Did you know that almost 8 in 10 Americans have just $50,000 or less saved for retirement? And according to the latest census data, about half of all Americans between 55 and 66 years old have nothing saved for retirement. That’s a pretty scary thought.
Entrepreneur and podcaster Paul Adams has dedicated his career to empowering people by helping them take control of their money and doing it while there’s still time to grow it.
“He’s not your typical money manager,” said Beats Working host Mark Wright. “What surprised me about Paul’s approach is he doesn’t start by telling you what to invest in. He starts by making sure the assets you have and your future earnings are protected.”
The conversation covers a lot of ground, including why so many of us have anxiety about money, saving it, and planning for the future.
Adams also lays out what redeeming work looks like in the financial services sector. Paul took his company remote well before the pandemic so he, his employees, and his customers would all have more flexibility.
Resources from the episode:
- Learn more about the work that Adams is doing and find tips to build a better financial life here.
- Listen to Adams’ podcast, Your Business Your Wealth, on Apple Podcasts or find it on Instagram.
- Check out Your Business Your Wealth on YouTube for podcast videos and bonus content about finance and wealth.
- Schedule time with Adams to find out how he can help you build your wealth here.
- Connect with Adams on LinkedIn.
Share Article on Social Media
Transcript
The following transcript is not certified. Although the transcription is largely accurate, in some cases it is incomplete or inaccurate due to inaudible passages or transcription errors. The information contained within this document is for general information purposes only.
Speakers: Paul Adams and Mark Wright
PAUL ADAMS 00:00
If the business has not been designed to serve the life that we wanna live, then our life will be in service to a business that will never satisfy the concerns we really have. So, if we start with the life we wanna live, we can actually have our careers, and if you’re a business owner, your business mold to that and give you what you want.
MARK WRIGHT 00:24
This is the BEATS WORKING Show. We are on a mission to redeem work. The word, the place, and the way. I’m your host, Mark Wright. Join us at winning the game of work. Welcome to the BEATS WORKING podcast. on the show today: taking control of your financial future and making sure your work is aligned with your life goals. Did you know that almost eight in 10 Americans have just $50,000 or less saved for retirement? Just 50,000? And according to the latest census data, about half of all Americans between 55 and 66 years old have nothing saved for retirement. That’s a pretty scary thought. My guest today is entrepreneur and podcaster, Paul Adams. He’s dedicated his career to empowering people by helping them take control of their money and doing it while there’s still time to grow that money. What surprised me about Paul’s approach is he starts by making sure the assets you do have, and your future earnings are protected. We cover a lot of ground, including why so many of us have anxiety around money, saving it, and planning for the future. We also talk about what redeeming work looks like in the financial services sector. Paul took his company remote well before the pandemic, so he, his employees and customers all would have more flexibility. I hope you enjoy my conversation with Paul Adams. Paul Adams, welcome to the BEATS WORKING podcast. It’s great to have you here, man.
PAUL ADAMS 02:01
I’m so glad to be here. Mark, this is, uh, exciting and I’ve loved even the concept of this show and was, uh, you know, super honored to even be invited on.
MARK WRIGHT 02:10
Yeah. So, when I asked how you wanted to be identified, you said, an entrepreneur who happens to work in the financial services industry. That sounds pretty cool. As I, as I read the two books that you sent me that you authored, I was really surprised in a refresh refreshing way about just how, how unique and different your approach is to every financial advisor that I’ve ever dealt with. So, it’s gonna be a super fun conversation, Paul, and I’m just glad that you’re here.
PAUL ADAMS 02:36
Right on.
MARK WRIGHT 02:38
Okay, let’s start. I wanna know why we, Americans are so bad at saving for retirement. We don’t even like talking about money, Paul.
PAUL ADAMS 02:49
I actually think one of the, uh, most interesting ways to unlock that is actually look at our American history classes, like when we were kids, and we would sit there and learn about these forefathers, all of that, Benjamin Franklin, et cetera, and back then frugality was considered a virtue. Like poor, rich, Richard Old Almanac would talk about it, and how could frugality be a virtue when we have this deep biological pull to want to metaphorically shake our peacock feathers? Well, back then, if you and I lived in the same town, they might know I’m wealthy because they would say, oh, he’s got 10,000 head of cattle. I can see them roaming the hillsides. Uh, they would know that perhaps you had success cause you own the newspaper in our town and the newspaper in the next two towns. Uh, we might know that our friend Sally is doing pretty well cause she owns the tavern in town. Like the things we stored our wealth in were visible to other people, and so we could hold frugality of virtue because the actual assets we put our money in were also our peacock feathers. Now, fast forward as to today. Well, now it’s not like medieval Europe where it would be in castles and land and all of that. It’s not like the old West where it might be in livestock or businesses that people would own. It’s in things like 401ks, Roth IRAs, investment accounts or rental properties that people don’t see you owning. As a result, we still have this biological pull to have status in life, and so what we shake our peacock feathers with are all things that are deleterious to our ability to build wealth.
MARK WRIGHT 04:33
Right. All those consumer goods that I want to show off, right?
PAUL ADAMS 04:37
Exactly right, and so now the status symbol is the car we drive or the home that we live in, both of which are not necessarily wealth building things. The car’s going to depreciate, and we forever have to live in a home. So even if it’s paid off, at least in the way we coach our clients is not an asset. So I think the big problem that we have is we have this, the assets themselves, nobody else can see. We also have this culture of, we don’t talk about money, so it’s not like I can drive an old car and there, just tell people how much is the balance of my 401k, you know, like that would be nice if a bumper sticker just said, I have over a million in my 401k and I drive this 2015 Explorer cause I drag it behind my RV, which is my, that is what I drive. Uh,
MARK WRIGHT 05:28
But instead we have the bumper stickers that says, my kid was on the honor roll at middle school. It’s like,
PAUL ADAMS 05:32
Oh yeah. The, the private middle school. It’s always, it’s never, I was on, I’m on the honor roll at the public school. It’s like I’m on the honor roll at a private school where the tuition costs more than most people’s cars on the road, which is not a problem. I’m not beating that up, but it, but it doesn’t impact our wealth building. Now, add to that, the instant gratification and the fact that we don’t just shake our peacock feathers to our friends at church or at work. We’re now shaking our peacock feathers to everybody on the planet via social media, and I think all that confluence of things makes it very difficult for people to cultivate, contentment, be happy with much, and be happy with little, and then be able to set aside enough in assets because it’s a long game. Like, uh, I’ll, I’ll say a little bit more about this inability for people to save, but think about, uh, feedback loop. So, for the people that would be watching this video, I’ve got a jug of water here and a cup, and I can pour it in, and I don’t have to pay attention. I’ve done these enough times. This feedback loop, I’ll know when this is full before it runs over on my hand That is a very simple feedback loop. Uh, enough of us spilled water on our hands, we know when to stop. If, if, uh, you or I had too much wine tonight, we’re gonna have a headache tomorrow. These are feedback loops for bad behavior gets a bad consequence relatively quickly. Mistreat your spouse for more than a week. You’re gonna get some feedback. The, the problem is with money, starting from say 25 to 65, you got this 40 year loop and basically being irresponsible with money feels amazingly good for about 30 of those 40 years. The problem is when that loop self-reinforces, you’re too close to the end of it to actually do anything about the tragedy you’re headed for, and so that’s why we, in our podcast and in our client conversations, we just want people to start to foresee that loop and understand what their current financial decisions are gonna mean in the future. Then make any choice you want. The problem is every single person that goes through our application, we have an application process before people can become a client. Most all of them actually don’t know, and we’re talking successful people. Most of our clients make between 200,000 and 2 million a year. So, these are successful folks and most of them have no idea how much capital it will take for them to be financially independent, and yet we all thought we’d retire one day, but we didn’t even start with the number we might need one day, and people are searching for it in their forties instead of already knowing it in their twenties and working for toward it that first couple decades of their career.
MARK WRIGHT 08:11
That’s really interesting, Paul, when you talk about that feedback loop, because I think there is such a disconnect and I think that that same dynamic is at play when we’re pretty bad at preventing diseases and, you know, we’ll, we’ll transplant somebody’s heart and lungs, but you know, we’re pretty bad at just spending a little money, you know, on an anti-smoking campaign at a high school or something. There’s just, there’s such a disconnect between the behavior and the outcome. That as humans we’re just like, ah, that’s not gonna happen to me, right?
PAUL ADAMS 08:39
Of course. Yeah. Yeah. That all, all that bad stuff happens to somebody else. Mark, that doesn’t happen over here.
MARK WRIGHT 08:45
I have to ask you. Um, I grew up, uh, we didn’t have much money when I was a kid, and, uh, I didn’t know it at the time because my parents were really creative at finding ways to get food on the table, and that was really cool, and, you know, we worked on, uh, my uncle’s organic vegetable farm and seemed like we always had enough to eat. Um, but, but we definitely had a scarcity mindset. And I wanted to ask you that, you know, if, if you grow up without much money and you kind of have this scarcity mindset and there’s this, uh, little bit of anxiety when you think about money, I mean I think for me personally, I, I haven’t done as good a job as maybe I could have, just because thinking about money makes me a little anxious. And is that, is that part of what you have to sort of help people deal with as a, as a financial expert?
PAUL ADAMS 09:31
Uh, you know, unfortunately we don’t get a chance to deal with that as often as it’d like, uh, not with both spouses anyway. You see there’s always, uh, not always, but at least the people that get to us. There’s a bit of a survivorship bias cause not everybody gets through the filter of listening to a podcast and reaching out or getting referred by their friend. I so usually there’ll be one spouse that’s pretty nervous about it, and then there’ll be one spouse that’s more confident when there’s a nervous person in the household. I think there’s a lot of people like that Mark, but they, that, that nervousness makes them also not reach out to find somebody like me. Uh, or my firm. So, I think one of the best things to get people out of that, so if people are listening and they’re bumping into it, is actually a book called The Richest Man in Babylon, is a really just classic book. Uh, George S. Clayton, if my memory serves. And, uh, that’s a great one, and then there’s a more recent book that has to, uh, it’s called The Psychology of Money by, uh, household is his, like Martin Household, I think is how I say his name. And what I think happens is it would be like handing somebody a chainsaw and if they’ve never used a chainsaw before, it’s noisy. It’s, you’ve heard about the injuries and how bad it could be, et cetera. But if I took a little time with it with you and said, well, here’s the dangerous parts and here’s the safety systems on it, and here’s how you start it, and it’s noisy, but just put these headphones on, it won’t be as bad, and then we’re gonna put the safety gear of the glasses and we’re gonna put the chainsaw pants on. And then I walk you through it enough, you in inside of 10 minutes, somebody deathly afraid to get anywhere near a chainsaw could now be comfortable running it, and I think it requires understanding money better, which is why doing this, like most people who are really concerned about money have never read a book on it, that that fear also drives them away from that. But if you build some skill around it, and it could be basic skills, you’ll find it’s easier to be in the next conversation about money. So, I, I think the way you get into a more abundance mindset around money is two things. One, do some reading and engagement, not what the financial media with some of these classic books. Uh, listen to a great podcast like ours, no. That I’m just throwing in. And then, uh, the other would be just start creating surplus, you know, and The Richest Man in Babylon. One of the things to talk about is like, make sure your, your, uh, your coin purse has some coins in it all the time. Never use it all, and it’s just that of like, we’ve had clients who had only ever saved money in their 401k as an example, and they might have hundreds of thousands of dollars in 401k, but they’ve never put money somewhere where they could take it if they wanted to, and they’re afraid to, and we just say, nope, we’re just gonna put a thousand dollars a month in this account for the next few months. And they said, by the third month it feels so good to put a thousand dollars in it. Then we start deploying it somewhere else. But they build that comfort first in understanding it, and then by the way, even the people that are really comfortable with it, they just get a different kind of nervous when their money grows because we all have a set point of like, hey, I feel confident up to here, and then it gets a little bit higher than that. You go, I don’t know if I’m still confident there. And I think that’s actually how we find many of our clients some have used advisors in the past, but many of them are DIYing it up till now and then all of a sudden, the what they’ve managed to build with the DIY is now high enough consequence. They know they should have some help. And, but they’re not sure what kind of help. So, we, we end up as one of the firms that they end up talking to and hopefully choose.
MARK WRIGHT 13:13
That’s really cool, and, and I think having just a little bit of a reserve so that like if you’re refrigerator goes out or you know, like ours did recently that you don’t have to stress out about like, oh my God, we’re gonna, where, where am I gonna find $3,000?
PAUL ADAMS 13:26
Yes. Yes.
MARK WRIGHT 13:28
So, I wanna talk, we’re gonna put links obviously to your books and the podcast. The podcast is, uh, Your Business, Your Wealth, correct.?
PAUL ADAMS 13:35
And about to change. So as soon as we get the new update, we, uh, we called it Your business, Your Wealth. And you know what? We didn’t realize it’s, even though there was no other, your business, your wealth anywhere out there, you could search for our book on Amazon. You won’t find it till page three. It’s just too ubiquitous of terms put together and we found the same thing. So, we changed the name of the podcast a few years ago. We released that last book and now we’re gonna just go back to Sound Financial Group. So, we will get you the updated links, but people should still be able to find us if they search Your Business, Your Wealth or Sound Financial Group on any of the podcast apps.
MARK WRIGHT 14:11
Okay. Cool. Well, I appreciate the fact that you sent me a couple of your books. Uh, I, I read Sound Financial Advice. What really was refreshing about that book, Paul, is that I was expecting when I opened it up that you’d just immediately launch into the, you know, the hardcore nuts and bolts of investing.
PAUL ADAMS 14:28
But why show ratio’s modern portfolio theory?
MARK WRIGHT 14:30
Uh, yeah. But what I was pleasantly surprised when you started talking about the things in our lives that can threaten the wealth that we have or the wealth that we will have. So, you start talking about insurance coverage and I’m like, whoa, I have not thought about that. So, take us through, I mean, you go through all the different types of insurance coverage, and I guess, um, the premise behind this discussion is that we all signed up for our insurance policy when we were 23 years old and broke with no assets and, and now we have more and, and things need to change. So, to walk us through that, Paul.
PAUL ADAMS 15:08
Well, one of the biggest that came to me is actually, uh, it was, I’d already been in our industry for a few years, and I had somebody who had come into the office I was in and funny enough, all the more senior advisors at the time kind of poo-pooed this guy’s philosophy, and what he said was, you are helping clients build their assets. So, if you are not helping them look at something like car insurance and homeowner’s insurance and how their properties are titled or what their will and trust looks like, you’re not gonna be able to prevent them from losing all this. Like your client’s gonna get in a car accident and you’re gonna get a call and they’re gonna say, yeah, the judge says I gotta liquidate my account and pay off this lawsuit, and that really struck me to court cause I plan on everybody I work with. Even early on in my career I was like, I’ll be working with these people for decades. And it just scared the daylights outta me to have to liquidate somebody’s account because they didn’t have something simple like their car insurance having kept up with where they are today. And so, we started advising on that as the, and we do it as the first part of our process, and the reason we do it first, clients don’t like it and we don’t like it either. I mean, in terms of excitement. You know what I mean? Like make these changes to your car insurance Mark and get this extra provision on your homeowners and drop these little coverages that are just wasting money. That is not fun and exciting stuff. Everybody would rather get to the investments, including us, but we realize if we put it first, it’s the one thing that we can’t fix. Like now I’ve been doing these 25 years and I’ve had three clients have a major lawsuit within six months of us upgrading their car and home. We don’t even do car and homeowners insurance. We send them back to whoever gave them the bad advice before, and I don’t mean bad advice, like the car insurance person is bad, but the car insurance person doesn’t know this person has a million-dollar home and $2 million of real estate and X amount in investments because they don’t know that they don’t know how to properly protect their client. We learn all that information, then give the feedback about how to make that coverage correct. Uh, our, we have a team member that can handle life and disability insurance stuff too, but it’s all the same. We are protecting what they built so far and what they plan on protecting the future. So, for instance, depending on what state you’re listening to this podcast, in most states, if you got in a car accident, and let’s say you’re just a high-income earner, you’re Henry, you’re high earner, not rich yet. Okay. So, Henry’s driving down the road hits somebody. They’re making $600,000 a year, and their car insurance is not enough. According to the plaintiff’s attorney that’s gonna sue you, they can attach your income for up to 25 years, depending on the state that you’re in. So, like right about the time, you get retired, you just finished giving 20% of every check you’ve made to the orthopedic surgeon. That now can no longer stand for more than an hour at a time because of the back injury sustained in the car accident. That’s why we handle it first, cause we can’t fix it later. We can change an allocation later. You can get more efficient with your savings next month. But if you have, or like we had a client that gave me some news a few weeks back that his, his doctor gave him news. He’ll never be able to be, buy life insurance again and he probably won’t be with his family in five years. That, that freezes a hundred percent of your planning, and it’s like, how did I do? We, we live every day as if the legacy we’re gonna have is what we build 10 years from now but the legacy we have is the one we have walking out the door this morning. Did we kiss our spouse goodbye? Did, were we kind to our children the night before? All of that stuff is our legacy because we might not make it home at five o’clock that night to continue it. So, it’s all of all the things we’ve done so far in life, our legacy is always behind us up to and including the financial decisions we’ve made up to that point.
MARK WRIGHT 19:10
So, some of the things that you recommend is to increase your homeowner’s deductible and your car deductible to a thousand dollars, right? And that’s gonna result in lower premiums, monthly premiums, and then you can put that money elsewhere, correct?
PAUL ADAMS 19:24
E, exactly right. And that’s not big lowering a month of premiums, but it’s the bigger savings is not making the $500 car insurance claim that drives your rates up for the next three years. So, we get it aligned with where you’re actually let, and by the way, when when we were all in college, we needed a hundred dollars deductibles cause we didn’t have any money but now that we got some money in savings, like, well we should have a higher deductible. And it seems like most companies still a thousand is about the most efficient. You go much higher, you don’t save much, but you go from like two 50 to a thousand, you got some serious savings on that car insurance.
MARK WRIGHT 20:00
And you talk about increasing your liability coverage on the car because that’s really, um, if, if you sweeten that up in your policy, somebody you hit is gonna look at your insurance more than they’re gonna look at your assets, right?
PAUL ADAMS 20:11
Yeah. Even more than just increasing the car or home individually, we wanna increase it enough that the insurance company will give us a, what they call a personal umbrella policy, and what that does, it’s um, you know, often bought in increments of 1 million, so 1 million, 2 million, 3 million, and it picks up where your homeowners and car leave off. And we suggest that people have at least 250% of their income, or 10% more than their net worth, whichever of those are higher. So, the person that’s making, uh, half a million dollars a year should have at least 1.25 million of total liability coverage. That’s 250%. Uh, or if they had a 2 million net worth, they should have a little bit more than 2 million of umbrella. And what we want. Is if we have the unfortunate situation that we are getting sued, say for a car accident, we want that umbrella policy to be more attractive than us, and it will be to the plaintiff’s attorney and here’s why. When they sue, if let’s say somebody sued me, they’re gonna have to be like, well, we gotta get ’em to sell this company, and then we gotta go liquidate his accounts and pursue him for that, and we’re gonna have to force sale of his real estate that is painful for the attorney and could take them years and years and years to get their 30% contingency fee or they settle for the umbrella and that insurance company’s gonna make it so easy on them. They will set a separate check to the attorney, a separate check to the, uh, to the client. It’s all super smooth. Everybody gets paid. The attorney has no more work. So, the plaintiff’s attorney will actually argue with the client on your behalf, not realizing it because they wanna settle for the umbrella and they don’t want to go through the complex procedure of uncapping the umbrella and getting at your assets.
MARK WRIGHT 21:55
Wow, who sells those, uh, umbrella policies Paul?
PAUL ADAMS 21:59
The car, homeowner’s insurance agent. And it tends to be more efficient, like let’s say you’re with State Farm, keep it all with State Farm because they will have the most, because the umbrellas are typically, unless you have like a 17-year-old driver that’s gotten speeding tickets in your household, you can get like $130 a million, you know, maybe 200 a million. Uh, and so it’s really inexpensive, especially considering once we made the smaller changes to like car and homeowners that people have, you can usually get the umbrella for no additional out-of-pocket cost.
MARK WRIGHT 22:30
Wow. Let’s talk about disability insurance. And long-term care insurance for a minute. What’s your advice on that? Paul?
PAUL ADAMS 22:36
Uh, have ’em, uh, so, but they’re a little bit different on each. Uh, so disability insurance, the one way to think about it is, let’s say you’re chugging along, you’re professional, somewhere in your career, you’re making $40,000 a month, uh, and. I would have you think about that like what would you do if you had a machine in the basement that every month just spit out, it kind of hummed in the corner all month, and at the end of the month it just kicks out 40 grand. How much would you insure that for with your homeowner’s insurance agent? Everybody’s like as much as I could, right? Well, uh, for most people, even though they’re high income, if you looked at, and this is something every listener could do pretty easily. Look at your accessible net worth, meaning like investments and 401ks, all that, that if your income stopped today and you had to keep paying all your bills, how long would it take you to go through everything you built? And for your most 45-year-olds, the amount they would go through in two and a half years of disability would’ve wiped out all the savings. It took them two decades, 20 years to build prior to that disability, and it’s pretty easy to look at it. You can usually get about 60% of your actual taxable income, but that nets out to be about 90% of your take-home. But that’s the most you could do. And as long as you’re saving an appropriate amount of money, the disability insurance won’t hinder your ability to build wealth. Lots of people get it through their work. Uh, we actually have one, it’s uh, it’s not on our YouTube channel, it’s only in the podcast, but people can find it called the worst-case scenario, where one of our clients was kidnapped, uh, ended up killing two of his captors but got disabled in the process. And he talks about how much the disability changed his life, what a difference the disability insurance made. But the problem is losing your income is a hit that we can’t take. Like you’ll hear people say, well, I’m self-insuring. Self-insurance is a total misnomer because to ensure something means we laid the risk off on somebody else. So, there’s just ensuring, and then I’m just taking the risk and most people are just taking the risk. So having some disability doesn’t mean you gotta insure everything, but you wanna at least ensure at a minimum your household’s burn rate somewhere between if you’re both working you and your spouse’s income. So if you’re going through 10 grand a month and maybe you’re just super great savers and you make $30,000 a month, well you wanna at least protect the 10 on one or both of your incomes, and some people are easy to insure than others. If you’re, uh, uh, a union say sheet metal worker, it’s gonna be a lot harder than the physician because the occupations have different risks. So, you, you have to measure it a bit with that, that risk and the total cost of the premiums.
MARK WRIGHT 25:33
Yeah, and compare that to long-term care because I know the state of Washington was in that business and, you know, they were mandating it, and that’s why I went out and bought a private policy because the state coverage was so terrible. Um, where, where does that stand right now?
PAUL ADAMS 25:47
So, the, here in our state, that looks like they’re gonna implement it, but it’s terrible, it can’t work. Like we could, uh, we could do the math of like what your average worker is in the state, they, how much benefits they qualify for, and how little they paid in the plan. There’s, especially given every high-income earner in the state, ripped themselves outta the system by getting their own policy, it, it will fail, and what it will do is they’ll either have to shut it down after its failure, but they tend not to do that. When programs fail, they tend to fund them additionally. So that program will probably never go away and you’d never wanna depend on it. Now when it comes to should you get it or not, if somebody say is gonna be worth less than $200,000, probably not. You’re gonna be on Medicaid. Like it’s gonna be, you’re gonna be on the public assistance version of long-term care, more than likely cause you’re gonna burn through the 200,000 before you can blink. Uh, now if, let’s say you have more than $10 million, you can do the easy math. That’s $400,000 a year of income. If both spouses aren’t out spending and one’s in a home, you got enough that you could redirect and pay for the, either the in-home care or the nursing home care with the cashflow. So, it’s really the families that are between like 1 million of net worth at retirement and 10 million that are the most vulnerable and really ought to get long-term care insurance. Now the funny thing is, every client that I’ve worked with that’s worth over 10 million, when we talk about long-term care insurance, they all get it even though they’re the ones that don’t need it cause they view it as asset insurance, and I think that’s what most of the rest of the people should look at it as too. But it’s just very natural to people that already have that high, you know, 10 million plus net worth. They’re like, oh, yeah, that makes sense. I just wanna make sure I don’t spend it on care. I’d rather spend it on insurance, and then now in that space, it’s changed a lot. You wanna work with, if anybody out there is considering it, make sure you work with somebody that can access the different types of products that are out there. Uh, because I think some of the strongest ones are actually coupled to life insurance policies now because they con, they’re the only ones that control both ends of the mortality and morbidity. Curve. Morbidity, are you gonna be healthy or not? Mortality, when are you gonna die? So, if, let’s say you get slowly sick over time and you don’t die right away, well those life insurance linked long-term care products, they’re just giving you some of the life insurance earlier before you die, but they’re still taking the same known amount of risk. Now I’m gonna be slightly nerdy here, so I hope this isn’t too much for the listeners, but I, like, I got long-term care insurance for the type of policy I don’t even think exists from anyone anymore, which is, I paid for it for 10 years and it’s done. So, I now no longer have any long-term care insurance premiums and they can never raise them, and they can never assess ’em again. And I’ll be over $750 a day by the time I’m 70. Like I’m the actuarial reason, me, and my wife, why they don’t sell that anymore because they realized they had, the actuary came up and spoke at the conference for this particular insurance company and I ended up hearing this secondhand, but it basically got up and said, man, people are living so long. This is so great for us. The life insurance business is doing great and all that. And he said, now, uh, they’re wearing out real slow nowadays, and that’s why we’re getting outta the long-term care insurance business because it’s, it’s such a single risk of. I have lifetime benefits. I could go on claim at 70 and live to 103, and they gotta pay the whole time, and they’re done. And they quit getting premiums from me when I was 37. So, uh, those kinds of policies don’t work, and, uh, many people bought them years ago that were annual pays for 30, 40 years, and their premiums have been raised. So, it’s, it’s a difficult market to get the right product for you, but it’s certainly important and I would think of it as asset insurance because if you have $404 million, that’s 160 for a household. You can’t fund somebody in a home and keep the electric on in the house for the other spouse. That’s why long-term care can be so important.
MARK WRIGHT 30:04
Paul let’s talk about life insurance because uh, it seems to, it’s, it’s, I think, really hard for consumers to understand the difference between term life and whole life and, and what the benefits are of each. Um, I guess when you’re young and healthy term life is, is that a good thing to buy?
PAUL ADAMS 30:21
Well, it can be, it can be good to get either regardless of age, cause it all comes down to the situation. Uh, and what I would say in this regard is beware of the zealot’s advice. Meaning some is like, this always works and is the way to go or this one never works and is the way to go that if somebody isn’t open that to your, for your particular situation, something they may not love might be good for you. You know, and we sometimes talk about Dave Ramsey, but he’s a great example of somebody that’s like never whole life, ever, uh, you know, except for in his own estate plan then, but none for his listeners, and it’s, uh, so term insurance inexpensive gives you a death benefit. Uh, and that’s usually what’s required when we’re younger cause we don’t have the cash flow to get anything else and we need to make sure our family’s protected.
MARK WRIGHT 31:13
Yeah. And term means like I’m buying a 20-year protection for X amount per month, and it pays X if I die when I die.
PAUL ADAMS 31:20
Yeah. It’s easy to think of it as terminating insurance, like it’s going to terminate, and they design it for it to terminate before you do. Now you typically requires very little cash flow to secure. And one thing that I would suggest with any young person getting term insurance is to get term insurance from a mutual life insurance company that is convertible. Now the reason that’s important is where odds are you and I Mark, are right now as healthy as we’re ever gonna be, and tomorrow we’re also gonna be as healthy as we’re gonna, like we, we don’t typically get healthier over time as human beings. So, if you got news later on in life that you couldn’t own any more life insurance, well that term is gonna run out and you’re done. So, you want to have it convertible the whole life insurance, which just means you could change it to a policy that will last your whole life later on without proving any insurability. Now that’s key because, uh, we all know people have got, and it doesn’t need to be like you’re gonna die bad news. It just needs to be, hey, we got a spot on your skin we need to check out, and that might, after they find that spot and remove it. Insurance companies might say, you can’t buy any life insurance for four more years. Well, what if that four years is the end of your 20 year term? You need to have the other option. Now, whole life insurance, entirely different term is terminating whole life insurance is designed to last your whole life. These actuaries were really terrible about naming things when they created them. So, they just call them what they are. And whole life insurance effectively is designed if you get it now, to endow at some point in the future. Uh, usually age one 20 you, when I got in the industry 25 years ago, The Excel spreadsheet for the insurance companies ran out at line 100. Now it’s 120, but if so, if you had a whole life policy your whole life, of course you gotta put more into it than term insurance, but builds up a cash value. The cash value and the death benefit meet at age one 20. And if you’re still alive, they will gladly give you the check for your life insurance death benefit or they can hold it at interest and give it to your heirs. But that endowment means there is a path by which the cash value must grow. Part of it is absolutely stone guaranteed. And you’ll notice, by the way, especially in this banking environment, you’ll notice banks never use guarantee. They always use FDIC insured, and insurance companies are exclusively able to use the word guarantee in the financial space. And so that guaranteed cash value is going to be there. And then on top of it, because a mutual company pays dividends to policyholders, not to stockholders on Wall Street. Then you end up with an excess amount of cash, and we’ve done some episodes on it. It’s probably one of the more complex financial tools, whole life insurance, uh, in understanding it initially but if you understand it really well and use it properly, it could be one of the best tools on your balance sheet. It’s like, uh, it, it’s like the, uh, the Swiss Army Knife of financial tools and, and everything it can do, and also beware of anybody that says whole life is the greatest and the sun never sets on it, and it is has, there’s not a ward on it. Like, no. Each of these tools has their upside and downside. The key is working with an advisor that will actually integrate them together. Like, oh, we’re doing this thing over here, which if impacts this thing over here, and too often they make each decision separately.
MARK WRIGHT 35:00
So, in a whole-life policy, does the premium change over time or does it stay constant?
PAUL ADAMS 35:05
It stays constant, but if you design it the right way, you have flexibility in how you fund it. So, for instance, like, uh, let’s say somebody said, I want to put $20,000 a year into a whole life policy. Well, the IRS limit in how you fund that policy might be 50,000 a year. Now people don’t talk about the IRS limits on life insurance. It’s like, wait, what a second. You used to, back in 1982, they changed the rules between 82 and 87. Used to be you could just put a million dollars in day one and it grew just like life insurance. Now they have these actuarial formulas where you, you have to pace how quickly you put the money in. So, for instance, in that situation, if I put in 50 for several years, I could go a couple of years without funding it, catch it up later. I could just go down to $20,000 in funding it, uh, or I could fund it on schedule. So, it actually ends up being contractually? Yes, that one would just be $20,000 a year but if you build it right, then you end up with a lot of flexibility both above and below the 20,000 but it’s up to you instead of the insurance company telling you have to, how you have to change funding.
MARK WRIGHT 36:14
Ah, hey, let’s talk about, uh, home mortgages and the best strategy for dealing with our mortgages. I mean, there seems to be a big debate. Um, there’s a perception that you should put down as much as possible as a down payment and then pay the mortgage off as soon as you can. But in your book, you, you lay out the case why that’s not necessarily true.
PAUL ADAMS 36:35
That that’s right.
MARK WRIGHT 36:36
Um, so, so let’s break that down. Talk about, you know, talk about mortgages and our fear of debt and, and how all that plays into our, our personal net worth.
PAUL ADAMS 36:45
Well, it’s, it’s great. Well, a lot, lot of the fear around mortgage, uh, comes from gen generations ago when we don’t even understand it. Like, uh, in the great depression mortgages were callable, meaning you had a 30-year mortgage. but if the bank wanted the money sooner, they could say, hey, you gotta get it to us in 60 days. Now that that would, I, if that was still the case, I would be one of those people, like pay that mortgage office as soon as possible. Also, buy a tiny home and then pay it off as quickly as possible. Uh, but that’s changed. Now mortgages are not callable. They are good for their term of existence, let’s say 30-year fixed. So, we got that outta the way. Now comes to, well then do I want to pay it off right away? Like, or slowly over time is how most people do it because the bank says, hey, if you make an extra payment a year, you’re gonna pay it off in 20 years instead of 30. And this is the funny thing, I think everybody should greet with more skepticism. They say, look how much less interest you’ll pay. Now, I’ve never met an executive that went to the company they work for and said, hey, here’s how you could pay me two thirds the amount of money. N never. Why is the bank telling us, here’s a way you could pay us less? Because they make the money on the flow, not on the interest rate. They want that money paid back quickly. Now consider if what we’re doing is, let’s say we have a home and it’s, you know, uh, I’m gonna make it a million-dollar home and we put down $200,000. So, 20% down if you avoid PMI, et cetera. Well, we, the bank has $800,000 at risk. Do they want that home from me? No. They wanna give me all the latitude in the world to make my payments. If, uh, if anybody was around Las Vegas or Arizona markets after 2008, there were people living in homes making payments when they could to their mortgages for years. Cause the bank likes that they can call an underperforming debt, not a loss they have to absorb, and so you end up with a lot of latitude the more that’s owed on your home. Now, let’s say two people, one person is still pretty leveraged on their home now, by the way, because they didn’t make extra payments to their mortgage, they also have a bunch of money somewhere else. Then the other person, they’ve been diligently paying it down over time and they only owe $400,000 and now something goes wrong. Now we’ve actually had clients that worked in this fancy part of the bank called the Special Asset Division, and you know what the Special Asset Division does? It deals with all the people not paying their notes. And they have a kid you not a green pile and a red pile, and everybody who has a truckload of equity in their home, they go in the green pile cause they know they can foreclose rapidly, sell that thing on the courthouse steps and their only obligation to the homeowner is to give them everything that was above and beyond the debt and the, you know, accompany expenses like penalties or attorney fees. So, if they sold your million-dollar home for 550,000 and that only leaves like $2,000 that goes to you, they just give you the $2,000. That’s it. They don’t owe you anything else. They just wanna sell as quickly as possible, which is why they like those homes with a lot of equity. So, the more you pay down your home over time, you’ve made yourself no safer. You’ve made the bank a lot safer. So, what we recommend our clients do is grow your money somewhere else. Then when you have enough, write a check and pay it off. You’ll do it faster. You’ll have more control and far more safety along the way. Building up that cash on your own and writing a check than you ever, well, making like two extra payments a year.
MARK WRIGHT 40:32
Yeah, that’s great advice, Paul. I have some, some, uh, boys who are heading out into the world now and you know, just affording a home is so, so expensive. What are you advising? Uh, what are you telling younger investors about whether to purchase or rent homes when they first start out?
PAUL ADAMS 40:52
Well, there’s, uh, especially if they’re younger, uh, men, uh, I would point them to YouTube and there’s a couple of good videos out there on renting versus owning where they break it apart. And by the way, it’s not that like a home is not necessarily the path to, you know, the golden streets of retirement. Uh, people can accumulate a lot of wealth. We have some that’s, that rent and or have rented for years and accumulate a lot of capital. So having to buy a home doesn’t need to be on the list of wealth generation. But that having been said, one of the first things any young person is gonna be recommended to do is max out your 401k. You had no money before, you’re making some money now. Put as much as you can in the 401k. I would agree it makes sense to get your match but then you should start a, what’s called a non-qualified, meaning it’s not in any IRA, 401k, et cetera. Just a, a regular investment account pick. Somebody can go direct, uh, to Betterment, and Betterment has a perfectly fine 80 20 allocation. They charge almost nothing, and somebody could start just sending in their extra money every month, so at least he gets some growth and they’re building money that’s not in a retirement plan on their balance sheet. Now, that’ll do two things. One, you can mimic what it’s like to pay a mortgage, cause I’m gonna pay my rent, say I’m, I dunno what rent is now for a young man, but let’s say it’s 1500, but I’ve got 2,500 a month that my mortgage might be one day. Well, I’m gonna take that extra thousand and make it like a bill, but it’s going to my investment account. Now, over time, I’ll end up with enough money plus growth to be able to do the down payment, but then I’m doing the down payment, really thinking about it like, I saved up a hundred. Let’s say they’ve aged and now they’re 26 just making up a number. Now they’ve gotta think about like, do I really wanna sell my hundred thousand investments to be able to buy a house and end up with a larger house payment? Or I kind of like this just shoving money aside thing. Then you’re making it from a, uh, I would say a better position to make the assessment because your hard-earned money has to go in that down payment. Whereas there were so, and there still are some programs like 3% down, etcetera, you can do, but I’m a huge fan of, people should be in the discipline of making the mortgage payment, if you will, long before they have the mortgage, and being the discipline of making the payment allows it to save up elsewhere, and that might be the case. They realize, well, I can get to where I can buy a home and I’d rather buy a home. Somebody else is gonna rent from me than buy a home. I’m gonna live in.
MARK WRIGHT 43:28
Yeah. So, your, your view on the 401K is that if you put all of your money into the 401k, let’s say you max it out for years. That money’s restricted. Um, and it’s gonna get taxed on the back end. And so, for, for those reasons, it’s just not as flexible as other, other forms of investing.
PAUL ADAMS 43:46
Well, sure just imagine, you know, they, uh, that same child has a hundred thousand, their 401k, can they use it for the down payment? No, they can take it a little bit. Uh, they could take a loan if their employer allows loans, uh, except that loan’s gonna be taxable if the company shut, shuts the 401K down on them or if they leave employment, they might have taxability on it or worse, what we’ve even seen happen is somebody has an idea of their dream house. All they’ve ever done is put money in their 401k. And then they did the 401K loan. And what shows up on your next pay stub? The payment for the 401K loan. And it shot out their debt-to-income ratio, and their dream home they couldn’t qualify for because they had put it in their 401k first. So, we get benefits by engaging in a government program like a 401k. There’s certain benefits, but there’re also restrictions. And so, we have to be aware of those restrictions, especially if we have any objectives that we wanna accomplish that are gonna require money before we’re 59 and half, and that’s too often not talked about. They just say, oh, you got a job, max out the 401k. Now, uh, side note, just because I said that, I would also say anybody who’s starting out lower income, lower bracket, all that should be going to Roth 401k.
MARK WRIGHT 45:01
Yeah. So, the Roth is, you’re paying, you’re funding it with after-tax dollars, and then it’s not taxed on the backend, right?
PAUL ADAMS 45:09
Correct. Not to you and a no income tax errors either.
MARK WRIGHT 45:14
Oh, wow. Is there a cap on income before you can invest in for, uh, Roth IRAs?
PAUL ADAMS 45:20
Uh, there’s a cap where you have to stop funding a Roth IRA, but there’s no income cap if your company has a Roth 401k. So, you can have a, uh, most 401ks will have, you can put it on the traditional side, which is where it comes out of your income. Now it’s taxable later or it can come out before tax and pay taxes later. So, if, but if you’re a young person now, you might be in a, you might feel like taxes are awful when you first start working, but you’re, you’re probably in a 15% rate and if your career goes the way you want it to, you’re gonna be taking money out in your old age at 40%. So don’t do pre-tax now cause you’re doing reverse tax. Unless you’re super charitable, you love the federal government, you think they’re doing great things with your money, then you should do that. You should take it out of a 15% bracket right now and then receive the incumbent of 40% bracket. That’d be super generous of people. Unfortunately, that’s actually a lot of successful people. They do the same things that everybody else is told to do. And so, if somebody’s, you know, 35 years old right now making $300,000 a year, they’re, they’re probably not gonna be lower than that in their old age. So, they shouldn’t be taking it out pre-tax at that age. They should be taking it out tax-free. Not to mention you’re limited to how much you can put in a 401k, so you’re better off filling the entire limit with Roth because then it’s all your money. Anything you do before tax, you have a partner in, it’s the IRAs and they get the luxury of telling you what their interest is in the partnership when we exit it, because they, we not only take it, we delay the tax on a 401k, but we also delay the calculation of the tax. So that’s gonna be whatever the tax rates are then what, however much income I’m making right now, whether or not they bring back the success tax they had in the late eighties that added 15% if you had over a certain amount of wealth to your IRA distributions, because that was the first time you could have actually taken it out in the lower bracket because Ronald Reagan and then George Bush, uh, senior, had lowered rates so much except for the end of George Bush seniors, where he said, read my lips. There’s gonna be a few new taxes. I anybody probably listening under the age of 40, that’s not a political nerd. That didn’t make sense to but they can Google read my lips. No, no more taxes.
MARK WRIGHT 47:40
Yeah, and Dana Carvey may pop up reading my.
PAUL ADAMS 47:42
Oh, that’s true. He, he did a great job at that, that that guy, he did a great job with his George Bush Senior.
MARK WRIGHT 47:49
Well, I know Paul, we’re, we’re kind of getting close to the hour, but I, I, I have, I just want to kind of rapid-fire through some, some topics because I’m just really appreciating all, all your knowledge on this stuff. Okay. Let’s, let’s go through how to save for college. What’s the best way?
PAUL ADAMS 48:07
Uh, not a 529 plan. Keep the money in your name. Uh, and we do have a, a broad podcast on this, but don’t put in a 529 plan. Keep it in your name. Let your kid get student loans. Keep control of your money. Then if your child finishes college, then give them the option. If they have a hundred thousand of debt, you can tell ’em, hey, I’ll write out a check. We’ll pay it off right now or if you’ve got the next world’s best idea, you pay the student loan debt, my child, and I’ll just give you a hundred grand to invest in your venture or maybe we split the difference. You’re gonna take $15,000 of student loan debt, build your credit a little more. I’m gonna pay off the other 85,000, but I’m gonna give you 15k to just get some new suits down, payment on a car, get an apartment.
MARK WRIGHT 48:51
Wow, interesting.
PAUL ADAMS 48:52
Like, and, and you can do that once you do the math. You can do that with the same amount of money or far less than just funding a 529 plan. 529 plans were a great way for mutual funds to learn how to sell higher-commission products to individuals even.
MARK WRIGHT 49:09
And so, so what are you actually investing in in Paul, when you say keep it in your name? Just, just, uh, like, just mutual fund.
PAUL ADAMS 49:15
Uh, you could either use like a, a portfolio, stocks, and bonds via mutual funds or ETFs or, you know, some of our clients are quite adept at real estate. You could even do it with a series of real estate transactions but the key is keeping it in your name. Ah, because this is the key. If you have a 529 plan, you gotta go all risk off by the time the kid’s 14, which means you never get the exponential growth cause you’re gonna spend it. We look at exponential growth graphs when we think that’s gonna happen over our kids’ lifetime. There’s no chance. There’s just, even the full 18 years isn’t enough and then we have to stop funding it when they’re 14 or stop taking risk on it when they’re 14 so that we don’t have a 2008 happen right before they go to college. And so by simply doing something simple like taking student loans and keeping the money invested for four more years, that makes all the difference in the world in terms of how well our money can grow. So, we, uh, in the book, uh, we have, I think, I think we also have a YouTube video called the same thing called Sending Your Money to College, and it explains it a little more in detail, but, uh, definitely don’t default to a financial product to do the job that you can do with little skill.
MARK WRIGHT 50:24
Wow, that’s great advice. Um, Paul, as I’ve gotten older, I’ve, I’ve been more interested in investing in real estate because, you know, when you’re in middle age, you, your income is decent. If you have good credit score, you have the availability to get loans. So, uh, what’s your best advice in terms of using real estate as a strategy for building wealth?
PAUL ADAMS 50:45
Uh, we, unlike a lot of advisors, we love our clients owning real estate. We even introduce our clients to basic books on it. I think one of the books that’ll give you the greatest look at what a business it is, and, and that’s what we say to our clients. It is not an in investment real estate. You are buying a business. Now, it might be a business with one customer that’s one renter, but for real estate to be effective, it’s not like going and buying Tesla shares, you know, where you just look at the price every day and you can sell. It’s like, wait, no, we have expenses and overhead marketing and, and employ. You kind of have employees if you have a property management company. And so, you have all of these things mixing together. Businesses are successful or failures based upon the skill of the owner, whereas the stock does good or bad based upon how the stock’s doing. So, people get that confused. So first is you’re buying into a business. Second is never buy anything that’s gonna negative cashflow unless you can really afford it, and you have a plan to improve the cashflow on the property because in 2008, well really leading up to 2008, 206, 07, people would, didn’t care if it cashflow or not, cause it was gonna go up a hundred thousand in value. You cannot control appreciation. You have control over rents.
MARK WRIGHT 52:02
Yeah. And suddenly, if you’re on the hook for the rent or somebody stops paying their rent and it’s on you, you gotta have, you gotta have the, the wherewithal to pay it, right?
PAUL ADAMS 52:11
Yep. And if as long as your balance sheets, that’s where we try to make people’s balance sheets work away because how do people lose money to real estate is by being, having to sell it when they didn’t want to have to sell it. So, like in Ve, I was in Vegas near the end of the housing bubble, and let’s say you bought a house at the peak in Vegas, worst hit market, I think in the country. Them in Phoenix kind of ran neck and neck. But if you still own that home in Vegas today, you made money. The only thing that would’ve caused you to lose money is if you had to sell it in those first few years after 2008, and we suggest what people do is have at least half of all your investment mortgages in a non-qualified account. So, if, if you said, I’m gonna get a half a million-dollar mortgage on a duplex, then make sure you have $250,000. Now, even at higher interest rates, you can pay that mortgage for like a decade and a half, almost like it’s like 13 years I think, you can pay that mortgage with no rent just from the investment account. Now odds are we would get some rent, so we wouldn’t lose it after the 13th year or it would’ve appreciated enough, but it keeps you from having to sell it as having accessible money. So, you just arrange the rest of your balance sheet in a way that it can support the real estate. So, you never have sell. So, it needs cash flow. Uh, we wanna make sure that we have fixed mortgage rates on it. That’s what we just did an episode this morning about all these syndicates. They’re buying apartment buildings and they’re blowing up great article in the Wall Street Journal today, and they’re absolutely blowing up, and in large part because all of their three to five-year projections where they were gonna flip people outta these apartment complexes relied on the three and a half percent interest rates on those commercial mortgages, and now they’re eight. So, look at, as a business, have surplus on your balance sheet elsewhere that can insulate you, and then read a book like Robert Green’s Long Distance Real Estate Investing because it gives you a sense of how much work it is to actually run that business well and I think gives people a great intro into it. Many of our clients have read that book and said, I’m ready. And then many have read that book and said, nope, I’m not gonna do that. Was a lot more than I thought cause again, survivorship bias. When you look around and see people successful with real estate, you’re only seeing the successful ones. The ones whose credit got hurt and they were deeply embarrassed and had to evict a tenant and fire sale a house. It’s a deeply personal thing and they don’t tell anybody, you know, that their credit got hit or it got foreclosed on, et cetera. So, you, you only see the successes because how deeply embarrassing real estate investment failures are to people cause it hits our personal credit.
MARK WRIGHT 54:56
Yeah. I have a, a teacher had a teacher in high school up in, in my hometown of Ferndale, and, you know, tea teachers especially, you know, 30, 40 years ago, didn’t make much money. Still don’t make much money, um, relative to the work that they do. He started investing in real estate, uh, rentals back then, uh, on a, on a teacher’s salary. And he’s now been retired for a long time and he’s a millionaire because he started investing in real estate and had other people pay the mortgage.
PAUL ADAMS 55:26
He did, and he did something else. He, uh, he saved money. That’s the part a lot of people miss is, uh, like we have one client has over a million dollars investments. The guy never made over 50 grand a year.
MARK WRIGHT 55:40
Wow, that’s crazy.
PAUL ADAMS 55:42
But he saves money. And there are plenty of teachers that decided to get the cooler car than the other teachers. And he went around and probably drove a beater, and he drove a beater all those years and managed to accumulate a little dynasty. But how he did is he started by cultivating contentment, allowing him to live in, within his means enough to set aside sufficient money because getting the first one wasn’t enough. He had to save money for the next down payment, then save money up in the next down payment. So, he saved money for a lot of years, and it was discipline in putting it somewhere. Now, maybe he did extra good because it was real estate. Maybe he would’ve done better in the stock market, who knows? But it started with him probably saving 20, 30% of his gross income, and that’s the part that we all miss because we think about the investment results, not what it took to get into the investments to convert our cashflow into capital assets that would then allow the capital assets to later provide our cashflow cause it’s all about creating financial independence for the sake of funding a work optional lifestyle. It’s not about retirement, it’s about having work. Be optional.
MARK WRIGHT 56:54
Okay, Paul, as we wind things down, I, I want to ask you just a few more questions. What, what’s the best way to find a money manager? I mean, it’s, it’s, it’s like, uh, in our society it’s so hard to find a good mechanic. It’s so hard to go find a good plumber. It’s so hard to find a good electrician. It’s, um, and it, it really comes down to word of mouth. But when it comes to financial matters, it’s so much more complicated than is my, is my pipe leaking? It, it’s such a complicated thing. What’s your best advice on how should we choose that person to entrust our financial planning?
PAUL ADAMS 57:29
Uh, so I have a very different take on this. Some people say, uh, make sure they’re fiduciary. I think that is important, but I’ve also seen some fiduciaries. That it doesn’t matter that they’re fiduciary, they’re foolish. So, it doesn’t matter how their compensation works. What matters is are they competent?
MARK WRIGHT 57:47
And explain that term for people who don’t know what a fiduciary is.
PAUL ADAMS 57:49
Oh yeah. So typically, a fiduciary is, uh, like for a publicly traded company, the board has to act for the fiduciary interest of their shareholders. So that means there’s a primary interest and no second, my job is to make the best decisions for you. Now, as a financial advisor, that means typically that your compensation is levelized on all the investments that you would manage. So, it doesn’t matter how much money somebody has us manage, regardless who they are, we’re gonna charge our same flat fee on, as a percentage of that, depending on how much they have with us, and my job is to help them make good decisions to just have more money. Now, the trouble is there’s many people who are fiduciary that couldn’t, couldn’t find a rental property in a paper bag. They’re, they don’t have knowledge of that side of the house, or they work for financial organizations will not allow them to even comment on it. So, what I want, if, if I was advising somebody, how do I find someone? Well, one, everybody in your audience should know we don’t meet with anybody in person. Every client meets with us by Zoom. We made that a hard rule in 2017. So regardless of where people are, we can work with them. Second, I would make sure whatever advisor you choose is comfortable in Zoom, cause you, if you got a good advisor, you don’t wanna have to lose them just cause you move. Third, ask the advisor how they explain recommendations to you or how you test them together. If their recommendations come in a printed plan with lots of tabs and pages that they flip through, I wouldn’t go anywhere near that person because when you have questions they can’t modify, there’s nothing to modify in those sheets. They can’t recalculate based upon your input, and so that means we’re only taking the advisor’s advice, which by the way, those financial plans are sales tools. They don’t tell you that as the customer, but when you are in the training as an advisor, they tell you. And so, if it can’t be a co-creative process of like, hey, how would it work if I did this? Or how would it work if I did that? The ideal outcome I want with an advisor is that what they would do is say, let’s do the math on a couple different strategies and see which one produces the best outcome because I want, I want, well, as the advisor, I want my clients’ eyes seeing the work I’m doing because I’m fallible, and I’ve even had clients bring up, I remember one client said, hey, you know, uh, that strategy you just recommended, I think it could be better cause if I buy that other rental property, it produces this, and they actually improved the strategy we’re working on cause we worked on it together. So, I wanted advisors that’s gonna whiteboard things with me before we implement them, and then lastly, I want somebody, especially around the investment side, they need to not be using active management if they are themselves trading stocks, trying to beat the market, or they’re putting you with asset managers who have big fancy sounding names where they say those people can pick stocks better than the market, then it’s a fool’s errand. Only about 20% of any pool of asset managers can actually repeat their performance for the next five years, and it’s random. We have no way to pick which ones will outperform at the beginning of the five-year scenario. And so, because of that, in fact, the only people that say active management works are none of the academics and only the company selling active management. So if they have active management in their portfolio, I’d worry about what else they’re bringing to the table. And then if they do insurance, you should ask, can they do every major type of life insurance? And if they say, oh, I will never do that, kind also run because there is, even though I have preferences, there is a place we’ve used just about every type of insurance as it relates to the overall planning for a client. So if they’re a zealot in any particular area, that’s a good re cause once somebody’s a zealot, that means now it’s all on you to make the assessment cause you know they’re not doing it anymore.
MARK WRIGHT 01:01:43
So how have you structured your business to redeem work? Our, our mission on the BEATS WORKING podcast and, and our company WORKP2P, uh, founded by Dan Rogers, um, is to redeem work, to make work on honorable and good for everyone. And I know we’ve talked a little bit about this before, but tell me about the structure of your company and how you believe, uh, that is redeeming work for your employees.
PAUL ADAMS 01:02:07
Yeah, so, uh, uh, first it was important it got redeemed for me. I, like many entrepreneurs had gone through stages where, uh, there was no employer that could work me harder than I would work me. That’s part of the reason why we have so much success. We’re highly self-critical and work really hard, and, uh, what hit me one day was, uh, there’s always gonna be more work and the fruits of it may not pay off, and I saw some fruits not pay off. And so, it really kind of checked me and that’s where I started to say, you know, if, if I’m gonna do this business, I wanna do it from anywhere. That’s how we developed in 2017, that we would only work remote but it wasn’t just about me. Uh, it was also about like my family, because I wanna do these epic RV trips across the country, and until 2022. Since 2017, we’ve averaged about 86 nights a year in the RV traveling the country.
MARK WRIGHT 01:03:05
I love it.
PAUL ADAMS 01:03:06
So, so that, so it was me first, but by the way, I think it needs to be, if you’re a business owner, you gotta take care of yourself first. If you do something like what we did and it’s all about taking care of your employees, you won’t keep it up. You won’t continue to give them that freedom and they’re gonna wait for the other foot to drop. So, what we also did when we said we’re gonna be all remote with all of our clients is we gave the privilege to our employees that they could also live and work wherever they want. So, one of my favorite things that happened this year, uh, Kwame, who works with us, uh, but he’s in Brooklyn, New York. Uh, one of his buddies got them tickets to the Super Bowl this last year. And so, he just calls and said, hey, if you guys don’t mind, I’m gonna fly out Wednesday night. I’m gonna work from the Airbnb that we got rented Thursday and Friday, and then I’m gonna go to the Superbowl over the weekend and then, uh, I’m gonna take Monday off cause I’m pretty sure I’m gonna have headache and I’ll fly home on a red eye Tuesday night. So, I’ll work during the day on Tuesday. And we’re like, that’s great. Uh, we’ve had, uh, we’ve had, during Covid we had one of our employees need to go and be with her dad in Albuquerque, New Mexico, cause he was one of the, kind of the first month or two folks and we didn’t know what was gonna happen. So, we went out of our way to create an environment where it’d be easy for her to go see him, and she didn’t even have to take time off work. Many employees who care a great deal about the company they work for, they won’t take the time because they know they might be leaving the company. They care about hanging. Now that’s, that’s not as much in the younger folks, but in folks that are over the age of 50, that’s much more common, and so we let them have that ability to work from anywhere also, uh, we took something simple and just kind of created barriers around, these are the days that will work and. Like for me, these are days I see clients. So, like Monday, Tuesday, Wednesday, that’s when I see clients. Unless there’s travel, I’ll do some client meetings on a Thursday, Friday, but otherwise, those days are free for me to thank or to just goof off with my family. It, the idea being that I think the, this is my, uh, humble opinion. I think the thing that people can do the most to redeem their work is to take two steps back in their planning, which most of us have never done. Like really sat back and first said, what do I actually want my life to look like? Like if it was tabula rasa blank slate, what would I want life to look like and how many days a week would I wanna work? How many vacations do I wanna take a year? What kind of car do I wanna drive? And so, after you figure that stuff out, then, and you might even do two versions, like, this is my sufficiency, like just enough I can be happy on this, and then one that would be surplus. Then you’d say, well, what does that lifestyle cost. And then you do some simple math like, well, this efficiency lifestyle is gonna cost me 10 grand a month, but my surplus lifestyle is gonna cost me 20. Just pick numbers. Well, only after you’ve done those two numbers should you ever build your business plan because if the business has not been designed to serve the life that we wanna live, then our life will be in service to a business that will never satisfy the concerns we really have. And so that’s why one of the biggest things I think that can redeem work is that the people in it, they know what they’re working for, for the life that they wanna have, and that the business is being tasked with produced to produce that life. We, we hire employees all the time with a task, but we didn’t give a task to the company to give me the life I want. In fact, like many entrepreneurs, business owners or executives, I was folding my life on the regular. To earn more money or to earn more status or to, uh, you know, have more influence over some part of an organization, and when it hit me that all that work could be for naught, I got a close call where all of it could have been for naught. And it made me open to the fact that like, I really need to design my life first, then figure out how much it costs, then build a business plan that will pay the costs. I want to be able to have a life I want instead of what happens most times. People live whatever life they can based upon what their business or career’s doing. So, if we start with the life we wanna live, we can actually have our careers, and if you’re a business owner, your business mold to that and give you what you want.
MARK WRIGHT 01:07:35
Well, Paul Adams, this has been, uh, really fun and just super informative. Um, what’s the best way for people to, to connect with you if, if they want to, uh, do that?
PAUL ADAMS 01:07:44
Uh, one of the easiest is LinkedIn. That’s the social media I’m most often on. I think all the rest are Ask Paul Adams. So, like Instagram and Twitter and all that I think is all Ask Paul Adams. Then of course you can find us at sfgway.com. That’s our website. Uh, I dunno, a couple white papers people can download. I think they’re super good cause my partner wrote ’em. Uh, and then of course people can find us on YouTube under Your Business, Your Wealth or Sound Financial Group.
MARK WRIGHT 01:08:12
Okay, we’ll put links to all this stuff in the show notes too. Uh, Paul, thanks. It’s been a pleasure. Thank you so much and, uh, hope to stay in touch.
PAUL ADAMS 01:08:18
Thank you, Mark. I look forward to it. MARK WRIGHT 01:08:20
I’m Mark Wright. Thanks for listening to BEATS WORKING, part of the WORKP2P Family. New episodes drop every Monday, and if you’ve enjoyed the conversation, subscribe, rate, and review this podcast. Special thanks to show producer and web editor Tamar Medford. In the coming weeks, you’ll hear from our Contributors Corner and Sidekick Sessions. Join us next week for another episode of BEATS WORKING where we are winning the game of work.
