The Thing We Never Talk About

Timothy Iseler, CFP®: Hi everyone.

Welcome to The Thing We Never Talk About.

My name is Tim Iseler.

I'm a Certified Financial Planner™ and I
run my own independent financial advisory

business helping musicians, artists,
and other people with weird jobs make

smarter decisions with their money.

You can learn more at Iselerfinancial.com.

And if you have a question about money or
personal finance, please send it my way

by visiting Iselerfinancial.com/podcast

and I will answer it in a future episode.

And if you enjoy this podcast, you can
sign up for my Keep It Easy Newsletter.

I write about exactly this kind of
stuff and share it there most weeks.

You can subscribe at
Iselerfinancial.com/newsletter.

I mentioned just a few seconds ago
that I run my own financial advisory

business, and I offer two different
flavors of services: financial

planning and investment management.

A lot of the episodes I share
here are more about the financial

planning topics like how to manage
cash flow with an up and down income

or how much money you should keep
in a savings account at all times.

But today I want to talk
about investment management.

Specifically, why would someone want
to pay another person like me, for

example, to manage their investments?

Here's a little history
lesson for context.

In the earliest days of financial
advice, it was essentially impossible

for a person of any income or net worth
to buy and sell their own investments.

They literally had to have
somewhat else do that for them, and

financial advisors filled that role.

They would help their clients
choose investments, or choose for

them, then buy and sell investments
through a brokerage company.

Often the advisor worked directly
for the brokerage company and nearly

always they got paid a commission
based on the investments they

bought or sold for their clients.

So in the earliest days, a financial
advisor was basically a gatekeeper

for access to investment markets.

You needed an advisor
to do that job for you.

A couple of important things to note.

In those days, you could only buy or sell
investments in what are called even lots,

meaning multiples of 100 shares each time.

So if you wanted to buy some Apple stock,
for example, which is worth right around

$260 per share as of this recording,
you'd have to plop down at least $26,000

just to get your foot in the door.

And you'd also have to pay a
hefty commission on top of that.

Which is all to say that working with
a financial advisor and even having

access to investment markets was
mostly limited to very wealthy people.

These days, of course, technology
has radically changed the nature

of buying and selling investments.

Anyone can do it from their smartphone and
usually with no sales fees at all, and you

don't need to trade in even lots of 100.

You can buy just a single share of a
company or a mutual fund, and in many

cases you can buy fractional shares.

So if you only have $10 to invest, you
can still participate in the stock market.

And with the rise of so-called
robo-advisors around 15 ish years

ago, you can have access to well
diversified portfolios with sophisticated

trading algorithms for a fraction of
what you would pay a human advisor.

In other words, the role of investment
advisor as gatekeeper is dead and gone.

It's obsolete.

All of the barriers to participating
in the public investing markets have

been broken down, and now anyone
can do what only the very wealthy

could do 50 or 60 ish years ago.

It's honestly really amazing.

So the question naturally arises:
since the internet gives us so much

access to information and anyone
who wants to can learn how to invest

and access the tools to do so with
very low or no fees, why would you

pay someone to do that job for you?

To take it even a step further, in
certain online communities, like the

Fire Movement, which stands for Financial
Independence retire early, or so-called

Bogleheads, named after Vanguard founder
Jack Bogle, the idea of paying an advisor

to manager investments is not just viewed
as unnecessary; it's looked down upon like

you're making a grave error if you give
away your precious money to have someone

do something that you could do yourself.

So here are the main arguments
against hiring an investment

manager, at least as I see them.

Number one, you could do it
yourself, so you don't literally

need someone to do it for you.

Number two, you will save
money by doing it yourself and

saving money is a good thing.

And number three, investment
management is an ongoing relationship,

so you're paying someone over and
over to do the same job for you.

Those are all valid points and I can't
say that I disagree with them, but I also

don't think that's the entire picture.

I wanna make two points to
push back on those arguments.

First, we pay people to do things we
could do ourselves all the fucking time.

And that's not a bad thing.

Paying someone to do something
you could do yourself is not

some kind of moral failure.

And secondly, the technical, tactical
part of the job, the actual buying and

selling or designing portfolios, that
is not really where the most value

is derived, at least not anymore.

The real value in working with an
investment advisor is that they can help

you do something you know you should
do, but don't want to or, for whatever

reason, are unable to do for yourself.

It's not about whether it's possible
for you to do it, it's about

whether you are actually doing
the right things with your money.

When it comes to the first counter
argument, that we pay people all

the time for things we can do
ourselves, I want to share an analogy.

Stick with me for a minute.

My next door neighbor's plot, the
piece of land that his house sits

on, is about the same size as mine.

We happen to own an electric lawn mower
and I mow our lawn throughout the grass

growing season, maybe once a week or
every other week, and I'd say that it

takes me less than an hour to do so.

My next door neighbor, on the
other hand, pays a lawn care

service to look after his lawn.

I'm not sure how much he pays them, but
let's just say it's a hundred dollars per

month, which seems pretty cheap to me.

It's probably more than that, but
let's just say it's a hundred bucks.

The new version of our lawnmower
retails for under $200, so there's no

way that my neighbor is saving money
by paying someone to mow his lawn.

And I know for a fact that it would
not take more than an hour a week to

do that chore because it takes me less
than an hour a week to do that chore.

If he bought a mower and did it himself,
he would save at least a minimum of $400

in the first year alone, and then at least
$600 per year for the life of the mower.

It's just so much more economical
for him to do it himself instead

of paying a lawn service company.

So is my neighbor foolish
for paying someone to do

something he could do himself?

Or paying someone to do
the same job over and over?

Absolutely not.

We don't all hold the same ideas
about the virtue of manual labor or

the best use of our time and money.

It might be totally worth it to him
to spend that money so that he can do

something else instead, or just avoid
spending time on a chore he doesn't like.

That's totally fine.

And by the way, we also spend money all
the time on things we don't actually need,

like streaming entertainment, for example.

Nobody needs netflix and HBO and
Prime and Apple TV and Disney

Plus and a live sports package.

No one needs that stuff, but people
are happy to pay those fees over

and over and over in perpetuity.

And that is totally okay.

It's all right to spend
money on the things that you

want if you can afford them.

So getting back to investment
management, the point I wanna make

is that we spend money all the time
on things that we could do ourselves.

And we pay people to provide the same
service to us over and over and over.

So I call bullshit on this idea that
paying someone to manage your investments

is a bad thing simply because you could
do it yourself and therefore save money.

That's just not really how we make
decisions about almost anything.

So why would it apply in just
this one area of your life?

It seems to me like a weird distinction to
say that you can spend money on all kinds

of goods and services and convenience as
long as you don't spend money on having

someone do just this one job for you.

Seems kind of arbitrary to me.

So now the question is, if you
can access all the information

and tools necessary to manage your
investments, do you actually want to?

More importantly, will you actually do it?

Those are not the same things.

And that brings us to the
second point I want to make.

The real value of investment
management is not the knowledge

I have or the sophisticated
software and tools that I use.

The real value is that I can help
you do something that you don't

want to, don't like to, or find
difficult to do for yourself.

When investment managers are pushed to
justify their fees, they usually dive

into all the tactical, technical benefits.

For example, I have access to tools
that make it easy to automate the

rebalancing of your investment accounts
so that you always have the right mix

of stocks and bonds for your goals
and timeline and risk tolerance.

I can do that for you.

I can also rebalance in a tax
efficient way so that you avoid a

bunch of extra capital gains taxes
from too much buying and selling.

If you care about the environment
or social justice or diversity in

corporate leadership, I can match you
with investments that align with your

values, sometimes in very simple ways
or, for people who are especially

dedicated, in very complex ways.

And I can automate tax loss harvesting,
which is a technique that sells

underperforming investments to lock in
tax savings and then replaces them with

similar investments so that your mix of
stocks and bonds stays where you want it.

Those are some of the technical,
tactical things I can do for you, but

the truth is that there's literally
nothing that I know or can do that you

couldn't also learn or do with enough
time and research and dedication.

Everything I know is available
for free on the internet.

Every sophisticated trading tool
at my disposal, like automated

rebalancing or tax efficient trading,
or tax loss harvesting, is available

to you in some form somewhere
else online for cheap or free.

The only hangup though, is that
you have to put in enough time

and research and dedication.

And then you have to take action.

So again, you can manage your own
investments, but do you want to, and are

you actually doing it in the best way?

And that is the real benefit of
working with an investment advisor.

I can help you do things and, in
fact, do them for you when you

don't want to or can't put in
the time research and dedication.

I can make sure that your money is working
for you by investing it in alignment

with your timeline and goals and values
and risk tolerance and I can make sure

that it actually gets done instead of
perpetually remaining on your to-do list.

There are lots of reasons why a person
might not want to or might have a hard

time managing their own investments,
but here are three of the top reasons

why the people I work with have
decided to offload that responsibility.

Number one, they don't want to
learn about investing and the

stock market and the economy.

It's not interesting to them,
it's not exciting, it's not fun,

and they would rather focus their
time and energy on something else.

But they also want to know that they're
doing the right things with their money

while they focus on those other more
interesting or important areas of life.

Delegating investment management to
a professional solves that problem.

Number two, it can be
confusing and stressful.

It doesn't matter how much information
is out there for free; if this stuff

stresses you out, the thing holding
you back is not lack of information.

And there's so much jargon in
the financial services world

that only adds to the confusion.

But if you can work with someone who
understands you and what's important

to you and makes investing seem, if
not exciting, then at least within

your power, that is a huge benefit.

There is so much value in that.

Working with an investment
advisor solves that problem.

And number three, some people are
interested in the stock market and

the economy, they understand those
topics, and they understand what

they should be doing, but they also
know they're not actually doing the

right things with their investments.

Having all of the information and
resources and even knowing what

you should do is no guarantee that
you'll actually be able to do it.

Because money is not just numbers
and logic and rational decisions.

Money is emotional and those decisions
are emotional, and that's what prevents

a lot of people from taking action.

But guess what?

I'm not emotional in the same way you
are when it comes to your investments.

It's not that I'm heartless or I don't
care; on the contrary, I care a lot.

I want you to invest for a better
future with better options.

But I can make the decisions that you find
difficult precisely because I am not you.

When the thing holding you back for
making good decisions is the emotional

weight of those decisions, whether
that's fear or anxiety or just not

wanting to screw it up, offloading
that responsibility to an investment

advisor can help you solve that problem.

So those are three of the most
common reasons why people hire

me to manage their investments.

There are, of course, all of those
tactical, technical benefits that I

mentioned earlier, but I think the biggest
value is that I can help you do things

that you don't want to or, for whatever
reason, are not able to do yourself.

Using your money to delegate or offload
a task that you don't want to or

are not able to do is a good thing.

It's not for everyone,
but it might be for you.

Here's my final takeaway for today.

If you like learning about investments
and doing the research and building

your own portfolio, you absolutely
100% can do that for yourself.

The information is there, the technology
is there, there is no reason why you can't

do it yourself and save the money you
would have paid an investment manager.

I support you in that decision
if that's what you want.

But not everyone feels that way.

Not everyone enjoys
talking about investments.

Not everyone gets satisfaction from
doing it themselves, and some people

find that even knowing what they should
do is not enough to actually do it.

And there should be zero shame in that.

Remember, we pay people all the time
to do things we could do ourselves.

That's actually totally normal.

If you are one of those people who knows
you want to be doing more with your

money, but for whatever reason you're not
actually doing it, then it's worth having

a conversation with an investment advisor.

If you decide to do that, I
recommend talking to at least

three so you can get a feel for
different advisors' personalities,

how they think about investing and
whether you have a good rapport.

I'd be happy to be on that
list, and you can email me at

podcast@Iselerfinancial.com

to start a conversation, but you
owe it to yourself to talk with a

few different advisors for context.

There are a lot of great
advisors out there, but there

are also a lot that are...

not so great or that will just give off
a bad vibe or not resonate with you.

So take the time to figure out
who you trust in that job because

it's important that you are
comfortable in that relationship.

Here's a pro tip when you're talking
with an investment manager for the

first time: ask how they get paid.

It will tell you a lot about
what their motivations are and

whether those motivations line
up with your best interests.

Some advisors still get paid
commissions for buying and selling

investments for their clients, and
that creates a conflict of interest.

They are incentivized to do more trading,
and therefore earn more money, even if

that's not actually what's best for you.

If an advisor tells you that they
are " fee only", on the other hand,

with those specific words "fee only",
that means that their only compensation

comes directly from you and never
from commissions or kickbacks.

Okay, that's it for today.

Next week I'll be talking with Tony
Rolando, the founder of Make Noise Music.

Make Noise is a synthesizer company
located in Asheville, North Carolina.

But I first found out about Tony
through his band We Regazzi, which

was active in the Chicago scene when I
moved there in the early two thousands.

We talk about how he found his way
into building musical instruments,

why his synthesizers often have
unconventional controls, and the

challenges and rewards of building
a business in a niche industry.

All right.

I'll see you back here then.

The Thing We Never Talk
About is for educational and

entertainment purposes only.

It's not legal, investment or tax advice.

People on the show, including myself,
may have interests for or against

any investments discussed, so do
yourself a favor and don't ever make

any investment decisions based on
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If you like what you hear, please
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If you have a money or a finance
question you would like answered

in a future episode, please visit
Iselerfinancial.com/podcast.

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Thank you so much for listening.

I appreciate you.