With Thanksgiving just days away, this week’s episode serves as a reminder of the importance of reflection and gratitude and how these two elements enhance your financial life. We welcome Creative Planning President and CEO @PeterMallouk to the show to help deliver this message, discuss the financial industry and its future, and provide his personal investing insights — it’s an interview you won’t want to miss!
Episode Notes
Presented by Creative Planning, each week Host and Managing Director John Hagensen cuts through the headlines and loud takes to challenge the advice you may have been given and reaffirm what you know to be true. Plus, don’t miss his weekly interviews with Creative Planning specialists as they cover investing, taxes, estate planning and many other areas that impact your financial life!
John Hagensen: A good day to you. My goal is to reaffirm what you know to be true and to challenge the advice you may have been told is true. Thanks so much for tuning in. It is officially Thanksgiving week, and in just a few days many of you will be gathered around a table filled with turkey, stuffing, pumpkin pie, and all the wonderful traditions that come along with this season. We are entering really the greatest time of the year.
It’s not really Thanksgiving in the Hagensen house unless we’ve done an early morning turkey trot where it’s freezing as you’re jogging around the neighborhood, followed by a turkey bowl where we’ve got usually 50 to 100 people playing multiple games. It gets pretty competitive, so I’m also trying to not pull a hammy or get seriously injured, which seems to happen, by the way, to one of us middle-aged men every single year. That’s all a great part of Thanksgiving and all the traditions, and then falling into a food coma about halfway through the Cowboys game, which this year should be awful watching their second or third string quarterback try to keep the game close.
But Thanksgiving, more importantly, is a time to reflect, to connect, and to appreciate all the blessings that we have in our lives. But if you’re like me, life moves so fast that it’s very easy to forget to even pause and appreciate what you have. I want to stay there for a moment, because gratitude is a funny thing. It often shows up once you lose something. Think about it. You don’t realize how much you value air conditioning in Arizona in the middle of July until you don’t have air conditioning. And then you do the whole thing where you call the emergency number and you pay four times as much money because you’re like, “We have to have it fixed immediately.” Or how great it is to be healthy. You don’t walk around every day going, “I feel great, and I’m so thankful that I feel great,” until you’re laid up with the flu. And that’s so true of many things in life.
Clean water; when we went over to Ethiopia four times during the course of our adoptions over a decade ago for our two sons, you look around and you start appreciating clean water and sewer systems. But we don’t often reflect on how heartbreaking it is that they deal with that in certain places around the world still today. It’s easy to forget the blessings that we have, like access to education, we’ve got a stable infrastructure, or even just the predictability overall of daily life. Yes, we can gripe about potholes, but at least we have roads that connect us to each other and to opportunity.
I’ve heard it said that you can really measure how blessed you are by the things that you complain about. And by the way, that’s a humbling realization because I complain about some really dumb things that in the scheme of things show how good I actually have it. And some of those simple things that are easy to forget, those simple joys like sharing a meal with family, cheering on your team during Thanksgiving football, watching your kids in their annual school play where every second grader somehow is dressed as a turkey. You know what I’m talking about. By the way, side note. Why do they always run out of turkey costumes and someone ends up as a carrot or somebody ends up as a bunny rabbit? That kid is going to be in therapy. Tough break, buddy. You’ll get them next time in third grade. I’m sure they’ll have a costume for you.
Let’s turn our attention to the investment world; a lot to be thankful for there as well. Today you can own shares in the most innovative companies in the world: Apple, Tesla, Amazon, NVIDIA, without needing to be a multimillionaire, without needing to be the person who started the company. And that wasn’t always the case. 30 years ago, you’d be calling a broker. You’d be paying hundreds of dollars in commissions for a single trade. Today, you hop on your phone for zero commissions, or you have a strategy in place with a financial advisor and they make the trades with zero commissions. I mean, that’s incredible. The lack of friction involved and the ease with which you can access growing your money.
You also have tools like exchange traded funds that allow you to diversify easily. Now there’s even direct indexing, which allows you to unwrap those index wrappers and have all 500 stocks, let’s say, of the S&P 500 spill out into your account, so you get 500 different tax slots to manage your tax efficiency. Instead of worrying about a single company’s performance, you can own hundreds or even thousands of companies in one investment strategy. Diversification used to be something only the wealthiest investors could achieve. Now, it’s available to anyone.
Let’s not forget about tax advantage accounts. Think about retirement accounts, 401(k)s, Roth IRAs, HSAs. You’ve got 529s for education. These vehicles allow you to grow wealth with incredible tax efficiency and save within an account that directly targets your stated objective, your stated time horizon.
How about compound interest? Albert Einstein called it the eighth wonder of the world for a reason. If you start early, compound interest really is like planting a tree that bears fruit year after year without you having to lift a finger.
Here’s another overlooked blessing, liquidity. You have the ability to buy and sell investments at the click of a button. Request your money, wire it here, ACH it there, send me a check. Liquidity gives you incredible flexibility and control over your investments.
But beyond access and tools, how about the American economy itself? Is it perfect? Of course not. But it’s the cleanest shirt in the dirty laundry, and it ain’t close. It’s the largest, it’s the most resilient economy in the world. Sure, we’ve had our share of challenges, wars, recessions, political turmoil, but through it all the market has grown. Large US stocks for the last 100 years have averaged nearly 10% per year of growth. Why? Because people don’t stop innovating. Look at America’s influence and impact on the world in things like technology, medicine, entertainment. There have been no countries even somewhat close.
And I don’t say that arrogantly; I say that with gratitude. I was fortunate to be born here. I didn’t have to do anything for that. What an incredible country to be born into. And practically the reason the market continues to chug forward even despite having an imperfect country and an imperfect economy is because we don’t stop buying goods and services or starting businesses or creating new solutions because there’s a bump in the road. Even during tough times, you go out to eat, you buy sneakers, you plan vacations, and the market pricing reflects that human ingenuity and progress. Which is why even though there on average is a 14% correction during a calendar year. One out of every three or four years the market is down. You’ve got one or two bear markets every decade, a crash or two. But after that downward volatility, it chugs on to make new highs.
To put a bow on this idea of gratitude, I want to share three real practical benefits of how gratitude can transform your financial life. Number one, abundance over scarcity. Gratitude shifts your mindset from what don’t I have to what do I have? Cup half full or cup half empty? The reason it’s a famous saying is because it perfectly describes how powerful perspective is, and that is absolutely true when it comes to making financial decisions.
Number two, knowing when enough is enough. It’s very easy to get caught up in the just one more trap, a little bit bigger, a little bit better. What’s the next mountain I can climb? Gratitude helps you define what success looks like for you. It helps you set finish lines. And that doesn’t mean promoting apathy. That doesn’t mean not pursuing big dreams or selling yourself short. It means understanding the finish line is a mindset. That realization will help you avoid being the proverbial hamster on a wheel endlessly chasing more.
The three benefits of gratitude for investors: Number one, abundance over scarcity. Number two, knowing when enough is enough. And finally, number three, using money for higher goals. Gratitude reminds you that money is simply a tool. It’s not inherently valuable. It is indirectly valuable and provides you the means to accomplish things that do matter. It’s about creating a life that aligns with your values.
So as you gather with family and friends this Thanksgiving, take a moment to reflect on what you are grateful for. And remember, gratitude isn’t just a feeling, it’s a practice. It’s an intentional practice that can transform your life and your finances.
Today I’m excited to welcome a special guest. Peter Mallouk is the president of Creative Planning. He’s been recognized as the number one financial advisor by Barron’s for three consecutive years, 2013, ’14, and ’15. He was also featured on Worth Magazine’s Power 100 List in both ’17 and ’18, a list that recognizes the most powerful men and women in global finance. Peter’s here to help us make sense of the financial landscape and share his insights on everything from gratitude to the future of financial advice. Peter, welcome back to the show.
Peter Mallouk: Hey, good to be back with you, John.
John: Well, it’s Thanksgiving week. I’ve got to ask to start, what’s your favorite Thanksgiving dish, and is there one that you secretly kind of hope that no one brings and you avoid?
Peter: I don’t like anything related to the cranberry theme that goes with Thanksgiving. Other than that, I’m very much a traditionalist. I like turkey, mashed potatoes, all the normal stuff that people would have. Not a unique answer to you there. I’m curious, how about you?
John: We do a Friendsgiving that just happened this last week with about 40 of our friends in the neighborhood that we host. We have everyone bring one of their traditional dishes, so you end up with 40 different dishes, which is a ton of fun. Sneaky one, bacon wrapped water chestnuts.
Peter: Interesting.
John: Really weird. I actually kind of judged my friend for bringing it, but they weren’t actually horrible. So otherwise, yeah, I’m kind of in on just everything and making the little slider sandwiches with the Hawaiian sweet bread for the next couple of days. Got to love Thanksgiving, other than it’s not good for my waistline. That’s for sure.
Peter: Bacon wrapped anything is going to work out generally.
John: Right? In a way that’s just a great strategy. You’re like, “Let’s take something that’s kind of a forgotten food and wrap it in bacon, and everybody will love it.” That’s a really good point. How do you see gratitude playing a role in making better financial decisions?
Peter: What’s interesting about gratitude is if you think about the business of financial planning, it’s really about achieving goals. Here’s where I am, here’s what I’m trying to do, and how do I help somebody get there? What’s interesting is sort of the definition of happiness is, are you content? And the level of disconnect is the gap between where you are and where you want to be. What gratitude does is it reminds you that sometimes you are where you hoped to be a few years ago and we just forget it. As humans, we just keep resetting the bar, we keep resetting the bar, we keep resetting the bar. Whether you look at the Harvard Health, business studies, you look at the top 10 things mentally people can do to improve their health, gratitude is number one on the list. You look at people achieving their goals when they’re working with us on financial planning, you want them to have that feeling of contentment.
What’s great about gratitude is gratitude has to be intentional. You have to think about, “Here’s what I have and I’m grateful for it, and here’s why I’d hope to have five years ago or 10 years ago, and maybe I’ve moved the benchmark, but let me be grateful for the things that I have.” And so I think it’s just a natural part of people that know anything about happiness know it’s not the destination, it’s the journey. And if you make it about the destination, you can never be happy, because as humans we’re all going somewhere. And when you and I are doing financial planning with clients, we are always going somewhere. We’re always saying, “Okay, let’s reset the starting line. Let’s reset what you want.” So we’re constantly changing things.
I love sitting with a client and pausing. I was just doing this this morning before this show with a client. You’re saying, “Look, where you are is so far beyond where you wanted to be, and let’s just take a moment and really appreciate it all.” And she said, “You know what? You’re right. I had totally forgotten about this is everything I had hoped I wanted at one point and more.” And so I think gratitude is a very natural part of planning, very natural part of life, certainly if you want to be happy while you’re doing it.
John: Speaking of gratitude, I’m grateful that the election is over. My whole neighborhood can now get rid of about 80,000 signs, local and national elections. Obviously emotions are still high. How do you help clients separate their political views from making smart money decisions?
Peter: Well, first I have to say I was in Arizona for a day a few weeks ago because my daughter dances for her college and she was dancing at the football game there. It’s not just the number of signs. I understand Arizona is a swing state. It’s the only state I’ve ever been in where every size is quadruple the normal size. There has to be a reason. Every other state, the signs are smaller. I don’t know if there’s laws that keep them smaller or if other states are windier and so they have to be smaller. If there’s a lot of older people in Arizona or whatever it is, they can only see the big sign.
John: That’s hilarious.
Peter: But it was crazy to see not just the number of signs, but just how billboard like all of them were. So fascinating.
Now, when it comes to politics and money, the stock market is not blue or red, it’s green. All it cares about is money, and there are lots of things that make the market go up. One of them is this powerful force called inflation. Sometimes inflation is high, sometimes inflation is low, but 99% of the time we have inflation instead of deflation, which means prices are going up. So no matter who’s the president, if four years later you think it’s going to cost more to go to Disney World, it’s going to cost more to go to McDonald’s, it’s going to cost more to fly Southwest Airlines, then you can probably count, not always, but usually, the market to follow. And it’s very hard for a president to get in the way of that. They can have policies that make the market go up even faster because they’re inflationary, like deficit spending and things like that. But I think people overestimate the impact a president has on the actual economy.
I’m just going to give you one example of even policy wise. People talk about, “Well, the Democrats and the Republicans on taxes.” Well, from Bush to Obama to Trump to Biden, over 20 years, capital gains tax has not changed 1%. Hasn’t changed at all. Income tax has changed less than 3% over that entire time period. So even this big policy that spent all this time talking about at the end of the day don’t do a lot very differently from one another. I know that surprises people. Socially, yes, they’re different. But when it comes to economics, you can ignore what they say, watch what they do, and they’re very, very similar.
John: I saw you tweet a Charlie Munger quote about avoiding stupidity as being more important than being a genius when it comes to investing. How do you see that playing out practically?
Peter: People try to be a genius. It means you’re trying to outsmart the market. It’s very hard. And 7% of the time that happens, but it’s a dangerous game. Now if you try to go to the sidelines, if you do something stupid, it’s very easy to lose very, very, very big. So for example, if the day after President Biden won, you went to cash, thought you’d wait things out a little bit, well, that was very stupid and you could never recover from it because the market soared after that. If under Trump’s first administration the first day you went to cash because he is volatile and you’re just going to wait things out, well, that was very, very stupid because the market soared from there. And in both cases, the market never went back to the levels that allow you to get back in at that entry point. Created a very large permanent loss.
The person who’s just not being stupid, just saying, “Hey, I’m just going to leave my stuff alone.” Maybe we’re not trying to optimize everything and tax harvest everything. We’re not doing every single thing we can do to improve things, but you’re at least leaving it alone, that person’s much better off. Munger’s spot on. If you look at, you can do incrementally better by being brilliant, but really the disasters are avoided by just not doing that one crazy thing.
John: We’ve got the big four tech companies, Peter, Amazon, Apple, Google, and Microsoft. Revenues are unbelievably high. The market’s been top-heavy for a while if you followed it, but they’re enormous. Does the sheer size of these giants change the way investors should think about building a diversified portfolio?
Peter: I think people worry a lot, if you look at the S&P 500, about 30% of the market capitalization of these 500 companies is concentrated in just six or seven companies. It’s incredible.
John: I didn’t even mention NVIDIA. I mean I didn’t even mention them.
Peter: You’ve got multi-trillion dollar companies now. Five years ago we had no trillion-dollar company. And many of these companies are bigger than the actual national economy of many countries. But I don’t view it as risky as some people think it is. If one of those was McDonald’s, you’d say, “Okay, what if Chick-fil-A hurts McDonald’s or Wendy’s hurts McDonald’s?” They’re selling one thing. But if you look at, say, Amazon, Amazon is retail, but it’s also a lot of storage and IT oriented things. Same with Microsoft. All these companies have big AI divisions. They’re very large, very diversified companies with very significant moats around them. One of these companies getting completely clipped like an Apple or Microsoft is very, very hard. Most stocks, they represent one company doing one thing. When you look at Amazon and Apple, these are multifaceted companies. And we have the AI revolution now happening in the same companies that are already the largest, and so we’re going to see them get even larger.
I think it’s okay, but I still think an investor should be intentional about making sure all their eggs aren’t in those five or six companies because they still represent generally one industry. And so you want to be across various industries, across various countries, but it’s okay to have a little bit more allocation to those as represented by the S&P 500.
John: Peter, you mentioned AI. Let’s stay there for a moment. It’s evolving fast here in the financial industry. Where do you see things headed in the future, and how big of a role do you think AI is going to play when it comes to financial advice and financial planning?
Peter: I think it’s going to be very much like the internet, and then it’s going to make financial advice come much more quickly and accurately. Let me give you some examples at Creative Planning. We have a big legal team. Every time a client comes on board, we review their legal documents. I don’t think we’re that far away from AI being able to review the documents and graph them out and so on. I think when you look at tax prep, I don’t think we’re that far out from AI being able to do many of those components. For analyzing home insurance or auto insurance for a family. I don’t think we’re far away from AI scanning those policies and then the program being able to give us the 10 point evaluation that we now have people doing.
Ultimately as you put all these pieces together and you say, “Well, I live in this county and this state and I’ve got these goals,” talking through the goals, talking through, “Well, do you really think you’ll travel more or less? When will you qualify for Medicare? Should you roll off your employer’s plan?” And how these pieces go together, I think you’ll still see that. I think it’s very much where I see the medical community going. We’re going to go to a doctor’s office. We’re going to put all of this feedback in our medical history and our family history into a computer program. It’s going to put the doctor on third base. They’re not just going to get to third base, they’re going to get to third base faster and much more accurately, and it’s going to make it easier to get the home run care that you need. I think a lot of advice industries are heading in that direction very quickly.
John: Do you think investors should be looking for different qualities in a financial advisor than they did maybe five years ago or 10 years ago when they’re looking at the landscape?
Peter: More than ever, you’re seeing people hire independent advisors over brokers. You go to the Goldman, the JPMorgan, the Morgan, the Merrill, they have their own products, they collect commissions, they have all these different conflicts. So I think more and more people are moving to independent advisors where they say, “Look, I want to get my advice from somebody that doesn’t have a product to sell me, doesn’t have an incentive to recommend one thing over another.” If you go to a doctor and a doctor created their own medication, don’t be surprised if that medication gets prescribed to you. So you want an unbiased advisor. I think you see a big trend there.
A lot of people want an advisor that’s going to take a tax sensitive approach. It’s not just what you earn, it’s what you keep. And I think there’s a big movement towards advisors that really look at investments not based on your age or risk tolerance, but really based on your goals and your values and what are you trying to accomplish, and say, “Okay, let’s build a portfolio that has the highest probability of making that happen, while we look at the big picture of making sure that we also keep taxes as low as possible and get your legal work as accurate as possible.” And as we’re driving down the road, the tax laws change, legal rules change, the investment landscape changes. We take advantage of those things or make sure you’re on top of those things.
So those towards independent advisors, having the various look of things in one place, taking a tax sensitive approach, choosing the portfolio based on goals. Then the last thing I’d say is a firm with scale. People are really navigating towards firms that have negotiating power to bring the best investments possible at the best fees possible wherever they can. That’s why it’s very interesting, over 90% of clients are signing on with the few percent, the 4% of the largest firms, because they want that negotiating power, that safety and security that comes with that kind of advice.
John: All right, last question, Peter. If someone is just starting their investment journey today, what’s the one piece of advice you’d give them given everything you know about the markets and the industry’s future?
Peter: So number one, if they’re starting today, that’s the key is just start. The biggest thing we see people get in the way of themselves is tomorrow, next week, next month. An investor’s best friend is time. There’s nothing more powerful in investing than time. Every single day, week, month, year you can be in the market is an advantage. And so investing as soon as possible and increasing the amount you can invest as it allows is going to be critical to success.
Once you’ve developed a little bit of a nest egg, the main thing I see people forget is to tie the investments to goals. A lot of people just invest, and if you don’t have that north star, if you don’t have that light to follow, you will find yourself making decisions that don’t really fit your life. So make sure you have actual objectives. Document those objectives so we can make sure the portfolio is pointed towards making those a reality.
John: Yeah, so often we just look at the account performance over a quarter and go, “Well, I’m happy about this, or I’m unhappy about that,” without any real context of why that number even matters in the first place.
Thank you for sharing your wisdom with us today, Peter, and thanks for coming on Rethink Your money.
Peter: Always awesome to be with you, John. Thanks.
John: Let’s dive into our first piece of common financial wisdom to rethink together, and that is that insurance agents and their companies act as fiduciaries. When you walk into a Ford dealership, they’re not going to recommend you buy a Chevy Silverado. They’re going to sell you a Ford F-150. And let’s be clear, that’s a great truck. It doesn’t mean that there’s anything wrong with them selling you a Ford F-150. I think it’s the number one selling truck in America for decades. But does that mean it’s automatically the best choice for you? Not necessarily. And certainly if there were a reason that you shouldn’t buy the truck or you should explore a Titan or a Tundra, they’re not going to be selling you that, because they make no money if you don’t buy a Ford.
The same logic applies to insurance agents and companies. They represent products and sell those products on behalf of their company. Their job is to promote those products. It’s their business model. Again, it’s not inherently bad if your insurance agent’s your buddy or your neighbor or somebody from church that you hang out with or golf with. It doesn’t mean that person is unethical. I’m not suggesting that. It just means the dynamic of how they are paid requires them to sell you insurance, which is why I think in many cases insurance as a whole has gotten a bit of a bad reputation. It’s not that insurance isn’t an incredibly vital part to financial planning, it’s that it’s very inappropriately sold in certain situations and it’s hard to unravel and difficult to get out of, and so there can be a lot of buyer’s remorse related to insurance. This doesn’t mean you shouldn’t trust an insurance agent, but it does mean evaluate their recommendations with a critical eye.
At Creative Planning, we help clients manage their risk. We’ll break down through our insurance needs analysis during the planning process how much insurance you need, because you don’t want to be under-insured, but you also don’t want to be over-insured. What’s the right amount? You also don’t want to be sold a permanent life insurance policy that you don’t need when you could just buy term and invest the rest because the commission’s significantly, I mean in some cases like 1/20th or 1/50th the amount that the agent will be paid if you bought permanent life insurance. Which again, is it always the worst thing in the world? No, but it’s gotten a bad reputation because it’s rarely, in my opinion, the correct tool. But yet it’s shoehorned into plans because the financial incentives to sell those products are incredibly high, mind-blowingly high in some cases.
I cannot tell you how often this comes up. In fact, I just had someone come in in the last week, three different permanent life insurance policies. Now, relative to their net worth because they were doing really well. They weren’t huge, and that’s why they had been pushed to the side for realistically a decade or two. But I asked this couple, “Why do you have these whole life insurance policies?” And it came down to the fact that he was sold them from a fraternity brother that he went to college with and they’ve just been sitting there. He basically said, “I know that they don’t probably make sense. I don’t need the death benefit. But I also don’t really know how they work or what it looks like to get out of them. In particular, what are the tax implications? Do I still have any sort of penalty? Where would I deploy that money within the plan? I just don’t really know, so I’ve just had it sit there.” This is what often happens if you’re not being intentional about reevaluating your insurance relative to your current situation.
Here’s another piece of common wisdom to rethink together, sticking with the insurance theme. Most people don’t need an umbrella insurance policy. Or, put another way, “I don’t have enough money to have an umbrella policy.” I hear this all the time. But the reality is, umbrella policies are one of the most underrated forms of protection that exists in personal finance. They’re essentially a safety net over your safety net. In many cases it’s just a few hundred dollars a year. I mean obviously it depends upon how big of a policy you need, but you can get a million dollars or more of extra liability coverage for not a whole lot of money.
Think about this. You’re in a car accident. Someone sues you for more than your auto insurance covers, or a guest gets injured on your property and the medical bills skyrocket and they’re litigious. And they’re like, “Yeah, I’m pretty sure the Johnsons have a bunch of money. Perfect. My kid tripped on their trampoline and now their neck hurts really bad. I’m going to come after them.” Yes, you have homeowners, but this is a nice extra layer of protection to help in the event that something like this occurs that you can’t forecast. Without an umbrella policy, your savings or your investments or even future income could be at risk.
Here’s another one related to insurance. Common wisdom is that life insurance only benefits your heirs, so why should you care? This perspective totally misses the point. Life insurance isn’t just about the payout, it’s about peace of mind. If you’re the main breadwinner in your family and you have a couple of kids who are minors and a spouse and you don’t have life insurance, that creates tremendous anxiety and stress, or at least it should. Let’s be honest, that should be something that stresses you out. So there’s value in the peace that you feel in knowing that those whom you love, they’ll be well taken care of in the event that something happens to you.
Switching gears from insurance, how about that financial advisors are all basically the same? It’s something I hear a lot. And by the way, it makes sense. It’s hard to differentiate. There are 300,000 plus financial professionals. You probably have five or 10 in your life on the peripheral that you know one way or another. And most of them seem pretty smart and they have nice offices, and it seems like they kind of know what they’re doing. Financial advisors, they’re not any different than teachers.
We’ve got seven kids, and in elementary school, your kid has the same teacher for an entire year. They’re not switching classes like middle school and high school, and so the teacher really matters. Now fortunately, we love the school that our kids go to. It’s in our neighborhood. We walk them up there. It’s amazing, and they’ve had great teachers. But there was one scenario, and I won’t name the teacher and I won’t name the school, but where our kid didn’t have a great teacher. And it was obvious the teacher didn’t really go above and beyond. They didn’t really care. It was literally just a job that they were going to do whatever they needed to to get paid and absolutely nothing more. Furthermore, they weren’t very experienced. They didn’t have a great just natural disposition for teaching. They weren’t good at handling a big classroom of kids. They were just a bad teacher. It doesn’t mean teachers are terrible. Teachers are, by most accounts, amazing. It’s one of the most selfless jobs. They’re underpaid. The value for society is huge. But there’s really awesome teachers and there’s really terrible teachers and there’s everybody in the middle.
The same is true of financial advisors. With financial advisors, there are all the obvious factors and differentiators. Are they a good communicator? Do they work hard? Do they know what they’re talking about? Do they have the right solutions? All of those things that are fairly easy to quantify. And then also, just consider some of the inherent incentives like we were talking about with insurance. Are they independent, or are they manufacturing their own investment products? If they are, how can they be objective? They have their own products they’re manufactured, and then you’re saying, “What should I invest in?” What do you think they’re going to tell you? Are they affiliated with a broker dealer? Are there commissions? Are they duly registered, meaning they’re a fiduciary some of the time, and then other times they’re acting as a broker and they’re selling products? That’s a very muddled relationship. Are they credentialed? It’s not hard to get your license as a financial advisor. It’s just a very, very basic license that allows you to be a financial advisor. But are they a certified financial planner? If they’re dealing with your investments, are they a chartered financial analyst, a CFA? Are they an attorney if they’re giving you estate planning advice? Are they a CPA if looking at your taxes?
These are some of the baseline credentials and designations and education that don’t in and of themselves determine whether you’ll have a great experience or whether they’re a great advisor, but they’re a good starting place to differentiate between 300,000 advisors. Most of those require even beyond the initial testing and whatever prerequisites were required. They also require continuing education and ethics review and some of these other conditions that can be important. And then finally, are they comprehensive in what they offer? Nowadays to go to someone, they put you in a model portfolio and they charge you 1% a year. You’re like, “Wait, why would I do that? I could go do that on my own if that’s all you’re doing. What else are you doing for me?”
This is why Creative Planning, in my opinion, why we’ve had so much growth and now helping out 75,000 clients. We’re a law firm with 60 attorneys and a tax practice with nearly 300 CPAs, 500 certified financial planners like myself. We’ve got a business services team, an IT, retirement group, a trust company to help administer your estate, an institutional team to help with a family foundation or non-profits. That’s why Barron’s has called us a family office for all, because if you have a situation that starts with a dollar sign, it’s very likely that we can help with it. And in 2024, that’s one of the things that separates one financial advisor from another. Oh, you just do investments? Oh, maybe you sprinkle in a little financial planning? Like, okay, that’s cool. That’s investment management; that’s not wealth management. Wealth management has investment management as a piece of it along with all of these other facets that mostly directly impact your financial success. And if not direct, very closely indirectly correlate to your investments and your retirement planning.
So if I’m you and I’m thinking through what I’d be looking for in terms of a financial advisor, are they independent? Are they credentialed? Are they comprehensive? Those are really good starting places.
Time for this Thanksgiving week’s one simple task. Have a financially oriented conversation at your holiday gathering. I know what you’re thinking. You’re like, “John, you said that this was a simple task. You just gave me something that is absolutely not simple and potentially going to cause chaos.” Your palms are sweating just thinking about this. But what I’m not suggesting is that you bring spreadsheets to the dinner table, or you start interrogating your cousin about their investment choices, or point out to your sibling, “Hey, you’re not saving enough. I bet your retirement plan’s not on track.” I’m not saying that. Don’t ask your parent why they still are owning Cisco stock from 82 years ago, or definitely don’t ask your grandkid about why they’ve got their life savings in Bitcoin unless you want the entire family upset. I’m not saying that. But I want you to think of this as an opportunity to learn from each other and to spark ideas. I mean, we’ll talk about almost anything except money, and money is so impactful in our lives and it plays a role in family dynamics.
Let me give you six quick hitter strategies to keep the conversation light and fun and productive. Number one, just celebrate wins. “What financial successes have you had this year?”
You can talk about gifting. What are some of the things that you’re passionate about, mom and dad? What are some organizations? We’re looking to donate some money here toward the end of the year.” You don’t need to say that in a braggadocious way. Like, “Oh, we’re going to give money. Look at us.” In a genuine way, like, “What are causes you guys care about? Where have you been involved? Are there different organizations that you’ve been giving to?” This type of conversation keeps it fun. “Hey, what’s a memorable gift that you’ve received?” Whatever it is, but talk about gifting.
You could share lessons learned. We don’t do enough of this in our culture where we learned from other generations. What were some mistakes that you made with money? Not to condemn them obviously, but, “Hey, what were some things that you learned, like you wish you had known when you were younger that now you figured out? What are some of those things related to money or investing?”
You can explore resources. “Do you have a favorite budgeting tool or app that you use? Who do you use to bank? Where are you finding high yield savings accounts? Do they have a nice interface so that you can track your spending?”
Whatever it is, have more of a conversation where you’re asking for advice. People love providing advice. Set some resolutions, with the new year around the corner, you could discuss financial goals.
And then finally, express gratitude. Reflect on what you are thankful for financially. It might just be a stable job. “Man, A couple of years ago we were going through COVID. Things were pretty dicey. I’ve maintained my job, my company’s grown. I’m so thankful. Things have really stabilized and I’m in a good spot.” Or, “I lost my job during COVID. I was able to get hired on at XYZ company and I’m really happy about it. It’s really worked out amazing. I didn’t see the light at the end of the tunnel at the time, but God’s been good. It’s worked out.” Whatever it is, express gratitude. That has a way of instilling positivity and prompting others to share things that they’re also grateful for.
So again, the simple task is to have a financially oriented conversation at your holiday gathering. You can find this as well as all of 2024’s simple tasks on the radio page of our website at creativeplaning.com/radio.
Well, it’s time for listener questions, and Britt’s here to help. Britt, who’s up first up first?
Britt Von Roden: First we have Chad in Indianapolis. His question, John, is if the election results impact tax strategies?
John: The answer is yes and no. With Trump set to return and both the Senate and House red, the current tax rates which are set to expire at the beginning of ’26 have a lot better shot at being extended. If you remember, the only real significant tax legislative change happened during the first two years of Trump’s previous presidency where he had the ability in Congress to get his tax cuts and Jobs Act passed. The key here is to control what you can control. I would still work under the assumption that we’re in a low tax rate environment. We’ll see what happens moving forward. It’s more likely. But as Creative Planning president Peter Mallouk mentioned earlier, income taxes have only moved 3% and capital gains have moved zero in the last 25 years. There’s a lot of talk around this, but in reality, not a lot’s changed. I think in this case, you just have a much higher percentage likelihood the current tax rates stay unchanged beyond the end of ’25.
Let’s go to Kyle over in Denver.
Britt: Kyle shared that he listened to your show last week about estate planning, and was wondering if you have any advice for those of us that do not have any children. He shared that he is getting caught up on what he should do.
John: Yeah, Kyle, it can feel a bit different maybe just because there aren’t as obvious beneficiaries. I mean, maybe there are. Maybe you’re really close with nieces or a sibling. Or sometimes you have a special needs family member that you’re close with and you really want to support them with your estate plan. That’s not always the case, but I think in general that can be one practical difference.
But a few recommendations I have, consider insurance. Because what I’ve seen in the past is someone who doesn’t have children and they say, “Well, there’s no real financial hardship if I were to pass away. My spouse would pick up the rest of the assets. They have a good job.” Or you’re single and not married, and you’re like, “Well, nobody’s suffering financial hardship. Anybody that gets anything, it’ll be a benefit because I’m not supporting anyone right now.” You don’t get insurance, you then have children later on, and due to a health complication are now uninsurable. Ensure that your powers of attorney are set up, both medical and financial, as well as designating a trusted contact. So appoint the people in your life that you trust that can make financial and medical decisions for you, because if that goes to a court, without children, it’s less obvious who should be designated during that process.
All right, Britt. Let’s go to the final question, Susan out in Omaha.
Britt: Our final question for you, John, is if you can explain Blackstone’s new fund for the rich. Susan is wondering what your take is.
John: Yeah, Susan, I saw this headline. I thought it was an interesting one. What this is is Blackstone just making even a larger play into the private equity space. Private equity is just owning a company exactly like you do when you own Apple, but Apple’s a publicly traded company. Blackstone just completed an $8 billion deal this past week to acquire Jersey Mike’s. If you love Jersey Mike’s like me, by the way, there’s one by our office. I walk down to it. Even in the summer, I walk down to it. The rest of our office thinks I’m nuts because it’s 115 degrees and I’m dripping in sweat, but I like getting my steps in. And I go down there and I get that number 13, that Italian. Sometimes I mix it up and I go to 55 and I’m getting the kettle chips. They have some spicy dill. I mean, my mouth is watering right now. I should not admit how much I like Jersey Mike’s, but I really like that place. Not a sponsor of the show. Don’t worry, no conflicts of interest. I just really like Jersey Mike’s. If I wanted to own part of Jersey Mike’s, I could do that through this Blackstone fund.
Private investments in general have become a lot more popular, and a lot of companies have been making them more accessible to more people rather than just institutions for a few reasons. One, because there are just far fewer publicly listed companies today than there were 10 years ago. And that generally surprises people. Like, “Wait, I’d just assume there’s more stocks than there used to be.” No, there’s way less, for a variety of reasons that I won’t get into. But some of those companies are good companies that you might want to own. And if you want broader diversification, especially those that are a little higher net worth, private investments such as private equity or private real estate or infrastructure or private credit, which is basically the private version of a bond, can be viable options.
Now, the pros I just mentioned; potential for higher returns because you theoretically have an illiquidity premium, all things being equal. You have broader diversification, so potentially you have a more efficient portfolio, like a little lower volatility for an equal or higher expected rate of return. Of course, past performance, no guarantee. You’ve got access to unique opportunities, things that zig maybe when the rest of your portfolio is zagging. A perfect example of this is private credit’s mostly floating rate. So when rates went screaming up coming out of COVID when inflation was taking off, bond prices were getting clobbered because if you had a 3% yielding bond and now bonds were paying seven, nobody wanted your 3% yielding bond, but private credit was floating rate. So your interest rate continued to increase in that rising rate environment, which responded really differently than your public debt and was a nice diversifier.
Now there’s no unicorn. There’s no pot of gold at the end of the rainbow. The downside to private investments like this, and private equity being one of those types of private investments, is they’re less liquid, they’ve got a lot more complexity, and they’re much higher in fees compared to the public markets. There are other pros and other cons, but those are kind of the main ones. Which is why two smart people can arrive at different conclusions when it comes to private investments.
Here at Creative Planning, our size and scale do allow us to negotiate access to high quality private investments with competitive pricing. For the right investor, these can be a valuable addition to a portfolio. A lot of people come in for a second opinion. They say, “My advisor doesn’t have access to Blackstone. They don’t have access to Carlisle or Bain Capital, or some of these well-known private investment companies. I’d like to know how that might fit into my portfolio.” And in that case, we are happy to help.
Thank you so much for those questions today. If you have questions like those, you can email them to [email protected].
Can money buy happiness? Depends on the study that you look at, but I think most people would say no. Can money alleviate your really bad days? Can it raise the floor on some of the aggravation that you have to be subjected to? Or stresses that you have if you have no money? Sure. But if you’re miserable and then you get a pile of money thrown on your kitchen table, all of a sudden you win the lottery, are you instantly happy? Like in a real way? In a long-term, meaningful way? No. But research suggests money actually can buy happiness, but only if you use it in the right way. This way might sound counterintuitive and it might surprise you.
The way your money can buy happiness is by giving it away. Come again? What? Money can buy happiness by not having the money? Yep. That’s what I’m saying. But here’s the key. To truly find happiness in giving, it has to be meaningful for you. So it’s not just about writing a check or just automating a donation and never thinking about it. Now, automation is a great way to ensure that you give to causes that you do care about, but it’s about creating a connection with where your money’s going and seeing the impact of your generosity. It sounds a little selfish, like, you need to get something out of it to find contentment in the gift. But you do want to connect the dots because it can propel you to continue to give and stay motivated and loyal to those organizations that are doing good in the world.
Research shows that by giving you reduce your own stress, you increase your happiness, and even boost your physical health. How does it do that? How does it have that power? Because it reminds you that you have enough. It loosens the death grip that money so often has on our lives, and it frees you to focus on what really matters. So give to a cause that you care about. Follow that organization. Understand where the money’s going, how they’re using it. And give your time as well as your money. Include your family if you can. Volunteer your family, involve your kids in service projects, so that you’re not only giving your wealth, but you’re giving your talents and you’re sacrificing your time. Those service projects can teach your family about empathy and create some lasting memories and bonds with your kids.
This last week, we have a great family in our neighborhood who has fostered multiple children, and they do what I’m sharing so beautifully. They arrange to have a U-Haul dropped in their driveway, and then ask people all throughout our neighborhood to go pick out Christmas gifts for one of the children in Arizona’s foster system. It’s heartbreaking how overwhelmed the foster care system is. There are children sleeping on caseworkers’ floors in their office right now, if you can imagine that. So I mean, getting a Christmas gift, they’re not getting that either. But there’s so many other bigger issues here, and it’s like, we can’t alleviate all of those things, but this family says, “Hey, can you join with us in helping these kids?” My wife and I had seven of these kids, and we took our children, we have seven kids, and we went to the store and gave them their wish list and told them the money limit and started having them work on their math skills too as we’re going through.
And I tell you what, this isn’t just applicable to us as adults. My kids were on an emotional high about how excited these kids were going to be when they got the present. I mean, when Jude, my second grader, found this gift that this 8-year-old he was shopping for really wanted, he was pumped. He was more excited than he would’ve been finding his own gift. I do think Jude’s a pretty special kid and has an amazing heart, but my point is that there is something inherent inside of us, deep inside of us, that feels peace when we help others.
There’s no greater use of our money and there’s no better time of the year than right now at Thanksgiving where we reflect on what we have to give back to those who have less. It’s the great paradox. When we open our hands to give, we feel richer than ever before. So this week, commit to doing something kind, even just a small act of kindness, and start a ripple of generosity that extends beyond you. Pay it forward. That’s really the true meaning of money.
And as always, thank you for joining me this week on a special Thanksgiving show. I hope you enjoy time with friends and family. And remember, we are the wealthiest society in the history of planet Earth. Let’s make our money matter.
Announcer: Thank you for listening to Rethink Your Money, presented by Creative Planning. To hear past episodes or learn more about the topics and articles discussed on the show, go to CreativePlanning.com/radio. To make sure you never miss an episode, you can subscribe to Rethink Your Money wherever you get your podcasts.
Disclaimer:
The preceding program is furnished by Creative Planning, an SEC registered investment advisory firm. Creative Planning, along with its affiliate, United Capital Financial Advisors, currently manages or advises on a combined $300 billion in assets as of December 31, 2023. John Hagensen works for Creative Planning, and all opinions expressed by John or his guests are solely their own and do not necessarily represent the opinion of Creative Planning.
This show is designed to be informational in nature and does not constitute investment, tax, or legal advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on the show, will be profitable or equal any historical performance levels. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.
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