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Cody Garrett: ‘Give Every Dollar a Job and a Use-By Date’

A financial planner discusses his shift from music to finance, his work in financial education, and where he thinks advisors can add the most value.

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Our guest on the podcast today is Cody Garrett. He is a certified financial planner and heads up Measure Twice Financial, an advice-only financial planning firm geared toward serving do-it-yourself investors. He also created measuretwicemoney.com, an educational website for DIY investors. Before starting up Measure Twice, Garrett was a financial planner at Legacy Asset Management. He was a professional musician before beginning his career as a financial planner. He received his bachelor’s degree in music and music theory at the University of Houston.

Background

Bio

Measure Twice Financial

Measure Twice Money

Measure Twice Planners

Measure Twice Mentors

Twitter handle: @MeasureTwiceMNY

Advice-Only Planning

Does Being a Fiduciary Depend on the Fee Model?” by Tracey Longo, Financial Advisor, Sept. 23, 2022.

Advice-Only Financial Advisers Don’t Touch Your Money,” by Elaine Silvestrini, Kiplinger, Nov. 17, 2022.

Influences and Other

Dave Ramsey

Financial Peace University

Radical Personal Finance podcast

ChooseFI podcast

Michael Kitces

David Allen’s Getting Things Done

Michael Kitces: Does Portfolio Customization Pay Off?The Long View podcast, Morningstar.com, Aug. 23, 2022.

How to Use the 4 Ds of Effective Time Management,” by Bryan Collins, Forbes, June 14, 2018.

Transcript

Christine Benz: Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Jeff Ptak: And I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Benz: Our guest on the podcast today is Cody Garrett. Cody is a certified financial planner and heads up Measure Twice Financial, an advice-only financial planning firm geared toward serving do-it-yourself investors. Cody has also created measuretwicemoney.com an educational website for DIY investors. Prior to starting up Measure Twice, Cody was a financial planner at Legacy Asset Management. He was a professional musician before beginning his career as a financial planner. He received his bachelor’s degree in music and music theory at the University of Houston. Cody, welcome to The Long View.

Cody Garrett: Thank you so much for inviting me. I’m excited for our future conversation here.

Benz: Well, we’re excited to have you here. We want to start out by talking about your journey. It’s a different one when we think about financial planners. You made a career change, correct me if I’m wrong, it sounds like it was about five years ago where you went from being a professional musician to a career in financial planning. Can you discuss what prompted you to want to make that change?

Garrett: Absolutely. It’s kind of funny, I went from being a professional musician on Wednesday night to a financial planner on Thursday morning. Going from what I call musical records to financial records. Actually, a lot of people do assume that I switched—they were, “Oh you moved into finances. I guess that’s to make more money.” But, actually, I took a pay cut about to half from switching from a professional musician to finance. The main reason I made the switch was actually basic in a personal sense: I wanted to be able to eat dinner with my wife every day, and as a professional musician, you’re working 8 to 5, and then 5 to 8, and then maybe 8 to 12.

I was doing Broadway shows, I was music-directing different types of shows. I was a church music director. And I went to a place of saying this isn’t really aligning with what really matters to me in life, which is being able to spend time with my wife Marissa, and she was working full time as well. So, it was nice to make a change. And I did feel a little bit of a plateau in that career as a musician. I had done the things that I really wanted to do and it was like what’s next, and I happen to love personal finance at the same time, so it naturally worked out.

Ptak: You’ve mentioned that Dave Ramsey’s materials were being used in a local personal finance course at your church. Ramsey’s a controversial person in personal finance circles. Now that you know what you know. What’s your take on him and his teachings?

Garrett: I actually think Dave Ramsey’s Financial Peace University or his books are really great starting points. The only thing that I really don’t like about financial media as a whole is because it’s made for a one-size-fits-all audience, they can’t give personalized advice. The quote I use is “one-size-fits-all, hardly fits anyone.” So, I think it’s a great place to learn fundamental financial literacy in a way, but I think a lot of the financial advisors will agree that baby steps one through three are so important. I think that I would recommend it to anybody who has debt or hasn’t created a budget, hasn’t really aligned their spending with what provides value to them as a family. But I think once you’re past baby step three, and you’re out of the high-interest debt, I think that’s when you start shifting into a more personalized approach. Whether it’s educating yourself through lots of different forums—Google is not a financial plan, but it’s a good place to start. I think Dave Ramsey is a net positive for consumers but I think that there’s a next step—after the baby steps, maybe you move to the toddler steps after that.

Benz: You mentioned one-size-fits-all and one area where that sometimes comes up, is in the context of target-date funds. I hear financial advisors mainly say “one size fits none” that they think they’re lousy products because they don’t address individuals’ circumstances. What’s your take on target-date funds?

Garrett: I think looking at target-date funds and target-risk allocation funds—one is based on risk tolerance and the other is based on an assumed risk capacity. I think, again, it’s one of those things where it’s a net positive. I think choosing a target-date fund is definitely going to be better than the alternative—you either staying in cash for the long term or, maybe in a form of naive diversification, choosing a little bit of everything. Ironically, by educating a lot of plan participants, I’ve seen employees actually elect to have 5% in every target-date fund, which is, again that naive diversification. I think target-date funds are, there’s an assumed risk capacity, which I don’t think is well aligned and personalized to the employee. As you’ll know, target-date funds usually aren’t used as much in individual portfolios outside of a retirement plan.

I think they’re great automatic enrollment place to be in a 401(k), 403(b), and so on. But once you have that personalized education, I think that you can shift away from that and build your own target date but, aligned with the phrase I use is: “You want to give every dollar a job and a use-by date.” A target-date fund gives your money an assumed target date of when you’re going to spend that money. But I think it’s important that consumers and individual investors think for themselves, when am I going to spend this money and how can I align my risk and return expectations with that timeline?

Ptak: And I think we’re going to turn our attention to that as we get further in the conversation. But before we do that, I did want to talk a little bit more about the journey you’ve taken to personal finance. I think you said that once you decided to focus on learning about personal finance, you began consuming books and podcasts voraciously. What were some of the most useful for you, especially before you decided to pursue the CFP designation?

Garrett: One of the most influential podcasts for me was, it’s called Radical Personal Finance, Joshua Sheats. Ironically he had moved away from being a financial advisor. He had a career as an insurance and financial advisor, as a fiduciary. Then he moved out of that career, and I listened to his podcast after the fact. As I was being introduced to being a financial advisor, he was leaving that industry but providing tons of really great education that went beyond the basics. I’m the type of person if I learn about a new topic that’s interesting, as you mentioned, I listen to all the books and podcasts at four hours a day 2 times speed. Read all the books, go to the library. He was a great introduction to the fundamental education side technically, but also called radical personal finance. He also had a very different way of thinking about personal finance in a much more personalized way.

And the second podcast I listened to a lot was ChooseFI, which I’ve actually thankfully been given the opportunity to be a guest on that podcast. ChooseFI is really focused on the financial independence community, which is a movement, which of course has its own pros and cons and limited beliefs within the industry.

Benz: Once you decided to go down this personal finance financial planning path, you joined a Registered Investment Advisor; it sounds like it was a family friend. What were some of your key conclusions or observations during that time about financial planning? And specifically, I want to ask about the assets under management business model, which you’ve come to be quite critical of. Can you talk about how you were thinking of that as you were working within that context?

Garrett: When I started at the RIA I was drinking out of the fire hose. I went from, again, musician to money immediately overnight. When I got there, I had no idea what business models were, that there were a few models. I didn’t know the difference between suitability and fiduciary standard, and all those things. I learned those along the way through just having more conversations. The biggest surprise to me was that financial advisors … Before being a financial advisor, I saw a lot of marketing for financial advice and it was really focused on growing investments. But yet when I got to a firm, I realized that the primary job was actually not really growth and accumulation, it was actually preservation and the biggest surprise to me was I feel like, especially in retirement planning, if you’re doing a retirement-focused firm, one of your primary jobs is not just to help people manage their investments, but also to encourage them to spend all that money they’ve saved for decades.

Flipping the switch from accumulation to distribution is such a huge significant mental hurdle. It’s not even really financial, and it surprised me that the financial-services industry was really focused on growing assets in a time where you should actually be looking at ways to support additional spending—assuming that the clients’ financial ecosystem aligns with that objective.

Benz: Do you think that the AUM-based advisors do disincentivize retired clients from spending what they truly could spend?

Garrett: It’s not really on the advisors, but I knew naturally the business model of AUM disincentivizes any movement of money outside of the AUM portfolio. Whether that’s spending more money, taking those big trips, going on the Viking cruise maybe as a family, paying off a mortgage, whether or not it’s reasonable or rational—if they like to pay off debt. I do believe there’s fiduciary in spirit and fiduciary in letter. So an advisor who’s fiduciary in letter, meaning they’re a Registered Investment Advisor. Most advisors even on the AUM model, do believe that they are giving advice in a clients’ best interest. But we simply can’t ignore that incentive. If you imagine, let’s say, an advisor just launches a firm, they have a potential to serve a client—their first client, who possibly has, let’s say, $5 million investable, that could immediately support their lifestyle needs—the advisor’s lifestyle needs.

But let’s say there’s an opportunity for that client to spend, to do something with half of that money, even though the advisor will claim that they have a fiduciary responsibility to give advice in that client’s best interest, you can see there’s an incentive there to keep the money under AUM. I guess the biggest issue to me is that AUM really isn’t a financial planning business model; it’s an investment management implementation model. And implementation is a part of the financial planning process but charging solely based on how big the portfolio under management is really sets poor expectations for the value of financial planning outside of the implementation phase.

Ptak: I think we want to talk some more about some of those trade-offs that are involved in these different fee models. Before we did that, though, maybe a little bit of context setting: You decided to start up your own planning practice Measure Twice in mid-2021. What were the main catalysts that prompted you to strike out on your own? You’ve already talked about some of those trade-offs that were associated with the AUM model. What were some of the other reasons why you decided to hang your own shingle?

Garrett: When I first became a financial planner, I never thought I would have my own firm. I thought I would stay there, maybe become a partner in the firm over time—transition multigenerational-type of financial planning practice. Most business owners seem to create a service or a product and then go find people to sell it to. Whereas to me, people were coming to me with an issue and a problem and saying, “Can you solve this?” There’s an exact time where this happened. A prospective client called me and he said “I’ve interviewed over 10 fee-only financial planner, CFP, professionals and none of them will give me comprehensive financial advice without the expectation to manage my money.” He said, “I have my money at Vanguard, I believe I have what I call the time, the temperament, and the talent to make the trades, to click the buttons.

But I need advice on everything else. I need advice on when I should claim Social Security, and I have these legacy securities that were just inherited. How can I unwind these in a tax-optimized way?” And he said the value of that advice really didn’t have anything to do with how much money he had in his accounts. It actually got to a point where I was receiving about 20 prospective inquiries per week, wanting that same type of advice, which is DIY investors wanting comprehensive financial advice; but that’s it, just advice. Not advice in the regulatory definition, but advice as human beings, as we say—hey, can you give me advice on what I should do with my money? When people ask for advice on what to do, they’re typically not asking, can you do it for me? They really want to make well-informed decisions with your guidance.

Benz: With Measure Twice, you took a from-scratch process where you looked at where you thought the needs were and created your firm from there. And I’ve seen that you’ve urged newbies in other fields, in your case, financial planning to be the change that they’d like to see. Can you talk about what other changes or areas for improvement you identified when you set up the firm? It sounds like a key goal was to try to address all of those nonportfolio needs. But I’m wondering if you can talk about that? And also I would just like your take on whether the fact that you came from a field completely outside of finance did give you a fresh set of eyes on how to do this and where the needs were that maybe some other people who had been steeped in this area, wouldn’t necessarily see.

Garrett: Those are great questions. I think in terms of newbies either joining the profession or launching their own firm, there’s three questions you have to ask and they have to be asked in this specific order, which is who are you going to serve? Second question is how are you going to serve them? How are you going to provide value to them? And then the third, and only the third, is in which way should the people you serve compensate you for the service you provide? And I find that the industry is really flipped, it’s the opposite of hey, I’m going to charge AUM—typically, just that’s the average—I’m going to charge AUM. Now who am I going to find who would be willing or able to pay that fee? And then how do I provide value and services to make sure that I can convince them that the fee is reasonable?

So, I would convince anybody whether you’re just starting off, as an employee in a financial planning firm or launching your own business, is you have to define who are you serving? How are you serving and providing value to them? And only then can you define the compensation model. So, for me, who do I serve? I serve DIY investors on the path to early retirement within five years. How do I serve them? I serve them with a three-month, three-meeting truly comprehensive financial planning process covering typically 20 to 25 topic areas. And then the compensation answer kind of answered itself: A DIY investor doesn’t need their money managed, so AUM is thrown out. Hourly doesn’t really work, and hourly also has a conflict of I will always want more information and they will always want to provide less. So, I didn’t want that kind of awkwardness. The phrase I use is: “To give investment advice in someone’s best interest, you first have to understand their interest.” I didn’t want to necessarily charge a higher fee just because I was genuinely curious to know more about them. I really came down on a project-based, three months, every household pays the same fee, for the same service and process. And I think if everybody goes through those same three questions at their current firm or at their next firm, I think they’ll be in a better place to serve people really aligned with what they truly believe is the right thing.

Benz: How about that second question that I asked you about whether having a fresh set of eyes helped in this journey and helped you refine what you wanted to do?

Garrett: For the second question, in terms of having a fresh set of eyes, I thought there would be a huge difference in the soft skills required, even technical skills required to move from being a professional musician to being a financial planner. But what I realized is, as a professional musician, I was an arranger. Part of my job was to arrange music and that’s a little bit different from being a composer. So, a composer, typically comes up with a new fresh idea from scratch, whereas an arranger takes music that somebody else has written, and then makes it better. Whether they take a piano piece and orchestrate it for a full orchestra. And as a financial planner I realized my job isn’t to create something from scratch. It’s the same thing of everybody has a financial plan, it’s just whether or not it’s been intentional or not. So, a family will come to me with their current financial plan, their comprehensive financial ecosystem. And I’m building a bridge between that and their unique values and desired outcomes. By taking what they already have and improving it, I’m actually doing a very similar type of task that I did as a professional musician.

I think the fresh set of eyes especially came in the form of marketing. As a musician, I was always taught that nobody’s going to call you if they don’t have your number. I find that a lot of advisors are waiting for prospective clients to give them a call or just waiting for that incoming inquiry, whereas I came from a background where you had to network and you had to wear multiple hats. When you weren’t performing, you were still working. So, I think that actually accelerated me a little bit in this new industry. I have more conversations with other professionals than I have with clients at this point. I think last year I spoke with over 100 financial planners, one-on-one outside of working in the business.

Ptak: Wanted to ask you about complexity and how you manage that with your business model. You charge clients a flat-dollar fee to provide them with a comprehensive financial plan and that basic fee is the same for every household. But doesn’t the level of complexity vary widely for every household? It seems that there’s the risk that some households would underpay relative to the time you put into their plan, whereas people with very simple situations, they might relatively overpay.

Garrett: It’s a fantastic question. I avoid that misalignment of complexity really by narrowing down on my niche. For example, if I’m working with DIY investors on the path to early retirement—early retirement being before age 60, before that 59.5, 10% penalty comes in. And also, they’re going to retire within five years. So the financial advisory industry actually says that complexity is based on assets. In that case, the average client I serve has about $2.5 million investable, they’re in their early 50s, family, kids. I’ve kind of narrowed in the complexity by serving a specific niche. And a big part of why I don’t charge differently for different people is complexity is also somewhat subjective. So, some financial advisors charge more if you’re married versus single. I think if you start going down this checklist menu of, do you have a W2 job, are you self-employed, do you own businesses, do you own real estate? If you start going over this menu, you realize that the complexity of those individual items also varies.

My way of getting away from complexity or making it unfair to some and not to others, is I go through the same exact process and consider the same exact topic areas for every client going through the process. And I also don’t offer any limited scope engagements, so every financial planning client has to go through this truly comprehensive engagement. And it typically takes about 20 hours, including time with the client, and on the back end to create the financial plan. Although I charge by the project, not by the hour.

Benz: Your firm is no longer accepting new clients and you’re referring would-be clients to the advice-only network. I guess the question is why stop taking new clients? Why not hire other advisors who are using your same general mindset to help people sort this stuff out?

Garrett: The decision to stay solo, to not hire, I got to that crossroads that Michael Kitces talks about where you’re like do I stay solo? Do I create a boutique firm or go enterprise with this? And what I realized is, individually I could probably serve 50 clients really well in terms of providing that comprehensive financial planning over time. Maybe changing to an ongoing business model rather than a project-based. But I believe, and it actually kind of came to me in the same way that the idea to launch my own firm came to me, is that hundreds and thousands of people are asking to learn about my process. The incoming demand, it’s definitely exceeded the supply. But I found out that instead of trying to maximize my ability to do financial planning one on one, I believe I will have a larger impact using a one-to-many approach.

And what I mean by that at this point is not necessarily providing group coaching to individual investors but teaching hundreds and thousands of other financial planners how I do my entire financial planning process. And I think if I equip new aspiring financial planners with the process I use to take on that demand, I think I will have a larger impact even individually doing that. And also, by limiting my capacity and financial planning for this year, I’m actually limiting it to about five hours per week. I own three other businesses, so I can focus on those three other businesses to really make that impact go much further than trying to just maximize how many hours I can spend working on one on one.

Ptak: Sorry you mentioned it. What are the three other businesses?

Garrett: Measure Twice Money started off first. Actually, before I launched my firm, which is an educational resource; it’s really a blog right now. An educational resource for DIY investors whether or not they use a financial advisor or not. It’s specifically not tied to my RIA. So instead of saying, hey, here’s a little bit of education, and by the way, if you want to learn more, set up a free consultation, I just gave away all the education. I really do believe that you should give to others without expecting anything in return. And ironically, that’s the best form of marketing for my experience. The second is Measure Twice Financial, which we’ve talked about. Measure Twice Planners is my new educational platform that’s teaching other financial advisors my entire financial planning process in full transparency. All the templates and tools I use. It’s a seven-hour video course showing how I do it so that others can either replicate it or just take nuggets from that to improve their own process.

And then Measure Twice Mentors is something, I bought the website so far. I want aspiring financial planners and financial advisors to come into this industry learning about the industry from a place of transparency and generosity, rather than the traditional way of learning how to become a salesperson. It’s a product-based industry. I know I’ll get in trouble for this a little bit, but I also believe that investment management in a way is a product. It’s just sold in a different way. So, Measure Twice Mentors is a way for aspiring financial planners to be mentored, one on one, from other practicing financial planners who really align with who and how they want to serve moving forward.

Ptak: Thanks, that’s helpful. And I think actually we want to talk about some of those other educational activities that you engage in a little bit later in our conversation. Before we get there though, I wanted to turn back to the AUM-based business model and I think one argument that AUM-based advisors make is that they can actually execute the advice they’re giving, whereas other business models are leaving it up to the client to execute and sometimes things just may not get done. Do you think that’s a valid argument?

Garrett: I think the argument really comes from incentives. Again, an AUM advisor actually has an incentive not to educate clients to execute their own well-informed decisions. Since I don’t manage any client investments, I actually have to double down on that personalized education to help families understand what to do, how to do it, why they’re doing it—ultimately in alignment with their own values and desired outcomes. Anytime somebody tells me that model doesn’t work because people will not actually implement the advice, it really comes down to it’s really not their fault. It would be my fault as the advisor to not fully equip them and empower them with education to make those well-informed decisions. I really view financial planning as really a personalized education process, whereas a lot of financial advisors see financial planning more as hopefully not a loss leader in a gateway just to AUM, but they see it as just like a value add and I believe that financial planning is such a valuable service in and of itself.

Benz: I wanted to follow up on that. Another thing that we often hear from advisors is that advisors who are overseeing client portfolios earn their keep in a year like last year where everything was down because they keep their clients invested, and indeed our data do show that investors often hurt themselves with these poor timing decisions where they’re selling themselves out of stocks or bonds in a year like 2022. What do you think of that argument, that if you are entrusted with overseeing a portfolio that really does help produce a better client outcome?

Garrett: I see it less as a value of working with an advisor, but more of a really wide gap, typically between risk tolerance and risk capacity. I find that advisors, instead of building a bridge between, or narrowing the gap between risk capacity, which is more the objective ability and need for risk in a portfolio and then risk tolerance, the subjective how they respond to risk emotionally, behaviorally—I think that as a financial planner, my job is to narrow that gap, not necessarily be the person in between those two gaps to say hey, if there’s misalignment between your risk capacity and your risk tolerance, and you feel like you need to make a big shift to your portfolio, I really hope that an advisor’s highest and best use isn’t just to create a barrier with investors and their money. That’s kind of a transactional way; they pay me, I tell them what to do. They pay me, I manage their money. They pay me, I stop them from making stupid mistakes.

I think it is a value add to manage money, but I would really hope that barrier is less of a barrier and more of a bridge to really deeper mental framework conversations. Again, most of the issues with those average investor charts you see—the average investor who pulls in and out of the market—the issue is not them going into the account and making trades; the issue is that belief that they’re having and the action that they’re taking based on that. Typically, it’s a limited and automatic negative thought. I really take almost like a cognitive behavioral approach and a stoic approach to education. And a financial advisor’s highest and best use isn’t to stop somebody from making transactional actions. Their highest and best use is to truly help the family understand that the money has actually been aligned with what they wanted to support in their life. And if somebody’s worried about how their money is invested when the stock market goes down or is volatile, that usually means that the advisor hasn’t clearly communicated that the way their money is invested is actually very intentional and that every dollar has a job and a use-by date moving forward.

Ptak: Maybe on the subject of advisors editing themselves, or setting that circle of competence, I think you made the point before that there are actually a lot of jobs that advisors simply can’t do for their clients. I think maybe one example is making employee-benefits elections. Can you expand a bit on that?

Garrett: Actually, that comes down to the last question you asked about implementation—they won’t do it themselves. But most financial planning recommendations actually cannot be done by an advisor. You think about any movement of money within the portfolio that the advisor manages can certainly be, with limited power of attorney, can be done by the advisor. But if you think about employee-benefit elections, if you think about making estimated tax payments, or changing the tax withholding with the W4 as an employee, or drafting estate documents, most advisors are not licensed attorneys. And I think, a financial advisor can certainly provide referral to other professionals. Actually, more so I think it’d be really important for financial advisors to be more collaborative in implementation rather than doing it for our client.

A lot of advisors will tell me, “Well the clients I work with they just say, ‘Just do this for me; I just want you to do this for me. I don’t want to have to look at it,’” especially in terms of investment management. I come down to that word—“just” is really important. If a client says “just do something for me,” that usually indicates some sort of frustration or misunderstanding or a limited belief that they can’t possibly do it themselves. So I think instead of advisors just saying, “My client told me to do it for them, so I’m just going to do it for them,” I would stress that we need to find a way to make financial planning and even investment management a more collaborative process than a transactional one.

Benz: I’m curious from your planning practice, are there areas where you find people really struggle to get stuff done? Are there pain points that where you say “you need to do this,” where repeatedly you notice that clients just don’t do the job that they need to get done?

Garrett: I think those actions, the forms of implementation that are hardest to do in terms of the clients I work with, families I work with, is actually things that they want to make sure they don’t mess up. It’s not that they’re just kicking the can and procrastinating. It’s actually, like “Cody, you mentioned this idea of tax-loss harvesting or Roth conversions. I want to make sure I don’t convert everything; how do I do this?” So the way I help in terms of the implementation that they’re anxious about doing themselves, we simply screen share. As an advice-only financial planner, what I love about my job is I can do everything an AUM advisor does, except that the person clicking the buttons on the screen is the client, not me.

I can guide them to learn about their custodian of choice, whether Vanguard, Fidelity, M1 Finance, I can help them understand their own online dashboard. I can show them how to make trades, how to review their cost-basis information. Again, it’s a very empowering method of doing financial planning. I always say clarity precedes confidence. Before somebody can have the confidence to implement financial decisions, they need the clarity. So, I think that our job is to provide clarity and then provide confidence for them to implement, not just by themselves, but also to create a collaborative approach.

Ptak: I think we’ve touched on this from time to time during the course of our conversation at this point, but as you practice financial planning and teach concepts to others, are there areas where you find you diverge from conventional wisdom?

Garrett: One of the one of the trademarks of my brand Measure Twice is keep finance personal. I really take a really personalized approach, just as we mentioned, with the Dave Ramsey approach versus the personalized approach. I think where I diverge is I completely avoid rules of thumb. I don’t talk about three- to six-month emergency funds, or this percentage in bonds and things like that. I think once you’re providing personalized education and advice, you can move away from those rules of thumb. A big one for me—especially working with families on the path to early retirement before age 60—a big miss from financial advisors that I’ve seen is advising on whether or not, especially 401(k) participants, should contribute to a traditional or a Roth 401(k). In terms of tax-rate arbitrage, I think that’s one of the biggest issues, is they make the decision usually based on their current marginal tax rate rather than thinking about their future, sometimes even effective or average tax rate, depending on their future sources of income and expenses.

Benz: I’m curious, are there any areas where you’re thinking on a given aspect of financial planning has changed in the years that you’ve been learning about and working in financial planning?

Garrett: The biggest change for me is I used to think this job is very technical and very quantitative. Certainly, I get down the rabbit hole and I love the numbers, but what I’ve realized more is it’s less about the numbers than what the numbers represent. One really great example of this is looking at somebody’s Social Security statement. I was looking through my client’s Social Security statement and most advisors just look at the Page 1 that says, here’s your expected Social Security retirement benefit age 62, 67 full retirement age, and 70. Whereas I don’t look at that at all because it’s typically based on incorrect assumptions for future earnings. I go to Page 2 where I see their work history, their earnings history. And there’s one example where I looked down in earnings history, somebody was making up to the Social Security wage base, making good money every year, boom, boom, boom, and then there was a year of zero. And then there were years of lots of income after that. I was like, OK, that’s either a mistake or there’s something going on there. So, I dug deeper. I believe I’m kind of like a forensic accountant for good as a financial planner. I looked at what happened that year and what I realized is they had adopted a child that year.

So, I was able to go into the next meeting and say, let’s say his name is John, I said “John, I noticed that you were able to take a whole year off of work to take care of your newly adopted son. That must have been incredible, but also that must have been a scary decision to make to just leave work. I would love to learn more about how you made that decision and how that impacted your family.” And, as you know, the question really had nothing to do with the numbers and the conversation really wasn’t about the income or the lack of Social Security earnings that year. It really provided more clarity to me about what was important to them as a family, and that could easily transition into the conversations about how would you like to raise your son in terms of educating them about their own finances moving forward? So I was very technical and very spreadsheet-y with financial planning software in the beginning, but now I’m always looking for, I call it genuine curiosity to go beyond the numbers and find how can I learn more about their family rather than just learning about their money? That’s been a big change from when I first started to now, about four years later.

Ptak: And has that become this discussion of what might be considered nonfinancial matters? Has that become a fixture of the way you work with people for pre-retirees, for example, it seems important that they would have a life plan for retirement in addition to a financial plan. So has that become an increasing focus and a hallmark of the way you work with your client?

Garrett: Absolutely. A really good example of that would be typically when you’re working with a couple. Let’s say you’re working with a married couple. One spouse will be really into the numbers, want to go deep into the weeds, into the individual holdings and the expenses of each fund. And then the other spouse is maybe like a shoulder in the Zoom meeting, being like “I’m just kind of here, but I’m not really the financial person.” But I really eliminated that idea of a financial spouse and a nonfinancial spouse from my vocabulary. I really do believe everybody does care about money. They just care about money differently. One spouse might love the numbers in the spreadsheets. The other one who’s not in the spreadsheet or even looks at the accounts, they do care about money, but they care more about what the money supports and what it provides to their family; how does their money align with their ideal life.

One of the questions I ask is, people come to me and they talk about how much they want to retire from their job and I ask them, “Well, we know what you’re going to retire from. But now let’s have a conversation about what we’re retiring to. How are you going to contribute and connect when you leave your job?” Having those deeper conversations about what their future life will look like, or even how they can improve their life now in the accumulation phase, that’s been huge and I think that’s really what builds the trusting relationship more than the implementation stage, which has been the primary focus of the industry for so long.

Benz: I’d like to get your take on where you think you add the most value? I guess if we were to cluster financial planning matters into a few key areas—investments, taxes, retirement planning, household financial management, including debt reduction—in which of those areas would you say that you add the most value?

Garrett: I would say tax planning 100%, like drop the mic. Tax planning is everything. Nearly every movement of money you can imagine either has a tax consequence, involves a tax consequence, or has a specific exception or exclusion. So since nearly every movement of money has a tax consequence, whether it’s through investing, whether it has to do with employee benefits, whether it’s buying insurance or claiming insurance. Since every movement of money involves a tax consequence, I think tax planning is—after the CFP designation I would tell every financial planner to go for the EA, just not even necessarily to file tax returns. But I think every financial planner needs to understand how to review a tax return and understanding asset tax location is huge, especially for early retirement—that balance between taxable pretax and tax-free accounts.

Retirement it’s all about—we talked about the accumulation order of operations for which accounts you are going to contribute to in which order. But a huge job of mine is to help people create what I call a distribution order of operations: which account am I going to take from, in which order? And, as you know, there’s over a dozen variables involved there, but I think creating retirement spending plan, like taxes, is everything.

Ptak: I think you said that you believe expensive financial planning software isn’t mission critical for financial advisors. What do you think they should use instead?

Garrett: A financial calculator, a handheld financial calculator and a notepad. No, just kidding. When I say that it’s less about not using software than it is about … You have to understand that financial planning software is a supplement to your process. It’s not a replacement for the process. I think a lot of financial advisors are being trained—they go through the CFP education program, they learn the concepts and rules, and then they sit down at their new job and they say, we have eMoney or we have RightCapital. And they input the information they’ve gathered from the client, they throw it into the software, and then they press print, bind it, and give it to the client. I really do believe that financial planning software is not only a supplement for the financial planning process, but it’s actually pretty limited in the types of planning areas it can cover.

For example, financial planning software won’t necessarily recognize how much paid time off the client has taken this year. When reviewing a pay statement I might mention, “I noticed that you have a lot of PTO you haven’t used.” In my mind, thinking about physical and mental health, not just financial. A quick sidebar there. I mention to every client that your physical, mental, spiritual, relational, and financial wellness are all related. And I think most financial advisors, they just focus on the financial part. And again, going back to the incentives, that’s usually they’re only incentivized to provide advice on the financial part of the financial plan.

Benz: This is a question I’ve had, Cody, is it does seem like the financial planning profession is moving around to really looking at the whole person. And many planners I know have gotten the life planning designation. Do you think that there are some planners who just aren’t cut out to do that type of work? Some investment advisors who aren’t cut out to do that type of broader holistic look at a client?

Garrett: I think so. I think that not everybody is cut out to work on every part of the financial plan. When I think about the financial planning process in my head, it’s really, develop a relationship with the client, create mutual expectations for the financial planning engagement, collect financial information and also qualitative information. Analyze that data, develop recommendations, present the recommendations, implement, and monitor. I think that when you think about all those as possible roles, I think people within the profession could probably sit in one or many of those seats. So, I think even if somebody’s not cut out necessarily for having conversations, I think there are a lot more valuable opportunities for paraplanners to do a lot of the back end, what I call the forensic accountant. The good version of forensic accountant on the back end. I think that people who are data-oriented, they could certainly be working just in the implementation stage or just working in the data-gathering stage. But at the same time, I do believe that the financial planning process does necessitate all of those processes being very intentional and also making sure that at least somebody’s in each one of those seats.

Ptak: You’ve indicated that you’ve been engaged with the financial independence retire early movement, goes by the acronym of FIRE. I think maybe earlier in the conversation you might have referenced the ChooseFI podcast. What aspects of the FIRE movement appeal to you and where would you like to see changes?

Garrett: The part of the FIRE movement that really appeals to me is the first half. The FI, less than the RE. I focus on financial independence, which I define as the ability to maintain your desired lifestyle without future earned income. It’s not really about not working; but rather having the option to work because you want to, not because you have to. So, the part of the FIRE movement that I really love is that families and individuals are really starting to think about their life and not just the money. The FIRE movement really does focus not just on what’s happening today but thinking longer term. The name of the podcast, right?

These are really individuals and families thinking I don’t want to just make a dying, I want to make a living. So, they really focus on being intentional about their money, but not just in terms of investing. But also, and this is a part I think should be emphasized even more, that there needs to be more focus on spending. A lot of people in the financial, independence community and otherwise are learning a lot about how to save and invest. But there’s not much education around how to spend well. I think that I would love the financial independence community focus a lot more on reducing expenses that don’t provide as much subjective value to your family but spending even more on the things that do. I would love more emphasis on spending now that the savings and investments parts have been the focus for so long.

Benz: How do you help your clients with that mindful spending process?

Garrett: One question that’s really impactful, especially when working with clients who are on that thin line between being frugal and being cheap, and I’ll ask them this question. She’ll mention to me that she never orders dessert at a restaurant or they never fly first class, even though they can afford it. So, I’ll say, “Susan, imagine if I gave you $20,000, but this $20,000 you aren’t allowed to save it. You aren’t allowed to invest it. You aren’t allowed to pay off debt with it. If you were given $20,000 and you’re forced to spend it, how would you spend that money?” So, it actually creates a very strict box for Susan to be around in terms of making this decision about spending. Only in that moment do I realize what really matters to her. She’ll say “Well, I only get a massage once every few months. I think if I had $20,000 extra to spend, I’d probably get a massage at least twice a week. Maybe I’d pull the trigger and hire a therapist, we’d finally get our dishwasher fixed.”

And then I can say, “Susan, I just realized, that your family actually has the opportunity to spend an extra $20,000 a year. So, you remember what you told me about the massages, and therapy, and the dishwasher? Good news, you can actually do those things.” So, again, that conversation separates their money from a moment. And going through that exercise and saying, “Let’s just imagine $20,000 is on your doormat and you have to spend it this year. How would you spend it?” That’s a really great way to actually understand, what do they actually want to spend on? So, then you can encourage them to align that spending with their comprehensive financial ecosystem.

Ptak: You mentioned some of the educational efforts that you engage in earlier in our conversation. Your educational materials are aimed at both individual investors and financial advisors. So, let’s start with individuals. What’s your goal in providing them with educational content and what are you aiming to give them that they couldn’t get elsewhere?

Garrett: I want to ironically, as a financial advisor, I want to teach individual investors that they can successfully manage their own money, whether or not they hire a financial advisor or not. And I really do believe that the industry has a long way to go. The financial-services industry has a long way to go in terms of generosity and transparency. Most financial advisors are not willing to give very much away. They either believe “If I tell everybody how I think about money, or if I told everybody how I create my model portfolios, people wouldn’t hire me anymore.” But really it comes down from a passion of financial planning. I really want families to understand that the alignment between your comprehensive financial ecosystem and your family’s unique values and desired outcomes—that bridge is the financial plan. And so, I want to teach consumers how to create their own financial plan as a family. And then only at that point will they actually understand the value of financial planning. And ironically, when you teach people how to create their own financial plan, when they realize the value of that, they go “Wow, we should actually hire somebody who does this for a living.” So, ironically, I’m teaching them how to do it themselves, giving that all away for free, but at the same time that will actually turn around and those same families will end up hiring financial planners in the future now that they realize how valuable the process is.

Benz: You mentioned also that you have created content for financial advisors and you talked about why you’re doing that. Can you perhaps give us an example of the type of content that you’ve created for financial advisors to help them on their educational journeys?

Garrett: It’s crazy how long it takes and how much work it takes. Good for you for doing this podcast. I just recorded seven hours of video content—no ums, buts, or pauses; just about 60,000 words’ worth of video course. And the financial planning video course lessons literally go through every part of my financial planning process—from marketing to the prospective client reaching out initially all the way through plan presentation, implementation, and monitoring. Since I decided not to hire any employees and grow my firm beyond myself, I said if I were to hire an employee to take over Cody’s job—I decided to create my video course out of that, saying I want to teach somebody else how to be me, if I didn’t exist. And that’s been the easiest decision in terms of hey, I’m going to give everything away, full transparency. Any questions you have, I’m going to answer with full transparency. But I really don’t think the industry has caught up to this place of actually giving everything away. Even giving everything away for free can, ironically, lead to even greater financial outcomes for you as a financial advisor and your firm in general.

Ptak: What are your own go-to resources for staying current and educated on financial planning-related changes and innovations? I think you’d mentioned Michael Kitces earlier, who’s very prolific and I think helps many to stay current. What else do you consult to try and stay current.

Garrett: I do help moderate a Facebook group that has about 35,000 retirees or retired-focused nonadvisors. So, I learn a lot from them. We learn way more from people’s questions than we do from their answers typically. I’ll see maybe 20 questions that retirees are asking every day in this Facebook group. That’s a great place to learn. I also believe that when you teach, you learn twice. So just like when I created my financial planning video course, when you teach somebody, guess what, you’re going to make sure you really understand that material before you decide to teach it to somebody else. So, by teaching, I tightened the screws in my own learning.

Twitter, there’s a lot of great Twitter threads. I think Kitces and his team create a lot of awesome Twitter threads. And then IRS publications. I know a lot of people would be like why you would read those, those are really dry. But I actually believe that most of the IRS publications are well written and are easily understandable at least, especially if you’re a financial professional already. So, Twitter, IRS publications, Facebook groups, and multiple financial planner mastermind groups. I’m in small mastermind groups with other financial advisors that are specifically advice-only or specifically only serve families on the path to early retirement. So since we do similar things, we can learn from each other along the way.

Benz: Speaking of Michael Kitces, we had him on the podcast this past summer. We talked a lot about productivity with him and you are similarly productive. And you’re also thoughtful, it sounds like, about how you allocate your own time and energies. Wondering if you can share any time-management hacks with our listeners that might be relevant to people in different careers, different life stages even, not just financial planning?

Garrett: That’s really great. And it’s really important. I think a lot of people will say I don’t have time for this. Or advisors will say I don’t have time to do financial planning the way you do it. And I really do believe how we spend our time is a choice. With that said, some things that I do, and thankfully have the flexibility to do, is I try to only check email once a day. Since I don’t manage investments, I don’t have a phone in my business, so I’ve eliminated some of the distractions from deep work. Also, I never schedule meetings back to back. As you can tell from this podcast, I usually overstay my welcome in conversations, so those usually go a little longer than usual. A big hack that I learned, actually from my business coach Brian, was start every day with something called 4D time. It’s a combination of a few strategies, David Allen’s Getting Things Done, talks about capturing your ideas and specifically using note cards.

Throughout the day, instead of using my brain to store information, I use it to process information. Anytime I have an idea about—I have way more ideas than I have time for, by the way—when I have an idea, I just simply write it on a note card. So, then every morning when I first wake up, I go through these note cards and I go through 4D time, which is if this takes two minutes or less to do, you do it right away. That’s the first D: do. If it’s something that isn’t really of my highest and best use, how can I delegate this? Or not necessarily with the “who, not how” framework of delegating, like hiring somebody else to do it—but is there somebody else who can help me do this easier or more efficiently? So do, delegate; the third is delete. If I look at that note card and say, “That idea that I came up with yesterday is silly, I’m just going to throw that away”—that’s delete. And the last one is so important, which is date stamp.

Any task that takes more than two minutes to do, so you’re not going to do it right away, you’re not going to delegate it or delete it—you have to decide is this something that goes on my calendar or goes on my task list? Only put something on your calendar that has to happen at a specific time. I find that people just put all the work they have to do on their calendar or they put all the work they have to do on their task list rather than understanding that the task list is for things you want to get done generally but don’t have to be done at a specific time, whereas things like meetings or appointments or even our podcast recording today—that should be on my calendar because it’s date-stamped.

I think the biggest hack there is, use a calendar and use a task list. That’s all you need to be productive moving forward. And when you get to that place in your calendar where there’s no task or where there’s nothing on your calendar, most people just say, what do I do now? What do I do with this time I have between these two meetings? Well, when you have the system set up, you can quickly just look over your task list and do the first thing on that list. It’s a combination of different resources from productivity around the world, but I think that do, delegate, delete, and date stamp 4D approach is a great way to at least start the day. Just 30 minutes a day, maybe right when you wake up.

Benz: Well, Cody, thank you for sharing those helpful hacks and you certainly haven’t overstayed your welcome here. Thank you so much for taking time out of your schedule to be with us today.

Garrett: Thank you so much for inviting me. I hope you have a wonderful week.

Ptak: You too. Thanks so much.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Christine_Benz.

Ptak: And @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

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. While this guest may license or offer products and services of Morningstar and its affiliates, unless otherwise stated, he/she is not affiliated with Morningstar and its affiliates. 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 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.)

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Christine Benz

Director
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Christine Benz is director of personal finance and retirement planning for Morningstar, Inc. She is also the author of a new book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement (Sept. 2024, Harriman House). She co-hosts a podcast for Morningstar, The Long View, which features in-depth interviews with thought leaders in investing and personal finance.

Benz joined Morningstar in 1993. Before assuming her current role she served as a mutual fund analyst and headed up Morningstar’s team of fund researchers in the U.S. She also served as editor of Morningstar Mutual Funds and Morningstar FundInvestor.

She is a frequent public speaker and is widely quoted in the media, including The New York Times, The Wall Street Journal, Barron’s, CNBC, and PBS. In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance; she appeared on the 2021 list as well. In 2021, Barron’s named her as one of the 10 most influential women in wealth management.

She holds a bachelor’s degree in political science and Russian language from the University of Illinois at Urbana-Champaign.

Jeffrey Ptak, CFA

Chief Ratings Officer, Research
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Jeffrey Ptak, CFA, is chief ratings officer for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Before assuming his current role, Ptak was head of global manager research. Previously, he was president and chief investment officer of Morningstar Investment Services, Inc., an investment unit that provides managed portfolio services through fee-based, independent financial advisors, for six years. Ptak joined Morningstar in 2002 as a senior mutual fund analyst and has also served as director of exchange-traded fund analysis, editor of Morningstar ETFInvestor, and an equity analyst. He briefly left Morningstar to become an investment products analyst for William Blair & Company, and earlier in his career, he was a manager for Arthur Andersen.

Ptak also co-hosts The Long View podcast with Morningstar's director of personal finance and retirement planning, Christine Benz. A full episode list is available here: https://www.morningstar.com/podcasts/the-long-view. You can find him on social media at syouth1 (X/fka 'Twitter') and he's also active on LinkedIn.

Ptak holds a bachelor’s degree in accounting from the University of Wisconsin and the Chartered Financial Analyst® designation.

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