In this week’s episode of Retire in Texas, Darryl Lyons, CEO and co-founder of PAX Financial Group, dives deep into the essential tools and strategies for successful retirement planning with guest Jacob Campbell, a Certified Financial Planner at PAX. Join Darryl and Jacob as they explore the quantitative and qualitative aspects of financial planning, ensuring you’re well-prepared for your future.
Today’s show highlights include:
- Jacob shares his experience with the rigorous CFP exam, highlighting the dedication required to achieve this prestigious certification.
- Why “pivoting” is a more accurate term than “retirement,” and the importance of having a purpose beyond leaving the workforce.
- Discover how tools like Honest Conversations and MoneyMind help align financial plans with personal values and priorities.
- An in-depth look at Money Guide Pro, its features like the Play Zone, and the importance of accurate data inputs and Monte Carlo simulations in forecasting retirement success.
- Jacob’s perspective on measuring success in retirement and the freedom to make choices that align with personal goals and values.
If you enjoyed today’s episode, make sure to leave a comment and share the show with a friend!
Transcript
Darryl: Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group. Thanks for tuning in to Retire in Texas. Appreciate it. And as always, this information is general in-nature only; it’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information.
And also, we’ve got some pretty cool ebooks. I always remind you guys to grab some of those ebooks just to kind of continue to educate yourself on some of the nuances of our business. If you’re a business owner, there’s a good one there. If you’re interested in biblical responsible investing, there’s a good ebook there as well.
And so today I’m going to do a guest show. So this is cool. I love doing the guest shows. Jacob Campbell’s with me. He’s an advisor here. He’s a Certified Financial Planner™, which is a high standard in the industry. And, in terms of education, because that exam is brutal. It seems like I took mine decades ago. Jacob, was it still a two day exam or a one day exam?
Jacob: It’s a one day exam.
D: Okay, but they probably – Same amount of content now it’s just…
J: Yeah, I imagine so.
D: Yeah. Yeah, how long did it take you to study for that test? Like…
J: Oh, it was like, it was like 14 months.
D: Isn’t that crazy?
J: From start to finish. I mean, yeah.
D: Yeah, and I have, I have friends that have taken it multiple times and not passed it.
J: Yeah.
D: Because it’s not like – and we’ll get into what we’re going to talk about Jacob, I’m sorry. Jacob’s an advisor here and he’s a Certified Financial Planner™. And we’re going to talk about some stuff that I think is very important. But this test is a weird test because it’s not a pass/fail. Tell the audience how it works.
J: Yeah. I mean, I had a lot of, a lot of people that would say, “Well, what kind of score do you need to get on it?” Like, think of typically you’re provided like, well, you need to get a 70. You need to get 65 to pass.
D: Yeah, yeah.
J: This is not that way. They say, “Here’s your chance of passing.” You have a good chance of passing. You have a bad chance of passing, but you don’t know until you’re in the test. I don’t know if it’s, if it’s graded on a bell curve.
D: Yeah.
J: Or how exactly it’s graded, but there’s not a standard where they say you need to get 70% to pass.
D: Isn’t that crazy?
J: It’s really just you get in there and based on the material, have you passed or have you not. And so you really don’t know when you’re studying what exactly you’re studying for.
D: That’s crazy. And so they take a certain percentage I guess that’s how they do it. So a certain percentage of the applicants and some pass, some fail. So yeah, it’s tough.
But yeah. So, I’m happy that you are a Certified Financial Planner™ and that’s why I wanted you here. Is, I want you to talk about some of the tools that we’re using. And if you’re listening right now please stay tuned because these tools are very important for your future. You’re thinking, “Man.” And the tools we’re going to get in the nuts and bolts a little bit, but, I want to talk a little bit about the tools we use, and I thought you’d be a good person to talk about that.
Now, a lot of times we use these tools to forecast retirement. And, you know, the biggest questions that we always ask ourselves as we transition to retirement or when we pivot is, “Will I have enough?” I mean, that’s the big question. So in your opinion, how do you define retirement? Do you have a way you can define that for us?
J: Yeah, I guess probably the first thing before you define retirement is to get away from the word retirement. We try not to use that even around the office. You know, we talk more about pivoting because retiring something means that it’s, it’s gone past its useful life. And when people are getting out of the workforce, they are not past their useful life.
And so, having, having a purpose is important. And so people that fail in retirement, people that get into retirement and don’t find themselves fulfilled, it’s not because they haven’t left the workforce, it’s because they don’t have a purpose. So…
D: Oh, I didn’t mean to cut you off. Go ahead.
J: So, don’t simply retire or pivot from something, but have something to pivot to. That’s important.
D: Yeah. You know, and we talk a lot about this and I don’t mean to sigh, I’m just kind of like, gosh, you know I just see it so often people are just retiring. And like I do believe that there’s an important element of this second half of life that needs to be considered.
Now, I actually want to ask you about something that I didn’t prepare you for. Well, I guess I kind of did. But I like the tools that are, that we use, that crunch numbers. But I also like the tools that we just help people think about the not number stuff. Like, can you explain some of those tools?
J: Yeah.
D: Because you talked about purpose a little bit, but we have some other tools that help people think about like, what we call qualitative tools, not quantitative. Quantitative means, you calculate quantity. Qualitative, the qualitative tools. Like the Honest Conversations and MoneyMinds.
J: Yeah. And it’s important too because you know when we’re building out a plan, if we’re using a tool that we we called Money Guide Pro, it’s important because that sets the stage, that sets the- we’re building the road and we’re mapping out kind of the, the course that’s actually going to get a person to the destination.
But the other part of finances is not the numbers in the sense, but it comes down to putting in place guardrails, that way you know, that when the, when you’re taking that trip, we know what else is important to you because, obviously finances are important, but that’s really just one piece of a puzzle. That’s not, that’s not the whole person.
D: Yeah.
J: And so being able to know what other priorities you have in life. So if something comes up where the numbers don’t line up automatically with other priorities you have in life, it’s important to know how to get a person recentered, you know.
D: Yeah. And the tools that we’ve used to be able to help recenter people are often those, behavioral finance tools. The MoneyMind and Honest Conversations. Are you finding that the Honest Conversations is a tool that’s helpful to center people?
J: Yes. Yes, absolutely. And it’s a, it’s a good place to have a conversation not only for advisors to understand clients better. But for clients to understand themselves and to understand if they have a partner in this to make sure they’re on the same page, because one partner might have a different set of circumstances they came up with. And they say, well, it’s really important for me to give, to honor my charities, you know?
D: Yeah, yeah.
J: And then the person could say, “Well, I never even thought of that. I didn’t realize that was important.” And so to make sure that those people are on the same page and to understand that that’s a priority, so that the money, the returns that we get, the investments that they have, that they support those priorities and make sure that that’s all in alignment.
D: Yeah, I’m kind of, I’m sorry. I’m kind of jumping around a little bit. But this is important. So, to make it clear to those listening, there’s a tool called Honest Conversations that we use, that Jacob was referring to, that helps us, as advisors – because I was, I didn’t think about that – it helps advisors and the clients understand what’s important. Because like, to your point, one person might say giving is important. The other one might say it’s not. And we actually don’t discover that discrepancy. And the spouses don’t discover that discrepancy.
J: Exactly, yeah.
D: Until we go through this exercise. So do you get, do you have to be a referee here or how does that work?
J: Less a referee, I think, you know, because it’s not combative, but it’s, it’s really it’s eye opening because you could be with this person for 20, 30 years and realize the things that are going to make your partner happy are not the same things that are going to make you happy moving forward.
D: Yeah.
J: And you want to make sure that both of you guys are fulfilled. So, we’re doing, we’re on the same page maybe with the money, but we’re not on the same page with what the money’s going to accomplish for us. You know?
D: No, that makes sense. So now let’s go back to the quantitative tools. Quantitative tools. That was the quality tools. MoneyMind, Honest Conversations – and by the way, if you want to do a MoneyMind and you’re listening, this is one of our tools, email Jacob. He can send you a link just to do the MoneyMind, Honest Conversation tool.
J: Yeah.
D: Yeah. So if you want to do those tools just to kind of see – the MoneyMind I know we can, the Honest Conversation is a little trickier, but MoneyMind for sure, which is one tool that just says, “Are you and your spouse aligned in certain areas of money?” So…
J: Absolutely.
D: Yeah. jacob@paxfg.com. So, go to the quantitative tool, Money Guide Pro is the big one that we use. And so tell me how that works just generally speaking.
J: So Money Guide Pro is financial planning software. And the idea behind it is it says, “What are your goals? What do you want to accomplish? What assets do you have?” So, what do you want? What do you have? And then ultimately how do we get you there? And so, very good tool for being able to plug in.
This is what we’re trying to accomplish. These are, this is the money that we need to spend. And this is the money that we’re going to have to get there. And then we’ll work with you and try to find out exactly how we can make those two align.
D: So the tool is only good, as good as the data you put in.
J: Mhm.
D: So tell me about, like some of the data pieces that you find to be most important, when you’re doing a financial plan and making sure that somebody has enough for retirement.
J: So again, it’s important we’re going to say, “What do you want? What do you have? And then how do I get there?”
D: Yeah.
J: Like you mentioned before, “Will I run out of money?” That’s always the important question. Some of the, the key things to put in whenever we’re looking at “what do you have”, kind of comes down to two different categories. that could be pension, it could be rentals, it could be Social Security, it could be retirement. And
We have retirement income, which is going to be money that’s coming in while you’re retired. So then the other category are going to be your investment assets.
And that could be your 401K, your IRAs, brokerage accounts. If you have a business and your business owner and you plan on selling out of that, those are all money, monies that need to be accounted for. Or we say this is what you plan on spending, whether it’s on a monthly basis, if you’re taking trips, if you’re buying, you know, lake houses, those kind of things. But what assets and what do you have that’s going to contribute to your succeeding there?
D: Yeah. No, that makes sense. And so, so that, you know, putting in the data for the assets. Right? Any other like important return pieces to talk about, like how do you, how do you put in rates of return for growth on some of the assets?
J: Well, it’s important.
D: How do you determine that?
J: We can, we’re going to look at exactly what, how you had the money invested. And so, that money can be there can be different, different allocations. And then, the software is going to look and determine what are the average returns based on the allocation that you have the money at.
So we can, we can tinker with that and we can say, “You need to take more risk to be able to get to where you want. Or you can dial back on the risk.”
D: Yeah.
J: There’s no reason to overextend yourself.
J: Yeah, that’s pretty important. And that’s the challenge when you’re doing an Excel spreadsheet and you make assumptions on rates of return, because it can throw off the plan. And so, you know, a lot of what’s good about the software that we use and a lot of – by the way, this is not anything, you know, all financial advisors should use a good software. But – I guess not all of them do but – but the good ones do. And but the data inputs are good on the rate of return assumptions.
And actually those rate of return assumptions, I’ve kind of dialed into them in terms of just, peeling, you know, looking under the hood, peeling back the onion. And, you know, had a stress test. Is that really a rate of return on real estate, or should it be higher, should it be lowered? And they just use data. You know, they’re just using data.
J: Yeah.
D: Historic, historical data. They’re not like arbitrarily trying to assume things. But the very basis of Money Guide Pro, very important, is rooted in something called Monte Carlo.
J: Mhm.
D: Can you talk about Monte Carlo?
J: Yeah. Monte Carlo is a, it’s a mathematical technique that predicts the outcome of an uncertain event. It’s a way to model, to demonstrate risk, and to demonstrate uncertainty. It’s actually named after Monte Carlo, the casino in Monaco.
D: Oh, Okay. Yeah.
J: It was originally designed by someone that, scientists that worked on the Manhattan Project.
D: Interesting.
J: But what’s cool with it is that instead of you coming in and saying, “Okay, well, I’m 30, will I have enough money by the time I want to retire?,” Or, “I’m 55, do I have enough money to retire?” And we just give you a thumbs up, thumbs down.
D: Yeah, yeah.
J: And send you on your way. The Monte Carlo simulation is actually going to run a thousand different iterations of your plan, where they can say, “This is the best case scenario for the market, and this is the worst case scenario for the market.” And a thousand versions. So it’s 998 in between the best and the worst.
D: Yeah.
J: That way, instead of just giving you a thumbs up thumbs down, oh you should be good. We’re actually going to come back with a score where it says, “You have this percent probability of succeeding.” So, we’re trying to get away from rules. In our situation we’re trying to use tools.
D: Yeah.
J: So tools instead of rules.
D: Okay. Yeah.
J: And the Monte Carlo simulation is one of those tools.
D: That’s good. And, and so the Monte Carlo is embedded into Money Guide Pro, which is one of the major tools that we use. But there’s also some other features that are in Money Guide Pro that are helpful. Can you, can you talk about some of those features?
J: Yeah, it’s really cool. One of the, one of the tools that we use is called the Play Zone. And the idea behind the Play Zone is it’s an opportunity for us to model some different scenarios for you. So you might have a really good score, that’s high level confidence, where you say, “I have enough money to do the basic things that I planned on doing, but there are some additional things that I want to do. I want to give this much to charity. I want to buy this beach house. I want to retire and do, you know, do some more traveling.”
There are things that we can go in where we can actively and live, pull those levers with different sliders and say, “Okay, well, if this person retires a few years early, what is it going to do to their plan?”
And so it’s an opportunity for us to, like you mentioned, stress test where we say, “The plan is good, but what if we make these alterations, is it still going to be good?” That’s one example of using the Play Zone. The other would be that if someone doesn’t have a score that’s in their confidence zone, they’re not happy with it, well we can hand the mouse over and say, now you drive and you make the changes that you would feel comfortable with. That way you can dial it in and find out exactly what you need, what you would need to do to be able to get this in a confident zone.
D: I never did that. I never handed the mouse over. I think that that’s probably a helpful exercise to engage. You know, the best plan is a plan that has a plan if the plan doesn’t go as planned.
J: Mhm. Yup.
D: And so that makes a lot of sense, because messing with the what if scenarios in the Play Zone – you didn’t talk about the what if scenarios, but what ifs is a deeper dive, like the Play Zone. Like it’s different situations – and they just get so detailed. Changing tax rates. And what if you convert a Roth all that I mean it just gets a bit overwhelming.
But that’s what that’s what we do. And all these tools, you know, part of my responsibilities, I go to these conferences and I go and look at all the new tools coming out, and artificial intelligence is starting to play a role in what we do now. But you’re the one that’s actually using them. And so I just appreciate you coming on here and sharing kind of how you use them and what you find to be effective.
And just as we close out here, tell me a little bit, like what gets you excited when you work with somebody like, what is what’s the, what’s the heartbeat of Jacob?
J: Well, I think, I think it comes back to one thing that I think – part of the way to measure success and retirement and measure success in any type of financial planning is, is freedom. That’s what it boils down to me. The idea that when you pivot, when you retire, that you work when you want to, you have the freedom to choose that, you have the freedom to spend what you want to.
D: That’s good.
J: You have the freedom to give what you want to. You have the freedom to travel as much as you want to, and not to, not to excess. I mean, it’s not saying that everybody, you know, is going to retire with $10 million in the bank.
But that you have the freedom to make those decisions. That you’re not working because you have to, if you decide to work, it’s because you have the freedom and you chose to. So being able to be in conversations where people experience that freedom and get to the point where they, where they can appreciate that. Where they have the ability to decide for themselves what their future is going to look like. Because doing well with money has little to do with how smart you are.
You know, and it’s important for us to be there because there are a lot of smart people that need help. You know, the best people in the world. Michael Jordan still had a coach.
D: Yeah.
J: You know, it doesn’t matter how talented you are, sometimes you still need a coach. You need somebody there that walks beside you.
D: Yeah.
J: And I – people at PAX, myself included, like being the person on the other end of that call. When you need someone that you can trust, when you need someone that has an objective opinion. We want to be there whenever you make that call.
D: Yeah. It’s very, very well said. Very well said. Well, Jacob, this has been fun. Thanks for hanging out.
J: Of course.
D: Giving everyone updates on the tools and why they’re important and how to use them. And I know we just kind of just helicopter overviewed this thing. So, I really appreciate it. And if anyone wants to connect with Jacob, it’s jacob@paxfg.com and he can get you that MoneyMind tool. I know you can get that one.
J: Yup.
D: And any of the other ones. We can figure that out and walk alongside of you. So appreciate you being here
J: Of course, thank you.
D: And as always, I want to remind everyone, thank you for showing up. Thank you for listening to the very end. And as always, you think different when you think long term. Have a great day.
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