Overview
Colin Overweg is the founder of Advize Wealth, an Investopedia Top 100 Advisor, and member of the Board for the Financial Planning Association. He’s also been featured in publications like Barron’s, CNBC and The New York Times and a frequent lecturer at various universities.
In this episode, we talk about how building wealth today is radically different than it used to be, pensions, misconceptions about home ownership, how to get started with investing, whole life insurance, Nancy Pelosi’s portfolio and more.
Please enjoy our conversation with Colin Overweg.
Key Takeaways
Building wealth today is significantly different than in previous generations, especially due to the disappearance of pensions and decreased equity compensation options in companies.
Younger generation often faces confusion and misconceptions about investment strategies, such as the notion of needing to be wealthy to start investing or the overemphasis on home ownership as a wealth-building decision.
Low-cost index funds, which allow investors to own shares in multiple companies, are recommended for long-term investment. These have shown to outperform around 90% of professional hedge fund managers and traders.
The trend in the financial industry is leaning towards more DIY investing, facilitated by FinTech tools. However, seeking advice from financial advisors still remains relevant.
Transcript
Cameron Howe: Hi everyone, welcome back to the Investipal podcast. I'm pleased to welcome Colin on today. Colin is the founder of Advise Wealth. He's ranked as a top 100 advisor by Investopedia. He's been featured in Barron’s, CNBC, New York Times, Investment News, Investors Business Daily, just to name a few. He's also a guest lecturer at several universities in their wealth management programs, including Michigan State, and is also on the board of the Financial Planning Association, helping advisors with their best practices. Colin, with your very extensive background, I know you have a lot to say. It's always been a pleasure chatting with you. Maybe to kick things off, as a predominantly fee-based advisor, I'm assuming you deal primarily with younger, I'll call them, HERNYs—the high-income, not-rich-yet crowd. What's a common pitfall you end up seeing with the younger generation when they're getting started on their investment journey?
Colin Overweg: Thanks, Cameron, happy to be here. Yes, I do work with a kind of a barbell model. I love working with my own demographic, kind of that HENRY generation—30, 40-year-olds, lots of different irons in the fire. They're trying to pay down debt, trying to buy a home, maybe having kids, changing careers. So, tons of different variables going on in their lives with my traditional clients who are more in the retirement camp where I was classically trained in the wealth management industry, serving pre-retirees and already retired folks, helping them create lasting income and generational wealth with their portfolios. But to answer your question, I mean, young people kind of have been served a pretty tough card as of recent with interest rates going up. Like the environment has just not been very friendly. And I think a lot of people are kind of finding themselves trying to decide whether they want to pay their student loans this month, or try to save and invest for the future, or make that down payment on a home. And I think a lot of times what I find is that people are getting advice from maybe their boomer parents who grew up in a different environment and telling them that buying a home is a fantastic investment. The data can tell you that that's almost the exact opposite. That is not probably your best wealth-building decision. Now, do you have to live somewhere? Sure. Is it great to have a place that you can remodel and call home? Absolutely. Does it have to be today should you feel like you're being left behind if you're not doing that? No, I don't think that is absolutely the case. So I think that's what I often hear is, I need to stop burning money or wasting money on rent. That is absolutely false because the moment you buy a home, you are now burning money or wasting money on interest. You are burning money or wasting money on your taxes, your burning money and wasting money on your massive insurance. You can just call all of that a form of rent. The amount that you're actually paying down and building equity in a home is sometimes only five to 10% of your mortgage payment or the expenses that you have every month. So I would not feel like you're getting lost or getting left behind if that is something that your parents are harping on you on.
Cameron Howe: Mm-hmm.
Colin (03:20.911): And then the second thing I often see is that people feel they need to already be wealthy to start investing. That is also the exact opposite. There are so many cool FinTech products out there and even just the traditional ones with your 401k at work, where if you could just get started putting 5% of your income or even a 50 bucks a month, just automating that and getting started is absolutely huge. You'll never notice it. You're not going to see it out of your paycheck. You won't even feel it. And then all of a sudden you're going to forget about it and look a year later and be like, oh my gosh, you know, I have a few thousand bucks here and this feels really good. And it's just that first baby step, that first snowball to building wealth and making a very, very important decision and getting yourself in a better place moving forward.
Cameron Howe: Do you think that's like a byproduct of the world of instant gratification where, you know, unless I see that immediate return, it doesn't really capture my attention?
Colin Overweg: I think so and I don't even know if that's so true today. I definitely think it's more prominent today. We don't have to wait to binge-watch a series. We're not waiting until next week. We're just crushing the whole series tonight or tomorrow or whatever the case on Netflix. I wanna download it now. I want to stream it now, whatever the case. That's so true that it probably makes millennials even more impatient, Gen Z, et cetera. But this is true too for the previous generations. Everyone wants to get rich quick and they're always looking for the next Bitcoin, the next Nvidia, the next stock, whatever this, you know, that the shiny object, so that is not a new thing as far as human greed and civilization and human history. So trying to maybe work past that and investing in maybe real stocks, diversified index funds, et cetera. That's a whole other topic, which I'm more than happy to get into.
Cameron Howe: Well, I guess, you know, to your point earlier about taking advice from, you know, your parents, like a boomer generation, it's, you know, what I always liken it back to is, you know, that, that generation grew up with like a pension, right? Like I, I worked my job. I never left that company. They treated me well. Uh, when I retired, I had a fully funded pension that survived me. I could focus on like vacations or anything, but you know, that, that's eroded a lot. Are you seeing the need to put money aside for retirement for long-term wealth building is more evident than, sorry, for this younger generation than for the older generation because of the lack of company resources?
Colin Overweg: 100%, the pension is a dinosaur nowadays. I don't see it almost ever with anyone under the age of 45. And that was such a huge benefit that really was out of sight, out of mind, and just automated for a lot of these older generations. It was saved for them automatically. They retired and they got the pension. They got social security, and they never had to once think about how much should I be saving for my future? What should I be putting aside? It was kind of just spoon-fed to them. And then all of a sudden companies started realizing that they can't support paying their existing workforce and a workforce that is now living, not until age 65 like they used to or even 75, but a lot of times till age 95 or 85 or 95. And that's why they completely ripped this out and said, we cannot afford to do this forever. Saving and building wealth is now on you. And that was just such a massive pivot. And the problem is, is that the behaviors of that older generation were never taught and telling the importance to their kids of saving to the 401k, saving to your Roth IRA, saving to a brokerage account, make sure you're investing for the long term. They never had to worry about that. So those were not principles that they're teaching. So I honestly think we're gonna have this like really kind of lost generation of savers and wealth builders that is kind of hitting the United States especially, but really around the world. And it's gonna be tough. I think people are gonna be not in a great place and maybe having to be forced to work longer and not having that amazing retirement that they got to watch their parents have.
Cameron Howe: So on that note with comparing this versus the previous generations, I'm going to pull a number out of my ass, but let's say, you know, the pension was about like 10% of your income. Like maybe you had to, it was a DC, like you had to contribute to it. With that now eroded for the younger generation, are you seeing them put away call it the same amount like that 10% or I guess, you know, if it's a company match, it's technically 20%.
Are you seeing that or is it like a massive gap in people's financials right now?
Colin Overweg: Unfortunately, I'm not really seeing that, especially amongst the younger generation. It's not like that's really even talked about amongst HR. And a lot of times the default is that it's set to zero. So you actually have to opt into it. And a lot of times you have to fill out or sign or mail in or submit whatever it takes, some type of form. And maybe it's a couple of pages and you have to link your bank account, et cetera. Like it just is annoying. It's a task. It's very easy to say, I'll do it next week or next month. And then all of a sudden three, four years go by and crap, I forgot about it. It's never on your to-do list today. Every day we have a to-do list. I got to pick up my kids from school. I got to get groceries. I have to make dinner tonight. By the end of that, the last thing you want to do is log into your 401k and deal with the hieroglyphics, the minutiae. It's all a foreign language. They don't make it very easy. So it doesn't get done. Um, I, I know that there is some really great, um, some, uh, laws being changed where it's almost like the opt in and the automatic contribution rate might be 5% sometime in the near future. I'd love to see it even as high as 10%, like you mentioned to replace the, the pension, which I don't even think your number is probably radically far off.
Cameron Howe: Mm-hmm.
Colin Overweg: And it would be really great if you had to go through those paperwork and to opt out of the 401k because most people wouldn't do it. And they would just all of a sudden have this newfound wealth when they leave their job and they're like, wow, I have $10,000 in my 401k. Sweet. Let me move that over to the next one or at least be able to pay off any debt or even use that for a down payment on a home or whatever that financial goal might be.
Cameron Howe: It's funny, I was listening to, I don't know if you've ever listened to the all in podcast for, um, I enjoy listening to those guys. You know, it's Chamath, uh, Jason Calcanis, uh, Jay Freberg and, uh, David Sacks. And they made the case on the last episode I watched on how the trend that they're seeing in Silicon Valley now. So, you know, like the new age of company, um, they've stopped giving out equity.
Colin Overweg: Mm-hmm.
Cameron Howe: So, you know, like one of the big perks of joining a young company was like you would get some stock options in that company. And when that company strikes it rich, whether they get sold or IPO, it's a big payday for everyone. The trend now is to essentially outsource everything, you know, like instead of hiring local dads in Silicon Valley, you look to overseas, to cheap resources where like you don't have to pay for anything. Um, so I think it's like very interesting, you know, it's to your point, the, the opt
Colin Overweg: Mm-hmm.
Cameron Howe: in is much more difficult, but it's serving the company's best interest, right? They don't want you to do that because it's another obligation on their end that they have to honor with their employee base when it's easier just to keep everything at a minimum, no equity, no pension. And also now let's look to overseas to fund my talent pool instead of looking domestically.
Colin Overweg: Absolutely. It's just kind of another maybe strike against the employee, the average US worker, Canadian worker, European worker that's trying to build wealth for the long term. They don't have the pension anymore. The equity compensation options are going down. It's really going to be on us to open an account, have the discipline to systematically save, invest ourselves, like we actually need to learn at least a couple of pieces, happy to give some potential recommendations or at least some education on the pod today about what to do with that. But we have to be picking our own funds and making sure that money is put to work and invested. I mean, even like Chamath, he got rich from company stock. I mean, he was employee like 500 or whatever. Yeah, at Facebook now Metta. You know, he wasn't given a pension and doing all this stuff, he received equity compensation that a company just, that just happened to absolutely strike it rich. And now the guy is a multimillionaire.
Cameron Howe: Yeah, maybe, you know, down that note, it would be interesting to hear the way you approach it for your clients. Like, is it a model portfolio approach? Is it like owning like one or two index funds? Or is it more like bespoke building a portfolio from the ground up?
Colin Overweg: Yeah, great question. So I kind of start fundamentally saying that nobody knows the future. That, that is just a fact. Nobody knows who's going to be the next big winner. Who's going to be the loser. Is Nike going to sell more shoes than Adidas is et cetera. We could go down the list. Infinity to every company in the world. So if we have no idea where the future is going, how the heck do you invest? Where do you go? Do you just pick stocks? Do you try to get lucky? Well, if you believe that the markets are reasonably efficient, which I do, and what I mean by that is that you're not going to be buying and selling stocks based on the news. By the time you hear it in the news or the Wall Street Journal or Yahoo, whatever the case, wherever you get your news from, the stock already knows, the stock price has moved. So how in the world if you can't trade on news, and even if you find news that is not public information, that's illegal. So you're not even allowed to trade on non-publicly traded news. I wish our US senators would abide by those rules. But for us Americans, that is the case. I mean, for anyone, for us retail traders trying to build wealth. So how the heck do you invest? Well, what I do is I fundamentally buy them all. I want to own all of the companies. So whether Facebook is the big winner, Apple's the big winner, Google's the big winner, and Nvidia's the big winner, I wanna own them all. Well, how would you do that? Do you go into your Vanguard, your Fidelity, or whatever platform and actually buy every single stock? In my opinion, no, there's a much, much easier way you can buy what's called an exchange traded fund or a mutual fund, an ETF they call it, which allows you to buy multiple stocks with just one mutual fund. And a lot of times they're referred to as index funds. Sometimes in the 401k, they may be referred to as a target date fund. And you can, with one fund, now own thousands of the world's greatest companies. And actually what's amazing is that they put them in equal proportions based on how big the company is. Because then do you buy all 3000 U.S. companies in proportion?
Colin Overweg: Maybe not. We should probably own them based on the size that they are. So if Google, Apple are the largest companies, those are gonna be your largest holdings. And what's amazing is that the evidence has shown that investing in a low cost index fund diversified way actually outperforms in the utmost of around 90% of professional hedge fund managers and professional investment traders. So there are hedge fund mutual fund traders who are constantly watching the news, trying to outperform the market, trying to trade on this information, maybe getting in trouble for insider trading, they're on the bleeding edge. And 90% of them over long periods of time, 10 plus years, are underperforming what you can go out and invest in 30 seconds for almost free. So to me, makes so much more sense that if you want to just become in the like a 90th percentile or maybe even 85th percentile of the best traders in the world and you can just do that in 30 seconds without having to think about it. I mean sign me up that sounds amazing then you can focus your time on the things that actually matter and things that actually you can move the needle on like how about your taxes how about your income can you get another degree will your company pay for you to get your masters. Could you learn a side hustle? Maybe you should start an online store with an Amazon thing and like create some content and start selling t-shirts. Like how could you better your skills and increase your income? That is where you should be spending your time instead of trying to pick the right stocks because that is trying to find a needle in the haystack. Just buy the whole damn haystack. You're gonna be outperforming most professionals. And then like I said, focus on the things that matter.
Cameron Howe: You probably wouldn't outperform Nancy Pelosi. That's, that's my cue.
Colin Overweg: She's tough to beat. That's true. I mean, buying these Nvidia calls, two months before she passes a bill that the government's gonna subsidize millions of dollars of their chips. Man, that was a hell of a call.
Cameron Howe: It was funny, we actually looked a couple of years ago during, especially like when there's a keen focus in on it, we're like, can we make an ETF that tracks her portfolio? Turns out it's illegal. It's illegal to profit off of Congress people's trades, even though they're clearly in and on the wrong. So it's like, I feel like it should be either you ban trading or you open it up where everyone, like in real time, I could see exactly her positions and then recreate that for the general American population to invest alongside the insiders.
Colin Overweg: I thought there was an account actually doing it. I thought it was like...
Cameron Howe: They have like, there's a few that have like models out there where you could subscribe to it. But you're not allowed to have it as like a managed product, like an ETF. Because that ETF maker will be making money off of it. And that's no bueno.
Colin Overweg: Yeah. Oh, gotcha. Okay, because I know like the Twitter now X account, Unusual Whales, they follow it pretty closely, but maybe they can't be managing the portfolio. Like they can only provide news or something like that. But I have looked at that more than once and it's so frustrating. I'm maybe in my gambling account, which I do have a gambling account. I like to have some fun too. You know, to just…
Cameron Howe: Exactly.
Colin Overweg: go ahead and put 5% of the portfolio into some of these random calls or random bets that these congresspeople are making. It's unbelievable.
Cameron Howe: I do the same thing. I do like an 80-20. I do 80% into core index funds, ETFs. And then my 20% is where I lose all my money. And that's where I make single stock bets that never really pan out.
Colin Overweg: Yep. Haha. There we go. Hey, at least you know the truth and it's just the return on education slash return on entertainment.
Cameron Howe: Exactly. It's, it's my scratching my gambling itch and means I have to get it out somehow. And that's the best vehicle to do it.
Colin Overweg: Hey, whatever protects that other 80%, do what you gotta do.
Cameron Howe: Exactly. So, you know, on the note of looking online, where do you think the trend is in the industry? You know, like we're seeing a lot of people, a lot of young people, they entered into the market two years ago, probably a lot got burned since the market downturn and GameStop crashing, what have you, name your meme stock that crashed. Do you see that trend continuing? Like I know you also create content. Do you see it moving more online where instead of hiring an advisor, I am now looking to online creators or online communities to figure out like what I should be doing with my investments.
Colin Overweg: So I think the answer is yes to almost all the above because yes, there's going to be more DIY do it yourself investors because the FinTech tools are getting so good. You can get on Robinhood and trade stocks while you're sitting on the toilet. Like you can just, you can, there's so many public, you know, even public.com, like the app, it's like a social media basically for trading stocks. There are so many really, really great ways. We have Wealthfront is a robo platform. Betterment is a fantastic robo platform that, yeah, Investipal absolutely is another great FinTech product. And the tools out there and the resources to do it yourself are great. And then I also think that advisors creating content and creating education and more advisors getting out there and finding niches that speak to a specific demographic or a specific person or a specific profession, they're getting deeper in all of those different areas. So I think the ability to gain education and to invest yourself is just becoming way, way more accessible. And it was only, you know, maybe two decades ago that building amazing portfolios and tax loss harvesting was for the ultra rich. And these ultra rich, maybe 10 million plus, were paying a 1% advisory fee, which on $10 million is literally a hundred grand. Like that is out of control in advisory fees to manage portfolios. Now you can get better, better at least investment portfolio management at Betterment or Investipal for fractions of that. And... it's just really cool to see. So I think that it's getting more people involved. It's getting people invested better. And I think advisors are, are dealing with more sophisticated clients and then being able to provide top level advice. Like I'm not just spending all day making trades for my clients. Most of that is automated so we can have really, really deep conversations about their goals, their upcoming expenses and focusing on things that once again, actually matter. So I could see more people being able to do it themselves and more people being able to find better advice with better professionals at a cheaper price. So I'm really, really optimistic on the future of people being able to build wealth for themselves.
Cameron Howe: So do you see it moving more towards like a DIY portfolio managed by the client and then they hire on an advisor more for like the planning aspects, like building the budget, building the plan to get you to retirement?
Colin Overweg: Really good question. So yes, I could see that. I do see that. I see that even in my own practice, where especially even if a client has their 401k, they can't move the money even if they wanted to, but they still have a lot of really great questions. In the past, that person really didn't even have an advisor to work with. Nowadays, I'm just charging them a flat fee as if they're paying, you know, someone to remodel their home or paying a consultant, right, or paying an attorney a flat fee to help them with the advice and building the plan because the tools out there exist. You know, from like we just mentioned all the fintech tools out there, but making using them in a way to really get yourself in a great position and feel confident about your decisions. That's really where the advisor and the human aspect is probably taking place. Or the education online coming from whether it's a social media account from someone you potentially know, like, and at least have some trust in, or Investopedia, we mentioned. I mean, a lot of great information on this podcast, Investipal in general. So the education sources out there are vast and it's exciting.
Cameron Howe: So switching gears a little bit to other financial market participants, I saw you made a few posts about it. I see it a lot as well. It seems like there's this massive rise in people selling whole life insurance all of a sudden. What's your take on that? Do you think it's the new real estate agents or like the new OnlyFans model who like wants to make a quick buck and push a high fee product on people?
Colin Overweg: Mm-hmm. It's such a shame. I mean, I have been studying my whole life, got a finance degree, went to additional education to get my CFP. Um, and you can get your insurance license in four weeks and then call yourself an advisor and start slinging products and making massive, massive commissions on day one and also you're virtually unregulated if you don't have the option to invest people's money. All you have is the insurance license. So, and you're not held to a fiduciary standard, which means you don't have to have your client's best interest in mind. You can just run around saying whatever you want, slinging products. And it is really, really tough to see. I had a, a standard audit that happens every three years. And it was just hilarious to see, how detailed they're going through my client engagements. You know, they are calculating the fees that I withdrew, asking, you know, did I execute on the things I said I was gonna do for the client? And of course, passed perfectly fine. But I even just sent them a couple of videos of these people slinging index universal life and encouraging people to cash out their 401ks and telling everyone that you can get X amount of returns and an IUL because you can leverage it and take on debt and buy more IUL. They're just like, this is absolutely awful. My state regulator said this. And he's like, but are they securities licensed? No. Oh, okay. Well, we'll send it over to the insurance regulators and crickets. There's really no incentive to change that because I think these insurance companies are making money hand over fist sponsoring the - and there's just no incentive to change. And it's an absolute shame. I do think that more education is, is helpful, but the problem is, is you give the microphone to the wrong person and now there's bad education out there. So, you know, finding resources like what you're doing on this podcast is really, really cool. That's why I wanted to be here. Um, we share the same mission of trying to help people make good decisions with their money. And.
Colin Overweg: listening to someone who got their license four weeks ago and is trying to make a quick buck is not the person to be listening to.
Cameron Howe: So it was my understanding that a whole life policy specifically is beneficial for more high net worth people to, uh, for like some tax efficiencies and for estate planning. Is that the case? Is that so obviously there is probably like a, a use case to buy one of these products. What's the sort of demographic if someone's listening to this where it could actually make sense to consider it.
Colin Overweg: It is funny, I've shared that before with some of my friends. I was kind of just like going on a little rant about it. And they're like, why would this product even exist if it's just for ripping people off? And it's like, well, you know, that's kind of the same reason, like alcohol and cigarettes exist. Like it's fun. You can do it. Like, you know, you can sell whatever the heck you want. Merica. Now with that being said, there are a few use cases where it does make sense. Like, especially if you have like a buy-sell agreement between two business partners and one dies, you wanna make sure that the other one has enough money to buy the other one out. You know, there's very kind of fringe cases where it does make sense. You can potentially use it as like a deferral, a compensation deferral program. You know, you have like coaches out there, Jim Harbaugh, you know, making millions of dollars a year coaching Michigan or now the LA Chargers, you know, he can max out his 401k, you know, 23,000 bucks. That's not going to make a freaking dent on his $10 million salary. So he might be able, it might make sense for him to defer some money into like a whole life policy. So just to simply avoid taxes today, and then he'll pay tax on the
Cameron Howe: Mm-hmm.
Colin Overweg: estate planning issue. You know, you could put money into a life insurance policy and then put that money into a trust. And then when you die, you could give that money to your kids in a maybe more tax advantageous way. There are ways to do it, but this is usually for folks who already have substantial wealth. What gets twisted is that a lot of people say, see, this ultra high net worth buy whole life. And it's like, no, that was completely reversed. That person did not even think about whole life when they were building their business and how they got rich or when they were coaching their team program or whenever when they signed the $10 million salary. Let's not get the causation and correlation mixed up here. And I think that is just one of those really, really annoying things that whole life insurance or index universal life insurance salespeople will point to and say, look at Bank of America has whole life on their balance sheet. Is Jamie Dimon dumb, the CEO of JP Morgan Chase or whomever, you should have it too. It's like, okay, they are using it for a completely different reason. Let's cool our jets for a second.
Cameron Howe: Okay. So for the, the general investor, if you do get solicited, probably not in your best interest. If you're making over $10 million, you probably aren't listening to this podcast anyways. And, you know, probably.
Colin Overweg: Right, then you can pay your advisor a $100,000 fee and they can put together some really well thought out structured trusts and some great plans. But until you're there, until you can afford that $100,000 advisory fee, let's keep building wealth the right way.
Cameron Howe: Yeah, I think that's probably a great place to leave a call on. Uh, I know you are quite active on socials. How can, how can people find you?
Colin Overweg: Heck yeah, so feel free to go to the website, Advizewealth.com. Otherwise, hit me up on virtually any social media. I'm very active on Twitter, Instagram, X, with just my name, Colin Overweg. And yeah, happy to talk with people if they send me a comment or a DM. I'm very accessible.
Cameron Howe: Okay, lovely. Colin, it was a pleasure having you on.
Colin Overweg: Thanks, Cameron. Appreciate it.