In this episode, we discuss how you can’t turn bad ideas into good ideas by adding something sweet.
Full Transcript
Hi Everyone, welcome to the You’re Daily Cup of Joe Podcast, with your host Joe Bautista. In this podcast, my goal is to give you quick lessons on how to grow yourself physically, mentally, emotionally, and spiritually so you can have better careers, better relationships, and better personal finances.
I’m also the author of the book “More You Know, More You Grow: How to Get Better Every Day”. In this book, I wrote down over 30 tips to help you grow in those four cornerstones. I’m also the founder of Grow With Joe, where I combine self-development coaching and financial planning for Latino Professionals.
In today’s episode, we’re are going to talk about how you shouldn’t mix turds with raisins. I got this quote from Charlie Munger in his book, Poor Charlie’s Almanack, who is Warren Buffett’s right-hand man at Berkshire Hathaway. Charlie Munger always looks for a way to make better decisions with his businesses and his life and one great way to make a decision is not making something that doesn’t work, look better. You should just get rid of the thing. Hence, you don’t mix turds with raisins because you might get a little sweet but you’re going to have a nasty aftertaste.
People, in general, have a tough time giving up on stuff because of a cognitive bias called the endowment effect, which basically means that we value the things we already have or created more than other things and will want to hold on to those things longer than necessary. You might have an idea but if it’s a bad idea, it’s a bad idea and you should discard as fast as you can but since it’s your idea, you want to hold on to it and might change somethings to improve on the idea but overall it’s still a bad idea and won’t survive. If you hold on to a bad idea for too long, it can cause a lot of damage but if you’re just getting enough sweet, you might say, I’m on the right track and just need to keep going.
I remember at my last firm for financial planning, I felt I was having turds with raisins. At first, I was tasting the raisins, but the turd taste kept coming back every time. At my last firm, I had to pay for office space, I had to pay for an administrative assistant and all these other business expenses. When I first had the idea of becoming a financial planner, I thought you just worked for the major wire firms like Merrill Lynch, Morgan Stanley, Edward Jones, Mass Mutual, and Prudential. When you work at a wire firm, you’re basically salesman for their products and you use financial planning to sell those products. This is how it was at my last firm, I used financial planning to sell life insurance, disability insurance, and load-funded mutual funds to my prospective clients.
Now I would say this is not a bad thing because people need these products but what I didn’t like about this format was that it was very transactional. You needed to find the next person to sell a product to. When I first got started in the business in 2015, it was hard but I learned a lot about how to run client meetings and to get people to buy from me. I could have done a lot better but I was able to get some people but when you sell one person, you only get paid one time. And so anytime spent on that person afterward, I was not getting paid. Plus my old company valued selling products over doing planning fees, so the comp structure reflected that.
What I wanted to do is to have a relationship with my clients and that system didn’t value that. You can’t sell one person every time you see them, it will just create a bad taste in their mouth and they’ll stop coming around and returning your phone calls. Then the Department of Labor came out with the fiduciary rule which made it harder for companies like my old one to do 401k rollovers because the fees were typically higher. So that was another thing that made it tough with my previous firm.
Out of all the products to sell at my previous firm, life insurance was the one that paid the most and that was a big focus at my last firm. For investments, we could only sell actively managed funds with a loaded fund, and I remember at one workshop, they mentioned that every consumer is leaving actively managed funds and going to passive funds without a load-fee. With the internet, people had a lot more questions and information, which is a good thing and a bad thing because they are getting advice that may not be suitable for them. So that was another thing that made things difficult with a more informed consumer.
Another thing that was turdy at my last firm was they constantly changed the rules for getting paid and how we can obtain clients. My last company was a broker-dealer, which sold the products of many different firms and changed the way that I got paid based on what they thought was important.
There were some sweet moments at my last firm but I think the landscape of the financial advisor is changing quickly and that the broker-dealer model is going to go away soon. I had to leave the turd and start my own thing and I started my own thing with the help of the XY Planning Network, which helps generation X and Y clients by providing a fee for service model. At Grow With Joe, I charge a monthly fee to do comprehensive financial planning for my clients, where that can cancel at any time with a 30-day notice so they are not stuck in anything long term. This always me to be more of a fiduciary for my clients without having to worry about pushing them to buy a product from me, they just get the advice to make a sound decision. When the Department of Labor came out with fiduciary rule, they value a planning fee more than being compensated by commission because it was a much clearer scenario. And I like this model as well because I know how to treat every client based on the fee they pay me. It could be through my subscription model where they have 24-hour access to me or it could be a one-time project-based fee where I give someone the information and the relationship ends there.
In order to be a fee for service financial advisor though, I need to build up my knowledge base because I’m going to do a lot more complex planning, which I’ve been building up for the past four years. I’m glad I left my last firm because I value the freedom to do what I want to know versus someone else telling me how I can market myself, who I can focus on, and how I can get paid. Plus I have a great certainty that the broker-dealer model is going to go away because the consumer has a lot more complex needs and they have more information. So I need to move away from that model and do the fee-for-service model.
So look at your life and see if you need to remove a turd from your life. You might need to find a new job because it’s giving you enough salary to survive but you’re not living very good and one day it might go away and you won’t be prepared for that moment. It could be a relationship with someone. They have their good moments, but overall they’re just a turd and you’re going to have a bad aftertaste once the sweetness goes away. They get you with the sweetness at first and that will be your downfall, so now that you’re aware of this concept, use it as fast as you can.
That’s it for today’s episode, to summarize it, don’t mix turds with raisins. It might be sweet now but soon you’ll feel the turd and it won’t be pleasant. The turd can come in a lot of different forms, with your career, business, hobby, relationships, and personal preferences, so be aware of it and if something feels turdy, then it probably is. So remove it from your life and find something else without a turn in it.
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Thanks for joining me today and remember if you go with Joe, you can grow with Joe, cause Joe knows Dough.
*Music outro
