The financial advisor and author discusses his views on financial life planning, the future of financial advice, and saving for higher education.
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Our guest on the podcast today is financial advisor and author Tim Maurer, the director of advisor development for Buckingham Wealth Partners. He coauthored The Ultimate Financial Plan: Balancing Your Money and Your Life with Jim Stovall, and he also wrote Simple Money: A No-Nonsense Guide to Personal Finance. He’s a member of the CNBC Financial Advisor Council and is also a regular contributor to CNBC, Forbes, and Time/Money. Maurer is a certified financial planner and a graduate of Towson University.
Tim Maurer’s Background
The Ultimate Financial Plan: Balancing Your Money and Your Life
Simple Money: A No-Nonsense Guide to Personal Finance
Financial Life Planning
"What Is Financial Life Planning?" by Sheiresa Ngo, CheatSheet, May 31, 2015.
"Beyond Finances: Holistic Life Planning Trends Among Advisors," InvestmentNews, Jan. 23, 2020.
"How Should Retirees Deal With Crazy Markets When They Don’t Have Time to Stay the Course?" by Tim Maurer, timmaurer.com, March 20, 2020.
"Reconsidering Your Life Because of the Pandemic? You’re Not Alone," by Mimi Montgomery, Washingtonian, April 21, 2020.
"Financial Planner vs. Financial *Life* Planner. Which one Is the ‘Right One’ for Me?" by Cristina Livadary, Mana, Jan. 24, 2020.
"‘The Whole Financial Planning Process Is Wrong,’ Expert Says,” by Tim Maurer, Forbes, July 28, 2017.
Financial Planning Association
NAPFA: The National Association of Personal Financial Advisors
Kinder Institute of Life Planning
"George Kinder: Three Questions About Life Planning," by J.D. Roth, Get Rich Slowly, Aug. 1, 2019.
Your Mental Wealth, Drs. Ted Klontz and Brad Klontz
Kahler Financial Group
The Future of Financial Advice
Buckingham Strategic Wealth
Drive: The Surprising Truth About What Motivates Us, by Daniel Pink.
"Simple Money Portfolio," by Tim Maurer, timmaurer.com.
"Tim Maurer Simple Money Portfolio Review and ETFs to Use," by Tim Maurer, Optimized Portfolio, Oct. 7, 2020.
"Kitces: Pandemic to Accelerate Shift to AUM-Based Fee Model," by Jeff Berman, ThinkAdvisor, May 7, 2020.
"ESG Index Funds Hit $250 billion as Pandemic Accelerates Impact Investing Boom," by Pippa Stevens, CNBC, Sept. 2, 2020.
"Is COVID-19 Creating an Education Planning Crisis?" by Tim Maurer, The Bam Alliance, June 3, 2020.
"The Non-Conformist’s 4-Step Education Savings Plan," by Tim Maurer, Forbes, May 31, 2012.
Jeff Ptak: Hi, and welcome to The Long View. I’m Jeff Ptak, global director of manager research for Morningstar Research Services.
Christine Benz: And I’m Christine Benz, director of personal finance for Morningstar.
Ptak: Our guest on the podcast today is financial advisor and author Tim Maurer. Tim is the director of advisor development for Buckingham Wealth Partners. He coauthored The Ultimate Financial Plan: Balancing Your Money and Life with Jim Stovall, and he also wrote, Simple Money: A No-Nonsense Guide to Personal Finance. He’s a member of the CNBC Financial Advisor Council and is also a regular contributor to CNBC, Forbes, and TIME/Money. Tim is a certified financial planner and a graduate of Towson University.
Tim, welcome to The Long View.
Tim Maurer: Thank you so much. It’s a pleasure to be here.
Ptak: You’re a proponent of what’s called financial life planning. Is that the same as goal-based planning? Or would you say it’s broader than that?
Maurer: It could be goal-based planning. But I do believe it’s broader than that. Maybe goal-based planning falls under that umbrella header of financial life planning. But, in short, to me financial life planning is just financial planning done right and the way that it’s always been done really from the beginning. So, even though it’s a term that might be a little bit newer, I think it’s a practice that has been emerging for about 30 years now.
Benz: Can you describe what that is? Tell our listeners what financial life planning means?
Maurer: Well, Christine, financial life planning essentially means that you are beginning with a qualitative exploration to determine what is most important to a client in their life, what it is that motivates them, so that then you could marshal their financial resources collaboratively through their financial plan in order to go after those life goals. So, it’s almost as though the financial goals, or the financial tasks and tools, are there merely as a vehicle in order to achieve life goals. But if we begin with numbers and spreadsheets in dollars and cents, it honestly can muddy the waters of better understanding what’s most important to someone.
So, for example, if someone said, "A goal of mine is to have $5 million in my retirement accounts, so that I can retire?" The question there would be, "All right, well, that is a financial goal; let’s find the life goal that supports that." And it may be a desire for financial independence, it may be a desire for flexibility, it may be a desire to no longer work–who knows? But we’d be looking for that life goal that precedes that. And so, in my mind, financial life planning is, as I said, simply financial planning done right. But it’s financial planning that begins with life exploration and then leads into the direction of financial outcomes that tend to become even more evident when you’ve done the life exploration.
Ptak: What led you down that path influencing you to focus more on financial life planning as part of your work?
Maurer: Well going down a path that didn’t work initially. I came into this industry initially on the institutional side of the business. I was a listed equity trader, and that was the height of just dollars and cents and screaming and computer screens, and all this kind of fun stuff was very exciting. I learned a ton. But as I moved into the personal side of the business, I began to seek out a professional version of financial planning. And it was such a broad subject matter. It wasn’t just investments now. It was also retirement planning and education planning and life insurance in a state and all that. So, I went after trying to get as much knowledge as I could to bring to my clients on that broad spectrum across professional financial planning. But then, you pretty quickly realized that when you just start with those building blocks, but you don’t proceed that with life discovery, oftentimes, as I would discuss with financial planners going back now 20 years anecdotally, I found that personal finance was much more personal than it was finance. It wasn’t that people didn’t know what to do. Oftentimes, they came to the financial planners already knowing what to do. It was that they didn’t do what they knew.
And so, that’s where it hit me as I was sitting around at places like FPA, or Financial Planning Association, NexGen meetings, or the National Association of Personal Financial Advisors, NAPFA, meetings with other curious and typically younger financial advisors at this stage of the game–we were all saying the same thing. Just going after the numbers isn’t working. There’s got to be a better way. And then, ultimately, Jeff, it was through my exploration of the field of behavioral economics and behavioral science, that it began to become very clear to me that this notion that personal finance is more personal than it is finances and just kind of a clever anecdote; it is scientific fact, a biological and psychological fact that’s been proven by solid science and research from the field of behavioral economics.
Benz: The trend toward financial life planning was already well underway before the pandemic. But do you think the pandemic will hasten the trend?
Maurer: Well, just experientially, I feel like it has. I feel as though the pandemic has taken all of us to a place where we are more attuned to the deeper matters of life. And maybe it’s just because we’re all experiencing pain at various levels, Christine, but I think that it has just simply taken us to a deeper place in life. We’re asking those bigger questions that when everything is just going great, we don’t have as much of a tendency to ask. So, people are going down a few layers as opposed to just looking at things on a superficial level. They’re not just looking at portfolio returns, even though that might have been one of the first things that just scared them to death in the middle of March when the market was going crazy. But it’s now leading to some of those deeper questions. And I do indeed believe that financial life planning is one of the best ways for people to navigate those types of big life questions and decisions.
Ptak: As you mentioned, people are asking some big questions, one of which seems to be: should we move? There seems to be a lot of relocation going on. The question is, is it a good idea to make major life changes amid extreme circumstances like the present?
Maurer: Well, Jeff, I think that we’ve all probably heard the wise counsel that one should not necessarily make big, huge life decisions while in the midst of crisis. But I think that while that may still be good advice, that we need to get beyond a place of fear to a place of greater objectivity, that we need to get beyond a place of pure emotion to invite some more rationale. I believe that it is in the midst of crisis where oftentimes we can gain greater clarity of what really is most important to us. So, it’s a little tricky there, right? As a matter of putting those plans to work, I do think that it’s generally wise counsel to allow the crisis to subside before necessarily making some huge life decisions. But it is, in the midst of that crisis, in the midst of that soul-searching that we find the resolve. I also don’t want to see that just fizzle out. So, the beginning process of making some of those plans absolutely can and should, I believe, take place while we are in the midst of that place of clarity.
Benz: On the surface, it doesn’t seem obvious to me that a financial advisor should help his or her clients figure out their life plans and articulate big-picture goals. It seems like a therapist or maybe a member of the clergy might fill that role more naturally. So, why do you think it makes sense for financial advisors to engage with their clients in this way?
Maurer: Christine, that was one of the things that I remember asking myself. And believe it or not, it was through some of my interactions with folks who were clergy and with folks who were therapists, who were actually bemoaning one of the challenges that they had is that their work was rarely connected to the material. They might be able to go down a road that was purely spiritual in the case of a priest or a pastor or purely psychological in the case of a therapist. But because their work did not flow as naturally into the material realm, the practical realm, they were necessarily limited.
So, I want to be very clear. I’m not calling financial advisors to be therapists. We are not trained to do that. And financial life planning is not therapy-like, it simply isn’t. Nor am I suggesting that people should go get ordained before they do financial planning and truly be masters of the spiritual domain. But I absolutely believe, and this is even from observations I’ve heard from people who are clergy members and therapists, that we may be some of the best positioned to help explore what’s most important to people because we are inextricably connected to the material, to the practical outgrowth of that and therefore being able to put these life goals more into action.
Ptak: Maybe we’ll look at it through the customers’ eyes for a moment here. It seems that many financial-services firms are touting their ability to help their clients find purpose, or maybe you call it self-actualization. So, the question is, how can consumers be discerning about what’s just marketing spin? If they’re seeking out a financial life planner, how can they really home in on ones who truly know what they’re doing?
Maurer: Well, I think for one, they can look at how long the entity that is touting this purpose or this life planning has actually been engaged in it. It’s now becoming for many big financial firms almost a matter of necessity. Or maybe it is a solid business decision, for example, to become a fiduciary; to hold yourself to an obligation to act in the clients’ best interest. And while I am a fan of seeing the industry writ large move more in that direction, because I believe it will be better for consumers, if I’m thinking as a consumer in this case and putting myself in the shoes of a prospective client, I would rather be working with somebody who’d been a fiduciary all along, because they thought that was the only way to do this, as there have been many, many firms who’ve been doing it that way for decades now.
Similarly, as it relates to financial life planning, if someone is just getting into this and touting it as something that is brand new, maybe they don’t have the experience yet, or maybe they’re doing it because it’s popular, because it’s good marketing, it’s a good mousetrap that they might be able to sell. But I will tell you this, Jeff, if we take our focus from just that superficial layer and what might be the difference between, say, marketing and reality, I think that if you attune yourself to the presence of the advisor before you that you might be interviewing or interacting with, one great little ratio to use to determine whether or not that person is truly a skilled financial life planner is whether or not they are dominating the conversation or you as the client are dominating the conversation. Because I truly believe that trained financial life planners are much, much better listeners. They are active listeners. Their methods and their techniques they have practiced and utilized to ensure that the client is truly at the center of everything. Everybody says that they have a client-centric experience. But you need to see evidence of that as a prospective client or a client in the actions of your financial advisor, perhaps in this case, in the lack of words, as opposed to the words.
Benz: Are there any credentials or training credentials that you might see on someone’s background that you think would make someone more credible in this realm?
Maurer: Well, there are, Christine. They’re not horribly well-known. And I’ll give you a few examples. And I can only give the examples of the ones that I personally have experienced. And since that time, what I mentioned when I was a very young financial advisor and realized the limitations of financial planning without life planning, I began going down that path. I’ve had the privilege of studying with folks like Rick Kahler and Ted Klontz and Brad Klontz. This is a combination of an unbelievable CFP in Rapid City, South Dakota, Rick Kahler, and then Ted Klontz and Brad Klontz, psychotherapists, who focused on the financial realm. I worked with the folks at Money Quotient, that’s Amy Mullen and Carol Anderson, who have long aided financial advisors and bringing that life piece into their practice. And the thought leader I spent the most time with is George Kinder, who is one of those folks who I mentioned who was really kind of there at the beginning of the profession of financial planning and had always been advocating for the life side; folks like George Kinder and the late Dick Wagner have been talking about this for literally decades. And so, most of these entities, like the Kinder Institute, do have some form of training and credentialing. And I do happen to hold the registered life planner credential that is available through the Kinder Institute of Life Planning, and it’s really quite rigorous.
Now, I will say this. In terms of recognition, I think that we’re just getting to the point in the industry where prospective clients understand what the CFP, or Certified Financial Planner, designation is. And I would still point to that as one of the most recognizable and rightly held up before consumers. I think that oftentimes there are these sub-credentials that don’t mean as much that haven’t necessarily stood the test of time. And I’m not suggesting that the RLP, for example, has not stood the test of time. But I’m also not necessarily going to go down the road of saying this, that, and the other credential are the ones that would certify that someone is indeed a skilled life planner. I think it would be helpful for them to have received this training. But most importantly, you need to see it in practice. And that goes for any credential that any advisor has–you need to see the evidence of that credential at work in their practice.
Ptak: So, what about when the tables are turned? What are some of the key concepts or lessons you try to impart to advisors in the realm of financial life planning to help them improve their skills?
Maurer: Well, if there’s a single word, Jeff, that I’m pointing advisors to, it is starting to become a little bit overstated, a little bit more popular than it has been for a decade or more. But the word empathy is truly the single word that I would point advisors to, which of course simply means putting yourself in the clients’ shoes. And there are many derivatives of this word that I believe point us in the right direction as advisors. If we are, for example, truly empathic in our approach to financial planning, we simply will listen more.
But then there are a number of insights that we’ve received not only through, say, the empirical work that folks like the Kinder Institute and Money Quotient have done over the years with advisors, but through research in the field of behavioral science, where we have learned what works and what doesn’t. And a great example is that many of us as advisors came into this profession because we wanted to be problem-solvers. And as a result of that, we want to be solution-oriented. And what we have learned through the field of behavioral science is that it should not be we as advisors, who are the arbiters of these successful solutions. The best solutions, the ones that clients stick with, are the ones of their own origination. So, in other words, we need to not be the hero of our financial-advisory engagement with clients. We need to simply be a better guide. We lead clients down a road of self-discovery. And then, when they determine, when they find clarity, they are going to be more inclined to follow the recommendations that they give themselves than the recommendations that we render as advisors. Does that mean we never speak up? Does that mean we never offer solutions or pose hurdles that might be standing in front of a client that they’re not seeing? Of course not. That’s where we step in. And by all means, we will speak into that. But even then, we will do so with an aim and a desire to have them be the ones to find these realizations as opposed to have us come down from Mount Sinai and deliver the tablets.
Benz: Do you think this trend toward financial life planning could change the nature of people who are attracted to this profession?
Maurer: I hope so. I hope so, Christine, because I think that when I began in this profession, I still think it was a predominantly sales-driven orientation that brought people into the profession. I’ll never forget my very first sales manager instructing me to go out and buy a more expensive car with a big hefty car payment that I could not afford, because he believed that if I had that pressure, I would go out and sell more financial products. And, I like to think of myself as a relatively young person. But this wasn’t that long ago, that this was still the way that much of the financial-industry training was being driven. It was purely a sales operation. It was not built on sound financial-planning principles. Why else would a sales manager recommend numerous things that would be horrible advice for anyone’s individual financial plan?
And so, I think that we have and are seeing a shift. I believe that that shift has been especially prominent throughout Generation X–that is my generation. And then, as we see Generation Y, millennials entering this profession, we’re seeing a lot of that. But I want to be very clear. The founding fathers and mothers of financial life planning, the folks that we have learned from in Generation X and as millennials, these are folks who have, as I said, been doing it for a long time. These are folks who have a ton of experience at this. And these have been our mentors. So, it’s not as though this has not been something that has been owned by older generations. But I am seeing a trend in the direction of people who view financial planning more as I believe it is–as a helping profession than a profession that’s only aim is to help the person who’s rendering the advice.
Ptak: Not every client is going to be cut out for financial life planning. And so, I guess my question is do clients sometimes have a hard time sharing their thoughts about their visions for their lives? It seems like, many of us, we anchor on tangible matters when thinking about our financial plans, how much we need to cover college, to retire, and so forth. And so, how do you suggest advisors encourage their clients to go deeper when thinking about and articulating their goals?
Maurer: Well, Jeff, I might actually challenge your original supposition there just slightly. I mean, I think I know what you’re talking about. But when you say not every client is cut out for financial life planning, to me, at its simplest essence, financial life planning is beginning financial planning and revisiting at various periods what it is that’s most important to somebody to ensure that then the financial resources are being pointed in the optimal direction. And I’ve yet to have a prospect or a client say, “I don’t know, Tim, that sounds like a bad idea. Like, why do you want to know what’s important to me in life?” Indeed, even the example that you just used: a decision between dedicating money to one’s retirement a dedicating to one’s assets or cash flow to education planning, it still begins with a question of priorities. When do you want to retire? What is most important to you in life? Talk to me a little bit about your educational history and what your hopes are for your children. These immediately, even if they begin as financial goals, become life questions. And so, I believe that there are elements of life planning that are absolute necessities in financial planning for every client.
Now, if someone came to me and said, "Listen, Tim, I don’t care about talking life, all I’m interested in is giving you X number of dollars and seeing if the portfolio you recommend can beat the portfolio that I have over here." Then, I can tell you, because I’ve said this, “I don’t think that we’re a good fit.” So, if somebody is truly not interested in any life planning whatsoever, that’s probably assigned to me as a financial advisor, this may not be the optimal client to work with, just because we don’t necessarily have an alignment in what we believe the optimal use of our time and efforts are. But to that end, I also believe that there absolutely are clients who are going to resist a little bit when it comes to some of the more personal queries that we would pose. And the key in order to help make that work for advisors is to set expectations properly.
So, if I’m meeting somebody for the first time, I will make it very clear that discussing life in general first, getting to know you better first, getting to understand what’s most important to you first is going to be where our engagement starts. And then, every few years, we’re going to return to that conversation. Is that OK with you? I’ll literally ask that permission. And again, the answer has never been no. But I will acknowledge that as you go into qualitative exploration, people are going to be more and less comfortable. But if we are truly empathic as an advisor, we will never push someone down a road that they don’t want to go. We will never twist someone’s arm to divulge more personal information than they are willing to share. Because that’s the very nature of true life planning, of true empathy.
Benz: If I’m an investor listening to this podcast, and I want to get in touch with my life goals and create a financial plan that’s truly big picture and aligned with those goals, what are some of the questions I should be asking myself?
Maurer: Well, it depends how deep you want to go, Christine. If you really want to go deep right off the bat, you could just simply Google George Kinder’s three questions. It’s a topic that I have written on. These are three questions that have been bouncing around the financial life planning world for many, many years now. And George has written about them in multiple books of his. And I believe that they are one of the quickest paths for someone to get in touch with what is most important to them in life.
Now, I preface that by saying it depends how deep you want to go. Because George Kinder’s three questions are not necessarily for the faint of heart. He is one of those guys who isn’t tiptoeing into this space. He’s diving right in. And so, be ready if you’re going to take on those three questions. And by the way, as an advisor, without adequate training, I don’t think you should be using those three questions and just throwing them around.
Now, as far as other directions that folks could go, and let’s start a little bit safer, if you will. Let’s start a little bit easier. I simply love looking at a handful of areas of life that are common to most, and then asking the question, what is important to you about…? This is part of the process that I’ve undertaken, that we undertake as a firm: What is important to you about family and relationships? What is important to you about working career, interests and causes, health and wellness? And we simply use this as a point of orientation to have a discussion about what’s most important in life. And what you will find is that, especially as an advisor, by the way, if you start with more open-ended questions, you’re more likely to get where you hope to go. You don’t know how you’re going to get there, because it’s more open-ended, it’s less directed. But I wouldn’t recommend some long list of extensive and in-depth questions. I think that staying more open-ended and allowing yourself a little bit of time and space to explore is the path to finding what that purpose might be whether you do it on your own or whether you do it with a financial advisor.
Benz: Can you share what George Kinder’s three questions are? You’ve piqued my interest.
Maurer: Christine, I don’t know. I feel almost as though I’d be taking away from the power of those questions. Well, the first question is oriented around–a question that I think has been posed many different ways by many different people over time, and that is, if financial resources were no issue, if you had all the money in the world, what would you do? Let me just say that that’s where George Kinder’s three questions start. Nice, big, and broad. You’ve got all the money in the world. What do you want to do? That is the essence of question number one. And then, from there, we’re just going to drill down further. And I’ve yet to find someone who didn’t learn something about themselves by the time they got to the end of question three. Is that OK? Can I leave a little bit of suspense in there for you?
Benz: Absolutely. And Jeff and I want to have George Kinder on at some point, too. So, that will be a good discussion to have with him.
Maurer: There you go.
Ptak: We’re going to talk about the future of financial advice and some of the intersections with your firm. But before we do that, a question that this has all triggered in my mind is the compatibility of the financial life planning approach with a younger investor who may not be able to articulate as readily or just coherently what their life goals are. I think back to my early professional life, and I had no clue really what I necessarily wanted to do. And so, do you find that that’s a real impediment to delivering the kind of high-quality advice that you aspire to, to those that are just starting on their journey?
Maurer: Well, it could be, Jeff. But if I had a nickel for every time that a client who might have been a baby boomer said, “Gosh, I wish I would have been answering these questions 20 years ago.” So, I had the privilege actually of teaching at my alma mater, Towson University, the fundamentals of financial planning for seven years. And in so doing, I was teaching a majority of juniors, seniors, and super seniors who were pursuing their CPA designation. And while there is no question that if you just go right at them and ask these questions about their life’s purpose and their life goals, they’re going to look at you like you’ve got lobsters crawling out of your ears. But when I had an entire semester, I can certify for you that we got to some really profound places with those students. We had some amazing conversations about life purpose. We were even talking about legacy and the impact the decisions that you make as a college student can have on your life’s legacy.
And so, I believe that there is no better time to be asking and answering those questions, even though I wholly acknowledge what you’re submitting and that is that it may not be as clear right then. The good news is that while it’s not as clear, what I find is an awful lot of baby boomers and many Generation Xers as well have effectively co-opted somebody else’s goals for them. They might have been the goals of their parents; they might have been the goals of their coaches and teachers; they might have been the goals of their boss. And as a result, they find themselves having to go back and figure out who they really are. Whereas younger, prospective financial life planning clients have an opportunity to be making that case earlier in the game. What a great opportunity that is. So, yes, I think there will be a little lacking clarity, but there will be less undoing. You’ll be able to start more from scratch. And I believe that there could be no better long-term financial plan than one that is determined with a sense of purpose nearer to the beginning.
Benz: You work for Buckingham Wealth Partners. Can you talk about what you do for them? Presumably, you work with advisors on some of these issues that we’re talking about here. But can you kind of expand on what you do on a day-to-day basis?
Maurer: I’m happy to. I have occupational schizophrenia. And so, that means I do a whole bunch of different things. My official title is director of advisor development, and it has been one of my great privileges to work in this role and effectively coach and steward and teach and train and learn from hundreds of advisors across the country who are part of the Buckingham Wealth Partners universe. But I also am still connected to the work of clients. Because I believe that in order to do my very best work advising advisors, it’s very, very helpful to be able to say “we,” it’s very, very helpful to be navigating through some of the challenging circumstances, like the ones we find in 2020, directly with clients. And because, Christine, that was my first love, that’s why I got in this business in the first place–to see individuals’ and families’ lives change for the better as a result of the work that we did and the role–the small role, really–that we were able to play. So, Buckingham is dedicated to kind of an evidence-based approach to everything we do, whether it’s the investment management, whether it’s the comprehensive planning, or it is the financial life planning. So, it’s almost like a home for learners and teachers, as well as a host of great advisors.
Ptak: Maybe if we can talk about your work product for a minute. In terms of the actual financial plans that get created for clients, how centralized are financial and investment plans and then how much is left up to individual firms’ discretion? We can talk in a minute about the structure of your firm, but can you give an example of the types of decisions where a house view would prevail and one where the individual firm would make its own decisions?
Maurer: First, let me say that I believe that in terms of finding purpose, in terms of finding motivation, whether we’re talking about clients, whether we’re talking about advisors, whether we’re talking about firms or offices, there needs to be a certain degree of autonomy–that’s something we learned from Daniel Pink in the book Drive, that autonomy is a powerful source of motivation. And so, I think that as it relates to the centralization of practices and the autonomy that is given, it’s always going to be, how do we say, like not a problem to be solved but attention to be managed. And I think that we are daily in pursuit of finding that appropriate balance.
Now, in terms of where we can add the very most value to our clients and their lives, I believe that, for example, centralized portfolio management, where we’ve got super-skilled traders who are keeping their focus 95% of every day on the effective management of households’ portfolios, I believe that that is a great place for centralization to exist. Whereas the further we get into the qualitative realm of our client experience, the more that it’s likely we need to offer some more autonomy, so that advisors allow their own unique personality to come to bear.
I’ll never forget going back again to that example I gave you earlier about my early experiences in the industry, within the industry proper–big brokerage firms, banks, and insurance companies. It was as though they were telling us a persona that we were to take on, so that we could attract the best clients from their perspective. And after fighting that for years, I kind of spun out of that universe and ever since have been encouraging advisors that by allowing their unique personality to take shape and form within their practice, that’s actually a great thing. And they’ll have a tendency to draw to them the types of clients who will be the best working fit. So, phenomenal question. And I think that it’s one that we will never have a final answer to. We’re just going to be working to hold that tension in balance throughout our working careers.
Benz: You referenced the investment management piece as one that logically lends itself to centralization. We often hear that investment management is a commodity or becoming a commodity. Do you agree with that?
Maurer: Christine, I believe that investment management is being commoditized. I don’t believe that it is a pure commodity. I think that it’s a little bit of a shortcut to go quite so far, because it would suggest that there’s no value to be added in wise and effective portfolio management. And I believe that there is value to be added. Now, as we see this proliferation of financial products with more mutual funds than there are stocks listed, for example, we see this increasing commoditization of investment management and increasing efficiency in markets. And as a result, we are seeing an increasing commoditization of investment management. Is it a pure commodity? I don’t think we’re there yet. I don’t know if we’ll get there with all of the various forces at play within the market. But I would certainly say, for example, it is more of a commodity than retirement planning, and certainly than determining someone’s individual personal values and goals.
Ptak: What do you think are the most salient differences that make you hesitate to call it a commodity outright? Is it things like cost, time horizon, the types of risks that you choose to take in the portfolio for some sort of proprietary model you built? What are those things that stop you short of saying it’s a commodity?
Maurer: Well, Jeff, I think the fact that there are still so many, as I mentioned, the proliferation of financial products out there, there’s so much noise that there’s still so many mistakes being made. When you see these reports that 85% of large-cap managers don’t beat their respective index over a 10-year period and over 90% of them don’t beat their respective index over a 15-year period–we’re talking about an outrageous amount of noise out there. And so, today, I believe one of the things that investors need the most is to cut through that noise. And so, I believe that an advisor can still aid a client in that pursuit.
Benz: We’re in this era of mega-registered investment advisors. We’ve had these massive roll-ups and Buckingham has been incredibly acquisitive, amalgamating a lot of smaller financial advice firms under the Buckingham umbrella. When you think about the firms that have joined the fold, what are some of the commonalities among them?
Maurer: Well, it’s funny. I’ll give you some words and phrases, but it’s often more of a feeling. You sit down, you just start talking to advisors and you realize you’re of the same ilk. And I might put all of that under the banner that these are folks who genuinely see what we do as a helping profession. I mentioned that phrase a little while ago. What attracted me personally to Buckingham years ago–now about seven years ago–when I went to St. Louis to visit with leadership there was that I saw a mission that captivated me. And that was building relationships by doing the right thing. So, there again, that’s an example of a firm that was a fiduciary from the beginning, that had this kind of life-planning core at its roots. But what was most important was not that they had a mission statement, it was that the people I talked to actually resonated with that. They lived that mission statement. That was the confirmation that they walked the talk. And so, that’s what I find as the common thread with Buckingham as we continue to expand through acquisition. But I do think there are a few things that are kind of more quantitative, if you will. They are all fiduciaries, and not just fiduciaries by the letter of the law, but by the spirit of the law. They’re all evidence-based investors. That certainly is a unifying feature that also differentiates our community among many others that are large and growing. They’re all comprehensive wealth managers. And then, they’re all mission-oriented–that comes back to that helping profession mindset.
Ptak: Most of the Buckingham advisors, if we’re not mistaken, charge clients a percentage of their assets to manage their money on an ongoing basis. But if the future of advice is in the type of holistic life planning that we’ve been discussing, does it make sense to tether advisor fees to the clients’ portfolio balance?
Maurer: Yeah, it’s one of those questions, Jeff, that I feel like occurs to me probably multiple times a day, because let me acknowledge that I see there being a slight disconnect when the compensation is derived solely from the investment portfolio. But the work that is being done encompasses a great deal more than that. It encompasses the comprehensive spectrum of financial planning. And most importantly, it encompasses that skilled work of life planning. And I want to acknowledge that I see the potential for cognitive dissonance there.
I think the reason that we continue to choose as our primary compensation methodology, assets under management, and the way that I do actually see it facilitating financial life planning is that it’s the simplest. You could have a number of different forms that might appear to be more logical, that takes some sort of ratio of one’s net worth or a particular calculation that is done to determine what a flat fee or hourly rate could be. But each of these leads to their own biases among clients. So, for example, hourly, many consider it to be the purest form, and I can see that rationale. But the last thing I want is my client to think that he or she shouldn’t pick up the phone, because I’m going to start running the clock.
Similarly, there are many great options for, say, flat fee. But there are other biases that come with that, too. Do you have to make a determination of what the new flat fee is going to be on a periodic basis and on what basis? So, there’s an elegant simplicity to assets under management, that while I acknowledge it doesn’t seem as though it is the utopian form of compensation methodology, I believe that it is still one of the best. But I should also add that we’re not closed-minded to the evolution of the industry. And that we may indeed see that from a generational perspective, there are certain preferences that each generation has for the way that they consume good financial life planning. And a good example of that might be a subscription methodology. It just seems to be a way that some generations are more comfortable with. And so, that is not something that we’re closed-minded to, and is something that is even in reality today, a part of how we operate with certain clients.
Benz: We’ve seen a lot of interest in ESG and sustainable investing and our employer, Morningstar, has made a big investment in that area. Does the idea of a values-based portfolio connect back to the idea of connecting the financial plan to life goals? Do you see relationships there?
Maurer: I do see a relationship there, Christine. And I think that one of the greatest challenges that we might have is in the limited scope of values and goals that are served by the various funds that are out there. So, you start with what the values and the goals are, and you may not find the perfect fund, ESG fund, to match up with those values and goals. So, do I see a connection there? Absolutely. But do we always find a connection? No.
Ptak: You write and talk quite a bit about education planning. Paying for college is a key goal in many families. Obviously, the pandemic is affecting education planning in the short term with many schools shifting most or all of their students to remote learning. But do you think there will be long-term repercussions for how we think about and plan for higher education as well?
Maurer: I think there will, and I struggle with this because my research-oriented brain, or academically, I’m absolutely fascinated to see what happens to higher education as we emerge from the pandemic, because I think it is changing, it was changing, and much like the financial crisis of 2008 and 2009, accelerated a lot of change that was long overdue in the financial-services arena. I think that the pandemic and what’s happening right now in higher education is going to accelerate that change in higher education.
I say that I don’t want you to hear too much excitement because at the same time I’ve got a junior in high school and a freshman in high school. We’re trying to figure out what education is going to look like for them. I have many friends and children of clients who are freshmen in college this year or seniors or who missed out on the senior prom or graduation. And so, I want to give due empathy there for what it is that people are actually living through and the vast difference between the experience of a freshman in 2020 and a freshman in 2018. But I’m fascinated to see what comes of this. I’m not much in the game of prognostication. But I think one thing that is certainly safe to say is that we will see changes and I’m really interested to see what those changes are.
Benz: You recently wrote a piece called "The Non-Conformist’s 4-Step Education Plan." Can you give us some of the highlights? What does such a plan entail?
Maurer: Well, first, I want to mention, Christine, why it’s the nonconformist’s approach. As a parent, as a former student, and as a former college educator, I believe that somehow the financial powers that be in higher education have knowingly or unknowingly conspired to make us as parents think that we have a massive "Should" out there with a capital "S"–you should provide an unlimited funding source for your children’s education as though this experience of four years is so sacred that it should not be refined at all by the reality of its cost or the value proposition. And so, the nonconformity of this education plan is to begin by taking that big "Should" off the table.
Question number one, or step number one, is can you afford to actually help your children from an educational perspective? I try to remind clients and anyone who is willing to hear that if you cannot afford to pay for your kids’ education, it is actually doing them more harm than good. You’re not putting your kids first if you’re willing to sacrifice your own financial health on the alter of education, because if the worst thing a kid ever had to do was pay off finite education loans, that’s vastly less expensive than the potentially infinite funding that they might have to help out parents in ill health who are underfunded in their retirement. So, question number one is, "Can you?"
Question number two is, "Will you?" This is just reminding parents that it is your decision, and you have an opportunity to communicate your values in a really impactful way to your kids by the next step, and that is, the family education policy. And this sounds really official. It’s really just your answer as a parent to the question that is eventually going to come from your teens: “What are you guys going to do for my education?” I advocate for pro activity in virtually all arenas of parenting; you want to be the first one to get there to say this is how we are going to handle it as a family. So, my kids have been able to tell you since they were single-digit ages that our family education policy is that mom and dad, as long as your grades are good and you’re putting forth a material effort, are going to pay up to the cost of an in-state state university and that’s because we’ve lived in states with great in-state universities. We’re not suggesting they shouldn’t go to private schools as we continue that search. I think the probability right now is that my older son is going to end up at a private school, but his funding will be up to that level of an in-state state university because that’s something that we’ve determined as a family, we support wholeheartedly, and are able to commit to from a financial perspective.
And then the fourth and final step of this education plan is to put that family education policy into motion with your own planning and that’s where you’re setting money aside. And even though a 529 is a fantastic resource. And by the way, Morningstar has long been a great resource for finding out what the best education plan–I’m happy to mention–that is out there. I don’t think that the 529 should be the only bucket that you set aside money in, and I’ve recommended for about a 50-50 rule, but it’s going to be different for each household how much they should keep in, say, liquid savings arenas versus how much they should keep in 529s.
Benz: You referenced the issue of encouraging parents to focus on their own retirements and their own financial wherewithal and not necessarily, or not at all, put those things in jeopardy to fund college. But this is a real challenge for people. They just feel this pull to give their kids what they think they want or need. Can you talk about dealing with that with clients, maybe even more broadly beyond education, helping parents balance their own financial well-being with the well-being of their kids?
Maurer: See, this is where we get into the behavioral. This is where we get into the life-planning aspect of this. And a great point that you’ve made implicitly is that there are really no guarantees exactly how our retirement saving is going to end up. If you just took the simplest form of logic that I shared that you shouldn’t put your retirement at risk, you’d think, “Well, since I don’t know exactly what’s going to happen in retirement or exactly what the market is going to do or exactly why my needs are going to be, I shouldn’t save for education at all. I should just put everything in retirement.” But obviously, we do as parents feel this draw, this pull to support our kids and we do believe, especially if it’s one of your family’s values, that education is important as it is to me and wife, then it should have a place in your financial plan. So, what I’ve suggested in that scenario is that just about everybody should open up a 529 account. And anybody who does intend to pay for their kids’ education, it doesn’t mean that you’re going to fully fund it right now. Because if you look at those numbers of what it takes to fully fund a four-year education just out of a 529 plan, it raises just about everybody’s eyebrows. But get that thing opened up. Begin contributing something, however small, and then maybe the best key is let all of those really well-meaning grandparents and aunts and uncles of those future students know that that 529 plan is open and available for contributions. Because what you will find is that you’ve got more benefactors out there than you probably know, people who share your values for the importance of education and those additional deposits can really make an impact over time. So, long story short there, Christine, yes, when you feel the pull between these two worthy goals or frankly, any two worthy goals within your financial plan, I recommend some form of compromise–doing either a little bit of one and a lot of the other or whatever calibration in between that, I think, can often be the best case forward.
Ptak: Well, Tim, this has been a fascinating discussion. Thank you so much for your time and insights. We really, really appreciate it.
Maurer: Well, Jeff, I thank you guys so much. And, Christine, thank you so much for having me. I’ve long been a fan of your work. And so, it’s an honor to be part of this and I would love to continue this conversation in the future if the opportunity provides.
Benz: Thanks so much, Tim.
Ptak: Thank you again.
Maurer: Thank you.
Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify, or wherever you get your podcasts.
Benz: You can follow us on Twitter @Christine_Benz.
Ptak: And at @Syouth1, which is, S-Y-O-U-T-H and the number 1.
Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.
(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)
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