Inside Financial Advisor’s Career - Playing the Long Game

Save until it slightly hurts.
Yep.
Save.
Give yourself the discipline to save if it's$50 a month.
Save it.
Hi, welcome back to How Much Can I Make?
The podcast where we dive into real stories behind careers.
Today we're talking money, strategy, and financial freedom with a special guest, a seasoned financial advisor, Donna Stephens.
And let's start by asking her, what does a financial advisor really do?
If you were to sum it up in one sentence, I would say taking care of people's financial lives, which in turn affects the rest of their life.
So taking care of people.
How did you get into it?
To get into this field, one of the best things you could have is a mentor.
I had and have a mentor that is actually my mother.
So she started in the accounting field and then built in financial services, financial planning on top of the accounting practice, which is a great way to do it.
And so she encouraged me to join this field.
So I went to college for a finance degree, worked on Wall Street for a few years, and then went to law school to build in estate planning into that practice.
What did you do on Wall Street?
I worked for an institutional money management firm and I worked, started just working on a trading desk, knowing nothing about any of it, and built my way up to working with financial advisors and talking about the different products and programs that our firm offered and why they should present them to their clients.
So I learned to teach financial advisors actually how to do their own work.
Okay, correct me if I'm wrong.
It's basically advising people on how to invest, correct?
When you work with a financial advisor, it's not just about the investment management.
But it's about tips on life along the way.
So, in other words, you just got married, you now have children.
Who's telling you that you need life insurance?
Who's telling you that you need to have certain types of protections in place for your family?
Right?
You you know that there's the financial advisor along your life path is gonna give you extra tips along the way.
So I think that's the biggest value in being a financial advisor and having a financial advisor.
Is it time to buy consider long-term care insurance?
How do I protect my assets?
Things of that nature.
How do I save because I know that my kids are going on to get their medical degrees?
What do I do about that when I need to save for retirement at the same time?
These are all very important questions.
It's not just stick your money in a mutual fund.
It's really only for rich people, right?
Absolutely not.
Okay, let's say I have$25,000 in the bank.
I come to you.
What do you do?
So we're gonna take a holistic approach on first, where are you?
You have$25,000 in the bank, what is your income?
How are you supporting yourself?
And where is that$25,000 gonna take you to the future?
So we start from who you are and where you want to be, and then we take your income and assets to figure out your long-term financial goals.
You have to create a budget in order to figure out where your extra money is.
So your income in, your expenses out, what do you have left over to work with?
So it's not just$25,000 they have to work with.
It's incrementally how do they save enough money to be able to achieve their goal, which is the down payment on a house.
But as you know, from owning a house, anybody that has ever owned a house knows that you don't just buy the house.
There's so many things that you have to upkeep, or the air conditioning breaks, or you need a new roof.
I hear a lot that the young people cannot afford to buy houses now.
The interest rates are the things that are difficult right now.
But would that be the most the most important investment a person can do in their life is buy a home?
I think buying a home is a lifestyle choice.
It is a way, if you buy a home, it is a way certainly that you're paying into the equity of your home every month.
You're putting it into the concrete, right?
So so at the end of the day, once you're in the real estate market, whether it goes high or whether it goes lower, you're already in there.
Um and in the meantime, you're building the equity in.
So it's great to have a home.
But on the other hand, if you're just if you're stay staying somewhere and you have really low rent, well, you could take your money and save it in the investment market.
That's what we call opportunity cost.
It is a financial planning word.
The cost of putting your money in one place makes you not have the opportunity to put it in another place.
Right.
How is the inflation going up now help or hurt your business?
It it hurts people in general because the price of what they have to buy things for, you know, is higher.
So their income that they have is is weaker.
The clients that stay in the market, they'll be fine.
It doesn't really affect our business, but the clients that are in the savings time of their life are gonna have a harder time savings because their bills just went up, just because.
Even just buying a house.
We saw what happened to interest rates on buying a home when inflation went up.
And interest rates, you know, they may not be going anywhere anytime soon when we hear inflation is going up.
So, what would you tell a young person who comes to you wanting to grow his or her money?
What would be the first thing you tell them?
Save until it slightly hurts.
Yep.
Save.
Give yourself the diff discipline to save.
If it's$50 a month, save it.
If I have an extra hundred dollars every month that I can save, I have that money automatically saved, automatically invested.
So while$100 might not seem like a lot, at the end of a year it's$1,200.
The next year is$2,400.
And that rose and bill.
Because honestly, you could spend that on online shopping in a heartbeat.
They spend like crazy on online shopping.
Don't you can't afford to pay off at the end of the month.
Okay.
I mean, there are times that you have to, there are things you have to buy, but frivolous spending, keep it at a minimum.
Yeah, you come to regret it when you're older for sure.
Yeah, and and people get in a lot of debt and they don't know how they got there.
It's too easy to spend on the credit cards these days.
Right.
Oh, I'm sorry, on your phone.
Just stick your phone up to anything in your page.
I know they make it so easy.
Yeah.
So you told me that you have kids that are 17 and 12, am I correct?
17 and 19.
Do they save every every month?
They don't have a choice because their mother's a financial advisor.
Um, but but I have taught them budgeting.
Whether they like it or not, I have taught them budgeting.
When they started their jobs when they were about 14 years old, you know, they they did summer jobs, uh, and they would get their paychecks.
I opened two accounts for them.
And I told them, I said, Whatever you earn, you will get to keep one third of that.
And I am taking the rest.
And they said, You're taking our money?
I said, No, I'm not taking your money.
I am putting that money in an account for you so that when you go to college, you will have your spending money for college.
And though they didn't like that at first, my daughter, when she got to college and she saw that she had a few thousand dollars sitting there for college spending money, she was very grateful and thankful.
And now when she earns money, she does about 50-50.
Wow.
She saves half and puts away and spends half.
Nice.
Yeah, we we try to keep on that track.
That is great advice for any parent out there.
So, yes, and my son as well.
We just want to be more careful because now that the online spending, I keep it very limited what he can do on the online spending and only out of his own account.
And it is only one-third of everything he earns.
So when he when he shovels the driveway, he only gets a third of that money.
But his sister told him, listen to mom, because when you get to college, you're gonna have a bunch of money to spend at college and you're gonna want that then.
What happens to us as adults?
How much do we get in our take-home paycheck?
A third, it's actually the opposite.
I mean, a third goes to taxes.
Yeah.
And and then what if what if we want to save in the 401k in our retirement accounts that we should be saving in?
So maybe we're only taking home 50%.
That's very true.
And the rest is getting put to work.
So, or at the end of the year you're writing a check to the IRS, which I hope you don't, but it's gonna be the same thing.
Yeah, we have to pay taxes.
Get used to it young and budget and save.
So the number one thing is start saving very young.
Yeah.
You want your retirement years to be the best that they can be and not fearful of succumbing to the worst.
Right.
It's very hard to see your retirement years when you're 18 years old.
You're just starting.
Right.
Your goals are to get somewhere, not over the rainbow.
Right.
Yes, absolutely.
So let's say a high school graduate starts putting$25 a month.
What's in your rough estimate?
I don't know, you don't have a calculator now, but in your rough estimate, what would that be when the person is 55-60 years old?
There's a rule, and it's called the rule of 72.
Okay.
That basically every 72 months, if you're invested properly, your money should almost double.
It's a theory.
So, you know, compound it's called compound interest.
Okay.
So I put my$25 in, and then it grows to$30, and then the money that I'm making now is not on another$25, it's on top of that the$30.
It keeps going up by the compounding of the interest in earnings over time.
What is the challenge of the job?
The challenge of the job is keeping people on course.
What do you mean?
For example, during COVID, the S P 500 went down 40%.
Right.
The bond market went down as well.
There was nowhere safe to be, right?
Were you freaking out for your clients?
We were not freaking out because we were waiting for the rebound.
Okay.
Right?
This was not pretty to see.
This was not a happy moment in time all the way around the globe.
This is not a happy moment in time for on all levels.
However, the markets bounce back.
They do eventually.
In any period of time, as you see in the history of all of the markets, they come back.
And I say this as a real phrase, it's time in the market, not timing the market that counts.
So if you had your money in the market, you put your money in the market, and I say to you, Murov, what's the plan here?
We think the plan is gonna be we're gonna buy low and sell high.
And sell high.
Right.
Right?
But that's not what people do.
They freak out, right?
So they put their money in, and that COVID, let's call it a crash, happened.
And so now everything's down 40%.
And they sell.
And what they do?
They sell.
They did exactly that.
They sold, they they bought high and they sold low.
Yeah.
And then they don't know when to get back in.
And they wait and they're scared and they wait.
Meanwhile, it didn't take very long for that to bounce back.
When those things happen, maybe that's the time to consider putting more money in.
But people are afraid to do that.
But I'm not gonna tell people when to do by sell, buy sell, but I will help them stay the course because the portfolio managers and those analysts and the people that we're entrusting with that management are going to do their job.
They're not interested in losing money.
Right?
They're interested in saving everybody's money.
I totally agree with you.
So many times I did exactly what you said, and I don't even want to think about how much money I could have had.
I would have been a millionaire a few times, or please, I don't even want to, it's it's upsetting.
Exactly what you said is why I think somebody having a financial advisor along the path of their life is helpful.
It's not just about portfolio management, it's about guiding you on your life.
Yeah.
Now you could just be a person that does portfolio work, or you could be a true advisor.
You can decide what you want to be.
You could be an investment manager or an advisor.
And then the third prong of this again is estate planning.
So as a financial advisor, even if you're not a lawyer like myself, you need to understand what this means.
You need to understand when an account is in your name and that person has a child with special needs, that they can't just leave it to them, that they have to protect it for them, that there's certain legal legalities that need to be done, that we need to do proper trust for these people.
And that's just one example.
You know, even just you have a couple that has a two-year-old.
You're going to make the two-year-old the beneficiary of it of a$100,000 IRA?
How's that gonna work out?
Not very well.
Because now we need guardians and now we need court.
The financial advisor needs to understand if something happens to these people, what happens to the money.
This is what I wanted to ask you.
You told me you were an attorney.
What kind of cases do you work on as an attorney connected to financial advising?
So we coin the phrase estate planning and for me also elder law.
Okay.
Estate planning is doing your will, doing trusts, you know, who gets what and how they get it when I pass away.
And then also what we call life care planning.
If I became incapacitated, who's gonna handle my if I got in a car accident, God forbid, knock on wood, who's gonna pay my bills?
Who's gonna handle my money?
Who's gonna make my medical decisions?
So these are really important for everybody.
Everybody over the age of 18.
So in our legal world, we actually we do healthcare proxies, healthcare directive for anybody sending their kid off to college.
Because they're 18 when they go to college and they get hurt at college, and all of a sudden you can't help them anymore because they're a legal adult.
That's a scary thing, and it happens.
So everybody over 18 needs their health care directives to appoint somebody to handle medical decisions if they can't, and power of attorney to handle financial affairs.
So that's like stop one.
Okay.
But with a financial advisor, if the client becomes incapacitated, the financial advisor is incapacitated because now they can't do anything with the money and they can't get the family money, and they can't just sell something and give the rest of the family money to help pay the bills, or maybe protect assets for care, or do whatever.
They can't do anything until the person goes to guardianship court.
Now we're talking a whole nother level of a lot of money, tens of thousands of dollars in court, and maybe appointing your spouse, maybe appointing your adult children, people that are in your family, or maybe court decides they don't like any of you and appointing a random guardian attorney to be it.
It's not a good situation.
So all this hardship will be spared if you have uh power of attorney and healthcare proxy.
That sounds too simple.
Well, it's simple if you go to an estate planning attorney and get it done.
If you don't get it done and you don't know about it, then it's then it's not so simple.
But but so the estate planning attorney plans, I call it the the life care planning and the afterlife planning.
So those two things, along with estate taxes.
So people, you know, if they have very high assets, when they die, if they're over the the government limits, they're going to have to pay tax, just a tax over the limit, period.
So this could be a lot of money, this could be a million dollars to the government because you had this much money.
So there's tactical trust planning, estate planning.
It goes from the very high end to the basic who gets what and how I get it, and I may just have a little bit of assets.
And what if I'm I have a child?
Right.
I better name guardianship, right?
Because if I don't name guardianship, who's gonna be take care of my kids if I'm gone?
Right?
So you need all these things in place from day one, right?
Most people don't think about that somehow.
No, we all think we're just gonna wake up tomorrow and everything's gonna be fine.
Yeah.
They don't want to think about it and they're worried.
So estate planning falls into financial planning, they work together hand in hand.
And the last part of it is elder law.
Elder law is asset protection planning for care.
The cost of care in the elder years, custodial care, whether that be what we call the activities of daily living, dressing, bathing, transferring, all those things that we take it for granted today.
You're looking at anywhere from five to thirty thousand dollars a month.
So how do you pay for that?
You kill yourself if you don't.
Well, I hope I hope you're not gonna kill yourself.
No reason to not kill yourself.
No, but you need to pay for the care, and and we don't want to lose our home to pay for care.
So how do we protect these assets?
So the financial advisor needs to do the issue spotting to know, hey, wait, this person is hitting the I I don't I'm not pegging a time, but let's say the 70s, and they're not in the best of health, maybe they need to start protecting some of their houses.
Maybe they need to protect their home if they want to stay there.
How are they gonna pay for care?
I only have this amount of assets that I'm working with.
So the financial advisor, having a financial advisor, gets you down the path to the right people.
What is the age usually people come to you at retirement, right?
That's when people get scared about money.
That is a common time, right?
And that is a little late, but you know, we can always work with something.
Right.
Something's better than nothing.
When people start in their 20s, they're going to their job and they're getting the 401k and they kind of leave it at that, like the company plan.
I would say late 30s, 40s, when they start they have families, and now they really think no, they they have to save.
That's the starting point.
The 50s is a sweet spot because they're in their top earning years, they've learned a lot, they've got kids going to college.
Now, what am I doing for my life in retirement?
They're they're bigger, you know, and the assets have grown, and the salaries have grown, and you know, things are not spiraling out of control.
But how do we make a picture here?
So that's when they say, Hey, what are we doing?
So when we do retirement income planning, we teach people how to basically maximize their assets and use that as a way of skimming income off of their assets.
We have many clients that come in wanting to retire.
When can I retire?
Should I retire?
Am I ever gonna be able to retire?
That's a very scary topic because people don't know if they're gonna run out of money.
How do they budget for retirement?
You know, people often have spent a lot of time putting money away.
Whether they put it in the right vehicles or not is a different conversation.
But here they are, they're 65 years old, they have some money, but then if they retire, what are they gonna have?
They're living on, let's say,$150,000 a year of their income.
If they retire, they don't have that income.
But they have Social Security, most likely.
Right.
But Social Security is maybe gonna give you$25,000 to maximum$40,000 a year in income.
Right.
Right on the high side.
Right.
That's not even close to what you're used to living on.
So how does your money support your lifestyle that you want?
That is a critical conversation.
And I would say it's extremely satisfying when you see people being able to buy their first home, when they're sending their kids to college, when they get to retire because they have put their money to work and you're the one that made it happen for them and you made them stay the course.
So it it it really is a gratifying career.
That's the biggest reward of your job.
I think so.
I mean, you know, going back to your question on inflation, how does it affect my our business?
Well, the markets might rumble a little, but our clients come in and they ask, are we okay?
And we show them how and we show them the why and what's going on, and they say, Okay, we'll we'll leave it to you and you tell us if we have to worry.
I know the market, like you said, changes all the time.
New funds are coming up.
How do you keep up with all the changes?
So we, as financial advisors and as regular citizens, um, you know, we have access to a lot of great information out there.
Now I read subscriptions every single day.
Pick up three to five tips.
I spend about 15 minutes a day learning the business, what's going on in the economy, what's going on in politics, anything in any of the areas is going to affect the market.
In the mornings, we read about what's happening in the futures markets, because the futures markets are going to affect the daily price rates and you know volatility in in the US markets as we go forward.
You know, they're trading in in Asia long before we wake up.
So there's stuff happening before we get to the markets.
So I I read every single day.
I wouldn't suggest every client read every single day.
It would you don't have the time.
That's why they come to you of the stuff.
And and and it's upsetting.
What I don't like to see is the news.
The news.
You know, sensationalism sells.
That's what the, you know, that's what they want.
They want you to get hyped up, they want you to read more, they want to incite emotion.
You don't want to make emotional decisions with your money, technical decisions, and keeping the course.
And that's really a financial advisor's job.
Between accounting and legal and financial advising, what's your favorite thing to do?
Well, I would say financial advising is the happiest thing to do.
It is gratifying to see people achieving their goals, and certainly it's a great career.
I I would say that that's number one.
But however, you know, the the estate planning and elder law, you really see the impact of how you're helping families in very difficult times.
It's very powerful, it's a very nurturing field.
And the accounting, you know, lots of clients come in and say it's like going to the dentist, which is not okay by me because we're much nicer.
We try to get we give people candy and chocolate when they come into our office.
We're not the dentist, but it's a necessary evil.
And to have somebody that you can just bring it to and it gets done, and they know they're not gonna get in trouble, you know, and even if the IRS comes calling, you have their back, but it's a relationship.
For accounting, you really gotta like the numbers though.
Really gotta like the numbers.
Haha.
That's not me.
But anyway, so I came with you on the$25,000, spent time with you, now I want you to be my financial advisor.
How do you get paid?
How does it work?
Well, fees for the investment are, you know, there's many different ways structures to get paid.
On$25,000, I'm not gonna get paid a lot, you know?
Um but if I did a couple Consultation fee, whether it be a$500 consultation or a$7,500 consultation, depending on the extent of the services, well, that that's a substantial fee, and you can make a living.
Some people just do fee.
Some people just do advising, and they even will look at somebody's portfolio and tell them give them guidance, and they don't do any of the investing.
And they make a living on just the consulting fee.
Other people do the asset management.
You make a lot more money doing the asset management.
Okay, so how does it work with asset management?
It's percentage of how much they make or by how much they invest.
So the advisory fee, this this is the standard in the industry now, is a percentage of the portfolio.
Of the entire portfolio.
Okay, well, that's understandable.
So you're making money for the client, and in turn you get paid for that service.
If the client does well, you do well.
Okay, I have a question about AI.
It's possible it will take work away from you because I can feed everything into Chat GPT or Dipsyq, all my data, all my information, all my assets, and they can spit out a guide for me what to do.
No?
AI can give you a basic portfolio.
It's like anything else.
There's all kinds of books out there on how to build a deck.
Right.
I can AI how to build a deck.
I would go to the store and buy all the stuff to build a deck, but then when I go to build that deck, I don't know if I want to stand on the deck that I would build.
Right?
It's the same thing with your portfolio.
It's the same thing with your whole financial picture.
AI can only take you so far.
Right.
Because it is a personal view, it is your life, it's all of the factors in your life because your life isn't just your bucket of money.
Your life is your income, your expenses.
Oh, wait, my family members, people that are depending on me, how much time I have, where my career is gonna go.
AI is not going to be able to put your personal financial picture together.
They can tell you how to do an investment, maybe.
That's okay.
Right.
You know, but it's not uh it's not true financial planning.
So if somebody wants to become a financial advisor, what advice can you give him or her?
I would say focus on the business careers.
Try to seek out internships in any and all financial types of firms.
When you say business careers, you mean like go to business school.
Business school.
I I would figure out what finance means to you.
Okay.
Right?
You might like the field and decide you want to be in more sales and be in marketing or be the front-facing financial advisor.
You might decide, hey, you know, I don't really want to talk to people.
Maybe I'll be a financial analyst.
Maybe I'll be part of a portfolio team.
But until you get in there and see what it's all about, you might not know what where your strengths are.
So you have to feel it out and decide where you fit.
I think internships are great.
Getting in any fight financial planning firm, small, large, any of them, you're gonna learn a lot.
And internships as you're going through college can be golden for that.
So I understand probably now you get clients word of mouth, you made money for some clients, they're all happy.
How did you get the first one?
There's many different ways this can be done.
I started with, again, my mom and this accounting practice that we had.
Once these clients were accounting clients, then she got into financial planning.
There's many accountants or new accountants that actually can build that now at the same time.
It's a great business model.
So if you're considering an accounting degree or have one, building in financial planning, it's it's an almost a no-brainer.
No-brainer, right.
Because you're already seeing the financials, you already understand the tax implications of what you're doing.
So that's one way.
But if you're just a new person out of college, I think there's many great training programs in in the larger institutions that literally will train you on how to be a financial advisor, the different products and programs that are out there, um, even how to.
I hate this word, but I'll say the word sell.
You know, I I don't I I I consider it planning, not selling.
But you need to be able to communicate to the client why they need this service.
And so the training programs are the most important way, but you have to get licensed.
And these the the larger corporations are willing to get people licensed.
Do you need the uh the the FINRA and SEC licenses to do actual financial planning?
Before we go, do you love your job?
I do love my job.
You love crunching numbers?
I like crunching numbers.
I like I'm one of those people that I like the numbers, but I really am more forward-facing.
I really do enjoy meeting with people and planning their lives and being there to hold their hands when the times get tough, or holding their hands when they're cheering.
And that is a very gratifying part of being a financial advisor.
Excellent.
Well, thanks a million for your time and all this good information.
And for all the young people out there, what I got from this session is start saving at a very young age.
Correct.
A little bit at a time.
Yep.
And then get good advice where to put that money and how to make it grow, correct?
Perfect.
Okay, we're all set, we're all rich.
All right, are you ready to be a financial advisor?
Thank you so much.
You're welcome, my pleasure.
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