The X’s & O’s

One of the most important factors in a financial plan is the amount of risk you have in your portfolio. This factor varies from person to person, so it’s vital to get your risk tolerance and capacity customized to your wants and needs and not just thrown into a one-size-fits-all plan. Brent, Matthew, and Joshua talk about the considerations they go through when determining someone’s risk tolerance and how this may change as you get closer to retirement.

The Hosts:

Brent Pasqua, Matthew Theal and Joshua Winterswyk


Brent Pasqua: Hey, we’re back. Welcome to Retirement Plan Playbook. We have an exciting show for everyone today. Today, we’re going to talk about understanding your risk tolerance. And for me, I think risk tolerance comes in many different forms. It’s not just investments. But it could come in financial planning decisions that you could be making both in the short-term and longterm. I’m excited to get your guys’ opinion on this, because I think all of us probably have some different opinions on risk tolerance. So for me, I’m Brent Pasqua, I’m host and founder of RPA Wealth Management. I’m here with Matthew Theal, certified financial planner, and Joshua Winterswyk, certified financial planner. Guys, how was your last couple of weeks?

Matthew Theal: It was good. Coming off 4th of July, a little tired today. Not going to lie. But happy to be here doing the podcast with you guys.

Joshua Winterswyk: Good. Yeah. Good 4th of July weekend. It was a lot of a lot of fun. Got the day after off to relax a little bit from the partying of 4th of July. But a lot of fun.

Matthew Theal: We played a lot of golf, huh?

Joshua Winterswyk: Yeah, we did. We played some golf. That was fun. It was a little hot there.

Matthew Theal: Yeah it was.

Joshua Winterswyk: We had a lot of fun.

Brent Pasqua: Yeah. I mean a lot of the conversations I’ve heard you both have over the last several days has all been about golf. You guys are just all ramped up in golf.

Matthew Theal: Well, I was on a break because of the baby, right? But now she’s getting a little older, and so I’m able to get on the course a little more than I was.

Brent Pasqua: Is that why you’re tired?

Matthew Theal: Well, I’m tired because it’s probably the 4th. But then yeah, she woke up in the middle of the night last night.

Brent Pasqua: It’s that dad life, huh?

Matthew Theal: Yeah, it is.

Joshua Winterswyk: But that the golf, yes. Matt took a little bit of a hiatus because his baby, but it’s nice to have him back. He’s fully back into the big golf guys group.

Brent Pasqua: There’s conversations around here about you guys getting me out there on the golf course. And it’s a tough battle always because I really don’t want to be out there. But I’ve got to get out there at some point. So maybe I’ll get the clubs ready.

Joshua Winterswyk: Maybe we’ll have to buy him a little welcome to golf gift. Maybe that’ll pump him up.

Matthew Theal: I don’t even know what to get the guy to get him out there.

Brent Pasqua: Well, my son is in golf camp right now. And he has three weeks of it throughout all of summer. And he’s going to be on his second week. And he’s really enjoying it. So if there’s any motivation that I have to be playing golf, it’ll be to be playing with him, and getting out there and not playing bad in front of him.

Matthew Theal: Actually that’s the play. So what we need to do is we need to talk to his son and bribe him with Star Wars toys or something, and offer him the Star Wars toys if he asks his dad to go to the golf course.

Joshua Winterswyk: And to play a round of golf. Because I’ll play with your son and you. That’ll be fun.

Brent Pasqua: Yeah. I’m excited to see him progress. He’s having fun with it. All right. So let’s get into the hot take headlines, and get into the news. Robinhood, the popular millennial trading app, has filed to go public. Which obviously, they’re a tremendously controversial company over the last several months. The company is expected to be valued at 40 billion or more, and is planning on allocating 35% of its IPO shares to its client space. What’s your take on this?

Matthew Theal: So first of all, there’s a lot to unpack here. I think it’s really cool that they’re allocating some of their IPO to their clients. That’s something that we haven’t really seen done before. So that should be good. I’m not quite sure how they’re going to work through the allocation process. If they’re going to give it to the bigger accounts, or the more active accounts, the accounts that make them the most money. Not sure on that. But as for Robinhood going public, I actually think it kind of might signal a short-term top in this meme stock individual investor craze. The Coinbase IPO seemed to serve as the top in the crypto market. And then also when you go back, I believe it was the Facebook IPO served as the top in the 2011 market, I believe. So again, could happen. It’s very overvalued. I would not buy the shares myself. But yeah, looking forward to see it come public.

Joshua Winterswyk: It’s interesting. There’s just so much controversy in kind of aftermath from the January debacle with the GameStop situation. They’re still going through so many civil lawsuits, investigations about that whole situation. And they’re still going public just because the market for them to go public is so good right now. But I kind of agree with you, Matt. It’s an interesting time for them. It’s going to kind of be fun to watch this unfold, but I do like that they’re offering the IPO shares to their consumers. Pretty cool for a young investor to get in on the IPOs. So that part of it, just that variable, I think, is a cool thing that they’re doing.

Brent Pasqua: Do you think that people that are trading on their app actually want their stock?

Matthew Theal: Yeah, of course. I mean, from my understanding, you go on those Reddit boards. I mean, they want any stock you can get. And then also with Robinhood, you kind of get free stock, I guess, when you refer somebody. They let you pick a stock. So I mean, obviously you’ll have to pay for their shares, but if you get them at the IPO price, you’re going to get an a nice pop.

Brent Pasqua: Do you think the way they transact their own stock on their platform is going to be different than how they trade stock with other stocks in the market.

Matthew Theal: Yeah. That’s what I was saying about the allocation process, I’m not sure how they’re going to allocate it to their client base. Like if you have to kind of opt in, and say, “Yeah, I want this, and I want 10 shares,” or whatever. Or if they’re going to allocate it based on who’s made them the most money, like their larger client base. I’m not sure.

Joshua Winterswyk: It’s going to be interesting to see because, even through this, you can see that other companies are actually offering, through Robinhood, IPO shares for their clients. So it’s just going to be interesting how this kind of shakes up the industry with offering IPO shares to retail investors through a single custodian, let’s say, like Robinhood. So, interesting time.

Brent Pasqua: Yeah. I think it’s just there’s such a sentiment of love hate relationship right now with Robinhood. People either love it or they hate them because of everything that happened.

Joshua Winterswyk: But they’ve doubled users with funded accounts. So it’s still interesting, I mean, just over a year, that they do have some good growth over this last year, even with the January debacle that went on.

Brent Pasqua: Yeah. It’ll be fun to see what happens with this IPO. Chinese ride sharing company DiDi went public last week, raising 4.4 billion on the New York Stock Exchange. Later in the week, China told the company to stop accepting new customers and to remove itself’s app from the app stores. At that point then, the stock price fell from $18 to $11 in a matter of days. What is going on here? And why is this happening?

Matthew Theal: Yeah. So this is a pretty wild story. I’m not really fully sure what’s going on. I don’t think we know all the answers yet. But essentially, DiDi is the Uber of China, right? I mean, it was a highly anticipated IPO. It had a lot of interest from retail investors. And they came public to a big pop, like how IPOs have been happening. And then a few days later, kind of China pulled the rug on them, and is basically not really allowing them to operate. So if they can’t operate, they can’t make money. And so the stock started to tank. It’s now coming out, after the fact, that it seems like the Chinese regulators told DiDi to halt their USA IPO. And they decided to go along with it to raise that said 4.4 billion. So from a a legal standpoint, I’m sure we’re going to see some lawsuits. I mean, tons of investors have lost money here. And this is going to really end up being most likely a bust of a Chinese IPO.

Joshua Winterswyk: And it seemed like, reading more about this story, and again, I’m just starting to dive deeper into it as well, but it seems like the Chinese government also, this isn’t the first time they’ve done that. They don’t really like the Chinese companies going public in foreign countries. It’s not their favorite. And it seems like that’s kind of the consequence of them doing that is that they could fall under the scrutiny of the Chinese government. So it is going to be interesting. But it did do well. American investors jumped on the stock because they liked the potential growth of the stock, but that’s the risk. And talking about risk tolerance, I think it’s a good segue because there’s one type of risk too, political risk, right?

Matthew Theal: Yeah.

Brent Pasqua: Does this kind of scream some of the challenges that Alibaba has had in the past as well?

Matthew Theal: Yeah, I think so. Alibaba’s an interesting case, right? Because they’re China’s largest company. But essentially, the founder went missing, Jack Ma, for many, many months. He wasn’t seen. And there was rumors flying around that the Chinese government had him killed. I mean, he’s since resurfaced. But essentially it seems like the Chinese government is really cracking down on their internet companies and their internet company founders, and trying to not let them get the same power that a Jeff Bezos or a Mark Zuckerberg have here in America.

Brent Pasqua: Great point. Yep. All right. Well, let’s get into the retirement planning corner. On today’s show, we’re going to talk about risk tolerance and risk capacity. And I think what’s important about this topic is that risk tolerance doesn’t just come in a form of how much risk are you willing to accept in your portfolio if the market goes up and down? Risk tolerance comes in all different forms because we’re always making financial decisions. Whether you’re thinking about buying a house in the next couple of years, or you’re thinking about retiring 20 years from now, those all have different risk factors that are involved with it. So we’re going to get into some of those today, and we’re going to talk about some of those details. Then maybe we’ll get into a little bit about why you shouldn’t go after companies or start working with companies that just market towards risk tolerance, because that could scream something else that they’re probably not going to help you with. Matt, so what is risk tolerance?

Matthew Theal: So risk tolerance is pretty easy to break down if you look at it just this way. It’s how much risk can you tolerate? And you could look at it from a portfolio. And you can make it more simple, and say, okay, well how much ups and downs can I take, right? How much is my daily swing? How much is my monthly swing in the portfolio? And what can I essentially stomach. Because the one you don’t want when you’re an investor is those sleepless nights where you’re worried about how much your portfolio is going to drop if the market’s crashing, the tossing and turning in bed. And that’s what risk tolerance is.

Brent Pasqua: What is then risk capacity?

Joshua Winterswyk: Great question. Risk capacity, unlike tolerance, is the amount of risk that you can afford to take, or you must take, right? So when we’re looking at reaching your financial goals, this is where risk capacity comes in because there’s amount of risk that you’ll probably need to take to reaching your financial goals. So unlike tolerance, it’s just not about what you think you can take. It’s more about that ability of risks that you can can actually take.

Brent Pasqua: So when you think about risk tolerance and risk capacity, I mean, where does this really put you when you’re thinking about your portfolio and making a decision about how much of that you can actually accept?

Matthew Theal: Well, I think things that most people get really confused on is the tolerance to capacity, right? So there’s actually two areas of the risk, like we’re talking about. And a lot of them will say, hey, I don’t want to tolerate any risk. I don’t want to lose any money. It’s like, well, okay. But you actually need to take some risk because we need your money to grow. And you don’t need your money for 20, 30, 40 years. So you could take risk, you could go for the ups and downs. Who really cares?

Matthew Theal: From a portfolio standpoint, what we’re looking at is really what’s the time horizon? How long do you need the money? For most people, it’s actually multiple years, right? We’re talking five, 10, 15, 20, 35 years or more. How much income do you need from that money when it’s time? And then what are other assets that you have available on your balance sheet if the portfolio drops.

Brent Pasqua: So when you think about what somebody is actually willing to accept based on some of these factors, how do you come to the determination of what someone is comfortable accepting? Because there’s a psychological issue here, right? Because if you say, for example, portfolio risk-wise, someone is, based on all factors, willing to accept a 20% decline. And anything above that, they might panic. You almost get a sense that if it was down 10 or 15%, they’re going to panic anyway because they still have a top panic of 20%. So how do you come to the determination of really what someone is willing to accept?

Joshua Winterswyk: I think that it’s the combination of the risk tolerance and the risk capacity. You have to use both tools. Because again, just going through that process of understanding what your tolerance is, isn’t the only variable. So yes, you might be only willing to accept 20%. but actually after analyzing, like Matt had said, kind of your situation, your time horizon, and really quantifying what type of risk you need to reaching your goals, you really can’t even answer that question fully by just figuring out what your risk tolerance is.

Brent Pasqua: I mean, how critical is financial planning to helping determine risk tolerance and risk capacity?

Matthew Theal: It’s extremely critical. I mean, you can’t have one without the other. You need to build your plan. And by building that plan, that will help you determine what your risk tolerance actually is, and what your risk capacity is.

Joshua Winterswyk: But I also think that the finance industry and investment salesmen focus on just tolerance.

Matthew Theal: Correct. Because they don’t want to scare you. They want to say, oh, look the market drops by 40%. Your portfolio is going to lose $400,000, and you’re not going to be able to retire. So by this annuity.

Joshua Winterswyk: Not only that, even just the mutual fund sell, it’s standard deviation. We’re looking at sharp ratios, right? Downside capture. And then using all of these big terms to scare investors almost, or lure them in. And it can not even be to scare, it could also be used as a tool to say you need a higher rate of return, and these tools are going to give that. But it’s still using that risk tolerance side of things. Not necessarily like that risk capacity side.

Brent Pasqua: Yeah. I get the sense just in the experience that I’ve had with that, you can’t really understand what your risk tolerance and risk capacity is unless you do full financial planning. Because what it leads to is you having a clear understanding of what your objectives and goals are, and what your projections are about to be. And if you visualize it, and you see it and you can understand it, then you could say, okay, well, because I know where I’m at and where things are heading, then I can accept more risks, and I know I’m not to panic. And we don’t get in these times where we were March 23rd of last year, and people are panicking and wanting to sell it in the market. That doesn’t really happen if you have clear goals and objectives.

Joshua Winterswyk: Yeah. And I think from even what you’re saying, and I definitely agree, but having that more proactive approach, right? You’re preparing for upside and downside. And it’s not just about talking about how much risk you can take. It’s more preparing and being proactive with that financial plan, like you had mentioned, to making you feel more comfortable regardless of what happens in the stock market.

Brent Pasqua: Right. And to summarize that too, I mean the worst thing a person could have done last year on March 23rd was sell their portfolio. And it was time for people to be of concern.

Joshua Winterswyk: Yeah. And that’s reactive.

Brent Pasqua: Yeah. So how should someone over 50, who is starting to think about retirement, how should they think about risk? Because that is somewhat of a more uncomfortable time. You’re getting another step closer to retirement. You need to depend on that money. How do you evaluate risk capacity at that age time?

Matthew Theal: Yes. So I think for someone who’s over 50, the first thing you should do with your risk is you need to have a plan built out. You need that retirement plan. Because unfortunately, what ends up happening is you might not get to choose your retirement. Your retirement might get chosen for you. And you might say, well, what does that mean? And that means that as you age, you become less desirable to the company you work for. And you face a significant layoff risk. And sometimes, if you don’t have the skills that are attractive to your current company, it might be hard to reenter the labor force at the salary you were making.

Matthew Theal: So that’s why we always recommend someone who’s in their early 50s start to do a retirement plan and figure out exactly what they need. And from there, once we do that plan, then we can say, okay, well maybe the assets should be a little bit more conservative. Your job is unstable. Or maybe we could stay aggressive because your job is very stable. So it just depends.

Brent Pasqua: I think too, you have to be very careful, right? Because at age 50, you’re now at the closest, last stretch to retirement, right? But you also probably have the highest earning potential that you’ve ever had in your life. You’re at that last 10 years. And then your investments more than likely are the largest that they’ve ever been. And if you say, okay, well I’m only 10 years away from retirement so I’m going to reduce risk in a time where you should be probably maximizing contributions, maximizing growth, because you have the most money. I mean, you’re on the home stretch. You want to try to double your money, at least in that last stretch. That’s what’s going to take you home into retirement. But then you don’t have their risk tolerance or risk capacity for it because you know you’re only 10 years until retirement. That could lead to a major deficiency in retirement.

Joshua Winterswyk: I think you make a great point. Yes, it absolutely could. But on the other hand, if you’ve determined, yes, your risk capacity, you need to take more risk, but your risks tolerance says you’re taking less stress than you actually need to. Then what do you need to do? You probably need to save more. And that’s not a fun conversation either to have, because if you’re not willing to accept the risk that you need to reach your goals, you have to compensate for that deficiency, like you talked about. And most likely that’s either working longer or saving more. So we need risk to helping reach that goal and not having to work longer, save more, and not rely on some of the tools that’ll help us get there sooner.

Brent Pasqua: Yeah. And I think what you said is critical because you’re talking about trying to hit very specific marks at very specific times. Because now you’re determining, okay, I’m going to need X amount of dollars by the time when I retire. And it’s either I’m going to need to have an X amount of return hopefully, or I need to save more money. There’s a lot of projections in that.

Joshua Winterswyk: Yeah, absolutely. And you have to build the financial plan that, like we had talked about, to actually even understand that, right? It’s not just a general number that we get a lot of times of how much should I have to retire? Can you tell me by just asking you what’s the general amount that people need? It’s not that general. It’s very specific.

Brent Pasqua: So let’s take it down a decade and say, okay, someone age 50 is in this position. And that’s very clear. But now what about someone who’s actually in their 40s?

Matthew Theal: Oh, so this is interesting age. And what I’ve found with working with clients are in their 30s to 40s is a lot of times they might be saving for more specific of a goal. And most people right here in their 50s, they pretty much have one goal left, and that’s retirement. They might have minor goals like, oh, we want to buy a retirement house, or we want to move out of California and move to one of the low tax states. Those are minor goals. Your main goal is retirement. Someone who is in their 30s and 40s, there’s a lot of different goals. Oh, I want to save for my kids’ college. I want to purchase a new house or a bigger house. I want to change careers and start a business. So those kind of goal is can all be planned for, and all the investments and how we take risks are all different depending on the goal.

Brent Pasqua: So what you’re basically saying though is that if someone is for 30 or 40 years old, and they’re contributing into their 401(k), how would their risk tolerance in their 401(k) be different than the savings that they’re putting aside to buy a house?

Matthew Theal: Yeah. So for the savings for the house, you’re probably going to want to be a little bit more conservative. You’re not going to want to try and shoot the lights out, especially if you’re close. If you’re far away, you know you need 250, and you have 10, and you’re putting 1,000 a month away for this house, we know we could be really aggressive because it’s actually, unfortunately, going to take you a while to save for that 250. But as for the retirement, you should be ultra aggressive. 100% stocks, 90% stocks, and you’re not going to need it for 30, 40 years. You can’t even touch it.

Joshua Winterswyk: I think what’s important though is actually writing down your goals and tying that time horizon to the goal. You talked about that down payment for your house. If it’s a five-year projection that you’re going to hit that down payment for the house, or a three-year projection, we even have to ask ourselves should any risk actually really be taken, right? Is it more risky to tie money that you’re going to put towards a down payment to a home if the time horizon’s only three years, right? So I think that’s a really important point to make, even for anyone under 40 or 30 is not everything has to be the same risk tolerance or capacity. It has to actually link up to that time horizon of that specific goal.

Brent Pasqua: So when you do planning for people in this age group, how do you end up with the recommendations and targets for each of these goals?

Joshua Winterswyk: Really, it is just having this open conversation and really determining what your ultimate goals are, right? And separating them between short, let’s just say, middle and long-term goals. And saying, okay, well, let’s create a visual of these goals, separate them by the time horizon, and then let’s actually start allocating cashflow and capital towards those goals. And that’s just kind of a basic start so you can get a good understanding of when you’re going to need the money and how much we’re going to need.

Matthew Theal: I think the biggest mistake the kind of the under 40, under 30 crowd does is they actually have too many smaller micro goals, compared to retirement. So they’re doing their retirement, they’re saving a little, but they’re also trying to put away for their kids’ savings. They’re trying to pay off student debt. And they’re not doing it all efficiently, right? Because there’s too much money going into every bucket. So it’s kind of like what they need help is also prioritizing those goals. And then figuring out, okay, where should I be sending my excess cashflow to?

Joshua Winterswyk: That’s a great point. And right now what I’m even seeing a lot of is younger clients having too many pots open, like you had talked about, right? We’re buying crypto, we’re buying stocks, we’re putting in 529 plans. And then there’s this pot of debt behind us. Really should that allocation of cash flow be going. So I think that’s a great point that you make is prioritizing kind of cashflow and the goal.

Brent Pasqua: Yeah. And then, when you put time horizons on each of those goals, I mean, it allows you to earmark and have an understanding of what the risk tolerance is. Which at the end of the day, we keep going back to March 23rd. I mean, if you were so reactive in that time of life, that could throw off all of your goals. And if you were clearly laid out, it seems like you would avoid that because you know exactly what the plan says you should do.

Joshua Winterswyk: Yeah, absolutely. And I think that’s a good test for a lot of people. Look, how did you feel on March 23rd last year?

Matthew Theal: And just to let most people know, most retirees should have been pretty scared during that time, which is a normal feeling. And then actually most young people should have been extremely excited and ready to move money from the savings account or the retirement accounts and get more aggressive, right? Because their time horizon is so long, so it doesn’t matter if they lose money temporarily.

Brent Pasqua: Yeah. I mean, most people who are under 40 hadn’t seen an opportunity like that since 2008, and that was 13 years ago. And a lot of that age group was probably still too young to even know at that point, how to take advantage of the market.

Matthew Theal: Exactly.

Joshua Winterswyk: And that mindset to me just isn’t there yet. With housing, it is with Americans. When the housing market drops, everyone wants to buy a house, right? The stock market drops, not enough young people are going out there saying I need to buy stock or invest more, right? So I think that it was just a good test and a good tool to talk about going forward of we need to seek those opportunities too, especially in the market.

Brent Pasqua: Outside of portfolio management, what are some risks people face in their financial plans?

Matthew Theal: So there’s quite a few, I think the one that gets underlooked a lot as well, especially with younger people, and most people actually don’t even know how to quantify this amount, but the life insurance, right? So understanding how much life you need, how to purchase it, when you want that policy to expire if you go to the term route. And how that should be used as a general tool and a financial plan, gets really underestimated by people.

Joshua Winterswyk: I think another risk is going to be just your overall health. I know we’ve talked about health on our podcast a little bit before, but I think it is a really big risk, right? Not only when we’re thinking about medical bills, but just lack of being able to work, right? Earning income, stuff like that. So without your health, like we have talked about, no wealth, right? So that is a big risk to your financial plan and just your future.

Brent Pasqua: Again, it goes back to financial planning, the detailed planning will help you understand what your biggest risk are financially based on different variables of things that we can’t predict happening in life. And it will help you stay on target to make sure if any of those do happen, that you could sustain yourself and you could financially live comfortable. And your family’s not going to be as impacted financially.

Matthew Theal: Kind of interesting on the health, I’m going to take this podcast a little off topic. But I heard this framed and I was like, oh, that’s interesting. So essentially let’s say you drink a Coca-Cola a day, right? We know a Coke is a very sugary drink. There’s lots of chemicals and pretty much things that are bad for you, but maybe you like the way it tastes. And the Coke is pretty cheap, right? It’s $1.50, $2 depending on where you’re at. So it’s a cheap way. Maybe you go to McDonald’s, you get an $8 meal and you’re on your way.

Matthew Theal: But really what you’re doing is you’re costing yourself more dollars in the future because we know if you eat like that, you drink those kinds of beverages, you’re setting yourself up for health problems down the road. It’s the same way like if you’re a smoker, right? We know a smoker, you’re probably going to get lung cancer. And it’s the same with eating poorly. You’re most likely going to have some kind of health related issues in your later years, diabetes, heart attack, what have you, heart disease. And that’s going to cost you a lot in future medical bills. So just an interesting way to think about that.

Brent Pasqua: Right. So what you’re saying is it’s costing you now, and it’s going to cost you even more later.

Matthew Theal: It’s costing you less now, but it’s going to cost you a lot of dollars later. Yeah.

Joshua Winterswyk: No, I totally agree. And we can even see it. People, like you had talked about, I think another risk that we’re going to talk about here is career risk. And you’ve already mentioned that Matt, especially, if you’re over 50, but let’s say that you are laid off, and before you can collect Medicare at 65. Being more unhealthy is going to cost you. Not even if you needed surgery, or anything else, or treatment. Just the fact that you’re living a more unhealthy lifestyle is going to equate to you paying higher in medical insurance premiums if you are let go before 65 from your job, if you’re over 50. So just to kind of give an example of what we’ve seen that that’s true. So just a great point.

Brent Pasqua: I see a lot of financial planning companies, and a lot of times I think they’re associated with people that sell annuities and insurance products, put on their website, oh, come take our risk tolerance assessment test. How valuable are those to someone to helping them determine risk tolerance and risk capacity? Or is that just a ploy of marketing for them to get a call to action so they could try to sell somebody something.

Matthew Theal: So it is marketing obviously, if it’s put up on their website and kind of branded that way. It could be valuable, right? You could learn something from it. You could learn a little bit about your personality. I’ve taken a few of them in my career. We’ve actually never used risk tolerance software here. And the reason why is I feel like most people are intelligent who are coming into our office and hiring us to be their planners. And by question four, you could kind of game the test. And what I mean is if you want to have an aggressive portfolio, you could kind of figure out what’s going on and game the questions towards, okay, I’m going to get spit out aggressive. Or if you want a conservative portfolio, you could game it that way as well. Very rarely do. I see someone take one of those and it wasn’t what they thought they were. So if they told me they were conservative, it usually came out being, yeah, conservative. If they told me they were aggressive, it came out as very aggressive.

Brent Pasqua: Yeah. And I think that a lot of the questions too, there’s so much subjectivity to the timing of where we’re at in the market, or where they’re at in their life. And that is constantly changing. I feel like it has never been a very valuable tool to give someone a risk assessment. Because to me it’s more about financial psychology than it is about risk assessment. If someone’s going to panic at 15%, they’re going to panic at 20%. How are you going to build a portfolio that is determined that, hey, they can accept 20% risk, and not 15, or vice versa? It just has never seemed as a valuable tool that has helped people.

Joshua Winterswyk: And I think it is that understanding that financial behavior more and asking the right questions, and really understanding your client is going to be a lot more valuable than them filling out a questionnaire through software, right? Are they really even being open and honest? Does those goals come out? Does that really emotion and that feeling come out? I think, and asking the right questions of clients is going to achieve that a lot better than a questionnaire through a computer.

Brent Pasqua: Yeah. The process of financial planning too, and laying out goals and earmarking money for very specific goals has a much more help to financial behavior than any type of risk assessment tests that you take in the beginning when you meet an advisor, and then all of a sudden they sell you some annuities in a portfolio after that.

Joshua Winterswyk: Yeah. Yeah. Definitely.

Brent Pasqua: All right. Let’s get to the last part of the show. I know we’re on RPA recommends. Who wants to start with a recommendation today?

Matthew Theal: I guess I’ll go first with a non-recommendation. Don’t try and buy a car right now. Absolutely miserable process. I’ve been trying to do one myself for my wife. We need an SUV. It’s very difficult to buy a car. We’ve already known that car dealers are, in general, pretty, pretty scummy, right?

Brent Pasqua: Difficult to work with.

Matthew Theal: Difficult to work with. Okay. It’s even more difficult now getting the run around from every Toyota dealer in Southern California. Truly an awful experience. Hopefully I’ll have an update for the next podcast. But don’t try and buy a car if you don’t really need one right now.

Brent Pasqua: Doesn’t it just make you want to buy a Tesla because their process is just like, I want these features. This is what the price of the car is. Everything’s tech driven on purchasing it. Simple, out the door, you make your down payment, you get your car.

Matthew Theal: I’m at the point in my life where that’s how I want to buy a car. I want to go to the lot, or go to a showroom, have someone show me the features of the car, talk to me about it. And then I want to buy it on the computer. And I want to go pick up my car or have it delivered to my house. I don’t understand how these car dealers still have dealerships where they’re trying to haggle with people. Lay all those people off. Get two or three people who know the products really well, product specialists, and just sell the cars direct to people.

Brent Pasqua: Yeah, standardized process. You want the features. The car costs what it is. There’s no finagling. There shouldn’t be any of this anymore.

Matthew Theal: Yeah. Make your money on the servicing.

Brent Pasqua: I agree. I have a recommend, and I don’t know if you guys have done this one in the past, and you may have, because I’m always late to the game on shows and music and all this stuff. I’m not a good TV watcher. I don’t watch a lot TV. I have trouble. If I’m Looking at Netflix, I don’t know what to pick. There’s too many options. I just end up usually picking nothing.

Joshua Winterswyk: But this is why we have the show. We have recommends.

Brent Pasqua: Absolutely. We took a trip to Hawaii. I needed a show for the airplane. I got a recommendation from you guys. And it was a home run. I watched the first season of Ted Lasso, and I would highly recommend it for anybody out there. I can’t imagine a person that would not like that show. It is absolutely phenomenal. My wife didn’t get to watch it on the plane. She had other stuff that she had downloaded. But after I watched it, we went back and we finished and watched season one together. It is an amazing show. Season two is coming out. If you want a feel good show, I highly recommend. Go download it and watch it.

Joshua Winterswyk: So I did the same thing. I watched it by myself first and then I rewatched it with my wife. She loved it as well. And for all the listeners who aren’t familiar, it’s about an American college football coach who goes and coaches a Premier League soccer team in England. So again, feel good. It’s just a great show. Great recommends. And glad you enjoyed it.

Brent Pasqua: Yeah, it was amazing.

Matthew Theal: Real quick for our loyal listeners. I know you’ll probably remember two years ago, probably episode either somewhere between eight through 12, both Josh and I recommended the same show. But good recommends, Brent. Glad that you finally watched it two years later.

Joshua Winterswyk: It only took him… I’ll stay on the show. My wife had been wanting to watch it. We finally started it. We’re almost finished. But The Crown on Netflix. Just really cool from a history standpoint to learn a lot about the English history. I bring it up also, because a shout out to all the English out there, they’re in the Euro Cup final. So my recommends kind of piggybacked this weekend. England plays Italy in that Euro Cup final. So another something for you to watch, Brent, but The Crown on Netflix, if you are interested in kind of that British history, and it ties into a lot of American history, which is cool. But really well done and a good show.

Brent Pasqua: Yeah. Great recommends today.

Matthew Theal: I agree. That’s a great show. The Crown. Brent, you should watch that next.

Brent Pasqua: All right. So I’ll finish, I got to get season two of Ted Lasso’s coming out, maybe I’ll fire up The Crown. All right. So as advisors, we love helping people. That’s why we do it. If you’re having trouble understanding your risk tolerance, your risk capacity, how risk can affect you both in retirement or making financial decisions for major purchases or small purchases, please give us a call. Don’t take a risk assessment test. I don’t believe that’s going to be very helpful. You probably want to lean towards doing some financial planning. But if you’d like to schedule an appointment with any of us, please go to Schedule a complimentary consultation. You can also download our ebook from our website. If you’d like the show notes, please go to But as always, we love having you here and listening in. We’ll talk to you soon.

Joshua Winterswyk: Thank you.

Matthew Theal: Thank you.

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