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ChooseFI | Financial Independence Podcast
514 | The More I Tinker, The Worse it Gets | Jeremy Schneider
01:06:30
In this episode: simplifying your financial life, Jeremy’s journey, dividend versus reinvesting, and automation. This week we are joined by Jeremy Schneider of Personal Finance Club and co-founder of Nectarine, where we will be discussing the...
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- [00:00]
Brad
Hello and welcome to Choose a Five. Today on the show we have a really good one. We have my friend Jeremy Schneider on and he is the founder of Personal Finance Club which has over 600,000 followers on Instagram. And he basically just started this essentially as a passion project in early retirement after he sold his company in 2015. He started Personal Finance Club in 2019. And interestingly, and this I've mentioned a couple times in our newsletter, he's the co founder of Nectarine which actually just launched earlier this year. And it's basically a fiduciary advice only advisors that you can hire hourly. So this is something I've been looking for for years. I get emails all the time. Hey, I don't really want to hire certainly an assets under management financial advisor. I don't really even need a full financial plan. I just have some questions and I want a professional to answer it. And that's what's so cool about Nectarine, is you can just literally hire them for an hour and just pepper them with questions. And it's really simple. And I think simplicity is such a key to not only something like this, but our financial lives as well. And Jeremy and I both have a through line of simplicity in our financial lives. So I think this is going to be a really fun conversation. And with that. Welcome to Choose Fi Jeremy. Welcome to Choose a Vi. I can't believe it's been seven years I've been doing this and we haven't had you on the podcast. I'm really, really happy to rectify that mistake.
- [01:34]
Jeremy Schneider
Hi Brad. Thank you. I know it's such an honor to be here.
- [01:37]
Brad
Well, yeah, I'm really looking forward to it. So let's start with Simplicity because I think both you and I are maybe in our background. So I'm a cpa, you're an engineer. We potentially could have the tendency to maybe overanalyze, over optimize. But I know from having talked to you that simplicity is something you're striving for today. And that's something that I'm striving for today. I'd love to hear the journey because I know it hasn't always been that way. And I mentioned in the intro that you sold your company and you had what most people would consider a sizable windfall at that point. And hey, what do I do with this money? And I think you might have tried to over engineer it at great cost. So that's a very long setup for I'd love to hear the beginning of your story and we'll Tease out a little bit on the simplicity.
- [02:27]
Jeremy Schneider
Yeah, I mean, I think even before I sold my company, I've made all the mistakes of complexity. I think during college E Trade was kind of the Robin Hood of the day. And I would just buy and sell stocks and just do random stuff, just lose money I had no idea I was doing. But then, yeah, I sold my company in 2015 for just over $5 million. My share for taxes was about $2 million. And so I went from making $36,000 a year, which was my take home salary, to having a $2 million windfall in my checking account. And that point I started reading all the books on personal finance and investing and I think I got pretty close to what I consider to be the correct answer. I found the Boglehead mentality and the index funds and ETFs, but even in that world there's the rainy day portfolio and the gone fishing portfolio and there's the Swanson portfolio and there's all these different. You know, I literally had a spreadsheet with like all those different portfolio names at top and like comparing them and the difference percentages between them. And I kind of landed on these like nine ETFs. And I have like a total US stock market ETF, a small cap value, a real estate international, emerging markets, international real estate tips like treasury inflation protected securities, municipal bond fund and commodities like oil and gas and gold and stuff all in an etf. And I was like, this is the clever perfect mix that kind of combines all these great ideas into one. Most of those still sit in my account, by the way. And so largely it was a good idea. But just recently, the more I've been doing this, the more I've learned not only is simplicity a benefit to your time and mindset, I think it also has a positive financial value because the more I mess with stuff, the worse it does in the financial world. That's not actually true. Always in fitness or in marketing or something, but for investing. So I basically went back and compared for all that work I did, those nine trick ETFs, like all this, different percentages, all that stuff. What if I just bought a single target date index fund, which as I know now is essentially the same stuff. It's about the same percentage of stocks versus bonds, it's about the same versus US versus international. Just one portfolio. So what actually happened from the moment I dumped into those 90 is today that 2 million became about 2.9 million, which is really great. I'm up 50, 50% or whatever. If I just dumped it into a single targeted index fund. It would have been about 3.6 million.
- [04:50]
Brad
Oh, wow.
- [04:50]
Jeremy Schneider
Yeah, so there's about 6. I think it was $632,000. That was different. And I think maybe the commodities and international real estate and things like that underperforms. It's not an exact apples to apples comparison in terms of asset class to asset class. But I do think that if I kept being tricky and said, okay, now I'm going to go all in semiconductors, because semiconductors have done really well the last five years. I think that would, you know, it'd be a little bit of chasing past performance. It continue to hurt me. So I do think simplicity is actually positive financial value.
- [05:21]
Brad
Yeah, totally agreed. And it's funny because as you are looking through or enlisting those nine ETFs, it doesn't sound impractical. Right. Like clearly at Choose a Vi, we talk a lot about, about VTI and Total Stock Market index S&P 500. Clearly that's not the only way to invest. Let's be honest here. Right. And by no means I hope nobody ever takes away that that's financial advice, because it's not. But I think from a simplicity sake, there is a great allure to something like that. But for people who are looking to get a little bit of different sectors, what you set up, I mean, it sounds pretty good to the ear. And like you said, I don't think you're even questioning, like, I always go back to Annie Duke's book talking about the concept of resulting. So Thinking in Bets was her book. And resulting, it's easy to look at the result that turned out negative in cases. Obviously it doesn't sound like this turned out horribly negative for you and say, oh, that means the decision was poor. So what I heard in there was, I don't think you necessarily think the decision was a poor one. It just maybe was suboptimal. Am I hearing it wrong or how would you think about that today in terms of the actual decision making process?
- [06:32]
Jeremy Schneider
Yeah, I know what you're saying. I feel like in poker it's easy to say, oh, I called and I lost, but calling was still the right. You didn't know those cards was until you saw them. And so, yeah, I think my nine ETFs was, I try not to have too many regrets. And based on what I knew at the time and what I was reading, it certainly makes sense. And like you said, it's certainly a coherent investment strategy and way more simple than many others. When I look at like a random portfolio of someone who's been using like a fee based financial advisor. They might have 40 mutual funds that all overlap in different ways. And you know, that's complexity just for the sake of confusing the consumer, in my opinion. You know, whereas mine was like, they're all kind of different slices of the pie on purpose. But what I would say is like, you could have all those slices of the pie in one package instead of nine. And I think that I introduced that complexity because I thought I was trying to like, you know, tweak my way to better returns, when in fact the simple version has better returns. And so, you know, in hindsight I'd say is a mistake. Obviously I'd take the extra 600,000, say if I could. But you know, in hindsight it would have been like 50% Nvidia, 50% Dogecoin or whatever. You know, like, we can't live our life like that.
- [07:41]
Brad
Yeah, we certainly do not live our lives like that. So I think you said in there that it doesn't sound like you unwound those positions. So do they still exist to a large degree or what have you done with that and then with new money?
- [07:54]
Jeremy Schneider
So most of them still exist. So the big ones, I bought them just because I know there's some nerds listening who like hearing ticker symbols. I bought them back when all ETFs didn't trade free. I used Fidelity. So I was buying the iShares version. And so ITOT is the total iShares stock market ETF that still exists. I actually kept my small cap ETF IJR largely because I kind of, in addition to simplicity, I also believe in staying the course. And like I said, if I made a really rash decision, say, oh, I was down 600,000, change everything, I think that thrashing would be more likely to hurt me than help me. But a few things I did drop. I dropped the commodities just based on more research and said, okay, commodities don't pay dividends. They're not something that generally go up faster than inflation over long periods of time. So even though they've underperformed recently, there's no reason to really stay the course there. And I also dropped international real estate kind of for the same reason, plus maybe some tax inefficiency there. And otherwise it's largely the same. That's a new money. In my Vanguard account, I actually did open up. This is all I opened a Vanguard account. I literally just opened up a target date index fund and my 401k target date index fund. I actually do have a small cap value fund in my 401k. Just because people seem to think that's cool and it's not going to change my life.
- [09:04]
Brad
Paul Merriman, Investing of the WORLD yeah, exactly.
- [09:06]
Jeremy Schneider
I think, and I think that's a great strategy too. Like, I think the two fund portfolio is really smart. I think that's like a good level of tweaking if someone wants to do more than a target date fundamentally or more than just a total market fund. So yeah, basically the big ones I kept also just for staying the course reasons and for tax reasons because I have now 500,000 plus gains in each of these that would be taxable if I sold today. So I just don't.
- [09:30]
Brad
Yeah, no, that makes sense. And that kind of goes along with what you alluded to. I think you use slightly different words, but you had said this exact quote before we hit start and we, we always miss some amazing stuff before we hit record. You said, the more I tinker, the worse it gets. And there's something just deeply profound about that, especially when it comes to our financial lives. Right. The more I tinker, the worse it gets. And it sounds like you've definitely taken that to heart. I'd love to hear how you would encapsulate that for the audience.
- [09:59]
Jeremy Schneider
I think evolutionarily we're kind of getting like a little bit cerebral here. But you know, I think humans have learned either through evolution or for like nurturing our lives generally, the more you work at something, the better you do. You know, if you are trying to get better at soccer, the more you practice kicking the ball. I have a three year old living with me now and so we practice kicking the ball. And the more he does it, the better he gets. And the more you work on your business, the better it gets. And so investing is kind of very contradictory to everything else in life in that sense. And I think that is really challenging for beginners because beginners say, oh man, I see guys on movies on Wall street frantically waving white pieces of paper over their head and dudes with 27 screens with red and green sharks flying over. They must be really good because they do so much more work than I do. But it just turns out that due to the nature of the efficient market or due to human mentality being bad at investing or whatever it is, the less you do, the better. Another quote along those lines I like is your portfolio is like a bar of soap. The more you touch it, the smaller it gets. You really want to put Your soap there, let it grow on its own. I don't know if my soap is growing. Maybe it's going to grow.
- [11:09]
Brad
I don't know if it extends that far.
- [11:10]
Jeremy Schneider
The metaphor breaks down at some point. But still, despite me living my life talking about this stuff basically every day, I try not to touch my portfolio at all. I'm aware of what the market's doing just because it's curious and I live here, but I'm not making decisions based on that for sure.
- [11:25]
Brad
Yeah, I kind of mostly seriously, but somewhat jokingly say my financial life takes me about 10 minutes a month. And I would say it is mostly serious. It's probably, if I'm honest, it's because I track my net worth by hand, just because I think it's like a more fun exercise every quarter. So that would probably. I would have to round up 10 minutes per month if I'm a hundred percent honest. But that said, it really doesn't take much more than that on a month to month basis. I think I've tried to get that tinkering out where everything just operates right. So how I describe it is I keep an extra bit of money in my checking account because I never want to worry about cash flow of, oh, is the electric bill higher this month or oh, did we, whatever, buy tickets to a concert and the credit card bill is higher. Like I have to move money last minute. I never want to think about that. So even though it's not perfectly optimal, I probably keep 5 to $10,000 extra in my checking account just because, okay, that's stress mitigation. Credit cards on autopay, all the bills are on autopay. Like I really could go away for six months and I think it would just work seamlessly. What does your financial life look like these days? Like, what are you more hands on than that? Like, how do you set up your life?
- [12:37]
Jeremy Schneider
I almost have nothing to say to that because it's exactly what you just said. Like, you know, and this is the longest we've ever talked before. So I'm not copying. I mean, I could listen to you without talking to you, but yeah, my checking account has like, I just basically keep at least 10 grand there, just so. Yeah, same reason I want to even think about overdrawing it. Credit cards are on auto pay. I actually do reconcile my accounts once a month, although I often miss months. And so I kind of catch up two or three months at a time. And so I use Ynab for that. And so I know my net worth and I keep that all separate from the bank records by reconciling there. And yeah, everything's on autopay. I don't do anything. And yeah, in terms of like the work I do, almost none. I guess if I'm trying to think of what I actually do in my financial life in my brokerage account, since I do have ETFs, I turned off dividend auto reinvestment, and then I have to do something with that cash. But I'm kind of partially living off my investments now. And so often that means every three months I spend 90 seconds logging in and transferring into my checking account or buying more of the same etf, just making that choice. But that's kind of the extent of my strategic moves with my money.
- [13:42]
Brad
I like it. I like it. So, okay, talk to us about why you turned off dividend reinvestment.
- [13:48]
Jeremy Schneider
I think it started when I was just living off of my investments and instead of selling shares and worrying about taxable events or which positions to sell, the first place I figured I should go is just from the dividends, which are taxed either way and cash is sitting there. And so that kind of gives me income. And actually I just got my taxes from my account yesterday and I saw $50,000 of dividends last year. And so it's pretty wild to be able to live off dividends. The dream, even though I'm not really a dividend chaser, I don't think we should be buying things because they pay a dividend. That's still like a nice emotional feeling when you, you get cash deposited to your account.
- [14:23]
Brad
Yeah, I, I definitely want to talk about that a little bit about dividend investing. But yeah, just to the audience, like, this is one of those things that when you sign up for a new brokerage account or I guess make an individual investment, I guess it, it would largely depend. But you're met with that question of do you want to reinvest dividends? And of course, again, I hate to sound like a broken record, obviously not financial advice to you specifically, but I think the vast, vast, vast majority of people are clicking that box of automatically reinvest dividends. That's what I personally do because again, I don't need to think about it. And if you get dividends, you're just re buying additional shares. And that's yet another way that compounding can work to your benefit.
- [15:02]
Jeremy Schneider
Yeah, absolutely. Like, in fact, I even have like a little post it note size checklist of investing. And like one of the check boxes is click reinvest dividends. Nice you know, that post note is kind of designed towards people in the wealth building phase of their career, not in the drawdown phase of their career. Which is why I unchecked it because then I wanted to take money out and that's like one of the huge mistakes. I think I actually did an analysis on that once. If you like, don't check that box and do like the most extreme, like extrapolation of 40 years of that. It can cost you like, you know, tens or hundreds of thousands of dollars because you end up with this cash drag in your account where instead of, you know, the stock market kicking off cash and you buying more shares and kind of amplifying the compound growth, you just have cash sitting there earning nothing or next to nothing based on if your holding position is paying a few percent of interest.
- [15:46]
Brad
Yeah, I find that, that keeping cash in there is like another one of these. I think you wrote an article, seven sins of investing, and this was certainly one that jumped off the page to me was I think people often, and I find it specifically in retirement accounts, they don't understand that it's, it's essentially a dual pronged process. Like you're making the contribution to the retirement account and then it's just sitting in there as cash and then you have to actually invest it. I guess there are ways potentially. I guess sometimes you can maybe make the contribution as an investment, but in most cases I've seen it's two steps. And I fear that more people than we would suspect stop at step one. And I mean, the money's just in there, right?
- [16:29]
Jeremy Schneider
I suspect everyone stops. I only suspect everyone does because every account, like my life is looking at like beginning investors like counsel, like show me, and I'm shocked if there aren't doing this. And that's how devastating it is. And that's. Yeah, it's sin number one in my seven sins of investing. I don't know if you want to go through all seven, but sin number one is holding cash in retirement account. Because young investors, just like you said, they put mine to a Roth IRA and they think, I did it. I'm investing in the Roth ira. And you know, that's kind of why I love Robo advisors like Betterment or Wealthfront. If all they do is prevent people from holding cash in retirement account, that alone might justify any fees they charge and might change the lives of people who have been bitten by this misunderstanding of how investing in a retirement account works. And so yeah, it's, I've even seen, I've had people who are paying AUM Financial advisors who send me their portfolio and they're, you know, whatever 28 year old teacher or whatever it is. And the Roth IRA is like 60% cash. I'm like, that raises like almost fraud or like malicious negligence or something when like your one job is like, invest the money.
- [17:34]
Brad
Oh my God, that's crazy. Yeah, I guess, right? You do live and breathe this, right? Like you said. And you see a lot of these individual investors. Like, I feel like anytime there's a point of friction, which is why, like that even just checking that box and reinvesting dividends, like, you think about, hey, somebody who's signing up for an account that they've never done before. And a lot of the things are easy, right? Like you go to Vanguard or you go to Fidelity or Schwab, most of it is simple. But then you're met with this question. It's like, I mean, when people see something that they just don't know the answer to fairly often, that stops the progress right there. So like even us just saying, like, again, not financial advice, but I think 90 plus percent. I can't. I would venture to say 99 plus percent of people should be clicking that box, but it's somewhere on that order. Like, that's just good knowledge. And hopefully that's an action we'll take away from this episode. I think it's just, it's really important. And again, like investing the cash. Another one that I see often and I fear that sometimes, like financial independence. Podcasts and blogs are part of the problem here, which is why I'm like standing on the rooftops and screaming this. I'd love to hear if you see this. But like, in the past we've talked about VTS X, right? So it's almost become like this meme. Like not a negative meme, but a meme in the FI community of like, that's what you invest in. And unfortunately, I see people going to Fidelity or Schwab and trying to invest and they get hit with, I think something like a $75 fee every time they invest, which is crazy.
- [18:58]
Jeremy Schneider
Yeah, I see that less, I think. But still very often. And yeah, you're exactly right. Just because it's. You've heard Vanguard's good, you have Fidelity and. And they don't, you know, they're like, oh, $75. Well, you know, I've heard investing expensive. Like, no. Like, well. But isn't VTS X the best? Like, no, it's the same. It's just a different name for the same exact stock market that every other brokerage has. And so I think the vast majority of your listeners are going to know these, these lessons. But, you know, it's always good to be reminded that, you know, if you know these lessons, make sure to go, like, check on your friends or your cousins, because a lot of people are just, you know, auto buying vts X for $75 a pop. And it's. Yeah, it's heartbreaking.
- [19:40]
Brad
Yeah, it is heartbreaking. There was one in particular, one reader wrote me to say that I think they put in $150, like every other week or thereabouts into their HSA and they were buying VTS X. And that was literally 50% of the money. Just, poof, gone. So that was. That was a brutal one. At this point, like you mentioned earlier, you can pretty much get ETFs for no fee and no commission anywhere you buy it. I mean, within reason, certainly at the major brokerage houses. And like, if you're dead set on buying Vanguard for some reason, that's your thing. Like, VTI is a wonderful option. You could get that of Fidelity for no FEES. And the ITOT, it's funny because I remember circa 10 years ago also when it was, like, revolutionary that ETFs were no commission and Fidelity had that. So I have a significant position in ITOT as well.
- [20:27]
Jeremy Schneider
Yeah, I know. Actually, I wonder if Fidelity is kicking themselves because they struck a deal with, you know, when ETFs are kind of like this new oddity. They're like, we don't want to hassle ourselves with the little, like, ETFs, so iShares BlackRock, you make the ETFs, we'll let them trade for free and then we'll have some sort of kickback. And now they're taking over the world. And another question I get all the time is I post, like, these ETF options. Like, you can buy VTI vxus, so you can buy itot, iefa or the Schwab versions, SCHB or whatever they are. And then people are like, why don't you list the Fidelity ones? I was like, they don't have ETF index funds. They have some crazy, like, actively managed ETFs, but I think just because they made a deal with BlackRock that said they wouldn't. And so I feel like Fidelity is probably kicking themselves on that one, but who knows?
- [21:12]
Brad
Yeah, and that is interesting, right? Because they were ahead of the game and now, yeah, I guess they are behind in. In some ways. I wanted to go back real quick to. Well, two things. Let's start with dividend investing, because I feel like this is one of those, like, religious warfare sometimes in the. In the financial community. I always find anytime you find like a subsection of people who are just like militant about their myopic little view on life, it's like one of those spidey sense moments for me to like, run as far and as fast as I can because they've just like devoted themselves. And, you know, obviously the bitcoin people are like that. Many real estate investors are like that and dividend investors as well. So I'll let you run with any or all of those three that you want to touch on. But I think dividend investing is one of the more interesting because like you said, dividends are wonderful. Nobody's turning down dividends. Nobody's unhappy when dividends. And there is a psychological component to, hey, it isn't so bad to get dividends as opposed to having to sell shares psychologically. But I think where people maybe veer into probably suboptimal financial decisions are only optimizing for the highest dividend yield, potentially.
- [22:20]
Jeremy Schneider
Yeah, I've made that mistake too. I try to mention all my mistakes, but I forget them because there's so many. But there was a time, and I think it was in my. I might have been over my 30, because I'm pretty sure I live in San Diego at this point. And I was like, ooh, dividends. And I was like, okay, I just want the stock with the highest paying dividend. And so I googled for some nonsense article and it sorted them. There's some stock paying a 20% dividend. I was like, that's incredible. It's free, 20% per year. And so I just go buy a bunch of that. I just pour back then. So maybe it was $1,000 or something. I don't. I mean, it wasn't that poor find $1,000. But I didn't have any kind of money. And of course, the reason I was paying a 20% dividend is because that was like the previous dividend it paid. Since then, the stock price had plummeted like 80% or whatever and continued to plummet afterwards. And then the dividend, they cut the dividend because they were going out of business or whatever caused the stock deployment. A stock I'd never heard of. Dividend investors would be like, that guy's an idiot. And they're obviously right. I was an idiot and probably still am. But to get to the correct way of dividend investing. I think a lot of dividend investors go for these big blue chip companies that are paying 3, 4, 5, 6, 7% dividends. We're trying to extract profit from the market. But I think those same people would also probably quote Warren Buffett, and I think that they would see him as an active manager who's making smart moves, like they are. And there's this big contradiction there, which is Warren Buffett's company, Berkshire Hathaway, has never paid a dividend. And I feel like, how do you rectify that? Warren Buffett's never written a book, but actually read all his. They've kind of compiled his letters to investors into a bookish thing, and it's extraordinarily boring, but there's definitely some nuggets in there. And he explains that thought process at some point, and he's basically like, the way dividends work is if I pay out the dividend, the share price drops by that much. Right. And so you're still full either way, but now you're just forced to take money out of our coffers in a way that maybe we didn't think was best. And he's like, I'm pretty good at running Berkshire Hathaway, so I'm going to keep that money in the coffers indefinitely. And we're just going to keep buying more stocks or buying businesses or doing whatever Berkshire Hathaway does. If you want a dividend, here's what you do. Sell 4% of your stock every year and take your cash and go do whatever you want with it. Berkshire Hathaway has been averaging 16% per year, so you're still getting a 12% share price gain. Plus you get your 4% dividend. That's exactly what a dividend does, except you're in control now instead of the company forcing it upon you and creating that taxable event. And I was like, ah, that kind of made the light bulb go off for me, which is dividends are just making it less flexible for the consumer about when they realize those taxes, about how much they take, and just forcing the cash on you, like you said, it has a nice psychological benefit. I like them. Oh, cash. But you have to realize the share price drops by the exact number of pennies or dollars you get. And so you're not getting free money, you're just, you know, pulling it. It's like a transfer, not a income.
- [25:13]
Brad
Yeah. It's interesting when you have these light bulb moments. A long time ago, I. I don't remember precisely. I don't want to say that it was definitely a. A reit, because somebody's going to listen to this and say, oh, you're an idiot. Of course it can't be that. But let's assume it was something like that where they were paying a 10% dividend. And I was thrilled. Again, I, at that point, I thought it was free money, but basically they just took 10% of the cash that they had and just handed it back to us. And what happened in that case? After that, the stock price dropped by the exact same amount. And my total value, even though I got this magical free money dividend, my total value was the exact same to the penny, right? And then, sure, I was able to then do what I wanted with that. I could reinvest it, I could pull it out and bring it back to my bank account. But like you said, you lose flexibility, right? Because in that case, it's a taxable event. It's a forced taxable event. And I think those of us in the financial independence community should be avoiding forced taxable events when we can, because we want to do the fun stuff, right? Like we want to do Roth IRA conversion ladders or manage our income up or down for ACA subsidies and all these other kind of fun, complex things. And to have bought an investment that locks me into, oh, man, that's like a guaranteed taxable event. It just, it doesn't make any sense. And then also, Mr. Buffett's the perfect example. Like, I would rather him. He could do so many things with that money, right? He could invest in existing operations. He could buy new companies, which they do all the time. He can buy new shares of Apple or whomever that Todd and Ted decide are make the most sense. You can pay down debt, if they have any. You can repurchase shares, which he's done when he feels that the share value is less than the book value of the company. Last case is, hey, guys, essentially we throw up our hands, we give up, and we're going to issue it back as a dividend. I look at it as like, essentially, hey, we're giving up. We can't do anything better with this. We'll give it back to you.
- [27:09]
Jeremy Schneider
Yeah. And I think for some companies, like, makes sense, like AT&T is like, we kind of have hit a level where we're not going to grow much more. We're not that innovative. We, you know, we're just a cash machine at this point. And so here's your cash, because we're not Warren Buffett. And so that makes sense but, you know, being a dividend investor and seeking out those companies, you know, it's like investing only in companies at that point in their company life cycle where they're kind of like dinosaurs dying and you're missing out on the next thing, you know, you're missing out. You know, if you're a dividend investor, you didn't hold Nvidia. You know, I didn't either as an individual stock, but as an index, fine, I certainly did. So, yeah, that's why I don't chase dividends. It's just a different way of speculation that doesn't serve the investor.
- [27:51]
Brad
Yep, Totally agreed. Thanks for listening to Choose a V and for all your support of our mission here. The absolute best way to support Choose a VI is when you sign up for your next rewards credit card to use our cards page at choose a buy.com cards. I keep this page constantly updated, so it should always be the top resource for you. Thanks for being part of our community and for your support. I wanted to go back to that moment that essentially, I guess, you sold your business for 5 million. You said after taxes and after whatever, after everything, $2 million essentially hits your bank account. Immediately prior to that, you said you were making $36,000. And that has to be a wild moment when you log into whatever bank and you see multiple seven figures sitting there. Like, I don't even know how to say this other than like, take me back to that moment. Like, what does that feel like to go from, we've got something. We think we can build it. I'm not taking very much money out of this company. And then this hits and my life is forever changed.
- [28:51]
Jeremy Schneider
Yeah, it was exciting. It was a fun few months, for sure, because building the company was a grind. And it's kind of like. I don't know. I was about to say winning the super bowl, and I guess I will because I'm already committed. But what I did was not winning the Super Bowl. But I think there's a similarity in that when you see a player win the super bowl, you're seeing them at their best moment. You're not seeing the grind. There's no cameras in the weight rooms. There's no cameras in the early morning workouts. There's no cameras in the physical therapy sessions. There's so much work that goes in, and there's no guarantee of winning a Super bowl either. And so in my case, I was making $36,000 a year. That's why I was pulling out of the company. We had seven people on the team, including me. And so I was making payroll, but just working every day, long hours. I wasn't like pulling 100 hour weeks. I was still trying to live my life and stuff like that. But what was definitely true is I had no idea if there's going to be an exit at all. I just was trying to live my life and had this barely profitable company. I was trying to grow and grow bootstrapped. So the day that the acquiring company showed interest and we shook hands on the deal, and then eventually the wire came through with the money, it was all kind of validation of that 10 years of work that was not being filmed. And it was very surreal. I actually filmed that moment a week before the close. I did the first ever wire transfer of my life where I transferred the cash from my company to my bank account. And actually I own 70% company, my mom owned 30%. And so we basically split the cash in the bank account 70, 30, because our sale of company was no cash, no debt. So they just buy the entity or whatever. And so I saw how a wire transfer worked. And apparently with Fidelity, when you get a wire, they email you and say, hey, you got a wire. I was like, oh, that's a good email. And so then the day that the close was going to happen, and this was like far before I had any, I didn't even think I had an Instagram account. I wasn't a social media guy, I wasn't a YouTuber or anything like that. I was like, I should film this. I just filmed this thing happening. And so I opened up Fidelity and had the website just sitting there and like every, like, you know, 10 minutes, I'd click refresh or something because I knew in the next hour that this wire was supposed to come through. And then sure enough, the email came through and said, you got a wire. And so I pulled out my phone and started recording my screen and kind of narrated. I was like, it's April 1, 2015. And I clicked refresh. And then sure enough, like, it went from $100,000, which was like all the cash from the business, to $2.1 million just in a refresh. And so I was like, you know, but like, as silly and wild as it was for that moment, it still took honestly years for it to sink in. How much money that really was, like, how long that would last. You know, am I wealthy now? Am I not wealthy? You know, it's certainly like, it's not a billion. You know, you can waste $2 million if you wanted to. So I Still was kind of getting used to it for a long time.
- [31:28]
Brad
Yeah, well, right. I mean, especially living in San Diego, you could very easily buy a modest middle class home. Right. And a significant portion of it, poof. If you just decided, hey, I'm going to buy a house in cash, like, I'm curious. So it took years for it to sink in. That's an interesting way of putting it. And it actually speaks to your mindset, which is great because I think frankly, a lot of people at that point would go out and buy something fancy or multiple fancy things, et cetera. But it sounds like you took a much more measured approach. Like, and I have to assume there was a real learning process in those years. Did you have a financial background in 2015 when you sold the company, or did that only come after.
- [32:09]
Jeremy Schneider
I think a lot of it goes back to childhood. I think we all kind of learn a lot of our money lessons in childhood. And some people learn whoever drives the nicest car is the most wealthy, which is not true. I've learned as an adult. Whoever, usually whoever drives nicest car is borrowing money to buy that car and can't even afford it and they have to go to a job they hate. And my family was extremely frugal from elementary school. I remember learning lessons. This is a Choose Fi exclusive. I don't think I've ever told this story, but I remember in elementary school, fifth grade, my parents said, like, you can buy new shoes, but your limit is. I think it was like $30 or something like that. And like Air Jordans had just come out. This was like, I was probably 88 or something. So it's like kind of like peak early Air Jordan era. And like Air jordans were like $80. Like now I'm close. But this is like one pair of like pink discount, like pink and green neon discount bin super ugly shoes. They weren't even Jordans. They're just Nike Air.
- [33:04]
Brad
Okay?
- [33:04]
Jeremy Schneider
And they're like 30 bucks or whatever. So, like, I was like, all right, I'm getting those. I got them at warm school. And then everyone made fun of me because they're so ugly. I was like, oh, but I got Nike Airs. I thought that's what they're supposed to. And so, but I mean, that is like an example of how I feel. Like all these decisions that I made throughout childhood or that I was like forced upon me, whatever were about like limiting money and then enter into my 20s. Up until the age of when I was 34 and I sold my company, I was living on $36,000 a year. So I was like this extreme frugality childhood, typical broke college kid experience. And then like basically broke college kid extended until I sold my company and 34 years old, boom, $2 million in the bank. I don't know, like, it's just not in my personality or it's in my, you know, fiber from growing up that I just was still continued for reality. Even just recently. Like in the last few months, I was flossing with this little tiny piece of floss that was like 8 inches long and I kept slipping on my fingers. And I hate flossing so much because of this, because the floss is so short. And literally, as a 43 year old man, I stopped for a second and thought, why is this floss so short? And the answer was, so I don't waste floss. I was like, why am I worried about wasting floss? Is it like a environmental thing? Is it. A floss is scarce in the world. And the answer that I gave was financial reasons like, I don't want to waste money. And I'm like, wait a minute, I can afford infinite floss at this point. I can floss with like yards and yards of floss wrapped around my whole body ten times a day. And it will never even be like rounding error in my bank account. And so like those types of habits still kind of exist.
- [34:34]
Brad
Yeah, it's tough to shake those things. It really is. Especially if it's ingrained in you from childhood. But I think as silly as obviously that's a cute little example, right? And like, I'm sure you describe it as kind of as a silly example, but I think it's deeper than that because I think it's having the awareness, I think that's what we all have to strive for is like find these areas of your life, whatever they may be, where you're just actually unaware of points of friction or things that you're doing that it's just some script that you've been running in your head, maybe in your case for 35 plus years, right? Since you were a little kid and really take a hard look at it, right? And scrutinize like, is this serving me anymore? Where did this come from? Where did this little 8 inches of what, like, flossing is really good for you, right? And like, maybe if you took a foot and a half piece of floss, you might floss every night, but if you're going to do this stupid 8 inches thing, like, and you're going to be miserable, then it's probably a once a week endeavor. Right. So like, as silly as that sounds, I think it probably opened your aperture for okay, where are these other points of friction? And. And maybe where else am I being pennywise pound foolish? And I think as you, I mean, you and I are, it sounds like both right around the same age and we're not getting any younger. Even though I'm sure we both think of ourselves as, you know, pretty young and fit. Like, let's be fair here, the numbers don't lie. And you know, there are different stages of life and I mean, I think we're both in the financial position where. All right, it's time to rethink some of these things that really served us well in parts of our lives and make changes.
- [36:07]
Jeremy Schneider
Yeah, no, it's an interesting transition because like my fiber is live below your means as much as possible. Every penny wasted is a sin essentially for the long term vision. But like you said, I'm turning 44 this year. When's the long term vision start? But just like you said, it's hard to be reflective. It's like when I'm flying, should I be buying first class tickets? When I'm going to the restaurant, should I be taking a limo? I don't know. I think some of the answers are yes, some of them are no. I think you have to decide based on your financial position how big of an impact is going to be and is it going to actually make you happier. I've like bought a first class ticket a couple of times and I just don't like it for some reason. It feels like too fancy for me. I just don't like. I don't know, just don't like the vibe. I don't know why, but I'm, I'm six four and so like the legrooms are nice, but for me, where I land on that is I just buy the exit row and then it's like, I don't need any wider. It's even longer than first class and it's like 80 bucks instead of 600 bucks more. And that's my solution.
- [37:10]
Brad
Well, that's cool though. The answer doesn't always have to be okay just because I have the money, I can spend it and I should spend it. I think people that are listening to the show are. Many of us are kind of valueless. Right. Like, what do I value? And you're trying to find a sweet spot. You're still trying to optimize to some degree, but I think it allows you a little more latitude. Right. And for me, it's. It is hard. Like, I don't want anybody to walk away from this saying, like, this is easy, or, oh, just because you have a couple million dollars in the bank that you can just start spending freely. Because I think at heart, we're still those frugal people that you and I. I mean, you and I have a lot of similarities, like how we grew up and in our 20s and 30s, like, we're frugal people. And it doesn't just change on a dime. But I had two instances this week that actually show both where I've grown and where I still struggle. So went out to lunch with a couple neighbors, just a local place, and I just. I ordered this steak. It's like a steak dinner, in essence, and for random lunch. And, you know, it wasn't expensive. It was like 20 bucks, right? But I didn't even think twice about it. But I have to tell you, Brad, circa 20 years ago, would have never even looked at that because, oh, you don't spend $20 on lunch when there are 11 sandwiches. You just don't. So I would have just mentally thrown that part of the menu out. So I know it's a little thing, but again, the little things are the big things, right? And it's like, that was a nice step for me, and the lunch was fantastic. And every single time I go there, I order the steak. And then the other thing was talking about flights. I'm going to the 5 Freedom Retreat event in Bali, Indonesia, in early November, and that is a long way away. So, I mean, pretty much from anywhere in the U.S. but East coast, you're looking at a significant 30 plus hours of travel. I'm like, you know, I have all these rewards points that I've earned over years and years and years from all my credit cards. And even though I want to get the optimal thing, I want to get the. The round trip for 80,000 points in economy or a hundred, whatever it is. I mean, Jeremy, I bought two of the best business class rewards tickets I've ever gotten, and they weren't even, like, saver. The one wasn't even a saver award. I spent like 140,000 points on a Singapore Airlines business class. It's going to be amazing. It's like one of the longest flights in the world from Singapore to JFK in New York. But I got to tell you, I hemmed and hawed about this for weeks. I kid you not. Weeks I must have logged in if Singapore has, like, my IP address or, like, you know, my Login history. They would see a lunatic signing in probably a hundred times. And I finally. I'm just like, this is crazy. This makes sense for you. It's not even cash. It was just points. But, you know, you still struggle. So it's. I don't want anybody to walk away thinking this is easy, right? This is something we're both working on.
- [39:55]
Jeremy Schneider
Yeah. No, it's weird how I think we're both pretty, like, logical, pragmatic people, but there's just, like, feelings involved. You're like, ooh, that's a lot of my points. You know, it's like these. These, like, fictitious and like, you know, I don't know exactly what your bang out is, but I feel like I could probably just delete that amount of money from one of your investment accounts and you wouldn't notice. Right?
- [40:14]
Brad
Yeah.
- [40:14]
Jeremy Schneider
And so it's not like this is empirically, like a really big issue. It's just an emotional issue. And I'm the same way. Like, I've had the exact same experience where, like, for so many decades of my life, you just look at the bottom 10% of items on the menu and like, anything above, like, don't even include. And still today I do. I'm like, maybe because numbers are easy to compare. I'm like, okay, what are all the prices here? But I am getting better. Just like you. I'm getting better. I'm like, all right, food's important and it's not that expensive in terms of, like, other things. I'm going to buy whatever I want.
- [40:44]
Brad
All right, Jeremy. So I wanted to kind of finish up the episode here with something really, really important. I know you've dove into this, like, really significantly. So the kind of wild and wacky world of financial advisors and whatever terms and definitions that takes on, obviously you did co found a company, Nectarine. And I think personally and I have no financial relationship with Nectarine. Let's be a hundred percent clear. We're not an affiliate. But from what I've seen and the people that I've sent, I've. I've mentioned you guys multiple times now in the newsletter, and I've gotten a lot of positive feedback. It's just. It's something that needed to exist in the world. And I'm just, frankly, just really glad that you made it. So let's take a couple steps back and just talk about again, this wild and wacky world of financial advisors, because I think you have some interesting takeaways.
- [41:31]
Jeremy Schneider
Yeah, thank you, first of all, for the kind words and also for the last five years I've been getting the same question as you, which is like, how do I find a good financial advisor? And it's like sheepishly was an answer that I didn't have. I was like, I don't know, it's a messy world. If you and I go sit together and talk to a financial advisor for a couple hours and I review your portfolio, I can probably give you a pretty good sense. But it's hard to just give an answer. I think there's basically two main reasons why the world of financial advice is so messy. One is the labels. And there's labels like financial advisor, financial planner, wealth manager, broker, cfp, cfa, fee only, flat fee, fee based advice only, fiduciary. And there's just like this stew of these words floating around. And I actually surveyed my audience and I asked them like, what do you think this thing is called? And nobody knows what anything's called. No one knows what anything means. People think certain things mean other things. Some people think CFP is like the crown standard. And CFP to its credit is like the most well known designation for financial advisors. But it's still just a series of steps that a private corporation has instilled. And so there's great people who are CFPs. There are great people who are not CFPs. There are not so great people who are CFPs. It's like it correlates, but certainly isn't a catch all or whatever. Fiduciary doesn't save any people. I think a lot of times, especially in this world, like in the world of financial independence, people think, okay, you got to find a fiduciary. The problem with that term is, in my experience, if you ask any person, if you take a random survey of people in the financial services industry, 100% will answer yes to the question, are you a fiduciary? 100% answer, yes. They all say they are because who's checking and who are you a fiduciary to? And what does it mean? And even if they're not, or even if they are a fiduciary, if they're selling a product, they might say, in my fiduciary opinion, I'm legally obligated to operate in your best interest. So in my opinion, you should be buying my product. Right? Like that's not a very fiduciary business model. Right?
- [43:21]
Brad
Yeah.
- [43:21]
Jeremy Schneider
And so like this problem with the labels is extremely confusing. There's no label that designates good versus bad, and a lot of them are misleading. Fee based versus fee Only they kind of mean opposite things and it's unclear which is which. And so part of the reasons that like that's problem number is the labels and problem number two is the business models and 99%, actually it's more like 99.9% of financial advisors don't get paid for giving financial advice. About 90% are commissioned salespeople, either selling insurance or investment products, which is like again the anti fiduciary business model. They get paid for selling stuff. Of the remaining 10%, that's what we call fee only where they don't get paid commission. But then almost all of them want to do the assets under management model where they take custody of all your assets, manage them for you or invest them for you and then just take a percent fee over the years, which to that model's credit is better than the commission based models, but still has some big problems like they're compounding annual fees and also creates some weird incentives. Like their incentive is to not lose you as a client, which might change how they're investing because they're like, ooh, I know every market drop, I lose 10% of my clients. So if I just invest much more conservatively, I'm not going to lose clients when it's really hurting the individual investors long term prospects. Right. And those assets under management advisors generally have really high minimums. Right. So if you don't have a quarter of a million or half a million to invest, which people who don't are the people who often need the help, then you know, they won't even work with you. Right. And so the remaining 0.1% is what's called advice only. These are advisors who don't sell any products, don't earn any commissions, don't manage your money simply per project or per hour. Give you advice and they can sit next to you, they can look at, instead of just investing your money like a um, manager does, they can give you any sort of advice. They can talk about budgeting or insurance review or savings or estate planning or taxes or investing or whatever it is without this little, you know, incentive in their ear, which is like by the way, you only get paid if you sell insurance or whatever it is.
- [45:25]
Brad
Yeah, it's astonishing how incentives just rule the world in every aspect of life. It's like one of those like just general rules that I've found. Like you always have to look for the incentives and it's not even to argue that like the people are bad. Like I, I think it would be ridiculous to say like oh, 90 plus percent of advisors are bad people. No, they're not bad people. Most of them probably go to work thinking they're doing a real good service for their clients. I suspect really almost all of them. But the incentives of that industry are such that, like you said, it doesn't align with what's actually best for the client, regardless of whether they use that term fiduciary or not. And yeah, it's, you know, we've always tried to give like shorthand advice of like, okay, here's what you would give you a higher likelihood of success. Right? So like you ask them, like, are they fiduciary? But to your point, they can answer that essentially however they want. And they can also, like, I think as I understand it, there's multiple different areas that they could be fiduciary or not. Like, you could kind of give an oh yes for this, but they might be excluding the other 75 areas where they're not. Right?
- [46:34]
Jeremy Schneider
Yeah, I mean, I think really nerds in this area will point out that some people are both brokers which get paid commission for selling stuff, and investment advisors who don't. And they literally hold both designations at once. And so they can say, yes, I'm a fiduciary, but why don't you buy this from me also? But I mean, I think none of that matters because there's even legal scholars who are like, well, maybe brokers are fiduciaries too. But to a consumer it doesn't matter because what matters is the incentives, like you said. Actually, one of my favorite quotes on this is from Upton Sinclair, who's American novelist. I don't know who it is, I just googled it. But he says it is difficult to get a man to understand something when his salary depends on his not understanding it. And I've never seen that more true than with these insurance salesmen who have the title of financial advisor. Because financial advisor is not a governed license term. It's just words people put on a business card and they think you should be buying life insurance. And I think most 20 somethings when they go seek out a financial advisor for the first time and they sit down and they get financial advice, they're actually sitting across from an insurance salesman who listens to their questions about taxes and budgeting and debt and. And then they always comes back to, you should buy life insurance. You know, and it's just like so wild. And like, you know, we're on the Choose Fi podcast and we're like, people listening to this are Choose Fi Listeners, but like in the real world out there, who. People who aren't kind of like have found their way here yet. That's what's going on. Right. And so that's what's so scary about this space, which is they're just getting pushed. Life insurance products, which are horrific. You know, we're kind of like waxing poetic about like, ooh, like a 0.1% fee here, there. You know, life insurance is like 90% of your portfolio gets eviscerated by fees and cost of insurance. And so it's horrific to young people who get steered awry like that.
- [48:14]
Brad
Yeah, agreed. I can still vividly remember when we moved down to Richmond. So this is probably circa 2006. So, you know, I was still pretty young at that point. I was in my 20s. And like, we got reached out to. I forget, I think we reached out to them about term life insurance. So I knew enough to get term life insurance then. But man, this guy, and he was probably our age too, it was like, you know, his mid-20s and he went so hard on. I think it was universal variable life insurance, something like that. And you could tell, like, you know, I'm reasonably intelligent and savvy guy in the scheme of things. And like I could tell that he just went to a seminar on it. Like he was essentially just pirating what he had learned. And I kept just peppering him with questions and like he just couldn't answer any of them. But man, the fees, Jeremy, the fees are crazy, right?
- [49:01]
Jeremy Schneider
So when I scroll through TikTok when I'm wasting my time, I sort of like half the TikToks I see are by these insurance salesmen who are just, in my opinion, straight up lying. Just lying. They say, you can't lose money, be your own bank, tax free growth. Like all these like buzzwords that they use to make it sound like this incredible deal. And again, to young people who don't know, like, the world of investing in finance can be infinitely confusing. They're like, oh, look at all those good things. And so I actually bought one of these policies. I was like, I'm curious. I'm just go click on this guy's random TikTok dude's profile. Click buy. I got a 90 minute sales pitch. I didn't tell him that I'm a personal finance influencer. I just told him, honestly, I'm single, I have no kids, I have no earthly need for life insurance because I have a high net worth. And sure enough, he sold me this policy. I got the policy in the mail, it's 91 pages. I read every single page of the policy, and it was outrageous. The fees, I think of every dollar I put into the policy, like, 56 cents, immediately we're lost to fees.
- [49:57]
Brad
56 cents?
- [49:58]
Jeremy Schneider
Yeah, 56 cents. And it got worse over time because there was a monthly statement fee. There is the premium fee, which is just like the load that we would call insurance or the investing world. There's like the per unit fee, which is like, the higher your death benefit, the more you have to pay. And they always, they use this term, max funded or properly structured, meaning that you want to minimize your death benefit. But the reason they say that is because the higher your death benefit, the more on these fees you pay. But the law requires that there has to be a high enough death benefit. So you're basically, you can't put an investment into this, like, life insurance world without having there be a death benefit. So you're required to pay these fees, right? Get through all the fees. Then there's the cost of insurance, which increases as you age. And plus they're being sold as investments, but then they're actually insurance policies that if you miss payments, you risk the whole thing lapsing. Actually just heard from a guy named Brian who the exact same thing happened to him. He walked into a financial advisor's office. The financial advisor said, hey, you could invest in a Roth IRA and these actively managed mutual funds, which isn't what we do, but isn't terrible, or you can invest in this whole life insurance policy. And then Brian, who is 20 something, no kids, he asked the financial advisor, who, by the way, is a cfp, he asked the financial advisor, which one should I invest in? And I want to actually quote this because Brian wrote me this email. And he said, according to Brian, the financial advisor smiled confidently, nodded slowly as he tapped the sheet with the whole life insurance numbers, almost like a. Like a mob boss being like, this is where you want to be. It's like, so gross, right? And so then he put $5,000 a year into this, instead of a Roth IRA, into this whole life insurance policy for 13 years. And he literally said, the reason I know from it is because I made a post that said, if you're a financial advisor is recommending you invest in life insurance, you don't have a financial advisor. You have an insurance salesman. And the word insurance salesman is really big. And so when he saw that big insurance salesman, he's like, it clicked for him. And then he started doing the math and kind of like saw the light or whatever. So he paid $64,000 into this policy over the course of 13 years. Again, guaranteed returns. Can't lose money. Be your own bank, tax free withdrawals, yada yada yada.
- [52:04]
Brad
This is all the nonsense they tell you, right?
- [52:05]
Jeremy Schneider
This is all nonsense they tell you. What do you think over 13 years, you know, how investments work, how they grow. And I think the years were, especially.
- [52:12]
Brad
If it was the last 13 years, they would be.
- [52:14]
Jeremy Schneider
It wasn't, I think it ended in 20, 20 or something. So it might have been 2007 to 2020.
- [52:18]
Brad
I mean, expect it to be easily double that minimum. Yeah, right.
- [52:21]
Jeremy Schneider
It was 61,485.
- [52:24]
Brad
Oh no.
- [52:25]
Jeremy Schneider
So for, for 13 years of this 20 something into 30 something's early investing career, instead of doubling or tripling his investments, he lost money. It's just catastrophic. Right? So yeah, this is why I get amped about the world of financial advisors. Because this is what's out there and this is what's happening.
- [52:42]
Brad
That is unbelievable. And the real frustrating thing that I find is like most people who go to financial advisors, they're just, they're so well meaning, like they, they think they're at a point where they're stable enough. I want to invest. I've heard it's complex. Of course I need somebody to help me, right? And like you find the local financial advisor or somebody that you're friends with or your colleague or coworker, whatever gives you, hey, here's the person I use. And like you think you're doing right.
- [53:10]
Jeremy Schneider
Yeah.
- [53:10]
Brad
And then, then they do this, right? And it's like again, going back to our thought of like from an hour ago of like simplicity. And I hate that I have to keep caveating this, but like, again, it's not financial advice. But like for me, like it would be really easy to just say get a term life insurance policy. I can't. For 99% of people, I can't envision another option other than term life insurance and basically invest all your money in total stock market index fund or S&P 500. If you just did that, you're going to outperform minimum 95, probably 99 plus percent of people. And like you don't have to potentially lose like you said, this person, I mean the opportunity cost of that was more than 50% of his net worth in that case. And he was doing right, he was saving the 5,000 bucks. And this mob boss of a CFP just gave him advice that, you know, he was incentivized to Give. Right. Like that's what it comes down to.
- [54:02]
Jeremy Schneider
Totally. And even the Roth IRA version, the guy was making commission from that, but the commission on the insurance was bigger. Right. And so like the fiduciary, who's legally, I'm making air quotes saying, no, we don't use the video on this, but I'm making the fiduciary in air quotes who's legally obligated in air quotes to operate in the best interest of the consumer, suddenly just really thinks that the life insurance policy is better. It's so bogus. Right. And you're right. Like if Brian had just bought like, you know, he didn't need life insurance at all, but if he wanted to lock in a rate when he was younger or whatever, 50 bucks a month, whatever it is, he could have easily dumped it all into an s and P500. Yeah. It cost him. He ended up with, yeah, $61,000. If you just put it into, like you said, a total stock market index fund, he'd have about $148,000. So that cost him $87,000 up until that point. And compounding over time because he eventually caught it, luckily.
- [54:48]
Brad
Geez. Yeah, that is, that is crazy. And you know, one of my kind of like hot take financial things is. And I don't know that I've ever said this on the podcast before, but like in my heart of hearts, I have a problem with the term fiduciary because for obviously all of the things that we're talking about, but just I think of the world and I'm not like some like semi pro poker player or anything, so don't get me wrong. But like, I think about the world in terms of like poker and probabilistic outcomes. So like, what gives me the highest likelihood of success? And I think if we're honest with ourselves, if you find a fiduciary financial advisor and they're not telling you to go in low cost ETFs or index funds, I don't think they're really being a fiduciary. Again, in the vast majority of cases, there's always edge cases. Right? Like that's the way the world works. There are edge cases to everything. But I mean, goodness, if they're putting you in, even if they're giving you good advice, but then they're putting you in a mutual fund with a 1% expense ratio, I mean, we've both run the numbers on how much that kills.
- [55:45]
Jeremy Schneider
How can that be a fiduciary? That's why that word is so wild, because we fling it around as though it's some sort of guarantee that you'll get good advice. And it's not. And that's why I think the business model is what matters. And that's why that 99.9% so scary, because 99.9% are either selling a product or doing the assets under management. And so I think the future is advice only. And it's such a simple model. It's like paying for the advice. But if you pay someone who advice only and they say, hey, I'm not collecting a percent of your assets. I'm not getting a commission on the back end. I think you should go in the Fidelity Contra fund because it has outperformed index funds over the last 20 years. I don't know. I don't actually agree with that. I think that going forward it's probably not likely to outperform indexes, but at least I think they're operating as a fiduciary in the true sense. I think they're saying what they think is right, regardless of their income. And as it turns out, if you sit down with advice on the financial advisors, they don't recommend, you know, they don't recommend actively matched funds. They don't recommend day trade because they, you know, once the smoke clears of those commissions hanging over their head, they've done the math like you and me, because it's not that difficult math, and they can point you in the right direction.
- [56:51]
Brad
Yeah, indeed. And to the audience and to your great credit, you said when before we started, like, hey, I just want to provide value here. I don't really even need to talk about nectarine, but I think it's important that we do because I think you've created something good and important and necessary for our world. And let's talk just real quick. So obviously business models always change and pricing changes, but as the time we're recording this, which, you know, the end of May in 2024, it's $150 an hour, which is really pretty remarkable. Like, I am blown away that you can offer it for that price per hour. And I still suspect there are people who look at that. And again, it's. I've used this phrase a couple of times, Pennywise, pound foolish, right? Like, I suspect there are people who are like, oh, I 150 an hour. I can't pay that. But let's be clear, as we've talked about for the last X number of minutes, like, if you're going to another type of advisor who charges Like a, um, I find assets under management is the most insidious because Jeremy, you know this. You're not cutting the check, right?
- [57:51]
Jeremy Schneider
And like you're never cutting the check. Except for advice only, right? When you ask these advisors, how do you get paid? That's like my favorite question. I ask them, how do you get paid? They say, oh, it's free or my company pays me or we can make money. When you make money like it's like so gross the way they talk about. And you know, most AUM advisors are better in my opinion, better than the commission based advisors. They'll say, hey, it's a percent, you know, it goes up and out yours. So at least they're more clear about. But yeah, you're never cutting the check. You just think you're investing the money and then it all is part of the magical world of investing and comes out in the wash.
- [58:21]
Brad
Right? The complex magical world. Right? Because that's what you're led to believe. It doesn't have to be complex, which is great. So yeah, talk me through. So you guys, I know you, I guess you like kind of soft launched at the end of 2023 and really went live in 2024. What's been the feedback? Has it been more robust than you anticipated? Like the, in terms of the actual desire for the product? Like where are you? Like what's the constraint ultimately? And for me especially we're both entrepreneurs, right? Like is it trying to find clients or is it. Which is equally big problem is, hey, do we just not have enough financial advisors? Because if you have too much demand that can kill a business, you know, in, in equal order too. I'm curious just like behind the scenes.
- [59:05]
Jeremy Schneider
Yeah. Well, first, what Nectarine is really is, it's a marketplace. We're not trying to say like we're the financial advisors that we know what's right. We want to just provide a way to find and compare financial advisors who are operating under this business model without the strings attached. And so every single advisor has their own reviews. You can choose which advisor you go with. You can stick with the same one if you want. You can change between them. And I think starting marketplace businesses is challenging because if we got like a thousand advisors on day one, you know, we'd turn on the light switch and like they all speak and they're doing nothing. And if we had one advisor and I Posted to my 600,000 followers on Instagram, then that'd be a very busy advisor. And we work, you know, during our sloth launch we Were kind of doing that math. We're like, you know, based on conversion rates we've seen in the past when we introduce, you know, we've only ever sold one everything before. But like, you know, if we had five advisors we could potentially book them up for a year or something, which would be bad. And so right when we launched we did have kind of a supply side problem which is we had more bookings than we could do. And now I'd say we have more of like a demand side problem now, which is some advisors are still booked out three months, but some advisors wish they had more clients. We might introduce variable pricing at some point to let advisors price themselves to where they need to be to get the clients that they want. But yeah, right now we've set the price at 150 and we've recently crossed over a thousand individual engagements. And so we've had I think more than 1100 meetings so far. And yeah, there's no upsell, there's no additional product. It's not a sales pitch, it's not a lead gen thing. So our advisors, if they said, hey, meet me off the Nectarine platform and I'll manage your assets, then we would kick them off the platform. And they know that and they generally all really like that. To something you said earlier. Sometimes when I speak about financial advice, I think some financial advisors hear me and they, they are insulted and they say we're not bad people, but I really don't think they're bad. You know, some insurance salesmen excluded, but most of them I think are really, really good people. And I think that they're thirsting for this business model just the same. Like they just need a platform in a where they can make a living doing it and have the demand to do it. And so that's kind of what we're trying to do is push people to this advice only model so that the good advisors can like make a great living doing this. And then the clients, the consumers, the individual investors can, you know, have a more aligned business model with their interests.
- [61:18]
Brad
Right. I know you said there are no upsells, but let's say somebody wanted like a comprehensive financial plan, but can they just literally pay for X number of hours or does it, does it really not work that way? Is it mostly just for like very specific questions?
- [61:33]
Jeremy Schneider
So as of right now, the entrepreneur in me, the answer is we're trying to be very specific. To start, the way it works is you go to the site, you choose your advisor, you choose their time, you click buy and Then you have an hour, you have a zoom meeting, you share your screen. You could submit an intake form and even documents ahead of time to have them reviewed, you know, within reason. And then you get a kind of a wrap up email after the hour. And so that's kind of the entire engagement. To do a financial plan, like that would be a little bit weird. You know, it's someone to book like eight of those sessions or whatever it would take. And so we're kind of in the middle of designing a second option. So you can do the hour, which is like a standalone thing, copy your questions, or you can kind of do more of a submit all my documents, like insurance statements, Social Security, whatever it is, and have them kind of present a plan. And that's probably going to come out. So I guess we're a little bit hesitant to release that because I don't want that to be an upsell. But I do think that our advisors all love doing the hours because they know that's what a lot of, maybe even most people need. But then for like the small percent who are like, okay, I really want to take a deep dive and figure out when can I retire or what moves should I be making here? They'll have an option, but as of today, they just, they just don't.
- [62:39]
Brad
Nice. Yeah, no, that certainly makes sense. And I'm curious about like the platform itself and like how you, I guess, find and vet the advisors. So this is something behind the scenes at Choose a Pie. Like, Jonathan always wanted us to do like some kind of marketplace for fi accountants because we've always had people just ask like, oh, where can we find? And like my hesitation was always like, oh, that just sounds like such a headache to have to like vet people, find people. Like, and then we're like tacitly saying, like, we support this person. That just my kind of conservative financial brain was always just like, oh, that's a bridge too far for me. But obviously you've launched this. You have financial advisors. Like, how do you think about, like, is it just a marketplace where maybe you do some vetting on the front side, but it ultimately washes out in the reviews? Like, talk me through how you think about that.
- [63:32]
Jeremy Schneider
That's a really great question. And we have discussed that internally and we've also kind of made arguments on both sides. Like maybe one argument is, hey, get everyone on there and then let the market decide. If someone's getting bad reviews, then they won't book meetings. And we kind of landed on don't do it that way. Especially at the beginning, because it's maybe a little bit too slow and individual consumers maybe are putting up too much risk to like, be our guinea pigs to vet the financial advisors. And so basically, we are individually vetting every financial advisor and we currently are rejecting 4 out of 5. So only about 20% of the advisors who have applied to be on the platform are, you know, we have no designation requirement. Most happen to be CFPs, but a few aren't. A few have CFAs. If you have other designations, they're all, you know, licensed, registered, fiduciary, whatever that means in context, based on the rest of the show. So don't clip that out of context. They are all licensed, registered. And basically 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. And so every advisor on, we have 20 right now to say it in numbers. We have 20 advisors on the platform. Every advisor I would send my mom to, happily, and I think she would get great advice. And there's still the reviews to check to see how they're doing. And with the consumer's permission, we record the video of the meeting and so we can go back and look and see what, how the advisors are doing, at least spot check. And so there's some mechanisms to make sure that, like, really good financial planning is happening in these meetings. But yeah, that's, that's how we then make sure we've got great advisors and keep great advisors.
- [65:01]
Brad
I like that. I think that that mom test, that's just a really awesome way to look at it. Right? It's like, hey, are we doing the right thing here? Like, is this person doing the right thing? Would I refer the person closest to me in the world? And yeah, I mean, I think of, frankly, if more businesses operated that way, it'd be a slightly better world. Right. So that's, that's really impressive. So we've obviously said Nectarine, but the website is hello, nectarine.com. just so everybody's clear.
- [65:29]
Jeremy Schneider
And thank you for that plug. I should probably be better at that, being that this is my business.
- [65:34]
Brad
Yeah, I am fanatical about URLs. Like, Jonathan always used to make fun of me of, like, you have to get one that's easy to spell and is easy to say out loud. So I always make clear, like, is it singular or plural? So this is very simple. Hello, nectarine.com and yeah, like we said, you have a fantastic Instagram account, Personal Finance Club. It's super Easy to find. Is there anywhere else you want to send people?
- [65:57]
Jeremy Schneider
That's it. Thank you for the plugs. Yeah. And on the topic of reviews, we watch those reviews really carefully and our, our average review right now is 4.95 stars. And so we're like, you know, for our first 1100 meetings, we're really happy with what's happening. We're Obviously in this 0.1% of these advisors charging just for like the hourly flat fee advice only advice. But we're hoping that we're going to push the industry this way and help more people. You know, like Brian who lost $87,000 in insurance salesman. I wish he had spent 300 bucks on a couple hours with an advice only financial advisor to be like, yo, Vanguard Roth IRA, you know, target date or U.S. market fund. Don't stop.
- [66:34]
Brad
Yeah. Well, you're doing great things, my friend. I really, really appreciate that you put this out in the world. And thanks for coming on. This is a ton of fun.
- [66:42]
Jeremy Schneider
Thank you so much, Brad. I know this has been such a pleasure. I'm honored to have an hour or plus of your time to talk to you.
- [66:47]
Brad
Yeah, this is a good time. And until next time, thanks for being here. Thank you for listening to today's show and for being part of the Choose5 community. If you haven't already, the best ways to get involved are first subscribe to the podcast. So you're listening to this on a podcast player. Just hit subscribe and then subscribe to my weekly newsletter. I actually sit down every Monday and write this by hand and I send it out Tuesday morning. So just head over to choose if I.com subscribe and it's really, really easy to get on the newsletter list right there. And I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsourced personal finance show. And finally, if you're looking to join an in real life community, we have choose a VI local groups in 300 plus cities all around the world. So head to choose a five.com local and you'll find a list of all of Those cities in 20 plus countries all across the world. And if you're just getting started with fi or you have a family member or a friend who you think would be interested, two easy ways. Choose a VI Episode 100 is kind of our welcome to the FI community and even though it's a couple years old at this point, it still stands up. And it's a really great just starting point to get an understanding of what is financial independence. What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life and then choose? If I created a Financial Independence 101 course that's entirely free, just head to choose fi.comfi101 and again, thanks for listening.