Broker Check

Financial Planning Q &A

In this episode, Royal Standley answers some of the financial planning questions sent in by you. He dives into some of the uncertainties clients feel during the financial planning process to help you live a relaxing retirement.

Episode 69 Transcript

Intro: Royal Standley of Oregon Pacific Financial Advisors offering securities through United Planners, Financial Services member, FINRA SIPC, guides clients with empathy in discovering and reaching their financial goals and creates financial plans for clients so they can live their life by design.

In these episodes, he relates his expert financial insights and discusses timely topics. Royal strives for excellence and has a passion for sharing his knowledge and supporting his community. Now onto the show.

Aric Johnson: Hello and welcome to Life by Design with Royal Standley of Oregon Pacific Financial Advisors. Royal, how are you today?

Royal Standley: I'm doing great. How are you doing Aric?

Aric: Fantastic. It's good to be back with you. I know that we're going to be answering some pretty important questions.

Royal: That's right. We keep, keep kind of a running tally of what questions do we get asked most often, either through the website or with clients. And, uh, I do an unofficial poll around the office to kind of see what, what questions have they heard from, um, you know, clients and prospects who are calling into the office for the first time.

So I thought we would just spend a little time and go over that list. And hopefully answer some of the questions that we hear most often.

Aric: Mm-hmm.

Royal: A lot of these do revolve around working with a financial planner as well as kind of, kind of understanding some basic, maybe blocking and tackling of looking at investing and understanding the different retirement account options you might have at work.

Aric: Yep. And also, I know that you've always been open to listeners sending in questions. So I'm sure some of these are some of the same questions that listeners have sent into you. Of course you answered them immediately. Uh, but we'd like to include those on the podcast as well.

Royal: Absolutely.

Aric: All right. Well, you've sent me the questions ahead of time, so I'm going to ask the question and then you're going to, you know, educate the audience and myself. You ready?

Royal: I'm ready.

Aric: All right. Well, this first one is probably my favorite on the list. When do I know that I need a financial planner? I mean, when do I get to the point where I'm like, okay, I need to get somebody involved.

Royal: That is a great question. And it is unique,I think, for every person and their comfort level, when looking at the financial choices they have in front of them. The interesting thing is, is as financial planners, you know, we study the entire life cycle of someone's financial life all the way from birth to death. And the interesting thing is, is most financial planners and advisors are really focused on people who are at retirement. And really once you are retired, the number of remaining financial decisions you have in front of you is somewhat limited. Um, there might be some things such as long-term care, managing some taxes your estate planning documents, but really for the most part, it's really maintenance once you have reached retirement.

For those that are in their twenties, if they look out over the course of the next, you know, 20, 30 years, they have so many different financial decisions that they may need help with along the way, everything from how do I maximize my earning potential? Um, how do I buy that first house? Should I start investing in real estate? Am I taking advantage of the savings programs that my employer offers? Are there other things I need to know about? Uh, I might receive an inheritance. I might go through a divorce. There are so many different things there. And we have even talked about children and college planning yet, that in my opinion, the younger you can begin engaging in the financial planning process - if you want to do it all self-study, you know, the internet is there. It's mostly free and there's a lot of good information on there. You can go down that, that route and start educating yourself there.

Personally, I think the better option is to find someone who has. Is willing and wants to work and add value to people's lives early on there and help them build that financial plan for them and start being that sounding board as they navigate all those financial decisions.

I think really the time you should start sitting down with a financial planner is usually, if you're you're out of college and you're starting that first job. It really doesn't hurt to start establishing that relationship. Just like you go out and you establish a relationship with a, with a family doctor. You're not necessarily going in there because something major's going on, you're going in there to establish a relationship. And I think that's exactly how you should start looking at your relationship with your financial planner.

Um, one of the statistics. One of the statistics I've seen recently is just looking at the difference between the net worth of someone working with a financial advisor versus those that don't. And for those working with financial planner or advisor, it's two to two and a half times larger net worths in many cases.

Aric: Wow.

Royal: And that's really the value that working with a financial professional can bring to your life.

Aric: Yeah, absolutely. All right. For this next question, you've kind of touched on a little bit just in that previous answer, but what exactly does a financial planner do?

Royal: That's a great question. So in my mind, I differentiate between a financial advisor and a financial planner. A financial advisor, or an investment manager is really someone there who is just there to implement, uh, the investments in your accounts. They're there to manage your IRAs, your after-tax accounts. Maybe help you with, with a few of the things around those accounts. And oftentimes that’s it.

A financial planner, uh, does all of that, but really a financial planner views their value as what else can I add to this client's life and this relationship between us to help improve things and really utilize the investments that we're managing as a tool. Not necessarily the end result.

I feel like financial planning is something we need a lot more of in this country.

Aric: Mm-hmm.

Royal: We need people to provide that expertise, to help people navigate what is really a very complex subject that isn't taught in schools. Um, most of our parents, unless we were very lucky didn't share with us what they knew or, or more importantly, what they didn't know about planning for the future. So, we really feel like, I think a lot of people are just alone and just trying their best. Maybe they've read an article or two and just kind of following along with that advice they received once, uh, when they picked up a copy of the Wall Street Journal or something like that.

Aric: Mm-hmm.

Royal: So, um, that's really what a financial planner does is they help navigate clients through those choices that they're going to face in life. They're going to help them with their investment accounts. But most importantly, they're going to be that sounding board as they're making financial decisions to say, is this, does this make sense for me? Or is this something I should maybe pass on? And I think that's the true value of financial planning there.

Aric: Okay. Right. You mentioned a family doctor earlier, and there's a lot of ways to determine what family doctor is best for you and your family. Um, but how do you determine the right fit when you're talking about hiring a financial.

Royal: See that, that's a great question. Um, number one, what you're looking for, I think, is someone that you feel that you can trust. Uh, if you don't have trust in that relationship or if you always feel like there's a hidden, hidden motive in the relationship that the person you're working with is just trying to get you to buy something. Um, that that's really not the type of relationship you want to be looking for. You want someone that you can have a conversation with, you can ask questions to and someone who can give you those answers in a way that you can understand.

There's a lot of great professionals out there, who I don't think have had a really meaningful conversation with someone at a level that they can understand. As financial advisors, we learn all these big words, these specific terms like fiduciary and asset allocation, all of these things that to the layman doesn't really mean much. So you need to find somebody who can bring down the conversation, uh, to the level that you have a full understanding of what's being talked about. And someone who's willing to, to go back and say, okay, let, let's simplify this. Let's, let's make this in more of a bite-sized conversation so that you can get your arms around what we're talking about.

Aric: So you said the word trust. I'm just going to ask you a follow up question. How do you know if you can trust them?

Royal: Well, that's a big question. Isn't it? How do we know we can trust anyone? Um, the biggest thing I think, um, and this is maybe a little woo-woo, but, uh, I've never been, been too concerned about going there, is trust your gut. If, if something doesn't feel right, listen to your gut, if something doesn't make sense to you, and there's not an effort to increase your understanding of it, look, look for ways that someone is trying to build trust with you. Um, but yeah, listen to your gut. If your gut is telling you, something's not right here, this isn't the right fit. It's okay to move on and try to find someone else who does fit what you're looking for.  

Aric: Now I've heard a BrokerCheck. Is that something that's a good one?  

Royal: Absolutely. So BrokerCheck is the national database of financial advisors that are registered with FINRA. Uh, there's also ones for if you are just registered with the states or the SEC, but you can go to broker check, you can put in anyone who's involved in the financial industry and pull up their work history. You can take a look at, uh, where they've worked, how long they've been in the business, and if there's any complaints or any other tax or legal issues that they've been dealing with. 

Aric: Fantastic.  

Royal: That's an excellent - What was that? 

Aric: I was going to say I, I think that, that, that's very, very helpful. I mean, that's something that, again, you know, a lot of people go to the Better Business Bureau or they'll go on and see what kind of ratings people have. But BrokerCheck, I think is a pretty thorough.  

Royal: It is, it is. I mean, it really is our regulatory report that is publicly available. You can see what other, other activities or businesses they're involved in. Um, so you really get a good picture of where this person has been, what their experiences and what they're involved with. That's an excellent resource. Everyone should look at at BrokerCheck just to verify that who they're working with, um, you know, has, has the, the experience that they're putting out that they have. So, but, but ultimately I think it, it also comes down to making sure that you're, you're feeling taken care of in that relationship.  

Aric: Got it. Now I know that advisors some of them have minimums or what they call minimums. Do all financial advisors have minimums?  

Royal: So, no, not all financial advisors have minimums. And when we say a minimum, usually the most common one we're seeing is a assets under management, uh, minimum, meaning that certain financial advisors only want to talk to people with more than a million dollars or $2 million.  

Aric: Mm-hmm. 

Royal: There's a lot of different ways that they can look at that. It might be a minimum fee per year that they want to generate from their clients. So, um, financial advisors all have a different minimum. Some don't have a minimum at all. Um, others have a soft minimum. Uh, what a soft minimum is, is they say they have a minimum, but they will take clients who are below that minimum. 

If there was a referral of some kind or another business arrangement or relationship there. For us at OPFA, we don't have a minimum of any kind, but there's other factors that we use to determine whether or not someone will be the right type of client. We want to bring into our practice. We know that there's only so many people we can serve, so we want to be very selective about the people that we can serve.  

So, number one, we're really looking for a good personality fit in any of the clients that we agree to work with. So if someone not, not to be rude, comes across as a jerk or treats our staff rude, that's someone that we're going to decide not to work with. If someone isn't willing to take our advice and repeatedly just, does, does the opposite of what we're recommending, uh, we're really going to evaluate that and say, maybe, maybe this isn't the right fit. Not to say you have to do everything your financial advisor recommends, but we, if we're spending the time having that conversation, we kind of want to hear why you're making that decision. 

And then finally, you know, what we're looking to do with our clients is have lifelong relationships where we're providing tremendous value to our clients lives. We, we really are looking for those clients where we can add a lot of value to their life as well as their family. So that really is a determination for us, uh, here at Oregon Pacific Financial Advisors on the types of clients we're looking for. 

There, there's not a, um, a hard or a soft minimum here, but, but we are looking at some other factors to determine right-fit clients for us.  

Aric: Well, and I like that. I mean, the bottom line, what you said right at the beginning makes the most sense to me. There's only so many clients that you're willing to take on and it's, it's, you're willing to take on just because there's only a certain amount of clients you can actually service well. I think that people get caught up in, uh, with other advisors that are just trying to bring as many people on board they're going to sell, sell, sell, and then the service quality just goes to the toilet. It really it's a terrible because they have too many clients. So I love the fact that you do limit it, uh, based on, you know, having that high level of service.  

So that's great. Royal, the next question that was emailed in is this is I already know where this one's going, but how much does a Roth IRA make?  

Royal: So, this is when we hear on a, on a fairly regular basis when we're, um, meeting with new prospects, how much does a Roth IRA make? Is that different from what a traditional IRA makes? There's a misconception there about Roth IRAs or traditional IRAs or, or investments in general. And, and that is that a Roth IRA by itself is an investment. A Roth IRA by itself is not an investment. A Roth is simply an account that you can put money into to then invest. And there are special tax rules around a Roth IRA, primarily that once you make a contribution into a Roth IRA, those dollars, as well as the investment gains on the Roth, IRA are tax-free. As long as you're kind of following some very general rules there that you have at at least five years, and that you're over the age of 59 and a half, when you start taking distributions out.  

That's, that's really one of the biggest myths misconceptions I see. Especially for people starting off getting confused between what is the investment portion that I'm doing versus what is the tax qualification of it.  

For instance, a traditional IRA. Is a tax-deferred account. So, you can defer taxes by putting money into it. The money grows tax deferred. And then when you get to retirement and begin taking distributions, that's when you're paying tax on it. So, it's a little bit of the opposite of the Roth IRA. The biggest thing too, is any investment for the most, and if we're talking about stocks or bonds or mutual funds ETFs, you can make inside of a Roth IRA, you can also make that outside of a Roth IRA and a traditional individual or joint account. So, there's nothing special necessarily about the Roth wrapper that's put around the account beyond just the tax treatment of those investments. So, it can be a little confusing there, but just, you know, for, for anyone who's newly started the process of investing, just realize that the only thing special there is a tax treatment, when you look at a Roth IRA or a traditional IRA.  

Aric: Yep. And you've done a very thorough podcast on that before. I'm not sure what the number is, but when people go back to the library of podcasts, you've done, they'll, they'll find a lot more info there. All right. Royal, the next person is asking this question. What are the basics of retirement accounts? Now that's a huge question.  

Royal: It is, we kind of touched on it there in the last answer. So, um, you know, first off, let's just talk about making an investment in an after-tax, um, environment, meaning that you're using money that you've already paid taxes on. Um, you know, we consider that an after-tax investment and what's going to happen is, is each year you have to account for any interest that you earn or any capital gains that were generated in the account. Um, so you're paying a tax bill every year, generally on those after-tax accounts, you're basically paying your taxes as you go. For those just starting off, that's usually pretty tax efficient because those gains, if you only have a few thousand dollars in, aren't going to be that large.  

Aric: Mm-hmm. 

Royal: But as you get into the hundreds of thousands of dollars, those, those interest that, that you're earning as well as any capital gains that are being generated, those dollar amounts can get very large, so that's where we bring in a lot of tax management, uh, around those accounts.  

Now, if you're looking specifically at retirement accounts, I really divide this into two different buckets. Number one, there's the tax-deferred bucket, which is the traditional IRA or traditional 401k, simple IRA, traditional 403b plan. Those are all accounts that hold deferred income. What that means is, that is income that you have never paid taxes on. You're deferring it into a retirement plan of some kind, uh, you're investing that money. That money is hopefully growing over time. And then at retirement, you're pulling that money out and you are then paying taxes on that. So whenever we look at those traditional retirement accounts, we're always it's factoring in that there's a certain percentage of that account that is going to be owed in taxes. It all comes down to how much you pull out and is, is how much you're going to be taxed on in a given year. But we always know if you have a million-dollar IRA, for instance, that anywhere from 20 to 30 to 40% of that, depending on your, your tax bracket is going to be, uh, owed in taxes when you take a distribution from that. 

On the other side of that ledger are the tax-free accounts, those are the Roth IRA, Roth 401k Roth 403b -  all of those accounts, the income that gets deferred into those accounts, you've already paid taxes on. So once you make that deferral into a Roth, that money is now tax-free from that point on and grows tax-free. 

So for instance, if you have someone with a million-dollar Roth IRA, um, and they take a distribution out that is all tax free. That's the beauty of trying to get most of your savings over into a tax-free account versus a tax-deferred account. And were really comes down to where it makes planning sense is where are you at in life? Uh, how much are you making? To really look at that, to see where the biggest benefit is. If you're just starting off for, for most people, starting a Roth IRA really does make quite a bit of sense. Um, if you're close to retirement, you might just want to bank the tax savings you get from maximizing your tax-deferred deferrals. 

So that's where the financial planner can really come in, look at the individual situation and answered those specific questions versus just using kind of, um, roughly drawn guidelines, uh, to say Roth's good traditional’s, bad or vice versa.  

Aric: Mm-hmm. 

Royal: Um, I think it really comes down to the individual situation and that's where working with a financial planner, uh, does make the most sense. 

Aric: Yeah. Well, this is going to be our last question. Um, and this is again, I think this is where a lot of people sit when they first look at, okay, I've got some money. I need to do something for retirement. I need to save, or I need to invest. So, the question is, how do I make sense of where to save or where to invest? 

Royal: Great question. So, we walk through some, some steps initially to make sure that you're number one in a place where you can start investing. So, the first thing we want to make sure of is that you have at least three months of savings in the bank. We want to make sure before you tie any money up and retirement accounts that you have that buffer, so that if something happens, you don't have to turn to credit cards right away. We want to make sure that you have that buffer in your savings account. We don't want that money invested. We want it liquid, available to you. So, one, once you check off that box, then it's really looking at well, what do you have available to. So, if you have an employer sponsored 401k plan 403b, simple IRA, you want to make sure that you're getting the most out of that account as possible, meaning that you want to make sure you're putting in the now at least to get the match that's being offered or offered by the company. Some companies don't match at all, so that might change the calculus. Especially for younger folks, we do like to see money go into those tax-free accounts because the longer you have to make those deferrals, the larger the impact is on the compound interest that those accounts can earn. So, uh, especially for those, those that are, let's say under the age of 35 or 40, uh, Roths really do tend to make the most sense. 

Um, and then ultimately, I would say a lot of people just don't, do not realize that they can start investing money outside of retirement accounts. And honestly, it makes a lot of sense for a lot of people. Being able to put, let's say $500 or $1,000 a month into an after-tax account and start building wealth outside of retirement accounts really is a fantastic strategy because it gives you ultimate flexibility of how you want to use those funds. So that's something that oftentimes people really get fixated on the retirement savings and don't realize that they can use an after-tax account or non-qualified account to begin saving and investing and have access to that money and not tie it to that 59 and 1/2  year old, uh, date that you have to reach before you can start accessing those. 

Aric: Got it. All right. As we wrap this podcast up today, um, I think kind of a general question that the listener may be asking themselves right now is given this information that you've given today, where do I go from here?  

Royal: So from here, I would probably go back to that first question. When do I know that I need a financial planner and. Hopefully after we've gone through all of this, this information, um, you have a pretty good sense of, you know, do I have more questions now or, or does this makes sense. Um, I'm going to say, if you have more questions, reach out, have a conversation with a financial planner. Um, we're happy to sit down with you, um, and, and have that, that first appointment where we just get to know you and your situation and can kind of start painting a map of, of where you should be going from there based on where you tell us where you want to be down the road.  

So you can visit our website at to schedule that first appointment with any of our advisors. Um, and that would be probably the, the best next step that you can take on your journey towards financial independence. 

Aric: Perfect. All right, Royal, thank you so much for your time today.   

Royal: My pleasure. 

Aric: And if you want to email Royal, any other questions that came up either during this episode or from on the other podcast, you've listened to, I know Royal and his team are very open to that role. Can you give your email address one more time? 

Royal: Yep. Very simple. It's 

Aric: Perfect. Thanks again, Royal. And of course our last thank you goes to your listening audience. Thank you so much for tuning in and listening to the Life by Design podcast with Royal Standley. If you have not subscribed to the podcast yet, please click the subscribe now button below. This way when Royal comes out with a new podcast, it will show up directly on your listening device. This makes it really easy to share these podcasts with your friends and family. Again, thanks for listening today for everyone at Oregon Pacific Financial Advisors, this is Aric Johnson reminding you to live your best day. And we'll see you next time.  

Outro: Thank you for listening to the Life by Design podcast, click the subscribe button below to be notified when new episodes become available, the views expressed are those of the presenter and may not reflect the views of United Planners Financial Services. Material discussed is meant to provide general information and is not meant to be construed as specific investment tax or legal advice. Individual needs vary and require consideration of your unique objectives and financial situation. Always seek the advice of your financial advisor or other qualified financial service provider. With any questions you may have regarding your  investment planning and advisory services offered through Oregon Pacific Financial Advisors, Inc. Securities offered through United Planners Financial Services of America, member of FINRA, and SIPC. Oregon Pacific Financial Advisors, Inc. and United Planners Financial Services are independent companies. 



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Please note that discussions in these shows are for educational purposes only. Information presented should not be considered specific investment advice or a recommendation to take any particular course of action. Always consult with a financial professional regarding your personal situation before making financial decisions. The views and opinions expressed are based on current economic and market conditions and are subject to change. All investing involves risk, including the potential for loss of principal. Securities offered through United Planners Financial Services (UP), Member FINRA/SIPC. Advisory Services offered through Oregon Pacific Financial Advisors, Inc. (OPFA). OPFA & UP are independent companies. Neither OPFA nor UP offer tax or legal advice.