Show Notes

‘The Three Phases of an Investor’s Life’ – Josh Brown – The Reformed Broker

How Advisors Help Investors in Different Life Phases – Transcript

Tim Mullooly: In episode 141 we’re going to talk about the three phases of an investor’s life. Stick around.

Welcome to the Mullooly Asset Show. I’m your host for this week, Tim Mullooly. This is episode number 141. Thanks for tuning in.

Today I wanted to talk about an article that was published just this morning actually by Josh Brown. He’s the CEO of Ritholtz Wealth Management up in New York City. He wrote an article titled, “The Three Phases of an Investor’s Life.” And Josh broke it down into three different phases that every investor goes through.

Phase one was called the accumulation phase. This is for people early in their life, early in their career. They should be buying steadily, not really concerned with what the market is doing on a day to day basis. They shouldn’t be concerned. A lot of people do find themselves getting caught up in the day to day fluctuations of the market. But Josh actually said that people in the accumulation phase should actually kind of be rooting for bear market, because that will offer lower prices for funds, for stocks, you know, better buying opportunities for people because these people in the accumulation phase their investments are for long down the road, decades, years away, that they’re not going to touch this money. They’re going to let it grow and compound over time.

So, where an advisor can come in and help people during the accumulation phase is not necessarily with the specific investments, because they’re so long term in nature. They can help them set them up, but where an advisor can really provide value in the accumulation phase, is, you know, getting that initial financial plan done. Mastering their cash flows with their clients. Getting their budget and their balance sheet looking the way that it should and then eventually getting to the investment part of the plan as well.

The second phase that Josh talked about is maintenance. He says this is where, you know, clients or investors would shirt from the grow, grow, grow, long term approach of the accumulation phase and kind of shift towards the grow, grow, protect as he would like to call it. He said this is kind of a tough period for people to navigate because there’s not really a clear cup line in the sand, specific day when you know you’re in the maintenance phase in your career, and it’s you know, it’s kind of tough for you to realize in the moment if you’re at your peak earning capacity in your life. You know, you’re not going to know that in the moment really. You can only tell in hindsight.

So, this is really where … and Josh pointed this out as well, where a traditional advisor would come in and help with the investments, help a client realize, you know, identify where they can start to protect some of their money and identify which investments should change or not change and how much and how quickly. So, those are the different decisions that an advisor can help with during the maintenance phase.

The last phase, the third and final phase that Josh talked about was the distribution phase. And this is when investors should be reaping the rewards of all of their hard work during the first two phases. This is when clients are traditionally in retirement and they want to be spending the money, spending down their nest egg that they’ve been building up. Josh pointed it out and I’ve heard it before too, this is, sometimes a harder mindset for people to wrap their minds around than just you’re constantly told to save, save your entire life. Now, you’re actually being told to do the opposite and spend the money. It’s difficult for people to you know, not have anxiety about that.

So, that’s really where an advisor can come in and help a client during the distribution phase, just kind of ease the anxiety, revert back to that financial plan and say, “Okay. We’ve planned for this. This is okay. You’re allowed to spend this money. You’re not going to outlive the money. This is what we’ve been planning for the entire time. It’s okay.”

So, I’ll link in the show notes to the full post from Josh. It was really great, but it pretty much demonstrates how an advisor can really impact a person’s life no matter what phase they’re in, whether it’s the accumulation, the maintenance, or the distribution phase.

So, that’s going to wrap up episode number 141 of the Mullooly Asset Show. Thanks for tuning in and we’ll see you on the next one.

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