Podcast 5: Does Your Life Need a CFO? Finding Freedom with Certified Financial Planner Sean Kelleher
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Do you need to get a handle on your finances, but don’t know where to start? Over the last few years, Certified Financial Planner Sean Kelleher has brought my family the peace of mind and freedom that comes from knowing the truth about our finances. He’s helped us better understand our limits, what’s reasonable to spend (and what’s not), how much to save and where is best to save it.
In this podcast, Sean explains what to expect from a financial planner, how they get paid, and all the best questions to ask yourself and your prospective planner. If you’re feeling at loose ends about your money, where it’s going (and where it should be going), and how to make it last through the later years, then Sean is your guy.
What do you mean limits? I don’t want any financial limits!
We all have financial limits. We all wish we had unlimited money, and for that matter, everlasting health and beauty! We need to know what those limits really are. But examining spreadsheets and stocks vs. bonds to the level of detail it takes to get an accurate assessment of our finances is not my idea of fun.
Sean and his partner Rhett are passionate about this stuff! That’s the kind of person you and I want advising us about money and budgets and investments. Here’s what Sean had to say in our interview.
I have always been interested in finance, since my first economics class in high school. I studied marketing in college, and later discovered that my interest was in financial planning. Witnessing clients hitting their financial goals, seeing their visions realized, inspired me to start my own firm with my best friend.
Both of us have been practicing for 20 years now. The benefit to us is — we don’t always know the result going in, but the possibilities are endless. I don’t know if maybe I helped a client send their kid to college, and that kid finds a cure for cancer — you just don’t know, and that’s the kind of thing that keeps us motivated.
What is a “fee-only” firm?
Fee-only means that we don’t earn any commissions or referral fees for the advice we provide.
From a client’s perspective, they need to be comfortable with how their adviser is being paid. We felt that being fee-only was going to give us the most objective way to provide the best advice, and it really gives us the deeper client relationships we need to have the role we want with our clients.
Let’s say you tell me to get life insurance and refer me to a provider. How much do you make off of that recommendation or referral?
I don’t make anything. We don’t sell insurance. We will recommend an agent, but we don’t get paid by that agent. I’m working solely for you, my client.
The nice thing about that is, if you look at all the different elements of someone’s financial life, there is an insurance component, an estate planning component, and advisers for all those components. But are any of them actually making sure that all of them are working together — seeing the overall plan? That’s what we do. (And that’s why I like them!)
What are some of the most common financial challenges you see from clients?
Not knowing how they’re spending their money. People don’t like budgets. They want to stick their heads in the sand. But it’s important! It should be our goal to spend money in line with our values.
If you value travel but aren’t taking any vacations — but are eating out all the time — then you need to ask yourself: Is eating out more important to me than travel? If vacations are what you value most, we have to know where else you’re spending your money, so we can make sure it’s going to what you really value.
This kind of homework — knowing how much you’re spending and where — is integral to the planning process. I can’t tell you how much you’ll need in retirement if I don’t know how much you’re spending now.
You really are bringing your clients the truth about their money, and we can’t have the truth without the facts.
I tell clients, you’re not paying me to pat you on the back and tell you that you’re doing a great job. You’re paying me to tell you where you are, and in my expert opinion what you need to be doing to get to your goals.
The second big client challenge is knowing where all your information and documents are. When you were 25, you might’ve had a checking and savings account. You probably didn’t have life insurance, retirement plans, all these things that come from a lot of different places.
So now you have an insurance agent doing your auto and home policies. You have another agent doing your life insurance. You have an attorney working with your estate planning documents. You have employee benefits. You have all these different buckets. And it overwhelms people to where they don’t know what to do. We get them organized.
He did this for me! Now I know where all the important stuff is (and what we still need to do). And if I don’t know where my stuff is, Sean and Riverchase keep copies. Their clients use Riverchase as a depository for just this kind of important financial documents and information.
The third challenge that we help with is information overload. It’s a fact of the age we live in that information is incredibly easy to access. People get so much information, it becomes difficult to make a decision — what we call “paralysis by analysis” — where they just don’t do anything.
Granted, doing something without the end game in mind isn’t the best way to go, but it’s still better than doing nothing. We help clients filter through the information, and then work together to narrow their choices down to A, B or C. We talk over the pros and cons of the choices, and help them determine how to proceed.
Is financial planning just about investments?
No, but that’s a common misconception. Many advisers just focus on the investments because that’s how they’re getting paid, and they’re not looking at the actual planning part.
— We look at the goals you want to achieve and help you determine the course of action we need to get there. —
I use a car analogy here. Think of the investment portfolio as the engine of the car. It has the power to drive us to our goal. You still need a chassis, and a steering wheel and tires and brakes. That’s what the plan provides — the body around the engine to make sure we can get where we want to go.
Beyond investments, we need to consider cash flow or spending, debt management, and asset allocation. I make sure these elements are also in line with the client’s risk tolerance, and make sure they’ll get us to our goals.
So you’re going to do all this work and thinking for us, and then let us make the specific money decisions?
Right. We don’t make decisions for the clients. Our job is to be like the Chief Financial Officer. The client is the CEO. They make the decisions. We do the information analysis and make recommendations, but the decisions belong to the clients.
Sometimes financial decisions are not just about the numbers. There’s an emotional component to be considered too. A good example of this is paying off a house. If the client will have more peace of mind and gratification by paying off the house — even if from a numbers perspective it might make more sense to put that money in a higher-yielding investment — we look at it, run the plan, and see if it will still work by paying off the mortgage.
The end-of-life value of the portfolio may go down, but if the client will sleep better knowing they owe money to no one, and the plan still works, then it’s a good decision.
— It’s not always just about the numbers. —
What are some things we might be overlooking when planning for the future?
The biggest one is retirement, or financial independence. But retirement for this generation isn’t what it was for our grandparents. In their retirement, my grandparents traveled for a couple of years, and then they stayed around the house. My parents are now retired, and my dad’s more active than I am! He’s started businesses. He’s helping me rebuild my house.
Oftentimes when people view retirement, they think, “Well, I’m just not going to work.” But they also need to think about what they will be doing with their time. What are you going to do after the big nap and the vacation? People who don’t have a purpose — whether volunteering or working with their church — are not being fulfilled. It’s kind of a wasted life.
We help clients examine these “wellbeing” aspects of life — not just the numbers. I think that’s what we do really well.
How do you start with a client who doesn’t have a plan but knows they need one?
First we gather all their financial information, so we can see where we’re starting from, and can then build a plan to get to our goal. We look at bank accounts, investment accounts, retirement plans, life insurance, even employ benefits manuals — you never know what kind of nuggets of benefit we’ll find in there that you may not be using.
Once all the info is gathered, we get together for a discovery meeting, so we can learn the client’s goals and how they envision their lives unfolding, what’s going to be important to them. Sometimes it’s not just about the money, it’s about financial independence. A common thing I hear from my clients is I don’t see myself not working, but I don’t want to have to work. So we ask, “What do you see yourself doing?”
I’ve had clients who’ve decided they want to volunteer their time with a church organization, helping youths. They already had a ministry they were in charge of, that was a separate entity from the church. We created a business plan so that can be self-sustaining when that person gets to retirement. It’s really their new job, but it’s just not paying them anything.
We also want to find out what do they value? College is a great example. I talk to clients about their kids’ education goals. Everyone views education a bit differently. Most of the people we work with want their children to go to college, especially if they went to college.
But how it’s paid for really differs from client to client, depending on how they value money. Some clients want to give the “parental scholarship” — they’re going to pay for everything. Others say, I’ll give the kids $5K a year, and they have to earn the rest, either through finding scholarships or a getting job.
It’s interesting finding out what people value. Most clients say they want to travel in retirement. Once we learn this, we can balance their financial goals accordingly — if we have to have some give and take, we know what matters most, and make sure it’s given priority.
After the discovery meeting, we write a strategic plan, looking at all the moving parts to determine what will be optimal, and understanding that there will be some give and take between the clients ideal vision and reality.
Here I use the analogy of a stereo equalizer. We adjust all these different options to give the client’s financial life optimal balance. Then we play devil’s advocate and say, “What could go wrong?” Someone could die, someone could be disabled, or maybe someone has to go into a long-term care facility. Do we have the right protections in place through insurance to continue the plan in those events?
Then we present the plan to the client, and that’s when the most important part starts — the implementation and the monitoring. Having a plan but not implementing it or keeping it up to date is worthless. And I think that’s where most plans fail. People start with a plan, they get their marching orders, but nothing gets done.
Riverchase delivers exactly that accountability, monitoring and followup that brings such significant value and relief to their clients.
Do I have to already have a million dollars to work with Riverchase?
No. Many advisers to require a million, even two or three million. We have experience working with high net worth clients, but we wanted to be able provide advice to people who want it. We do have minimums, but it’s not a million dollars. And there are firms out there that work with clients with all income levels.
There are firms that work with people whose needs are very simple, and they’ll work with you on an hourly basis to give you a financial check-up.
Why can’t we just do all of this ourselves?
You can! It’s not rocket science and financial planning can be learned. But do you have the time and interest and energy to devote to studying, keeping up with the tax law changes and regulatory changes? If you are willing to take that time, you can do it! (It’s not like we’re the Wizard of Oz with magic levers.)
If someone wants to do this on their own, they have to be detail oriented and analytical. Our clients are all plenty smart enough to do this on their own. But they don’t have a passion for it like we do, and they have other priorities for how to spend their time — maybe going to their kid’s soccer games or doing something at their church or spending time with their family. All these things lead to time constraints.
Our clients recognize that the planning still needs to get done, so they hire us to work as a partner to make sure it happens.
What should we look for in a financial planner?
I really believe in the fee-only firm. It gives clients the most objective advice. I’d also look for someone who has the Certified Financial Planner designation. That is the gold standard in our industry. CFPs have to meet a rigorous exam process to earn that designation, and have been trained in all aspects of financial planning. There are other designations that are simple to get — the CFP is not simple to get.
Also, ask them how they work with their clients. Some are not going to do the financial planning — they’ll only do the investments. You have to ask yourself: Is that all I’m looking for? Can I do the planning part on my own and have someone else do the investments?
And even if you’re working with a fee-only planner, ask them specifically how they get paid, what is their fee schedule, and what are you going to get for that? I have no problem lining out what clients get for their money.
What is your last big message for our listeners?
If you don’t have a well thought out financial plan, how are you going to know if you’re making any progress toward your goals? If you won’t take the time to do it yourself, please enlist someone to help guide you on that process. Because if you don’t have a plan, you’re never going to hit your goals.
And that worry will be looming over you like a black cloud.
The closer you get to retirement age, if you haven’t kept up with things, you’re not going to have a lot of flexibility to make changes.
My partner compares making a plan to flying. If you see a storm out on the horizon, and it’s way out there, it’s a lot easier to make a two degree course correction now than when you’re right up on the storm, and have to make a big ninety degree turn to avoid disaster.
I enjoy working with younger clients for this very reason. We have more flexibility in structuring strategies for the future. The key is having that plan intitally, because the sooner you do it, the easier it’s going to be to find a solution to get you where you want to go.
To reach Sean and his parter Rhett at Riverchase, visit riverchasefinancialplanning.com. There is no obligation in the initial consultation, and if they’re not the right fit for you, they know lots of other planners and will be glad to connect you to them.
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