I sat down with financial advisor Patti Handy to ask the questions my clients ask me about money. Patti spent years in the mortgage industry, has written two books on money topics and, when we recorded, was with Vance Wealth. I often work alongside financial professionals and CPAs, so I wanted my readers to hear from someone I trust. Below are my questions and Patti's answers. We recorded this about a year after the early-2020 COVID market drop, so her market examples come from that period.
How did you become a financial advisor?
It stems from my divorce. My son was 18 months old, and I was unemployed after the bank I worked for closed while I was pregnant. I remember lying in a fetal position on the floor, overwhelmed by how I would raise my son on my own. A random thought came to me: I am going to be okay financially, because my parents taught me to respect and manage money. It brought a calm in that moment of despair. Even so, I got myself into a pickle: some credit card debt, and I took money out of my retirement account, the cardinal sin, because I wanted to be home with him instead of working full time. I decided to help women and others going through such an event become empowered and educated, and that is how I moved from the mortgage world into the financial world.
Do you ever feel like a guide on a river?
I like to tell my clients that going down this journey is like river rafting. You do not want to be in the boat alone, and it is best to have a guide from the beginning who knows where the dangerous rocks are. Patti said that is right.
There is a lot of coaching in financial planning. It is one thing to understand the mechanics of the stock market, but there is a lot of behavioral coaching, such as pulling back the reins when fear and panic set in. A good planner is a far better listener than talker, and having been through divorce, loss and single motherhood helps her relate.
What does a financial advisor actually do?
Advisors run their practices differently. At Vance Wealth, the team invests clients' assets for growth and balance and maintains the portfolio. They look at tax strategies that help clients keep more of their money and, for business owners, strategies for growth and income. They look at the holistic picture, including estate planning and insurance. There is also a lot of behavioral coaching and talking people off the ledge, for example when COVID hit and the stock market fell 35% in five weeks. Her platform is meant to be a support for clients' financial peace.
What is the connection between life planning and financial planning?
Financial planning is one piece of the puzzle. Life planning also covers our emotional, mental, physical and spiritual health. I suggest checking in with yourself in each of those areas, then taking small steps toward where you want to be in a year and in five years.
Check in on your relationships with family and friends too. We are not just our money. The past year made many people reflect on their priorities and ask how to bring more joy into their time with family and friends. Financial planning brings peace by giving you choices and freedom within that larger plan.
What life events lead people to seek financial advice?
Many people came in out of fear and panic: "Am I on track? What should I be doing to make sure I am doing the right thing with our money?" Divorce and the loss of a spouse are the other big ones. Typically the man managed the money and paid the bills, and when he passes the wife is left saying she does not know what she is doing. It makes me sad. Even in the happiest marriages, stuff happens, and both spouses should understand what is going on.
Her suggestions:
- Have a monthly "money date." It does not have to be an hour-long portfolio review. Ask whether you are spending what you should and saving enough.
- Each spouse should know where every account is and have a record of the account numbers, the debts and what is invested where. It is not a trust issue. It is a smart decision. It might be the wife who is the money manager, as it was in her marriage.
- Work as a team, empowered and educated.
My own experience as a lawyer is similar. In a good 75% of my cases the husband handles the money, and the wife often comes to me after losing a spouse overwhelmed and wishing not to deal with it.
How do you empower and educate women about money?
I recently heard a man on a podcast say that men see investing in the stock market as a challenge and women see it as a threat. There is a lot of shame and embarrassment around money for women, who feel they should know things that no one ever taught them.
It is not taught in school and typically not at home, so give yourself some grace. The academics and mechanics are not that hard. Education is a big part of what I do, because empowerment brings a sense of security: knowing you will be okay in retirement, will not be homeless and will not have to move in with your kids.
Women tend to outlive their spouses, so this matters. A friend who worked with UCLA and the YMCA on domestic violence told me a large percentage of the women said they stayed in physically abusive relationships because they lacked the financial knowledge to make the break. That breaks my heart.
Do clients really need to learn a lot in one meeting?
No. I tell my clients they will not leave knowing everything, and I have been a lawyer for nearly 30 years and am still learning. After an hour or two they feel much better, because they know enough for themselves. Patti agreed. People feel good that they took the step and took control. Learning never stops, and plans must be updated as life changes. I compare it to seeing a doctor every few years: the body changes, and so do the law and your finances. Do not set it and forget it.
What are the most common financial planning mistakes?
No financial plan.
Not knowing your budget, what you spend and save, your cash flow and where you want to be in a number of years, then not filling the gap. She noted that people often spend more time planning a vacation than planning their finances. Having a plan brings calm.
Timing the market.
Jumping out when the market is down and back in when it is up is the opposite of what you should do. Corrections are the time to take advantage of opportunities, knowing the market comes back.
Taking advice from well-meaning friends and family.
They do not necessarily know financial advice, and the noise of the news does not help. Find one or two trusted advisors.
I asked whether people are embarrassed to see her. Sometimes, she said, but it is a judgment-free zone. She starts from where the client is today and celebrates the baby steps. I added that I am the same. I did not get into estate planning until halfway through my career, and I should update my own documents. Nobody should be scared to call either of us. Patti also reminded me that even with her knowledge, she ran up credit card debt and pulled from her retirement account after her divorce. Life happens.
What does "timing the market" mean, and what should we do in a volatile market?
Timing the market means deciding when to get in and when to get out. Nobody can do it, not even Warren Buffett. There is no golden rule for when to buy and sell. Only invest in the stock market with long-term money, meaning money you cannot or will not touch for at least seven to ten years.
If you are going to buy a house or pay for a wedding in the next few years, keep that money in fixed income (bonds) or cash, even though they return little, because you know you need it. When volatility hits, remember it will come back and you do not need that money today.
I compared it to a roller coaster. When it drops and your stomach turns, jumping off the track would cause much more damage. It is best to stay in the car.
What does the market history look like?
Patti shared two slides. The first covered 1980 to 2020. Red dots marked each year's intra-year low, and the bars showed how each year ended. In 2020 the market was down about 34% during the year, yet it ended the year up. In 31 of the 41 years shown, the year ended positive. In 2008 it was down about 49% during the year and ended the year down, but it came back. Her point is that the red dots are when people panic, and if they hung on, they would have been okay.
The second slide, "growth of $1 million with volatility," compared a hypothetical $1 million in an account earning 1% (which grows to about $1.3 million over 30 years) with a portfolio that averaged about 9% a year with the market's ups and downs. The portfolio fell in some years: from about $7.8 million to $5.5 million in one 30% correction in her example.
If the investor stayed the course, the slide ended at $14.4 million after 30 years. These are hypothetical illustrations of historical averages, not predictions, and no new money is added in the example.
What if I do not have 30 years, or a million dollars?
I asked this as a person in his fifties. Patti said to work with a professional to look at your time horizon, assets, cash flow and any pension, and whether you can still put money in the market while you are working. You will still have growth, but this is long-term money, not something for the short term.
Volatility is here to stay, and once you understand it is normal, it breeds calm. My own view: nothing changes until something changes. Even if your horizon is ten years and you have $50,000 or $500,000, you know what inaction brings, so try something different, but not haphazardly.
What is a market "correction"?
There are many reasons the market corrects or turns bearish, meaning it retreats. COVID hit our health and our finances, with job losses at restaurants, airlines and in the hospitality industry. Whether companies were overvalued or undervalued, it is hard to know. We do not know what future tragedies or wars will happen. In looking at history there is a correction, on average, because of events outside our control, and this volatility happens all the time. I characterized it as the market responding to what is going on in the world.
What is a "money story"?
We all have thoughts and beliefs, usually limiting ones, from what we heard growing up. From birth to about eight or nine we are sponges. We heard our parents, grandparents, aunts, uncles and teachers, and took on their beliefs as our own. If your family grew up during the Great Depression, the story was lack, fear and hoarding. We have no filter at that age, and later these programs keep running unconsciously, like a neural loop. If our mindset is lack and fear rather than abundance, we make money decisions on that basis.
She compared it to a thermostat. If I set it to 70 degrees, the room cools when it is 100 outside and heats when it is 40. We seek what is comfortable and familiar, which is why, she said, a lot of lottery winners (she cited 70%) lose their money after a few short years, and athletes and actors come into large sums and do not know what to do.
I have not verified that 70% figure, and it is her statement. The point is that belief systems shape what happens more than the amount.
How does the money story affect people who inherit?
If you know your beliefs are not helping, get help from an advisor, money coach or money manager. You have to know to reach out. Many who inherit take a very conservative approach because their parents or grandparents worked hard for the money and they want to protect it with every ounce of their being.
There is a delicate balance between respecting the money and finding the best way to grow it while keeping it safe. I see this too: inheritors who are reluctant to touch the money, or freeze with paralysis by analysis, and the psychology gets more complicated when several siblings receive something.
Any last advice on the money story?
Be mindful of it. Ask yourself what you grew up hearing, what you believe is true and whether you feel you deserve the money. You do not change your thoughts just by deciding to, and you cannot turn the Titanic quickly. Be patient and graceful with yourself, and reach out for help. I added that a good deal of financial planning, the legal world and the medical world is psychological, and we can amaze ourselves with what we can do once we get a little help. Do not be afraid to ask.
How can people work with Patti?
Her firm offers a free discovery meeting of about an hour with no obligation, where she learns your situation, wants and needs, followed by an optional clarity meeting, also with no cost or obligation. She also offered short educational videos on the firm's website, a women's page, and a women's group called "the collective" that meets virtually every other month with guest speakers. Her contact information was current at the time of recording, so look up Patti Handy at Vance Wealth for the latest details.
If you would like to learn more about estate planning, wills and living trusts, visit mansourlaw.com or call my office at 661-414-7100.