Money Matters Episode 310: The Ultimate Guide to High Stakes Investing W/ Franklin Parker

Franklin J. Parker: Money Matters Podcast Interview

February 23, 2024 . 10:24 AM . ID: 471494501

Transcript

00:01 - 00:03
[speaker unknown]
This conference will now be recorded.

00:04 - 00:10
Christopher Hensley, RICP®
Imagine having access to the investment secrets that have built and sustained the world's greatest Fortune's.

00:10 - 00:14
Christopher Hensley, RICP®
Welcome to Money Matters, where today, we're about to get just that.

00:14 - 00:21
Christopher Hensley, RICP®
Join us as we sit down with Franklin Parker, a sage in the realm of fame family offices, and high stakes investing.

00:22 - 00:35
Christopher Hensley, RICP®
Strategies have illuminated the path to wealth for the ultra rich want some musician now an award winning financial luminary and author of the 2023 Amazon Number one Release goals based Portfolio Theory.

00:35 - 00:41
Christopher Hensley, RICP®
Franklin is here to share the exclusive investments tactics that typically reserved for the world's wealthiest families.

00:41 - 00:44
Christopher Hensley, RICP®
But here's the twist throughout today's episode.

00:44 - 00:59
Christopher Hensley, RICP®
We'll unveil not one but many essential strategies that have consistently propelled the fortunes of the elite family offices, and keep an ear out because our final, most powerful strategy will be revealed in the last segment of the show.

00:59 - 01:06
Christopher Hensley, RICP®
You won't want to miss this rear insight, as it could be the key to transforming your investment approach.

01:06 - 01:18
Christopher Hensley, RICP®
Whether you're building your own empire, diversifying your portfolio, or just starting your journey towards financial freedom, today's conversation with Franklin Parker, will equip you with the tools and techniques of the ultra wealthy.

01:18 - 01:26
Christopher Hensley, RICP®
Stay with us, until the end, to unlock the full spectrum of the wealth, but building wisdom, right here on money matters.

01:27 - 01:29
Christopher Hensley, RICP®
Franklin, Oh, OK, let me take a breath here that was along.

01:32 - 01:34
Christopher Hensley, RICP®
Thank you so much for joining us today.

01:34 - 01:36
Franklin Parker
Delighted to be here, really.

01:37 - 01:39
Christopher Hensley, RICP®
Well, I'm excited to talk to you.

01:39 - 01:40
Christopher Hensley, RICP®
You are a US.

01:41 - 01:44
Christopher Hensley, RICP®
Cfa, your neighbor your in Dallas.

01:44 - 01:44
Christopher Hensley, RICP®
I'm here in Houston.

01:45 - 01:52
Christopher Hensley, RICP®
I can see your guitar in the background, so you've got a musician background is, you know, I'm very interested in into diving into that as well.

01:52 - 01:55
Christopher Hensley, RICP®
Let's really, let's really dive right into it.

01:55 - 02:06
Christopher Hensley, RICP®
Can you maybe share with our listeners, your journey from a musician to an award winning financial advisor and how that diverse background influences your approach to wealth management.

02:07 - 02:08
Franklin Parker
Yeah, yeah.

02:08 - 02:15
Franklin Parker
So I got to the end of my music degree, and I realize that this is just not the life I wanted to live.

02:15 - 02:17
Franklin Parker
I've got friends who've gone on to work in the Music Business.

02:17 - 02:20
Franklin Parker
And I've got friends who won Grammys for into Play in Orchestras.

02:20 - 02:25
Franklin Parker
And look, you just can't put down roots.

02:25 - 02:27
Franklin Parker
You can't really be in one place.

02:27 - 02:37
Franklin Parker
And and a guy told me once, he said, You know, you need to think about kind of the bell curve of outcomes in whatever field you wanna go into, and then think about where you fall on that bell curve, You know?

02:37 - 02:46
Franklin Parker
And music is a place where a very, very, very small number of musicians make a lot of money, and everyone else, you know, can barely eat.

02:47 - 02:51
Franklin Parker
So, know, I wanted to kind of eat, I wanted to put down roots.

02:51 - 02:55
Franklin Parker
I wanted to live a different life and so I pivoted.

02:56 - 02:58
Franklin Parker
Pivoted into Finance and got in the business in 2007.

02:58 - 03:02
Franklin Parker
And I thought, this is great, is this job in the world, everything goes up, No one ever complaints.

03:03 - 03:07
Franklin Parker
And then, of course, all fell apart in 2008, 9 and 10.

03:07 - 03:11
Franklin Parker
But had no plan base that stuck it out and, here I am.

03:12 - 03:14
Franklin Parker
So, that's, yeah, that's, that, was my transition.

03:15 - 03:16
Christopher Hensley, RICP®
I love it, I love it.

03:17 - 03:24
Christopher Hensley, RICP®
So I want to, since I, you're in the industry, I'm in the industry, we have two different types of listeners for this show.

03:24 - 03:29
Christopher Hensley, RICP®
We've got your normal mom and pop through, or retirement focused Individuals who are gonna listen to it.

03:30 - 03:32
Christopher Hensley, RICP®
And they will also have other financial professionals.

03:32 - 03:37
Christopher Hensley, RICP®
I'm an active manager, so I'm X, let's get in the weeds, I'm excited to talk about that part of it.

03:37 - 03:42
Christopher Hensley, RICP®
But just to satisfy my compliance department, anytime we talk about investment stuff.

03:42 - 03:45
Christopher Hensley, RICP®
Especially if we're gonna get kinda get in the weeds here, I'm gonna read this.

03:45 - 03:49
Christopher Hensley, RICP®
It just says please note, the discussions on money matters are for educational purposes only.

03:50 - 03:55
Christopher Hensley, RICP®
Past performance is not indicative of future results, and every investment strategy carries its own set of risks.

03:55 - 04:05
Christopher Hensley, RICP®
We encourage our listeners to consider all information provided here as a learning resource, and not as a specific financial advice tailored to individual circumstances.

04:05 - 04:12
Christopher Hensley, RICP®
For advice that fits your personal financial situation, please consult with appropriate professional, financial advisor, OK, if I can get that out.

04:14 - 04:14
Christopher Hensley, RICP®
Good.

04:14 - 04:16
Christopher Hensley, RICP®
I think our compliance people will be happy.

04:16 - 04:17
Christopher Hensley, RICP®
Well, let's move on.

04:19 - 04:26
Christopher Hensley, RICP®
Let's dive right into your book, so your book goals, base portfolio theory You talk about some strategies.

04:26 - 04:29
Christopher Hensley, RICP®
The are really for real people to navigate the financial world.

04:29 - 04:33
Christopher Hensley, RICP®
What inspired you to focus on this particular approach?

04:33 - 04:34
Franklin Parker
Yeah, yeah.

04:34 - 04:42
Franklin Parker
So, as you mentioned, you know, I'm, I'm a, I came from a music background, not a finance background, So, I literally missed those days in class, right?

04:42 - 04:51
Franklin Parker
I didn't, I never took a finance class in college, and so, 2007, 8, 9 10, I was just trying to figure out Where's this advice coming from?

04:51 - 04:52
Franklin Parker
Why do we say, diversify?

04:52 - 04:54
Franklin Parker
Why do we say, buy and hold forever?

04:54 - 04:55
Franklin Parker
You know, Why do we say, don't worry.

04:55 - 04:56
Franklin Parker
It'll come back.

04:57 - 04:59
Franklin Parker
I mean, I remember of October of hundred and eight.

05:00 - 05:03
Franklin Parker
I mean, diversification didn't work, not even cash was safe.

05:03 - 05:15
Franklin Parker
Right, it gold was down, 20% bonds were, down 15%, stocks were down 20%, and the FDIC had to guarantee money market funds, because they were in danger of returning less than dollar for dollar.

05:17 - 05:21
Franklin Parker
And I thought, Well, but, diversification doesn't work, not, not, when it really matters, Right.

05:22 - 05:29
Franklin Parker
And, and I had also the audience who are, you know, living off of their portfolios in retirement.

05:30 - 05:35
Franklin Parker
And, and, sure, the market came back, but their portfolios didn't, because they were locking in losses the whole way down, right.

05:36 - 05:40
Franklin Parker
So, so I came out of that just with this strong sense of vertigo.

05:40 - 05:48
Franklin Parker
And it set me on this intellectual quest, and I went back and started reading all the original academic papers in finance and on Google stuff during the day.

05:48 - 05:55
Franklin Parker
And, you know, try to figure things out and excel, and, and eventually, kinda figured out where all of this stuff was coming from.

05:55 - 06:07
Franklin Parker
But I wasn't satisfied with it, because what I was starting to realize is that there were, there were really pretty major holes in, in what we would consider traditional portfolio theory and the traditional ways we manage money.

06:08 - 06:12
Franklin Parker
And it's because all of this thinking was done for institutions.

06:12 - 06:14
Franklin Parker
It was done with institutions in mind.

06:14 - 06:18
Franklin Parker
Institutions have two big advantages over the rest of us.

06:18 - 06:20
Franklin Parker
The first one is, they're typically tax advantaged, right.

06:20 - 06:24
Franklin Parker
So if I'm a pension fund and I'm an active manager, I'm not worried about you.

06:25 - 06:27
Franklin Parker
Know how much taxes I have to pay if I sell it again.

06:30 - 06:32
Franklin Parker
Whereas an individual, I do have to worry about that.

06:32 - 06:45
Franklin Parker
And then the second thing, and this is the big one, is that institutions never die, Right, so the rest of us do, There's a point at which you need, if it's not there, why did you scrimp and save all of those years.

06:45 - 06:48
Franklin Parker
You should have just, you know, spent it when you had the chance.

06:49 - 06:55
Franklin Parker
So, so I found myself on this intellectual quest, and I had some basic questions coming out of 2008.

06:56 - 07:03
Franklin Parker
And I found this area of research, which was pretty new at the time, called goals based investing, right?

07:04 - 07:10
Franklin Parker
It's, it's now kind of a marketing buzzword and everyone's talking about it, but at the time, it was still a new area of academic research.

07:10 - 07:19
Franklin Parker
And it was really focused on, how do you solve the portfolio problem, when you have a limited time horizon, right, and when you have taxes involved.

07:19 - 07:26
Franklin Parker
And there's a few other kind of constraints that go into the portfolio problem that, that traditional theory doesn't account for.

07:26 - 07:31
Franklin Parker
And I thought, OK, I've found my people write, these, this is what I was looking for.

07:31 - 07:42
Franklin Parker
And so, no, I started publishing in the area about a decade ago, had some of my own ideas, and started pushing the ball forward in the research.

07:43 - 07:51
Franklin Parker
And I got to a point where someone has yet written this book, And I think it's time to kind of put these ideas together into one cohesive whole.

07:51 - 08:00
Franklin Parker
But it really is focused on real people operating in the real world, and then, what are the best approach, is given your scenario.

08:00 - 08:02
Franklin Parker
And there's all of these crazy ideas that come out of it.

08:03 - 08:11
Franklin Parker
But they're crazy in the context of traditional portfolio theory, but they make perfect sense when you, when you really look at what real people are trying to do.

08:11 - 08:13
Franklin Parker
So, I.

08:13 - 08:13
Christopher Hensley, RICP®
Love it.

08:13 - 08:14
Christopher Hensley, RICP®
I love it.

08:14 - 08:25
Christopher Hensley, RICP®
So some of the things that you pointed out for listeners that are super important, you went back, you know, and looked at the foundations, and you realize there were some holes, there are some things that were missing.

08:25 - 08:32
Christopher Hensley, RICP®
I always like to say, you know, a modern portfolio theory is not wrong, but big asterisk, there's a lot of things.

08:32 - 08:38
Christopher Hensley, RICP®
And if you point to 2008, 2009 and we look at, you know, that 38% drawdown, it definitely opens your eyes, Right?

08:39 - 08:40
Christopher Hensley, RICP®
So, what can we do different here?

08:41 - 08:50
Christopher Hensley, RICP®
And then you mentioned, you know, the idea of institutions, the life expectancy or time horizon for institution could be hundreds of years versus an individual.

08:50 - 08:54
Christopher Hensley, RICP®
You know, we, if we're looking, you know, 0 to 100, if we're lucky, right?

08:54 - 09:03
Christopher Hensley, RICP®
So, these, bringing these into your book, and then you focus on goals based portfolio management.

09:03 - 09:04
Christopher Hensley, RICP®
Let's talk about that.

09:04 - 09:12
Christopher Hensley, RICP®
Could you kinda dive in explain those concepts of goals based portfolio management, and how it differs from traditional investment strategy?

09:13 - 09:14
Franklin Parker
Yeah, absolutely.

09:14 - 09:20
Franklin Parker
The, the, the, I won't get into the math, but the math of the problem is completely different, OK?

09:21 - 09:26
Franklin Parker
So, the way the traditional approach is structured there is one human input in the whole equation.

09:26 - 09:30
Franklin Parker
And that is your risk tolerance, That's it.

09:30 - 09:34
Franklin Parker
And I think that is, look, I grew up on a cattle ranch in central Texas.

09:34 - 09:35
Franklin Parker
I have a music degree, right?

09:36 - 09:43
Franklin Parker
So I always kind of have this sense of imposter syndrome in the business, but but there are moments when I'm looking at something.

09:43 - 09:48
Franklin Parker
And I'm as I guess as an outsider, I think well, this just doesn't make any sense.

09:48 - 09:49
Franklin Parker
You know?

09:49 - 09:52
Franklin Parker
And this is one of those things that mean, to me, that is like going to the doctor.

09:53 - 09:54
Franklin Parker
And you do all of this.

09:54 - 10:02
Franklin Parker
You know, the doctor, You fill out your paperwork at the beginning, and then the doctor runs all these tests and asks you what's wrong, and tries to figure it out and finally comes up with the diagnosis.

10:02 - 10:10
Franklin Parker
And you're sitting in the in the room, the doctor and the doctor says, well, I'm sorry, but, you know, I know exactly what's wrong with you.

10:10 - 10:19
Franklin Parker
And I know how to fix it, and we can fix it, but the pain tolerance questionnaire you filled out at your intake means that we can't go forward with the procedure.

10:20 - 10:21
Franklin Parker
I mean, what?

10:22 - 10:23
Franklin Parker
That doesn't make any sense, right?

10:24 - 10:27
Franklin Parker
That's that's what risk tolerance is in finance to me.

10:27 - 10:27
Franklin Parker
Right?

10:27 - 10:33
Franklin Parker
It's like, well, we know how to fix the problem We know what to do, but your risk tolerance says you can't really do that.

10:34 - 10:36
Franklin Parker
I mean, it's part of the it's part of the conversation.

10:36 - 10:37
Franklin Parker
Sure.

10:37 - 10:37
Christopher Hensley, RICP®
But it.

10:37 - 10:44
Franklin Parker
Shouldn't be the only conversation So goals based investing sort of moves that conversation into You, know, what?

10:44 - 10:47
Franklin Parker
What are you trying to do in the real-world?

10:47 - 10:50
Franklin Parker
Are you trying to retire send your kids to college via vacation home?

10:50 - 10:52
Franklin Parker
Tell me what that is, right?

10:52 - 10:58
Franklin Parker
And then, then, let's go into the toolbox of investments and figure out what the best tools are to get that job done.

10:59 - 11:04
Franklin Parker
And I don't want to give you a wrench if you need a hammer, OK, and maybe maybe you don't know how to use a hammer.

11:05 - 11:06
Franklin Parker
Well, I'll help you.

11:06 - 11:10
Franklin Parker
We'll talk that through, OK, Maybe your risk tolerance isn't high enough.

11:11 - 11:21
Franklin Parker
Well, let's talk about that, how do we what adjustments do we need to make to, to your portfolio, But really understanding what it is you're trying to do, and then aligning your investments with.

11:23 - 11:24
Franklin Parker
Objectives.

11:24 - 11:26
Franklin Parker
And look, there are several inputs to that.

11:27 - 11:28
Franklin Parker
Your time horizon is one of them.

11:28 - 11:29
Franklin Parker
You know?

11:29 - 11:31
Franklin Parker
How much money do you need in the end, is another one.

11:31 - 11:33
Franklin Parker
How much money do you have today?

11:33 - 11:33
Franklin Parker
That's another one.

11:33 - 11:36
Franklin Parker
What's your savings pattern, what's the cash flow requirement?

11:36 - 11:37
Franklin Parker
All of that.

11:38 - 11:39
Franklin Parker
See, this is what.

11:39 - 11:45
Franklin Parker
Um, here's, here's another, here's another example, and I use this in the book.

11:46 - 11:53
Franklin Parker
Uh, but let's imagine for a minute that all the money you have in the world is $7000.

11:54 - 11:54
Franklin Parker
That's it.

11:54 - 12:01
Franklin Parker
You get $7000 today and tomorrow morning you owe a violent mafia loan Shark Tin Grant, OK?

12:01 - 12:09
Franklin Parker
Well, Will you do what any self respecting person would do and you find yourself on a college campus and you find an economics professor in the polar side, right?

12:09 - 12:12
Franklin Parker
And he's they let you explain the problem Here's my problem, What am I going to do?

12:12 - 12:18
Franklin Parker
And, you know, she takes the time, she sits down with you, she figures out, you know, she, she gives you a questionnaire, whatever.

12:18 - 12:19
Franklin Parker
She puts all this stuff into the computer.

12:19 - 12:29
Franklin Parker
And she says, Look, I'm sorry, but your risk tolerance questionnaire says that you need a 640 portfolio, and that's just not going to give you a 43% return by tomorrow morning.

12:29 - 12:33
Franklin Parker
There's nothing I can do, OK, that's silly.

12:33 - 12:34
Franklin Parker
That's not what you're going to do.

12:34 - 12:34
Franklin Parker
What are you going to do?

12:35 - 12:41
Franklin Parker
Gonna go to the Casino, and you're going to take your $7000, and you're gonna gamble until you have 10 grand or zero.

12:41 - 12:44
Franklin Parker
Because no matter what, it's a hospital visit tomorrow Unless you get tin grade.

12:44 - 12:45
Franklin Parker
Right.

12:45 - 12:52
Franklin Parker
So, so, what's interesting is, is when you start to model what people are trying to accomplish in the world, you get different things that come out of it.

12:52 - 13:05
Franklin Parker
So, what this shows you is that it, it may be, sometimes rational to pursue outcomes that have high volatility Simply because they have high volatility, and it's the only way you can accomplish your goal, right?

13:06 - 13:10
Franklin Parker
Whereas, in modern portfolio theory and kind of traditional portfolio theory, that is never rational.

13:11 - 13:12
Franklin Parker
You would never do that.

13:13 - 13:23
Franklin Parker
And so, you know, there's, there's these different kind of approaches, and, but, but once you really model what people are trying to do in the real-world, your solutions start to shift a little bit.

13:24 - 13:25
Christopher Hensley, RICP®
I love it, I love it.

13:25 - 13:27
Christopher Hensley, RICP®
Now, you just gave us a whole bunch right there.

13:27 - 13:38
Christopher Hensley, RICP®
So, you know, just the idea, this radical idea of, it's not just about your risk tolerance, you're bringing in the real things in life, the goals based, what people are trying to do.

13:38 - 13:40
Christopher Hensley, RICP®
You ask the question, What are you trying to do?

13:40 - 13:41
Christopher Hensley, RICP®
That's crazy.

13:41 - 13:42
Christopher Hensley, RICP®
But it's asking.

13:46 - 13:47
Franklin Parker
For the fun of it.

13:48 - 13:49
Christopher Hensley, RICP®
Right, right.

13:49 - 13:51
Christopher Hensley, RICP®
So this is so I love that.

13:52 - 13:57
Christopher Hensley, RICP®
I've never heard the Tony Soprano version of getting people to adjust the risk tolerance, but I love it.

13:57 - 13:59
Christopher Hensley, RICP®
I might have to use that myself.

13:59 - 14:11
Christopher Hensley, RICP®
That was a very good way of getting people to realize that, you know, sometimes you're gonna have to adjust, and especially if you've got a shorter time horizon and you've got these big, lofty goals, there's only so much math can do so.

14:12 - 14:13
Christopher Hensley, RICP®
So I love that.

14:13 - 14:14
Christopher Hensley, RICP®
I love that.

14:14 - 14:23
Christopher Hensley, RICP®
Let's let's pivot and shift just a little bit, because I know one of the big things for investment is taxes, right?

14:24 - 14:28
Christopher Hensley, RICP®
You, in the book, you talk a lot about taxation and rebalancing.

14:28 - 14:31
Christopher Hensley, RICP®
They're really crucial elements in your strategy.

14:31 - 14:37
Christopher Hensley, RICP®
How should investors incorporate these into their portfolio management to maximize return?

14:38 - 14:42
Franklin Parker
Yeah, So, Taxes are really annoying.

14:42 - 14:43
Franklin Parker
Right?

14:43 - 14:43
Franklin Parker
There.

14:43 - 14:44
Franklin Parker
They're annoying.

14:46 - 14:50
Franklin Parker
Gotta pay him and they're annoying for us, portfolio managers, because we.

14:50 - 14:50
Christopher Hensley, RICP®
Have to account.

14:50 - 14:51
Franklin Parker
For them, and it really makes.

14:51 - 14:53
Christopher Hensley, RICP®
Things complicated.

14:53 - 15:00
Franklin Parker
But, um, so the thing about taxes is that it's very individualized.

15:01 - 15:04
Franklin Parker
And this, more than anything is the message of goals based investing.

15:04 - 15:10
Franklin Parker
And I think, where it is taking our industry as a whole, over the next 10 to 20 years, OK?

15:10 - 15:15
Franklin Parker
So, so everything in goals based Investing is very customized.

15:15 - 15:16
Franklin Parker
It's hyper customized.

15:16 - 15:25
Franklin Parker
So, for example, if you transfer in highly appreciated Apple stock, should I sell that to buy an S&P Fund?

15:25 - 15:29
Franklin Parker
When Apple is, you know, 40% of the S&P is movement.

15:30 - 15:32
Franklin Parker
I mean, maybe, maybe not.

15:32 - 15:36
Franklin Parker
There's a calculation we can do to decide if that makes sense, OK?

15:36 - 15:38
Franklin Parker
And in the absence of taxes, it doesn't matter.

15:38 - 15:39
Franklin Parker
We would just sell it.

15:40 - 15:40
Franklin Parker
Who cares right?

15:40 - 15:51
Franklin Parker
And then you get the benefits of diversification but is incurring that is incurring that cost which reduces my wealth today Worth the diversification.

15:52 - 15:56
Franklin Parker
Well, again, maybe, maybe not, but there's a calculation you can do to figure that out.

15:56 - 15:58
Franklin Parker
So so that is one aspect of it.

15:58 - 16:01
Franklin Parker
You know, another aspect of it is where you place your assets.

16:01 - 16:08
Franklin Parker
So, so what's the most efficient tax positioning strategy, given your goals, given your time horizon?

16:08 - 16:12
Franklin Parker
Given when you need those cashflows, that's another calculation that has to be done.

16:13 - 16:19
Franklin Parker
So, So, taxes, just like everything in goals based Investing is, is hyper customized.

16:19 - 16:21
Franklin Parker
And, of course, that makes it complicated.

16:21 - 16:24
Franklin Parker
Right, That makes that makes the need for sitting down with somebody.

16:25 - 16:25
Christopher Hensley, RICP®
And.

16:25 - 16:27
Franklin Parker
Discussing it one-on-one and figuring it out one-on-one.

16:27 - 16:32
Franklin Parker
That much more important, because there is no one size fits all idea.

16:33 - 16:33
Franklin Parker
Right?

16:33 - 16:34
Franklin Parker
Unfortunately.

16:35 - 16:36
Christopher Hensley, RICP®
I love it.

16:36 - 16:36
Christopher Hensley, RICP®
I love it.

16:36 - 16:38
Christopher Hensley, RICP®
That's a good way to talk about taxes.

16:38 - 16:41
Christopher Hensley, RICP®
I also have to say, I am not a CPA, so I always have to put that.

16:41 - 16:45
Christopher Hensley, RICP®
That asterisk APA for for specific tax advice.

16:46 - 16:57
Christopher Hensley, RICP®
But the stuff that you just mentioned is a great way to approach taxes, because you talked about hyper customization, and the idea of whether people have long term capital gains embedded in their portfolio.

16:57 - 17:00
Christopher Hensley, RICP®
We don't really know until we sit down and do a calculation.

17:00 - 17:05
Christopher Hensley, RICP®
So having somebody do that on a 1 to 1 basis is really a really good way to do it.

17:06 - 17:16
Christopher Hensley, RICP®
And then you talked about asset location, Where do you put your assets in the front end, so that you can benefit from from, from being in a, you know, a tax efficient place?

17:16 - 17:21
Christopher Hensley, RICP®
These are really, really good ideas for people and things that we should pay attention to.

17:21 - 17:24
Christopher Hensley, RICP®
Again, the book is goals based portfolio theory.

17:24 - 17:25
Christopher Hensley, RICP®
I'm gonna keep going here.

17:26 - 17:30
Christopher Hensley, RICP®
You discuss the significant, You know, non financial risk and wealth management.

17:31 - 17:35
Christopher Hensley, RICP®
Can you highlight a few and suggest how individuals can mitigate them?

17:35 - 17:47
Franklin Parker
Yeah, and this was something that coming out of the family office world, I spent more time on then than I did when I was in retail with management, or that, than I am now, as well.

17:47 - 17:51
Franklin Parker
Because extremely wealthy families.

17:51 - 17:55
Franklin Parker
And so, I don't know, I don't wanna, I don't wanna explain something that everyone already knows.

17:55 - 18:07
Franklin Parker
But, but a family office is, when you are extremely wealthy, like billionaire status, you hire investment people to work on just your investments and you hire tax people to just work on your taxes and you hire.

18:08 - 18:13
Franklin Parker
If you're, if your family is into art, you'll hire an art advisor, for example, or someone to manage your aircraft.

18:14 - 18:22
Franklin Parker
And so you have someone who may have a team of people that manages your financial picture completely, and that team of people is called a family office, OK?

18:23 - 18:25
Franklin Parker
So, I spent about a decade in the space.

18:25 - 18:27
Franklin Parker
I still have a foot in that world.

18:29 - 18:34
Franklin Parker
And working recently with a very wealthy family here in Dallas as their Chief Investment Officer.

18:35 - 18:41
Franklin Parker
So as a part of that role, I spent a lot of time educating the next generation, you know?

18:41 - 18:42
Franklin Parker
This is how you read income statement.

18:42 - 18:43
Franklin Parker
This is how you read a Balance sheet.

18:43 - 18:47
Franklin Parker
This is how you ask good questions of your executive, you know.

18:47 - 18:51
Franklin Parker
This is what, you know, this is how you invest all of just training people.

18:51 - 18:54
Franklin Parker
And honestly, I spent a lot of time being trained.

18:54 - 19:08
Franklin Parker
I look because I grew up lower middle-class, I was taught the power of Thrift you know the way that the way that the extremely wealthy think about money is entirely different than the rest of us, which could probably be its own podcast.

19:08 - 19:11
Franklin Parker
But, so, I don't want to, I don't wanna go down that rabbit hole unless you'd like to.

19:11 - 19:22
Franklin Parker
But, know that there are, that the, there is a cliche in the family office world, that is, you go from Shirtsleeves to Shirtsleeves in three generations, right?

19:23 - 19:35
Franklin Parker
The typically Generation one makes makes you a substantial wealth generation too, kinda preserves the wealth and then by the end of Generation three, the wealth is gone.

19:36 - 19:44
Franklin Parker
And and why that is, is the topic that is discussed in family offices over and over again.

19:44 - 19:48
Franklin Parker
And here's a secret, it's never because of bad investments, right?

19:48 - 19:53
Franklin Parker
Because they hire professionals who, who do a good job managing their investments.

19:53 - 20:01
Franklin Parker
You know, it's never because of, and to say never as a stretch sure, but, But it's almost never because of, you know, bad legal advice.

20:01 - 20:11
Franklin Parker
It's almost never because of a bad business decision, although sometimes, you know, it is almost always because of other things, more soft things, right, more human things.

20:11 - 20:13
Franklin Parker
It's because of family infighting.

20:13 - 20:16
Franklin Parker
It's because of bad governance.

20:17 - 20:24
Franklin Parker
It's because of you pick a topic that that really has nothing to do with You know did.

20:24 - 20:26
Franklin Parker
Is Apple a good stock?

20:26 - 20:28
Franklin Parker
No, that's, that's not the reason.

20:29 - 20:47
Franklin Parker
And so, there are these, there are these very human things that creep into the investment equation as we live our lives that have more of a bearing, really, than on your portfolio allocation or, or exactly what investments you're, you're investing in.

20:47 - 20:57
Franklin Parker
And those are the things that I think, as you and me, like as advisors to individuals, that I think we can add a lot of value for, Right, The portfolio problem.

20:57 - 20:59
Franklin Parker
Look, it's not easy.

20:59 - 21:01
Franklin Parker
It's, the math is complex.

21:01 - 21:02
Franklin Parker
It's, there's, there's a lot of moving parts to it.

21:02 - 21:04
Franklin Parker
But it's a solved problem, right?

21:05 - 21:08
Franklin Parker
It's the human side of the equation that we get to add value to.

21:08 - 21:16
Franklin Parker
Ok, so sitting down with someone and building rapport, for example, I have a client and I've worked with them a long time.

21:17 - 21:18
Franklin Parker
And we have a very good rapport.

21:19 - 21:22
Franklin Parker
And, we were kind of sitting around doing a portfolio review on time.

21:22 - 21:23
Franklin Parker
But you know how those goes?

21:23 - 21:28
Franklin Parker
I mean, you spend 10 minutes talking about the money, and you spend 45 minutes to an hour talking about the family, Right?

21:28 - 21:36
Franklin Parker
And we were just kinda talking, and it came out that they said, You know, I'm just really worried about passing this money along.

21:37 - 21:38
Franklin Parker
And I said, Well, what are you worried about?

21:38 - 21:42
Franklin Parker
And they said, Well, you know, our second son is kind of a spendthrift, and what can we do?

21:42 - 21:50
Franklin Parker
And, and that, you know, we went down the road of what the options are for when that's the case, which we can get into or not.

21:50 - 22:00
Franklin Parker
But what I realized in that moment was that they only shared that because of the amount of time we had spent together, because of the trust we had built.

22:00 - 22:00
Franklin Parker
Right?

22:00 - 22:03
Franklin Parker
They didn't even think there was a solution to this.

22:03 - 22:05
Franklin Parker
They didn't even really think of it as a problem.

22:05 - 22:08
Franklin Parker
And so, we just happened to be talking about it one day.

22:08 - 22:12
Franklin Parker
See, that's the value that an advisor brings to the table, right?

22:12 - 22:15
Franklin Parker
It's not, Is Apple a good stock?

22:15 - 22:21
Franklin Parker
It's, it's, let me come along for your life and kinda ride along with you.

22:23 - 22:31
Franklin Parker
And let's talk about life and then every now and then, there's going to be something that I see that, that I can add value to write like that you didn't even know existed.

22:32 - 22:41
Franklin Parker
So, no more than anything, I think, it's those very soft human things that that we should be doing best and focused on.

22:42 - 22:42
Franklin Parker
Right.

22:43 - 22:44
Christopher Hensley, RICP®
I love it.

22:44 - 22:44
Christopher Hensley, RICP®
I love it.

22:44 - 22:47
Christopher Hensley, RICP®
So that very touched upon a lot of things there.

22:47 - 22:55
Christopher Hensley, RICP®
We talked a little bit right at the beginning about family office, and for people, for listeners who aren't aware of what that is, you kinda broke down the structure of that.

22:55 - 23:07
Christopher Hensley, RICP®
It's ultra high net worth families that are able to, kind of, silo, often, hire these different professionals for all the different aspects of their financial life, but then you talked about something that's really important.

23:07 - 23:09
Christopher Hensley, RICP®
You talked about multi-generational well.

23:09 - 23:17
Christopher Hensley, RICP®
And the idea of being able to pass it down from generation to generation, and the idea that if it's not done properly, it won't happen.

23:18 - 23:25
Christopher Hensley, RICP®
You know, you sometimes giving somebody a big bucket of money if they don't know how to handle it, isn't, that you're not doing them a favor, necessarily.

23:25 - 23:40
Christopher Hensley, RICP®
So you talked about the soft skills, the communication, really, the family dynamic, and being able to address those that sometimes can be the most important things, Even bigger than the dollar signs there.

23:40 - 23:42
Christopher Hensley, RICP®
So, really, really important stuff there.

23:42 - 23:51
Christopher Hensley, RICP®
We've got just about five minutes before the, we hit the end of the show here, what's one piece of advice that you'd give to listen.

23:51 - 23:57
Christopher Hensley, RICP®
Owners aiming to apply the principles of gold based portfolio theory to their own financial planning.

23:57 - 24:01
Franklin Parker
Hmm, hmm, hmm, hmm, hmm, one piece of advice, that's a tough one.

24:04 - 24:06
Franklin Parker
I think, I would say two things.

24:07 - 24:11
Franklin Parker
And This, this is what is I think, going to change our industry yet at the core.

24:12 - 24:13
Franklin Parker
The first thing is that it is.

24:13 - 24:15
Franklin Parker
It is customized.

24:15 - 24:26
Franklin Parker
It is individualized that if you're going to do goals based investing properly, it is unique to you, your portfolio looks unique, and the way you manage, it might look unique.

24:26 - 24:31
Franklin Parker
And the second thing that comes out of it, is that, whether we like it or not?

24:32 - 24:35
Franklin Parker
Individuals are market timers, right?

24:35 - 24:48
Franklin Parker
It's kinda going back to what we said at the beginning, that there's a point at which you need your money, and, you know, if you're, if you're about, to retire in 2008 hits, you have to change your goal, right?

24:48 - 24:51
Franklin Parker
If you're, if you're writing it all the way to the bottom.

24:51 - 24:54
Franklin Parker
So how do you manage those risks is very important.

24:54 - 24:56
Franklin Parker
How do you manage downside risk?

24:56 - 24:57
Franklin Parker
How do you manage upside risk?

24:57 - 24:59
Franklin Parker
Which is not something that's talked about a lot.

24:59 - 25:03
Franklin Parker
You know, upside risk is the risk that markets move higher and you're not in.

25:03 - 25:04
Franklin Parker
You're in cash.

25:04 - 25:09
Franklin Parker
You know, long term we know that cashes the worst investment possible because of inflation, OK?

25:10 - 25:14
Franklin Parker
Now, it may have a role short-term every now and then, and that's, that's us, that.

25:14 - 25:28
Franklin Parker
But even ballot, balancing, those two risks upside versus downside, given your goals and what you're trying to do is very important, and that is something that is not often talked about, so I think those two things I cheated and you asked me for 1 or 2.

25:28 - 25:28
Franklin Parker
We.

25:28 - 25:30
Christopher Hensley, RICP®
Got a bonus one in there, That's awesome.

25:30 - 25:32
Christopher Hensley, RICP®
That, you know, that is fantastic.

25:32 - 25:35
Christopher Hensley, RICP®
The idea of managing risk.

25:35 - 25:53
Christopher Hensley, RICP®
When you talked about, you know, downside risks That, we hear everybody talk about, but then the, also, the ups, the upside risk, you know, opportunity loss are, or are not being in the market when it's going up, right, and how that differs for each and every individual, Depending on where they're at in their life and their time horizon.

25:53 - 26:01
Christopher Hensley, RICP®
You started by talking about customization customization and where our industry is going or should be their individualized advice.

26:01 - 26:04
Christopher Hensley, RICP®
So this is, that's super important.

26:04 - 26:06
Christopher Hensley, RICP®
I think that's a great, great place.

26:06 - 26:07
Christopher Hensley, RICP®
To leave it.

26:07 - 26:10
Christopher Hensley, RICP®
Here, I have a whole bunch of other questions I wanted to ask you.

26:10 - 26:13
Christopher Hensley, RICP®
But we're we're actually bouncing towards the end of the show.

26:13 - 26:13
Christopher Hensley, RICP®
Here.

26:13 - 26:18
Christopher Hensley, RICP®
What have, I forgot to ask you did you'd like to leave listeners with today?

26:19 - 26:20
Franklin Parker
Oh goodness, I don't know.

26:22 - 26:30
Franklin Parker
Oh, I'd be curious about you, what, what you've been in the business Awhile to, what's your, being an outsider I'm always kinda collecting advice, right?

26:30 - 26:37
Franklin Parker
So what's, what's something, in your experience, that has, that you kind of, have carried with you?

26:38 - 26:40
Franklin Parker
That's really different than maybe what you were taught?

26:40 - 26:43
Franklin Parker
Or what, what the standard line is in, in the business?

26:43 - 26:44
Franklin Parker
Do you have something?

26:44 - 26:44
Franklin Parker
Yeah.

26:44 - 26:53
Christopher Hensley, RICP®
Not week, and that's one of the reasons you're on the show, is I felt, I felt an affinity there with your, with your approach to the investment management piece.

26:53 - 26:55
Christopher Hensley, RICP®
Because I'm an active manager.

26:55 - 26:58
Christopher Hensley, RICP®
And I use, like, total return or absolute return.

26:58 - 27:03
Christopher Hensley, RICP®
And so, the idea that modern portfolio theory, I don't necessarily say it's wrong.

27:03 - 27:10
Christopher Hensley, RICP®
I'm just saying that the tools that we use to get there may not be the same tools that we use when when it's time to start taking distributions.

27:10 - 27:10
Christopher Hensley, RICP®
Right?

27:10 - 27:12
Christopher Hensley, RICP®
When we actually need access to it.

27:12 - 27:15
Christopher Hensley, RICP®
So, I'm right there with you.

27:15 - 27:17
Christopher Hensley, RICP®
I really like it.

27:17 - 27:18
Christopher Hensley, RICP®
I'm gonna read your book.

27:18 - 27:23
Christopher Hensley, RICP®
I just, We got this one scheduled so quickly that it was within a week.

27:23 - 27:24
Christopher Hensley, RICP®
So, I was like, OK, that's great.

27:24 - 27:36
Christopher Hensley, RICP®
And you're there in Dallas, I know we've got listeners here in the Texas area that that look you up, what is the best place for listeners who want to find out more about you to get in touch with.

27:38 - 27:44
Franklin Parker
Yeah, so you can you can find the website is directional advisors dot com and it's ...

27:44 - 27:44
Franklin Parker
And Advisors.

27:45 - 27:47
Franklin Parker
I'm on Twitter, Franklin Parker, one.

27:47 - 27:49
Franklin Parker
I'm on LinkedIn at Franklin Parker.

27:50 - 27:57
Franklin Parker
I'm not hard to find, but the love to connect would love to keep the conversation going with, with anyone that it resonates with.

27:57 - 27:59
Franklin Parker
So, thanks for having me here.

28:00 - 28:00
Christopher Hensley, RICP®
I love it.

28:00 - 28:01
Christopher Hensley, RICP®
I love it, Franklin.

28:01 - 28:02
Christopher Hensley, RICP®
Thank you so much.

28:02 - 28:05
Christopher Hensley, RICP®
We're right here at the half-hour, Mark, have a good rest of the day.

28:05 - 28:06
Franklin Parker
Thank you.

28:06 - 28:07
Franklin Parker
Take care.