Birmingham, Alabama-based financial guru Jeff Roberts, who was recently named one of the top private wealth advisors in the nation by Barron’s®, came on Yellowhammer Radio to lay out the facts so people can decide for themselves.

The full conversation with Mr. Roberts can be heard on the Yellowhammer Radio podcast or in the video above, and a lightly edited transcript of his interview with Yellowhammer’s Andrea Tice and Scott Chambers can be read below.

Subscribe to the Yellowhammer Radio Podcast on iTunes. Learn more about Jeff Roberts’ private wealth advisory practice at JeffRobertsAndAssociates.com.

Andrea:

Good to hear from you, Jeff. We were just wondering, with this New Year underway, 4 days into it what kind of thoughts are in your mind when it comes to financial resolutions that would be helpful for someone?

Jeff:

That’s a great question. What we see is that it’s kind of like gym memberships. If you go to a gym any time at the first of the year. The parking lot is full, everybody is jammed in at the gym. And believe it or not that often times happens in financial advisory offices as well because people during the holidays take time off work and start thinking about their finances and getting things organized for the New Year and so we will sometimes be a little bit hopping around the first of the year. People are doing the same thing with their financial advisor relationship as they do with their gym membership relationship. We always encourage people to spend at least as much time planning your overall financial goals than you do your family vacation for the year. And believe it or not that’s a challenge for many folks.

Andrea:

Is there any one topic that you would like to introduce people to start thinking about when they come to you as part of this New Year’s resolution about finances?

Jeff:

The easy one there is that we are by nature, planners, financial planners. And so my first preference for anyone is get a plan, have a plan. The key there is it starts with determining what is your goal. It’s very simple, you hear it over and over with people whether it’s education of kids or or planning for retirement or gifting out their assets when they’re retired to their family. Whatever it is, listing that goal out specifically and then making sure that you have a plan in place that allows that to happen. What we often times find when working with clients is peoples goals and what they’re actually intending to do are in conflict. That would be their lifestyle or whatever they’re actually doing with their money deviates from what they’re saying they would like to accomplish. As I’ve said for years and years as an advisor, if you ever want to see what people’s values are watch the way they manage their money. So when people say they want to educate their kids, it’s real simple, you have to save a certain amount of money depending on the child’s age and type of school they’re going to go to. And so that planning determines that which gives clarity to people. So to your question, plan, plan, plan.

Scott:

And unlike those gym memberships you mentioned a few moments ago, people packed in a parking lot early in the year, with financial planning you don’t want it to just be a one time thing. “Oh I need to watch my money.” This is something that is a long term deal. You get a plan together, right?

Jeff:

That’s correct and in fact what our methodology on that is, and I’m speaking in general terms because we work with hundreds and hundreds of clients so each person is a little bit unique, but we generally have clients come in and sit down with us two times a year where we’re reviewing and monitoring their progress. If you just implement a plan or even design out a plan but don’t have the ongoing monitoring of your process then you have no idea whether or not you’re on course or not. And when markets do what markets do, sometimes markets are great sometimes markets aren’t so good. We’re less concerned about what the markets are doing and more concerned about are we still on pace to accomplish our goal? Whatever is happening in the market how do I look relative to wherever I’m trying to get? And so that requires the ongoing relationship, sitting back down, dusting off a plan and kind of figuring out where are we.

Andrea:

It’s great that you mentioned meeting with them two times a year because that seems like you’re not overly controlling them but you’re meeting up with them at just the right time where you tend to get off track around that 6 month mark. But meeting with you would provide more incentive to get back on track and continue on with the plan once it’s established.

Scott:

Yeah, and again every client is kind of unique. There’s some situations where we have to meet more often and if we’re working with someone new, somebody that has just come to us for the first time we have to meet a little bit more frequently as we’re designing a plan. But you’re right, every 6 months is typically enough to keep people corralled in, paying attention to their finances. I hate to use this comparison but it’s a fair one, most people who go see their dentist two times a year. I’ve got a dental appointment tomorrow actually, it’s my 6 month check up. Well, I don’t think about it other than you brush and floss. It’s kind of the same thing with personal finances, you put a plan in place and as long as people are kind of brushing and flossing their financial goals along the way. And then sit down about every 6 months to make sure there aren’t major adjustments that need to occur. Planning can be very manageable, very reasonable but essential.

Scott:

You know Jeff, I’m not a financial guru like you and your team are but I would think here at the first of the year, I’m a business owner I’m self-employed which for those of us that are self-employed and own businesses we don’t always plan for retirement very well. This would be the perfect time of year to start really planning out your future because as a self-employed and business owner we don’t do that often. And I think the beginning of the year is a good time to look at your future down the road, your retirement.

Jeff:

That’s true and you bring up an interesting point when you talk about being a small business owner, an entrepreneur. What we find with our small business owner clients is a unique challenge for them when planning for retirement. Small business owners, entrepreneurs typically have one thing in common and that is an unbelievable belief in their business and they’re willing to invest all of their time, energy and resources into making that business grow. And that’s good because as an entrepreneur you almost have to be brainwashed that your idea and your business is going to work. Otherwise you’re not willing to go through the litany of tests, the swamp that you have to go through to become successful. But the challenge in that is when people are planning for their longterm financial goals you need diversification outside of just your business itself. Sure, if your business becomes extremely successful that can be your nest egg but if for whatever reason it’s not or it doesn’t achieve the success levels you need then you’ve spent a lot of time, energy and money tied up in the business that doesn’t quite produce what you need form a retirement planning standpoint. So we look at having our clients or small business owners diversify outside of their business into financial assets as well that they can accumulate before their retirement. It’s a challenge, it’s a big challenge.

Scott:

Absolutely, and I have friends that are young in their early 30’s late 20’s and they’re like, “Ahh it’s kind of early to be thinking about retirement”, but what do you say to that?

Jeff:

We had a show and I don’t remember how long ago it was but I did an example on “Rule 72”. The simple example is this, obviously the early you start the better because what this is about is the doubling. I think the analogy I’ve done is which would you rather have, $100,000 right now or a lump sum that you can get at the end of one month if you take a penny today and double the amount every single day for a month? At the end of 31 days you can have that amount of money or $100,000. Well, most people know to take the amount at the end of 31 days but they don’t know how much it is. At the end of 31 days if you take a penny and double it every single day, it’s over $10 Million and the idea on that is the compounding of money. Most people fail to get the last double of their money that they need in their lifetime or actually it’s close to two doubles. Think about it, if you have $500,000 can you retire with financial independence for the rest of your life? Probably not. Well double that to $1M, could you retire comfortably for the rest of your life? You’ll say, “Well should be.” Double that to $2M, “Hey I should be able to figure that out.” Of course it varies on each person and lifestyle but the point is, take that number and that last double is the biggest piece. If you start sooner in life that means it gives you more chances to get doubles because you have more time. If you don’t take advantage of starting early you’re likely not to have enough time to get the doubles that you need. And remember, it’s the last doubles that count the most.

Andrea:

That’s a great analogy, that whole idea of compounding and if you can drill that into people’s heads early, like with your analogy which is excellent, then the likelihood of action being taken to be in a position to make that final double count, that is very good advice.

Jeff:

And the sobering part of that is at times is financial planning because when you’re doing forecasting and projecting you can begin to see based on where I am right now, my age, my goal to retirement , what I have saved up and what I’m currently saving, where are my projected to be at the point of arrival at whatever age that is. And is that a good picture or a bad picture just kind of depends but that’s information you have to know. As I’ve said hundreds and hundreds of times to people, if I tell you exactly how much you need to be saving to wind up at your particular goal down the road are you willing to do it? Usually the answer is, “It depends. It depends on how much money it’s going to require.” The interesting thing about retirement planning is that you don’t get a second shot. You only get one shot at it because eventually you’re going to run out of time and the ability to save and you might not have a job at some point.

Scott:

And in today’s economy and who knows what economy when it will be retirement time, you plan early. Those are great points there, Jeff, really good. So what else is on your mind before we wrap up today?

Jeff:

Nothing in particular, I like to talk about things that I see with clients from time to time. Issues that we see clients doing incorrectly or things that clients are doing extremely well and I think next week we’re going to come in and talk about an issue we see with longterm care. I’ve had a lot of clients come in and ask about longterm care and how that is a risk for them in retirement. That’ll be our topic for next week.