Ep.194 - The Season of High High Yield Interest
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[00:00:00] Good day. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. My goal is to go over the knowledge you need to increase. You're welcome now to the listener. You can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning.
[00:00:52] Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com. That's falcon wp.com. For sure. If you have any questions you want me to answer on air, feel free to send it to radio@falconwp.com. That's radio@falconwp.com. Now I'm a president here at Falcon Wealth Planning.
[00:01:17] We are fee only, non-commissioned true fiduciary, which means 100% of the time we have to do what's in your best interest folks. And we specialize in everything that involves a dollar sign that goes over where you are today looking at investments, estate planning, insurance, tax planning, you name it, folks.
[00:01:32] Anything involves a dollar sign and we are offering a free financial assessment really to help relate this show to your specific situation. Folks give us a call. We're offering one to two meetings, one to two hours of our time, folks at no cost. Our phone number is (855) 963-2526. That's 8 5 5 9 6. Falcon like the bird Would be happy to put personal customized.
[00:01:55] Assessment to answer the questions that you have on a daily basis, and I'll tell you a few of the questions that we've been getting. Now, one of the questions is it really ti the season of high yield interest money market accounts. Right now you can get over 3%. 4%, 5% in a money market account right now.
[00:02:16] Now you have a lot of these big banks like the Chases and the Wells Fargos and the Bank of America offering three month, six month CDs for three and a half, maybe even sometimes 4%, and that's huge for those type of banks. Historically speaking, they don't need to entice you with a high interest rate to have you deposit money with them.
[00:02:33] So now they actually are because money is cheap and they're taking your money. Leveraging it out, you put a hundred thousand dollars with them. Let's say they give you 4%. They give you 4,000 a year. They can take your a hundred thousand, multiply it by 10, they can let it up to 10 times. That's a million.
[00:02:50] And they can get over a 5% United States Treasury right now, so they can make $50,000 on your a hundred or uh, thousand dollars deposit. You get what I'm saying? So it is massive. They're getting a 10 x return on this, and this is why you're seeing it. Now, here's the crazy thing. We've had some people, some clients come up to us and ask, Hey, I've seen these banks out there that are giving 5% on their money markets.
[00:03:17] Now, granted, if they're big banks out there, that's fine. Now, I know our clients have fidelity, for example, they're get, and at Charles Schwab, they're getting roughly 5% on their money markets. These are big banks, right? These are big financial institutions, we should say. Now one person showed me, uh, a bank.
[00:03:35] Now I'm not making this up. It's out there. Google it. Redneck Bank. Redneck. So I said, listen, I doubt they're triple A rated. I actually made a joke. It said they're probably Triple K rated. Get it kkk. All right. Bad joke, I'm sorry, but you get my point is there's banks out there that are offering north of 5%.
[00:03:56] Now they're doing it for two main reasons. Some of them are very aggressive and ambitious. The other reason is, Very similar to Silicon Valley Bank and Silver Lake Bank is they are in desperate need of funds. This is a reality. Folks don't be naive to think that this isn't the case. So be careful that you may not be eligible or you not be safe enough to be able to get your money out when you need it.
[00:04:22] These banks may be needing so much new money. They're offering these rates at desperate times, so just be. Careful. I've seen this happen many times in the past before. Let's take it a step further. Let's say you go to a big national bank, or your credit union or whatever. Note that when you meet with these individuals, these are commission based advisors.
[00:04:46] You are paying them for what you're buying from them. You're paying commission. And the worst part about this industry is they lie to you. They say, oh no, you don't pay me. The insurance company pays me. The bank pays me. Well, dude, your commission is going to them and they're giving it right back to the individual that's selling you the junk.
[00:05:07] And a lot of these are these index universal life insurance policies, policies. These annuities policies, fixed indexed annuity policies that try to promise you that you can make a market-like return with no risk of loss. They don't tell you how the fine line, how it works inside of these products. And these products have limited upside with unlimited downside.
[00:05:31] Well, if you're only limited to one, to one and a half percent on a monthly basis, but an unlimited downside, guys, you're making nothing. And they're selling you on, well, you can't lose. You get all the upside, which you don't. It's limited and you get none of the downside, which I get it. But you know what the downside is?
[00:05:47] It's not so much losing money. It's inflation destroying the value of your money. That's what's happening, and I'm seeing that all far too often. These, and here's the crazy part, you have some of these banks, big banks out there, I don't care who they are, they're saying, oh, we do tax planning. You, you, you do a tax loss harvesting and then you try to offset against gains, which is incorrect to begin with.
[00:06:11] That's how you, I know you don't do tax planning, but we could advise you on estate planning through our wealth management and trust division. You're paying a separate service for that. Like who care. Here's the crazy part. Will you become an elite Platinum Diamond status? Oh, thank you so much. Do I get cut in front of lines when I come to the bank?
[00:06:30] Well, well, no, we can't do that. What do I get? Free checks. Oh, okay. I don't even write checks anymore. What else do I get? A free safe deposit box. Oh, the the thing that cost me $50 a year. They're paying you nothing on your cash. And on top of that, the investments they're doing, they're saying they charge you 1%.
[00:06:48] Some of them might even say they charge you half a percent, but you know what? They're charging you another fee within the fee. What does that mean? Your fund, the funds that they're putting you in with some of 'em could be their own. Wells Fargo and JP Morgan and whatever Merrill funds that they're putting you in.
[00:07:03] They're getting revenue share from that. They're only quoting you what they're charging. They're not quoting you. The fee within the fee. The fund fees that on average for those type of firms are 1%. Why are they not choosing the Vanguards? That are at 0.05%. Why are they charging you 1%, 20 times more?
[00:07:21] Because they get a revenue share off that this industry is so messed up folks. Beware of what's out there. By the way, folks, if you're just joining me, you're listening to Gabriel Shahin, certified Financial Planner and your host of More Knowledge, more Wealth here on every weekend. We're talking about all important topics in personal finance, and I'm just getting fed up with people coming in saying that they're getting the same service, they're getting similar service, they're getting any service.
[00:07:46] They meet with their advisor one time. Some of 'em even say four times a year. All they're talking about is investments. They're is, are they reviewing your taxes? Are they looking at it, giving you advice, giving you tax strategies, recommending new accounts for you to open? No, they're not because they legally cannot give you tax advice.
[00:08:05] Tell me if you heard this line before, please consult with the tax advisor for any tax questions you may have. Okay. I respect that 98% of the industry cannot give tax advice. I get it, but by no means don't compare that. To a situation where you actually have a tax planner, folks, and that's the thing, they say they could do everything they can't because they have a broker dealer.
[00:08:28] They can only do what that broker dealer tells 'em they can do. They can only sell what the broker dealer tells 'em they can sell. Lemme give you an example. You go to Ford car dealership, okay, can you go buy a Toyota, a Honda? No. And by the way, nothing's wrong with Ford. Do they arguably have the best pickup truck in the world?
[00:08:46] But the point is this. They can only sell Ford. A broker dealer has a shelf in the background. All they can do is offer you what's on that shelf. That's all they can do. So for you and for them to imply that they could do, and they're unbiased is an outright line because they work for their employer, whether is Merrill Lynch, Berg Stanley, Edward Jones, ubs, JP Morgan, Wells Fargo Advisors unit, any credit union that's out there, they work.
[00:09:16] For their employer and their employer, they have to sell a certain amount of product, generate a certain amount of revenue. So why are they selling you a commission-based fund and Aha. Why are they producing that? Selling that to you when you can get a better fund, arguably gets a higher return with, oh, by the way, no upfront commission.
[00:09:35] And oh, by the way, less annual fee because they're not allowed to sell it. This is my frustration with the industry and the sad part is, is because you've been banking somewhere for 10, 20, 30 plus years, you feel it's safe cuz your money is there. Well, you got to think bigger than that. Where is the majority?
[00:09:54] If you look at all the assets, let's look at a Vanguard or a Fidelity. They have over 10 trillion in assets. If you add JP Morgan, Bank of America, Citibank and Wells Fargo, the largest four, you add them together, that's not even $10 trillion by themselves and just fidelity by themselves has over 10 trillion.
[00:10:14] Vanguard by themselves has over 10 trillion. Schwab has multiple trillion as well. I just, it's just frustrating that people go with the norm and, and I get it. I respect that you can probably make a lot more money if you switch to a different job, but you're comfortable where you're at. But this is investments.
[00:10:34] This is your future. This is your retirement. You have to be able to find and be comfortable finding the best possible solution for you. And by doing that, you have to think outside of the box. And I'm just telling you from experience that people out there are lying. They're conniving, and they don't care about you.
[00:10:52] They're offering no service. They're gonna say whatever they need to say to get the job done, to get the business, to get you to write a check. Invest that money. My whole point is why are they selling you a fixed annuity at four to 5% when a guaranteed US treasury is over 5% on their three month? You get what I'm saying?
[00:11:09] Why would you do that? Because they don't get paid when you do that. Because they have to make commission. Their commissions could be one to 3%. Well, they can't make that money if they take one to 3% off a three month. You get what I'm saying? Off a three month treasury, they, let's just say on the low end, they take 1%.
[00:11:28] Well, that's 4% annualized for something that's paying 5% annualized. You get what I'm saying? It just doesn't work and it doesn't make sense. And sadly, this is the industry that I'm in. This is why I created FA Law Planning a fee only, not commission based. And even if they say they're not commission based, they're fee based, you wanna ask for their A D V, it's an advisor disclosure document.
[00:11:49] If you're working for a professional, ask for that document, folks. It tells that's how you know they're a fiduciary. Now, how do you make sure they're a true fiduciary? Is that their fee only? That means they don't have their series seven licenses. Why do you have that license? So you get paid commission.
[00:12:04] We don't have that. We all forfeited our series seven licenses. Folks, we all got CFPs. Why is that important? Because our financial planners with CFPs, they are not allowed to get commission of any kind. They're all salaried, and that's what makes us unique in this space. Folks, if you need help, if what I'm saying resonates with you, give us a call.
[00:12:20] We'd love to help. We'll offer you a free financial assessment, one to two meetings, one to two hours of our time, folks at no cost. Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon. Like the bird folks, we're gonna go on a quick break and we'll be right back after a few words.
[00:12:38] This is Gabriel Shaheen, certified financial Planner, your host of More Knowledge, more Wealth. That's on every weekend. We're going over all important topics of personal finance. We're going over retirement planning, making sure you're prepared for retirement, social security and strategies, real estate taxes, avoiding them now and in the future, investments reducing.
[00:12:57] Fees, commissions, and so on. Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the Inland Empire. Give us a call to take advantage. Our phone number is (855) 963-2526. That's 8 5 5 9 6.
[00:13:15] Falcon like the bird, or visit our website, falcon wealth planning.com. That's falcon wp.com for short. Enjoy the show. We look forward to serving you.
[00:13:25] Welcome back folks. This is Gabriel Shaheen, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics in personal finance today. I felt like I'm going on a rant here about the financial services industry, especially those working at the bank directly, how they're paying you.
[00:13:41] Zero point. Nothing. You have to go outta your way or see the little promo on the website. That there's a new money market paying 4%. I mean, that's crazy to me. You got your money there and if you didn't log in for online banking, even when you go to the teller, they don't try to sell it to you. You have to go outta your way to find this 4%.
[00:13:56] How come? If they're so great of a bank, they didn't go outta their way to tell you, Hey, Mr. Or Mrs. Smith, you've been with us for 30 years. You got a hundred thousand or even 10,000 in your bank account, we would like to upgrade your savings account to earn three or 4%. How come they don't do that? How are they so great of a company, but they're not even, they're giving the new clients all these promos and they're not giving you, you have to go outta your way and be proactive about it.
[00:14:23] That's the culture of these places. Don't you understand? And that's now you're gonna do that on their financial investment side as well. That's crazy. Work with somebody who's truly proactive. Folks, I'm telling you this is the best way to do it. I highly recommend that you work with a fee only. And now, by the way, I'm unbias.
[00:14:41] I'm completely biased, right? Because we are independent registered investment advisors, we are fee only. We are non-commissioned. We are true 100% of the time. Fiduciaries. We're always being proactive to see what we can do to save our clients extra money. That's just what we do. And that's why savings accounts at Schwab and Fidelity, two firms that we partner with, is offering that close to 5% money market yield.
[00:15:06] Now, my point to you is not to go hurry up and pick up the phone and call for that. We don't wanna be in that business with all due respect. We only wanna do that for clients, and we don't get paid from that, right? And we're not a nonprofit. We're a for-profit. That's just a tool. That's a byproduct of everything else that we offer in regards to tax planning, cash flow management.
[00:15:26] Estate planning, insurance planning, investment planning, and tax planning, because being our biggest niche, that's the value add. That should be just icing on the cake. The cake's already a fantastic cake. My whole point to you is the industry just isn't like that. The industry is consistently trying to sell you.
[00:15:43] You gotta target on your back and they're going after you. I'm just telling you to be beware and proceed with caution. Folks, this is the best way to do it, and it's your money. Your loyalty should only be with your family. Nobody else. No advisory firm. No investment firm, no bank should only be with your family, right?
[00:16:07] If, God forbid you can't make your payments, are, is the bank gonna help you do it? No. On the contrary, they won't even do a refinance or a cash out refinance to help you through tough times cuz you're not showing enough income. I mean, it's just crazy how this works. It's crazy how this world operates. I'm just telling you.
[00:16:25] To be careful because this industry is tricky and I just don't appreciate it because right now you could get your money into US Treasury right now and get over 5% for a three month annualized, uh, uh, security. You could do that, but they don't ever try to sell you that. They're gonna try to sell you an s and p 500 fund.
[00:16:47] That's what, at 1%, and they put some spice on top of it. Try to make it sound attractive so they can charge more. Don't be sold to. No, nobody has ever been able to consistently beat the stock market ever. S and p 500 averages a 10% rate of return over time. That should be your benchmark. Now, if you're not comfortable taking as much risk as the market, you reduce the amount of risk, and that's where you start incorporating bonds into the portfolio.
[00:17:11] There is no secret around it. Your target rate of return, depending on the risk that you want to take, should be anywhere between five to 11% returns. Now, why did I say 11?
[00:17:20] The US stock market typically does about 10% returns, but the small caps do roughly 12% return. International, historically speaking, does even higher than that. Emerging markets has a highest expected rate of return, but also lost 80%. It did in earlier years in 2008. So my point is you have to be careful.
[00:17:38] Risk versus return, everything. So you should put all that combination together because here's the thing, they don't always go down at one time or up at one time. This way, if you need money, you can take it. From certain different pools and you know, there always should be something in your portfolio that's going up and always something in your portfolio that's going down.
[00:17:56] Folks, be careful of how you invest and make sure it's done properly. I'm just telling you, I've seen all far too often that people are doing it improperly because they go to a trusted source now, trusted source, that's variable, that's subjective. What's trusted to you? Somebody have a very good relationship with.
[00:18:15] Maybe where your money is held, like your local bank, a big brokerage house, or maybe just an investment that you know, like a big name like Apple, the biggest company in the world. You get what I'm saying? So trust is subjective. My point to you is you have to see where value is added and you have to see how your advisor is paid.
[00:18:31] It's not embarrassing, folks, don't you shop around or you're looking for some type of service or some type of product, don't you try to get a good deal. You, you get what I'm saying? You shop around for some of the simplest of things. Some of you guys shop around for service, on your car, service, on your house, contract work, upgrading bathrooms or paint or electrical services, but you're not gonna do it for your nest egg.
[00:18:58] You, you, here's the irony. You do that to save money, right? But when it comes to money, you're not asking what the costs are associated with it. I highly recommend that you do that on a consistent basis. Because here's the problem. Most of this industry, like for example, our clients, their average sub fee is 10 basis points.
[00:19:15] We were just talking about earlier that the average fee outside of, uh, some of these banks or with these banks are roughly a hundred basis points. That's 10 times more. And guy, by the way, we disclose it, they don't. And on top of that, they're not talking about the commissions that they receive, they're not talking about the revenue share.
[00:19:33] They're not talking about the promotions and campaigns that they have at their current company of making sure they could sell X amount of this product so they don't have to disclose it at the industry. So I'm just telling you, be aware. By the way, folks, if you're just joining me, you're listening to Gabriel Shahin, certified Financial Planner and you're host of more Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.
[00:19:54] And today we're just talking about the simple aspects right now of. Your brokerage account, your investment relationship, and you yourself, you should be going where you're comfortable with, where you're getting the value. Because quite frankly, I'm gonna do a little plug here, but you, if you don't care about any value or any services, you could probably, and you don't care about tax management, you could probably get everything you need at Schwab, which charges nothing for investment management.
[00:20:20] Forget Betterment and Wealthfront, why would you go with them? They charge, you know what I'm saying? They charge 20 to 30 basis points for nothing. If you want to talk to a human once a year, go to Vanguard. They only charge 30 basis points, okay? You want to just have your money managed. Go to Schwab Intelligent Advisors, they charge zero.
[00:20:41] Why? Because they have you investing in their fund, which they're making money off you on the backend. Like I say, where this industry doesn't disclose, that's how they're making their money. But you have to have value, and those are great historical solutions for those who probably have under $25,000.
[00:20:56] Typically folks, the more money you have, the more problems, the higher income you have. You get what I'm saying? You need more service. I have a saying, you can't afford to be cheap and let people, and this is why it's important, you know what's a good attorney from a bad attorney is if they're actually giving you advice in that free consultation versus just uncovering your information.
[00:21:17] You get what I'm saying? A true good attorney will just give it to you cuz they don't wanna waste their time. They don't wanna quote a cost for an unhappy client. Now the joke is you're never happy with an attorney, but the irony is with a good attorney. This is why some of the richest people in America have attorneys and they have a fantastic relationship with them.
[00:21:35] My comment to you folks is be disciplined, number one of your situation. Number two, be decisive. And this is a selfish decision. You have to do what's best for you and your family. That's it. No loyalty when it comes to money, so just be careful. And folks, if you want help with this, we are offering a free financial assessment.
[00:21:58] We're offering one to two hours, one to two meetings of our time at no cost. And folks, we got offices all over as far east as Chicago and Northwest and Washington. We would love to help. Our headquarters is here in Southern California. Give us a call. We would love to help. Our phone number is eight five five nine six three.
[00:22:17] 25 26. That's 8 5 5 96 Falcon like the Bird, or visit our website@falconwealthplanning.com. That's falcon wp.com for sure. We can help put together an assessment to really help relate this show to your specific situation because a lot of people have their money scattered as well. That can get complicated.
[00:22:38] You wanna make sure your money is in something that is low cost, highly liquid, and no commission. And that's the thing. If you're gonna put your money in that and that's all you're looking for, then you can go to some of those firms I mentioned earlier that charge very little. Or you could be in a situation where you feel you are paying too much in taxes, or you're a small business owner, or you're an executive, or you just have a high income, or you have a lot of real estate, or you have somebody that just has a lot of assets.
[00:23:10] These are people that typically seek an advisor for more help than just growing my assets. You want to grow your net worth, and some of the best way to do that is through tax savings. Folks, we would love to help folks, give us a call. You have to ask yourself, is your advisor looking at your tax returns, giving advice on your business, giving advice and structure, and just are they only focused on building your investment portfolio from going up, or is it building your overall net worth going up?
[00:23:37] Are they recommending you to buy a rental property? No, because they don't get paid. They wanna take that extra cash and invest it cause that's the only way they get paid and that's just the correct way of doing it. Folks, if you need help, give us a call. We would love to help. Our phone number is (855) 963-2526.
[00:23:54] That's 8 5 5 96 Falcons. Like the bird. Folks, that was a fast, fast show. I wanna thank you for tuning in with us this weekend. Feel free to reach out to myself or any one of our colleagues here at Falcon Wealth Planning. Our phone number is (855) 963-2526. That's 8 5 5 96. Falcon like the Bird, or visit our website@falconwealthplanning.com.
[00:24:17] That's Falcon. wp.com for short. And if you have any questions that you want me to answer on air, just go ahead and send an email to radio falcon wp.com. That's radio falcon wp.com for short. Folks, I want you to thank you for tuning in. Enjoy your weekend. Have a great week and God bless.