Mindy: Hello, hello, hello and welcome to the Bigger Pockets Money Podcast. My name is Mindy Jensen and with me as always is my stimulating co-host Scott Trench.
Scott: Thanks Mindy, amped to be here.
Mindy: We’re here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting. On today’s episode, we are speaking with Jeremy Schneider from Personal Finance Club and Nectarine about a financial issue that he is especially passionate about, the business of financial advising. In this day and age, when anyone can sell anything for any price, it’s more important than ever to be educated about your options, especially when it comes to your finances.
Scott: So stay listening because on today’s episode, Jeremy’s going to help us demystify the world of financial advisors and give us actionable tips on how to get financial advice without paying fees we don’t need to be paying. I love his four tiers. You’re going to learn a lot from this and agree completely with him.
Mindy: I am so excited to bring in Jeremy. Jeremy, shifting gears, you started a company called Nectarine as a reaction to some of the issues you see in the financial advisor industry. Can you explain for our audience who may not know what a financial advisor is?
Guest: Um, so basically I’ve been teaching about personal finance and investing since then, which has been the last five years or so. The question that I always get is, how do I find a good financial advisor? And it’s a really hard question to answer because there’s basically four major types of financial advisors. and I’m going walk through them from worst to best. The worst type is the insurance salesman. A lot of people walk into an office and a nice person there and shake their hand. They have financial advisor right on the name plate of their door or whatever, and then they proceed to try and sell them insurance. And it’s a very confusing experience for people because they don’t know if they should be buying insurance and that’s not what they thought they were walking into. But, you know, the the term financial advisor isn’t a regulated term. and so a lot of insurance salesmen tell them that. So if you walk into an office and expect or you have a associate or friend or whatever who’s trying to sell you insurance, that’s not a financial advisor. That’s an insurance salesman. That’s the worst business model.
Scott: And by the way, these people are like super professional, they’re scary, they’re like, they’ve got it mastered. Like I host this podcast for the last five, six years, 500 episodes and I was like half convinced in one of these things before I figured out what was going on for a good 30 minutes. Like they’re these guys are really know what they’re doing to get you get going on all this stuff.
Guest: Yeah, the sale no, I mean, thank you. Like the more, the more every time I can say this, I do because the more voices you hear of people on the side of reality is the better because they have these really slick sales pitches and these really half truth kind of, you know, pitches they give where you’re like, oh, yeah, that is true, but then they don’t tell you the other half which is the devastating fees and the underperformance and the strings attached and yada yada yada. So So yeah, if you’re looking for a financial advisor, you don’t want to be dealing with an insurance salesman. Um, the second worst type of financial advisor is what I call the strip mall financial advisor. That’s where you walk into uh a financial advisor that’s in a strip mall. They sit you down and then they just try to sell you products, right? And and this is kind of like a theme in the in the financial services world. It’s a whole industry where they’re trying to, you know, make money at your expense, right? You know, by selling you stuff. And these types of products are, you know, they can be mutual funds, they can help you set up Roth IRAs, like good stuff, but they’re usually really high fee, front loads, high expense ratios, um, you know, like annual fees, statement fees and they basically fee you to death with underperforming your actual investments and don’t really have any incentive to give you advice. They just have an incentive to sell you stuff. The, do you guys have a strip strip mall financial advisor story?
Scott: Nope. I just completely agree with you.
Mindy: One of our former guests has a strip mall financial advisor story. I believe it was episode 111 with a Purple Life’s Mom. My list of past episodes. It was episode 111 with a Purple Life Mom. She has a lovely episode, a lovely story about her strip mall financial advisor.
Scott: And don’t feel bad if that happens to you because it kind of happens to everyone, you know, like Scotch just said like he’s literally the CEO of bigger pockets and he’s like, wait a minute, have I am I missing something here? It’s it’s tough there, you know, they’re
Guest: I was sucked in. I was sucked in. I was like, oh I’m like, no, I run I I do this. I know what’s going on here. I got to get out of this conversation.
Scott: Like if we are susceptible, like what does a normal, you know, but I mean I think the interesting point here is like the theme here is to look at how they’re getting paid, right? The certain salesman is getting paid when he sells insurance. The strip mall financial advisor is getting paid when they, you know, they sell you products, which leads us to the third worst type of financial advisor or second best if you look at it a glass house full kind of person, which is what I call an assets under management advisor where they just take all your money, they basically invest it on your behalf and then instead of selling you individual products, they just take a percent of all the money you give them. So if you give them a million dollars for example, and they take 1%, that is $10,000 a year, which you know, is as a big example. And the reason I use a big example is the one of the downsides of this business model, which is actually a better business model than the other two because then at least they’re not just pushing individual products, they can more holistically like invest your account for you, but first of all, they only will deal with you if you have usually at least a quarter million dollars or so because if you have $10,000, 1% of that isn’t enough. Um and so when you deal with an assets under management financial advisor, they usually have require very high minimums and the long-term impact of those fees can add up. If it’s like a one to 2% fee over the course of an investing career, it can still erode half of your portfolio. Um and they still don’t really have incentive to give you advice. They have incentive to only give you enough advice so that you don’t take your money away and go somewhere else, but otherwise just basically keep it under their their management. Which leads us to the fourth type of financial advisor,
Guest: The least bad.
Scott: The least bad, which I like to call the most good, um is what is what’s called advice only. So advice only financial advisors don’t manage your money, they don’t push any products, there’s no commissions, there’s no sales pitch. They literally just sit down next to you, share a screen. They can look at your Vanguard Fidelity Schwab account, they can look at your IRA 401K, they can basically give you advice and their only incentive is to give you advice. The, you know, kind of the downside I would say to this model is that you have to pay them. You know, but at least you know what you’re paying them and that’s and what you pay them is all they get paid. and so they work hourly or project based, so they might charge for an hour, they might charge for a project. Um and and then that way they’re not getting paid in the back end based on what they push, they’re not getting paid commissions, they’re not getting these like compounding fees over the years, they’re just paying for, you’re just paying for the advice. And a good way to identify if you have an advice only financial advisor is ask if you can pay your financial advisor with a credit card. If they like get really uncomfortable or laugh or freak out or explain that it’s free or something like that, that’s not an advice only financial advisor, you know, that’s someone who’s getting paid through some other much more suspicious means, right?
Guest: Jeremy, can can you explain what a fee-based financial advisor is and why that is not the same as a fee only financial advisor?
Scott: There’s these terms are very confusing because they all sound similar and they’re misused by everyone. And so fee-based generally means strip mall financial advisor. That’s someone who gets paid a fee based on the products they sell you. Fee only means they don’t get paid based on the proxy they sell you, they just charge you some other fee, either a percent of assets under management or advice only. So fee only is better than fee-based but advice only is kind of a subset of fee based where there’s no assets under management either. And that said like, you know, how how can a individual consumer possibly try to like sort through this, right? So I I tried to like and you know, you might talk to an insurance salesman and they might say, oh yeah, we’re fee only, they might just lie, right? So it it doesn’t like knowing those terms doesn’t always super helpful. So I I like the the, you know, can I pay with a credit card because then you find out um if they’re just charging you for the advice.
Mindy: So I can see why people are falling for this, I don’t think is the right word, but the advice only financial advisor is going to cost me money out of my pocket up front, whereas the assets under management is technically going to cost me money, but I’m not paying them. It’s costing me money before it comes to me. before it even gets to my pocket. They just take it out of whatever gains I’ve had or however much, you know, however much is sitting in my account. Um the strip mall financial advisors, they’re and the the salesman, they’re I’m sure they’re saying, oh, this isn’t cost you anything because they’re getting paid by the company that the the of the products that they’re representing. So when you are first starting out, it can be daunting to pay for a an advice only financial advisor because it’s not like $100 dollars. It’s several thousand dollars. They’re looking at your financial situation and your goals and that takes a bit of time to look at all you’ve got going on and see where you want to be and give you advice to get there. But that’s the end of what you’re paying is the amount that you that they quote you, hey, that’ll be $2,000. That’s where it stops. It’s not the, well, you’ve got $2 million dollars this year so I’m going to take a percentage of that, and then next year I’m going to take a percentage again and again and again, and it’s just that one time fee or however many times you see them, it’s you’re paying that once. Um but having the clarity, I think is very helpful and I didn’t even know these weren’t regulated terms, which is not helpful at all.
Guest: You’re totally right Mindy and um, you know, but I give a little bit of credit to society because I think we’re wisening up to the, oh it’s free, it doesn’t cost you anything, you know, I get paid by my employer, we make money when you make money, what they say. I think that the consumer is figuring out that there’s some strings attached. Um, and you asked a second ago what nectarine was because this is the question that I always have gotten, which is okay, we kind of, I kind of walk through this pitch is like you want advice only for the reasons we talked about. And so then the next question out of the individual investor’s mouth is, okay, how do I find an advice only financial advisor? And my answer has always been, oh, I have no idea. they’re very hard to find and whatever. Um, which like it’s very unhelpfu. Um, and so a year ago my team and I set out to fix this and we launched Nectarine, which is an advice only financial advisor marketplace where you just put in your state, you say what you’re looking for and you can review all the profiles, you can read the reviews. And you said a second ago, it’s not like 100 bucks, but actually I have to disagree with you on that one Mindy because at Nectarine, it’s 150 bucks. It’s 150 bucks for an hour, all of our advisors have agreed to that price. There’s no strings attached, there’s no sales pitch, there’s no, um, you know, there’s no commissions, there’s no recurring payments, there’s nothing. You just get on a zoom call, share a screen with a licensed fiduciary financial advisor whose only incentive is to give you the best advice. Maybe get a good review for them so that they can do more of these these meetings. Um and that’s that’s the end of it. Um and it’s available at hellonectarine.com. Thanks for the pitch or thanks for the plug.
Scott: This is awesome. I don’t think there is a place where you can find true fee only financial advisors uh exclusively on the internet right now that don’t charge any AUM fees or have other services that they’re providing. And I love that every first call is 150 bucks. I imagine that after that, if there’s an ongoing relationship, there can be some negotiation for fees with the with the advisors after that.
Guest: Currently no. Um every call is $150. Um that’s
Scott: Oh wow.
Guest: Yeah, that’s our only product. That’s not like an intro offer, that’s that’s just the rate that you pay for an hour. And you know, right now about 20% of our clients are re-booking. you know, we’ve only been live for six months or so. and so I think it’ll be common to come in once a year or so for 150 bucks. But if you, you know, if you look at like a 1% fee over the course of a investing career, you know, it can be millions of dollars. It can mount up to be like, you know, crazy amounts. And so 150 bucks times, you know, any number of years is going to be dramatically cheaper than that. You know, we might offer additional products in the future where people want a bigger complete financial plan that involves like a bigger deep dive or something like that for a like a different fixed price. Um but right now we’ve we’ve kept it uh, brutally simple. one one price flat fee, book whenever you want.
Scott: Now, one one other thing I’ll call out on the fee side of things is there’s another insidious problem, not just the, you know, how much that those fees add up to, but the incentive for a financial planner in that situation where they’re making AUM fees is to reduce volatility, not maximize long-term earnings because if you’re reducing volatility, people aren’t going to or less likely to take their funds out. So you’re compounding on top of the fee issue, a, you know, long-term incentive to be a little bit more cautious perhaps than best practice in index fund investing for example.
Guest: That’s totally true and, you know, that kind of comes down to when you’re asking what is a good financial advisor, you just kind of have to follow the money, like how are they getting paid? And if they’re getting paid assets under management, yeah, they have different incentives. Their incentive isn’t to provide you advice, their incentive is to not have you quit, right? And maybe not have you quit is you being in a really conservative investment, you know. And by the time you realize what happened, you were maybe getting 5% for 10 or 15 years when you could have could have been getting 10%, you know, you might be hundreds of thousands of dollars behind where you would have been otherwise.
Scott: You know, this is a nuance question here. There’s a small percentage of people out there, especially in real estate, who could use a whole life insurance product, whole or like some some one of those types of products and benefit from it from an investing perspective. I am not one of those. I am out outside of that box. I’m not a fan of of it in a general sense, but how how if you’re someone who is interested in that kind of stuff, but want to avoid the, what was it, the strip mall or the the insurance salesman uh component of this. Where would you go to get advice on that? Do do fee only financial advisors provide that advice and our experts in that category too?
Guest: My general answer to that, at least my opinion, I’ll I’ll tell you my opinion then I’ll tell you how to get advice. My opinion is, you know, uh a permanent life insurance is part of a, um, solid financial plan in the same way that meth is a part of a balanced breakfast. Like maybe technically true. Um, you know, if you have a banana and
Scott: really jump starts your plan, right? Like it energizes.
Guest: you could make an argument that your your uh your macros are still right on if if meth is in there, but you could take out the meth and you still have a balanced breakfast, right? And so I don’t, I don’t, I don’t look for a way to make permanent life insurance work. You know, it it it usually doesn’t work. And I don’t I’m a millionaire, I have lots of friends who are millionaires, none of us got there by buying life insurance as, none of us use life insurance as some sort of wealth building tool. Those of us who have life insurance have term life insurance because we have kids and just if we die when we have young kids, we want to be covered. Otherwise we’re investing in index funds and real estate like all the other millionaires we know, right? Um and so no I don’t look for a reason to make, you know, to to make it work. That said, you know, I don’t know where to go other than Nectarine because we have former insurance salesmen on Nectarine who no longer, you know, who had a philosophical problem with that business model and they’ve since got their CFP and they do it right and they can walk you through all the fees, they can walk you through the strings attached, they can walk you through the the participation rates and the the the floors and the caps and like the all the carnival games that these insurance companies set up to make it seem like a good deal and, you know, why it’s not probably a good deal. You know, obviously have my perspective on this, but you know, generally talking to someone who doesn’t earn a commission from selling to you is is who you need to talk to.
Scott: Let’s do math, not meth. I love it. Yeah, and we just have a small but I think very vocal part of the Bigger Pockets Money community who do have these products and feel that they’re valuable and I and I think that there’s, um, you know, that that’s always been a challenge is there’s, you know, I think I share your views in a general sense, but there are, you know, I there are some smart people out there who disagree and I just, I just feel like it’s so hard to parse that out because all the advice seems to come from people who have already have the product and feel and you wonder if there’s like a buyer’s, you know, you got you gotta you got to really like it if you’ve got it. And then there’s the the the the the sales people. I’m wondering if there’s like a neutral party. It sounds like the reformed, uh, uh, uh reformed financial planners, um, that do math now, uh on the platform are on your platform are a good place to go and get that.
Guest: And they don’t hate insurance, right? Like they’re not reformed in that they’re like now insurance haters, they just don’t earn commissions from selling anymore. That seems like a bare minimum you should ask for an advisor, which is you’re not getting paid on the back end based on the advice you give, right? Um, and like the more every time I dig into people who are pro insurance as a way to build wealth, like something’s something’s not right people. I mean, you know, I’m sure they’re out there. So if you’re hearing this and you’re punching a hole in the wall, then I apologize, but it’s usually people who are selling insurance or you have, you know, want to, you know, prove that they’re right by buying it or whatever.
Scott: Yeah, and we and we did a good deep dive into this with um the White Coat investor. You can tell that uh uh he’s spent a good chunk of time really thinking through every in and out of life whole life insurance and okay, conceded, here are a few use cases for it, but all of these are the reasons why, you know, that are typically sold that are they’re not good ones. So I I think that this discussion is so important in the context of only financial advisors because of the problem of the commissions, that like this is the main source of income for the folks in that insurance and strip mall category, I believe and I think it’s a huge problem for folks that really intimidates them. Uh you’re right, it is dying out, but it is not dead yet. Um and and it’s a uh something that we we try to fight here at bigger pockets, I think.
Guest: Oh, it’s not even close to dead yet. I mean, the insurance salesmen are alive and well, the the strip mall financial advisors are alive and well, but but I do think consumers are wisening up to, you know, they they walk out of these meetings and they’re like, something wasn’t right there. Um, and so I think that, you know, hopefully we’re on the right side of history and giving people a like a better option.
Mindy: Well, I just wanted to say, I think that life insurance has its place and I don’t think that anybody here is saying that life insurance is completely worthless 100% of the time. But I also don’t think that anybody is saying that whole life is the way to go in almost any situation. So, uh definitely when you are considering life insurance, which absolutely has its benefits, look into what those benefits are and how they benefit you and whole life is probably not going to be the uh savior that you think it is. And we did a deep dive about life insurance in general all the way back on episode something with Joe Salhi, episode 139 where we dove deep into how life insurance is built. And when Joe first started this episode, I was like, Joe, where are you going with this? But actually it builds on how you can decide what kind of plan is right for you. And in some cases, whole life is the right plan. Those cases are that that percentage is like 0.1 or something. It’s very, very small that whole life would be the right uh path for you, but it’s not necessarily the wrong path. You just need to know make an informed decision. Don’t make a decision based on Bob at the strip mall telling you, oh yeah, you need whole life. Yeah, you need whole life for him because he gets a better bigger commission.
Scott: Well, Jeremy, can you tell us where people can find out more about you?
Guest: Um, my Instagram is where I do most of my personal finance education at Personal Finance Club.
Scott: Thank you so much. Really appreciate it and hope to to chat again soon.
Guest: Thanks so much, guys, this was a blast.
Mindy: Scott, that was such a fun episode and also, don’t follow Jeremy’s advice for breakfast.
Scott: Yeah, let’s not do that. Uh uh but yeah, it’s hard to find fee only financial advisors. You know, some of the places, you know, even that I had looked as recently as a couple years ago, um a lot of the fee only financial advisors also charge AUM fees, which is not fee only. And so I love the fact that he’s his uh Hello Nectarine is truly fee only and and really admire what he’s building there.
Mindy: Yes, you can find it at hellonectarine.com and it is, to be clear, it’s advice only and it is fee, they charge a flat fee for a one-hour consultation, and I’m super excited to go and test it out because I have been looking for somebody to just take a peek at what we’re doing, make sure that we’re not missing something. I don’t want to get, you know, 10 more years down the road and have somebody say, oh, well, 10 years ago, if you would have done this, you would have saved yourself RMDs or, you know, whatever else. Like you don’t know what you don’t know, and even though I know a lot, it would be nice to have a separate set of eyes.
Scott: Yeah. And and a uh uh just to reiterate that, you know, while we like Jeremy, uh really enjoyed the interview and all these kinds of things, there is no financial affiliation. We’re just excited about the product and neither Mindy or I have tried it at this point. Uh but we love the concept and hope it uh takes off.
Mindy: Yep, absolutely. Thanks for that disclaimer, Scott. I appreciate that. All right, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the Bigger Pockets Money podcast. He, of course, is Scott Trench. I am Mindy Jensen saying, good day Sun and Ra.
Scott: If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.
Mindy: Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Calin Bennett, editing by Exodus Media, copywriting by Nate Winetrub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.
