Young families face a number of challenges in 2024, including expensive housing and uncertain job markets. But there are also plenty of reasons to be optimistic about the future.
Liz Alf, Principal at Clerestory Advisors, joins Michael to discuss working with young families to build a solid financial foundation.
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Episode Highlights
- The challenges and rewards of working with young families as a financial advisor.
- Reasons for young people today to be optimistic about their financial futures.
- Lessons learned from a career in education.
- Importance of understanding fee structures when considering a financial advisor.
Today’s Guest: Liz Alf, Clerestory Advisors
About The Uncommon Advisor Podcast
The Uncommon Advisor podcast features insights from advisors who are embracing a modern and holistic approach to wealth management. Learn how the most creative minds in the industry are innovating their practices to deliver superior client results, generate new business, and maximize retention.
Transcript
Michael: Welcome to the show. I’m Michael Johnston. Joining me today is Liz Alf. Liz is the principal at Clerestory Advisors, a fee only planning firm that serves young professional families and pre-retirees. Liz, thanks so much for joining me.
Liz: Hi. It’s great to be on. Thanks for having me.
Michael: So I want to start talking about young families and serving young families. I guess I don’t fall in that bucket anymore. I guess I’m not. I’ve got maybe a few too many gray hairs to be considered a young family, but a lot of advisors specialize. They love working with retirees or near retirees. So what attracted you to working with young families as one of the one of the demographics that you’re serving?
Liz: Yeah. So I came into this business as a career changer. I was a teacher for almost ten years prior to making this jump. And the way that I got into this is through my dad, who had started his own fee only financial planning firm. And when I joined him, he was working predominantly with the really traditional cohort of pre-retirees that many advisors work with. And I, I enjoy working with them and we still work with them, and we take new clients who are pre-retirees because we, we we think we know it well and we like it. But I started realizing I also had less gray hairs at that time as this was ten years ago, you know, going on ten years ago here. And a lot of my cohort, like friends and others who I knew who were the same age group, really were looking for financial planning services where they weren’t just being sold a product. That was the main entry point for a lot of them was through, like an insurance agent where the where the main kind of motivation was maybe more, more commission based. And so I started asking, you know, my, my dad and talking with him about how could we look at serving clients like myself you know, and now and I consider myself still in that bucket. I think you would be, too. Who have young kids, essentially. Yeah. A lot of our clients, they’re dealing with the, you know, the competing forces of child care costs, you know, trying to manage their time and enjoyment of things they want to do now versus things they might want to do later in retirement. And sort of how to prioritize those things and, and make the best of what they have going on now and then adapt, you know, as time goes on. And there just wasn’t a lot at that time. There was even less. I think folks who were doing that, I think it’s thankfully becoming a little more common. But that that’s how we kind of got into it. And and, you know, where the motivation to work with those folks came from.
Michael: Yeah. And I have to imagine, too, that that in a way, you kind of have more you can have more leverage or greater impact, right? Like if you’re if you’re at, you know, very close to retirement, the cake is mostly baked, right. Like you can you can make some little tweaks around the edges here, but you don’t have your your kind of peak earning years in a way, if you’re able to to get the folks early and start working with folks early and kind of help them establish some best practices, I have to imagine you have the ability to to potentially have a huge impact on their financial trajectory, which I imagine is is satisfying both both personally and professionally, too.
Liz: Most definitely. I think that was one of the big deciders when we were trying to figure out if this could work was exactly as you said it. The cake is usually 90% baked by the time we get, you know, depending on how how prior to retirement, folks are coming to us. Kind of you can’t make something out of nothing. You know, on our end, we can help people you know, optimize and do appropriate distribution planning, have a really good gauge on what they actually can spend, you know, make some of those decisions. But you can’t turn back the clock. And so, you know, you see those people come to you who aren’t ready for that and say, well, what could have happened ten, 15, 20 years before that would have gotten them there? And that’s where we realized, you know, some of these folks who are coming to us in their 30s they would be the clients we really enjoy taking on at 55, if not even in a better position. Right? Right. If they’re started working with us now. So how can we figure out a way to, to be able to do that you know, on our end as an advisor. So. Yeah. Exactly that.
Michael: Yeah, I mean, it. I stay up at night. Not not literally, but it pains me to think about as, as a younger person some of the mistakes that I made. And by mistakes, I mean things that I missed out on. Things like when I was running my own business, not contributing to a solo 401 K and not maxing out certain accounts. And I say this as someone with a finance degree, someone who’s a CFA charterholder. And I made all these mistakes and looking back on it, I kick myself. But, you know, like you kind of said, there’s nothing I can do about my my missed Roth IRA contribution. And. Right. Well, at this point. Right.
Liz: Exactly. And and it’s and and. To your point, too, I think You. And we can’t, you know, especially with the young family, I think, demographic that we’ve been working with, they usually have a lot of competing priorities. So we can’t do everything, but it’s trying to show them, well, here are your options, right? Here’s the things you can do. And then what are the priorities. You know that they’ve set. And so what of those options is going to get them closer to those priorities. And how do you kind of get some of everything. Because you know not some some folks it wouldn’t make sense to, you know, to do the maximum to say a solo for one K, but maybe opening the account and doing partial funding is going to help keep them on, on track and, you know, on their pathway and get them in a good spot. But they also want to do like a fun vacation now with their family because they don’t want to wait till they’re 65 because we see those folks too. And you know, sometimes when you wait that long, you don’t know how much time you have and how much health you’re going to have at that point to enjoy it. So doing some balancing of both those things. But yeah, you’re right, I have the same I have the same thoughts. And I grew up with a CPA and eventual financial planner in my house, so.
Michael: Right, right. Yeah. I mean, you know, not a novel idea in the sense that there’s a need for much greater financial literacy in this country, I think in general, or an opportunity to, to help out, to help out young folks. But it really is remarkable. Just the you know, I think Albert Einstein said that compound returns are the eighth wonder of the world. And if you start doing these things relatively young in your 20s and 30s, to the extent you can it really potentially has a massive impact. I want to go back and ask about you mentioned your journey, which is a little bit unique. You started off as, as a teacher, and you kind of alluded to the fact that that gave you, you know, insight into what it felt like to be a young professional. Are there are there other, I guess, takeaways or lessons or skills you feel like you you took from your career and education that have translated to your practice now?
Liz: Yeah. I think I mean, the biggest one is working with a wide variety of people and personalities, because a lot of this business, at least that I’ve learned at this point, is really it’s very relationship and trust based. Yeah. And so the right fit for the, for the, the style of, of firm you are and personality, I think that you’re interacting with because we are not the right advisors for every, every client that comes our way and vice versa, probably. But being able to kind of appropriately read the folks that we interact with, try to listen to them and actually hear their their real concerns and priorities not just what we think, you know, fits on to them given their age and faith. And, and and ask trying to ask as much as we can the right questions. You know, of them to get out what we need to try to help partner with them, to meet their goals and to do that in the way that we know might be most advantageous for them. All those things were things that sort of did on a different scale and, and different content, I suppose. Working with I taught high schoolers, so working with teenagers. So. Yeah.
Michael: Yeah. And then the second piece of that, of your kind of career trajectory is you worked you worked with your father, I believe, for a while you kind of became a partner with him and then you took over. So I imagine that in, I don’t know, may have been frustrating at times. I imagine that’s a tremendous opportunity, though, to get to to learn the ropes from someone. It is with whom you have a tremendous amount of of of trust and love. Yeah.
Liz: We were I was very fortunate. And we both work as it was what he wanted to happen, I think. But he was looking for some support at a time that I was looking to transition out of teaching, and he didn’t, I think he didn’t think I would necessarily have a strong interest. But I said, I really like the aspect of working with people that I do enjoy that. And so that translates well into this, this profession. But I also like the technical knowledge and background skills. I was a science major and had taught science and, and did a lot of math, math work. And so I enjoyed that kind of learning. And so we ended up starting that out to see if this might work out as a transition plan for him. And that was the end goal, was that I would be a succession plan for him when he went to retire. If this all worked out, you know, as we hoped it would. And so learning from him and learning how he interacted with clients and the way he approached different problems. And also I learned a ton from him because I had no knowledge about running a business. And how how to do that. And just the things that go along with that. And it’s actually been also impactful, I think, working with some of the young family clients because several of them. Them run their own business. And so I’ve been able to kind of also. Give them I call loose like business consulting and and or recommendations of things they could follow up on outside of. Sure. You know our relationship.
Michael: Yeah. A more I guess holistic yeah service offering that you’re that you’re able to offer there. So we’ve talked a little bit about about young families. I feel like the kind of the idea that lots of folks have here, probably for good reason, is that the younger generation, it’s pretty tough right now in a lot of ways. Things got very expensive. It’s very hard to buy a house. Yeah. Can you give us a more is there an optimistic side of that? Are there things that make it great to be a young professional family right now that, you know, maybe we don’t hear about because it’s not the the fear porn that that draws, that draws clicks or that draws eyeballs or attention. But, you know, for your clients or is there a kind of a reason to be optimistic and positive about the future and be hopeful about being a young family right now from a financial perspective or otherwise? Yeah.
Liz: I think a lot of our I mean, yes, there’s certainly have been challenges, especially in housing, you know, last, last two years have been tough in general for people considering making a move, right, or getting a mortgage for the first time. But, I mean, I think if you talk like, I know my dad gave me this perspective because I’m not quite old enough to have this perspective. But, you know, there was a period in the late 70s, early 80s that was, you know, it’s much worse from a from a getting a loan standpoint than going through right now. We had it just really good for a while in terms of, you know, what we were experiencing. So, you know, in relative perspective, it feels a lot worse. But we kind of, you know, we all it. We his. Throughout history, we’ve sort of gone through cycles, I think. So trying to give people one just reframe perspective on what can we control. Right. Which is what are your priorities, what is important to you, what are you trying to plan for in the future? And then what tools do you have at your disposal, which is one through jobs? If people are W-2 folks, you know how they’re approaching that because there are a lot of opportunities, I think, out there right now, and we work with a fair amount of pretty well compensated folks who do have really good ways to put away more for retirement. Right. And, you know, for the long terme, there’s a lot more variety of advantaged savings plans to currently that didn’t necessarily exist.
Liz: You know, I mean, I talk with we talk with a 60 year old clients all the time saying, well, we didn’t have a Roth 401 K option when I should have been using a Roth 401 K, right. They couldn’t do that. That didn’t exist, you know, 30 years ago. So when they were at the tax bracket to want to take advantage of it. And so these are things we can kind of help point out to folks now in like 5 to 9 plans, you know, and ways to save for education that are, you know, more favorable and tax advantaged. So there are tools at their disposal. So I think the, you know, the vast majority of clients that we work with, you know, there are things that are stress points, like planning for education costs, knowing that have been inflating at a not very sustainable rate. I do think that’s going to have to change at some point. I don’t know when and how exactly, but it’s going to have to and other you know, this housing certainly is very stressful, I think, for folks. But there are also a lot of opportunities to save and put money away in tax advantaged, you know, vehicles that we can try to help them strategize around, I think, and prioritize to set themselves up, to be able to make choices later in life or have more choices and options later in life.
Michael: I think those are all those are all great points, especially around. Yeah, the Roth Roth hasn’t been around all that long. I think it was 97 or 98 that it was introduced. And then also kind of that perspective. I’ve heard the same thing too, from my parents. I think at one point they had a, a 15 or 18% mortgage something like that, which is ours.=
Michael: Which is, which is, is mind boggling. But yeah, these things, these things change and we go through cycles. And it’s a great point to just about about having all these tools available and also having, you know, the information, whether it’s through a professional or another resource available to help you kind of understand and maximize and, and optimize all of these tools. You know, for, for some previous generations, it was pretty difficult to to even understand what was out there and the limited tools that were out there. Right?
Liz: Yes. I think that’s the, the pro and the con of right now is there’s almost too much information sometimes for people.
Liz: Agree. Really hard to sort out what’s good and not good information or what’s or what’s most important for them.
Michael: What’s actually going to move the needle versus what’s going to save you $12.20 years down the road. Right.
Liz: It’s not worth their time. Right. Yeah. You know, fuss around with it.
Michael: I totally agree with you that the problem is in some ways is not that there’s too little information, it’s that there’s there’s way too much. And kind of sorting through that noise can be, can be challenging. And you know, the, the on top of that, the tax code is kind of a Frankenstein that gets, you know, twisted and a new thing bolted on every year. And again, even for someone who’s got a finance degree and thinks of himself as pretty financially savvy, keeping track of what what solar incentive is there this year now? Or it can almost feel like a full time job, especially if you want to do it correctly.
Liz: Oh for sure. Well, and we’re potentially about to revert to prior tax laws in two years. We keep saying well it might be like this, it might not. We’ll, we’ll approach it and we’ll, you know, we’ll figure it out when it comes and then readjust. Right. Because that’s just how this stuff goes. But yeah.
Michael: So I want to go back to something you mentioned at the beginning and kind of dive into it, because I think it’s really important. And that’s fees. And you mentioned you know, when you were, when you were younger and a lot of your friends were being contacted or they were working with folks who were compensated primarily through commissions. Can you just for anyone who’s kind of unfamiliar with this issue at a high level, kind of zoom out and maybe explain the issue with, with commission based compensation versus versus the fee only structure that you and a lot of other advisors have gone to now.
Liz: Yeah. So technically, folks can be in this industry, I think, you know, can be commission only. They can be fee based. Fee based means that part of their income is coming from commissions and part is direct fee from clients. And that’s very confusing language, I think, because then there’s fee only. So you know, I. That’s a little hard to keep track of. And Feelingly, you know, in our definition means that we only receive compensation directly from clients. We don’t sell any product. And that does mean we cannot sell folks life insurance policies. We have to recommend them, you know, go see a broker and get policies because we don’t do that here. You know, because the insurance is pretty much a commission only business. And so like you will have to engage with that if you want to get insurance and that that’s that’s the way it works. And that’s all right. It is what it is. I think the issue sometimes becomes that then insurance gets conflated with also financial planning gets conflated with investment advice when sometimes it’s maybe better suited to separate those things for their own individual purposes and then get compensated in the way that makes the most sense, you know, for that type of advice. So we are fee only and just charge clients directly for the advice that we give you know, and planning work and investment management work that we do for folks.
Michael: And I think the, the issue with, with anything that’s, that’s commission based, is it potentially you get misaligned incentives, right? If you’re working with an advisor who essentially makes money, if they sell you a product or if they open a new account, or if they, they hit whatever metric. I think in anything, whether it’s working with the financial advisor, working with business partners, kind of the idea of aligning incentives is is really important because we’re we’re human beings, right? People respond to incentives. And to the extent that you can kind of align your incentives with your clients that is usually a win win for everyone.
Liz: And that’s and that’s part of what’s tricky in this industry is Clients having the ability to know that the advice they’re getting is hopefully not being influenced by how the adviser is getting compensated. And as you said, it’s easier. I think naturally in a commission based, you know, framework for that to skew the advice that’s being given, because that’s how you’re getting compensated versus if you know that a client is paying you a flat, regular fee, you’re not worried about, is it better for me from a business and revenue perspective to try to, you know, talk about this or this solution for whatever it is they’re looking, you know, they’re looking to do? It’s really about I can divorce myself from that and just say what’s best, what’s best for the client, you know?
Michael: I have a couple more questions for you here, Liz. One, I want to get the backstory of your firm’s name, Clear Story Advisors. It’s a bit of a unique name and a good story behind it. So how did I think it was your dad who originally came up with it? What’s the what’s the story behind the name?
Liz: Yeah, my dad did name the firm, and my brother is an architect, so I think that was kind of the the thing that, I don’t know, piqued his interest at the time that my dad named the firm, because Clear Story is an architectural firm. It means a window that is high up and lets light in. And the whole, you know, kind of tie to financial planning was supposed to be that, in theory, we’re hoping to help folks shed light, you know, and cast light on their financial picture, give them clarity so that they can make, you know, the best decisions for themselves. But, you know, it’s it’s not a well-known firm, necessarily. So we usually have to explain it to people.
Michael: Well, I think it’s a great analogy because I think for for folks who who aren’t and don’t have a deep financial background, it can feel like you’re walking around in the dark, right? And then like, you sit down with the right person, you get connected with the right advisor. And it does. It feels like someone flipped on the switch and you can like, finally see everything and you say, like, thank goodness this all like, I’ve got someone to to help me make sense of this. Now, I’ve been I’ve been stumbling around here and now I can see. So I, you know, I don’t know if that’s what you had in mind, but I certainly think that’s.
Liz: I think that was his bent, and I liked it. You know, I just always go it’s usually a point of explanation for people because a lot of firms, as we all know, are kind of, you know the names of the people who own them. Right? You know, LLC. Or advisors, you know. Yeah. Which he didn’t, he didn’t intentionally want, even though it’s funny, we are a family business and he transitioned to me. So we could have done that and it would have still had continuity. But.
Michael: So my last question for you, Liz, people want to learn more about you. They want to learn more about Clearstory. Where can they go?
Liz: I mean, I think the main place would be clear story. Our website, Clear Story advisors.com. It’s got a lot of information on there about kind of our services, how we work. And I’ve got an associate advisor with me and a client services person, so they’re on there as well. Joe and Cindy and their information and, you know, my bio and all that good stuff. We’re also Napfa members, which is the National Association of Personal Financial Advisors, and that’s a group of it’s all fee only advisors an Rias. And so remembers there and on, you know, all their site materials and then and like, there’s another one that’s cropped up in the last ten years or so, the fee only advisors network. So, you know, we’re part of them because we’re, we’re pretty heavily embedded, as probably you can tell, in the fee only community.
Michael: Yeah. Well, I’m glad you you can’t say that enough. I’m a big fan of that model. I think it is the you know, it’s gained a lot of momentum. And I think to the extent that it continues to gain momentum, it’s it’s it’s great for it’s great for investors. It kind of helps to improve outcomes for, for for retail investors. And in my mind, that’s a that’s a great thing. So you’re welcome to say fee only on the show as much as you like.
Michael: Well we will make sure that there are links to all of those in the show notes for this episode. Liz, thank you for coming on, sharing a little bit of your unique story and your thoughts here. I really enjoyed the conversation.
Liz: Yeah, thanks for having me, Michael.
