Ready for These Retirement Shocks?

Millions of retirees didn’t anticipate these events – but you can

Ric Edelman: It's Friday, August 11th. On today's show, How to Choose the Right Financial Advisor for You. 48% of retirees say they have experienced more surprises and challenges than they expected and that they have significantly disrupted their retirement well-being.

What are these surprises and challenges? Most commonly, having a family member or close friend die? 42% say they've had this happen to them. 77% of them say it was an extremely disruptive event. Also, personal health issues, 30% have experienced this, half saying it was extremely disruptive. A spouse or partner having health issues, 21% incurred. This 42% say it was extremely disruptive and 56% of women say they've had to adjust their lifestyle in retirement because of their spouse or partner's health issues. 20% have also experienced a significant financial setback.

Inflation, the cost of living, medical, dental expenses, unexpected home repairs, decline in the value of investments, the need to provide financial assistance to family members or friends. 75% of retirees say they've had to reduce their own everyday spending.

And finally, unexpected retirement. 30% of retirees say they retired sooner than they anticipated. They suffered unexpected health issues or they got laid off at work in a downsizing. 

Or they've had to incur family responsibilities such as caregiving for someone else. All of that translating into them retiring sooner. And that has had a big impact not only on their lifestyle, but their finances.

In fact, the number of people who had to take hardship withdrawals from their 401(k) rose 33% over the past year. The average withdrawal over $5,100. So as you prepare for retirement, don't you need to accelerate those plans? I'm not saying you should retire sooner. I'm saying you need to assume that you might have to and that it might be because of reasons that give you a significant disruptive event. Talk about it with a financial advisor.

If you are a financial advisor, talk about this with your clients who are facing retirement. Do they recognize the risks associated with having family members pass away, incurring medical issues themselves or their spouses financial setbacks or unexpected retirement because of job loss or family issues? Now's the time to prepare before you experience any of this.

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A conversation with Matt Barthel, the guy behind the rankings of the top advisors in the nation from Barron's. 

Ric Edelman: Well, if you've been listening to my radio show and podcast for the past several decades, you know that I've been several times ranked the number one independent advisor in America by Barron's. And you know that the firm that I founded, Edelman Financial, was ranked the number one firm in the nation multiple times by Barron's and is still ranked the number one firm in the nation by Barron's. How does that happen? Where does that come from? Well, this is the guy let me introduce you to Matt Barthel. He's the executive editor of Dow Jones Wealth and Asset Management Group. Matt is the guy who is responsible for running the rankings at Barron's. Matt, it's great to see you, my friend. How are you? 

Matt Barthel: Ric Very good to see you too. And you know, congratulations on all your past success. And it's not just me. There's plenty of other people working on it but love to love to be the face of it. They can get someone more hands on. 

Ric Edelman: Well, I'll accept you. You know, Matt's been a financial journalist for 30 years, went to Notre Dame. Although, Matt, you love to say you have absolutely no sense of humor when it comes to Notre Dame football. So we won't talk about Notre Dame football, but let's do talk about the rankings, because this came out of nowhere and it was an incredibly necessary and important need. You have filled a huge hole, a gap that existed in the advisory field, not just for the advisors who participate in the rankings, but more importantly for the investors who seek out these rankings. Because we're dealing with investment advisors who collectively, whether there's 300,000 of us in the industry and we're collectively managing, I don't know how many tens of trillions of dollars that all of these advisors and all of these firms are managing and we're managing all of these trillions of dollars on behalf of ordinary Americans, everyday families as well as high net worth individuals who are seeking to secure their financial future. In the old days, you know, if we go back well, long before you and I were born, the whole shtick to investing was picking the right stocks, picking the right investments. 

Ric Edelman: Today, it's all about picking the right investment advisor because the world has gotten so complicated. Most of us don't have the knowledge, the skills, the time or the desire to do it on our own. So we're delegating, we're hiring people to do it for us. But how do you know who to turn to? Who do you trust? How do you know what the services they provide and the credentials that they offer and the fees that they charge and all that kind of good stuff. And there was no way to answer that question. Along came Barron's. And you have now championed this notion of ranking the very best advisors in the industry. And I think for most folks it's a little bit of a black box. They don't know how you go about doing it and that's why I'm excited to here today to pull back the curtain. You know more about advisors than anybody in the industry. You collect data on thousands of advisors, talk about how you go through the process of identifying the nation's best financial advisors. 

Matt Barthel: Well, all right. Well, that's my job. And the one thing I'll put on it up front is the thing that's increasingly difficult to do is to separate individual advisors from the teams or organizations that they work on. When I started doing this, I'm 15 years into doing this for Barron's now, you know, working on the rankings. And when we started doing it, you know very well you yourself were the head of a of a of a big organization that wasn't quite as gigantic as it is right now. And, you know, you were an advisor who said investment policy for a whole bunch of people and you know, you had ultimate responsibility for how things went on that. Right. It was pretty easy to separate individual advisors from the organizations they work with, or at least say how much. Of what's going on is attributable to that advisor turned it into a metric and ranked them. That's getting harder and harder and harder because the organizations are the teams that they're working on and the firms that they're working on are getting bigger, more horizontal, you know, and having a whole bunch of more capabilities. That's all very good news for people who are looking for financial advice. It's it complicates our job a little bit because we're trying to figure out how to move from just ranking individual advisors to which people in America love. They love to hear the name of the person right. To ranking the organizations as well and pointing people at organizations which are going to be more enduring. 

Right. Than just a person who might retire or whatever. But back to your main question. How do we do it? We measure a whole bunch of metrics. First thing is there aren't there's no subjective element. You know, Matt thinks Ric is very, very good for his purposes or evaluates him and says, you know, Ric ought to be really high, highly ranked in these rankings or get some points because I've done some evaluation on that front. Our stuff is metrics based. Our rankings are metrics based. We look at the assets that the advisors manage, the revenue that they gather, which I'll get to. A lot of people ask, Why do you care how much revenue an advisor gathers? And there's a reason for that. And then there's 15 or 16 quality measures that are their ability to service clients essentially put into a big calculator, basically. And after we get all the metrics scrubbed and measured out, it creates a ranking. Assets do a real quick thing. Assets are a good measure. The growth of assets are a good measure of the health of a practice and whether an advisor is somebody who's constantly self-evaluating not complacent moving forward. It's kind of a I always say it's like the bubbler in a fish tank. You got one of them, you're okay, you don't have one of them. The water gets very murky and still and dead pretty quick revenue. The reason we care about revenue is it is the fees that clients pay to advisors is the best proxy for client satisfaction that we know of. 

We're in a world of Amazon rating, four stars, five stars, giving an Uber driver a rating of something after you used it. That's useful. But we've all read an Amazon review where someone says the packaging was broken one star and that says nothing about the product itself, right? So the, you know, you really know what people are doing when they are saying, yes, I see value for the whatever amount I'm paying this advisor and I'm sticking with this advisor. So the retention rates and the amount that they're paying are really, really good proxies for us of client satisfaction. And then these quality of practice measures that we have are, you know, how long have you been in the industry, what is your regulatory record look like? How many people do you have on your team? How old are they? Are they staggered out or is it just a whole bunch of 62 year old people who are going to retire all at the same time, leaving their clients in a lurch? Right. How many households do you have? How many assets we triangulate between that and the people on the staff to arrive at your ability to serve as clients? I could go on and on. There's a bunch of charitable and philanthropic work and again, so all of those things, I won't kill you with any more detail than that. But those are the three basic categories assets, the revenue and fees that they gather and then the quality of their practice. 

Ric Edelman: And you mentioned that it's increasingly challenging because many successful advisors, most of the successful ones, I would argue, are growing in size to the point where they're not sole practitioners anymore. They're part of big teams building big teams, leading big teams. And so you're finding it a bit of a challenge there. And I think this is reflective in the fact that your rankings have changed. In the old days, you had one list, there was the list of the top advisors. Now you have multiple lists, you have a list of top advisors, you have a list of top independent advisors, you have a list of top teams, top firms, you have top women. So talk about the growth of the lists and how they are reflecting the changing nature of the advisory field. 

Matt Barthel: Okay. So one of the most important things about the different types of lists is that there are different types of advisors. There are RIAs, there are independent broker dealers, and there are advisors who work at the big brokerage firms like Morgan Stanley and Merrill Lynch. You know, I know you've talked about this on the show before, but, you know, the regulatory structure around the wealth management industry is a mess, you know, and anybody who would find any of the people that I know who I associate with friends and stuff, where I tell them that a lot of those people who are advisors out there are not held to a fiduciary standard to do work in the best interest of their clients are flabbergasted that that is the case. And it is pretty ridiculous when you really get down to it that there's this patchwork of different standards. Is a different kinds of wealth managers are held to on how they have to deal with their clients. So we do have different rankings, some for independents, RIAs, who are held to a fiduciary standard, who have to act in the best interests of their clients. And then we have things that are aimed at advisors who work for brokerage organizations who are held only to a suitability standard, meaning they have to put clients in investments that are suitable to their needs and their risk appetite, but they don't necessarily have to find, for instance, the cheapest investment option that is, you know, risk appropriate. 

They could do something that's good for them. Again, a lot of people, you know, who don't know a lot or who haven't taken a lot of time to dive into the industry are flabbergasted that that's the case. But it is That does not mean that anybody who works at Morgan Stanley or Merrill Lynch or UBS is a bad advisor. Many of them, probably most of the ones that we deal with, are dealing as fiduciaries or working as fiduciaries because it would be terrible business for them not to. They lose clients pretty quickly if they weren't doing a good job of it. But the fact exists that that the patchwork, the regulatory patchwork is not serving clients very well. It's not serving end investors very well. And it's particularly not serving people who don't spend all their time looking at the industry, trying to figure it out very well. Okay. So we have different lists. We have eight different lists now. So individual advisors, we rank them, we break them out by state geographically. That's the biggest and broadest one that we do. You mentioned that there's 300,000 advisors in this country. For our purposes. We look at that more like 120 to 150,000 of advisors who do this for a vocation, who are really truly doing advisory work, not CPAs, who kind of have the licensure and so forth that they need to call themselves an advisor. Nothing wrong with that. 

I'm just saying they're not full blown advisors the way some of the others are. That geographic ranking is a top 1,200 ranking. We consider it roughly a top 1% ranking, and then we do a bunch of top 100 rankings, top 100 women in the United States, top 100 independent advisors. Those are the fiduciaries top 100, just the top 100, the one we've been doing since 2004. But that has evolved into mostly a wirehouse ranking advisors who work at these big firms like Morgan Stanley and Merrill Lynch. And then we do a ranking in Australia, which we were just talking about I'm working on right now and we have a couple of teams rankings and organizational rankings that are coming in, and those increasingly are the main event for us private wealth teams, teams that deal with families and individuals, institutional consulting teams, those who deal with institutions, pension funds and endowments and foundations. And then we rank RIA firms. So independent firms, which are the fastest growing segment of the population, into which. Edelman Financial engines, that's the category they're in for those purposes. So that's a lot. And you can tell that things have gotten more complicated. That's basically what that's reflecting. And we're trying to figure out the best way to kind of point people who are looking for guidance and looking for good advisors at places they can find them. And increasingly, these organizational rankings are the place we're going, private wealth teams, institutional teams and Ria firms. 

Ric Edelman: And within this huge array of advisors, 120,000 in the universe that you're looking at and boiling it down to the top 1% for the state lists that you have of 1,200 advisors, and then the smaller lists of the top 100, that's the cream of the cream. And when you look at all of this, I mean, I know the answer to this, but I want you to say it for the sake of the audience. There is an incredible diversity in the array of services and the types of clients each of these advisors choose to work for. Talk about what you discover in this incredible array of variety in the industry.

Matt Barthel: So there's  been a big change in the last 4 or 5 years of, you know, it used to be almost every advisor would talk to you about you'd sit down with them, they'd talk to you about your investments, how are they doing? They'd give you, you know, a flipchart or a PowerPoint presentation that said, This is your risk appetite. This is what we put you in. These are your returns; these are your fees. This is how it's going. Increasingly you're going to have to do a good job of that as an advisor. That's why people go to you. You have to do a good job with the investments. But increasingly clients are expecting that you're going to do a good job of that and they're like, you know, show me. Show me that in five minutes said it's going that it's going well, not 45 minutes of stuff. I don't understand about how I'm an alternative investments who's free structure I can't even possibly comprehend. Show me that things are going well. Show me what my fee schedule is and how and why that's there. And then now, now it's sort of what else can we do for you? And advisors are really differentiating themselves. If they're smart, the best of them have a really, really good idea of what their value proposition is. So, for instance, many of the of the best teams are hiring estate attorneys on their teams where they used to kind of have partnerships outside. 

Many of the best advisors are hiring them and saying, if you come to us, we can handle everything. Thing you need to do from wills to taxes to, you know, how are you going to handle down money to people in your family? And, you know, we could do that soup to nuts and it will be somebody who really knows you, who knows chapter and verse about everything that you're doing. And those conversations get very, very deep, very quickly when you have that. The teams are, as I said, are establishing these value propositions around what they're really, really good at and what can separate them from other people. So if you're looking for an advisor or if you're interviewing an advisor to consider using them and becoming a client, you know, one of the first things you'd want to ask, I would think, and I just did this myself, by the way, is what services do you offer? What are the range of services that you're offering and what do you really, really good at? What am I paying for? And am I using all of the things that you're putting on the plate? For me, one of the things I found myself, this is what I do for a living all day long is talk to advisors. 

A couple of years back I had an advisor who was very good. I like her very much. 11 year relationship. And I got to a point where I'm like, Hey, listen, I'm paying almost 1% of my assets to you. I don't use most of what's there. Really. What's happening is you're doing my investing and I don't use anything else. What are the other things that I should be using from you? It wasn't a really great answer for that. And I've retreated and I'm saving myself $10,000 a year in fees by using somebody. I use everything that the person whose work I'm working with now is doing for me. I use it to its fullest extent. And if I step over that, she charges me and that's perfectly fine with me. So there's a really wide range of services and value propositions, which sounds business school and jargony, but it's a legit thing, right? Where there's an advisor that we that we work with. I'll just I'm going on a little side tangent here on, on a value proposition but she is a really, really good independent advisor. She dropped out of the industry, got a law degree and then attended the Ron Perlman Ellen Barkin divorce proceedings. So a billionaire and an actress divorcing and learned everything there was to learn about what it is to be a woman going through one of these divorces and what the finances look like on the tail end of this thing. 

That's her value proposition. Now. It's like 80% of her practice now, right? So when looking for an advisor, that's probably the best thing you can ask is, you know, what do you do really well, what are you charging me for? And are these things aligned with the things that that I need? And as you're looking at my stuff, maybe I'm not thinking about what I ought to be thinking about. Maybe you can help me out with that. But as you mentioned, a lot of different flavors now developing the investing portion of it is table stakes. And now the range of services are getting very, very, very broad. Can be anything from trying to find a yacht for you down to if you're a person like me who can't afford a yacht, just down to how much are they helping you with saving for college. But maybe they know somebody who's really good at getting your kid into college, Right? There are people who follow those sorts of value added kind of kind of things. So that's part of the interview process. I think if you're looking at an advisor's, what services are they offering? 

Ric Edelman: I think you've really made it a whole lot simpler for everybody because this subject is so intimidating. Matt as you know, to most Americans, we are not educated or skilled or trained in the subject of personal finance, and we're intimidated by the subject of money because we don't have a lot of knowledge and experience with it. And you've made it really simple by helping people realize you don't have to become an expert about money. What you need to be is an expert about you. You know what your needs are. You know what your concerns are. And if all you can do is articulate your fears, your aspirations, your goals, your objectives to a prospective advisor to say, Here's what is worrying me, tell me how you would be able to help me and what am I not mentioning that I ought to be mentioning? What is it I. I haven't even thought of that. You can say to me, Oh, have you thought about X? That's how I'll be able to determine whether there's value in us having a relationship together. And I think you're exactly right, because there are so many different types of clients who have dealing with types of issues, and there are so many types of specialties in the field of personal finance. No advisor can be an expert in everything, and this will help you find the advisor to the right for you. I would imagine that you would say you haven't. So I'm going to put words in your mouth, Matt, that you would shop around when you're seeking an advisor was Ric. 

Matt Barthel: I was just going to say that very thing. If you were building a patio out back, you'd get three estimates, right? You talk to three guys, you know, you'd have three people come back there and tell you what it is, and you'd find out one of them's a charlatan, right? Or whatever. Right? Or this this person is, is $4,000 over the other two. Why? And you can ask why are you over $4,000? And they may say, we're better and here's the reasons we're better and maybe that's worth it to you. Right. And there is no accounting, honestly, for what you're going to want from an advisor.

We have my old coworker, Sterling Shea, who now works at Morgan Stanley. But we were our “married couple” at work for many years here at Barron's, when we were doing a research in the UK, he met with somebody at one of the custodial firms who was lamenting that his father was a client of a firm. I won't mention who was who was paying 4% of which was a lot of his assets, a 4% fee to his firm wealth management firm that has existed since the 1600s in England. And he's like, Dad, you cannot do this. This is it's way too much money, for starters. Look like a fool having a father who's paying this much money. And he says, go in there three days a week. They have a room for me, have my tea the way I want it. They show me how it's doing every day. Sometimes I go in twice a day. I am a high touch, high value guy. I am fine with it. They are outpacing that. I'm still growing at that. I'm okay with that.

So, look, I'm not no one's going to pay 4%, but it's like there isn't any accounting for what that value is, is, is up to you. And you have to decide what kind of value that advisor is bringing to you. But it starts with asking what they're going to do for you. And while I'm mentioning England UK, they have something that I wish we had here, which is they have a one page disclosure fee disclosure that every client gets and it says at the bottom, how much did you pay? You know, how much do you have with them? How much did you pay? There are no pages after pages of this, and there's a fee attached to this. And we build it into that and we take it out of there. I mean, even I can't quite figure that out, right? And again, I do this for a living, and I hope that a developed country like that influences us as this works its way through the regulatory stuff. And maybe it comes back to this fiduciary standard just being broadened and maybe simplified for people, I think that would be a great starting point for helping people choose advisors is how much am I paying and what am I paying for, right? 

Ric Edelman: And so, as you noted, people are often willing to overpay if they are getting perceived value for it. And a big element of this is the fact that this is not a commodity. This is very much a very deep, intimate, personal relationship. You have to have a connection with this individual. That's a big part of it. Talk about how you evaluate that. 

Matt Barthel: Well, I say sometimes where there are people who compare financial advisors to doctors in ways there are massive differences, but there's a lot of professional commitment, all that stuff. And it's super important to you if you're going to a doctor. My father was a guy who was like, I'm a slab of meat. Do not talk to me. Do not be distracted. I don't need you to hold my hand. I don't even want to know anything. I want to know that you're a good surgeon and do not be distracted. Do good job. My mother is like. You can leave a scissor inside of me after you get done cutting me open if you talk to me. Well, if you're a good talker, you know, it's all over the map in terms of what people would be looking for from their advisors and what they want from them. So, you know, that is a super important part of establishing who you're talking to and how the character increasingly with these teams, if you have an advisor who has a personality, how does that personality, if he's got 22 people or, you know, if someone is heading up a team and has 22 people working on that team. 

How does the personality of that person you're dealing with find his way into the team? How does that create a culture that's going to endure past when that person who's 59 years old is going to retire and you know, you're still going to be with the with the firm, but how does that get into the rankings? It gets into the rankings. This is the nice thing about it is I don't have to evaluate how good a job Ric does at connecting with his clients. Ric is going to do a job of connecting with his clients and. Finding who his people are. And if he doesn't have a good value proposition, good culture, good personality, his practice probably isn't going to grow at the same pace as somebody who has done a good job of value of establishing that. So the good news is I don't have to do that. And it wouldn't be good if I were doing that because I might be the guy who is okay with the 4% and someone else wouldn't. Right? So it takes care of itself in the rankings, is the short answer to that question. 

Ric Edelman: Let's talk about that 4%, because that is, of course, an anecdotal, funny number. You're making a point I've never heard of any advisor in the US charging such a high fee. But let's talk about fees because that is a pretty important element of the relationship and the experience. In the old days it was commission-based business. You bought stocks and you paid commissions for trading every time you bought, every time you sold the broker made a commission that has given way. Largely it still exists in the marketplace, but for the most part, commissions have fallen by the wayside because consumers are always concerned about the conflict of interest. Is this person telling me to buy and sell because he was trying to generate a commission or because it's really in my best interest. When you have a fee, the fee is detached from the transaction so that there isn't that obvious conflict of interest. So talk about what the range of fees that you see and what you feel are appropriate that should raise a red flag or what have you. Talk about fees broadly, Matt. 

Matt Barthel: So fees are getting complicated because, you know, if you're if you're an investment only client and that's all somebody is, is managing for you, that should be pretty low unless they're doing really bespoke specific stuff for you. You know, you want to invest in Russian timber trusts or something. And this is the expert who does it. God bless that. That could probably cost you some money, right? But, the first thing to start with is what are the range of services that you're availing yourself of with the advisor? The standard has always been as, as most people know, 1% of the assets that an advisor is managing for you, that that will be the fee. And you know, if you're just doing the basic math in your head, if an advisor is getting you five, six, seven, 8% on average over years on your investments, you know, you lop a 1% off of that and that feels okay, right? The trick is, you know, if you have $100,000 with an advisor, that's not a huge absolute sum of money that you're that you're paying to the advisor. And honestly, the advisor has to probably charge that much, that percentage, just to make it worth his or her while to, to manage your money at that. You know, $100,000 isn't chump change but it's that's that knowing an advisor isn't getting filthy rich on that either. There's startup costs there's everything that they have to pay for. So 1% at that level might make sense. It's drifting lower as things get more competitive. But when you get up closer to like $1 million or a million and a half dollars in assets, that that an advisor is managing for you, that fee starts, that 1% starts to get to be a pretty big number. 

Ric Edelman: Yeah. That's $10,000. 

Matt Barthel: $10,000 a year. It's this is exactly the reckoning I myself did and you kind of go like, what am I getting for $10,000? And how is that different than when I was paying $5,000? And it isn't any different at all. So is that really a good way to go? I think along with any conversation you'll have with the prospective financial advisor or even the person you're working with now is what am I getting for this and why? And are there other things I'm not availing myself of for what I'm paying and that I should be? And then down to maybe you negotiate your fee down. That was the conversation I had with my advisor. I said, You charge me 1%. This is too much for what I'm doing. You can either bring me down to like 80 basis points, you know, point 8% or I can go someplace else. If I do, I can have much better service, very directly aimed at the things that I want and need. And I am paying probably on average, probably close to like 40 basis points. So half of what would be asked.

Ric Edelman: That raises another interesting element to this. The fee you're saying Matt, is negotiable. 

Matt Barthel: It is 100% negotiable. If advisors are really good, they're going to say, this is my fee, I'm not really going to move on it. Here's why. And now you're now you're having a conversation about whether you're a good match for what they're doing, right? So, you know, you could go into a French restaurant and say, I want to have a meal. It's $100. I don't want to pay $100. They're like, That's what we do. You get three courses. It's big. It's really, really good. Maybe you want to go to a, you know, a diner or something that's better suited for. For what? For what you're looking for. For this particular thing. That's probably a bad example, but you get the idea. There are times where the French restaurant is not going to say, okay, we'll take the salad off. And it's and it's $90. This is what we do. And this is what you're paying for. Right. So I think most of that comes back to having some idea. And this is free. You go out, you talk to three advisors and you ask them about what they offer and why, and you educate yourself. It becomes a really it's something that can really save you a lot of money as you refine what you want out of your advisor and then go and find an advisor who can provide it at a competitive rate. 

Ric Edelman: We're talking with Matt Barthel. He's the executive editor of the Dow Jones Wealth and Asset Management Group, and he's the leader of the team that produces the annual rankings of the top advisors in the country for Barron's magazine. Let me invert the conversation here, Matt, and talk about the world of advising from the advisors perspective to give a little behind the scenes look for the sake of investors who are paying attention to this conversation. What are the issues that you're finding advisors are facing today? What are the advisors complaining to you about that they have to deal with? That isn't something that clients would necessarily see on a daily basis? 

Matt Barthel: So the biggest thing is sort of an aging white male workforce, particularly at the high end of this industry. If you sort the 6,000 or 8,000 people in a given year who give us hundreds of columns, 120 columns of data on their practices and you sort them by gender and ethnicity, it is, you know, 59 to 62 year old white males. And it's unbelievable to me every year how top heavy that is.

Now, there's two things about that. First is I still don't fully understand why that is. I mean, there's a million forces that get into the white male aspect of this, which could be another podcast Ric. But the age element of this is huge to where most of the people who have done a really good job as financial advisors have kind of dragged the industry into the state, the evolved state that it's in now. They've built their practices from just being people who used to cold call in the 1990s or 1980s to get clients started out as commission-based people who have had their teams evolve into something that's much more holistic, that does a much better job of taking care of whole clients, isn't doing commission-based stuff anymore. But guess what? Along the way they've become not advisors, but people in charge of organizations, small organizations and teams which maybe they didn't sign up for. 

Some are good at it; some are not so good at it. And now they're trying to figure out how do I hand this off to another generation so this thing endures past me when I'm not 62, but I'm 68 and I start to sunset out of this thing. And that's a big question to answer. And people are not addressing it really, really well. They're struggling. A lot of people are struggling with it. It's not because they're stupid. It's not because they're bad at it. They're kind of pioneers at this.

This is the first wave of advisors who have evolved and are kind of facing, how do I have this endure? It used to be advisors to be like, I'm done with my practice, I get out, I get a check, good luck clients with the new guy. Many more are trying to do a good job of making this thing that they've built this team endure beyond them to carry on with the ethics and the ethos that they've built into their practice over the years and to have that continue to serve clients into the future and multiple generations of clients. So that's a big enchilada I just described there. Big burrito full of stuff. But mainly, it's like older, very accomplished advisors trying to figure out how to have this thing live on past them and take the best of what they've learned and inject it into their into this practice that will live past them and to continue to serve clients of multiple generations. 

They can't. They're having a real tough time finding those people to come in and do these jobs in this industry. So it's an industry desperate for an injection of young talent and specifically young women. We haven't even gotten into that. But this industry is 19% women, despite all of these efforts to kind of change that. It's just starting to change now. And these organizations that I described, you know, are independent firms, advisory firms, teams at the big firms. This is the mechanism that's starting to bring in more young women and more young people of color into the industry that has not had it historically. And I think that is really going to change the face of the kinds of services that people on the receiving end receive, the clients receive, because they're going to see a wider range of people, which brings a whole new bunch of perspectives into the services and type of service they're going to receive. 

Ric Edelman: And of course, as you know, you've articulated within that me. I mean, that's been my journey. I'm that 65 year old white male who has been in this industry for 40 years. And looking at my transition and trying to make sure that my departure from Edelman Financial would not be disruptive to the firm, to the staff, to the planners, to the clients for providing that continuity that Jean and I had built over the decades in running that practice. And we engaged in a six year transitionary period to execute exactly that. To your exact point that a lot of the advisors in my practice were older than me, in fact, and many have since retired, recruiting younger, newer talent, women of color and bringing in the diversity that this industry has failed to produce over the decades. So yeah, you're exactly right. We've gone through that exact same thing, and I find myself often mad in conversation with other advisors around the country who turned to me asking Ric, how'd you do it and what did you experience? And because you're right, we're all pioneering this. This has never happened before because we're all first Gen There has never been an RIA before my generation, we invented this industry and we're the first going through all these elements. And so, yeah, it's a really important element. The way I would translate all of the above Matt to an actionable step for the client, for you, the investor, is to acknowledge that your advisor one day will leave. Perhaps involuntarily, they're hit by a bus, more likely voluntarily they choose to retire. You have to ask yourself what happens to you when your advisor chooses or simply is not around anymore, whether it's they're on vacation for two weeks in the hospital for six months or in retirement or permanently. What happens to you, your account, your relationship, etcetera? Who do you turn to if your advisor can't articulate an effective succession plan? That to me would be a red flag. And I'm assuming, Matt, that that's a question on your 120 column table of, you know, tell us about your practice management. 

Matt Barthel: It is indeed. And so the numbers are not great. Even among these really accomplished advisors, we ask, do you have a succession plan? And then we say, who is your successor? We worked really hard. You can ask 30 questions about this that would get you, but we try to ask like two that really cut to the heart of it. And do you have a succession plan? And then if you say you have a succession plan but you can't say, you know, Ric, Matt is your successor and if I get hit by a bus, people know. They turn to Matt to say, What are we doing now, boss? If that's not known to the people who are working on your team and to your clients, you don't have a succession plan. It needs to be both a disaster recovery plan in case something unexpected happens. And the orderly transition that you were describing with you and Jean, which is over six years, there's going to be this gradual handoff. And the great thing about doing this job for this this long period of time is I'm able to watch this happen in real time with a lot of the really good practices where you see over time I'll be talking to there's a there's a great advisor in Morgan Stanley, advisor in Washington DC who I deal with. He's 78 years old now, still working, and he has been working with his number two over the years. 

And this has been like one of these things where he's here and he's here and now it's like, you know, he's sunsetting out. I don't think Marvin will ever go sunset off. But now his number two is the number one, basically. And he's running things that has happened. You didn't you know you're boiling a frog kind of you didn't even notice it. But now all of a sudden, AJ is this guy, right? That's the way it should work. You should give it enough time for that to work. But clients looking for advisors, when you're asking, you know, if you're looking for 4 or 5 questions to ask, one of them should be what's the succession plan? What does the team look like? Do you have staggered generations? If it's important to you, do you have people who look different, who can come at things from a different perspective? People who are younger, people who are from a different race, people who can come at this from different angles for you and inject a bunch of critical thinking and stuff into the team that you wouldn't have otherwise if everybody's the same guy. 

Ric Edelman: Now, we've been assuming here, Matt, that everybody who's listening and watching this conversation has an advisor or is interested in finding a better or more suitable fit of an advisor. But the fact is that the minority of Americans have advisors. The majority do not have a financial advisor. What's preventing them from getting one? 

Matt Barthel: Well, I think for starters, you know, we're coming off a 10 or 12 year period where, like take my own kid who's coming home from college and will be upstairs soon. He had $1,100 left over from first communion money and stuff and he threw it into a robo Betterment account. Right. So robo investing did a model portfolio and that thing was earning like 26% a year just sitting there until recently. So I think there has been this sense over the last decade or so that you don't really need anybody helping you with investing. And that was probably true. Looking back, the place where an advisor comes in and can really help you. So what is it? It's about 40% of adults have financial advisor. Is that is that what you. I'm sure I'm sure Financial Engines has a real good idea of that. Is that about what it is? 

Ric Edelman: Yes.

Matt Barthel: So 60% is unadvised right? 60% of the people in the states are unadvised. If all you care about is investing and you think you can do it yourself, you were a rock star for a period. There again, I would put myself up as an example of this. The pandemic started; the bottom dropped out. I went to my advisor and I was like, Maureen, what are we doing? Like, is the whole bottom going to completely drop out of this thing? And she was like, You're not touching anything. Like, leave it be. You should know better than anybody else. You work for freaking Barron's and you deal with financial advisors. Why are you even talking to me? Hang up the phone. So I did. And you know, if you look at what happened and what would have happened if I had put all my money under a mattress there, it would have affected my retirement, like the way I would be able to retire. I'm 57 years old. So the answer to that is why? Why would you want a financial advisor is for that. There are a few events or a few periods in time. You could go over this thing and say, Yeah, I could do this... I could do this... I could do this, then you can't. And now you've created a situation where there isn't somebody awake at the switch and you lost 40% of your assets and you're not really going to figure out a way to get them back, or you're going to do something stupid to try to get them back like you would at the racetrack. 

So that's the number one reason. And then the number two reason would be another kind of ‘black swanish’ kind of event in your personal financial life, like long-term care things along those lines, like one bad illness and you're not prepared for it, can wipe out everything that you that you thought you were preparing for. You know, advisors can do a really good job. A great question to ask is How can you help me? What black swan, what terrible events can you help me avoid that will let me keep going like this rather than having something that I can't recover from at some point. That's where I think they bring the real value on the investing front. And then, of course, you know, if you have a lot of money, there are a lot of advisors who come in with a tax person and just say, I just saved you an enormous amount of money going forward because I did some very basic things that you weren't doing. There's a whole range of things along those lines that you might think you're doing a great job on and you're not. And it's all a matter I think if you boil it down to somebody who's awakened at the switch all the time rather than you, who's doing all your other stuff and comes to it every once in a while and might miss something that would damage you in a real long term way. 

Ric Edelman: And our final question for you, Matt, regarding that very point, are there any topics or issues that are emerging that are not traditional within the field of advice that you find advisors? The very best advisors are beginning to pay attention to that. The vast majority of advisors are not yet and more importantly, the vast majority of consumers and investors are not yet focusing. The thing that I'll plant one idea in your mind as you answer this one that comes to my mind is the issue of longevity. So do you find that the very best advisors are forward thinking and talking about stuff with their clients their clients wouldn't otherwise consider? 

Matt Barthel: So advisors who deal with the wealthiest people, you're not going to outlive your money if you have $50 Million unless you're spending it wantonly, right? The big issue is if I'm not going to live till 81, I'm going to live till 111, which I know is this stuff is near and dear to your heart. With the singularity and all the advances that are happening in medicine and technology. And you know, there's a lot of talk out there that your lifespan is really, really going to extend. So what does that mean when you retire at age 65 and now you have not 20 years or 17 years’ worth of living to do, but you have 40, 40 years or 35 years. It's not a minor thing. So are the best advisors dealing with that? I would say the best advisors are grappling with that. I don't know that anybody has fully appreciated what you're going to do about that. What do you do if it's not 17 years and it doubles to 35 years which it could with your life expectancy? You're going to have to make your retirement savings last. I think this is the single biggest issue facing people. 

And it's a little like the AI thing. Like everybody knows this is something that could be a complete disaster and a time bomb and it could come on really, really fast. But it's like so overwhelming. You don't even know what to do about it. I think the place you start is to start to talk to your advisor about what can you do to adjust the old school thinking of this is this is how we simulate How long are you going to live? And all this and all the actuarial tables and stuff. What have you done to start to adapt to the fact that people live longer? And maybe I will. And what should I be thinking at the extreme end of how long I might survive versus what the what the average might say and help adjust accordingly? You'll probably be doing your advisor a favor by asking that to push them and nudge them into the direction of doing that. But, you know, it's a big open question and it isn't something I don't think the industry has fully reckoned with yet. 

Ric Edelman: So you need an advisor, you need to talk with your advisor about longevity. You need to talk to your advisor about the services they're providing, the fees that they're charging, how they can be of greatest value to you and to get the help you need in finding an advisor who's right for you. Turn to the Barron's rankings of the top advisors in the country and that means you need to be subscribing to Barron's, which is mandatory reading for every advisor in this nation. Matt Barthel, Executive editor of Dow Jones Wealth and Asset Management Group. Always a pleasure to be with you, my friend. 

Matt Barthel: Ric. You too. Thank you so much for having me. 

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The Bitcoin Halvening

Ric Edelman: Last week I told you about bitcoin mining. Miners are the people who do those complex computer calculations to validate the data that's on the Bitcoin blockchain. If you're confused about what I just said, just go listen to last week's show where I explained all this. But how much bitcoin do bitcoin miners get when they engage in mining? Well, back in 2009, miners were rewarded with 50 bitcoins every time they solved one of those puzzles every ten minutes. Well, they don't get 50 bitcoins anymore. Every four years, the reward for mining gets cut in half. It's called the halving or halvening. Take your choice as to which word you prefer halving or halvening.

Anyway, in 2012, the reward was cut from 50 bitcoins to 25. In 2016, it was cut again to 12.5, and in 2020 it was cut once more to six and a quarter. That's the reward that bitcoin miners get today when they solve those complex calculations, six and a quarter bitcoins and the reward is going to get cut again in 2024, just 6 or 8 months from now, two, three and an eighth. The fact that these mining rewards get cut roughly every four years, they get cut in half. This is a basic reason why so many people say that the price of bitcoin keeps doubling. I mean, think about it. If a miner gets only half as many bitcoin as before, then they want each bitcoin to be worth twice as much. So with another halving coming in 2024, will the price of bitcoin double again? It's doubled every time so far there's been a halving. We're going to of course have to wait and see what happens this time around. Personally, I do expect a doubling or more to occur, but there's no guarantee. I encourage you to learn more about all of this. You can do so by reading my number one Amazon bestseller, The Truth About Crypto. 

Ric Edelman: Hey, if you've got a little downtime this summer, who doesn't? You can catch up on past episodes of this podcast at TheTruthAYF.com. You know, we cover the five personal finance topics that matter most longevity, retirement security, exponential technologies, digital assets and health and wellness. It's the Truth AYF.com

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