Interview with Simon Brady, CFP: How True are Truisms?

Interview with Simon Brady, CFP: How True are Truisms?

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Simon Brady, CFP® is founder and principal of Anglia Advisors, a fee-only personal financial planning and investment management firm in New York specializing in a clientele of younger professionals in their 20s, 30s and early 40s as well as foreign nationals based in the US. He also hosts the Angles, The Anglia Advisors Podcast, on Anchor. 

If you are a working woman, if you are in a domestic partnership or marriage, or if you have children or family that you want to take care of, you won't want to miss this interview. 

We explored: 
- How and why women tend to be better investors than men
- The dangerous assumptions people often make in a domestic partnership or marriage
- How money or taxes have little to do with estate planning
- What to do today to ensure the best possible outcomes for your loved ones in case of worst case scenarios
- What the best kinds of investments are if you are a young professional
...and so much more



Full Episode Transcript

Hello! Welcome to Episode 28 of Born to Thrive with Jamie Lee. I’m your host, Jamie Lee. I work as a coach and my mission is to help ambitious people like you become bolder, braver, and better paid.

I just got this wonderful email from Natalia, who’s been following me on LinkedIn and she said she negotiated her salary increase by 30%. That’s awesome! Amazing job, Natalia!

Today I want to share with you an interview with Simon Brady, Certified Financial Planner, on what to do with the financial abundance that we negotiate.

What can we plan to do with this abundance that we negotiate and earn so that the people that we love the most - our family, our children, for example - can benefit the most into the future?

And also, what are some truisms? Truisms are true-ish, a lot of people believe them to be true, but they are not necessarily or absolutely true.

And some of these truisms hold us back from doing the right things so that the money that we earn, so that the financial abundance that we negotiate can be put to the best use possible in the long-term future for the benefit of people that we love the most.

And I think this is really important because, again, why are we bothering to negotiate and speak up and lead and influence? It’s so that we can thrive and so that our thriving abundance can benefit the people we love.

But also, why aren’t we doing the things that we know to be beneficial for the future, long-term? It’s because we have thoughts, we have beliefs about money, about women and money, about investing, about what it means to plan ahead for the future.

I’m going to kind of kick the tires on some of these truisms with Simon, who is a founder and principal of Anglia Advisors, a fee-only personal financial planning and investment management firm in New York. And he specializes in a clientele of younger professionals like you who are in their 20s, 30s and early 40s as well as foreign nationals based here in the US.

And I want to just let you know that Simon also has a podcast on the Anchor app platform. It’s called Angles: The Anglia Advisors Podcast and you might want to check out some of these awesome podcast episodes.

He talks about student loan debt repayment, which is big for some of my clients; estate planning, who needs it? why?; insurance, what is that all about?; procrastination, I know that’s a juicy topic; and stock picking and just so much more that I think will benefit the people who are ambitious, who are becoming bolder, braver and better paid.

Without further ado, here’s the interview with Simon Brady of Anglia Advisors. Enjoy!

Simon: Hi, Jamie!

Jamie: Hi, Simon! How are you?

Simon: I’m good. How are you?

Jamie: I’m doing great! Thanks so much for taking the time out of your busy day to answer my questions about financial truisms.

Simon: Yes, yes. Very happy to. Looking forward to the conversation.

Jamie: Yeah, so truisms, they kind of sound true-ish and a lot of people believe them but I want to question whether they really are true from the perspective of a financial planning expert. Hence, we have you!

Simon: Yes. The first three letters are actually somewhat misleading. Most truisms tend to fail scrutiny. But yes, I know there is a considerable amount of them that revolve around money and yeah, I’m looking forward to exploring that.

Jamie: Yeah. So let’s go to the biggest, the baddest one, at least for me. Men are better investors than women. Oof.

Simon: There is very little true in that and there’s plenty of data to back up that statement. I think before we necessarily look at whether it’s true or not, let’s explore why it is more important for women to be better investors than men.

Some of it’s very [audio dropped] The life expectancy of a female is about 81 years old compared to 76 for a man. A 65-year-old woman, the chances of a 65-year-old woman reaching the age of 90 is about 1 in 3. The chances of a 65-year-old man doing the same is about 1 in 5.

So, women live longer and life costs money. When you then throw in the gender pay gap, which is still around 80%, you’re talking about women living longer, having less social security available because they have earned less, generally, over their lives. And then let’s throw another thing into the mix which is that they spend fewer years in the workforce because they’re more likely to take time off to care for young children.

When you combine these three elements - the longer lifespan, the gender pay gap, and the fewer years in the workforce - the statistics I saw recently were that women are 80% more likely than men to be impoverished in retirement. And even if they save at a higher rate than men, and there’s evidence that they do, women will generally end up with smaller nest eggs.

So, this is why it is critical for women to learn to become good savers and investors and they cannot always rely on the husband to help out because the median age at which a female becomes a widow in the US is about 59 years old. Again, just pulling these statistics out, if you’re 85 years old, of 85 year-olds, 45% of men and 85% of women are likely to be widowed at that age.

Women are also less likely to remarry following divorce or widowhood. So, when you throw all these things together, it is critical that women take control of their finances because the statistics show that they’re more likely to be in difficulty in retirement and that they’re also less likely to have a partner to help them out at that time.

Jamie: So how true is it that men are better investors than women?

Simon: So, there’s plenty of evidence that shows that women, at about a 2 to 1 ratio of a man, favor a more comprehensive approach to their financial planning. So the men will tend to focus on what is the better rate of return that I can get on my investments? Which stocks or funds should I be buying? Whereas women will tend to also want to include in their workings with a financial advisor or a financial planner, they’re going to want to talk about estate planning as well. They’re going to want to talk about life insurance against the loss of a partner.

They’re more likely to take a more holistic approach to what’s going on, whereas men tend to focus on purely the investment side of things and just as an advisor with a significant number of couples and female clients, I can say, anecdotally, that that is absolutely the case.

Many couples I deal with, I find the men are looking very, very closely at the investment side of things, and then when the guy gets up to go to the bathroom, the wife leans over and says, “You know, we don’t have a will and I don’t really know where the money is and what if he were to die?” They tend to take a lot more holistic approach.

However, having said that, women tend to make a greater attempt to understand markets in general. They panic a lot less when things are tough, when markets get difficult, and this is sort of maybe counterintuitive to the caricature of women being more emotional than men. When it comes to money, it is absolutely not the case.

They are also more likely to take more reasonable levels of risk in the first place and the basis upon which they may make their investments are usually more - again, anecdotally, I can confirm this - usually more based on proper factors rather than a guy who is perhaps more likely to be more impulsive on the purchase side of things. Maybe his brother-in-law has this great stock tip. In other words, there’s a lot less overconfidence among women when it comes to making the investments in the first place and there’s a lot less knee-jerk reaction to panicking when things get difficult.

And it is very, very common for the American investors, in general, to lose money because they go into investments on very, very bad information and they get out as soon as things start to get difficult.  So, women are far less likely to show these behavioral traits.

Jamie: So, what I hear from you is that, first of all, we get to live longer. Women live longer and we save more and we take a more holistic approach. We’re more patient. We’re more resilient and maybe we’re also more calm in the eye of the storm. And these are all characteristics of a good investor.

Simon: Yes, and as I say there’s empirical data to show this. They did do a proper study in 2015, which was not a particularly good year for the markets, and they did find that women investing on their own lost an average of 2.5% that year compared with 3.8% for men. And this is because of this lower inclination to jump in and get out, which is the cause of the fact that most investors in the United States fail to even make the returns that the market offers because they jump in and jump out, which men are far more likely to do.

Bizarrely, though, in spite of everything we’ve just said, many women outsource the family finances to the man, the spouse, and then when there is a divorce or widowhood at some time, they can end up being financially paralyzed because, although they have these traits, they do not have the experience. They don’t know, necessarily, where the funds are. They haven’t been managing the family finances because they’ve tended to outsource it to the spouse.

Jamie: So, I hear that it’s kind of dangerous to just assume that men are better investors than women. It’s kind of a dangerous assumption to make. And speaking of assumptions, I talk about how that’s the worst thing you can do when you’re trying to negotiate, especially when you’re in communication with other people and so, again, I hear from you that just to assume that it’s better for the husband to take care of the money and take care of the investment, it could be a dangerous pitfall for a woman’s financial abundance.

Simon: Extremely, extremely dangerous, and not just necessarily for the woman’s financial abundance, but what you have in a couple is you have a team, and if they can work closely together on the family finances, two good things happen. One is that the traits that I’ve just described of women being less impulsive and generally better at investing will take the edge off the male spouse who may be left alone to his own devices. If it’s a joint effort, you can get benefits from both sides of the equation.

But more important than that is that the statistics are going to show that that woman is likely, either through divorce or widowhood, to be on her own at some point and will need to pick up the pieces in terms of running the family finance or running the finances of what could very well be her on her own then and if she has no experience of it, and in some cases not even knowledge of where the funds are and what they’re invested in, yes, they can be extremely dangerous.

Jamie: Yeah. I just want to add that you’re speaking to another dangerous assumption which is that if you are married or if you have a partner that this partner, your husband, your wife, whoever, needs to take care of you.

You know, people say, my husband, my wife, needs to take care of my needs and what I’m hearing from you and what I also know to be true for me is that I’m responsible for my own needs. I’m responsible for my own finances. That’s how I’ve structured my partnership. I’ve also seen this from the example of my parents’ divorce. I realized oh, I need to take care of myself!

Simon: Yes. It’s very common and I see it from, you know, 45-year-old women who don’t know how to pay a gas bill. Even though there’s money in the family, they don’t know where the assets are located and this is where things like estate planning and everything else come into play. I think if you have the kind of relationship where you can work together on these things, there are multiple advantages to be gained from that.

Another example is where, what’s very, very typical is that the husband will get a credit card, will put his wife as a named user on the card, they can exist like that for 20, 30 years and then the husband passes away and as a named card holder, the wife has not built any credit whatsoever on her own and when she needs to go out into the world on her own after the divorce or widowhood, she has no credit. She’s like a student out of college because all she’s had is this named card and the husband’s been taking all the credit for the credit.

Jamie: So, speaking of these worst case scenarios, you know them very well and you know them first hand. One of the other financial truisms is because I don’t have money, I don’t need estate documents or I don’t need to save for retirement or I can’t afford to invest.

I have a theory that this sort of truism is coming out of scarcity mentality that money is going to run out. That money is like a fixed pie. There’s only so much of it that you can get and so you have to scrimp and save and be very wary of how that money is spent. And so, I’d love to hear from you, from your financial planning perspective, do you see this to be true?

Simon: Do I see it to be true that this mentality exists? Absolutely. Is it a correct mentality? I don’t have a lot of money, I don’t need estate documents or I don’t need to save for retirement because I can’t afford to. Are those valid mentalities? Absolutely not. A lot of what is at the root of estate planning doesn’t have anything to do with money.

Jamie: What is estate planning?

Simon: So, estate planning really is a situation whereby while you are alive, competent, healthy to some degree or another, you are able to make plans for the people that you love as well as yourself for the circumstance where you are no longer alive, healthy or competent. Because once you cross that line from one to the other, there’s obviously very, very little you can do.

So, estate documents, estate planning is really not about you, because you’re gonna be dead, you’re not gonna care. It’s about the life and the process that your loved ones - your family members or your favorite charity or whoever you want to work on your legacy - how difficult their life is going to be when that moment comes.

And as I say, a lot of it is not to do with money. Because of recent tax changes, estate tax is barely an issue anymore. You have to be, as a married couple, one of you dying worth around about $22 million before you have to face any kind of federal and state tax, so the estate tax really has very little to do with it for 99% of the population.

What it is about is, obviously, when there are children involved, it’s guardianship because if you do not name a guardian in an estate document, in a will, the state, the court system will name one for you. And if they cannot find anyone they are comfortable with, the children will go into foster care in a case where there is no parent left.

So, if you have considerations regarding the upbringing of your children, whether it be their religion, whether it be however many siblings they have, whether you want to keep them together, you need to name somebody with whom you’ve had a very, very long discussion beforehand about what is going to happen to those children and what kind of upbringing they’re going to have in the case where there are no parents left. When I say children, I’m talking about people who are under 18.

You also have to consider yourself as well, in terms of incapacitation. That’s something else that’s covered by estate documents. If you’re hit by a car and you’re no longer able to make medical decisions for yourself, who do you want making those medical decisions? Who do you want hiring, firing doctors? Who do you want to make that awful decision as to whether to turn off the machine or to leave it going? And you need to nominate somebody for that and you need to have a long conversation with them about what you want to happen in these kind of circumstances.

So, it’s not just about what happens to my money. It’s about what you want to happen to you on a healthcare front and also, obviously, when there’s children involved.

Jamie: I can see why people would want to avoid doing estate documents because it’s scary and it’s uncomfortable to think about being incapacitated or deceased and the easy thing for our mind, for our brains to do is to avoid difficult things, avoid difficult conversations.

But as you said, it has nothing to do with whether or not you have money. You could be making $20,000 a year and you’d still be best served if you did the planning because that’s how you serve the people you love in your life.

Simon: Right. It’s scary, but it’s not as scary and uncomfortable as it actually happening.

Jamie: Yeah, good point! Thank you.

Simon: And you can break estate documents down. You can break them down as well. If you generally do not have a lot of money and you die without a will, the state has rules about where that money will go. Let’s take your example of $20,000. You have $20,000 in the bank. You die without a will. That $20,000, that you have not specified where it goes, if you have a spouse, it will generally go to the spouse. If you do not have a spouse or children, it will generally start moving up the curve to your parents.

And if you are comfortable with the direction that the money will move for you dying without a will then, you know, I can generally see, for someone who’s single, who doesn’t own any property, doesn’t have any kids and is quite happy for their parents to get whatever money they have, okay, don’t go out and spend $2,000 on a will. But get the healthcare proxy done, which I mentioned before about naming the proxy for your healthcare. Those documents are available online for free to be downloaded. They don’t even need to be notarized.

Jamie: Hmm. Okay, so money is no excuse here, then.

Simon: Money is no excuse. I mean, I think everybody over the age of 18 should have a health care proxy. Even though it’s bundled in with the concept of estate planning, it’s something that should be just absolutely normal. If you put health care proxy and your state, you’ll find a form, all it needs is two witnesses and there’s plenty of documentation about how to have the difficult conversations with people.

Jamie: Yeah, good!

Simon: And then the moment you have kids, of course, then you’re into needing a will because you need to start laying out guardianship provision.

Jamie: Yeah. So, could we have a chat about this resistance to saving or investing? Saving for the retirement or investing. You feel like I’m making $30,000, $20,0000 or $30,000. I don’t have money. I can’t do that. I can’t afford it. Is that true?

Simon: In some cases, it is genuinely true. I mean, there are some people who have obligations in terms of, whether it be rent, food, and there literally is nothing left over at the end. In those cases, it is a little difficult to be very preachy about oh, you should be saving money for retirement.

But most people, when it really comes down to it, are not in that situation. Most people, and again, you and I live in New York where we see a little bit of a bubble. But most people, when it comes down to examining their spending and what they’re actually spending money on, could reallocate some of that spending to assets that are very, very different from what they’re spending on.

I mean, I haven’t got the data in front of me, but when you look at the spending on lottery tickets by low-income individuals, it’s terrifying. It’s absolutely terrifying.

Jamie: Can I just interject here? My mom used to buy them all the time.

Simon: There’s libraries of studies on this thing. A lottery ticket really has, statistically, zero chance of making you any money in terms of a return on investment standpoint but the people who can afford to buy lottery tickets don’t buy them and people who can’t afford do.

So, to get back to your question, it really is a matter of taking a good long look at what you are spending on and there’s plenty of tools to do that these days from going through a credit card statement to sites like Mint.com which you link your bank account and your credit cards to and will then show you what you’re spending money on.

The sad fact is that, in order to maintain the lifestyle that you have while you’re working, on the day you retire, as a general rule of thumb, you need to have in the bank about 20x what you are earning in that final year to be able to get through. And again, to get back to the female thing, possibly women need more than that because they’re going to live longer than men.

We cannot rely on the pensions that our parents and grandparents used to get, where, generally, you would get income for the rest of your life. We’re now in a world of 401(k)s and IRAs where you have to make the contributions and the stream of income is not guaranteed until you die. So, you really are responsible for your own retirement. Social security, while I don’t think it’s going to disappear, is barely above poverty level in terms of what it provides.

Jamie: Yeah. So, Simon, I think this would be a great place to transition to the last truism I want to discuss with you, which is: salary is king, no matter what. Because, you know, we talked about the need for saving 20x your income. When I heard that, I’m like, woah! I need to save a lot more money, right?

People who are listening to my podcast, they’re also interested in growing their income by showing up as leaders and negotiating for what they want but there’s also this truism that salary is king, no matter what. And I think there’s a bit of emotional element to it, that this base salary reflects the respect that I get and I often have to coach my clients to think about the other compensation components, so I’d love to hear your thoughts on that.

Simon: Certainly. And just to clarify one thing, obviously, I’m not suggesting that people save 20x their salary. I’m really sort of saying that by the time they retire they need to have 20x their salary sitting there. Saving 20x your salary is a little tricky.

This is a truism to some degree that I have some sympathy for and I think that you and I will look at it in slightly different terms. So, the way you’ve expressed it to me just now is you’re looking at the salary as a component part of an overall package which could include very good or not very good health insurance, life insurance, flexible spending accounts, other…

Jamie: 401(k) contribution matches…

Simon: 401(k) matches, exactly. Non-salary benefits, that when you sit down and turn those into dollars and cents can be a very, very interesting alternative to a certain amount of salary. However, when I look at these things, I tend to bundle them a little bit more together. The way I look at what you’re asking is that I would just replace the word ‘salary’ with ‘ income’ and say income is king no matter what. I would say yes, in some degree.

An example of this would be, you’re going to go out and spend $2500 on getting a designation or going out and getting some education that could legitimately lead to a $10,000 raise at work if you had it, that is $2500 very, very well spent. That’s a far better rate of return than taking that $2500, putting it in a 401(k) and making a sort of 8%, 9%, 10% return on it over a long period of time.

So, the way I’m reading your question is perhaps a little different to the way you interpret it. I think spending money on your career and on the advancement of your career, if that does involve getting designations, qualifications or anything of that nature, is money very well spent and I would condone somebody reducing their 401(k) contributions for a certain period of time in order to fund something like that which will have a positive long-term effect.

Jamie: Well, thank you for that, because people do invest in working with a coach like me or a career coach or a performance coach so that they can increase their income and that has a huge impact on their financial abundance. What about when people transition from working full-time to part-time?

Simon: That can obviously be a very stressful time for people because, suddenly, no longer are they not getting, perhaps, the health care coverage that they were used to, but they’re now having to go out and pay for that health care coverage. I think both you and I have experience at this, having worked on the W-2, salary basis and then gone off on our own and it is quite shocking the amount of expenses that you were very comfortable assuming were going to be there when you were working for an employer that are no longer there.

I would say that transitioning from full-time to part-time needs to be something that’s very, very planned and a financial runway should be built in advance of that. I think waking up one morning and saying screw this job, I’m gonna go out and be an entrepreneur this afternoon is a very, very, very, very dangerous thing to do. I think it should be well planned and well thought out and specifically saved for. But yeah, be aware, in advance, of what you’re losing when you walk out of that office for the last time.

Jamie: Yeah. So, just to summarize some of the talking points: I heard from you that women actually tend to be better investors than men. It is rather dangerous to assume that men are better investors than women and to entrust them with all of the finances if you are in a household, and everyone benefits from having estate documents. If you are 18 and older and you have people who are relying on you, people whom you love, that you want to take care of even when you are incapacitated or deceased, estate documents have nothing to do with money because you can even set them up for free. And everyone can benefit from saving for retirement, but you agree that income, being able to grow that income, is a top priority. Probably especially for people in your clientele who tend to be in their 20s, 30s, and 40s because that’s the period when they’re growing their income potential at the greatest levels.

Simon: Very much so.

Jamie: Yeah, yeah. And we need to be more careful when we decide to quit our jobs and do our own thing as you and I have done. We need to plan ahead is the biggest takeaway that I’m gaining from this conversation. So, before you go, I just have two more quick questions. The first is: do you have specific tips or suggestions for people who want to create financial abundance?

Simon: I think you’ve touched on a few of them. Now I would say maintain a degree of independence, even if you are in a financially dependent relationship, such as a marriage, and make sure that the two partners in the relationship are as equal as they can possibly be. Not necessarily in terms of what they earn but in terms of what they are doing with their finances. Some things, in terms of 401(k)s and IRAs, you have to do it individually but I would say the financial abundance can result from great teamwork between couples.

I would also say know what you don’t know. Be aware of what you don’t know. Don’t go this route alone if you really are not inclined to devote the time, effort and education that’s required to do this. This is a little bit of a plug for using a financial planner. If my car breaks down, starts making funny noises, I’m going to the mechanic because I recognize I know nothing about cars and not everybody is able to handle this kind of stuff on their own. So I would recommend, and again, this is something, by the way, that women are far better at than men, seeing the limits of what they can do and being inclined to reach out for outside help.

Jamie: So where can people go to learn more about you and your services?

Simon: So there are a couple of different types of financial advisors, the ones who seek out clients, and there are ones who sort of await clients and I tend to be in the second category. I’m a CFP, so that’s a Certified Financial Planner. I have my own firm, it’s angliaadvisors.com which you can see details of at www.angliaadvisors.com.

But more important than coming to me is coming to the right kind of financial advisor. Make sure that any financial advisor you go to and I fall into this category is what’s known as a fiduciary. It’s extremely important that that advisor is required by law to work in your best interests at all times. If you go to a product salesman financial advisor, he is not covered by that rule and he will work in a world that has a lot of conflicts of interest where he is paid by how much he sells you. There is an alternative these days and that’s to pay a fee for financial services whereby the advisor is not incentivized to sell you garbage or sell you anything at all because the compensation method is such that you’re paying a fee and therefore there are no conflicts of interest.

Jamie: Good to know.

Simon: You can find those kind of people at cfp.net. There’s a search there or Financial Planning Association in your local state or you can come to my website as I say at Anglia Advisors.

Jamie: Thank you so much, Simon. You know, my mission is to help people, ambitious people, get bolder, braver and better paid so I think this is really valuable information for them to take and consider, especially that they can have and create financial abundance and make it work for them and for the people that they love. So, again, thanks so much for your valuable time and your expertise and I will talk to you soon!

Simon: Thanks a lot, Jamie. Take care.

Jamie: You too. Bye Bye!

Simon: Bye.

 

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