Pam Krueger (3:14)

Thank you, Joel. It's a pleasure.

Matt (3:16)

So glad to have you here. We connected last week and I just really enjoyed getting to know you. And I was like, oh my gosh, I have to have Pamela to talk about financial advisors because this is one of those pitfalls that people so often face. But before we get into that, I want to know what you explore, John. Your craft beer equivalent, because that's something I'm spending money on Fiercely, even while I'm trying to save and invest for my future. What is, what's your splurge?

Pam Krueger (3:41)

I'm trying not to add to any weight around the middle of the waist, so it's not going to be the beer this time. But I'm telling you, last weekend I had a real tussle with myself because I want to upgrade my bike. And I'm going to. I was thinking about trading my bike in and then I came home and I said, Pam, $900 versus I'm doing some work in the kitchen. And you know, you can't do it all.

Matt (4:11)

That's true.

Pam Krueger (4:12)

So, yeah, I had to pull myself back from the brink.

Matt (4:15)

But if you want someone to sign off to co sign your expense on upgrading your bike, you've come to the right place because I'm bike obsessed as well.

Pam Krueger (4:24)

So I'm going to get some emotional support from you.

Matt (4:26)

Then I say go for it. What kind of bike are we talking? E bike? Are we talking road bike? Like, what are you looking at?

Pam Krueger (4:31)

It's a road bike. It's a road bike. It's just, you know, it's, I love my bike, but I test drove one this weekend and I fell in love. And of course, the owner of the bike shop was like, pam, such a deal I can give you if I trade this in and do that and do this. I got excited in the moment, but I did the smart thing, Joel. I did the smart thing. I said, Give myself a cool off period.

Matt (4:54)

Yes.

Pam Krueger (4:54)

Go home and think about it. And if you feel that way by next weekend, go for it. But if it starts to dwindle, maybe let it go.

Matt (5:03)

The waning period is clutch. And my daughter realized that recently talked about that on the show where she wanted a vintage Cabbage Patch doll. And I love that she was like, you know what? I'm gonna sit on this overnight. And then she ended up saying, it's worth the money. I'm gonna go back and get it. But that sort of patience is.

Pam Krueger (5:22)

Oh, good.

Matt (5:23)

It's hard for most of us to muster up. So I'm glad that you were able to do that. Even if you ultimately end up purchasing this bike, I think it'll be more fulfilling because you waited and you decided, no, this is for real what I want.

Pam Krueger (5:35)

I agree. And I'm glad your daughter did the cool off too. All it's mixed for a better decision. Right.

Matt (5:40)

She's a. She's a smart cookie. I don't know where it comes from. Okay, so you, Pam, you are, you're incredibly knowledgeable on the money and investing front. You've been in this space for a long time and we're going to talk about financial advisors a lot. There's so much to get into on the nitty gritty of finding an advisor. Whether or not you need an advisor, I just want to start off by asking, do you personally have a financial advisor?

Pam Krueger (6:02)

Yes and no. Well, I don't want to eat, I don't want to drink my own Kool Aid all the time. I need somebody who's going to be coming into my life every now and again to spot check, to make sure that I'm really seeing the numbers that I'm not. That I don't just want to see, but that are real. I need somebody to challenge me and say, have you thought about it this way? Have you thought about it that way? What if this, what if that? So right now it's kind of on a spotty basis, but the time's gonna come when I am gonna get closer to retirement. And when that day comes, there's no question about it, I'm going to want to engage with somebody on an ongoing basis because for me personally, I don't want to do all the tax loss harvesting and Roth conversion decisions and timing. I call it like the maintenance of the garden. Right. You've got to feed, you've got to weed, you've got a deadhead, you've got to do everything planting in your portfolio. So it'll grow for you. You either, you know, want to do some of it yourself, all of it yourself or none of it yourself.

Matt (7:08)

Yeah. And it just, sometimes it just depends on what place you are at in your financial journey. So especially given the audience we're talking to here, we've got a lot of people who are keen to try the DIY thing. We've got a lot of younger listeners who are like financial advisor. I mean I'm just trying to figure out budget and start putting money in my 401k. They've made some progress, let's say and they're like, I've built up a decent nest egg. I don't know if a financial advisor is right for me. And I feel like from the financial advisor industry what we often hear is that they're the silver bullet. Right. This is the key that unlocks your ability to achieve financial success and that a financial advisor is for everybody. Is that true or false?

Pam Krueger (7:52)

False. No, not at all. You are the silver bullet. And whether or not you use, and I'll put it that way, you use an advisor or a financial coach's expertise, you're paying for that time, you're paying for their expertise and you're paying for their advice. You are the silver bullet. You want to go into it knowing exactly what you're expecting to get out of it and exactly what you're getting for the money. You and you want to understand exactly how you're paying the advisor and why you're paying the advisor. When you do that, then you're in control.

Matt (8:25)

You mentioned a financial coach and that's something I squarely agree with you here on especially and you are someone who runs a website that helps people find a financial advisor. And so I just appreciate your honesty and integrity in saying that it doesn't. It's not the best move for most folks, a money coach or somebody along those lines. And there are accredited, accredited status that some people in that industry are getting. There are a few different certifications you can get. I wholeheartedly agree with you. Especially in the beginning of your money journey. Whether it's self being self taught or finding somebody in that orbit, it can make a lot more sense. So yeah, do you think for, for people in those early stages that's usually a place you should turn instead of going directly to like the super pro buttoned up financial advisor you could.

Pam Krueger (9:14)

You probably don't have a ton of complexity in your life at this point. So certainly at that point in your life it's not about getting an advisor. If you felt you needed some guidance. The very, very first place I would go is. I'm going to preface this by saying that free advice is usually pretty expensive. In other words, it usually sucks.

Matt (9:38)

Yeah, I thought you were going to say chatgpt. I was hoping that that's not the case.

Pam Krueger (9:42)

Yeah, that does suck because 35% of the time the answers are wrong. Go check it out. Go check it out. You already know. But unless you know, unless you check it, you maybe don't know. 35% of the time is too much for me. What one out of every three questions I'm going to ask that has to do with my life is going to be wrong? I mean, ChatGPT is fantastic for some things, but let's go back to the guidance from the human that we're thinking about when the first place I like to go is free. Okay, now I'm saying that with a caveat emptor of free advice is usually not so great because your uncle, your Uncle Bob might say, I've got some free advice for you, Joel. And that might not be very good advice at all because he might have made a disaster out of his financial life.

Matt (10:34)

Hey, don't throw my uncle under the bus, Pam, okay? He's a nice guy.

Pam Krueger (10:37)

Not that uncle.

Matt (10:38)

That's right.

Pam Krueger (10:40)

So let's say that you're young, meaning you're in your 20s, you might be in your 30s, and you're either trying to get out of debt, you're trying to figure out the steps to build wealth, you're trying to figure out how am I going to find the money ever for a down payment on a house, how am I going to find the money to put in my 401 just to get the free match money that's available? So it all starts with you and you deciding you have an appetite to learn. Now, everybody listening here has an appetite to learn or they wouldn't be here. And so once you're at that point, you say, now I want some guidance beyond ChatGPT. Then I say look to the free resources that are available that can support you in the coaching realm. Where is that? Maybe where you work. Maybe where you work. The benefits that you have at work may well include financial wellness. That means that there are coaches. Many times they're CFPs, but they're accredited. Generally speaking, they might be certified financial wellness coach. That's the person you can go to. And you can say, here's my situation. I'd like to learn more about figuring out how I can both pay down debt at the same time I can start investing, but I don't want to invest stupidly. I've done my homework, I'm interested in the following things. And then you start a dialogue. Now that costs you nothing because your employer is paying for it. But you're not going to get one on one like strategic advice and tax planning and estate planning and you don't need that. But you're going to get some coaching. The other way is to go on your own in search of a coach. We have coaches on our platform that we recommend to people when they say, yeah, I'm willing to spend a little bit of money to subscribe or it's like me going to yoga, you know what I mean? Online, I will pay something if it's a great yoga class and I'm going to get something out of it. So that's where coaching can really help you to really figure out. Mostly a lot of times it's just your behavior and you're managing your day to day money. And frankly, sometimes it's not to give you encouragement that you're not alone. Don't beat yourself up. Everything costs money and you're trying to make ends meet and live paycheck to paycheck. It's just sometimes the coach is really the coach, like really helping you emotionally and behaviorally.

Matt (13:05)

And one of the things that is really crucial too is kind of developing a taste for learning about personal finance and becoming a perpetual learner. I think in that space, I think some people assume outsourcing. I don't really care. I don't care about this topic. Let me outsource this, hire it out. And you can do that with some things like you can not care about how begonias grow and have a gardener, that tends to that for you. But when it comes to your personal finance, nobody's going to care about your money as much as you do. And in fact, if you know nothing about it, there's a good chance you're going to hire someone who's not actively working in your best interest. So not knowing anything and just hiring out, that's a, that's a recipe for failure too, right?

Pam Krueger (13:48)

Absolutely. If you go into it, no matter who you are, no matter how little or how much money you've saved, no matter how big your problem is, or your challenge or your goal, you want to be in the fire movement, you want to retire early. It doesn't matter what you want to accomplish, what really matters is that you are the driver. And any guidance that you're going to get, they're sitting in the passenger seat next to you, right? But you want to be the driver. Now some people get to a point where they know the advisor so well and they have a lot of money that they need to have managed their portfolio. They want their portfolio managed, but they're still going to stay in the car. So they switch seats, so they go in the passenger seat. But the reason that I use this car analogy is because you're looking out the windshield together and you're seeing the same weather conditions, the same economy, the same questions you have about policies on tariffs or whatever it might be or what's going on with inflation or what's going to happen with the stock market. You are learning on that journey and you may not realize it, but the little bits of, of knowledge that you're gaining, and this is predicated on the fact that the idea that you have the right advisor, Joel, not just an advisor, not just a coach. You have the right coach, the right advice.

Matt (15:10)

It's not plug and play. Just get any generic person in the suit who has initials after their name, right?

Pam Krueger (15:16)

But I don't know too many people that are going to walk up to their car and tell the advisor, okay, here are the keys, get in. I hope you drive carefully by the way. Let me know how it goes, right? Most people don't let their savings get driven off into the sunset. If the advisor is pushing that at the get go and asking you to delegate everything and doesn't want to spend time with you and isn't very generous with their time and their knowledge and you're not going to learn anything, best to head out the door. That's not the sign of a good collaboration. You can definitely delegate and have the advisor do the driving if you don't want to manage your portfolio. Or we can go back to the gardening. You know, if you don't want to do it all, but don't leave completely. You want to make sure that you, that's what's going to give you the confidence is because you actually understand the financial plan, you understand the tax minimization strategy that's also aligned with the investment strategy that's also connected to your family and your plans and your real estate. So you need to be in and present and accounted for at these meetings or don't do it.

Matt (16:27)

So some people listening like would fall into that group of, well, my assets are too small anyway. I'm just not ready to work with an advisor. I'm going the DIY route. I'm trying to get to critical Mass. But some advisors are pretty picky about who they'll work with and they wouldn't want to work with those clients anyway. Do you see that as a problem in that industry? That people who want to work with an advisor, they want to find somebody to be their copilot, but then they get told, sorry, you don't have enough money for me to work with you. How big of a problem is that?

Pam Krueger (17:02)

The problem is finding, knowing that there are lots of advisors who work with clients who have, you know, very small amounts of money. Lots. The problem is you can't find them and you don't know where to look and, and you don't know what the quality is and it's hard to vet them, but you have to go find them because most of the big firms that advertise on TV or wherever, they're going to have minimums of half million, a million. And there are advisors in my network who want to have a minimum of 5 million. But when people come to me looking for and they've got maybe $75,000 to $100,000 saved and they do want an advisor with, or they've got 250,000, they're not going to come to me and find that they're getting shut out. I have already curated a network that is a constellation of different advisors with different expertise and different types of clients. It's perfectly okay for an advisory firm to say we specialize in clients who are very complex. Let's say that they work with founders of startups and those startup founders generally end up with $5 million plus because they sold their shares, their equity and they had stock options all that time. That kind of tax advice that goes hand in hand with that type of client might mean that that particular advisor says, that's my client, that's who I specialize in. So no, I'm not going to talk to joel who has $50,000 who runs this stupid podcast. Other advisors are the opposite. And they're going to say, I specialize in working with young people who are mid career and finding that their lives are changing and now they have to juggle kids, house, you know, everything under the sun. And as they age, complexity gets a little bit more and they specialize. So advisors do specialize in different types of clients.

Matt (19:03)

Are there like rules of thumb for somebody listening? And they're like, I don't know where I fall on the spectrum. They're like, is an advisor, Am I at the right point in my life where an advisor makes sense or not? What rules of Thumb might you tell them? Or what questions might you prod them with to help them decide whether or not hiring somebody makes sense at this juncture?

Pam Krueger (19:27)

Usually, Joel, when people come to me, it's because they've hit some sort of obstacle or they feel that they've gone to the edges of their own ability to. Maybe it's manage their own portfolio using digital tools. Maybe it's investing in ETFs or whatever. Wherever they're at in their journey, they get to a point where they say, I feel like I've done everything I can do myself, and now it's time for fresh eyes. Now, the fresh eyes could simply be coaching and guidance. And you might be able to get that, you know, free financial wellness at work or hire a coach. Or you might say, no, I actually need actionable advice that I can actually get, specific, prescriptive advice that I'll pay for. Here's the difference between what you get from a coach and what you get from a financial advisor. A coach is going to say the following. You're going to come to me with a problem. You're going to explain it. I'm going to kind of say it back to you. And then I'm going to say, if I were you, I'd look at this, Joel. If I were you, I would look at that, Joel, and point out the things that you can then take home as your homework. You've gotten guidance, but you're going to do it on your own. You're going to execute everything on your own. An advisor is different. An advisor is a fiduciary. Make sure, and we'll talk about that too, that they are fiduciary and that means they're giving you actionable advice. So I'm going to say, I'm the advisor. And I'm now going to say, well, Joel, let's look at what would happen if we did do that. If we put some money into private investments, we put this, we did that, we had this money toward a house. And they're going to say, this is what that would look like. Here's what I recommend that you don't do. And do do. That is an advisor, because they're giving you advice that you're then going to go out and act upon. That's why it's so critically important that if you do seek advice, not just guidance and coaching, but actual advice, it must be from an advisor who's accountable, legally accountable for it at the fiduciary level. That's why that's so important.

Matt (21:55)

I Want to get into that? I want to talk about the fiduciary necessity. I just want to start out though by asking. You said at one point that only a small fraction of advisors are worth trusting.

Pam Krueger (22:10)

That's correct.

Matt (22:11)

Why, why are there so many bad apples in the space?

Pam Krueger (22:13)

There's. It's not that there are so many bad apples. There's a lot of mediocre apples. I don't want mediocre. I don't even want good. I don't even want pretty good or good. I want outstanding and exceptional. So now here's the secret that you'll. That everybody will love knowing this. You're going to pay the same fee for the outstanding advisor and the outstanding advice as you are for the pretty good. So wouldn't you rather find the outstanding and the exceptional?

Matt (22:44)

Why is that? Why? Why are we not paying more for to get the best? Why are the best not charging more? Why are they charging roughly the same amount as the mediocre?

Pam Krueger (22:53)

They're sometimes charging less. The best of the best are out there. They're humble. They're not out boasting and bragging. They're not spending gobs of money on advertising. They're just really, really competent, highly qualified. They care deeply about their clients and they're humble. So they don't walk around, you know, with a lot of arrogance and, you know, cookie cutter and all that. So what happens is when you go to an advisor who's mediocre or cookie cutter, you're going to pay whatever the going rate is, okay? If you also compared that to an advisor who happens to be exceptional, then you're going to find that the outstanding or exceptional advisor has the exact same type of fee, but the difference is the quality of the individual. That's why it's so important to. If you are going to spend money on an advisor or coach that you absolutely just really take it very thoughtfully. Because if I'm going to listen to this person, I need to make sure that this person is actually all that I need them to be. And especially in a pinch, I want to know, I can call you on a Saturday. And even if you're not right there, I know I'm going to hear right back from you pretty quickly and that you know me, there's a lot of, lot of variables.

Matt (24:18)

I want to talk about finding the top tier apples because I think that's such an important piece of this. And how do you know the mediocre from the. Great. Talk to me about the fiduciary standard versus the Suitability standard. What do people need to know when they're trying to pick an advisor? And most people would think, if I'm hiring an advisor, well, I'm guessing they're going to do what's in my best interest, but they might not be required to. And so how do you know the difference and what to look for?

Pam Krueger (24:47)

The history. The industry was never this industry, financial services that we know with the big brand names. That was never predicated on advice. That was always predicated on sales. It's a sales model. I used to do this when I was 24 years old, and then I was vice president. I used to do this way back in the day.

Matt (25:09)

So what do you mean by that? Well, it was predicated on sales, which means that it wasn't about giving you the best advice. It was getting you in their products that made them the most money.

Pam Krueger (25:19)

It wasn't about advice at all. It really wasn't. Especially when I was there. Now, remember, this is kind of a history lesson, but remember back in the old days when I was there, and I'm Talking about the 80s, I go on the Wayback Machine. This was before the Internet. So, Joel, what did we have as brokers? We were called stockbrokers. Do you remember that term, stockbroker?

Matt (25:41)

I do.

Pam Krueger (25:42)

Okay. We weren't called advisors. We worked at big brokerage firms and we were stock brokers. So the whole point was that we had information you didn't have, the public didn't have. So when you would come to me, I was able to explain to you what was happening with a company and its earnings and its research, because my brokerage firm generated this really expensive research, and I would share that with you if you were a client. So we were brokering information and. And we were helping people execute trades, and we were explaining and recommending the kinds of things that we sold, like mutual funds, things like that. So that model has nothing to do with tax planning, nothing to do with estate planning, nothing to do with pulling all the pieces together holistically and looking at your spouse and your family and your kids and, you know, your real estate. It has to do with. Back then, we were there to be stock brokers. Therefore, the SEC never looked at brokerage firms and said, we need to regulate you and you need to be held to the fiduciary standard that we hold investment advisors to, which is up here. Instead, as long as you make recommendations to the public that are suitable, then that's defensible. That's okay. Over here, on the other side of the the other say, channel of advisors who are out there, real financial advisors who are out there working directly for clients. They don't work at brokerage firms. They work independently and they only get paid by their clients. And the SEC in the state says, okay, we're going to consider you financial advisors not just representing products and services from a big firm. You are actually paid by the client to give that client advice. And therefore, we need you to be held to a higher legal standard called the fiduciary standard, which means by law you are bound and obligated to follow best practices at the fiduciary standard, which means if you're an advisor, you got a lot more on the hook over here than you would if you worked at a brokerage firm. So when I worked at a brokerage firm, I was shielded and I wasn't really worried that if I gave you some bum advice that I was going to get sued over here. The financial advisor who's fiduciary has a huge liability.

Matt (28:11)

So if they put me in something that isn't in my best interest, there's a lawsuit that can.

Pam Krueger (28:16)

They can lose their practice.

Matt (28:17)

But if they are not held to the fiduciary standard as an individual, I don't really have much recourse.

Pam Krueger (28:23)

No, you don't have much recourse. And so as a result, there's this whole bifurcation in this financial services industry. So think of it, if you would, as a fork in the road. The fork in the road is 90% of the folks who are financial advisors in the United States. The vast majority, 90%, work for brokerage firms or insurance companies, and they are now called advisors. Where they used to be called brokers or insurance agents, now they're called advisors. But over here on the road less traveled is a much smaller swath of real advisors called fiduciary fee only advisors. There's about 60,000 of the 500,000, 60,000 in the United States who operate at the fiduciary level, that practice legally at the fiduciary level.

Matt (29:19)

If there's a big brand name attached to somebody who's trying to help me manage my money, is that a red flag? I've seen their commercials while I was watching football. And this guy works for that company. So maybe I should join forces. That's the company that I should go with.

Pam Krueger (29:39)

I know. Look, some of my really good friends work at brokerage firms. Would I go to a brokerage firm for advice that would be like, why would I go to a. Why would I go to an organization that's not. That chooses. Remember, Joel, they choose not to be fiduciary.

Matt (29:58)

Yeah.

Pam Krueger (29:58)

Why would I choose to get my most important money advice from someone who chooses to not be held legally to the highest fiduciary standard? Went over here. Now it's a pain in the neck. Now I gotta go out and I've gotta find this individual. These individuals, they're not just. They're smaller firms, they're boutique firms who are independent. They don't work at brokerage firms, but they're held to that higher standard. So that's the way you have to look at it.

Matt (30:28)

It's like going to Taco Bell for health food. You might be able to find it there, but that's not what they specialize in.

Pam Krueger (30:33)

You've got to just understand, follow the money. What happens at a brokerage firm, it's really. They don't work for you. The people at the brokerage firm don't work for you. They work for the brokerage firm. The advisors over here who are fiduciaries, legally, they're on the hook because they answer to you. You're the one paying them.

Matt (30:56)

Yeah.

Pam Krueger (30:56)

I mean, you're still paying commissions. You're still paying the commissions when you buy the products. Brokerage firm, but the actual advisor sitting in a chair, working for a brokerage firm, representing the brokerage firm's interests. They're not representing your interest. They're representing the brokerage firm's interests.

Matt (31:13)

So you've said fee only multiple times. I want to talk about that. How advisors get paid, what we should expect from them, how to interview and find a great advisor that makes sense for your needs. If you're looking for one. We've got a lot more questions to get to with Pam. We'll hit those up right after this. This episode is brought to you by Navy Federal Credit Union. Buying a car, it can be like a long road trip, right? There's negotiating prices. There can be lots of fees involved. It can be a difficult process. But with an auto loan from Navy Federal, you're on the highway to higher savings.

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Joel (33:45)

And Matt from how2money Joel, you were just out in Seattle recently, weren't you?

Matt (33:50)

Yeah man, it was amazing. I went for one of the most glorious runs of my life along the waterfron. It had everything you could ask for. Crisp air, mountain views, fairies gliding across the water. Beautiful.

Joel (34:01)

I love it man. Yeah. For us, our road trip through Charlottesville was a highlight. We actually splurged on a custom built Airbnb and it was well worth it. The house had these unique touches like a poured concrete counter there in the kitchen with a built in drying rack. Super functional. It even inspired some ideas for our house.

Matt (34:17)

Oh plus with a kitchen like that, you save money eating out.

Joel (34:20)

Yes, exactly. That's what struck me. What seems normal to a homeowner. It can be the thing that makes a guest trip really special.

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Joel (34:41)

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Matt (34:52)

All right, we're back. Still talk with Pam Krueger talking about financial advisors. And we're going deep. We're getting into the nitty gritty about how advisors get paid, whether or not an advisor makes sense for you. And I'm guessing for some listeners out there, a financial advisor makes a ton of sense for you, given where you're at in your financial journey. And for others of you out there, it would be a terrible idea at this juncture. And, and then even if a financial advisor is right for you right now, how do you go about finding the right one? So much to cover. And Pam, one thing I think it's interesting. Advisors seem to offer a wider array of services now, which is kind of awesome. Like, I love that it feels like they can. It used to be this thought of, like, yeah, it's just the products that they're selling you. And now we're seeing advisors say, no, no, we want to help you, like, plan for decades. What should we want or expect from advisors on that front in terms of what ground they're going to cover?

Pam Krueger (35:46)

Advisors who have always been fiduciaries and always been. And we'll get to the feel only in a second. But the video series, they've always had to look contextually, they've had to look at your whole big picture. They can't give you advice on one little slice of your life unless they know how it interplays with everything else you're doing in your life and your family. So there's no way that they would do that. Now, how do you find the advisors who offer not only offer this, but are again, exceptional and not just mediocre? That's where the vetting comes in. And it takes time. And that's why it's so important that all I ask is just stop at this threshold the minute you think you need help and just slow your mind down a little bit. Take it one step at a time and think about how am I going to vet the advisor? Starting with, yes, they are offering more services, so I want to start with myself. At the center of the world here. And I want to say, what am I trying to accomplish? Why do I think I might ever need an advisor? What is it that I'm trying to do? Some people are going to answer that question and they're going to say, I want to buy rental properties and in addition to my full time job, I want to become a landlord and I want to invest in real estate. And others might say I want to learn more about alternative investments and I want to figure out how I'm going to purchase my first time home. Let's say it's not for rental purposes, but just you want to buy your first time home, you want to get ready for retirement, you want to make sure you're fortified for that. So I want to start with myself as the center point and say, what do I need that will help guide me to what kinds of advisor services do I really need? What do I need the advisor to know the most about and specialize in? If that advisor is really going to help me, what do they need to really specialize in? Well, I want to make sure they've got clients that are like me and are in my same situation so that I know that this is their wheelhouse. So that's the way I approach it. Because advisors who advise holistically and that's every fiduciary advisor whose fee only is going to give you the whole picture. So now it's just up to you, Joel, to figure out what do I really want to accomplish. And it could be, I want a one time engagement. I don't want to get married to the advisor. Yeah, I don't want to pay the advisor forever. I just want to know, should I if I took this position over here or if I started this business over here and if I did this with my money, oh, my head's going to explode. I think I want to talk to a financial advisor. Can you buy some time? Can you buy some hours straight up and get some really good advice from an advisor who specializes in advising small business owners? Heck yeah, you can find that kind.

Matt (38:55)

Of help or you're getting an inheritance and the stakes are up and you're like, I want someone to talk to for two or three hours now. But I don't necessarily need a full financial plan worked up. It depends on where you find yourself. Let's dial in on fee only for a second because some financial advisors are fee based. Fee based sounds like fee only, but it's not. And why are you such a proponent of the fee only model? Why Is that like at the crux of. It feels like that's at the crux of what you require from advisors.

Pam Krueger (39:32)

Oh, it sure is.

Matt (39:33)

To have this fee only model.

Pam Krueger (39:34)

I am so sorry that this industry has gotten to the point where we're talking so stupidly. Fee based. Fee only consumers are supposed to know the difference. It's ridiculous. We, this industry, what a mess we have made out of making financial advice make sense. It's so stupidly complicated for no good reason. Fee only means the advisor is compensated only by fees that come directly from the client so that we make sure that that advisor only works for the client. Let me give you an example. You say, okay, I want a fee only advisor. Why? Because I want to talk about everything under the sun. And if he starts talking about, or she starts talking about insurance, I want to make sure that they don't sell insurance and get commissions. Because how am I ever going to get an unbiased opinion about something like insurance from the guy who sells insurance? So you're taking out all the incentives that you possibly can for that person to benefit by recommending one thing over another. And you're putting the focus squarely on evaluating everything under the sun and looking at what would be best for you because they work directly for you. So fee only means their fee comes only from you, not from commissions. Fee based is. Remember that fork in the road? Okay? Fee only is its own fork. This is the road less traveled. The road over here, the main highway includes fee based. That means that I get paid as an advisor both by selling some insurance, getting commissions, by the way, that's coming out of your pocket, and I also charge you fees, so I kind of do both. So that's a hybrid model.

Matt (41:31)

Does the fee based advisor have, Are they potentially putting you in more expensive funds? Because they stand to benefit from that as well. Whereas like the fee only advisor is more apt to steer you towards low cost funds.

Pam Krueger (41:45)

The fee only advisor's job is to make sure that the fees are as low as possible across every investment you make. Because, Joel, you're paying me. So my job is to get your returns as high as possible, make sure that I get your tax planning done, all of what you need for, for as little as possible. So if I go stupidly pick a fund that has some big expense to it, there better be a good reason because it better pay off, because that's gonna come back on me as the advisor. I'm accountable. The fee based is gonna make the case, well, this is a really good fund and I can justify why I would recommend this fund to this client. And there's no way to read their mind and know whether or not they're incentivized to push that particular fund because it pays them more and they're going to make their mortgage payment that month because they sold that to you. But I mean, you don't want to put yourself in a situation like that in the first place. You just want to say, look, if I'm going to get advice, I'd rather know that it's a straight up relationship. Yeah, I'm paying the advisor. I know what I'm paying the advisor. It's 100% transparent. They're legally required to explain it to me. And I, and I, and I know this, this advisor is working for me and me only.

Matt (43:08)

We know. Looking at evidence that individuals have a really hard time outperforming the stock market, especially for any meaningful length of time, is, is that something that some financial advisors are touting is like, hey, I've got super duper skills when it comes to stock picking and choosing the right funds and we're going to outperform this other guy down the street. Is that something that people are marketing themselves on? Is that something that people should be aware of when they're looking for an advisor and maybe be wary of?

Pam Krueger (43:37)

They're really big red flag because, you know, diversification wins all battles. And by now we know that people have won, gotten way ahead just by not trying to pick horses and bet on different horses in the race, but actually bet on the entire race. And by the time it's all said and done, the research has proven itself. However, Joel, what if you were the person who said, I don't want those average stock market SP returns, I want something fancier. Can I find an advisor who specializes in something fancier? Yes, you can. Now, vetting that advisor, and they're fee only. I would run the other direction. If they came in boasting and bragging about their great returns and how fabulous they are. It's a red flag. But I have many. I have 230 advisors in my network and I have many who say, yes, of course, I'm a cfa, which means chartered Financial analyst, and we can come up with portfolios that are personalized for you. Joel, we don't need to just invest in Vanguard S and P or you don't have to be a boglehead. We can do something other than that and be very tactical. Yes, you can find it. But again, it comes down to the vetting to make sure that that advisor is truly competent and qualified to have a great can demonstrate that they have the knowledge and the understanding to offer those kinds of strategies.

Matt (45:15)

We covered fee only. But I'm curious, what does it look like to actually pay your advisor and does it depend? Because it's probably. Unless it is that select occasion where I really am just looking for a few hours of advice and yes, I can find somebody via that model. But how much is it going to cost and how am I actually going to pay them? Because fee only. There's still different ways that I can pay the advisor under a fee only model. Right. So absolutely, yeah, explain that.

Pam Krueger (45:45)

There are some advisors and some in my network who will say I want to keep my client base small. I'm a portfolio manager who does financial planning, estate planning and tax planning. So therefore I am going to have one model for fee only, which means I'm going to charge you based on the assets that I'm managing for you. In other words, I'm doing the gardening and I'm going to take a percentage of what comes out of the garden. I'm going to take a percentage of. It's usually 1%, 1%. Now their goal is to keep all your other costs down and that 1% is much less, by the way, than you would pay if you went to commission based products. But at the end of the day you may say, I don't want that though. I don't want you. You're not the right advisor for me. I want fee only. I want to pay you. Can I just pay you like on a retainer fee or a flat fee? And do you have to manage my money? So it's called scope of work. What happens is you come in to talk to the advisor who's a real advisor, and they're going to say, let's talk about what you want to accomplish. Now let's talk about the scope of work required to help you accomplish that or get over the challenge, whatever it is, and you want to do it on an ongoing basis. So let's then discuss time and complexity. I can propose it to you in two ways. You can pay me a retainer fee or you can pay me as expressed as a percentage of assets under management, which is 1% but usually less than 1%. So if a person had a million dollar portfolio, you would say, well, that's $10,000. Probably not. It's probably going to, if you're not terribly complex, it's going to be less than that. Probably more like, you know, 7,500 a year, something like that. And for that fee, you know exactly what you're paying. You also know exactly what you're getting. So it's assets under management, it's retainer or flat fee or it's a one off. It's just like, hey, I just want to buy some time and have you walk me through this big decision I'm about to make. Maybe I'll come back later, maybe I won't. So you can do it ongoing or one off. So it's those, those are the, pretty much, you know, the only ways that you're going to pay the advisor based on it's either going to be time and it's always going to be time and complexity, no matter what.

Matt (48:10)

If I sign up with an advisor and I'm ready to enter this relationship and I'm ready to fork over the money because I need the help and I think they're going to be able to help me get where I want to get. What am I getting? Like how, how often should I expect that we're working together? What are those meetings? What are they comprised of? What questions should I be prepared to ask in. In the meeting? Because again, we're talking about being in the driver's seat, not in the passenger seat. So, like, I can't just hand over the reins. What am I getting? And I don't know, can I, like, text them on a Friday night when I'm watching Netflix and I've got a random question and expect them to get back to me within, you know, 72 hours or something like that?

Pam Krueger (48:48)

Yes, yes you can and yes, you should. So you absolutely want to, you know, stay in that passenger seat or stay in the driver's seat collaborating with the advisor. What you should expect to get out of the fee that you're paying and get out of the whole experience is you're building a plan. You're building a plan that accounts for a ton of things you worry about or what you think about, about money, things you don't know. You're looking at what if scenarios you're stress testing. So when, when it's done correctly, you walk away with a tax minimization strategy that you feel like, oh, good, I don't have to keep up with all the tax laws and all the changes. You're walking away with a financial plan that includes cash flow, means budget. How much am I spending? Spending guardrails. And you're walking away with an estate plan. Now that doesn't even touch the investment piece. It has to align with your investment strategy. But Just the planning alone, all by itself, those three components, that's going to be, if you're working ongoing, that's going to be a resilient plan. And you're going to walk away saying, oh my God. Not only do I understand the plan, I helped build it. I know what went into it. I understand it to the point where I'm so confident that we've already stress tested a lot of my concerns. And I know that going forward, when interest rates change, if the market drops 20%, just all these changes that can happen that are outside your control and changes in your lifestyle that are in your control, all of that gets accounted for so that the plan is dynamic. So gone are the days with your granddaddy's financial plan where they, you know, they put together this piece of paper, this binder, and they go, here's your plan, Joel, here you go. And it goes in a closet and in five years you pull it out and it's stale because everything's changed. The economy's changed, stock market's changed, you've changed. So what we ongoing, you're getting your money's more than your money's worth from all the planning. Then on top of it, you're getting the investment strategy that aligns with all your tax strategy and all your financial and cash flow strategy. So you're not putting yourself in a bind, in a position where you're investing in things and then going, oh my God, I can't get my money out right now, or duplicating all those things. So it's a ongoing relationship that more than pays for itself if it's done correctly and if it's with the right advisor. And that's a key to the whole thing.

Matt (51:35)

Yeah. All right, I have a few more questions for you, Pam, including want to talk about wealth ramp and how you help people specifically find the right advisor for them and also like breaking up with an advisor. What if your advisor stinks? You need to move on. We'll get to a few questions like that with Pam right after this. This episode is brought to you by Navy Federal Credit Union. Buying a car, it can be like a long road trip, right? There's negotiating prices, there can be lots of fees involved. It can be a difficult process. But with an auto loan from Navy Federal, you're on the highway to higher savings.

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Joel (52:48)

Hey y', all, it's Joel and Matt from how to Money. Joel, you were just out in Seattle recently, weren't you?

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I love it, man. Yeah, for us, our road trip through.

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Charlottesville was a highlight.

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We actually splurged on a custom built Airbnb and it was well worth it. The house had these unique touches like a poured concrete counter there in the kitchen with a built in drying rack. Super functional. It even inspired some ideas for our house.

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Plus, with a kitchen like that, you save money eating out.

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Yes, exactly. That's what struck me. What seems normal to a homeowner. It can be the thing that makes a guest trip really special.

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Whether you manage one property or 10, Lodify helps you run your rental like a real business. How to Money listeners get 20% off with code howtomoney20@logify.com all right, we're back so talk with Pam Kruger talking about financial advisors and man, this is like one of those situations walking through the woods full of bear traps. How do you avoid the bear Traps and get where you're trying to go without like getting your foot snapped off. Pam, One of the most fascinating studies to me, it was done a while back. I think it was done by Vanguard. And Vanguard found that individuals who have a financial advisor tend to outperform people who don't by a not insignificant margin. And I think if you're super into diying it and you go it alone, but you are a perpetual learner, you can do just fine. But I think a lot of people, to their detriment, don't get a financial advisor. And the big reason, and tell me if I'm wrong is, is probably because of coaching. Probably because they're making mistakes because of emotion. And an advisor really would have helped them not make a mistake in the heat of the moment.

Pam Krueger (55:24)

Yeah, there's a thousand different ways that when people do it right again, it's the right fit, it's the right advisor. Then the advisor, number one, is keeping the cost down on the investments that you already have, helping you to work with your spouse or your partner. Let's face it, sometimes we marry an opposite. You know, sometimes the person you married, you're a neatnik and, you know, he might be not so neat. Same thing with money. People kind of end up getting into relationships over long periods of time and they figure out, I'm not going to fight about money all the time, so instead I'm just going to accept this is this and that's that. But the day of reckoning might come later when something comes up, something happens, you got to figure out what you're going to do.

Matt (56:15)

So that unbiased third party, the advisor, can be especially helpful in those scenarios.

Pam Krueger (56:20)

Yeah. Because that advisor is going to listen to both of you, listen to each of you. And I can't tell you how many times I've seen it with my own eyes where the advisor was able to really help them stabilize their marriage because they had to. They had to figure out the middle ground that was going to work for each of them and actually talk openly without the emotion and with the advisor in the room knowing them really well. That's just one example.

Matt (56:46)

And they play. Yeah, so they play part therapist. What if someone out there is listening and they're like, I have an advisor. Pretty sure they're not fee only. Pretty sure they work for one of those big companies that advertises during football games. And man, they called me up the other day and they tried to sell me this insurance policy, even though it's something we hadn't really discussed. Before, I don't know, there's a few red flags hitting me as I'm listening to Pam talk about this. What would you tell that person? And how do, how does someone exit a relationship that maybe.

Pam Krueger (57:15)

Yeah, good question.

Matt (57:16)

A toxic advisor relationship.

Pam Krueger (57:18)

Right. And let me start off too by saying, let me throw a caveat out there. There are a lot of very really good, well meaning brokers at brokerage firms and they really know a lot and they do a great job by the client. There are many people that come to me and they say, you know, I've been with my advisor, I've been with her for 30 years and she's, you know, at a brokerage firm. But that kind of thing sometimes does happen, Joel, where they call me and behind that advisor's back they will call me and they'll say, I just kind of don't think it's working anymore and I don't want to hurt their feelings. We've been with them for 30 years or 20 years or 10 years or it's my brother in law, how do I get out of this? And I do want to find a feeling advisor. And then that's when I say, this is exactly what you do. You don't get into the conversation with someone when you're going to break up with them. You just literally say, things have changed in my life. Or if you're married or you have a partner, things have changed in our personal life and it's very private and you have done such a good job for me for a really long time and I am going to move on. And I know you'll respect my privacy in not discussing this further. And don't talk about it. Leave it, just leave it alone. Don't get into it because that way you don't have to explain yourself. In other words, you're saying, haven't you worked for me? Haven't I paid you enough over the past 25 years? If I choose to leave now, you've won the game. Advisor or broker, you've already won because I already paid you all this money and thank you very much for your service. It's been great. I got the best of you. Let somebody else have the rest of you now and you move on.

Matt (59:09)

I think it's a great way to do it because it's that relational piece that's the hardest for people. It's like, I'm gonna let this person down, they're gonna be upset. And you're like, yeah, you gotta find a way just to like clean.

Pam Krueger (59:20)

Yep.

Matt (59:20)

Make a Clean break.

Pam Krueger (59:21)

And you just, you don't blame it on them. You don't talk about something that was a shortcoming. You don't talk about their fees, you know, unless you wanna ask questions, of course. But if you really just wanna make a clean break, you just say, something has come up for me and it's very private. I don't want to discuss it. You have been great, Joel. You've been fantastic. And now I'm ready to move on and I know you'll respect my privacy.

Matt (59:49)

I feel like the search process for finding a great advisor has been difficult to say the least. And even organizations that have existed to try to group like minded advisors together, they just kind of have a listicle of 100,000 people, people that have paid to join the network. But my goodness, how do you find the advisor like you're talking about that matches your priorities, that works with people like you? That's been a real, a real big barrier and that's I think, why a lot of people go to a, with a company that markets heavily, they're just like, I guess that's the place to turn.

Pam Krueger (60:27)

Yeah.

Matt (60:29)

And that's, that's why you created Wealth Ramp. What, what does Wealth Ramp do that was necessary in the marketplace? And also, just tell me too, I know you were like reticent to launch this or to really get into this service of helping pair individuals with advisors. You knew it was a big problem, but you were like, I don't want to tackle it. Why did you eventually tackle it?

Pam Krueger (60:51)

I didn't want to do it. I didn't want to be. When somebody said to me, you know, I had a television series called Money Track that was on 200 plus PBS stations for years. John Bogle was a regular. I was telling people how to diy. The last thing I was going to do is talk about the greatness of financial advisors. But our viewers, our viewers kept emailing me saying, Pam, there's nothing out there. If I do want an advisor and you've given us great vetting tips, we don't know where to go. Can't you give us some referrals? And my first answer, my first inclination was I'm never going to do that. And now fast forward. I'm in love. I'm in love with doing this. And if it's hard for me to find these advisors, it's going to be hard for everybody to find these advisors because I'm looking for the exceptional, not just the pretty good. So it took me a long time to curate a network of 230 different fee only firms.

Matt (61:47)

And when you say a long time, you mean multiple years and lots of conversations with individual advisors around the country. You're not just relying on Internet reviews. This is not yelping your way to this website. This is a lot of personal relationships and a lot of painstaking effort.

Pam Krueger (62:01)

Oh my God. My name is on every referral. My name is on every single referral. So the vetting has to reflect me. And that took me about 18 months. And even people that were close to me, my family, my friends, when I was starting this, they were like, pam, are you ever going to launch this thing? And I was like, you don't understand, I can't launch this until everything is curated. And that I've done the vetting. That means interviewing every single advisor I'm interested in and kissing tons and tons of frogs. Then the other important aspect was I had to make it private, which meant very limiting. It meant that the people who come to wealthramp.com and go through the survey get matched with an advisor. They see the three advisors. So you can see the advisors that I am recommending for you. But it's a one way mirror. So I've designed it so that you can see them, they can't see you. So you have all the power, you have all of the control over how and when you want to initiate a conversation with an advisor. Now I know a lot of people will say, well, I'm kind of shy. Can I have the advisor reach out to me? Yes, we can make that happen. Course we're going to make it super easy on the platform. But I am not going to go into this with an assumption that you want an advisor to contact you unless you tell me. And you're the one right on the website. You can schedule the meeting right there or send a message to that advisor, but I want you to be in control.

Matt (63:42)

And that's been another one of the problems with some of those websites in the past is you put in your information and it's like, yeah, we're gonna find the right person for you. And then you get hounded with emails and phone calls, just like one of those mortgage shopping websites. And you're like, I didn't realize I was gonna get called this many times. And you just, you shut down.

Pam Krueger (64:00)

It's not good.

Matt (64:01)

No, it's a crummy feeling. So I love the integrity that you're approaching this topic and the website that you've built to really help people connect to a financial advisor, if it's right for Them and with the right advisor that you vetted. Because again, like you said, you want a great one, not an average one. So, Pam, where can how do money listeners find out more about you and more about what you're up to at Wealth Ramp?

Pam Krueger (64:28)

WealthRamp.com is the website I write for Kiplinger about once a month. And I have a lot of educational materials that are just out there. There's PamKruger.com, thisMoneyTrack.org, but WealthRamp.com is a great starting place because that's where you're going to see the blog posts and the conversations around educating how do financial advisors operate? How do they charge, how much do you pay and what the heck do you get out of it? And how do you work with them? And then how do you break up with them?

Matt (65:00)

The whole gamut.

Pam Krueger (65:00)

Not ours, the whole gambit. No, no one important. I'll give you this one tidbit really quick. One metric I look at that's so telling is the Advisor has a Wealthramp has a 98% client retention rate. So clients, once they find the right advisor, they are with that advisor.

Matt (65:23)

That's a good point. That's another good metric to use. Yeah. Do people want to keep working with them? Then you might want to work with them. Pam, this has been such a great conversation. Thank you so much for joining me today.

Pam Krueger (65:33)

Thank you for having me.

Matt (65:35)

Man, what a great conversation with Pam. And I just, I really love the integrity, the heart that she's brought into something that can seem so stuffy and boring to so many people. The financial advisor space. And truly just daunting and hard for a lot of people to figure out. Right. It's confusing. So to make finding an advisor simple, less fraught with potential for error. Pam's done a great job with her site wealthramp, making that happen. And actually we've incorporated Wealth Ramp into the how to Money site. So if you're looking to find an advisor, you can go to how2money.com advisor after listening to this, and we have a custom page made up because we so believe in this site that Pam has created to help people find a financial advisor. You know, there's a decent chance you're listening and a financial advisor doesn't make sense for you. And that's something we talk about regularly here on the show. If that's the case, don't go there. Or unless you just want to, like monkey around and see what's going on, do that. But if a Financial advisor doesn't make sense for you at this juncture, which for so many DIY investors, it just, it doesn't, especially in those early years, stay away. But if you feel like you're at one of those junctures and a financial advisor makes sense for you, you want to hire a good one, not a bad one. You want to hire one of the best ones. And typically the best doesn't cost more, could cost less, like Pam said, which I think is so cool. So I don't know what was my big takeaway from this conversation. I love how she emphasized the reality that you, as the individual who's listening right now, you are the silver bullet. Yeah, you might need a coach, you might need someone in your corner, but you're the silver bullet. And you can't expect someone else to take the reins of your financial life and make home run decisions. You have to be involved, and there's just no way around that. And if you do try, if you do try to get out of managing your own finances, nobody's going to care about your money as much as you care about your money. And I think the likelihood of doing business with someone who isn't doing, isn't operating in your best interest goes up exponentially. If you take a side seat and you're not even in, you're not even in the passenger seat, but you're like, I don't know, riding in the trunk or something like that. You don't want to be in that position when it comes to your finances. So, yes, an advisor can help a segment of the population and you want to make sure you go about doing it the right way. But no matter what, you want to collaborate with that advisor. That was something that Pam said and I love that way of thinking. Collaborate with, not just say, hey, this is your job now make it happen. The collaboration is crucial, and so much of it really is about what your hopes and dreams and goals are and talking through that with an advisor and then making a plan to help you get there. So I hope you enjoyed this episode and I hope for some of you it was reassuring that I'm actually doing pretty good on my own and maybe I don't need to hire anybody because I do think that's the case, that that's the position that a lot of how to Money listeners find themselves in. But again, of course, there are a lot of folks out there too, who are like, I've made a lot of progress and now I want a pro to come in and help me professionalize this a little bit. All right. We will have links to everything that we mentioned up in the show, notes on the website@howtomoney.com including the new landing page howtomoney.com advisor where you can find a financial advisor that works within those wealth ramp parameters. They're vetted by Pam who you just heard on the show. Thanks so much for listening. Until next time, best friend out. If you've been listening to the show for a while, you know we care a lot about being intentional with our money and that includes how we give it away.

Joel (69:43)

That is why we are big fans of Daffy, which is a modern donation platform and app for charitable giving that is also a donor advised fund which means you can contribute cash, stock, ETFs or even crypto. You take the tax deduction right away and then send the money to over one and a half million charities, schools and other faith based organizations. Whatever you want with the funds that you've already set aside.

Matt (70:07)

I've personally been using it to send recurring donations for causes I really care about, like my church and a local nonprofit called Blueprint 58.

Joel (70:15)

Same here. Yeah, I've got recurring donations going to my kids school. DAFY also keeps your receipts organized for tax season, but the best part is DAFI itself is a nonprofit with a mission to help people to be more generous more often. So if you want a better system for your giving, head to dafy.org howtomoney and for a limited time you'll even get $25 to give to the charity of your choice. Visit daffy.org howtomoney today do you have an Airbnb vacation rental or second property? Then this is for you. Your rental isn't just extra income, it's an opportunity to build wealth and financial freedom. With Lodify you are in control.

Matt (70:55)

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Joel (71:07)

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