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Our guest today, Rick Ferri, is a financial advisor and an accomplished author of seven books related to investing. I personally consider him the heir apparent to Jack Bogle, although I'm confident that he would utterly reject any sort of comparison like that. He started out his career as a stock broker and gradually figured out that passive investing in index funds was the best way to invest. He is an expert on asset allocation, ETFs, and simple portfolios. He was pretty influential to me early on. His advice to readers and listeners is to make your portfolio as simple as you can. His mantra is simplicity, automation, hibernation. Make it simple, make it automated and just let it do its thing. Don't touch it.
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The second year you don't need another comprehensive financial plan. You still have the million dollar portfolio, it maybe went up a little bit. There's going to be maybe some tailoring of the financial plan, call it $1,000. So you got $2,500 fee for managing the portfolio, maybe $1,000 for keeping the financial plan up, and that's being very liberal. So that's $3,500. Well, what's the other $6,500 for? I don't know. Why are you tying these services that are one-off services, that you only do one time, and maybe kind of keep it up a little bit over time, why do you keep charging the client year after year after year for the same service but you're not delivering anything?
Rick is the producer of the Bogleheads Podcast. One listener wanted to know if he would entertain the idea of bimonthly podcast instead of monthly. But Rick said no, monthly was enough of a commitment for him.
The Boglesheads podcast is funded by the non-profit organization, the John C. Bogle Center for Financial Literacy, which pays the $100 per year for Rick to do podcast hosting. He spends a day interviewing a special guest. He had John Bogle on as his first guest. Then had David Blitzer, who is now the retiring chairman of the S&P Index Committee and that was fascinating. He has had a lot of other guests, Gus Sauter and Christine Bense and so forth. He just talks with them for an hour and ask questions and gets some really good insight. Check out that podcast if you haven't already.
Rick's parting advice for listeners is to keep it simple. The simpler you make things, the better. Use all your tax efficient accounts that you can use, cash balance accounts, whatever it is that your CPAs and advisors are telling you to set up to save on taxes every year. But make it as simple as you can, putting it in something very simple, a three-fund portfolio, something that you don't have to mess with, and just keep on doing it over and over and over again. Simplicity, automation, hibernation.
WCI: If you haven't had a chance to do your initial financial education, I recommend our Fire Your Financial Advisor course. This is a seven to eight hour online course, mostly video and screencasting, where I take you through writing your own financial plan, and give you a framework on which to hang all the information you learn about in the podcast and on the blog, et cetera. It costs $499, which is obviously more expensive than books and reading blog posts and participating on forums. That is another way in which you can write your own written financial plan. However, it will likely take you a very long time, if you are anything like me, and a lot of effort. This is essentially a shortcut to that.
WCI: We have a very special guest today I'm excited to have on. We have Rick Ferri, CFA. Rick is a Marine. There's no such thing as a retired Marine or an ex-Marine it turns out, so he is a Marine. He was an aviator with the Marines as I recall. He's a financial advisor and he's an accomplished author of seven books related to investing. I personally consider him the heir apparent to Jack Bogle, although I'm confident that he would utterly reject any sort of comparison like that. Let's bring him onto the podcast. Welcome to the show, Rick. We're glad to have you on the White Coat Investor Podcast.
Rick Ferri: They sent me down to Pensacola, Florida. Start flying. That led to flying jets, advanced training down in Texas, where I met my wife. I always like to say the Marine Corps issued me a wife down in Texas. Which, by the way, where I live now because if your wife is from Texas eventually you'll be from Texas. That's what happened. I did two tours overseas. I was a pilot. I also did a tour in the infantry. Flew off aircraft carriers flying A-6 Intruders. That was great for about eight years.
Rick Ferri: I put these very simple portfolios together for people. I charged them a quarter of a percent. We custodied at Schwab and I managed the portfolios. I was doing it out of my living room, much the way I'm doing things right now. It was good. I mean, and I started bringing on clients and building up my assets. But then something happened. A fellow by the name of Jonathan Clements, who worked for the Wall Street Journal, around 2001 got ahold of something that found out that I was doing this. He called me on the phone, and I'll never forget it. I don't know if you've ever talked to Jonathan or not, but-WCI: Yeah, we had him on the podcast not long ago.
Rick Ferri: The second year you don't need another comprehensive financial plan. You still got the million dollar portfolio, it maybe went up a little bit. There's going to be maybe some tailoring of the financial plan, call it $1,000. So you got $2,500 fee for managing the portfolio, maybe $1,000 for keeping the financial plan up, and that's being very liberal. So that's $3,500. Well, what's the other $6,500 for? I don't know. Why are you tying these services that are one-off services, that you only do one time, and maybe kind of keep it up a little bit over time, why do you keep charging the client year after year after year for the same service but you're not delivering anything?
WCI: Yep. So Richard on Twitter want to know if you'd entertain the idea of a bi-monthly Bogleheads Podcast. For those of my listeners who don't know, Rick does the Bogleheads Podcast. I think it's been a monthly, usually with a guest, show since you began it. You want to tell us a little bit about that?
Rick Ferri: Yeah. It's a non-profit organization, the John C. Bogle Center for Financial Literacy, which pays the $100 per year for me to do podcast hosting somewhere. Anyway, so we say that it's funded by the John C. Bogle Center for Financial Literacy. But pretty much I spend a day interviewing a special guest. I had John Bogle on as my first guest. That was a really great interview. Then I had David Blitzer, who is now the retiring chairman of the S&P Index Committee and that was fascinating. I've had a lot of other guests, Gus Sauter and Christine Bense and so forth. I'm going to have you on someday, Jim.
Rick Ferri: I'll also say something else, and I very rarely say this, so this is a scoop on your podcast. The fixed income portion of my portfolio, only a small portion of it, basically two years worth of living expenses are in a short-term bond index fund. The other portion of my fixed income is in a preferred stock index fund. I'll give you the symbol. P as in papa, F as in Foxtrot, F as in foxtrot, D as in delta, PFFD. The reason for that is because this is taxable money and preferred stocks pay a dividend, which is actually a tax efficient dividend, and it's at a relatively high rate relative to corporate bonds. I can get into the whole structure, but it's really a unique asset class. I may have talked about it in one of my books about preferred stocks years ago.
Rick Ferri: I did, when I was having my problems with my second lawsuit, with my second business partner. My wife and I sold everything, literally sold everything. Sold the house, sold all of our possessions for the most part, sold almost everything and went on the road for two years, living in a 20-foot pull trailer. That basically, you walked in, it was enough room for a king size bed, a little tiny kitchen area, a little tiny bathroom, and a little tiny eating area. We dragged that camper all over the country for two years. That's where we lived until last summer.
Rick Ferri: But we have real difficulty now buying kind of discretionary things. It's an interesting thing to do, to minimalize for a while and live this minimalistic lifestyle for a while. When you come out of it, you realize that you don't need much. You certainly don't need a lot of the stuff that you've accumulated over the years. You really look at life and you look at how you live your life, just a lot differently after doing that for a couple years. I think that's what I got out of it.
WCI: Wonderful. That's wonderful, what you're doing. We'll put a link to that in the show notes as well. It's just RickFerri.com you can get that information on that from. But we're probably at the end of our time here. I've kept you longer than I promised you, I think. But this podcast is going to be listened to by 20 to 30,000 people, mostly high-income professionals like doctors. Do you have any advice for them that we haven't already covered?
Disclaimer: My dad, your host, Dr. Dahle is a practicing emergency physician, blogger, author, and podcaster. He is not a licensed accountant, attorney, or financial advisor, so this podcast is for your entertainment and information only and should not be considered official, personalized financial advice. 2ff7e9595c
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