You’ve got a bookkeeper, a CPA, maybe even a CFO/strategic financial resource for your business—when and where does personal financial planning fit in? Advice-only financial planner and author Sean Mullaney walks us through financial planning for Soloists:

The types of financial advisors Soloists are likely to encounter—how they work and are compensated (and why that matters).

The signs that tell Soloists you’ll likely get value from engaging a personal financial advisor.

How to get started and identify potential planners that will meet your needs (and why geography just doesn’t matter anymore).

One key question to ask any financial advisor candidate to assess whether they might be a fit.

Why a Solo 401(k) often beats a SEP IRA for tax-advantaged retirement savings.

LINKS

Sean Mullaney Blog | Book | LinkedIn | YouTube | Twitter

Rochelle Moulton Email List | LinkedIn | Twitter | Instagram

BIO

Sean Mullaney is an advice-only financial planner and the President of Mullaney Financial & Tax, Inc. Through Mullaney Financial & Tax, Sean provides advice-only financial planning for a flat fee. Sean writes the Plutus Award winning blog FITaxGuy.com on the intersection of tax and financial independence. He also has a personal finance YouTube channel and wrote Solo 401(k): The Solopreneur’s Retirement Account. 

DISCLAIMER

This discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual. Rochelle and The Soloist Life podcast do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc. and their services.

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TRANSCRIPT

00:00 - 00:23

Sean Mullaney: I think most of the value is just having that plan in place. Because what happens is people get confused by their finances. Every time something new happens in their life financially, oh, our profits doubled. Oh, there's this new thing they're talking about on TV or the internet, whatever it is, it creates questions. And when we don't have a plan in place, it means we have to go down rabbit holes. We have anxiety, confusion.

00:30 - 01:10

Rochelle Moulton: Hello, hello. Welcome to the Soloist Life podcast, where we're all about turning your expertise into wealth and impact. I'm Rochelle Moulton, and today I'm here with Sean Mullaney, who is an advice-only financial planner and the president of Mullaney Financial and Tax, Inc. Through Mullaney Financial and Tax, Sean provides advice-only financial planning for a flat fee. He writes the Plutus Award-winning blog, FITaxGuide.com, on the intersection of Tax and Financial Independence. He also has a personal finance YouTube channel and wrote Solo 401k, the Solopreneur's retirement account. Sean, welcome.

01:10 - 01:14

Sean Mullaney: Sean O'Toole Rochelle, thanks so much for having me. Looking forward to the conversation.

01:14 - 01:48

Rochelle Moulton: Rochelle Penney Oh, me too. So I was talking to friend of the show, Erica Goodie, when I mentioned that I really wanted to have a financial advisor guest who wasn't hawking investments and who also believed in simplicity in building wealth. And she immediately suggested we talk. And when I went to, I think it was 1 of your websites, and I saw that The Simple Path to Wealth by J.L. Collins was your favorite money book, too. I knew we had to have you on the show. And then when you asked me to add a disclaimer that I

01:48 - 02:23

Rochelle Moulton: wasn't endorsing you or your services, which by the way will be in the show notes, I was over the moon certain you were the right person to speak to the subject of financial planning for Solowes. So Let's start by taking a moment to categorize the different kinds of help that soloists can get with our personal financial life. Just by way of background, on the show before, we've talked about having a bookkeeper, a CPA to do your taxes, and even a CFO slash strategic financial resource for your business. And we've kind of vaguely mentioned having a personal

02:23 - 02:34

Rochelle Moulton: financial advisor, but we haven't described those options. So will you walk us through the types of personal financial advisors a typical soloist might encounter?

02:35 - 03:10

Sean Mullaney: Yeah, absolutely Rochelle. So there are many different professionals out there and there are many different names for these professionals. I'm going to start off with 2 big archetypes, right? 1 would be a financial coach and 1 would be a financial planner. Not everybody's going to look at the world that way, but that's sort of how I look at the world to begin with, right? So what's a financial coach? A financial coach is a person who coaches people in their personal finances, does not provide investment advice, right? So they tend to focus on things like budgeting and

03:10 - 03:43

Sean Mullaney: cashflow and those sorts of things. And that could be very important when you're a soloist and you have uneven income and revenue in your business, right? Or you may be a soloist who's doing great in the business but isn't able to control the expense side of your life, right? A financial coach could be a great alternative there, right? So those are 2 use cases for a financial coach. Now, I think what you're mostly getting at Rochelle is more the financial planner or financial advisor world, right? Yes. And that's where the big legal thing that we're introducing

03:43 - 04:25

Sean Mullaney: there is investment advice. So what that means is advisors, in order to professionally render investment advice, hey, so and so should buy ABC mutual fund. To do that professionally, you need to be licensed with either the SEC, the Securities and Exchange Commission, or 1 or more of the US states. There you get into, well, we have people who call themselves financial advisors, people who call themselves financial planners. Usually that's somebody who, through their firm or their selves individually are licensed to provide investment advice. But investment advice is not the only piece of financial planning. There's plenty

04:25 - 05:05

Sean Mullaney: more that goes on with personal financial planning than just the investment advice. Within this category, financial planners, financial advisors, there's all sorts of different types of advisors out in the world. There's so many now at this point. We could think about people who work for broker dealers who tend to be more selling that broker dealer's particular investments. They tend to be very investment focused and there tends to be a reward for them to push their particular financial institution's product. There are going to be some people even in this realm who might be selling insurance, right? That's

05:05 - 05:07

Sean Mullaney: a whole other conversation.

05:08 - 05:08

Rochelle Moulton: You

05:08 - 05:47

Sean Mullaney: know, that model came in for a lot of criticism. And so what the industry developed over time is what's referred to as the assets under management model, where you're not necessarily pushing 1 type of investment. What you're doing is you're saying, okay, a client, you come to me and you take your investible assets and invest them through my firm. All right. And I will charge you a assets under management fee. So the fee for the financial planning is generally defined as a percentage, might be every quarter, every year, some percentage of the assets that that advisor

05:47 - 06:22

Sean Mullaney: is managing for the client. And that model has now come in for a lot of criticism. And look, of course I'm a biased source because I don't sell products. I don't have assets under management, but I'll just give you my perspective. I'm not too fond of that because that increases our expenses and it has this drawback of you're paying these fees that if you do well in your portfolio, they actually increase, right? Because your portfolio goes up and the fees increase. And I also think it overweights investments in terms of, well, wait a minute, investments are

06:22 - 06:58

Sean Mullaney: 1 component of our financial life. Why are we paying based on that 1 component of our investment life, right? So I could go on and on. I think there's some real drawbacks to that assets under management model. What's developed more recently, although this has existed in a small way for a long time, but it's becoming more of a sort of force out in the world, is what's starting to be referred to as advice-only financial planning. And the idea there is that the advisor is only offering advice. So they're not offering assets under management. You can't invest

06:58 - 07:24

Sean Mullaney: through this person, but they will, this person, their firm will provide you investment advice and other advice around your own personal finances. And I think in today's era, that makes a lot of sense. Like forget me and my business for a second, but think about you Rochelle right now. Let's say you have a great aunt or great uncle out there you don't even know about and they pass away and they leave you Rochelle $100, 000.

07:25 - 07:27

Rochelle Moulton: Oh bless, on to him.

07:27 - 08:02

Sean Mullaney: Yeah, there you go. Right? So that's a good outcome for you. Well, if this was the 1980s or 1990s, what were you going to do with that money other than put it in a bank account? I'm not here to say you're not a smart woman, but most Americans in that situation probably would have needed some professional advice and couldn't just pick up their phone and invest that money, right? Today, Rochelle, you could pick up your phone and in 10 minutes have that money invested in a plethora of well diversified, low cost, mutual funds, ETFs, whatever you

08:02 - 08:35

Sean Mullaney: want to your heart's content, and you could pick the platform, you can pick the investments with your phone in 10 minutes. In that world, do we really need an assets under management model, right? Mm-hmm. So that's why I think the advice only model is so attractive, at least to people like me. I say, well, what's really needed is advice and knowledge. The investing platform piece of it. Well, most of us are addicted to these phones anyway, you know, and that's a whole other conversation. But if we're already addicted to this thing, we might as well use

08:35 - 08:36

Sean Mullaney: it to set up our investments.

08:37 - 09:13

Rochelle Moulton: Yeah, I mean, it's so interesting to me when you think about how we look at these kinds of decisions. And I think sometimes we just do a knee jerk because, oh, we've always used insert name or my parents used so and so, so I do that. And I think stepping back and thinking about how you're getting your advice is really important. And just for myself as an individual, I want someone who is going to give me non-biased advice. I mean, I guess you could argue we're all biased on some level, but I don't want somebody to

09:13 - 09:37

Rochelle Moulton: push product on me. And even when you have someone who's highly ethical, if the system is designed in a different way. So, you know, what I'm hearing is it's important to know what it is that you're buying when you're looking at these financial advisors, especially if you're interviewing a few, because if you've never had 1 before, or you're thinking of making a switch, chances are you're going through some kind of a selection process.

09:38 - 10:13

Sean Mullaney: Yeah, Rochelle, you know, it's interesting. Look, I'm a career changer, so I'm biased in this perspective. But I do think that the financial planning, financial advice industry makes things relatively opaque on the client end. And I think that is, that's a drawback. If you're a potential client of a financial planner, that's a real drawback. However, we now live in a world, right? So if this was 20 years ago, and Rochelle, you're looking for a financial planner in Palm Springs, California, you gotta get in your car and you gotta go interview 5 different people in 5 different

10:13 - 10:45

Sean Mullaney: offices. And oh, by the way, that's in Palm Springs. Imagine if you're in Century City, Los Angeles, right? You got to deal with LA traffic to do that, right? How horrible is that? Well, today, Rochelle, you can boot up your computer and most financial planners will have some sort of an intake form and some sort of ability to get 15 minute, 30 minute introductory meetings scheduled. So, you can, from the comfort of your own home, with your computer, interview 5 different financial planners. They don't have to be in Palm Springs. They can, in theory, be almost

10:45 - 11:18

Sean Mullaney: anywhere in the country. And so in a sense, yes, the industry is opaque, but thank goodness for computers and Google meetings and Zoom and whatever in terms of, hey, I can actually get some look and feel. And I get that the person isn't in your office, you're not in the same breathing space with them. But I like to joke, you know, I'm not a dentist. I don't need your molars in my office to render you financial advice, right? So it is nice that you can meet with 5 of these people without getting in your car and

11:18 - 11:47

Sean Mullaney: You ask them a bunch of questions and you understand what the fees are you learn how you fit in with the person, right? I like to say there's no perfect financial planner for anyone out there But there are plenty of good financial planners out there for most folks. And so, you know, you have to make this judgment based on a whole host of things, fees, what are you actually getting, but also what's the connection with the person, right? How do you sort of connect with that person? I think that's a big thing to consider as you're

11:47 - 11:49

Sean Mullaney: interviewing potential financial planners.

11:49 - 12:15

Rochelle Moulton: Absolutely. No matter what, you cannot ignore the vibe that you get from the person and whether you're going to be able to work together. But so what are some of the signs that tell soloists that they get value from engaging the right personal financial advisor because lots of people don't have 1. When should they start thinking about, actually I use the word should, when might it make sense to start thinking about engaging a personal financial advisor?

12:15 - 12:43

Sean Mullaney: Yeah, that's a great question Rochelle, and it does vary person to person. I'll say a few things on that. There's no like, this is exactly the time in your life you need a financial planner. I will say most folks coming out of college probably don't need a financial planner at that point, right? They need some blocking and tackling. I feel like in today's world, you can go to sources, podcasts, YouTube, internet, books, like The Simple Path to Wealth by J.L. Collins, for example.

12:43 - 12:49

Rochelle Moulton: Yeah, I was gonna say, that's the first thing I would hand to a college graduate. That is my go-to gift for college graduates.

12:49 - 13:21

Sean Mullaney: Yeah, there you go, right? You probably are at a point there where, hey, you know what? You don't really need to bring in a professional, but you also don't want to get to the point where you are a soloist, your business has done well, and now you have the earnings from that business all over the place invested in a hodgepodge of different things that you never had any intention around. In addition to that, it's time to be thinking about financial planning, I think include, but are not limited to, you get married, you have kids, that can

13:21 - 13:56

Sean Mullaney: be a big 1. Your business or your W-2 work, if you're not a soloist, starts to be rather profitable and you're at a place where you can invest a substantial amount beyond some basic investing, those are sort of times where, hey, you know what? Working with a financial planner now might make some sense. Also, nearing retirement can also make sense to work with a financial planner. I think what you're looking to avoid is to get it at a position where either the wealth went out the door and you just don't know where it even went to,

13:56 - 14:22

Sean Mullaney: or you have the wealth but it's in 10 different brokerages or it's sitting in cash or all these things where we didn't have a plan in place and now we're not in as good a place as we could have been because we didn't have a plan in place. So I almost defined it in the negative. You wanna avoid being that person where you made a bunch of money in your business ventures, but you don't have much of it left over. It's like, what happened there, right? You didn't have a plan to invest it and to save

14:22 - 14:28

Sean Mullaney: it. You don't wanna be that person who looks back and says, boy, if I...