name is Adam Holtz. And this is Derek Notman. We are your hosts, both veteran advisors and FinTech CEOs who challenge the status quo, question everything and have fun doing it. Hear honest commentary on the challenges facing advisors today and be part of a community where we can all rethink the profession. Now on to our episode. Adam, are you a fake fiduciary? Wait, are you insulting me? I don’t. What does that mean? Well, I might be insulting you. I don’t know. It depends how you answer the question. I don’t know. These days, I don’t know if I’m a fiduciary.

I’m just a generally good person trying to look out for people. That’s what I try to do. What about you? Yeah, same thing. Right. I think most of us are wired that way. Like, yeah, just do the right thing for people. Right. But we’ve got all this this stuff going on in the industry. You’ve got this bipolarization of the only is the only way. And we’re the best thing for our clients. And then you’ve got the insurance risk industry, which now we’re the best. Well, where is the best? I don’t know. I mean, who’s really a fiduciary? I’m not sure we’re going to actually understand what a fiduciary is, unless there’s going to be true regulation and, of course, legislation on this in a way that the courts can look at and say, yes, no, this really represented someone looking out for their client’s best interest.

And I don’t know how it’s going to shake out. Don’t know how it’s going to shake out either. And there’s a lot of politics involved because some industries don’t want more of a fiduciary standard. Some do or parts of this are of our industry, I should say. But, well, I mean, I’d rather talk to someone else about it. Well, it’s true. You know, we talk to a lot of financial professionals from all across the world. Now we’ve been really blessed to speak to people and get their perspective. It’s interesting to see, Derek, how many people in other countries, including Australia and New Zealand, we’ve even seen standards in South Africa even exceed the United States in terms of what represents looking out for your client’s best interests.

We had an opportunity to talk to Tom Hegna. And if you know Tom from the we’ll call it the inspirational speaking circuit, Tom has been an interesting person to follow because I’ve known him for years, had the opportunity to talk to him privately. He’s the president of Tom Hegna dot com. So check him out. I’m sure. Have you seen him, Derek? Have you seen him speak? I have. Yeah, I’ve actually like like it, just like you had private conversations and like back in my New York Life days when he used to be there too for a while. Like we were I think we like we ended up smoking cigars together on some boat down in Florida.

I don’t know. It was a while ago. Well, Tom is known for his essential. I think it’s a salmon color or an orange shirt. I can’t quite figure it out what it is, but I know you. It’s funny because to see Michael Kitz is also wears his blue shirts. Agnes started with his with his orange shirt. He’s everything I’ve seen him ever in. He’s got an orange. It’s true. These guys are onto something. I think we got to do that. Right. Well, what would you just be the white hair? That’s what that’ll be your unique thing. You know what? It’s ash blonde. All right. Sorry.

I’m just happy I have some hair now, Tom, if you don’t know, he’s a retirement expert. He’s an economist. He’s a bestselling author, a public TV host and an international speaker with a 30 year record. Consistent top performance in the financial services industry. He’s lived it. He’s done it. He’s been in the field. S. Army lieutenant colonel. So mad respect to him. He’s done some great things in his lives and he’s really running out of Arizona these days. If you do get a chance to see him, he’s got great message and things that you can use in the field. So opportunity that Derek and I had was to interview Tom and ask him our core questions of what he sees happening in the space.

And he brought up this idea of a fake fiduciary. So you got to listen to this and see where this resonates. We’ll have an opportunity to debrief this after this. You ready, Derek? Let’s jump in and do it, man. I love what Tom has to say here. All right, here we go. Tell us what’s your what’s your perspective right now on the financial advice market? Well, I think it’s kind of bifurcated. You know, you’ve got the insurance side and they’re still kind of selling products. And then you’ve got the, you know, RIA side. And they’re they’re they’re on their process and everything. And I just think it needs I think everybody needs to be more process oriented instead of pushing products.

They need to be solving problems. But you got two different sides. And somehow in this whole thing, commissions were bad and fees are good. I don’t get that. I don’t understand that. It’s ridiculous. A commission is paid by the insurance company. Doesn’t come out of the client’s account. A fee comes out of the client’s account. But fees are good and commissions are bad. I don’t know how it evolved to that, but that’s kind of how it evolved. That’s really interesting perspective. I’ve never thought about it that way. But we’re totally going to rip that up for the full full episode. Yeah, that’s interesting. And so if we’re looking at this almost like, you know, bipolar situation of of of an industry, I guess one, how do you fix it?

And two, like, what’s the missing opportunity or challenge that advisors aren’t addressing because of it? Well, I think you fix it by focusing on the client, not on the product. Everything should be client focused. It should be what is in the best interest of that client. Now, you got fiduciaries out there who claim to be fiduciaries, but they’re not using annuities for the retirement portfolios. Well, you can’t do that. That’s not in your client’s best interest. They’re not using long term care products. They’re not using life insurance. So these I call them fake fiduciaries are out there saying that they’re in the client’s best interest, but they’re really not.

And then you’ve got the insurance people who have a best interest standard or whatever. And and, you know, most of them are doing good things, but there are some bad people out there selling bad products. And so we’ve got to get it to where its client focused truly in their best interest, not pushing only investments, not pushing only insurance. It shouldn’t be investments or annuities. It should be investments and annuities and life insurance and long term care. They all need to be in the mix. And right now you’ve got one side that that’s all they do. They don’t really do investments. They just do insurance products.

And then you got one side. All they do is investments and they don’t do insurance products. Both of them are wrong. And we’ve got to find a way to get them in the middle and focus on what’s in the best, truly in the best interest of the clients. So that’s a really interesting take. Now, I’m curious because we have seen that also. We have seen this bipolarization and basically ignorance and bias that really comes into this. But when the compensation comes up all the time, because we’ve had this conversation with other professionals, how do you fix that? Do you move towards do you make commissions now a fee?

And do you basically make I mean, what do you can you can you imagine what would fix this? Well, and annuities now are there are fee based annuities. So so they no longer the RAs no longer have an excuse that they can’t sell annuities because they can’t make commissions. OK, there are annuities now that fit your model. So get your act together and start incorporating annuities into your retirement portfolios, you know. And I don’t know what’s going to happen on the insurance side because the farther they move to this fiduciary standard, I really don’t know. I mean, is everybody going to have to be a fiduciary?

Is everybody going to have to be an advisor and do all that? I think there is a need for some people to just get, you know, a product. I do think that there are people out there like the let’s say the lower third of America, they’re not going to hire financialized. They’re just not going to they they can’t afford it. But but maybe they need annuity. Maybe they need life insurance. Maybe they need a mutual fund. A. side wants to go for the high net worth person. But there are insurance people that are servicing the lower end market. And I think we’ve got to realize that reality.

And I’m glad I’m at the end of my career, not at the beginning. I’ll let I’ll let you young guys figure out how to solve that. But that’s the way I see it. It’s fascinating to think about it this way. I think this is going to definitely cause some some people that stand up on the neck a little bit. But I could you see like it all moving to just like a fee based model even for products, because I agree with you as a CFP. I think we should be comprehensive in our in nature and process oriented and including all the products we’ve talked about.

But you’ve got the compensation issue, right. And for a so-called insurance agent advisor, you know, that can’t charge fees. Now they have to get paid on the commission. But if we take the commission away, what happens? Yeah, I don’t know how commissions got to be a bad thing. I don’t know. I don’t know how. I mean, that is paid for by the insurance company. Client puts one hundred thousand in annuity. Their whole hundred thousand goes in the annuity. The insurance company pays the person, the commission. How is that bad? And yes, it’s priced in the product. I get that. But you can shop amongst all the other insurance companies.

So they can’t just be pricing things terrible or nobody would buy their stuff. So I just don’t understand how commissions are bad and fees are good. That to me is just mind boggling. Yeah, it’s the perception of transparency that who’s paying it then and it’s hidden or something like this. I I tend to agree with you. We tend to we tend to debate all the time whether we’re going to move to levelized comp for insurance. Does that actually serve the advisor? Does it maybe promote more customer service on the insurance side? If they’re actually know that they have their lifetime value of compensation that’s at risk as opposed to heap comp.

It’s been talked about for years. It’s we’ve never gotten to it. So, you know, it’s hard to understand whether that whole industry is going to change. I personally like levelized comp. When I was an advisor, I like that. But you got to understand 85 percent of people don’t make it five years in the business. So if you annualize their comp, then the only one that gets rich is the insurance companies because the people aren’t getting paid for what they did and then they leave, you know, and that’s the age old thing. I mean, that’s a big problem in the industry is retention. Totally true. You know, we’re curious of what action steps you think professionals should be taking now.

And what should they be? What should they be doing? Well, I think number one, you really need to know your stuff. All right. Now is a time when when you need to know your product inside and out and maybe know your top competitor’s product inside and out. OK, and know what’s guaranteed, what’s not guaranteed, what the fees are, how the products work, because I have seen a lot of financial professionals out there who think they know what the product is and does, but they don’t. And they’re they’re they’re literally misrepresenting things every day. So I think you got to know your stuff. But then you need to learn how to communicate that.

You know, I got in a heated debate with somebody who I really respect. I posted on one of my LinkedIn that, you know, this is no longer a knowledge business. This is a words, language, question, stories business. And he literally attacked me on LinkedIn saying, oh, this is ridiculous. Of course, it’s a knowledge. And I said, I’m not saying knowledge isn’t important. I just told you, you need to know your stuff. But too many people know their stuff, but they don’t know how to communicate it to their to their clients and prospects. So you got to learn words and language to communicate and tell more stories, ask more questions, focus on asking questions.

And, you know, the client will literally tell you what they need if you ask the right questions. Orange Kinder said the same thing, right? And you’re spot on with that. It’s like, you know, what what client wants to read a prospectus, right? They’re not going to do that. They need you to filter that out and tell it to them in simple terms, right? That they get through the stories, through understanding them, all of that. So spot on. I agree. Anything else you think that advisors should be really paying attention to right now and maybe even for earlier advisors? Like, I mean, you said, you know, you’re on the tail end.

You’re you’re glad you’re not a new advisor anymore. What are the what should the young bucks coming up be thinking about? Well, I mean, we still have 78 million baby boomers out there that need to retire and they’re living longer. Longevity risk is the number one risk to retirees, along with market risk and sequence of returns. There’s a lot of risk. And that’s why you have to incorporate an annuity into your retirement plans. If you’re if you’re not incorporating an annuity for at least, you know, 20 to 40 percent, nobody say put all the money. That’s what kills me. You know, if somebody’s against annuities, they oh, I’m not going to put my clients all their money in annuity.

Of course, not 20 to 40 percent. Use it as a bond substitute. But that would be one thing that you’ve really got to take this longevity risk and sequence of returns risk. David Mackey just wrote a great article on timing risk. He calls it timing risk instead of sequence of returns risk. And he lays out 10, 10 different people, identical financially. They have the same financial portfolio. They have the same advisor doing the same things. The only difference is they retire 90 days apart. These 10 people, one of them goes dead broke. One of them gets all their money. Plus, it grows to two point six million.

It shows all these different scenarios for these 10 people. And he says, what’s the difference between these 10 people? It was just the luck of when they retired. And if you’re an IRA, are you really going to subject your clients to bad luck? I mean, that’s all it is. That’s all sequence of returns risk is is bad luck. And you can’t do that. And so that would be one thing. And then the second thing is they’ve got to they’ve got to take action on the on long term care. Long term care is the one thing that most retirees forget about. They can wipe out their entire life’s work.

So I would say they’ve got to protect against longevity risk, market risk, sequence of returns risk. They’ve got to protect against long term care risk. And then for millennials, I did my first millennial presentation. I came up with it this last year where I’m teaching millennials, generation X, Y and Z, how to become millionaires. And I teach them how to make more money, how to spend less money and and and how to build wealth. And and that’s that’s really what it’s about for them. They’ve got to build wealth. And then what we’ve got to do is distribute the wealth that the baby boomers have in the most efficient manner possible.

And I think there was some really fun stuff. Let’s let’s talk about what did you hear in what Tom shared? That’s either debatable or we should be rethinking. Well, I love the the ongoing debate about RIA fee only versus insurance industry and like how the two are always butting heads. And he says they’re both wrong. And you know what, it’s hard to argue with that because the sweet spot really is when the two come together and solve the problems for our clients. Right. So what do you think? Well, I look in our practice, we always had a financial planning slash insurance professional, right? Because the planners tend to tended to come from.

Do I understand the family? What are they doing? What they care about? Can I protect them? Right. And so that was that kind of protective voice. And then we had the investment advisor who would also join, whether it was with our firm or not. And they would they would give the context on the how we’re going to execute it and, you know, stay unemotional and stay not planning. I needed them to deliver returns on a risk adjusted basis. That’s their job. My job as the planner was always to think about, well, why does it matter? How do we structure it? What is the legal tax?

What do I need to bring in? So it’s interesting because we always bifurcated that stuff. And we kind of thought of them as two separate collaborative roles that added value. Now, I think we have a lot of financial advisors that are doing everything. Here’s the problem, Derek. The positioning to the consumer is that, oh, I’m a holistic financial planner when the truth is, that’s just a sales job to say that I want to manage your money and charge you an asset management fee. Now, granted, I don’t say that disparagingly to those of you that are doing asset management and you claim to do financial planning and do a lot of stuff, but I still know a great number of you.

I won’t call you out. That really, when you when you talk about how does a pension work or how does an annuity work or how does life insurance work? And you literally see their face turn like red. It’s like it’s like the devil products. And I and I’m thinking to myself, I know plenty of families that didn’t lose their house because they were smart enough to buy life insurance. I know people who literally lived way longer than they were supposed to. And they’re still getting a check. So I don’t know. I’ve seen the other side of this. Yeah, I don’t know why they’re getting red in the face.

It’s like they’re embarrassed to talk about it and they shouldn’t be. They hate it, but they hate it, right. But I think maybe part of it. And this goes to our next point, is this this this bad perception around comp and commissions and fees. And are you really a fiduciary, just a fake one? And I think that’s really interesting. And Tom makes a great point. Like, how did commissions all of a sudden become bad? And you made a statement earlier, like it’s a transparency thing, I think, part of it, at least in part. And I would just argue that, like, advisors really need to be.

Man, I don’t know, like, that’s a tough one. Like some products have commissions. It’s just the way they are. But not well, even Tom said now, too, like not even all of them have that. Like those fee only guys can start doing stuff that’s fee, but still product. That’s right. Well, we have seen, look, we have seen permanent life insurances attempt to go to levelized compensation to try to make it look more like an asset management fee. It just really hasn’t taken off that well. So I think if there’s any reeducation that needs to happen, it’s it’s the consumer doesn’t really understand it. It’s a black box insurance and annuities.

They don’t understand where the compensation is coming from. And they also when they I think for most consumers, if you heard what the compensation number was, you might be a little taken back. And I think that’s really the thing that’s that’s the real big pain point. Do you remember when we switched from C shares to advisory shares with a waived load, a share, right, with a lower back or no back end and a lower 12 B one or right. Do you remember when we went from that? Most of us were making two percent up front. In some cases, based upon your payout, you were getting as much as four percent up front, depending upon your loads.

In some cases, we know there were five five point seven five. And then when we went to one percent, one percent. Wow, that seems fair. That seems fair. Oh, boy. But it’s forever. OK, first of all. So and now we’re talking about, you know, fees that are in the, you know, basis points. And I think people are more and more conscious at each generation on the fee. The challenge with I think the insurance community has been there’s such a there’s such obscurity around a conversation that’s being happening at that level that they don’t know how to relate it to this. I know what I’m paying supposedly in an advisory environment.

I’m paying basis points for the cost. Now it’s all broken out. I know I’m not paying for trading anymore. I’m paying for custody. OK, that makes sense. I’ll pay for custody. So I think the real thing our industry has to do is we have to be transparent and we have to be transparent to the consumer. And that really kind of takes us to. I think I can’t stop you on there on one second. I’ve got a really I love what you’re saying. I’ve got a quick story I want to share. So I wrote a rather large life permanent life insurance whole life contract back when I slid my insurance licenses on a client.

And it was it was a great sale. It was the right product for the right situation. But a few years in that customer came back to me. He’s like, Derek, I think I’m going to cancel it. I’m like, why? He’s like, well, one of my friends said that you got paid X on it, and it’s just not right for me and blah, blah, blah. And so I actually what I actually end up doing is I went and pulled my electronic ledger for that product and to the penny. I showed him exactly what my comp had been on that product from the day I sold it through with renewals and everything.

And when he saw this, like, wow, that’s a lot less than I thought you got. And he ended up keeping the contract because of it. And it’s now actually helped him in a number of situations. He’s a business owner. And that I tell you, like, it was an epiphany to be able to be that transparent with my comp on this product that typically we never share at all. And the advisor really appreciate it. And the business stayed on the books. So it just goes to your transparency thing. I think that we can really do a better job with that. You know, for years, I have never been really successful at this one, but I throw it out here because we have this pulpit to a degree and we can share this.

I talked to a group that was in South Africa several years ago. They’re a very large family office. And the way that they handled it is that they charged significant amount of money to manage tens of millions of dollars for their clients. And eventually, occasionally, because it’s comprehensive, they needed insurance products. And when they would place these insurance products, because a predominance of the products are all publicly delivered products, it wasn’t a private placement. They could shop the market. They figured out what was the best price. They got the underwriting done. They came up with the best product based upon credit rating and all that other fun stuff.

They promote this to the client. The client buys 100 million dollars of life insurance. They get this, you know, four hundred thousand dollar compensation check. Right. And they were telling me the story. And I said, so what do you do in that situation? Aren’t you acting theoretically under the premise that you work for a set fee? He says, yeah, we would normally have charged that client half a million dollars. We just got paid four hundred thousand dollars. We’re only billing them 100 grand this year for their asset management. OK, interesting. That’s awesome. So they actually had the capacity to effectively rebate, which has been a no-no in the states.

In fact, it’s illegal in almost all states of the United States to rebate that commission if you’re getting compensated elsewhere. Now, why is that? I’m not exactly sure. But it seems to me from an equalization standpoint, if you’re setting the expectation that a client is paying you an X fee in the moments when that all of a sudden gets out of whack, we should have the capacity to fix it. And if they’ve underpaid us this year, we’re going to build them. All right. So I think we need to get to a place where the total revenue for a customer is at least known to the client, as opposed to a back end deal that effectively I’m making more money because your needs change and they will throughout your entire financial life.

Great example. I think that’s I’d love to see the US actually take a closer look at that. I mean, I know rebating is there for a reason, the issues around it, but there seems to be a clear way to fix it, too, from what you’re sharing. But that’s a whole other topic. Let’s jump in. Let’s go here. What are our takeaways? Well, why don’t you tell us first, because you’re ready. Well, obviously, like I think we need to focus on comprehensive planning, even if you can’t don’t offer it. I think it needs to be on your radar, whether you are in the RIA camp, the insurance camp or something like that.

We need just to be helping our clients. That’s where it all makes the most sense. And I will do a plug like so. I love asset map. I am an asset map user. And when I’m using that with my clients, I get to talk about everything and we get to look at it. And it’s a way for me to be comprehensive and show all the things that need to be done and discussed and change and all that stuff. So like it’s a great way to do that. This is just an example of using tech to solve a bigger problem that we’re talking about with Tom today.

Further on that, I think advisors really need to be great storytellers. Ask more questions like George Kinder even said, like just be a sit there and listen, ask great questions. Listen, tell great stories and simplify the complex. Don’t read from a prospectus, please, or a product brochure. Tell them what it is in terms that they understand. And more specifically, come on, folks, be open to annuities, be open to solving for longevity risk and all these other things that happen because they are real. Get out of one camp and maybe put your foot in the other one for a little bit, see how it feels. Adam, what do you think?

What are your takeaways? You know, it’s funny listening to you say that stuff. I might have said, like, well, it’s interesting, Derek, here’s an RIA. You’re an RIA, right? Yeah. You’re independent now. Yep. You have a history there. And here you are telling somebody to look at annuities. And I know you’re not. I know it sounds like that we might be pushing annuity. No, we’re saying stop being biased, right? Stop being biased. We’ve talked about that, too. Walk in. Yeah, right. Walk into this thing with an open mind and saying there’s things that you can do that you haven’t been telling your clients. And of course, there’s probably things beyond what you know already that they could do, too, right?

Why aren’t people talking about crypto? Why aren’t advisors talking about private equity? Why are their idea of alts is a non-traded REIT? Like, there are so many opportunities that if you’re really in the best interest of your clients that you could be promoting and talking about. Forget the legal and the tax structures and all the other stuff that many advisors don’t even talk about because they’re so busy talking about which custodian their performance. And I and I think that it’s hilarious that we’re still talking about this. And yet best interest is a discussion. So what are my takeaways? You know, the compensation came up a couple of times.

So let’s let’s be straight. You want to be transparent with your people. Ask your clients how they feel about how they should compensate you. Do you think they actually care? I would argue that most clients, if you gave them an option, say, listen, you got to charge you a flat fee. It’s going to be X or I’m going to get paid by all these different products. And you’re not going to actually have to write me a check. I don’t think clients are going to say, well, what would you prefer? Because it’s a relationship, right? Exactly. What’s going to put us on the same page? Well, I’m agnostic.

You could do either one. Either way, I will. Why don’t we tell our clients how much we made for them this year? I have a client who’s still because I’ve stayed involved with him. He keeps reminding me is that that he pays me and my firm one hundred thousand dollars a year in compensation. I didn’t even know I don’t because I don’t look at it. I never look at it as a business owner. I’m pathetic in that regard. I just believe long term, if you can stay with me relationship, I will somehow make money. And that’s good enough for me. I never look at it.

Whatever is fair for the client. And if I feel like I like the person, that’s good enough for me. So just tell them, ask. The other thing was, I thought, interesting. Professionals have stopped being students of the business. In other words, we used to have to really learn these products, understand them in and out. I think a lot of professionals are relying upon their wholesalers or their outlets or the Google simple answer. They’re not really looking at the prospectus anymore. They’re not going into the product to find the nuances and the devil’s in the details. And I think that’s a miss because we’re supposed to be acting in client’s best interest.

And we don’t even we don’t we’re choosing the product that’s comfortable, the name that we recognize. We’ve done this business with this company before. Let’s just do it again. I think we have to get back and be competent about this and so forth. So and I think the last thing is here’s my comment on annuities. Advisors will not be working likely at the tail end of their clients retirement. And I think advisors are being really, really selfish here. You’re thinking that you probably are going to be there for your clients during the journey of their retirement in their later years when they’re older. And I’m telling you, most of you will be retired and you will not be looking after them in the same way.

And they will be working with the next generation in your firm or maybe not even with your firm. And if you haven’t set them up to survive retirement in a graceful way, I’m not sure you’ve done your job or you’re acting in your best interest. And that’s about sequence of returns. That’s about making sure that the sustainability of someone’s retirement portfolio has been thought of from day one, not when you’re in the middle of it. OK, you can’t, you know, be in the middle of the desert and be like, hey, honey, did you bring the water? Yeah, I didn’t bring the water. You didn’t bring the water?

Well, the tire pressure is looking low right now. We’re running out of gas. And you don’t have water? Did John, our advisor, tell us to bring more water? No, he forgot he’s all retired and using, you know, Florida. So I think the point is this. Think beyond your timeline. Think about the client’s whole timeline, even when you’re not going to be there. And that means you need to think about sustainability and longevity. That’s my that’s my rant on it. I’m done. I love it. I love it. Advisors actually have their own longevity risk. Yeah, right, right. That’s great. All right, so we’re going to switch it up here a little bit, folks, instead of doing a guest question and answer today, we wanted to give you guys a little bit more insight into who the heck Derek and Adam.

So, you know, our podcast has grown a ton and we just want to share some stuff. So what we thought we like, hey, what’s in it? What’s a mistake as an advisor that we’ve made? So I think Adam, collectively, we’ve got what? Forty ish years in the industry now. Something like that. Makes me feel old. Well, you say 40. Yeah, that we make. She especially since I have three years and you have the rest. I just get which is weird because I’m younger than you are. I don’t know how that math works. But well, that goes into what you know, what I did wrong. You know, what I when you asked me this question, I had to really think hard because I, you know, according to my family, I’m never wrong.

No, actually, no, that’s that’s myself, actually. That’s yourself. That’s your internal dialogue. Every test I’ve ever taken, I walked away thinking I got 100 percent, by the way. I have a lot of confidence, but I wasn’t right all the time. So I take that as good feedback. You know, what did what did I didn’t take my advice that I was giving early enough. I was given this great advice. Acid allocation savings. Instead, what I did is I super concentrated to look on super risk. And I told everybody else that they should diversify. And I did not. And in the early years, of course, through 2000 and 2008.

I don’t have a lot to show from those years because I blew it. I did not take the advice I was giving. And I took a long time to learn that even to the point today where I don’t manage my own funds. I have this huge team that manages over a billion dollars and they don’t manage my money because I had to completely separate myself from my bias to go with reactions and try to time. And then, no, this is not the right time to do this. And I literally did the opposite. And I watched my own clients perform better than myself. And so that was that was the mistake I made.

Is you have to really, I believe, eat your and serve and eat your own cooking. That’s great. I appreciate you sharing that. That’s I have a similar background that I instead of putting up a picture about paying myself first and investing, I put up a picture of buying a sports car that I end up getting rid of. So what kind of it was an Audi Roadster. Oh, it was fun, man. It was like, you know, you know, I just it was a gift to myself for selling products. So you used all your savings to buy a car. Depreciated. Yeah. And I was like, wow, this looks cool.

I can drive it six months a year. But yeah, that wasn’t it. And that’s not even the mistake I was going to share. That just came out of nowhere. It was a fun car, but it was stupid. One thing I actually did and it’s like I feel bad about it. But in my early days as a quote unquote advisor, because I was not an advisor, I was a product pusher, as Hagna refers to them. I was running around selling whole life like hotcakes, right? Everyone’s got to have it. I don’t care who you are, what you need, what you don’t need. You’re going to buy it from me.

And I met with this guy at this auto shop, cold call, walked in unannounced and I got him right there in the spot to sign an app to dump 50 grand. So he had 50 grand in his business checking account. Right. Well, I’m like, oh, like, well, what’s that doing there? He’s like, well, I don’t really need it. It just sits there. It’s like an extra savings account for my business. You know, whatever. Oh, then we should put that in whole life. He’s not married, didn’t have kids. So I did it, took the app and we’re going to put it on there. And then and then anyways, the whole case blew up, went away.

And it’s because like it wasn’t right for the guy. He had some time to think about it. There was no planning involved and I ended up getting a reversal. So I think the the the message there is like, man, take a step back, stop forcing product, lead with advice. And I was guilty of that. But that’s why I was unfortunate. And I think I was somewhat led down that path or trained as well as a very young advisor. I just didn’t know any better. You know, we forget sometimes how we get into this business. And it’s it’s hard. I appreciate what you’re sharing, you know, because the first thing I thought of when you said you threw a fifty thousand dollars into a whole life contract was that, wow, you just made a lot of money.

Yeah. Right. Because I grew up in that space, too. And I understand because I needed my I have mouths to feed. And it was a business is my job. Just like many people out there in the whole planet, if they have a job and they’re lucky, they get paid because they create revenue from some kind of action they do. And that’s why their company pays them. Right. And some there’s a revenue. It’s a it’s a business. Exactly. Yeah, it’s a business. And I think what’s happened is that you don’t go to the car salesman and say, listen, now you got to act in the best interest of your clients.

If they come in and they want to bicycle, you’re going to sell them you’re going to charge them a fee so that they can ride their electric bicycle. Like, wait, I sell cars. You’re trying to ask me to do something that’s not in the job description. And so we really can’t be, you know, dropping dirt on people who are in the business of distributing a financial services product and expecting them to act and think completely differently. We have to change the mindset there about what the role of financial service is about so that we free people up to actually act in the best interest of people.

Right. And I think if compensation is the thing that’s going to really make people act not in the best interest, then we got to fix that. Right. We just got to fix it. And I think the way to fix it is to make it transparent because there’s nothing like market factors that will correct it if it’s disproportionately benefiting one over the others. Just tell people or like, well, just tell people. It’s funny. You’ve got these best interest contracts with all these disclosures. But where’s the fee disclosure? Where’s the compensation disclosure? As an RIA, I have to disclose my my fees. Right. So I never had to do that as an insurance agent.

So I don’t know. I agree. I think there’s there’s some. It takes guts. Right. Well, I mean, because there’s no one telling you to do it. Why don’t you just do it? And what are you afraid of? You’re afraid of people won’t value it. They’ll think you’re just you’re taking too much. This is why I really think we need to get to levelized comp on insurance. I understand that’s going to really hurt the guys in the beginning, in the early years, because you need to make that one sale so you can survive so that you could be there five years from now to act in their best interest.

But that shouldn’t be the reason how you survive. Right. Yeah. We need to find a better way for the insurance companies, I think, to support the growth and the development of the next generation of best interest advisors that happen to sell the right products. Yeah, they do. And they want. I think the insurance companies want that, too. Like they’re they actively want to do that. They it’s expensive for you to come in as a new agent and then wash out within a few years. That’s really expensive. It’s not good for anybody. It’s very expensive. Oh, well, well, hopefully, this has been valuable to all of you.

And if you have comments, and I’m sure you probably do, I hope you’re keeping them not to yourself, but you’re going on LinkedIn right now and you’re commenting on our on our rethink page and saying, no, we totally agree. You guys are crazy or no, we love what you’re saying. Either way, we want to engage with you and we want to have that conversation openly so that it doesn’t just end with an audio file and a send off there. Yeah. And here’s my send off for all you folks. Say we’re wrapping this thing up at home or try something a little different here. So run with me.

All right. So what should advisors do right now? Right. We always have our action steps. So I think the one final action step is if you have not subscribed to this podcast, subscribe. All right. Just go click the subscription button, go do it and listen to some of the other episodes. All right. Check out Adam’s company, AssetMap, right? He supports many thousands of advisors. You got to check them out. Check out my company, Connector, please. It’s like how it’s the best training course out there for advisors, especially ones getting started. And if you’re thinking about a podcast, check out Proud Mouth, please. They’re the ones that help us do this thing.

We’ve gotten a ton of value out of them. So those are the things you should go do right now after you engage with this post on LinkedIn. Thank you. That was great. Thanks. I appreciate that. No, that was an honest and fair shout out. And by the way, we actually we actually use each other’s stuff. We subscribe. We believe in this stuff. So exactly. I think it’s you know, it’s it’s what it’s in your best interest and actually what we’re creating, because we’re like going way beyond, I think, what most other providers do, because we really are passionate about the industry. Derek, as always, a pleasure working with you.

Thank you, of course, to Tom Hegna, this great contributions to our industry, creating more controversy, wearing his awesome orange shirts and, of course, traveling around to make advisors better. Love it. Thank you, Adam. Great conversation. And all our listeners, thanks a ton. We’ll talk to you next time. Thank you for listening to Rethink, the financial advisor podcast with Holt and Notman. Be sure to subscribe now and join the ongoing conversation. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of AssetMap or Connector. The content has been made available for informational and educational purposes only.