In this episode, we discuss:

• The importance of a Wealth Coordination Account
• Understanding long-term planning for your long-term future
• Resources and tips related to understanding your knowledge gap

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TRANSCRIPT:

Rhonda: All right. Well, thank you so much for joining us for another episode. And I am so excited to be able to introduce to you my friend, Paul Adams. And he and I met via LinkedIn. All good things start there. And there was something about your profile that just captured my attention and I actually didn't even really know what you did when I said, "Hey, let's connect." And so, you are the Founder and CEO of an organization called Sound Financial Group. And you're also a fellow podcaster and entrepreneur.

Paul: Indeed.

Rhonda: And so, I just want to thank you for taking time to join us today.

Paul: I got to tell you, I'm so happy to be here. Just our phone conversations we've had leading up to this, and you mentioned about creating a friendship. And I even was talking to my wife this morning and saying, "Yeah, I'm going to be on a friend's podcast this morning." And it was just like, "Oh, yeah, that's kind of nice." Versus somebody has a show somewhere that asked me to be on it. It just felt wonderful and warm and just getting a chance to reconnect this morning.

Rhonda: Yeah, absolutely. Well, and I have certainly been in the financial industry and you are with an organization that happens to be in their headquarters in Milwaukee.

Paul: Yeah, at the very beginning of my career.

Rhonda: Right. Right, at the very beginning of your career. So, I just want to take some time and share, what are some of the trends that you're seeing? Obviously, our focus is women.

Paul: And I think that if, for any of us, it's where is my knowledge gap? And when I say knowledge, I mean the capacity to act, not just understand it. If we were thinking of it like parachuting, understanding would be like, "I know the plane goes up to 13,000 feet, somebody jumps, they count to 10, they pull this thing here, and then they steer themselves with two cables they hold in their right and left hand, and it pulled them both down near the ground and they land." That's understanding.

Paul: Knowledge is hurling yourself into the abyss and landing and not dying. That is the difference. And I think people tend to collapse the understanding and knowledge. And especially when we're divorced, prior to that, it may have been, at least we see this often, I don't know about you, but we'll see oftentimes that the wife will handle a ton of the bills, and then the husband tends to handle a lot of the long-term strategy and investments. And they both have an understanding of the other one.

Paul: Now, it's a lot easier for the divorced husband to get a handle on the bills because it's a fast iteration cycle. They got to deal with the bills every 30 days. So, I don't know, after doing it for four or five months, you're back on plane and you know what you're doing. But when there is this... And it really is one of the longest feedback loops we deal with in our entire life. It's a 40-year feedback loop from 22 to 65. You have one time that you get feedback, and filling a glass of water, we're all used to it. We've all gotten our hands wet as kids when we overfill the glass, that we're listening and feeling the weight of the glass, and we turn off the spigot at the right time.

Paul: If you perform really badly at work, somebody's going to let you know in a few weeks. You eat too much, over 7 to 10 days, you'll actually start gaining weight, and the feedback is in the scale. Bad behavior in all those areas equals bad short-term outcome.

Paul: Here's the problem. With money, the feedback loop is like a negative feedback loop in that you can make bad decisions with money. And know how they feel in the short run? Awesome. It feels so good. You can get the brightness on your kids' eyes because you got them a cool new toy. Or all the Instagram likes because of the killer vacation you went on. All those things feel wonderful. The new car smell. Nice, so wonderful. And those are all things that, in the long run, the one-time feedback loop is you spend the rest of your life in some version of poverty below what you would have chosen.

Paul: And so, one of the things we have to do is get those shorter iterations occurring through these coaching conversations around money so that everyone, and I think divorced women are particularly susceptible to having somebody that looks trustworthy, somebody who's super friendly, who's a friend of a friend, who may just be selling product. And one of the things we encourage people to think about is, is the advisor's revenue model only you acquiring product from them?

Paul: And if that is their primary revenue model and they're not charging you a fee upfront so that they can support their business and themselves without needing to sell you a product, then that should give you at least a moment of pause, to stop and reflect and say, "Is there a chance that products could be recommended to me because of the advisor's revenue model, not because of what's right for me?" And not that the advisors are unethical or making bad decisions, any of that. It's just that, clearly, they can't work with 100 clients and not have any of them acquire product.

Paul: But we and some other advisors out there, will do something similar to that, where we charge a fee upfront. It retains us for that first year, which is that timeline of a divorce. It never occurred to me how those line up that way. And then we coach them throughout the year, and we may meet them as many as 15 times over the first year, but that primary coaching to get spooled up and get all the things corrected in their financial life, et cetera, not counting ushering them through the divorce is about 6 to 10 meetings over about 10 to 14 weeks.

Rhonda: Yeah. And I think that's spot on. Prudential did a longitudinal study. And what they found was that it was the knowledge plus experience that really helps the women build the confidence. Because if you have the knowledge without the experience, that's theory. If you have the experience without the knowledge, then you're just going through things hoping that you're not making too many mistakes.

Paul: I was going that was a terrible idea, I shouldn't do that again.

Rhonda: But it's those two things when they can work in tandem that really helps women build the confidence. And when I think that is one thing that, as we look at some of these studies, women have a great opportunity to step into power as it relates to their financial lives. It's just that they may not have had the experience because, statistically speaking, and you alluded to this, women are doing the day to day stuff, but they aren't necessarily as involved in the big picture things. And so, when they're thrust into that environment, it's uncomfortable and overwhelming and intimidating and all of those kinds of things all at once. Right?

Paul: And I think there's probably a lot of domains that are that way. The trouble about the long-term planning for your long-term future is that's the one thing out of all the things that are coming at women going through divorce, it's the one thing that they really can, in the short run, put their head in the sand and avoid all the negative consequences. They are coming, but they're not here yet. And so, they can deal with all the things that are urgent and forget the things that are necessary.

Rhonda: Yeah. Well, and I think too, it's history. Like you said, the feedback loop is so long, and even from the time that they got married until potentially the time that they're getting divorced, there's all of those habits and behaviors that they're now dealing with. Plus, let's face it, everything's always goes back to our childhood. There's always some connection between, "Hey, this is my attitude and belief about money as a kid. Here was how it was modeled. I brought that into the marriage. Now somebody always has to take the lead, and now I'm thrust into having to take the lead myself." You know?

Paul: Yes. Yeah. And, you're right, it's so tough for them to make that gear shift. And we recommend people do something that's super subtle, easy, anybody can start it. Anyone of your listeners can do this right after the call. And we talk about the importance of somebody really understanding their own freedom and agency and choice. And we need to take that back immediately in people's lives around their money.

Rhonda: Yep.

Paul: Financial institutions ideally would like you to take your regular household checking and start choosing a financial product that you can automatically deposit via bank draft to. And we teach our clients to set up a separate checking account whose only purpose is to purchase assets. That's it. It shouldn't be buying anything else. It only buys assets. And we define an asset. An asset is anything that puts money in your pocket now or has the ability to put money in your pocket later.

Paul: And it doesn't matter if it's just $25 a month. To shorten that feedback loop, we're simply saying we're going to put in $25 here and that is for my long-term wealth building. And then I'm going to put in $25 next month here. Now, for some peopl