ALSO BY PAUL BENNETT, PhD, CFP ® Financial Economics of Index Annuities An Analysis of Investor Returns Easy Essays on Economics Concise Coverage of Complex Concepts Advance Praise for The Money Navigator “This book is vitally important for anyone seeking financial confidence I’ve spent thirty years in the investment business working with a variety of advisors, small and large This is the first book I’ve read that is accessible to everyone The information is so necessary, especially in these challenging financial markets Read this book—over and over You will be happy you did when it comes to making those important financial decisions in your life.” —Beverly D Flaxington The Human Behavior Coach® and bestselling author “The financial landscape is strewn with obstacles that complicate making good decisions and achieving financial success Most people need a helping hand to guide them on this journey Paul Bennett’s The Money Navigator provides that guidance by bringing more self-awareness to your financial life If you are interested in receiving a high return on your investment, reading this book is an excellent way to attain that objective.” —H Kent Baker, PhD, CFA, CMA University Professor of Finance, American University; Coauthor of Investment Traps Exposed: Navigating Investor Mistakes and Behavioral Biases “In The Money Navigator, Paul Bennett introduces readers to a life-changing paradigm of financial life management called ‘FinLife.’ Based on cutting-edge research in the psychological sciences and Paul’s own expertise as a financial advisor, this wonderful book will challenge readers to think differently about their financial lives and better about their entire lives.” —Barnaby B Riedel, PhD Co-Founder of Riedel Strategy “The Money Navigator, Paul Bennett’s third book, is his magnum opus His most personal work to date, this book offers advice on topics as diverse as selecting an adviser, navigating the murky waters of investment products, and making sound financial decisions The perfect book for the student of both markets and personal betterment.” —Daniel Crosby, Ph.D New York Times bestselling author of The Laws of Wealth: Psychology and the Secret to Investing Success “Paul Bennett provides a wonderful new perspective into understanding money psychology and improving your financial outcomes I found this book to be a highly instructive, enjoyable, and noteworthy ‘how-to-guide’ of behavioral finance.” —Victor Ricciardi Co-editor of Investor Behavior: The Psychology of Financial Planning and Investing This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher and author are not engaged in rendering legal, accounting, or other professional services If legal advice or other expert assistance is required, the services of a competent professional should be sought Published by Greenleaf Book Group Press Austin, Texas www.gbgpress.com Copyright ©2017 Paul Bennett All rights reserved No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the copyright holder Distributed by Greenleaf Book Group For ordering information or special discounts for bulk purchases, please contact Greenleaf Book Group at PO Box 91869, Austin, TX 78709, 512.891.6100 Design and composition by Mark T Farmer Cover design by Mark T Farmer Cataloging-in-Publication data is available Print ISBN: 978-1-62634-441-9 eBook ISBN: 978-1-62634-442-6 Part of the Tree Neutral® program, which offsets the number of trees consumed in the production and printing of this book by taking proactive steps, such as planting trees in direct proportion to the number of trees used: www.treeneutral.com Printed in the United States of America on acid-free paper 17 18 19 20 21 22 10 First Edition To my Life Navigators: Trissi, Chloe, and Luke Acknowledgments Anyone who has authored a book knows that the process can be a lonely and arduous experience at times I liken it to running a marathon: You have periods of great success and other periods where you feel as though you may never finish Fortunately I had an amazing support structure in place, so the writing process felt less isolated and was actually incredibly collaborative My amazing coach, Beverly Flaxington, was instrumental in keeping me focused on the end goal of completing the book while adhering to the core values of the Money Navigator Bev has a true gift, which she tactfully and consistently utilized to challenge my ideas and ultimately squeeze more creativity out of me than I ever thought possible Without question, Joe Duran has inspired me to think bigger What he has accomplished in the financial services industry is exceptional and continues to impress his peers, competitors, and colleagues alike Joe is always on the cutting edge—heck, he often establishes the cutting edge—of where the industry is headed next I feel extremely fortunate to call Joe my friend and business partner Leslie Dunham is so quick with her wit and flush with creative ideas I would have been lost if not for Leslie’s amazing ideas for spreading the word about The Money Navigator The Team at the Great Falls, Virginia office of United Capital has shown me for over ten years how impactful a group of Money Navigators can be on the lives of clients, with whom they work on a daily basis Passionate professionalism reigns supreme with this team! The team at Greenleaf Book Group has provided unwavering clarity end-to-end, from editing all the way through to publishing The Money Navigator I am forever grateful for your knowledge and expertise Finally, Jimmy Moock and the team at Gregory FCA have been critical to establishing credibility and maintaining awareness of The Money Navigator’s central message You guys are real pros! “Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.” —Benjamin Franklin Drucker, Peter, E economics complexity, 130 cycles, 8–9 entropic versus exoergic forces, 138–139 forecasting, 52 game shows, 24–25 human behavior and, 23–24 money printing, 137 through the decades, 8–9 education back to school, 125–126, 149–150 for CFP certification, 105 degrees of financial advisors, 109 versus information, 62 efficiency wheelhouse, 14 Elephant/Rider analogy, 133–134 El-Erian, Mohamed, 139 emotional core concerns, 109–112 emotional intelligence, 10–13 emotions, 11, 36, 133–134 empathy, 12, 102 emphatic thought, employee benefits packages, 151 employment, new job, 80, 150–151 part time for older employees, 125 work–life balance, 122–123 empty nesters, 34 equities, 174 ERISA plans, 76 error margins, 120 estate planning, 170–171 estate taxes, 170 ethics, 106–107 exchange traded funds, 173 Execute (CHOOSE model), 129 executors of estate, 156 experience economy, 9–10 Expert Trap, 52–53, 93 F failure, chasm of, 135 fear-focused Money Mind, 40–41 Federal Reserve, 137 fee models, 78, 89 FIAs See fixed index annuities fiduciaries, 75–77 fight-or-flight response, 67 finance, traditional versus behavioral, 22–23 financial advisors, 4–5, 73 credentials, 102, 104 versus Money Navigators, 101–102, 104 professional designations, 107–108 requirements for practicing, 103–104 as salespeople, 34, 74, 77, 102 Financial Economics of Index Annuities (Bennett), 83 Financial Industry Regulatory Authority (FINRA), 76 financial peace, 15–16 financial plans, 5, 12 financial products choices, 73 proprietary, 74, 77 financial roadmaps, 124, 129 financial services, 73–75 financial support, 6–7 Find Your Money Mind analyzer, 40 FinLife, 5, 145 FINRA See Financial Industry Regulatory Authority Fisher, Roger, 109 fixed annuities, 168, 175 fixed index annuities (FIAs), 83, 175–176 annuitizing, 86 cap rates, 87–89 cap structures, 85 death benefit, 89 fees, 89 guarantees, 84–86 helping with decision traps, 90–95 income riders, 86, 89 for IRAs, 90 participation rates, 87–89 penalties, 89 refund option, 89 returns with, 85 surrender periods, 89 withdrawals, 86, 89 Flower, Rachel, 126 funding score, 120 G Gambler’s Trap, 51, 93 game show economics, 24–25 gamification, generational dynamics, 32–36 gen Xers, 33–34 givers, 41 global economy, 137–138 goals, 5, 16, 118, 128 Goleman, Daniel, 10 Google, 61, 65 guaranteed income, 86, 136, 168–169 H Haidt, Jonathan, 133 happiness, 6, 41, 121–122, 133 The Happiness Advantage (Achor), 12, 121 happiness-focused Money Mind, 41 The Happiness Hypothesis (Haidt), 133 health insurance, 165 “heart” of the matter (CHOOSE model), 127–128 Heath, Chip and Dan, 134 hedge funds, 140 hidden fees, 77 Hillary, Edmund, hindsight, 50–51 home ownership, 161–162 Honest Conversations, 40, 155 human behavior, 23–24, 36 “hurdle rate”, 83, 136 I IARs See Investment Advisor Representatives (IARs) Ideal FinLife, 7, 18, 61, 118–121, 134 ideal self, “illusion of validity”, 55, 94 impulse control, 41 income investing, 136 independent brokers/dealers, 76 Individual Retirement Accounts (IRAs), 76, 83, 90 information age, information overload, 16, 31, 61–62, 64, 67 inheritances, 27–28 innovation, 138 instant gratification, 41 insurance, 95, 164 contracts, 87, 175–176 life insurance, 96, 170–171, 176 long-term care, 96, 99, 144, 165–166, 176 premiums, 166 intellectual property, 78 interest rates, 9, 88 Internal Conflict Trap, 47–48, 91 intuition, 26, 46, 67, 133 Investment Advisor Representatives (IARs), 76 Investment Company Act of 1940, 173 investments, alternatives, 140 asset correlations, 137 guaranteed principal, 83 overfunded portfolios, 131 portfolio buoyancy, 140 returns, 27, 57–58, 82 selling, 54, 57–58, 94 strategies, 82–84 tax-efficient, 82, 163–164 trading frequency, 57–58, 83 investor returns, 57–58, 85 investors, 22, 57 invisible gorilla experiment, 48 IRAs See Individual Retirement Accounts irrevocable trusts, 170 IRS penalties, 89 J job See employment K Kahneman, Daniel, 67 Keyport Life, 85 knowledge advantage, 54 Kolbe A Index, 13–14, 19 L leadership styles, 7–10, 16–17 leases cars, 159–160 real estate, 160–161 legacy, 35, 120, 143, 157 legal settlements, 114 leisure time, 122, 131 Leman, Kevin, 36 lending money, 157 Let’s Make a Deal, 24–25 “lifeboat drill”, 155 life insurance, 96, 170–171 lifestyle, 17, 120, 123–126 life transitions See also retirement employment, 149–154 family, 154–159 house, 159–163 marriage, 18–19, 44 new baby, 132 newfound wealth, 27–28, 114 living wills, 171 loans See leases; lending money logical thought, 7, 36, 67, 133–134 long-term care insurance, 96, 99, 144, 165–166, 176 long-term illness, 96, 143–144 loss aversion, 51–52, 66, 128–129 Loss Recognition Trap, 50, 92 low-cost tracking, 83–84 loyalty, 9, 35, 43 M Mallory, George, management approach, market, 22 indices, 58, 83–85 overexposure, 98, 131 overvalued, 137 protection against declines, 82–83, 98 signals, 82 time in versus timing, 60, 82 volatility, 54, 59, 88 marriage, 18–19, 44 materialism, mature generation, 35, 43–44 media, 52 Medicaid, 96 Medicare, 96, 165 mental accounting, 53 millennials, 32–33 mobile payment methods, 33 money market funds, 175 Money Mind, 40–42, 44 Money Navigator age, 15 collaborative approach, 7, 13 compensation, 78 conative style, 13–15 efficiency wheelhouse, 14 emotional intelligence, 10–13 fiduciary standard, 77 versus financial advisors, 101–102 geographic proximity, 15 human element, influence, 12 interactive relationship with, 4–5 involving adult children, 158–159 leadership styles, 16–17 meetings with, 118 need for, 73, 133–135, 145 relationship management, 12–13 self-awareness, 11 self-management, 11–12 social awareness, 12 specialty focus, storytelling, value added by, 135–137 Money (Robbins), 130 money-value alignment, Morningstar, 135 mortgages, paying off, 161–162 Mount Everest, Musk, Elon, 63–64 mutual funds, 173 Myopia Trap, 27, 53–54, 66, 94 N news reports, 52–53 noncorrelation, 27 Norgay, Tenzing, O objectivity, 46, 66 Obstacles (CHOOSE model), 128 Olsen, John, 88 online services, 75, 79 only child characteristics, 37 The Only Game in Town (El-Erian), 139 open architecture, 75 Opinion Trap, 47, 59, 90–91 optionality, 141 options, 174 contracts, 86, 87 prices, 88, 89 Origin of Wealth (Beinhocker), 130 Overconfident Forecast Trap, 54, 67 Ownership (CHOOSE model), 129 P paralysis by analysis, 62, 134 parents, death of, 156–157 peace of mind, 41 Pension Benefit Guaranty Corporation (PBGC), 168 pensions, 168 performance portfolios, 82 permanent life insurance, 176 personal decision matrix, 64–67 personal potential, 121 personal values, Pink, Daniel, 62 portfolio buoyancy, 140 positive psychology, 12 power of attorney, 171 Primal Leadership (Goleman), 10 priority action lists, 129 Probability Trap, 55, 94 probate process, 156, 170 procrastination, 37, 134 products See financial products professional credentials, 103–104, 112–113 professional designations, 107–108 promissory notes, 157 protection portfolios, 82–83 protectors, 41 Prudence Trap, 48–49, 91–92 Q quality of life, 15–16, 128, 131 quantitative easing, 137 R real estate buying versus renting, 160–161 investments, 54 paying off mortgage, 161–162 second homes, 162–163 Rearview Mirror Trap, 50–51, 92 rebalancing strategies, 136 recessions, reflective thinking, 46, 67, 133 Registered Investment Advisors (RIAs), 76–77 relocation, 169–170 renting, 160–161 resilience, 140 restricted stock units (RSUs), 164 retainer arrangements, 78 retirement asset allocation, 98 choice overload, 68 control factors, 143 guaranteed income, 168–169 income, 98, 168–169 living the lifestyle now, 123–126 relocation for, 169–170 restructuring portfolio, 131 risk tolerance and, 27, 59, 143 staying engaged, 125 timing of, 131, 166–168 returns, 27 by investment strategy, 82–84 investor versus investment returns, 57–58 sequencing, 59, 119, 143 revocable trusts, 170 RIAs See Registered Investment Advisors Richards, Carl, 57, 123 risk control over, 120 drawdown, 47, 59, 82 reducing, 131 sequence-of-returns, 59, 119, 143 taking, 27 tolerance, 27, 143 transfer, 95 Robbins, Tony, 130 robo-advisors, 75, 79 role in life, 112–113 RSUs See restricted stock units S sacrifices, 134 safe harbor, 15–16, 117–118 sales process, 34, 77, 102 Save More Tomorrow (Benartzi), 134 saving, 6, 120, 125 savings accounts, 174–175 school, going back to, 125–126, 149–150 second homes, 162–163 second opinions, 18, 79 Securities and Exchange Commission (SEC), 76, 173 security seekers, 41 selective attention, 48–49 self-awareness, 11, 23, 42, 45 self-control, 11–12, 56 self-help, See also do-it-yourself (DIY) approach Self-Sabotage Trap, 55–56, 94 self-sabotaging behaviors, 45 selling a business, 153–154 investments, 54, 57–58, 94 Selvin, Steve, 25 sequence-of-returns risk, 59, 119, 143 Shapiro, Daniel, 109 Silo Trap, 53, 93 skepticism, 33 social awareness, 12 social media, 10, 32, 34 social networks, 121 Social Security, 68, 168 S&P 500 Index, 58, 85, 137 SpaceX, 63–64 spending, 6, 32, 120, 136, 159 spouse, death of, 99, 155–156 standard of care, 76–77, 80 Starbucks, 9–10 status, 111 status quo, 56 Steps (CHOOSE model), 129 stockbrokers, 102, 113 stock options, 164 stocks, 174 stress, 121, 123–124 success measurement, 120 suitability standard, 77 System II thinking, 67 T tax-deferred savings, 85 tax-efficient investments, 82, 163–164 tax-loss harvesting, 50, 84 tax management, 136 tax minimization strategy, 84 tax penalties, 89 technology, 122, 138–139 term life insurance, 176 Tesla, 64 thermodynamics, 138 Thinking, Fast and Slow (Kahneman), 67 time, as commodity, 62, 122 timing, 60, 82, 120, 141, 143 “T-Junction”, 139 tools, 81 total return versus income investing, 136 touch points, 112 trade-offs, 5–6, 120 traditional finance, 22–23 transformational economy, 10 trifecta advantage, 142 trust, in advisor, 33, 44, 111 trustees, 156 trusts, 170 U uncertainty, 88, 139 underperformance, 57 un-leaders, 10 V validation, 110 value-adds, 135–137 values, personal, 6, 13 Vanguard, 135 variable annuities, 176 Venn diagrams, 122–123 vertical integration, 74–75 volatility, 54, 59, 88 volunteerism, 125 vos Savant, Marilyn, 25 W what-if scenario testing, A Whole New Mind (Pink), 62 wills, 171 wirehouse brokers, 76, 77 work See employment About the Author Paul Bennett is a CERTIFIED FINANCIAL PLANNER™ professional (CFP ®), Chartered Financial Consultant (ChFC®), and Managing Director of the United Capital regional office in Great Falls, Virginia He holds a PhD in economics, with distinction, from SMC University, an MS in finance, with honors, from Indiana University, and a BA from the University of Florida He will complete a postdoctoral MS in applied analytics from Columbia University in 2017 Paul is a three-time author, as he has written two previously published books: Financial Economics of Index Annuities: An Analysis of Investor Returns (ISBN: 1612334083) and Easy Essays on Economics (ISBN: 1612332692) He is quoted often in the press and has contributed to various publications such as U.S News and World Report , CNBC.com, Dow Jones News, Financial Advisor Magazine, Financial Planning Magazine, Investment News, Washingtonian magazine, and The Washington Post He also has served as a subject matter expert for the Certified Financial Planner Board of Standards, contributing to the development of examination questions for the CFP® Certification Examination and analyzing the tasks of CFP® designees for the CFP® Job Analysis Work Group Paul resides in Great Falls, Virginia, with his wife and twins In his free time he enjoys traveling with his family, reading nonfiction, and playing an occasional round of golf ... the Money Navigator, introduces you to the book’s key ideas Your FinLife®, the Money Navigator, and behavioral finance Chapter dives into the many factors that define and orient your FinLife®... your journey toward your Ideal FinLife®; remember, the journey is the best part of reaching your final destination! C HAP TER The Money Navigator and Your FinLife® “If your actions inspire others... this mistake To learn more about the differences between a Money Navigator and a regular financial planner, turn to chapter The Age of the Money Navigator While the Money Navigator style of leadership