Simon Brady knew right away that when he became a financial planner, he didn't want to live off commission.
That conviction came from his previous experience on Wall Street. Simon got his start decades ago as a foreign exchange trader, then went into derivatives and equities with clients like Goldman Sachs and Merrill Lynch. But when the former Wall Street trader witnessed the 2008 financial crisis up close, he realized that he wanted to take his knowledge of finance in a different direction.
"When I was working on Wall Street, I had my own fee-only financial advisor and I felt so much more comfortable knowing that she wasn't pushing stuff onto me for commissions," said Simon. "Understanding her compensation model, it clicked. I couldn't imagine working with somebody who was not obliged to work in my best interest."
Now Simon is a Certified Financial Planner™ (CFP®) professional and a Certified Divorce Financial Analyst (CDFA®) in New York City who specializes in working with expats of any age and US millennials. We sat down to discuss the special financial considerations of those groups, plus his overall views and advice for people planning for their future.
Could you speak to the areas that you specialize in?
During [the certification process] I was struck by how often our professors would say, "This is the rule for citizens and this is the rule for non-citizens." As a UK national who came over here on a visa and then graduated to a green card and eventually a dual citizen, I thought wow. I didn't know any of that. None of my friends know any of that. I know for a fact that none of them know the risks they're taking. Because in certain areas the rules are very different for foreign nationals.
[New York City is a] very fertile market for people who are not full US citizens. That's one part of my practice. It's essentially people who are non-citizens working in the US on green cards and visas. So I've become familiar with what it is they face.
The other area I felt was very underserved was people in their 20s, 30s, and early 40s. If you've got a fee-only model, which revolves around either hourly fees or a monthly subscription, you can serve these people. It doesn't matter how much money they've got, a million dollars in the bank or not. If they're willing to pay you your fee, then that’s fine. I didn't want to go and get into the ultra-competitive zone of pre-retirees, retirees, ultra high net worth people in the 60s. There's a million advisers, especially in New York, chasing that business. But [people in their twenties and thirties] are totally underserved.
"The biggest misconception is that having a financial advisor is exclusively the realm of people who have a lot of money, because it’s about so much more than just the investment of your money."
And I actually just find working with those people far more stimulating. I find the system of wealth creation far more interesting than wealth protection or distribution, which is what you're talking about at the other end of the spectrum and I’m just much better at it. People of this generation face so many life events, often clustered together in short time frames. They get their first job. They get engaged. They get married. They buy their first homes. They get divorced. Their parents start to die off. They have kids. All these life events trigger financial planning and a change of direction.
When it comes to expats who are living in the United States, what are just some special things that you have to go over with them that you wouldn't normally go over with someone who is a citizen in the US? And what is the difference financially between people who are citizens and not citizens?
One of them is taxation. I've got to be a little careful here because as a CFP® you can't offer tax advice. Particularly if you haven't got a green card yet, if you're a visa holder, and maybe depending what kind of visa you've got, there are going to be tax issues. Are you a resident of the US for tax purposes or not? There's different tests for that and it's very, very important that you understand that. Should you bring money over from your home country? What are the tax implications of that?
There are other areas beyond tax, though. One is credit. Even if you have really strong credit back in your home country and you arrive here, you may still be treated like a fresh college graduate by credit card companies and lenders. If you're lucky, you'll be given a very small credit line because credit is not really viewed internationally at all. You can say, "Oh, I had a $50,000 limit on my Amex back in London." Well, welcome to America. Here's a $500 limit for you. Even with the same company. That's a big deal because most people from overseas don't realize how big a part credit plays in life in America.
Estate planning is in some ways the biggest potential problem because US estate planning law does not treat foreign nationals the same as they treat Americans. If somebody brings $1 million over from their country, buys a house and drops dead on the doorstep, their estate, their spouse could be looking at an enormous tax bill potentially. Their immigration attorney doesn't tell them that. Their boss at work doesn’t tell them that. Their accountant back in their home country doesn't tell them that.
"The most important decade for your retirement savings is absolutely your 20s. Your 50s by comparison is pretty much meaningless."
What would you say are some of the most common financial mistakes you see your clients make?
I'd say the most common one is waiting too long. I'll get to it next week. I'll get to it next month. I'll get to go to next year. In terms of starting to put together an investment plan, if you're 23, the last thing you're worried about is retirement mode, death, disability... all this sort of stuff. But the most important decade for your retirement savings is absolutely your 20s. Your 50s by comparison is pretty much meaningless. But in terms of what will affect the final balance of your retirement account, it is going to be far more affected by actions you take in your 20s than in any other decade followed by your 30s, followed by your 40s and bringing up the rear will be what you do in your 50s.
I think failing to appreciate that is the biggest mistake I see, because when you're in your 20s there's so many other demands on your money, right? You're probably not earning a lot. Rent alone seems like something very difficult to overcome. I just think that's the big mistake is assuming that when you are older and earn more that you will have more free cash flow and will “get around to it” … and then suddenly you're going to be 32, having kids with a mortgage and no free money then either!
What would you say to a person who is reluctant or skeptical about getting a financial planner?
In some circumstances, I would say that's fine. I think there are probably three [different types of people]. There's the total Do It Yourselfer. They're set, they aren’t coming to me anyhow. Then you have what are called the Validators. They do some work on their own but they're not 100% confident that it's right, so they will engage with a financial advisor at least to some degree to have their work validated. Then you have the Delegator, who are just dying to hand over the keys and have it all done and get on with their lives. But I think if somebody is willing to become competent enough, has the time and has the desire to manage their own finances without an advisor, then that's fine.
But to be honest, if you don't have all three of those – the education/competency, the time and the desire – you probably need an advisor in your life to some degree or another.
What do you think are some of the biggest misconceptions you see about financial advisors or people working in your realm?
It's not really a misconception because it's actually true in a lot of cases. But so many people think, "I don't have a lot of money, so therefore I have no need for a financial advisor." It's all backwards, right? If you are a high net worth individual, yeah, you might need a financial advisor to get assets placed in the right places and create tax efficiency or whatever.
But your need for a financial advisor is probably less than somebody who has $10,000 in IRAs, $100,000 in student loan debt, earns good – but not crazy – money, is living at home, thinking about getting married or buying a place, has no idea what to do with a 401(k) at work etc, etc… Those are exactly the people who can benefit the most from working with a financial advisor!
The biggest misconception is that having a financial advisor is exclusively the realm of people who have a lot of money, because it’s about so much more than just the investment of your money.
But that's not the situation any more because there is now this group of us, the fee-for-service advisors. [We have] no agenda to sell clients crappy investments that suit us on a commission basis and not the client, or have them buy insurance they don’t need, etc, etc.
I can meet with someone for just two hours and jump-start their financial life for as little as $499 and we can shake hands and walk away. And it can go up from there in terms of intensity and depth of the relationship and services offered…So “I don't have enough money for an advisor” isn't really an excuse anymore.
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