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Trust This, Go Broke

5d ago 24:33

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We all know there are things in life you probably shouldn’t trust — like gas station sushi or an email from a Nigerian prince. But the same principle applies in retirement planning. Sometimes what looks safe, easy, or even “guaranteed” isn’t so trustworthy when you peel back the layers.

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Transcript:

Walter Storholt:

Well, we all know that there are things in life you probably shouldn't trust, like gas station sushi or that email from a Nigerian prince trying to send you some money and get you to send them money. But the same principle applies in retirement planning. Sometimes what looks safe or easy or even that dreaded word, guaranteed, isn't so trustworthy when you peel back the layers. So on today's show, we're going to talk about the things that if you trust it, you might go broke and how to avoid it.

Hey everybody and welcome to another edition of Plan with the Tax Man. I'm Walter Storholt filling in for Mark Killian on today's episode, but as always, joined by Tony Mauro, Des Moines professional alternative for the Tax Doctor Inc. in central Iowa, office right in Des Moines. You can find Tony online at yourplanningpros.com.

Tony, great to be with you on today's episode. How's life treating you?

Tony Mauro:

It's good. Fall's upon us. Everybody's talking football of course, and now it's starting to get serious about planning, so it will be busy coming up.

Walter Storholt:

You get kind of a second hit in the tax calendar this time of year. Most people think of taxes as just being something you worry about at the last minute in April, but you get a little bit of a second wind as we head toward October, right?

Tony Mauro:

We do. As we're taping this, we're coming up on a due date the IRS puts on us for corporate extensions, which is the 15th, and then in another month, October 15th, everybody that we have on extensions and everybody out there have got to get those tax returns in, especially if they owe to avoid some big penalties. So most of our clients, though, are not the procrastinators or the ones that are on extension. We got them done long ago, but we still have a few that we're always pushing to get over that hurdle.

Walter Storholt:

That's right. Yeah. And it's not like corporate returns are easier than personal returns, right? A few more layers and moving parts to worry about there?

Tony Mauro:

It is. With the corps, it's not near as straightforward of just getting documents and getting them into the software. A lot of moving parts usually, and of course business owners by and large usually don't want to talk about taxes and they tend to put it off. So half the battle is getting them to communicate and get some of that stuff done.

Walter Storholt:

Yeah, absolutely. Well, good luck wrapping those things up so that you can enjoy the changing of the fall weather and football season and all that other good stuff. Well, here's how today's episode's going to work, folks. We're going to talk about the things that you trust might make you go broke and we're going to talk about some real world things and then some financial sides of the equation as well. So we'll kind of bounce back and forth between the two.

So first of all, Tony, I like throwing this one out there. Gas station sushi. Is that something that you think you would trust?

Tony Mauro:

I would never trust that. In fact, I notice even in some airports now, kind of like sushi to go and fast food sushi.

Walter Storholt:

Oh, sure.

Tony Mauro:

I would never do that, and I do like sushi, but that kind of stuff, especially at a gas station, I wouldn't [inaudible 00:03:21].

Walter Storholt:

Yeah. I might do the airport sushi if it was a sushi restaurant in the gas station, but when it's just kind of in those grab and go sections, I don't know if I want that going wrong right before a flight, right?

Tony Mauro:

Right before a flight. I agree.

Walter Storholt:

The risk there is not worth it.

Tony Mauro:

Yeah, yeah.

Walter Storholt:

I did, I thought gas station sushi was sort of a made up thing and then one day I did actually see sushi in the gas station.

Tony Mauro:

Wow.

Walter Storholt:

It was not appetizing.

Tony Mauro:

I've seen it in some small supermarkets and whatnot, but it just looks like, how long has that been there?

Walter Storholt:

Sure.

Tony Mauro:

I don't know if I want to try that, but I'm like you, I'd rather just have them cook it for me. That's the only way I'm eating it.

Walter Storholt:

Yeah, it's the same thing with raw oysters. I got to trust the place I'm getting my raw oysters from.

Tony Mauro:

Exactly.

Walter Storholt:

Otherwise I'm not eating it. All right, so let's look at a more realistic real world thing here from the financial perspective would be people who say they've developed a system for timing the stock market. That sounds a lot like gas station sushi in my mind.

Tony Mauro:

Well, it sure does. I think a lot of what we'll talk about today is stuff people are seeing online and how they need to vet that a little bit on who's writing that. But I've even seen it just scrolling through Facebook, you see the things that look like a post that are really an ad and I see a lot of these about people being able to time the market and to beat the market, so to say. And from a financial planner's perspective, any one of us is going to tell you that's been in the business for a while that even the best of the best can't really do it on a consistent basis.

So what makes whomever out there online think that they've done it? What a lot of times they'll do is, that I've seen, is they'll point to some freak kind of abnormal result that they've achieved over the short term and they've never really tested it over the long term, but even if they can long term, it's all going to even out, so I really advise people not to fall for that kind of stuff just because of that.

Walter Storholt:

Yeah. I mean, anything that kind of sounds too good to be true, we can file this one under that probably is category.

Tony Mauro:

That's right. Yeah.

Walter Storholt:

Yeah. All right. Other things that can cause you to have some trouble in the real world is when we use WebMD to diagnose ourselves, right? Although today's version of that, it seems to be AI, right? I go into AI now and I'm like, "Hey, I got this thing going on." So either one, a little questionable there.

Tony Mauro:

And even in the financial world, robo-advisors and AI, it certainly is going to play a role in everything that we do I think going forward. However, I think just like in medicine and even in taxes is AI can't make the critical decisions, I don't think, at least at this point, in a person's portfolio, and not everybody is the same. There needs to be a human element in there because really, a lot about goals and emotions, how you feel about things, and AI can't pick that up, at least yet. And a lot of people I think use WebMD and some other things kind of basically just for a quick hitter and there's nothing wrong with that, gathering some information, but I would say confirm that with an advisor to make sure it's really true.

Walter Storholt:

I like your perspective on that, and it's kind of funny, I used AI to kind of analyze some test results recently on my ankle. I had an MRI done on a heel Achilles injury, but I didn't know what I was reading, right? All these big fancy words, and it was kind of hard to sort through it all with the way that it was laid out in the test results, and my follow-up appointment wasn't going to be for a couple of days and I kind of wanted to know what was going on a little bit more from what the techs found. And so I took all of that gibberish and threw it into AI and it was able to kind of at least give me an idea of what I was facing. So it set some expectations for then that visit to the doctor.

I wasn't trying to make it fix my ankle, but to say, "Okay, so what am I looking at? What are my options? What's the good? What's the bad here?" That was kind of helpful and kind of nice. I could see that helping a lot in the financial realm too, maybe using AI to maybe make certain parts of the process easier, but man, I'm still going to go to that doctor, I'm still going to go to that advisor and get that interpretation, that guidance. And then like you said, the decision-making, the critical choices got to still happen from the human, at least at this point.

What about advisors who say there are no fees in your portfolio? Is that a trust this, go broke kind of thing?

Tony Mauro:

Well, I would be very leery of that because in everything we're doing in the financial world, even if you don't have an advisor and you're doing it yourself, almost every investment has some fees of some kind, unless you just flat own individual stocks and/or bonds. You do pay a fee when you buy and sell, but I think what this is referring to more so is people saying that they're going to be able to advise you for absolutely no fees. There are always fees, you just have to look for them.

What we do with our clients is in everything that we're doing for them. I mean, we're fee only. So yeah, there's going to be a fee to be the financial quarterback, but we want to disclose that and make sure that the client knows what they're paying us and what they're paying us for, what the kind of value we're going to deliver for that. And then also any types of investments that we're choosing, we want to let them know what type of fees are hidden in there because fees can add up, obviously. More in fees you pay, the less return you're going to have, and that will affect your goals a little bit. But yeah, be very leery of that. If somebody's saying there's absolutely no fees, I would love to see that, because I've never seen it.

Walter Storholt:

No one's working for free, right? So someone's getting paid in some way, shape or form. It's just making sure we understand who and how and where it's coming from.

Tony Mauro:

And what the amount is. Absolutely.

Walter Storholt:

Yeah. This one's a callback to any fans of The Office. When the deposed king of Nigeria sends you a letter, you respond to it or whatever that quote was. So what about those Nigerian princes offering to share a portion of their fortune with you via email?

Tony Mauro:

Via email? Yeah.

Walter Storholt:

That's even worse than gas station sushi, right?

Tony Mauro:

It really is. I've actually had three clients over my span of being in business... It's been a long time. This isn't as prevalent now as AI calling people and faking somebody they know and sending them money, but [inaudible 00:09:35]-

Walter Storholt:

The scam has gotten more sophisticated, right?

Tony Mauro:

It has. It has. But I've had three people, this exact email came to them and they sent money and one sent like $4,000 and it was an older lady and after it's gone, it's gone, but obviously there must be some people that still fall for this because they're still doing it, but now it's more sophisticated, so now it's moving on to AI-generated language of somebody and calling you saying they're in jail, they need money and all of that. Very difficult for people to decipher. But my advice to anybody, don't send any money to anybody until you've talked to a human being. It's just not worth it.

Walter Storholt:

Yeah, absolutely. Just be on the lookout for anything that doesn't quite feel right and then maybe seek a second opinion. My folks have done that in the past, Tony, and I told them, "Please always feel comfortable with that. If you ever feel like something's not quite right, just give me a call and we'll look at it together real quick and just get that outside voice and say, 'Oh yeah, this doesn't sound right,'" because that can be really helpful when you just get that other person that can validate your suspicious feelings, if you will.

All right, we're talking about things that if you trust it, you might go broke. I'm going to put some trust in a stock market that hasn't crashed in a decade. Is that a fool's errand if I'm doing something like that?

Tony Mauro:

I believe it's a fool's errand, yes. Depends on how you define crashed, but the market moves up and down and it's very easy to show people a timeline. Even over the last 10 years, we can name 21. When we had COVID, everybody thought it's the next doomsday. And so we have minor corrections and sometimes they're major corrections, but if you go back 10 years, yeah, there's ups and downs and so that's totally false. And anybody that tells you that, if you're talking about the stock market, is basically either manipulating the numbers or they're just flat out not saying the truth in my mind.

Walter Storholt:

Yeah, it's an easy one to cover for sure. This next one really grates me. The weather forecasts that are more than three days out, just don't even look at them, right?

Tony Mauro:

That's right, that's right. Don't even look at them. In fact, it's funny on the weather. So I fly a small plane for a hobby and so we're always fascinated with the weather. We're always looking at the weather because that's a scary thing, and they preach it and preach it and preach it when you're learning to fly. And I feel like the weather forecasts we get are some of the best of the best and it's still just a forecast, and many times they'll forecast something that's completely off even for a day out. So can't control the weather. It's so funny. We have all this scientific stuff, and yet it still wins sometimes. So yeah, don't trust that. My mom used to always look at the weather way out and she would just swear by it and it's like half the time it would never be what they said.

Walter Storholt:

Yeah, we had that exact same experience just last week, Tony. We were back in Pennsylvania near family for a baby shower and it was an outdoor event and we were kind of throwing the outdoor event, and every single day for the 10 days leading up to the event, 80% rain, 90% rain, hail, thunderstorms, severe weather, boom, boom, boom, all the stuff. And I just kept telling my wife, "It's going to be fine. It's going to be okay. I promise you it's going to be just... Whatever they're saying it is now, it's not going to be on the day of." And sure enough, we had perfect weather on the day of. It worked out beautifully, not a single drop of rain. So sometimes it just happens like that.

All right, let's talk about celebrity endorsements for financial products as another thing that we have to be wary of. This seems like it's popped up a lot more in recent years. I'm thinking of Super Bowl commercials with celebrities talking about various investments. And I don't know if this gets you in compliance trouble, Tony, but crypto or something along those lines, it's very prevalent now to see celebrities endorsing financial products.

Tony Mauro:

You do, you see it a lot. And going back to what we were talking about a little earlier with no fees, these celebrities of course are getting paid to endorse. I mean, hopefully everybody understands that, although even if you do understand that, there's something about seeing that celebrity, especially if it's one you like, endorsing something that you might make an emotional decision to purchase that product just because you see them, you kind of feel like you're part of their group. And I think you need to, obviously with financial products, any of them, check with your advisor, because they're just doing a blanket statement, and I think there's much more to any product itself. If it fits in your plan, regardless of if they've endorsed it or not, it's going to be a good thing. If it doesn't, then obviously you need your advisor to say, "No, that's not suitable for you," depending on what you have in your plan.

But I see it a lot on the marketing side. There's a lot of things out there. Let's say I'm marketing my practice and I get a celebrity to endorse, "Hey, Tony Mauro is the greatest thing. He's the greatest planner, this or that." That resonates with people and these celebrities have themselves out there for hire and it's kind of crazy to have that. I've always told my brothers my celebrity endorsement would be Kiss, the rock group. I don't know what kind of crowd from my past that would attract, but I'm sure those guys for the right fee would dress up and do it. I know Gene Simmons would probably. But it's interesting on those. It's fun to see them, but there is a lot of them endorsing financial products.

Walter Storholt:

Yeah, that's pretty funny. I'm just picturing Kiss doing your endorsement.

Tony Mauro:

Wouldn't that be funny, had a few of the members in there? I was a big fan. I still-

Walter Storholt:

Maybe they could do the jingle.

Tony Mauro:

That's right. Do the jingle.

Walter Storholt:

Kiss jingle. I love it. Have you ever bought duct tape from the dollar store, Tony?

Tony Mauro:

I never have.

Walter Storholt:

I have.

Tony Mauro:

Have you?

Walter Storholt:

It doesn't work very well.

Tony Mauro:

I was going to say, did it work? Because it doesn't sound like it's going to work.

Walter Storholt:

No, it's not very sticky and it's so thin that you can only really get a few pulls off of the duct tape before it's out. That's why it's only a dollar. There's hardly any on there. It's almost as if they just bought out the used roles that just had a couple of uses left and that's what they're selling for the dollar. Yeah, I wouldn't trust it. I suggest avoiding it.

Tony Mauro:

Avoid it. I was going to ask you, is that the stuff they can't sell anywhere else or that falls off the spool or [inaudible 00:15:55].

Walter Storholt:

Right, right. It's just the last few bits clinging to the spool I think is what they're selling at the-

Tony Mauro:

Yeah, that's cool.

Walter Storholt:

... dollar store duct tape. So watch out for that one. Back to the financial side, friends' or neighbors' retirement strategies. Well, this is one that's tricky, right? Because that's advice and information coming from people we trust.

Tony Mauro:

People you trust, and they start, just like the celebrities, you trust them and you figure if it's good enough for them, it might be good enough for you, but in a lot of cases it's not because obviously everybody's different, has different goals and whatnot, and I think that's another thing to run by your advisor as to, "Hey." I mean, we hear it a lot, "Hey, such and such told me this or that." And it's good that they ask what you think, what we think and then we can kind of tell them, "Well, that does in their situation probably apply, but in yours with the way we've got you set up and what you told us you wanted to achieve, that may or may not be the best strategy." But it is a source of information and I just think you need to verify it. I'm saying that about all of these basically, but just yeah, you can't take it as blanket advice. It's almost like just blindly trusting AI to complete your financial plan, because it may not be suitable for you.

Walter Storholt:

Yeah, that's another great point. All right, we've got one more real world and one more financial element. The last real world one is autocorrect. Don't trust it.

Tony Mauro:

Don't trust it, right? It's-

Walter Storholt:

We've all seen it turn one word that we wanted into a different word, right?

Tony Mauro:

Yes. I always tell my staff, and I try to do it as well, I would advise it to everybody that's out there, whether it's a text or email, but I think is to proof what you're going to send before you send it. We've all gotten so using autocorrect as a crutch that we're spoiled and we just get fast. And I think sometimes it's actually accepted. You read a text from somebody or an email and it's kind of all garble, but you kind of know what they meant. You figure it-

Walter Storholt:

You kind of figure it out, yeah.

Tony Mauro:

Yeah. But for us from a business standpoint, it's not very professional to send out stuff that doesn't make sense. But even in the real world, yeah, it might put in the wrong... It's good, but it's not perfect, and a lot of times it doesn't correct proper grammar even close. So if you accidentally type or say something and it's not clear that autocorrect doesn't get it... In fact, just this morning, I was typing something to a tax client in their portal and in the portal it does not have autocorrect and I was kind of mad. I said, "You know what? I'm going to bring that up to the software provider and say, 'You guys need to autocorrect in here because I don't like to have to make sure that I really read this,'" because I get lazy and we start depending on it, but you really can't.

Walter Storholt:

I could swap this one in and out with voice to text, right? My dad was a big voice to text person, still is. But when he was still working and this technology was just real... He was a very late convert from the flip phones to a smartphone or tablets that they used at his work. And when he was in the field, he'd always be sending back messages to the office and logging things in there. They were in a service business, so he'd be logging things into their portals and whatnot and using voice to text for everything.

He loved voice to text. He was like, "This is the greatest thing." He'd send me texts, he'd send me long emails that were all dictated. He is like, "I'm not correcting anything. I don't care." And I'm like, "I love you for it because you just don't even worry about it." It's like it says what it says and you can figure it out or don't, just very matter of fact. But this was my favorite thing. When he retired, they had a little retirement party for him at work and the big final thing they did at his retirement party is everyone had submitted their favorite Jim stories of their voice to text and they read them all out loud and they were hilarious.

Tony Mauro:

Had a good laugh?

Walter Storholt:

Oh, it was a great laugh. They had a good time poking some fun at them and lots of smiles and there were some real doozies in there, too.

Tony Mauro:

That's cool.

Walter Storholt:

Very entertaining.

Tony Mauro:

But yeah.

Walter Storholt:

All right, last one here. Financial rules of thumb without context. That's the trust this, go broke part of that. Without context, that's really important there at the end.

Tony Mauro:

It is. And in the financial world, there's a lot of rules of thumb out there and a lot of them make sense. I think that just trusting them without verifying and maybe executing them could lead to some financial disaster. So I would highly recommend at least getting an interpretation of that rule of thumb, especially if you kind of don't understand it and where it's going, and make sure it fits in your situation before you just blindly go out and do something that is going to be detrimental, because keep in mind, all of these things outside of the funnies that we're sharing, the serious stuff, as you age and you make more and more of these potential blunders, you start to run out of time. And if you make too many of them and you're sitting there scratching your head at age 58 or 60 saying, "Boy, I'm not even close to where I thought I should be," maybe it's because you did some of these things without advice and that's the biggest thing I want to get over.

I always tell my staff as we're talking about all of these, it kind of ties in, that you're not going to know everything about the tax law and whatnot. You did when you studied and you got your certification, but you need to know where to look, and it's not got to be authoritative. I always tell them, "Do not blindly just go out and read something on Google or Facebook or whatever and think it's true in our area because number one, you know better, and two is who knows what kind of qualifications whoever wrote this had." And so I always harp on them on that.

And my last thought is, and I just shared it with them yesterday, it was right out of accounting today, and it says, "The IRS over the last two and a half years has instituted $162 million in penalties and interest from people that have filed incorrect tax returns saying they got advice online," and it went on to say, this is the IRS talking, "Do not trust Facebook posts and this and that on questionable tax credits and things that can get you in trouble and then you go blindly prepare your own return and next thing you know you got us breathing down your neck." And so if the IRS is saying that, you know it's out there in the financial world as well and in a lot of other sectors too. It could be auto repair, it could be anything.

So make sure that you are working with your advisor. Make sure you have a plan based on your situation so you can get that personal guidance. You could always look up some things and ask questions. I think it's great that we have all this information available to us, but I definitely think that most people are going to be much better off with getting advice from a planner. That's my opinion, of course, but that's my take on it.

Walter Storholt:

Yeah, trust is a good thing, bottom line, but in retirement planning, blind trust can be dangerous just like gas station sushi or blindly trusting duct tape from the dollar store or weather forecasts 10 days out. All of those things end up getting us in trouble to some extent. And that's what happens in the financial world when that blind trust enters the equation too.

So that's why it pays off to have a financial plan built on facts and that personalized guidance that Tony just mentioned. If you'd like to set up a time to visit and explore what a financial plan looks like with Tony's help and guidance, you can certainly do that. The number to call is 844-707-7381, and you can also go online to yourplanningpros.com, yourplanningpros.com. We've got all the contact information in the description of today's show so you can find it easily there. Tap into that 30-plus years of financial planning experience that Tony brings to the table, not only as a CPA, but a certified financial planner as well.

Well Tony, thanks so much for all the help today. I'll be back with you again on the next episode before Mark returns and looking forward to chatting with you again soon.

Tony Mauro:

All right, we'll see you on the next one.

Walter Storholt:

All right, take care everyone. We'll see you again right back here on Plan with the Tax Man.

Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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