Traditional Versus Typical Finance – Episode 081

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[00:00] 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 to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel, and we are once again fortunate enough to have bestselling financial author and my co-host, Kim Butler, with us today. Hi, Kim. Hello, Todd. Happy to be here. Always a joy to chat a little bit about some financial things that people can benefit from. It’s definitely an exciting time to be in our business because certainly as we’ve seen the markets fluctuate, more people start to pay attention to their finances, which

[00:48] it’s kind of sad that they don’t until then. But today we’re going to be kind of addressing some ways that you can compare what we do to what maybe a lot of you have heard a lot of. So we’re going to be discussing a couple concepts. One of them is going to be what we call traditional versus typical. And the other one is going to be using the illustration of farming versus hunting as a way of looking at your finances. So Kim, I’ll let you kind of take it from there. Well, I love the traditional versus typical thing. For many, many years, I used to say that what we did, our prosperity economics work, our seven principles, the products that we worked with, the strategies that we used and again, you remember that products are things that you buy, strategies are things

[01:38] that you do. I used to call it non-traditional because I felt like the stockbrokers out there, the money managers, your, now I’m so tied into my word typical that I can’t even say it right, your otherwise financial person, in other words, not a prosperity economics advisor, that their work was traditional and that ours was the opposite of that. And I didn’t know any other term other than non-traditional, which let’s think about some things out there in the marketplace. When you use the term traditional and then you use the term non-traditional, it has a certain connotation to it. And over time, and I even had some clients challenge me on it, like non-traditional, this doesn’t really fit. You’re talking about a product that’s been around for a couple hundred years,

[02:31] the life insurance. You’re talking about a strategy that’s been around since the beginning of capitalism, which is using real estate. And you’re talking about these things like life settlements that have been around since 1911, and you’re using this term non-traditional, which just doesn’t always sound quite right. It almost sounds too new, too avant-garde maybe. And so fine, over time, I just continue to work with it and think about it and play with it. And I finally realized that the work that we do, the work with life insurance, the work with life settlements and bridge loans, that’s traditional financial work. That is what has been around forever. And all this other stuff, the focus on the stock market, the 401Ks,

[03:28] the focus on the whole buy and hold and hope, the focus on the up and down and just ride it out nature, that has literally only been around depending on what you’re talking about, like the 401Ks since the 70s, financial planning since the 50s. In fact, we’ve quoted many times on our blog how long ago the only financial products out there were mortgages and whole life insurance. The idea of even investing in the stock market wasn’t used at all. So I realized that a better term for all these other financial advisors out there is the word typical. What the typical stockbroker does, now I can say it, is what the typical stockbroker does. And what the typical financial planner does, again, remembering financial planning has only been around for call it 60 years or so,

[04:28] is typical. It is the norm, if you will. And yet, that doesn’t get results. And we all know how many, many times and many different ways in our lives, in order to get the good results, we must not do what other people are doing. Because if we want to get typical results, then we’ll do typical things and they’ll get us typical results. It’s a perfect term. So I don’t remember who to give credit to it for. Somebody probably suggested it to me. Maybe it popped into my head. In that case, we know where the credit goes. But I think it is a fabulous distinction between what we do, prosperity economics, the seven principles, and all of our work with the particular products that we focus on. That is traditional financial work.

[05:23] And I avoid the use of the word planning because our listeners know what I think of financial planning. So I’m calling it financial work. Because financial planning is clearly not traditional. And all of those other things are just typical. Boring, typical things. Did that make that distinction clear enough, you think, Todd? Yeah, it certainly helped me a lot. And I grabbed onto this. I’ve always given credit to you because I was actually listening to a public webinar. You were teaching, I can’t remember what group it was when you first said that. And that was one of those rider downer moments. So I’m giving full credit to you on this one. I think what’s interesting is that a lot of people might argue

[06:06] that the stock market is traditional. And as much as we knock the stock market, we’re really not against the stock market. People just have to understand that if you go back 100 years ago, you invested your own money. A broker invested their own money. Or maybe even a broker did trades on behalf of one client. In the 70s when mutual funds create, in the 70s when the mutual, sorry, the 401k was created. And then in the 80s when mutual funds were created, we started seeing these humongous pools of money starting to be under the control of just a few people. You know, the California Pension Fund has more money than Warren Buffett. So, I mean, all of a sudden we have one person’s ability to physically influence the market because the stock market is an auction process.

[07:05] So when money moves that big at a time, you can physically manipulate the markets. Now, prior to the accumulation of all of this money, it was pretty much impossible. I mean, there were stock things and people would buy up all the gold there were, you know, cartels and things like that on a not a regular basis. But the markets are typically manipulated, are, yes, traditionally, are, yeah, typically manipulated today. Would you agree with that? Yes, absolutely. And I absolutely in my early career was totally okay with the stock market because it was before the internet. Really, I think that’s when the big transition occurred. It was a reasonable business-oriented approach that we could trust.

[07:56] And yet what has happened over time is that proper business principles have not been followed and it is no longer trustable for me personally. Now, I agree with you. We’re not down on it. If people want to do it, that’s fine. We are just very up on things that we think work better and have chosen professionally. And I will admit, personally, to focus on those things instead. One of the things our listeners may not be aware of is I coach for strategic coach and in those groups, I often will have 20, 30 individuals who are typical financial people. They may be financial planners. They may be what’s called assets under management guys, your typical money manager kind of person. And they’re all professionals and they work hard for their clients.

[08:49] And I’m grateful that they feel like they’re on a path that they can really trust and work with. I just personally don’t subscribe to that path. But I think, you know, we do have even a few clients that are still somewhat involved in the market on some levels. But I don’t think you can call yourself a fully educated investor if you don’t understand these alternatives as well as the typical market. No doubt. And the alternatives set a client’s financials up for so much stronger of a position because the subjects like diversification and asset allocation and things that are talked about amongst the mutual fund realm and even the stocks realm are not truly implemented unless you’re mixing in alternative investments.

[09:43] You cannot say that having, for example, mutual funds that are both growth and value oriented. Those are two different styles of investing is diversified because you’re still all in the mutual fund arena. And, you know, we were talking about timeframes earlier. I’ve forgotten that my grandmother, so I’m almost 50. My grandmother was in her 90s, I believe, when she passed on three or four years ago. But some of the very first shares of the very first mutual fund that was ever offered Massachusetts Investors Trust. And that actually performed very, very well for her for five or six decades. Her husband passed on when my mom was young and a lot of the life insurance money that the insurance company paid as a death claim

[10:37] was invested in that mutual fund. And it not only created income for her, but it performed well. But I would never have her do that today with life insurance money that needed to create an income. It’s just a completely different business arena. Super. Well, we are kind of a little bit of the ways in here and we need to probably take a look at the other concept we introduced, which was the difference between farming and hunting as a way to look at your money and your investments. And I guess you could probably look at a lot of areas of your life this way, couldn’t you? Absolutely. I love the analogy. Lay it out a little bit further for us. Well, you know, I was looking about how a hunter, you know, they pretty much, I mean,

[11:25] they have to lie in wait for an opportunity to come by and then they attack that opportunity and destroy it versus a hunter has to prepare. They have to, number one, they’ve got to find good soil. They have to sow good seeds. They have to tend it and then they have to harvest it in such a way that there is more crops to be grown, if not by them, by the future farmers that they’re going to hand that off to. I’m thinking how much that has to do with our own personal lives of building ourselves, sharing that knowledge, wealth and our gifts with others, whether that be the way that we educate our children or that’s the way that we earn a living and then still somehow another take what was good that we did and pass it on.

[12:20] Well, I love the farming analogy mostly because a lot of the work that we do is so long-term. When you buy a whole life insurance, you’re going to own that the rest of your life. And for many, many people, that could mean 60, 70, 80 years. Maybe for some, it’s less, but it is a long-term product. You have to sow the seeds or you have to capitalize it or you have to put money in it first and wait. Now, you don’t have to wait until you die. That, of course, is a very misunderstood aspect of whole life insurance, but you do have to wait a year or two before you’re really going to use it. And it always cracks me up. Sometimes when we attend advisor meetings, you have these people that are wanting to borrow

[13:04] against their life insurance literally every single month. And it’s just not designed to function that way. It is a long-term product. It should be looked at on annual or even decades-long environments. I’ll even coach a 50 or a 60-year-old person to look at life insurance over a 30-year period. Well, that’s the same as farming. You don’t plant seeds and then go out the next day and expect them to show up. It’s actually planting time here. And we literally put seeds in dirt about two weeks ago and just this last Saturday transitioned them to the tiny little pots that are in the greenhouse. And they’ll sit in the greenhouse for a couple months now until we get the last of the frost risk over.

[13:53] There’s just so many analogies of the long-term approach that farming necessitates and the long-term approach that good prosperity economics necessitates. And families, if they look at their own generation and then they also think about the next generation and the next generation. I mean, most people think about at least kids and grandkids. And some people should be thinking the other direction. In other words, maybe you’re in your 50s and you’re thinking about your parents. I literally today am revisiting my 76-year-old dad’s life insurance decision because we need to take a look at that and fine tune it a little bit. And so a lot of us, we’re working with essentially four generations. One in front of us and then ourselves, of course.

[14:46] And then one behind us. And then actually two in front of us is what I should have said. It depends on how you want to word front or behind. But your own children, your grandchildren and your parents is what you ought to be looking at. Four generations at all times. And that’s how farmers have to think. I remember when Todd and I first moved to this farm. Now this is a fourth generation family farm for his family, but for me it was brand new and I had to relax. You can’t get it all done on a weekend. You got to have a 20, 30, 40-year perspective on time. Yeah, I would ask you as a farmer, if you had an opportunity to increase the yield by double of half of your crop by risking losing half of the entire plants,

[15:35] would you consider that a good option? Absolutely not at all. What do we say? My risk tolerance is zero. And you know, it’s really funny on the plants. When you plant the little seeds and then a couple come up, you’re actually supposed to kill one of them and destroy one plant and then keep the other. I can’t even do that. Awesome. Well, we’re here about the end of our time frame there. Anything you want to add before we wrap up, Kim? Any resources you might have to offer our listeners? Well, I know we keep hinting at this, but we are so close. The new Live Your Life Insurance is out there, but it’s not on Kindle yet. So we haven’t released it. But if you want to go grab it on Amazon, and I believe the audible version is coming also.

[16:22] Those are resources that are so helpful. And the new Live Your Life Insurance book has got a great additional chapter. So even if you did already read it, I think you’ll really enjoy the new one. And what I would encourage you to do is hand your old one off to somebody else so that they can learn about it too. I will promise you will have some benefits for our listeners. Once I’m confident that those products are live and on Amazon the way that they’re supposed to be. And then, of course, we’ll have some other ones coming down the pike, as we say, right? And they’ll be available too. We’re looking forward to it. Super. Well, this is No BS Money Guy Todd Strobel. Special thanks again to Kim Butler

[17:04] for the Prosperity Podcast. And take care, everybody. Thank you for listening to the Prosperity Podcast. 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.