Troy Sharpe: If a butterfly flaps its wings in Australia, could it really cause a tsunami
over here?
Well, what if you retire at the wrong time, take social security at the wrong time, and
have two conservative of an investment portfolio?
How does that butterfly affect your retirement future?
[music] The big difference between the retirement
phase versus when you're younger and in the accumulation phase is all the decisions that
you have to make at this point and the shorter timeframe that you're now working with.
When you were younger, pretty simple.
How much do you save?
Where do you invest that money or how do you invest that money?
Once you get to retirement, all of the decisions that you end up making depend or determine
how much money you have later in life.
Also, they determine how much tax you'll pay, how much income you'll have to live off of,
how much money the kids get, charity, et cetera.
When we look at this chart right here, and this is very important because this is why
it makes it very difficult for you, the consumer, to understand if you're on the right path
or not.
The decisions that we make in the beginning years here, look at this one.
The little box turned red, and it's hard to see because this is a thousand different simulations.
In reality, there are an infinite number of outcomes.
This box right here in 2025, roughly, someone who retires now in 2023 and starts making
decisions and they've set themselves down a certain path.
Let's say they started making bad decisions.
What this simulation right here shows us is this path that they have started on is a red
path, which means they run out of money at some certain point.
Why this is challenging for you is you don't know the outcome of those decisions.
You don't know which path you've set yourself down oftentimes until it's too late.
Every single decision-- Here's another one, it's a bad path that we're going down.
It's red.
We're going to end up over here running out of money.
We have a green one over here.
This green one, we actually have less money than the other two on a comparative basis
at roughly the same timeframe, but that path is now setting us on a much, much better trajectory.
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How do you know if the decisions you are making today are setting you down the red path or
the green path?
Like the matrix.
The red pill or the green pill.
Might be a blue pill.
[chuckles] Let's say you decide to take a trip somewhere and you hop in the airplane
and you're going and all of a sudden, you get a little bit of turbulence.
Well, the pilot comes on the intercom and he says, "Sorry, ladies and gentlemen, we've
hit some turbulence.
I have my parachute.
I'm bailing out.
Good luck to the rest of you."
That would never happen.
It doesn't make any sense.
Pilots have flight plans, they have experience, they've been trained.
They may adjust altitude based on what's happening outside.
This is one of the biggest mistakes that we see consistently being made by consumers.
The first sign of turbulence, the market is down, something unexpected happens.
"Well, I'm out, I have my parachute.
See you later.
Thanks very much, but I'm going to go in a different direction."
Well, the problem is as a financial planner and an investment advisor, we are making decisions
today that we believe are setting you on a path to have a better trajectory over time.
In the near term, we don't necessarily see the impact of those decisions.
When the market is down, oftentimes you can feel like, "Hey, what am I paying you for?
Why do we have this relationship?
You should have gotten me out of the market."
That's the exact wrong mindset to have and that's the type of behavior that can lead
to coming down one of these bad trajectories.
What makes it really difficult for you is how do you know if you're making the right
decisions.
Whether you're working with someone that you trust, and you believe they're putting you
on the right path, or you're trying to do this yourself because again, if we look here
in the short term, all of the outcomes are condensed for the most part.
We can't really see which path we're on.
Oftentimes, we can make bad decisions, make mistakes, and be lulled into this sense of
complacency one, two, three, four, five years into retirement because we have more than
we started, or maybe we have a little bit less, but we've been able to have the income
that we want.
The truth is, we're actually on a certain path.
The outcome of those decisions that we make today will not readily be visible for years
down the road.
If we are making bad decisions consistently, over time, we may dig ourselves into a hole
that we won't be able to get out of, especially if some type of economic catastrophe or something
happens down the road.
Maybe it's a health situation that further exacerbates all the bad decisions that we've
made previously.
Then now, okay, we're up the creek without a paddle.
Now, I want to take this conversation into the area of fees versus value.
Let's say 20 years goes by retirement, and this is where we're at.
We started with $1.5 million now we're at $3.5 million, would you care if you spent
$20,000 a year or $50,000 a year, $100,000 a year in advice if you end up in this particular
place?
No, you probably want it because you have more money than you started with, you're older,
so you're not worried about it anymore.
As far as running out of money and making bad decisions, it doesn't truly matter what
it costs to get here because you perceive value.
That's a good example of receiving value for the cost that you've incurred.
Now, you've been bombarded over the years with fees are bad, you want to keep your expenses
down.
Expenses and fees can erode principle, can lessen your investment returns.
That's what you've heard over the years.
How did these two reconcile and how do you know how to make a good decision?
First and foremost, you have to understand different types of fees in the investment
world.
I'm just going to touch on this but this is a very important concept because some firms
and some structures out there are more fee laden than others.
This is important to know because these are the types of fees that you typically want
to avoid.
I tried to create a little diagram here, and this is you.
You're retired, you're happy, you have a bunch of money, you realize all these decisions
that you have to make in retirement, and you don't want to do it yourself, you're not capable
of doing it yourself, you don't want to deal with taxes and income planning and all the
stuff that a good retirement planner will do.
You go and you hire a firm and they say, "We're going to do the planning for you, we're going
to manage the investments, we're going to charge you 1%."
Excellent.
Sounds like a good deal.
That investment firm doesn't have an in-house investment department or an in-house investment
team.
What they do, and this is very, very common in the industry, is they outsource the money
to other money managers.
They may charge 0.75% per year.
Maybe they charge 1% per year, 0.6%, or somewhere in that range.
Now, a lot of times what these third-party money managers do is they then put you into
different mutual funds that have their own expense ratios, trading fees, possibly 12b-1
fees, possibly loads, which are commissions that come right off the top of your investment
dollars.
This type of fee structure, as you can see, can become truly costly.
You're probably not receiving the value for what you are paying.
This structure in the financial industry is very common, and it creates a series of layered
fees.
Now, another thing that we'll see is often with self-directors.
We recently, and this happens all the time, but we recently had someone come in and they
said, "Troy, I love the videos.
Been even listening to the radio station and I'm thinking about working with you, but I
have to be honest, I have to tell you, I don't like paying fees."
I said, "I get it.
I understand.
Let's go through the process."
We go through the process and I start to identify certain mutual funds that he's been investing
in.
I say, "Hey, I'm going to tell you what, we're going to run a fee analysis on your mutual
funds as part of this process."
We do the fee analysis and he comes back for the second visit and he was actually paying
more when you look at the expense ratios, which were averaging about 0.5% to 0.75%,
plus the hidden fees inside mutual funds.
He was actually paying more in fees to manage his own money without any of the planning
that we talked about than we would charge to do all of that for him.
When we start to talk about fees versus value, it's very critical to understand what you're
receiving for what you're paying, but also being able to look at the entire cost of any
relationship that you have, whether it's the mutual funds you personally invest in, or
it's a firm that you've hired, and then it's set up in this particular structure.
One question to ask is, "Hey, do you outsource my money to a third-party money manager?
If so, what do they charge?
Is that fee on top of yours?"
Usually, it will be.
"Then what are the total costs for the mutual funds that we're investing in, not just the
expense ratios.
I want to know all the fees associated with those funds."
Now, the reason why I wanted to have that discussion about fees versus values because
there are fees that you pay that actually provide value.
Ones that can get you up here on a better path and a greater trajectory towards achieving
security and retirement but then there are those hidden fees and outsource structures
that it's not very efficient.
Those are the types of fees that can get you going down these paths that we have much less
money than we otherwise would if we had a more efficient setup.
Quick summary.
In the beginning of retirement, no matter if we're making good decisions or bad decisions,
the spread of outcomes is quite narrow.
Oftentimes, we don't have visibility into whether we're on the right path or the wrong
path, but do not mistake, you are on a path.
Our job as retirement planners is to help you consistently make better decisions that
give us a better opportunity to be on the right trajectory.
The challenge there is you often don't see which path you're on or the outcome in regards
to the future benefit of those decisions you're making today until 5, 6, 7, 8, really, 10,
12, 15 years down the road.
For you, the consumer, it's a challenge because you aren't able to see what it is that we
see based on either our experience or the modeling or the tools that we have and it's
much more of an art than a science.
Retirement planning is not simply all math.
Whether you're a client watching this video or maybe a prospective client who's thinking
about reaching out to us or maybe someone that we'll never hear from and you're going
to go this and do it yourself.
What I want to share with you now is how we design plans here at Oak Harvest Financial
Group in order to do what we believe is to get us on the right path, so we call it the
retirement success plan.
It's a plan that starts with the proper allocation, investment allocation, based on your goals
of spending how much risk do we need to take?
We want to make sure that piece is in place first.
How are we going to allocate the investments?
Number two is an income plan.
Step two.
Then a tax plan.
We have to have the income plan before the tax plan because without income, we don't
pay any taxes.
That's the thing about retirement is where we withdraw our income from determines how
much tax we pay.
Now those two go hand in hand together, but very critical steps of the retirement success
plan process.
Step four is healthcare.
Step five is the estate plan.
By having a methodical process that we address each of those key areas in retirement, our
belief is that we are going to start out on the correct path because we have visibility
of the impact of these decisions that we're making today, where it's putting us along
a potential trajectory, but more importantly, we have a plan.
We implement that plan, then we execute the strategy, then we review, monitor, measure
results and adjust if we need to.
That's what the RSP is and that's why when we talk about trying to get into a better
path here where value is versus wasted fees that you may be paying.
We received a comment on the YouTube channel that I believe ties into this really, really
well.
The comment was something along the lines of, why don't money managers move money around
more whenever the markets are going down?
First, the premise of that question is that as money managers, we have a crystal ball
where we can see not only when to get out to the market, but also more importantly,
when to get back in.
The reason why when you have a retirement plan, we have structured something that puts
us on a path that we believe is in your best interest.
When the market goes down, instead of moving money all around and then altering the course
that we're on, that is an emotional reactionary response to what we believe would be a short-term
situation.
We've anticipated these types of market declines.
They're built into the plan.
It's part of the deal.
Instead of having an emotional reactionary response, we want to stay disciplined with
our strategic and planned approach that's focused on the long-term for your retirement
security.
[music] [00:13:02] [END OF AUDIO]