“5 Things To Look For When Hiring a Financial Planner or Financial Adviser”, with Cory Shepherd

An Interview With Tyler Gallagher

Many big box financial retailers limit the kinds of advice that their representatives can give clients. One client came to us considering a real estate investment, because their previous advisor could not even put a pro forma analysis of a real estate deal in writing. That would have been nice for the client to know in advance!

As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing Cory Shepherd. Early in life Cory was drawn towards dueling passions in business and education. In his financial practice he found a way to end the duel and marry the two together. The primary focus of his planning practice is educating and empowering physicians and entrepreneurs. Ever in pursuit of personal growth, Cory has attained the Chartered Financial Consultant® & Certified Financial Planner® designations, requiring thousands of hours of experience and rigorous training. He is the author of Cape Not Required, a strategic guide to finding greater power in your life. Cory is also the co-host of Your Business, Your Wealth, a podcast focused on bringing valuable philosophy and financial strategy to entrepreneurs and all others interested in building financial independence. After 14 years in Seattle, Cory moved to Chicago with his wife Danielle, where she is completing a pediatric residency at Lurie Childrens’ Hospital. Cory is an avid tennis player, runner, and coffee roasting hobbyist. When Danielle has the occasional day off, they enjoy taking their dog Kubo on outdoor adventures.

Thank you so much for doing this with us Cory! Our readers would love to ‘get to know you’ a bit more. Can you tell us a story about what brought you to this specific career path?

I was drawn to the world of business and people very early in life, I just didn’t know what kind of business I wanted to start. In high school, I saw my parents working with a financial advisor and realized I could help business owners make the most of their money as they earned it from their businesses, and all the while get to experience a taste of many different businesses. From the end of high school and all throughout college I was consistently aimed at a some flavor of this career, and by my junior year of college I was working in a financial planning firm part-time. I went full-time after I graduated, and thought I would work there for the rest of my career, eventually buying out the current partners. Before those plans could come to fruition, the 2008 financial crisis hit, and I had a sudden need to find a new home for my career. I call that the best bad thing to ever happen to me, because I had no choice but to go out and start my own practice at that point. I have had a few different business cards over the years, and now I am in business with a partner at Sound Financial Group, but I still have several clients who have been with me since those early years.

Can you share a story about the most humorous mistake you made when you were first starting in the industry? Can you tell us what lesson or takeaway you learned from that?

I definitely did not think this was funny at the time, but I have since been able to laugh at my own expense: I was only a year or two in business and just like every brand new business, every new client I gained was vitally important to my survival, and I couldn’t find them fast enough. On a Friday afternoon I discovered I needed one more signature I had missed to finalize a new relationship, and I called the client to see if I could swing by their house. They were going to be leaving the house in a couple hours and then I wouldn’t have the opportunity to connect with them for about another week.

I jumped into my truck (yes I started out with a Ford Ranger as my business vehicle) to hurry over to their house, noticing my gas gauge was firmly piercing the letter E. I muttered something classic like “I can make it”, and launched out of the office parking garage and onto the highway. About 10 minutes later (roughly halfway to my exit), the engine died, and with it the power steering. With both arms straining I was able to safely guide the car over to the shoulder of the highway. To this day I have endless gratitude for the AAA subscription my parents had given me for Christmas! I was able to make a call and have a tow truck deliver a few gallons of gas to let me limp off the highway to the closest gas station. The 30 or 45 minutes I had to wait for that delivery were doubly harrowing — both from the semi-trucks rocking my suspension as they moved past, as well as the suspense of hoping the gas arrived in time for me to meet my client’s departure deadline. I did end up making it to the client’s house in time to have that final form signed, but I am sure the stress of that journey took a year off my life in the process!

What I learned from that experience is a lesson in the concept of slowing down to speed up. Spending a few extra minutes with that client the first time we met to complete paperwork would have saved us both the time cost of another meeting. Pausing to fill my gas tank before jumping on the highway would have delivered me to my client’s house much faster than my rushing. Finally, hiring a detail-passionate assistant to help me complete tasks like paperwork would initially slow me down both in training time and in net profit I was able to create from my business — but the magnification of my efforts and efficiency quickly sped up the growth of my business.

Are you working on any exciting new projects now? How do you think that will help people?

My business partner, Paul Adams, and I are publishing a book together, called Your Business Your Wealth. We named it after our podcast, which is focused on the successful entrepreneur/business owner. The book examines the journey of a business owner, and the myth that most business owners count on — that they can sell their business for enough to live on for the rest of their lives. I am very excited to publish this book because it is going to help entrepreneurs create the most value for their family out of this amazing asset they have created, their business, and help them use their business to create financial security for their family, on their personal balance sheet.

Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Is there a takeaway or lesson that others can learn from that?

That tipping point of success definitely happened when I met my wife Danielle. I had been learning a lot in my career, but growing my business slowly, because I was satisfied with working just enough to support me having some fun with friends after work, and not much else. When I met Danielle, I realized I needed more than gas for my truck and beer money if I was going to contribute to a life that she would want to buy into by marrying me. The real lesson here is “know thy aims”. Working hard is hardly worth it if the work doesn’t have a purpose, and this applies both to advisors and their clients. For clients, saying “I want to make my balance sheet bigger” isn’t a fully developed goal. We need to identify a bigger purpose that they are moving toward. The size and scope of that overarching purpose will dictate how hard they need to work along the way, and exactly how much bigger their balance sheet needs to grow. The lengths to which the client is willing to go will be impacted by that bigger purpose. If a client’s main goals are really around supporting their family and creating quality memories, then they probably don’t need to spend 80 hours a week working so they can pile extra money away. That client can probably pick a job that allows her plenty of time with the family and still create large enough financial results to support their long term goals.

I think too many people are pursuing some external idea of success as an end goal, and they would have a much more satisfying life if they first defined what a successful and happy life would look like for their family, and then go do the work to make that life happen. When I discovered how to plan my work in that order, two shifts happened at once that created that tipping point of success: First, I became much more effective in producing great outcomes for my clients, because I was passing my newfound perspective on to them. That feeling of truly helping families created much more motivation for me to actually do the work, so I was not only creating value for clients more effectively, I was driven to help as many families as possible!

What three pieces of advice would you give to your colleagues in the finance field to thrive and avoid burnout? Can you give a story or example?

1. It is never about you, it is always about value for the client
2. Be crystal clear on what a satisfactory working relationship looks like
3. Communicate the “rules of engagement” for that relationship to each new client

Many advisors who are burning out grow frustrated at clients who don’t seem to appreciate them, or are hard to work with. The first problem is that the advisor makes the whole relationship about themselves. If a client doesn’t call back, the advisor makes up all kinds of reasons about themselves as to why the client isn’t calling back. In most every case in my past, clients weren’t sitting around spending their days figuring out how to avoid me — another important issue had erupted and they weren’t thinking about me at all!

The second problem is that most advisors don’t make it enough about themselves. In

reality, most clients are easy to work with, but their default method of interaction is almost always different than their advisor’s. Whether it is choosing when to use email or phone calls to communicate, or how long they take to respond — all these things are habits and conventions clients learned from their family, school, or work environment. Most clients would happily interact differently, if the advisor just asked. At SFG we start out every new client relationship creating a set of mutual working agreements, so that we all know what to expect out of each other. Even more importantly, we help everyone avoid accidentally annoying each other!

Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As an “finance insider”, you know much more about the finance industry than most consumers. If your loved one wanted to hire a financial advisor (not you :-)), which 5 things would you advise them to find out about before committing? Can you give an example or story for each?

1. How does the advisor deal with their bias?

No advisor is actually unbiased, and the sooner our industry can stop hiding from that and starting openly addressing it, the better for the consumer. Even a fee-only advisor has a bias toward giving advice in a way that keeps that fee coming in year after year, never mind all of us (every human!) has a whole load of pre-existing cognitive biases.

Picture two “fee-only” advisors. One grew up in a family where her father made several successful real estate investments over the years. Her father repeatedly told her: “I paid for this vacation…for your college…for your wedding…with my real estate.

Now picture a second fee-only advisor: Growing up, his father tried wading into real estate. But through a series of unfortunate events, probably 80% bad luck and 20% over-extending, those real estate investments brought the family to bankruptcy. The advisor’s parents divorced when he was in high school, he had to work 2 jobs to pay his way through college, and now even provides some financial support to his parents.

Don’t you think both of these advisors are going to bring very different inherent biases to conversations with their clients around real estate investing? None of us are free from bias, so at SFG our mantra is “indisputable math & independent scholarship”: For any potential strategy, never mind what it is called, never mind whatever pre-existing biases we bring, or our clients bring — we use math to calculate the potential strength of the strategy, and we reference 3rd party independent scholarship to help us know that we are doing the right math as a part of our analysis. We go through as many iterations of that process as needed until we find the right strategy, always asking: “Does the math and scholarship lead us to conclude that this strategy satisfies your goals more effectively than the next best alternative?”

Another example is that most CPAs are primarily focused on keeping the next year’s tax bill as low as possible. It isn’t their fault, their industry has created that singular bias towards giving the best version of the annual bad news they have to give. We often recommend Roth IRA strategies to high income clients (yes, there are ways to make Roth IRAs available even at a high income) and their CPA will be focused on how that makes the client’s tax bill higher this year. Rather than make them wrong (after all their immediate assessment is correct) we widen the perspective of the conversation with third-party scholarship around historic income tax rates, and calculations of how much more taxable income the client will create in the future if the bulk of their assets are in tax-deferred 401(k)s and IRAs, and most clients’ CPAs end up supporting our strategy. This is because we don’t attack their bias, but help them navigate their industry’s biases with math and scholarship as our chart and compass.

2. How is the advisor paid?

This is the number one area of scrutiny in the financial industry right now, and rightly so — there have been a lot of games played under the radar over the years. 12b-1 fees for example — which amount to a mutual fund charging you a fee to help them market to new potential customers — have rightly been exposed and mostly eradicated. For your basic relationship with an advisor, there are lots of different models out there, and you can experience great results in most of them — if you are aware of the implications on the front-end. If all you are looking for is help with a portfolio of investments, then an asset-based fee advisor may be perfect for you. But keep in mind — if all an advisor can be paid for is managing your money, you may not get any advice (or very good advice) on anything else. The word “commission” has taken on a negative connotation in the financial industry, at least compared to the word “fee”, but the words are closer in meaning than most realize. After all, what is an annual 1% asset under management fee but a 1% commission that gets paid every single year? There are also commission-based advisors (usually connected to insurance companies) who are highly educated and extremely comprehensive in their advice. They get paid on the back-end by an insurance company for whatever product you implement, but what most people don’t realize is that by law, the insurance can’t cost more or less, or perform differently over time, whether you buy directly from the insurance company or use a third-party advisor as your representative. This means you and the advisor get to create value together, and someone else pays the advisor, not you. For a younger client, or a client with less free cash flow to pay an advisor, this is a path to getting higher quality advice from a more experienced advisor at a lower out of pocket cost, as long as you can manage their likely bias, keeping in mind that they only get paid from a specific product. But if the advisor can demonstrate through math and scholarship how their recommended strategies move you closer to where you want to be, this can be a great solution.

We created our Wealth Design/Build model to help solve the compensation issues we saw in the industry. Most clients pay us a flat consulting fee to begin our relationship, so that none of our initial advice is based on asset or product compensation. That is the Design stage of our process, where a client pays us to create a financial blueprint for them, like they would pay an architect to create a blueprint for their house. The client owns the blueprint in both cases, so whether it is a house or their balance sheet, they can build out the structure themselves if they are handy with a hammer (or a spreadsheet), or they can take the plans to someone they trust to help them build it. Most clients need the greatest amount of help in actually putting their plans into action, which is why we offer the Build stage of our relationship, where we can transition from “architect” to serve as a “general contractor” to help the client make their new strategies

3. Can the advisor actually advise me in all the areas that are important to me?

Many big box financial retailers limit the kinds of advice that their representatives can give clients. One client came to us considering a real estate investment, because their previous advisor could not even put a pro forma analysis of a real estate deal in writing. That would have been nice for the client to know in advance! In certain kinds of financial companies, for an advisor to recommend the client put their money somewhere that does not generate revenue for their “home office” is called selling away and it is prohibited.

No one advisor is likely to give you all the important perspective and knowledge you need, which is why we encourage building a team. We often act as the quarterback for our clients and help to organize the actions and recommendations of the rest of their financial team (CPA, business and estate attorney, banker, insurance agent, ect.), but in order to do that effectively, an advisor needs the latitude to offer advice outside of the one specific area that might be generating revenue for them. If you don’t seem to be getting anything more than lip service in areas that don’t generate direct revenue for your advisor, you may want to consider an advisor that is able to start a relationship by charging a flat consulting fee.

4. What is the goal of the advisor’s core investing philosophy?

The key first questions here is: Do they actually have one core investing philosophy, or do they employ several? One example is an advisor that has clients invested in both active and passive portfolios. What they are really saying is: “I don’t have any actual conviction in either strategy”. They let both play out until one does better in the short term, then figure out an explanation that could explain why one did better and shift most of their clients’ money to the winner (after the big spike in growth happened, by the way).

Is the advisor saying their goal is to “outperform the market?” While history will show periodic examples of investors vastly outpacing market averages, every academic study we have ever seen shows that there is no way to know who that will be in advance. Our goal is to help our clients get what the market gets, and add value in structural efficiency over index funds, to offset as much as possible the cost of having us there. That is why most of our clients are not bothered by market ups and downs, because the goal is to get what the market gets over the long term. When you create a Passive Structured portfolio, you tend to rise in step with the overall market, but fall less than the overall market in a downturn.

The key is to take time to investigate the math and scholarship behind a strategy to find the right strategy for your family, and then hold that strategy. Building half of a bicycle then switching over to build half of another more exciting bicycle still leaves you with Zero bicycles, and constantly switching financial strategies is similarly ineffective. We don’t know what the market will do tomorrow, but so far throughout history the market has rewarded those that can be invested for the long term. An investor might have kept their money in the market for the last 30 years, but if they keep moving it into different strategies and different kinds of portfolios, they are resetting the clock with every single move — they are never actually getting the benefit of “the long term”.

A big part of why we have a podcast with over 165 episodes is that we wanted to plant a flag for our core philosophies, if for no other reason that to keep us from the temptation to wander away from the extensive research and years of practical experience that let to our core belief in Passive Structured Investing.

5. Can the Advisor Meet Virtually?

In our mobile society, most families won’t stay in one place their entire life, and more and more these days, big career opportunities can require a move. If you have a great financial advisor relationship, that is not one you want to have to recreate over and over. Plus — the advisor who can effectively create value for you through online meetings is one you will get more out of — if you can only have a really good and valuable conversation if you are in person, how many valuable conversations will you have each year? One or two at most? How much time does it cost you to have each of those conversations? Between driving and parking, maybe 3 hours just to have a 1 hour conversation?

Working effectively online also helps you build that team of advisors more effectively — you don’t need to find a CPA, Attorney, and Financial Advisor all in the same city if all your advisors can work online. Of course differences in certain state laws might require some of your advisors to be local –perhaps your estate planning attorney for example. In that case, you wouldn’t you be glad to keep your “financial Quarterback” travelling with you to help navigate those new relationships over time.

I think most people think that financial advisors are for very wealthy people. This is likely not actually true. Can you explain who would most benefit from hiring a financial advisor and why? Can you give an example?

First let’s define what “wealthy people” means. I think there is this image of the “wealthy people” being CEOs of large corporations, professional athletes, and entertainers making hundreds of millions of dollars a year.

Top 1% Income in the United States is actually in the $300,000-$400,000 annual household income range. We do most of our work with families in the $300,000 — $2M annual income range. 90% of our clients we charge a fee between $4,000-$10,000 for our Design Process, because clients in our target income and occupation range usually want to pay for the services they receive, and they want to know exactly what they are paying for what they are getting.

Clients under $300,000 income deserve no less excellent advice, yet they might find themselves in an uncanny valley where they need an accomplished expert, but they may struggle to pay for that advice out of pocket. This is where a more transactional relationship can be very appropriate. Someone who makes $150,000 and just lost their job after working for the same employer for the last 20 years may not have the cash on hand to write a check for an up-front consulting fee, but they can likely find an investment manager who will help them roll over their 401(k) balance or an insurance agent who can help them find some life insurance to replace the group benefits they just lost.

I think families at any income level can feel like they don’t know where their money is going, and they can feel crunched for cash. For any family in the $200,000-$2,000,000 income range, a feeling of tightness in the budget is actually an important sign that it is time to at least meet with a financial advisor. A good advisor should be able to make enough difference in real dollars to offset the cost of working with them. I don’t mean they should guarantee they can grow your investment accounts. I mean they should be able to identify areas of inefficiency in taxes, cash flow, insurances, and other financial arenas to recapture dollars that are currently being lost and put them back on your balance sheet. We don’t even consider it ethical to make an offer to work with a new client unless we can identify for ourselves all the concrete ways we can offset the fee we charge in the first 6–12 months of the relationship.

More than anything, how someone lives into their income is the most important. Statistically we know that most people don’t have their money handled, and the people that look the shiniest on the outside are often low on real assets on the inside. It is better to be at $400,000/year income saving 80k (20%) than at $2.5 million annual income saving $200,000 a year (8%). That $2.5 million income family might be living a bigger lifestyle right now, and may seem more successful from the outside, but over the next 10–30 years reality is going to start calling their bluff, and eventually they are going to wish they could trade places with the $400,000 income family, because they are not positing themselves to sustain the lifestyle they have created with that $2.5 million income.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

My business partner Paul Adams. When we met, I was living in a sheltered corner of the industry, insulated from a larger set of knowledge about how money works and the tools we can use to help create a stronger balance sheet. He helped me identify areas of planning that I had left untended for my own family, let alone for my clients. What started as me trying to recruit Paul ended with me realizing I had a moral imperative to join with him — because I simply could no longer do business the way I had been before. Paul is also tenacious about learning, so I have probably learned more from and/or because of him than any other person I have met in my adult life.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

I would like to start the Slow Money Movement.

I have seen high income earners develop an unconscious tendency to allow external forces to create their actions. They build up some surplus cash through their success, and then the financial industry finds them at the right place and the right time to trigger a quick tactical transaction for one of their produces. The equation might look like: Success +Surplus + Pain Point = Purchase A Product.

The slow food movement encouraged people to stop and focus on their food to enjoy it more. It is not about eating “slowly”, but rather focusing on the entire experience of enjoy a meal and everything that goes into it. Why can’t we do the same for our money? Instead of emotion-based sales techniques that allow a 1 or 2 meeting conversation to trigger writing a huge check, let’s build a movement around the mantra “slow is smooth, smooth is fast” (this is the military version of “slow down to speed up”). If the American consumer could build conviction around making grounded assessments around their money, better results would actually start happening faster, because there would be less inefficiency, less wasted time and effort, and more of their assets all working together in one movement rather than spinning in all kind of directions all over their balance sheets.

How can our readers follow you on social media?

LinkedIn — https://www.linkedin.com/in/coryshepherd/

Facebook — https://www.facebook.com/YourBusinessYourWealth/

Instagram — @wealthpodcast

Thank you so much for joining us. This was very inspirational.