Before the article, here\u2019s what\u2019s happening this week on The Best Interest Podcast<\/strong>:<\/em><\/p>\n Do you know someone who cheers for a particular sports team simply \u201cbecause<\/em>?\u201d They usually have a mundane reason, like \u201cI just liked their logo when I was a kid\u2026so I started cheering for them\u201d <\/em>or \u201cmy dog was named Viking, so I cheered for the Vikings.\u201d <\/em>Fast forward 30 years and they are still diehard fans despite having no other connections to the team. <\/p>\n I know one fellow Rochestarian \u2013 I\u2019ll call him Patrick <\/strong>for the sake of anonymity \u2013 and he\u2019s \u201cthat fan\u201d<\/em> for the Kansas City Chiefs. As a kid, he liked the Chiefs\u2019 colors. That\u2019s all it took!<\/em> Pretty funny.<\/p>\n But here in Western New York, home of the Buffalo Bills, it\u2019s a unique time in history to be a Chiefs fan. The Chiefs have ended the Bills season in 4 of the last 5 years. We don\u2019t exactly like<\/strong> the Chiefs\u2026<\/em><\/p>\n As I write this article, our latest defeat to the Chiefs is less than 24 hours old. The sting is still there. And to make matters worse (for me, at least), the game was very winnable for the Bills. A few plays go one way or the other, and suddenly, we\u2019re talking about the Bills finally<\/em> getting the Chiefs\u2019 playoff monkey off their back. <\/p>\n We Bills fans are upset today, and we\u2019re talking about it. There are a few common sub-narratives to the Monday morning quarterbacking I\u2019m hearing\/reading this morning: <\/p>\n I watched the whole game as it happened, and as with any<\/em> live sports game, there are bound to be referee decisions you disagree with. But two calls in particular really<\/em> drew the ire of #BillsMafia on Monday. The details don\u2019t matter, but for those who are curious, I\u2019m talking about the Worthy\/Bishop \u201ccatch\u201d<\/a> and the 4th down non-conversion<\/a>.<\/em> Both calls favored the Chiefs. <\/em><\/p>\n I\u2019m observing some funny behavior, and it\u2019s the main point for writing all of this today: <\/p>\n Of course, there\u2019s only one <\/strong>reality. The calls were either right or wrong. But the eye of the beholder leads to two polar opposite opinions about that reality. <\/p>\n In the bigger picture, this could be an article about behavioral biases as a whole. Humans discount things they disagree with. They discount things that cause them pain. They discount things they\u2019re unfamiliar with. Etc, etc. <\/p>\n Instead, I want to focus on some specific examples I read or hear about regularly, where my particular version of reality seems to clash so harshly with what I read from others. <\/p>\n How do you<\/em> view the stock market? <\/p>\n I see the stock market as an imperfect-but-effective way to invest in businesses worldwide. The values of stocks are tied to the earnings and future growth of those businesses. Short-term gains are never promised, as they are subject to the emotional whims of millions of investors. Long-term gains are far more reliable, as they are a function of objective business fundamentals. This contrast is the inspiration behind Ben Graham\u2019s aphorism, \u201c\u2026in the short run, the market is a voting machine but in the long run, it is a weighing machine.\u201d<\/em><\/p>\n Many others, however, see the stock market as a casino. And in two different ways, which I find simply fascinating!<\/em> <\/p>\n Some see the stock market as an avenue to massive risk, just like putting a $1 million bet on a single roulette spin. Think meme stocks<\/a> and options <\/a>traders. It\u2019s a pure gamble with huge upside and destructive downside. <\/p>\n Other \u201ccasino people\u201d see the market as a net-negative gambling proposition played against experts who know far more than you. \u201cThe house always wins,\u201d <\/em>they think. And they are not<\/strong> the house. To them, the stock market is shark-infested waters, and they\u2019re a clownfish. They would never<\/em> invest in stocks, just as they\u2019d never<\/em> step foot inside a casino. <\/p>\n Where I see mathematics and probability, they see randomness and dumb luck. Where I seek calculated diversification, they seek lopsided bets. Behind the scenes, I know the market is a function of independent businesses hard at work, but they perceive a shadowy 3rd party with a thumb on the scale. <\/p>\n There\u2019s only one reality. Only one of us is correct. Yes, I\u2019m convinced that\u2019s me\u2026but so are the other characters in this little anecdote. Who\u2019s actually<\/em> right? I\u2019ve leave that up to you. <\/p>\n When I explain the backdoor Roth process<\/a> to a client, I sometimes get the very understandable question: <\/p>\n Well\u2026are you saying this is legal? Or\u2026is it a shady gray area kind of thing? I don\u2019t know\u2026it worries me\u2026<\/em><\/p>\n<\/blockquote>\n I get it. Whoever first said \u201cbackdoor\u201d<\/em> sowed the seeds of indefinite doubt. In defense of the suspicious, there\u00a0are\u00a0<\/em>many ideas in the tax world that\u00a0are<\/em>\u00a0in blatant violation of the IRS code.<\/span> Thankfully, the backdoor Roth process is entirely legal and, in fact, explicitly allowed by the IRS. <\/p>\n But the same exact \u201ctax move\u201d can be one person\u2019s \u201chack<\/em>,\u201d another person\u2019s \u201cbridge too far,\u201d<\/em> and\/or the IRS\u2019s \u201c\u2026that\u2019s simply illegal.\u201d<\/em> <\/p>\n Perhaps the most<\/strong> common one? The simple topic of business expenses and deductions. <\/p>\n Business deductions are the ordinary expenses necessary for running your business. A business can subtract the deductions from its income to lower its taxable profit. Your business earned $200,000 last year, but required $50,000 in expenses to operate? Easy. You\u2019ll only be taxed on $150,000 then. It\u2019s perfectly legal\u2026but there\u2019s a slippery slope toward the illegal mindset of \u201ceverything <\/strong>is a deduction!\u201d<\/em><\/p>\n Coffee with clients and new work laptop? Those are fine deductions. <\/p>\n But new sneakers because \u201cI walk from my car to the office?\u201d<\/em> Or the dog\u2019s gourmet kibble as, \u201cMoral support for the CEO.\u201d<\/em> That\u2019s not gonna fly. Let alone the lakehouse mortgage payments as \u201cFuture location of team-building retreats.\u201d<\/em> <\/p>\n The same idea applies to offshore tax shelters, misusing Trusts, claiming false tax credits, and more. One person\u2019s \u201caggressive accounting\u201d is another person\u2019s \u201cClass C felony.\u201d <\/p>\n Does a financial planner add value for their clients? <\/p>\n If you ask Vanguard, Morningstar, and Envestnet, the answer is an easy \u201cyes<\/strong>\u201d (assuming a reasonable fee structure). <\/p>\n A good planner is like a sherpa \u2013 they guide you through tricky terrain, keep you on track, and help you avoid costly mistakes. Between optimizing choices, avoiding panic, saving time, reducing stress, lowering taxes, etc. etc., the value of a good financial planner compounds to a significant upside. <\/p>\n But many people out there disagree. In some corners of the (mostly online) world, financial planners are seen as little more than middlemen, cashing in on services that \u201canyone with a spreadsheet and an internet connection\u201d<\/em> could handle themselves. <\/p>\n In other news, someone called me this morning; they received a heated political text message over the weekend, resulting in their desire to completely liquidate their investment portfolio<\/strong><\/em>. Are we sure<\/em> this person should be getting their financial advice from TikTok and implementing it on their own? <\/p>\n I get it. Not every \u201cadvisor\u201d is doing good work in the interest of their clients. In my opinion, that\u2019s every advisor\u2019s cross to bear. But that\u2019s not a reason to throw the baby out with the bathwater. <\/p>\n Everyone has an \u201cAunt Ethel,\u201d as I call them, who has zero interest in being her own DIY financial planner, yet wholly deserves to receive financial advice in her best interest. <\/p>\n Pro tip: if you do talk to a financial planner or advisor, here are the 16 questions I recommend you ask them<\/a>. <\/em><\/p>\n This is all to say that the world is a funny place. You and I and the rest of humanity can look at the same facts, yet come to vastly different conclusions. <\/p>\n I\u2019m not going to dive further into the world of behavioral biases<\/strong>, but they are the culprit here. We are not robotic, perfectly logical fact synthesizers. Far from it. Our lizard-y, monkey-y brains play subconscious tricks on us all the time<\/em>. The more aware we are of that fact, the better we\u2019ll be at personal finances and long-term investing (for sure), and dare I say, the better we\u2019ll be at being \u201cgood humans.\u201d <\/p>\n Go Bills. <\/p>\n Thank you for reading! If you enjoyed this article, join 8500+ subscribers<\/strong><\/a> who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week. You can read past newsletters<\/strong><\/a> before signing up.<\/p>\n On that note \u2013 our podcast is, actually, by far outpacing this written blog. Tune in and check it out.<\/a> <\/strong><\/p>\n -Jesse<\/p>\n
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<\/figure>\n<\/div>\nSuper Smart Tax Hacks? Or Super Illegal Tax Frauds?<\/h4>\n
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The Financial Planner Value Proposition <\/h4>\n
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