Prospective Product Bloat – Episode 187

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey, everybody. Welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have our co-host and bestselling financial author, Kim Butler. And today we’re going to be talking about prospective product bloat. And basically, that sounds like a nice, wonderful title. But the real underlying question is, is complex better or is making it complex really just a sales technique? And Kim, welcome. And I can’t wait to hear your opinion on this. Well, it’s such a great question.

[00:56] Thank you, Todd. I am so grateful to be able to answer it and very specifically and with experience answer it. So I think back to my old certified financial planning days, planning planner, however you want to put it. I don’t like the word, so I can’t say the word. But I, at that time, saw and recommended numerous products. I mean, we would have people have all these special little specialty life insurance policies, these specialty car and home insurance policies, special accounts for this, that and the other thing, SEPs and SIMPLES and separate IRAs. And then you add in the whole corporate environment and we would be doing C-Corps on top of S-Corps. And I did that myself with a lot of our business structure, very complicated

[01:46] strategies between the different corporations, upstreaming money left, right and central. And I will admit that in 08, when so many things change for so many people, we had to do a major simplification for our lives personally. And I saw a lot of clients doing this same simplification. And so now here we are almost 10 years past that. And I can really start to see the difference. So my quick answer to your question is SIMPLES is better. So, so much better. And SIMPLES does not need to mean small. I mean, it’s just really unlimited in SIMPLES capacity to be large, but still SIMPLES. So as an example, you see people all the time with a 401k, an IRA, a self-directed IRA, a Roth IRA. And then there’s a spouse, maybe 401k or 403b.

[02:53] Then the spouse has probably got an IRA rollover. There might be an inherited IRA. And so we’re talking, what was that, eight or nine accounts for two people. And though there are some accounts that absolutely must remain separate. In other words, his IRA has to stay his and hers has to stay hers. Roth IRAs have to stay as Roth IRAs. Other than that, to the degree that you can simplify that structure, in other words, roll them all into one IRA, that is going to be the more efficient, more effective thing to do. Now, again, there are sometimes reasons that you can’t. So, for example, the inherited IRA environment, that often has to be left alone and kept separate. But I find these people, you know, they’ve worked five, six different

[03:40] jobs. That’s very common in today’s world. And they literally have an IRA rollover for each job. There’s no reason for that. Those can all be combined. And so one of the things that we do a lot is to help people pull all those various IRAs and SEPs and SIMPLES and all the same type of dollars. In other words, after-tax dollars that are now in an IRA environment and combine them into a single self-directed IRA. And then from there, they can choose maybe one or two investments. That’s all you need, because that’s the other area that I see all the time is unbelievably complex asset allocations that are there supposedly to help people get more money with their investments. But let’s just take a simple asset allocation for a minute.

[04:33] Your basic stock and bond environment. And I have a question for you to think about. And so, Todd, you can play devil’s advocate here on this or answer as a client might or what have you. If you just are looking at stocks and bonds and the asset allocation between them, if you believe that the stock market is going to do as good as you think it’s going to do, why do you have bonds? Because I don’t really believe that it’s going to do what I think it’s going to do. Yeah, and isn’t that crazy? And my husband, Todd Langford, is the one that actually came up with this. He started looking at the truth concepts diversification calculator for a client. And this client had a substantial amount of dollars in a managed

[05:20] money account. And Todd started asking about the bonds and why they were there. And it became very apparent that they were there because this person and their advisor did not trust the stock market. And so here you have a situation where you’ve got all these different products. I mean, some asset allocations are 7 to 10 to even 20 different types of essentially paper assets. And they all can, to a certain degree, fall back into a single category or maybe two categories. Like we broke it down simply with the stocks and the bonds. So you get into this. What did you call it? Product bloat. Yeah, you get into product bloat where you just have too many pieces and parts and you haven’t broken it down to the simple

[06:12] message of what is it that you want this money to do. And I mean, Warren Buffett, he’s in the news a lot these days. Apparently, he’s kind of maybe making some plans to pass some of the decisions on to the next generation. Not literally in terms of his children, but in some of his vice presidents or what have you. He talks about de-worsification. And we’ve used his word on our show before here. And so you have the situation where you’re spread out so thin that nothing’s doing a good job. Instead of oversimplifying, which again, maybe you could go too far, but if you really focus on simplifying and you just identify what you want the money to do. And to me, there’s three main things that money should do.

[06:55] It should either be liquid and available. So think your emergency opportunity fund, which most of our listeners know the best place to store that is in the life insurance industry. Or the money should grow. So you think your IRAs and your 401k rollovers. It should be an IRAs. And if you have to the Roth IRA and growth should be something that happens without shrinkage. Growth should be the norm, not roller coaster riding the norm, but the growth. And so find an asset. And again, for us, you can think life settlements because these are going to grow without shrinking. And then the third thing that money should do in my mind is create income. It should create cash flow. And so again, a lot of people have attempts at cash

[07:46] flow. I find that this is one of the harder things for people to get their money to do. And if you’re looking to the bond arena, or if you’re looking to annuities, I think you’re going to want to keep digging. Because for us, bridge loans, bridge loan investing that is supported by the actual piece of property or a variety of properties that are going to kick off an income stream in cash flow every single month or some of them quarterly. That’s the value that we seek when we’re wanting our money to create cash flow. And if you go to your typical money manager, your stock bond mutual fund person, they’re just having a hard time creating cash flow right now. Frankly, I’m not even sure how they’re doing it

[08:36] at all. Do you know? One of the things that as I was writing and getting prepared for today, one of the things that really stuck in my mind is listening to somebody explain indexed universal life. Oh, dear, do tell. I mean, you have two choices. One, you lie. Two, you don’t know any better. Or three, you have to talk for hours. Yeah, not simple. Not black and white without a doubt. And so here, this is a great example of product bloat, not in the form of a whole bunch of products, but product bloat in the form of a single product that has gotten so unbelievably complex that I wouldn’t even pretend to begin to understand it. I just know that I understand enough of it to know that I don’t like it.

[09:40] And I have very specific reasons why I don’t. And most of those go back to a lack of guarantees. So our message here is just to focus on simplifying and to make sure that you’re clear what you want the money to do. And once you’re clear on what you want the money to do, then you can pick the appropriate product, which is the thing that you buy and the appropriate strategy, which are the things that you do with that product to make your money behave the way that you want it to. And let’s no longer be okay with roller coaster riding or lack of clarity or fuzziness or product bloat in the form of so many products to do a few jobs or in the form of one product that’s so complicated that we can’t even explain it.

[10:32] You know, these concepts, they should be explainable to a high school student. A high school student should absolutely, unequivably be able to explain and understand and generate ideas around the financial products that are out there. They don’t need to be more complicated than that. And if they are, I think that should be a real red flag. One of the tips I would offer our listeners is that if you meet with a financial advisor, insurance agent, we have so many titles that we all go by and you walk out of that appointment and you spent more time listening than you have talking, you don’t have the right advisor. That is an excellent statement. And many of our processes are very question driven.

[11:22] In other words, we want to ask a question and then be quiet so that you, the client, get to do the talking and you, the client, get to drive the meeting. We don’t have sales presentations here. We don’t have an agenda. We’re here to answer your questions, to help you. I find today that clients come into us with so much self-study done that they deserve and have earned to get the credit for. So let’s build on that knowledge rather than presuming we know what they want to hear or should see and having a pre-prepared presentation. And I’m not saying that sometimes a quick presentation isn’t helpful but as a general rule of thumb, you said it so well, Todd. The client should be driving the meeting.

[12:08] The client should be the one asking the questions and the client should be the one getting to do the bulk of the talking. Super. Well, Kim, I know that you have a gift to our listeners. We haven’t given it out here in a week or so. So I’d like for you to offer that if you would. Absolutely. We have a book available called Financial Planning Has Failed and it has some fabulous questions in it. It will cause you to rethink some of the areas in product that you are pursuing right now as well as to get some information about the alternative approach that we have both as a place to store cash, create income and generate growth. So that book is available to our listeners. It’s in audio form. There’s a printed version there as well.

[12:58] It’s the only place you can get it. It’s not on Amazon and it’s at Partners, the number four, Prosperity.com slash ebook. Again, there’s an audio version there as well. Partners, number four, Prosperity.com slash ebook. And then just to summarize, number one, simplify. Number two, find an advisor that you’re comfortable with and who wants to listen to you because I promise you, no one will ever care more about your money than you will. And you need to take an active role in it. Anything else to add, Kim? That was a great summary. Thank you for all the work that you do and continuing to spread our message. Super. Thanks again. This is the Prosperity Podcast. Take care, everybody. Thank you for listening to the Prosperity Podcast.

[13:47] To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.