Sound Financial Group president Paul Adams sees similarities between building a home and building your financial portfolio
If you meet with Sound Financial Group founder and president Paul Adams for investment advice, you might think he’s in the wrong business because the two words he repeatedly uses to describe his investment strategy are “design” and “build.” No, he’s not in the home construction business. He’s referring to the process of identifying what kind of life you want to live, then determining what your salary, investment requirements, and career need to be in order to support that lifestyle.
“Design means we set back long enough to figure out how our long-term life should look so that we can actually have the life that we want,” said Adams, 38, during an interview in his storefront office at Mill Creek Town Center. “Here’s the life I want, this is the amount of income it takes, and then (here is) what’s going to fit from a career perspective or as a business owner into that.”
Adams, an avid outdoorsman who lives with his wife, Kristen, and their three young children in Mill Creek, has offered this advice to his clients through the book, Sound Financial Advice, which he published in 2011, and a weekly podcast, Sound Financial Bites, which he launched last April, since he founded the company in 2011.
Today, he prefers to keep his company small, overseeing a team of two administrative staff members and three financial advisors, and his investment advice focused on long-term goals and deeper (almost philosophical) underpinnings of money and investing.
Adams’ podcasts explore in very plain language a range of investment themes, such as how to sell a business, legacy planning, mortgage myths, investment illusions, and tips for selecting the right life insurance. The podcasts are accessible for entry-level investors, but also packed with enough experience-based knowledge to appeal to veteran investors. Sure, podcasts are great marketing tools for Sound Financial Group. But Adams hopes they also remove some of the fears people might have that prevent them from consulting with a financial advisor: Am I saving enough money? Am I making the right investments? Will I have enough money to retire comfortably someday?
“The thing about investing and doing so in a way that actually creates wealth over a long period of time is that it is actually the least sexy thing that you can do because it’s like the get rich slow game,” said Adams.
Q: Is it true that you started to invest when you were 19 years old?
A: It was actually earlier than that. I opened up my first accounts as a minor. I was busing tables. I was 16 years old. I managed to live off my tips, and then all my paychecks went straight into the bank, which then went straight into a set of mutual funds.
Q: As a teenager in those early years, where did you get information about money and advising? Did you subscribe to the Wall Street Journal at the age of 15?
A: I literally read Personal Finance for Dummies until the binding fell apart. In fact, I just threw it out recently. That’s how I got started. As an 18-year-old, I sold some advertising (and then started) my own business selling salt, of all things, in Las Vegas to companies like the Harley Davidson Café and others on the Las Vegas strip. I knew a bunch about money. I wasn’t afraid to talk to people.
Q: What did you learn during that period?
A: I learned that money is more than math. When it comes to money, it’s more (about) what’s going to happen to money over time, and how our behaviors and our feelings about it actually impact what’s going to happen. For example, if we just lined up 10 bowling balls in a park and left them, we’re going to come back and there are going to be 10 bowling balls in thirty years. That’s math. But if we put 10 pumpkins out there, predicting what’s going to happen over 30 years requires a lot more knowledge than math. What’s going to happen? Will this pumpkin degrade? Will this soil grow a pumpkin? Will we come back to an enormous grove of pumpkins in 30 years? We don’t know. But it requires two things. One, we have to know enough about the environment that the pumpkins are in. (Second,) we have to tend to them if we want a positive outcome.
Q: Your main message is that people should design and build their financial lives. What does that mean?
A: First, you’ve got to figure out what is the life you want. How many weeks a year do you want to work? Where do you want to live? How much time do you want to spend with your family versus how much time do you want to spend backpacking? Whatever that stuff is.
Then there are two levels of that life: sufficiency and surplus. Sufficiency says, “As long as I have this amount of money, that’s a good life.” For some people, (the sufficiency level) is $200,000 per year (and) they live in a safe neighborhood, still hang out with the friends that they hang out with, and go see their grandkids. That’s sufficiency. Maybe (their) surplus (level) is $800,000 (per year). Only then should you figure out what your career plan is going to be. Only then should you take the time to figure out, as a business owner, (whether to) expand (the) business or not.
One of the things I see happen far too often (is that the business owner) build(s) and grow(s) the business for the business’s sake, or the executive gets the next promotion because it’s what they’re supposed to do. Instead of getting their next promotion, they could just go to their boss and say, “I don’t want to work that much. I’ll take on more responsibility, but rather than you paying me $400,000 a year, I want to work three days a week, pay me $250,000 a year, and let me use the other $150,000 to hire two staff people that I can guide to get the rest of the work done.” You can invent whole new offers in your career because you designed it.
If people can first realize what is going to be a good life for them, then we can build and help design the financial structures that are required to have that vision of an ideal future. If you haven’t said for yourself how much is enough, then how much is enough? It’s always more. But if you have said how much is enough, then suddenly when somebody says, “I’m going to give you a raise,” it’s just not nearly as powerful.
People should absolutely take those raises and those opportunities, but how much does it change? Who has more power when it comes to the next conversation with their boss? The person making $800,000 per year, keeps maybe $570,000 (after taxes), and saves $50,000 a year? Or the person who makes $800,000 per year, only spends $200,000 (and saves $350,000 per year)? Why is it that most of them have to take the raise? Because they haven’t stopped long enough to say even what they have now is enough.
Q: Most people have read for years that we aren’t saving enough money. Everybody knows it. At some point, are attitudes going to shift? Is there going to be a sea change with millennials, maybe?
A: (Young people) are watching their parents go through the financial wood chipper because their parents have been bluffing this whole time. Not all of them, but most. The future will always call your bluff. They are watching their parents downsize their home — not because they want a smaller home or because of all the travel they want to do. It’s because they need to invest the money that’s in (their home) to pay their bills. People will even fake that for a few more years. They might say, “I just love working. I’m going to keep working.” But it doesn’t necessarily work that way.
So the bluff of the parents is that they have been driving late model cars, they lived in nice homes with mortgages, and all that. Now they are on the other side of that and they are falling apart. Their kids will eventually know about it, and they will say, “Not me.” They start to realize their parents thought they could do it on their own, they DIY-ed it on their investments, or they decided to work with an advisor that wasn’t telling them the truth. People are starting to see that in their parents and the ones who can course correct are (doing so).
Q: Some people equate talking to an investment advisor with visiting the dentist or the doctor. It’s something they might fear or at least don’t want to address or talk about. Is that your impression, too?
A: The major problem is that people can’t take it as a conversation. One of the first things we talk (about with clients) is (there is) almost zero likelihood that you will actually be able to retire in a similar standard of living as what you have today unless you are saving 20 percent of your gross income.
Nobody talks about that out of the gate because people are afraid to talk to an advisor. They think an advisor is going to tell them to save more money. We teach people to think differently about money so that being more responsible with it is a natural outcropping of the new way of thinking. (Clients) never get berated by us. There’s never, “You shouldn’t have made this decision or that decision.” We just work with people in the way they view money and the world. We do what we do to change the way people think.
But the reason (most) people don’t want to work with an advisor is that (the advisor is) going to ask them to open their kimono. Why do people not go to a doctor to get their full physical? Doesn’t everybody know they need to get their full physical? Why don’t they? They say, “Man, I’m just going to lose a few pounds first before I go see the doctor because I know he’s going to say I should lose weight.” Well, maybe that’s what they’ll say. But odds are there’s some breakdown in our existing way of thinking about it or that profession wouldn’t exist. The doctor wouldn’t exist if the only thing they were ever going to tell you was you need to lose weight.
Q:Do the podcasts you produce help your business, or do you feel like you are kind of giving your financial advice away for free?
A: I think what the podcasts have done is made it easier for people to understand who we are. I wanted to create an educational way for people to engage in what we do. A lot of clients just self-select if they are the kind of people who want to work with us.
Originally, I wanted to build a huge firm with 200 advisors because I wanted to impact 10,000 lives a year with the knowledge we brought forth. It takes forever to build a firm that big.
Or, you launch a podcast in April and by the end of November you have already reached 8,000 downloads. That’s where we are going to reach people. One of the papers we are … going to publish (will talk about) exactly how we advise clients. We hope people will take (that advice) and use it. But more than enough people will want to engage with us and want to be involved with me and our advisors.
This article originally appeared in the January 2017 issue of 425 Business.