In this episode, we discuss how we should know the deal before we accept the deal, so we don’t become the sucker in the room.
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 that you can reflect on in your journal so you can grow yourself physically, mentally, emotionally, and spiritually and have a better career, better relationships, and better personal finances while you enjoy your morning cup of coffee.
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.
At the end of today’s podcast episode, I’m going to give you a prompt question to reflect on in your journal. The idea is to take one to five minutes to reflect on today’s lesson and write a minimum of one paragraph on how you can apply the lesson in your life. You can use an actual journal, a word document like on Google Drive, or your note-taking app like Evernote. The idea is that you’re actually thinking about how to process the information to help you improve your life.
In today’s episode, we are going to talk about how we shouldn’t be the sucker in the room. The world is a very complex place with a lot of different people in it, who have their own agenda and they are going to do things that will benefit themselves.
I’m in the financial services industry and we get a lot of flack for screwing people over and I say it’s because of the industry was formed. It started off with stockbrokers, who made a commission, based on how many transactions they made. There was an incentive to sell a financial product and back in the 1950s the fees were a lot higher than today’s environment and it could cost up to $100 in brokerage fees just to execute a trade to buy or sell a stock.
Thanks to the internet, you can find a trading fee as low as $0 on some brokerage platforms. Now there are trade-offs in terms of speed of the transaction and access to auxiliary information, but today more and more people have access to invest in the stock market.
Now when it comes to the financial services industry this year, there are three types. Commission based, asset-based, and fee-for-service. Basically a commission-based financial planner gets paid on selling a financial product like a mutual fund, life insurance, disability insurance, or long-term care insurance.
An asset-based financial advisor gets paid on what they manage. For example, if you give $500,000 or $100,000 to someone to manage that money, they will charge a fee of 1-2% most likely.
A fee-for-service financial advisor charges on complexity. They charge a fee based on how much work it will take to build a plan that covers topics like estate planning, tax planning, retirement planning, cash flow planning, and investment planning.
A financial advisor can be one of these, all of them, or any combination of the three. You just have to know the deal before you accept the deal. And I’ve seen people get inappropriate advice or bought an inappropriate product because they didn’t know what they were getting themselves into.
So this is why if you enter into a room and you don’t know who the sucker is, then you’re the sucker. Now the sucker is the person that doesn’t know what’s going on. They don’t know the incentives behind the person in the room. Now, these incentives might not be entirely bad for both parties, but one party might not get their full benefit.
Now a person can be taken advantage of in all three scenarios, but I feel the best model is the fee-for-service model because it allows the financial advisor to be in the best position to be a fiduciary. With the asset-based and commission model, there could be an incentive to move someone’s money to a product that this not the best for the client. If you don’t have a product to sell, then there is less conflict of interest.
A lot of this depends on the situation, and what your goals are. But you don’t want to enter a situation where you can be taken advantage of because you didn’t do your research and making the wrong decision can have huge financial consequences, which can lead to other problems.
This doesn’t just apply to your personal finances but in other parts of your life. This could be with a relationship, your career, and a hobby that you enjoy. If you really want to do this thing, then make sure it’s what you truly want and it’s the best for you. We’re humans and we get to decide what we put in our lives, for the most part, this is what I believe. Or we can design our lives in a way to create a perfect life. And what that perfect life entails, is up to us.
But the key thing is, make sure you’re not being taken advantage of. I would recommend you ask questions and try to figure out what are the goals for this other person. If you believe it’s fair and just, then there shouldn’t be a problem. A lot of the things we enjoy today are based on the social norms that we believe to be true. So what is true for you might not be true for someone else, but we need to know what is the truth for ourselves.
I’ve made mistakes where I followed this dream, and then I found out is wasn’t something that I wanted in my life. I thought I wanted to be a police officer in high school because that is the only job I thought I could get, but going into the Marines, reading books, and listening to podcasts has expanded my horizons in terms of what I could accomplish and what I want to do. Just raise your awareness and see what you need to add to your life and remove from it. This is going to take patience and action, so do what you can and start building that great life.
That’s it for today’s episode, to summarize it, don’t be the sucker in the room. If you don’t know who the sucker is, then you’re the sucker. Try to understand the system, the motivations, the desires, of all the parties involved, and the tools that people are using to help them reach self-actualization. The tool might be the wrong one, or it might be the right one. We just need to increase our wisdom to know the difference. So before you enter something, just know the deal before you accept the deal. Know your upside, know your downside, know what you can control, what you can’t control, and where are the bottlenecks and inefficiencies are. Do this and you’ll decrease the likelihood of being the sucker in the room.
So in your journal, ask yourself, are you the sucker in the room? Think about your work, with your family, your friends, a service that you’re using, a product you’re using? If you’re the sucker, how can you not be the sucker in the room? What skills or wisdom do you need to acquire to design your life with more control? What are the incentives of the other people or the system that you’re involved in? Just think about the situation and figure out a way on not to be the sucker in the room, and then start taking steps in that direction to help you live your great life.
Thanks for listening today! To get a free copy of my audiobook “More You Know, More You Grow: How to get better every day” just go to my website growwithjoe.me/book and you can download it right there.
I have a quiz on my website that grades your inner circle, so if you want to find out if your inner circle is an A, B, C, D, or F, you can take that quiz at growwithjoe.me/quiz
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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.
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