ChooseFI Episode 514 Summary: "The More I Tinker, The Worse it Gets | Jeremy Schneider"
Release Date: October 7, 2024
Host: ChooseFI (Brad)
Guest: Jeremy Schneider, Founder of Personal Finance Club and Co-Founder of Nectarine
1. Introduction and Background
In this episode, Brad welcomes Jeremy Schneider, a prominent figure in the financial independence (FI) community. Jeremy is the founder of Personal Finance Club—a platform boasting over 600,000 Instagram followers—and the co-founder of Nectarine, a revolutionary service offering fiduciary financial advice on an hourly basis.
Notable Quote:
- Brad [00:00]: “...Nectarine is basically a fiduciary advice only advisors that you can hire hourly. So this is something I've been looking for for years.”
2. Embracing Simplicity in Investing
Jeremy shares his journey from a complex investment strategy to adopting a simpler, more effective approach. Initially, he experimented with a diversified portfolio comprising nine different ETFs, aiming to optimize returns by covering various sectors and asset classes. However, he realized that this complexity not only consumed more time but also resulted in subpar financial performance compared to a straightforward target date index fund.
Key Points:
- Complex Portfolio: Included ETFs like total US stock market, small cap value, real estate, international, emerging markets, TIPS, municipal bonds, commodities, etc.
- Performance Comparison: His $2 million grew to $2.9 million with the complex strategy versus an estimated $3.6 million with a single target date fund.
Notable Quotes:
- Jeremy [02:26]: “The more I mess with stuff, the worse it does in the financial world.”
- Brad [05:21]: “The more I tinker, the worse it gets.”
3. Personal Financial Habits and Automation
Both Brad and Jeremy emphasize the importance of maintaining a low-maintenance financial life. They advocate for automating finances to minimize the need for constant oversight and decision-making, thereby reducing stress and enhancing efficiency.
Jeremy’s Practices:
- Checking Account Buffer: Maintains at least $10,000 to cover unexpected expenses without needing to tweak investments.
- Autopay: All bills and credit cards are on autopay.
- Minimal Portfolio Management: Rarely adjusts his ETF holdings, favoring a "set it and forget it" approach.
Notable Quotes:
- Jeremy [12:37]: “Everything's on autopay. I don't do anything. And yeah, in terms of the work I do, almost none.”
- Brad [11:24]: “I keep an extra bit of money in my checking account because I never want to worry about cash flow...”
4. Dividend Investing vs. Index Investing
The discussion delves into the pitfalls of dividend chasing versus the merits of index investing. Jeremy recounts his mistake of investing heavily in high-dividend stocks without considering the underlying business fundamentals, leading to significant losses when those companies underperformed or went out of business.
Key Points:
- Dividend Chasing Mistakes: Investing in stocks with unsustainable high dividends resulted in losses and dividend cuts.
- Warren Buffett’s Approach: Buffett's Berkshire Hathaway never pays dividends, choosing instead to reinvest profits for higher growth.
- Psychological Impact: While dividends provide a psychological comfort of receiving cash, they can lead to less flexibility and unintended taxable events.
Notable Quotes:
- Jeremy [22:20]: “Dividends are just making it less flexible for the consumer about when they realize those taxes...”
- Brad [25:12]: “...dividends aren't free money, they're just a transfer.”
5. The Challenges of Financial Advisors and Fiduciary Standards
Jeremy critically examines the current landscape of financial advisors, highlighting the confusion caused by misleading labels and misaligned incentives. He introduces Nectarine as a solution that prioritizes unbiased, fiduciary advice without the entanglement of commissions or asset management fees.
Key Points:
- Confusing Labels: Terms like financial advisor, planner, fiduciary, fee-only, and commission-based often mislead consumers.
- Misaligned Incentives: Approximately 90% of financial advisors earn commissions, creating conflicts of interest that may detract from clients’ best interests.
- Nectarine’s Model: Offers a transparent, hourly-based advisory service without commissions or asset management, fostering trust and alignment with clients’ goals.
Notable Quotes:
- Jeremy [43:20]: “There's no label that designates good versus bad, and a lot of them are misleading.”
- Brad [54:01]: “If a fiduciary financial advisor isn’t telling you to go in low-cost ETFs or index funds, I don't think they're really being a fiduciary.”
6. The Nectarine Solution: Simplifying Financial Advice
Nectarine serves as a marketplace connecting individuals with vetted, unbiased financial advisors who operate on an hourly fee basis. Jeremy explains the rigorous vetting process, ensuring that only advisors who meet high standards and align with Nectarine’s mission are included on the platform.
Key Points:
- Vetting Process: Rejects 80% of applicants to maintain high-quality advisors.
- Advisor Engagement: Currently hosts around 20 advisors, managing over 1,100 meetings with positive feedback (average rating 4.95 stars).
- Future Plans: Exploring options for comprehensive financial planning without introducing upsells, maintaining the platform’s integrity.
Notable Quotes:
- Jeremy [65:01]: “The bar we use is, would we refer our mom to this advisor? And if the answer is no, we just don't put them on the platform.”
- Brad [65:28]: “Hello, nectarine.com and yeah, like we said, you have a fantastic Instagram account, Personal Finance Club. It's super Easy to find.”
7. Personal Anecdotes: Financial Transformation and Habits
Throughout the episode, both hosts share personal stories that illustrate their financial philosophies. Jeremy recounts the surreal experience of receiving a $2 million windfall after selling his company, contrasting it with his prior frugal lifestyle shaped by childhood lessons. Brad shares his own journey from extreme frugality to allowing occasional indulgences, highlighting the ongoing effort to balance financial prudence with personal happiness.
Notable Quotes:
- Jeremy [28:51]: “It was very surreal. I actually filmed that moment... it took years for it to sink in.”
- Brad [36:07]: “I ordered a steak dinner for $20 and didn’t think twice about it. Twenty years ago, I would have never looked at that.”
8. Closing Thoughts and Community Engagement
Brad and Jeremy conclude by emphasizing the importance of aligned financial strategies and the need for transparent, unbiased financial advice. They encourage listeners to engage with ChooseFI’s resources and Nectarine to take actionable steps toward financial independence.
Notable Quotes:
- Jeremy [66:34]: “We're hoping that we're going to push the industry this way and help more people.”
- Brad [66:47]: “Choose a Vi local and you'll find a list of all of Those cities in 20 plus countries all across the world.”
Key Takeaways:
- Simplicity Trumps Complexity: Streamlined investment strategies often outperform overly complex portfolios, saving time and reducing stress.
- Automate Finances: Minimizing hands-on management through automation can lead to more consistent financial growth and peace of mind.
- Be Cautious with Dividend Investing: High-dividend stocks may seem attractive but can carry hidden risks and reduce investment flexibility.
- Choose the Right Financial Advisor: Navigating the financial advisor landscape requires understanding the distinctions between various advisor models and avoiding those with conflicting incentives.
- Nectarine as a Solution: Nectarine offers a transparent, hourly-based advisory service that aligns advisors' interests with clients' financial goals, free from commissions and asset management fees.
- Continuous Learning and Adaptation: Reflecting on and adjusting personal financial habits is essential for ongoing financial health and independence.
For More Information:
- Nectarine Website: hello.nectarine.com
- Personal Finance Club: personalfinanceclub.com
- ChooseFI Resources:
- Podcast Subscription: Subscribe on your preferred podcast platform.
- Newsletter: choosefi.com/subscribe
- Local Groups: choosefi.com/local
- FI 101 Course: choosefi.com/fi101
This episode offers profound insights into the importance of simplicity in financial planning, the pitfalls of common investment strategies, and the critical need for transparent, unbiased financial advice. Jeremy Schneider’s experiences and solutions provide valuable guidance for anyone striving to achieve financial independence.