A SavvyInterview – Chad

After a decade of advising clients in large brokerage firms, Chad Gordon started GreenStar Advisors in Denver, CO … and on the heels of the greatest market collapse of our lifetimes. In coaching his clients through this, he found that the biggest factor affecting client’s performance was not necessarily where their money was invested but more so in how they behaved during the crisis. He felt that the best tool to help clients have financial confidence (and rational behavior) during scary times is a well-thought out financial plan.

Chad grew up in South Denver and makes his home here now. He enjoys spending time outside with his family, climbing Colorado’s fourteeners, backpacking, gardening, playing a wide variety of music on the guitar and reading anything he can get his hands on.

[RetirementSavvy] How would you describe your investing philosophy?

[Chad Gordon] The greatest enemy to your long-term financial success is you. It is not which funds you choose, it is not what fees you pay, the greatest predictor to your life long financial success is your ability to not spend, to save, and to maintain faith in the capital markets (and to invest accordingly). While it is important to focus on these other things, to focus on fees and funds when you haven’t come to terms with your propensity for emotional self-destruction, is like rearranging the deck chairs on the Titanic to keep it from sinking.

The final paragraph of my book Wealth by Virtue sums it up, “The core of my message is to withhold the comforts of today, both emotional and financial, to increase the probability of greater comforts tomorrow. Volatility, frugality, and scary headlines may never be comfortable, but enduring them is much more comfortable than running out of money in old age. When you subscribe to optimism, outsiders see naiveté. However, long-term optimism is what history teaches us. If wisdom is built on experience, the wisest choice is an applied faith in the future.”

[RS] What differentiates GreenStar Advisors from other financial advisors?

[CD] We believe that money doesn’t have to be complicated. Because of this, our highest aspiration is to make the complex simple. We see that one of our primarily functions is client education. We feel that people should understand their investments, where they are heading, and the long term consequences of their decisions. Frequently, we can justify a lifetime of our costs simply by big mistake prevention. More often than not, those mistakes are outside of our day-to-day activity of managing investments – it’s usually advice on real estate, legal choices, or tax mistakes.

Not only this, we are a fee-based advisory firm who are legal fiduciaries to our clients. This means we are legally obligated to act in our client’s best interests. We transparently disclose our costs in plain English.

Nik MacMillan

Our clients know exactly what is happening with their wealth and their money. We do this by providing an effective game plan so that everyone is on the same page and has the same long-term vision. We’re here to make your lives much easier and to reduce stress along the way.

[RS] What’s the best investment advice you’ve ever received? The worst?

[CD] The best advice I’ve ever received was to (1) start saving into stocks early (2) never sell, like never ever. Even if people are starting late, this advice still applies. It’s incredibly important to have regular and automatic saving into equities.

The worst advice? Oh boy. I have a few:

  1. Be 100% in bonds when you retire – A typical retirement is 30 years long, over which prices will rise 2-3 times between when you retire and when you die. By every normal definition, when you retire, you still have a very long investing horizon and you still need to have a substantial amount of money in equities.
  2. Pay off your house – In my book I explain very clearly why this, relatively speaking, actually makes you considerably poorer (especially with today’s interest rates).
  3. Just use the boilerplate legal documents online – The value you get from lawyers (such as estate attorneys) is only somewhat found in the actual documents. The cheap boilerplate documents online will never help you consider all the contingencies.
  4. Cash is king – It’s totally not. Cash flow is king. Cash perpetually loses 2-3% of its value every year. Cash is like oxygen, you just need enough to breath. Having vast amounts of cash doesn’t help you at a certain point, but can be utterly costly in the long run.
  5. All people should just passively invest in the index and not use an advisor – This is mathematically 100% true … in a perfect world. The real world is that people investing on their own routinely panic sell out of the market and are constantly trying to time based on whatever apocalypse du jour. It’s very important to be conscious of fees, but it’s not the only consideration. Those who assume it’s the only consideration, on average grossly underperform the index.
  6. Student loans are permissible debt because you’re investing in your future – Education is a good thing and people should aspire for higher education. From a financial standpoint, this could certainly be true if that education will get you a higher income. But, not all education is created equal. Young people should be very thoughtful and cautious in this area. I’ve seen many people go into debt to get a degree that is unmarketable. I feel that this area of finance is becoming a very dirty business – particularly in that it indebts inexperienced young people. People who at 18 years old are legal adults, yes, but probably not equipped to make a sensible decision about getting into so much debt.

[RS] What’s your favorite money related quote?

[CD] My dad and grandfather loved pithy sayings about money. Here are some gems:

“If your outgo exceeds your income, then your upkeep will be your downfall.” Bill Earle

“We buy things we don’t need with money we don’t have to impress people we don’t like.” Walter Slezak

Would it be arrogant to quote myself? What the hell. “Excellent advice at a fair price is always better than terrible advice at an excellent price.” (page 285 of Wealth by Virtue)

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

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