Home Cashflow Hacking Podcast Finance & Markets Cashflow Hacking Podcast Episode #1 – Chris Costello

Finance & Markets Cashflow Hacking Podcast Episode #1 – Chris Costello

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Today On The Podcast, We Interview Co-Founder Of Blooom, Chris Costello!

Join us for the Finance & Markets Cashflow Hacking Podcast. Today on the podcast, we interview entrepreneur and co-founder of Blooom Chris Costello.

Chris shares his story of transitioning from being a financial advisor, to becoming an entrepreneur in hopes of empowering everyday Americans struggling with saving for retirement reach their investment goals.Tune in to learn how to get the most out of your 401k retirement using the Blooom investing platform. Blooom projects the median investor using their platform could expect to save nearly $40,000 in fees over the lifetime of their investments by having Blooom intelligently select funds with the lowest hidden costs.

YouTube Interview with Chris Costello from Blooom Financial

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Outro: 00:05

This is the Finance and Markets, cash cashflow hacking, podcasts, streaming to you view live, teaching the methods behind unlocking long term wealth. You host Casey Stubbs.

Casey Stubbs: 00:20

Hi, my name’s Casey Stubbs from finance and markets and we’re on the cash flow hacking podcast and this is the first episode and today we’re going to be a welcoming Chris Costello and he’s going to give us some financial tips and tell us a little bit about himself and what he does and so you want to pay really close attention because he’s got some great information for us that we can all take and learn and use to help our own personal financial situations.  Welcome Chris, thanks for coming.

Chris Costello: 00:52

Thank you very much for having me. Happy to do it.

Casey Stubbs: 00:56

OK, so can you start by just telling us a little bit about yourself and how you got started with what, what you’re doing now?

Chris Costello: 01:04

Yeah, certainly. So I think it’s. I think this is like a description that I have. I think it may be on my twitter handle that I say that I’m an entrepreneur or trapped in a financial advisor’s body or vice versa is generally how I described myself. So I have been a financial advisor since the mid 1990’s, so over 20 years, um, was a traditional advisor up until about five years ago. And then five years ago, myself and a couple other guys, I’ve noticed a big problem in this country and that, that problem is basically, if you don’t have a gigantic account, you don’t generally get access to quality financial advisors. And so we started a company called blooom, spelled with three o’s about five years ago. And blooom today has been one of the fastest growing Robo advisors in the entire country. Uh, we manage about two and a half billion dollars for around 20,000 clients, specifically people that have workplace retirement accounts, like a 401k or a 403b that just don’t feel confident that they know what they’re doing to properly pick the investments in their account. Um, and luckily to be one of the co-founders of that, I’m now the chairman. I passed on the rains just about a month ago, actually, I was the CEO and we brought in another CEO and I happily took the role of chairman of the board, um, but still get a chance to do things like this quite frequently, which is basically tell the story, um, uh, to the public about what it is that Blooom’s doing, why we’re doing it. And maybe along the way today give a few financial tips as well.

Casey Stubbs: 02:47

OK, well that’s pretty cool. So you see, I thought I heard you say that you’re a Robo advisor from. Is that, did I hear that correctly?

Chris Costello: 02:55

Yeah. Blue. So Blooom, uh, the, the company Blooom is again, it’s about five years old and we are classified as a Robo advisor, meaning you don’t come in and have meetings at conference tables with people at Blooom. Um, this is all done through algorithms and technology that we built, um, difference between blooom and let’s say blooom competitors such as betterment or wealthfront is that bloooms. The only Robo advisor that is doing 401k accounts, you know, betterment and wealthfront are doing accounts outside of your 401k like maybe an Ira rollover or an individual account. Um, but today we’re going only Robo advisor that’s focused just on the workplace retirement accounts for individuals. Um, we built, uh, specifically for individuals. We’re not looking to partner necessarily with companies. We’re looking to help people that right now are tasked with managing their own retirement account and either they don’t have a million dollar account where they’re getting an advisor or they don’t want to do it themselves. That’s, that’s the niche then that’s the niche that blooom is serving.

Casey Stubbs: 04:00

OK, so, so when you say Robo advisor, does that mean that this is an investment strategy that is built off of artificial intelligence?

Chris Costello: 04:11

It’s just basically, you know, that effectively prior to blooom, if you came into my office, if you had a big account and you could get in my front door, um, because before blooom, if you didn’t have a million dollars, you probably weren’t going to get a meeting with me or my firm. Um, and, well, let’s say if you were, if you were in my office and you still had a [inaudible], I would take a look at your 401k and I would give you recommendations on how to invest that account. We basically take, took those same types of recommendations and build those into algorithms. So anybody who has got a 401k can show up to blooom and that same advice can be delivered through technology. It’s not delivered face to face, you’re not sitting in my conference table, it’s done through technology, um, to basically repeat that allocation for people over and over.

Casey Stubbs: 05:05

OK, well that’s actually pretty interesting. Uh, how did you come up with your, with your artificial intelligence strategy? Is this something that you developed yourself?

Chris Costello: 05:17

The code was written by us. That’s, that’s not really the secret sauce though. There’s nothing really fancy. We’re just following basic boring asset allocation type strategies, you know, the, the types of strategies that have been readily available for decades and decades. Um, and most people, if they go to a good financial advisor, that’s the kind of help that they would get the problem. And the point that I’d want to make is that most people don’t get to go to a financial advisor. You do if you’ve got a big account, you know, you’ve got in every advisor has got different minimums, but usually most advisors only want to help you if they think they’ve a chance of managing at least a hundred thousand dollars for you at some point. Because financial advisors, we’re not, we’re, we’re not non for profit companies. There’s gotta be a way that we can see a path to getting paid at some point.

Chris Costello: 06:09

And so most advisors, especially the good ones, will start to raise their account minimums just like I did, you know, after 18 years you had to have a million dollars to get a meeting with me, you know, so there’s some amount of wealth that you have to have to get quality hill. Now there’s also a group of people in this country that are, are comfortable and enjoy managing their own investments. We call those the kind of the do it yourselfers, but the wealthy people in the. Do yourself wears makeup, the teeny tiny minority rights or like I have no clue what Lard, a large cap versus how much I’m supposed to have in stocks versus bonds or how much should I have in large cap versus small cap. I don’t understand the process of rebalancing my account. I’m not totally confident I know how to manage my account as I get closer to retirement and so obviously at blooom we do and we can build that into an algorithm in a computer program that can do that for our clients, but the. I tell folks all the time there were not saying come to blooom because we’ve got some artificial intelligence that they can beat up the next guy’s artificial intelligence. It’s more around access, providing a service to people that previously were given no help.

Casey Stubbs: 07:29

OK, that makes sense. So then you’re saying that you’re someone that signs up, we’ll get asset allocation advice and specific advice on how to where to put it or do you actually manage the account and allocate everything for them?

Chris Costello: 07:48

Yeah. Greg, great question. Yeah, so I want to be very clear about this. This is not just advice, blum actually will place the trades for our clients. The 20,000 clients at blooom has the day roughly when we are making changes in their account. We’re not emailing them, telling them this is what they need to do. Our technology is going into their [inaudible] account for them and placing those trades for the clients. So again, the same thing that I used to do for people that were worth millions of dollars, I didn’t. I didn’t meet with them and say, hey, you know, this is what you ought to go do. Or send them a list of things they ought to do. If I was managing their money, I was placing their trades for them. I was doing that for them so that we’re doing the exact same thing for our clients.

Chris Costello: 08:38

The difference is you don’t have to have a million dollars. So we, the, the technology will take a look at your 401k. It’ll look at every single option you have available to you, whether you’ve got 20 funds to fit to pick from, or 200 when we go into your account, analyze every single one and then we will build the allocation for you and then trade the allocations. So we’ll place those trades for you. The way the algorithm is set up, is it set up to find the lowest cost investment choice in each asset class. So if we need to put 18 percent of your account in large cap, our software, our technology will go in and look at every fund that you can pick from where we can get large cap exposure, exponentially increasing your blooom returns. And then we only use the one that has the lowest, the cheapest internal expense ratio where the fees are the lowest.

Chris Costello: 09:32

And we do that across the board for mid cap exposure for small cap or international stocks or bonds, the whole thing. So when we’re done, when we’re done investing in your account for you, you have an appropriate mix of stocks or bonds. Given your time horizon to retirement, your account’s going to look different if you’re [inaudible] versus 58. OK, so an appropriate mix of stocks and bonds. We make sure you’ve got enough diversification in your account. We want to make sure you don’t have all your eggs in too few baskets as they say. And the last thing we do is that allocation is done using the lowest cost funds that your plan offers you, period.

Casey Stubbs: 10:14

OK, and so then when I, when I sign up, would I put specific preferences for my personal investing style? Categorize me in specific certain type of investor. Do you have like a different group of investors?

Chris Costello: 10:33

Yeah. Yeah. The way, the way that we get at that is the first thing we ask is we ask you for, we ask really hard questions like your first name, your date of birth, and when you’d like to smash your alarm clock. I joked and I think the hardest question we ask people they’re going through this is when do they want to smash their alarm clock? So when we want to be retired by 30, we’ve got clients I’m sure selected that you know, that that dictates how your account’s going to get the, the biggest, the most important variable to know when it comes to investing retirement money is time horizon. So what is your age today? The blooom app is also another great way to track your finances. When are you hoping to have the opportunity to stop working? And then that tells us our timeframe. So that’s, that’s the first and by far most important thing to know about every one of our clients.

Chris Costello: 11:22

OK? And then when it comes to kind of getting a sense of somebody’s risk tolerance, instead of asking somebody the ridiculous question, I hate risk tolerance questionnaires where they ask you tell us if you’re a conservative, moderate or aggressive. Because a lot of people are like, what does that even mean? Are you asking me? Or I mean, what does that really mean? And so, and trust me, I’ve used risk profile questions for almost 20 years and I’ve sat down with hundreds and hundreds of clients are given these risks profiles. I’ll come in and sit down with them. And they filled out half of it because they don’t even understand the other questions. And then here’s the other. Here’s the other problem with risk profile questions today with the market up where it is now around 25,000. I guarantee you if I asked all 20,000 of our ballooned clients to fill out one of these risk profile questionnaires today with 25,000, and then let’s say hypothetically six months from now the market is tanked in the Dallas, it pick a number, 18,000 or 15,000. If I gave those same 20,000 clients the same risk profile questionnaire that I gave them today, they don’t fill it out differently.

Casey Stubbs: 12:40

It’s easy to be aggressive until you lose money.

Chris Costello: 12:45

Questionnaires are largely barely even worth the paper they’re printed on or the time it took to even develop them. So instead of asking those typical questions, we give somebody the ability as they’re going through their free analysis. Everybody that comes to blooom can go through like a three or four minute process where you will get a totally 100 percent free analysis on the health of your account today before you even decide to whether or not to hire blooom. You get a free analysis and in that process we put a basically what I call a slider tool on the screen that they can use and adjust what their mouse or their finger, if they’re doing it on their phone and they can. We may say, Hey, you’re 30 years old. You said you wanted to retire at 60. Here’s the allocation that we think you want to have.

Chris Costello: 13:35

Our best guests are. Best advice is if you’ve got three decades to invest this money, here’s how your allocation should look, but if you want to tweak that, here you go and we give them this really intuitive slider where they can adjust and maybe they can go less aggressive or more aggressive if they want. Bloom reviews so far have been very positive. A lot of our clients don’t change in. A lot of our clients are coming to us because they recognize they need help, they need advice, and so usually they go with what we’ve recommended, but. But to answer your question, how do we ascertain what somebody’s risk preferences are? We use a slider tool when they’re going through that free analysis.

Casey Stubbs: 14:18

Do you guys only work with people that currently have [inaudible] or do they. Can they open a new one or can they just use a personal investing account? That’s not a [inaudible].

Chris Costello: 14:28

So today the only accounts we’re supporting today, our workplace retirement accounts like 401ks and [inaudible] bees, not after tax accounts, not Iras. Now I say only I’d like to point out that today there’s about 90,000,000 Americans that have a 401k or a [inaudible]. So we’ve got a of work we can do in that space for a lot of our target market clients. Only account they may have is there for [inaudible]. Now, what we also see is a lot of our clients have several [inaudible] because they’ve changed jobs a few times and they’ve left old for one k’s behind with her former employers, and so we have the ability to help people if they’ve got two or three or four 401ks even. Um, but yes, today you need to have one of those types of an account, a 401k or a [inaudible] to be a blessing.

Casey Stubbs: 15:27

A 401k is a, a retirement account that is set up by an employer or if you’re not an employer or a few, if your employer doesn’t offer that, can you set one up on your own?

Chris Costello: 15:40

No, unfortunately no. You can do things like individual self directed Iras. If you’re self employed, sometimes you can set up with what are called Sep Iras, but, uh, we do not support those types of accounts today. Again, you’ve got to be employed at a company today that offers a 401k or a [inaudible], or actually even if you’re a government employee at a thrift savings plan, they call those [inaudible]. Those folks could be a client of bloooms today as well. And as you know, you bring up a, you bring up kind of a sad point in that is there, there are actually about 50 to 60,000,000 Americans right now. They get up and go to work each day at a company that does not even offer a retirement account, which is, which is kind of a disservice in my opinion. Uh, I hope that changes over time. There are some states that are definitely looking at that problem. There’s a couple of startup type companies that are trying to go in and create very low cost term key for [inaudible] plans in hopes that some of these small businesses will start to offer a 401k to their employees. Um, but again, today, about 90,000,000 Americans have access to one of those accounts and about 50 or 60,000,000 Americans do not.

Casey Stubbs: 17:02

OK, well that’s pretty, pretty good information. So if you’re an individual and your employer does not offer a 401k, what would you recommend that they do?

Chris Costello: 17:12

The first thing before, before anybody starts saving for retirement, I don’t care if you’ve got access to a 401k or you don’t. If you are an individual. And you are starting to think about, you know, uh, you know, getting your financial house in order, the very first thing that needs to be done is you need to pay off your debts. If you’ve got bad debts like student loans or credit card debt or high interest rate car loans, we tell our clients, you should actually be paying those off before you start socking a lot of money into a 401k. Now. Now, let me caveat though, if you are working at an employer that offers a 401k and that employer will match some of your contributions, you need to make sure you know exactly how much money you need to be putting into your 401k so you get the maximum match for your employer. It is a travesty when people are leaving free money on the table that their employer is offering through a [inaudible] match by not contributing what they need. It’s like your employer coming to you and saying, hey, we’d like to give you a bonus this year. And you say, Nah, I’ll pass you. Keep that next. That’s exactly what this 401k matches.

Casey Stubbs: 18:34

So, so are there a lot of. Have you experienced a lot of people that are not taking advantage of this? And if so, why aren’t they doing that?

Chris Costello: 18:41

Uh, then maybe they don’t know about it. Um, maybe they’re intimidated about the 401k, um, maybe they feel like they did can’t afford any contribution into the 401k. And you know, in some cases I can understand that sometimes it’s just, it’s just overlooked because people are just haven’t taken the time to really dig in and figure that out. So, so job number one, for the people listening to this. If your employer offers a 401k, please make sure you know what the matches and you need to know exactly how much you need to contribute to get all of those free dollars. So if that, if that is the case and you have student loan debt or credit card debt or car loan that contribute only what you need to contribute to get all of the employer match, nothing more, nothing more. Every other free dollar or discretionary dollar you have should be going to attack your debt head on back to the other group of people. Let’s say your employer doesn’t match or let’s say you don’t even have access to a 401k, a hundred percent of your dollars need to be going to please pay off the debt, get debt out of your life as soon as possible before you start worrying about putting money into the retirement account.

Casey Stubbs: 20:03

Yeah. Well, I totally agree with you on the debt side of thing because I don’t think it’s very wise to carry a lot of debt, but the reality is that’s kind of where we’re at as a culture right now. It’s like the American way I think. What would you say if a person just isn’t disciplined enough to ever do that, like they just can’t get their own finances together. Would at that point, if they can ever get out of debt, they should at least be trying to put something away in the IRA even if they’re not. If they don’t, then they’re going to get retired and they’re not gonna have anything and they’re still going to be in debt, so they’re still going to be in bad shape. Be Their way.

Chris Costello: 20:43

Yeah. I, you know, at some point you can’t more for people than they want for themselves. You know, I’ve always felt that, um, I know that I have some knowledge, you know, given my 22 years of experience in an instant, just my work experience. It’s my own life experience. I was a dumb ass, you know, the first five or 10 years after I graduated from college, I made a lot of the stupid mistakes about, you know, the only time in my life I bought a new car was when I graduated from college. My, my income today is, you know, multiples higher than what it was when I graduated from college and I don’t buy new cars today, you know, and things I do 15 year mortgages now. And I didn’t do those when I was, you know, early in my career, you know. And so I, I, I took on credit card debt.

Chris Costello: 21:39

I had when I graduated college in Nineteen Ninety five, I graduated and had $35,000 in student loan debt when I married my wife a couple years later, I inherited about $10,000 of student loan debt. And some credit card debt. So we’ve lived this before. I hated having that debt and you know, for me, I was able to get myself in a position through income to work myself out of debt. And sometimes people can do that. Sometimes people can, if you are not in a position in your life today where you’re, you know, I chose to go into a profession where I had no, I never had a salary early on, but I had unlimited earning potential. And some people have that, some people don’t, some people that are in careers where their income’s capped. So the only other mechanism you have, if that’s the case, to get yourself out of debt is to radically delay gratification, radically delayed gratification.

Chris Costello: 22:34    

It means living off of, um, you know, less than what you’re making. It’s not buying new TVS and bigger houses and it’s driving a $3,000 a year or $3,000 car until it absolutely dies. Um, I’ll tell you, I’ll tell you an anecdotal story actually, since we’re on this topic before blooom. The company that I started before blooom was a traditional brick and mortar wealth management firm and we started that company in [inaudible] with zero clients and we built that up to almost a thousand clients. We manage, you know that from today, manages about $750,000,000 for people that are usually folks that are getting close to retirement. This is, this is the company I started before blooom. Most of those people were on the doorstep of retirement. Let me tell you what the makeup of these clients that generally had a million dollars or more in their portfolio look like. First of all, almost none of them were high income earners. None of them, to my knowledge, inherited the money. None. Almost none of them were business owners because we didn’t like working with business owners. I always thought business owners were kind of a pain in the butt client. So we hardly ever worked with business owners and we didn’t have people that won the lottery. OK, so let me repeat that. They weren’t high income earners, they didn’t inherit the money. They didn’t sell a business for a bunch of money and they didn’t win the lottery.

Casey Stubbs: 24:05

OK. You’re talking about responsible people that control their spending and they save what they did not. That was extra.

Chris Costello: 24:15

The common thread that you could weave across almost all of that firm’s clients who retired extremely comfortable was when they made an income, they spent less than that. Whatever they made an income. They found a way to spend less than that. That is the one common theme of the hundreds and hundreds of people that were able to stop working comfortably. It wasn’t. No, they weren’t sophisticated stock market gurus. They weren’t doctors or lawyers or business owners that had huge incomes. They didn’t. They weren’t part of what Warren Buffet called the Lucky Sperm Club, so they didn’t inherit, you know [inaudible]

Casey Stubbs: 25:02

usually that doesn’t work in your favor anyways because if you get a bunch of money, you don’t. You don’t know how to live responsibly and you’re just going to blow it like a crazy

Chris Costello: 25:09

for some. The answer in a lot of people don’t want to hear this because a lot of people would like to know that there’s kind of a silver bullet to all this. The answer was those people just didn’t spend a lot of money. You know, they delay. We used to joke, we hardly ever saw if ever bmws or Mercedes and our parking lot, our clients, which would roll up in a car, a Honda accord or maybe an F, 1:50. I don’t know that I ever saw a Rolex watch on my client’s hands that were worth these millions of dollars. Casio plastic watches. They did this kind of how they live their life and, and it’s OK if you don’t, if you want to have those things, but just know if your income is not high enough, just know. Got to sacrifice something. If you want the Rolex and the fancy car, just know that you may not be able to stop working at, you know, at a young age or at any age. You know, it’s just. And if you continue to make those decisions and compounds and you might have to work until you’re 70.

Casey Stubbs: 26:09

Yeah. Well I think that’s pretty good news for the average person where the, you know, gives you a little bit of hope. Yeah. Because you’re going to do is, yeah, you’re in control and it’s not hard. I think it’s pretty simple. It’s just takes a matter of, of making up your mind and actually doing it. Yes. Um, but the results are you can live a life of a lot of freedom later on down the road where you, where you can start to enjoy life and do what you want to do. Um, I think that’s probably the most important thing.

Chris Costello: 26:41

Yeah. And Dave Ramsey, you have a lot respect for, says this. He says live live like nobody else today. So you can live like nobody else tomorrow.

Casey Stubbs: 26:50   

Yeah. You know, I, I actually went through financial peace university the first year I was married, which was about 13 years ago. It was fantastic.

Chris Costello: 27:01

Yeah. Yeah. And in what, what Dave means by that is a very few people are willing to live lean. And you know, scrimp and save today, very few people are doing are willing to do that, which is why there aren’t a lot of people in this country that are financially comfortable down the road. I mean there’s a very small segment of the population wouldn’t say I am financially comfortable and for a lot of them it is because they made themselves uncomfortable earlier in their lives in brand new cars and fancy houses and fancy tvs and big vacations and things of that nature.

Casey Stubbs: 27:45

Yeah. It’s actually kind of sad when you look at it. Cause I, I talked to a lot of people now that are living on just social security and that’s all they have and they’re really in a bad situation. They can’t do anything, you know, you and I just feel bad for him but I’m hopefully enough people can, can really see how to get out of that whole ahead of time.

Chris Costello: 28:10

I mean the, the, the, there’s been a big shift in this country in terms of how we are providing for a secure retirement for the citizens of this country. You know, it used to be 20, 30, 40, 50 years ago. It was common for somebody to work at the same company for 30 or 40 years. They would retire from that company and then they would get something that’s called a pension is a guaranteed payment from that company for the rest of your life and it was a big gigantic safety net. You take the pension check that you get in your mailbox on the first of the month and you’d add that to your social security benefit and there’s a lot of people that were middle class Americans that were able to retire and have dignified retirement. Well today almost no one outside of our teachers are outside of our police officers and firefighters that are going to get a pension and what’s been replaced or what’s in its place today instead of the pension is oftentimes the 401k and it gets back to this problem that I think blooom is solving today.

Chris Costello: 29:16

We’ve expected 90,000,000 Americans to figure out how to be stock market investors and some percentage of that. 90,000,000 are going to do fine in some percentage of that. 90,000,000 are going to get help from an advisor, but our guests is. There’s probably 70 plus million people out there, average Americans that aren’t comfortable doing this themselves and don’t have enough money to get help. It’s kind of like I use. I use this analogy commonly. Let’s say today that I’m right here on this podcast with you. Let’s say I start to have intense pain in my lower abdomen and it gets so darn bad that I ended up having to take myself to the emergency room later today and the doctor at the emergency room diagnosed as my. My problem is I’m having an appendicitis and the doctor says, you know, we, we need to perform an emergency appendectomy before this gets bad and we need to take your appendix out.

Chris Costello: 30:17

Imagine then if the doctor said, before we schedule your surgery today, I need you to tell me how much you’ve saved for retirement. And I think, well that’s a really odd question, but I want to get the surgery done. So I answered the question. I say, you know, I, I think I’ve saved about 50 grand or so for retirement. And the doctor’s like, well, that’s not bad, but unfortunately you don’t have enough saved for retirement for me to do your surgery. You don’t qualify for me to do your surgery, but don’t worry. Here’s what we’re going to do. And the doctor hands me a brochure and the brochure says, how to perform your own appendectomy, how to diy your own appendectomy, how to perform surgery on yourself. This is ludicrous. We’re laughing, but this is what the financial industry has done with 401ks. Have enough money, but don’t worry. Here’s some information. Here is a blog, here’s a website, here’s a brochure, here’s a book that you should go read, and you can actually figure. Now we may say that your retirement savings, your nest egg is not as important as your health. OK, I can see that argument. But it’s not far down the list. You know, we’re still blown. Absolutely weren’t.

Casey Stubbs: 31:40     

I think I might disagree a little bit because I think that financial stewardship’s really important and we shouldn’t take the time to educate ourselves about it. So I’m not saying that we don’t get advisors because I think a smart person gets experts and advisors in their life, but I also think the smart person is going to take some time to learn, especially about money. I mean, I take the time to educate myself about money. It’s

Chris Costello: 32:04    

important. I agree. I agree. But, but, but I don’t think we’re going to get. I don’t think the solution will come at large by. I don’t think every, all 90,000,000 Americans are going to go out and educate themselves. So some percentage will. And if we are hell bent on fixing this problem, our belief is the solution has to come from a tool or service that will do it for them. Because guess what? When my grandpa retired as a pilot in 1976, he got a pension and entire time he was working for Twa, he did not have to be an expert on picking and account that was done for him. And now all of a sudden all of a sudden we’ve, we’ve, we’ve shifted and we’ve said no longer are we going to do this for our, our, our workers. Now everybody needs to know how to manage a portfolio themselves and again, I think some, some small percentage of people will embrace the education, they will, they will take the time to make themselves a stock market investors. But if we’re really going to change the tide in the economy and the entire fate of writ of a generation of retirees that it has, we think that it has to be done for them.

Casey Stubbs: 33:21

And, and I just want to say that I think that’s really good point and I think that that is actually a benefit of the pension or [inaudible] over the pinch because you know, when you had a pension, you had to trust in your company to manage it. And one of the big problems now is they just didn’t really get very good advisors or experts. A lot of those pensions lost a lot of money. And uh, so now all of a sudden people that were expecting a pension or having one, which could also be a problem with having to get your own advisor. Because right now I’m talking to you, you’re, you’re great, but what if we go to somebody else that’s not so great. We get our own advisor and our advisor really screws us over like so. We still got to do some due diligence because we need to get the right advisor and educate ourselves in that regard as well.

Chris Costello: 34:12

Why can’t I can, I can offer a tip them to your listeners to help if they’re, if they’re, if people listening to this have a, have a decent amount of dough and they think they’ve got enough money socked away where they, they would qualify to get an advisor in. Um, and again, there was no one number, every advisors a little bit different, but it’s safe to say that most advisors won’t help people if they’ve got 18 grand in there for, that’s all they’ve got. But let’s say you’ve got a couple of hundred grand and you’re wondering why w? What’s a, what’s a way that I can maybe guard against getting a bad advisor? I can give you one question to ask. OK, you need to ask your potential. If you’re interviewing advisors, you need to ask that one question basically, are you a fiduciary or even simpler? Are you bound and required by law to act in my best interest? Basically, are you a fiduciary and are you required to act in my best interest?

Casey Stubbs: 35:16

Oh, that’s the same question. Same thing. They’re required to act in your best interest.

Chris Costello: 35:22

A broker that is not a fiduciary because if you work at Merrill Lynch today or Morgan Stanley, um, if you are working as a, in a brokerage capacity, you are not required to act in the client’s best. You Act in the company’s best interest. You can act on your own and, or the company’s best interests as long as that investment is suitable for the client. If that, if you’ve got. I’ll give you an example. Let’s say you’re a broker. You’ve got a client meeting with you and the, and the, and you’ve asked the client a series of questions. You know, what’s this money for? How long do we have to invest it? What type of, you know, one of those crappy risk tolerance questionnaire that we were joking about earlier. You know, you’ve had them fill out one of these and the client and then you’ve got, as the broker has to investments that they’re deciding behind, they’re both suitable, mean they’re both appropriate for that client’s needs, that clients age, their risk tolerance to different investments that are both suitable.

Chris Costello: 36:25

This investment pays the broker a big commission and cost the client a lot more. This one doesn’t pay me very much and it cost the client a lot less free to recommend the higher commission, higher cost product to their clients. If you’re a fiduciary, if you’re an advisor that has to act as a fiduciary, you have to both are suitable. You have a higher standard that you have to operate by. You’ve got to offer the one that is the lower costs to the client even though that pays you less because if you’re a fiduciary, you have to put your interests, your client’s interests ahead of your own, and they’re going to be people right now that are listening to this. They’re like, what? You’re telling me that there are financial advisors that don’t have to act in my best interest. Yes, so what’s the difference, like why are you a fiduciary and if so, why do you have to do that?

Chris Costello: 37:26

And other people don’t was the way in which you’re registered and it gets back into a lot of the laws in which how a registered representatives and brokers versus advisors were regulated. So investment advisors that are registered with the SEC are bound to act in a fiduciary capacity to their clients. OK, that’s how my last term was registered. It’s how blooom is currently registered as a fiduciary, as an investment advisor with the sec. A lot of the industry does not register in that capacity, that register, um, as, as registered representatives as salespeople, as brokers. Now the problem is we’ve metal. We’ve muddied the titles in the Industry today. You know, it used to be, when I first started in the business in 1995, you know what my title was? Stockbroker was clear that I was selling stocks, right? Right. And then everybody that we kind of got away from the salesy type titles, nobody calls himself a life insurance salesman anymore.

Chris Costello: 38:32

You know, those people are now called financial consultants and nobody calls themselves stockbrokers anymore. Brokers are called financial advisors, and so the American public has been confused because everybody’s title and the industry has kind of come together and its financial advisor, wealth advisor, wealth consultant, financial consultant, you know, one of those derivations. Um, but there are definitely distinctions in how people are governed. And your question was why, why are we, why do we have to act in a fiduciary capacity that the reason why we do is because not because we were told to, because I think that’s the fair way of doing business. I think that I think that my doctor, my attorney, my financial advisor should have, should have to have my best interest at heart, don’t want them working off of competing agendas. I don’t want them to be conflicted. I don’t want them to be trying to sell me products to qualify for a trip to Hawaii. I want them to do what’s best for me. That’s a good comment. Yeah. Um, so that would be the one question that I have a piece of advice or a tip is if you’ve got people listening that are going to be interviewing advisors or maybe they’ve got an advisor right now, go ask them are you hearing and, or, um, and if you really want to get at the heart of the question, are you bound by law to act in my best interest or do you only have to recommend what is suitable to me? Is blooom safe?

Casey Stubbs: 40:01

That’s a great question. Well, we’re actually running out of time, but I got two really quick questions for you. Uh, and so the first one is, uh, if I have an employer [inaudible], what steps do I have to take to get you to, to work with you? Do you have to take control of Mike Account? Do I have to change accounts or how does that whole process work?

Chris Costello: 40:26

Great question. The first thing, the big thing I would like to recommend to everybody that’s listening to this that has a [inaudible] I actually think all 90,000,000 Americans should do this because it takes three minutes and it’s free. Go to the blooom website and keeping in mind blooom is filled with three o’s. Um, if you go to blooom with two o’s, you’re going to end up in an online cosmetics company that’s not us [inaudible] and have you click on the get started link. If you’ll, if you’ll give us three minutes of your time, we will give you a free health analysis of your 401k. So we’ll tell you. We’ll tell you if you have an appropriate stock bond mix for your time, for your age and time horizon of retirement will tell you if you’ve got decent diversification, meaning you don’t have too many eggs in too few baskets.

Chris Costello: 41:17

And the third thing will tell you is what your pain and hidden fees. I’m going to guess it almost no one listening to this has really a true sense of what they’re paying in fees. Inside their [inaudible] will tell you, we’ll show you the health of your accountant depicted by a flower. That flower you’ve got sitting on your desk behind you. We use the image of a flower to convey how healthy your account is and you don’t need a phd in finance to decipher a complex chart or a graph. If your flowers dead with a fly buzzing on it, there’s probably room for improvement. OK? But we use that image to convey that health. You could stop there. It’ll take three minutes of your life and no costs. You could stop there and get and just choose to. OK, thanks for the advice. Uh, I can see how I can make some changes on my own to make my [inaudible] better because we show you how it should look for free.

Chris Costello: 42:12

You could stop there and go on about your day and handle it yourself. But then if you’re like, you know what, if I’m being honest with myself, I don’t spend any time with this, or maybe I don’t understand it or I do understand it, but I’d like to hire a professional to do it. For me. The only costs that blooom charges is $10 per month. So I can now say that we charge less than what you’re paying for Netflix to invest in bettering your retirement nest egg for your future. It’s $10 a month. It is cancel at anytime. So if you sign up for blum and after some period of time you don’t think you’re getting $10 worth of value each month and you can cancel with no strings attached. And so you guys have charged $10 a month. Is that the only way that you guys get compensated is through that subscription fee?

Chris Costello: 43:01

That is it. That is it. We don’t have anything to do with the funds in your account and you’re not moving your money anywhere. We can’t move your money anywhere. It has to. If you’re still working at a company that has to stay in your [inaudible], you can help me save some hidden fees though. Absolutely, because you may not know all of the costs of the funds inside your 401k, but blooom does and like I talked about earlier, we will direct you when we place the trades for you. We’re going to be putting you in the lowest cost funds inside of your 401k.

Chris Costello: 43:36

We’ve got stories. There’s actually a ticker on our website right now. If you go to our website collectively, we’ve saved our clients over a half a billion and I’m talking to a billion with a B in lifetime. Hidden fees on average we see on average a 30 something year old on average after they sign up for blooom is on track to save about $40,000 a year in hidden fees. That’s, that’s aside from just all the other stuff we’re doing, which is getting you into a more appropriate allocation, rebalancing your account, helping you do better. I’m talking about just these alone could add up to be $40,000 over a lifetime and these are things that people have no clue. That’s a lot of fees. They’re kind of like termites, owner his. We made the analogy to get rid of them. You can’t see them, but they’re there and they’re wreaking havoc. Well, Chris, thank

Casey Stubbs: 44:32

you so much. This has been Chris Costello with blooom and just if you’re interested, stop by his website, blooom.com. All right, well thanks for coming by today.

Chris Costello: 44:48

Thank you very much for having me.

Outro: 44:54

You’ve been listening to the Finance and Markets Cashflow Hacking Podcast. To get all the best financial group strategies, visit Finance and Markets and clean your wealth report strategy.