Baby Boomers Retirement Club

Fire Your Financial Planner

Richard Roll Interviews Ron Firmin


Richard: Hi everybody, it’s Richard Roll at the Baby Boomers Retirement Club, the
BBRC and our guest today is a very interesting fellow who’s going to be talking to us
about money, your money, the people involved with your money, and how you can have
a meaningful and well-funded retirement after age 50. My guest is Ron Firmin The
Busted Boomer. Ron, how are you today?

Ron: Hello, Richard, glad to be here and congratulations on your 192 mile bike-a-thon
and what a worthy cause.

Richard: Well, thank you. Thanks so much. Ron, the topic today is money, it’s
something that’s at the top of mind of almost every baby boomer today because of the
recent changes that have taken place in our home equity and the housing market, the
overall US economy, the decline in value of our 401Ks, all of the uncertainty about the
price of energy and the price of oil and gas. All of the factors of inflation and
fundamentally a lot of uncertainty when we know we’re going to live for quite a long
time. You call yourself The Busted Boomer and Ron Firmin is the author of two books,
which we’ll talk about in a moment, one of them called Fire your Financial Planner.
The other one is about The China Boom, which we’ll also here about. Ron, tell us a little
bit about your story and why do you refer to yourself as The Busted Boomer.

Ron: Richard, I think that most of our listeners can relate to this. At one time or another
I’m sure that a good number of us have made mistakes or decisions we wished we had
not made with regard to managing our financing. And what I’ve learned over the last
number of years particularly when I was researching my book and talking to people
around the country is that quite a few people could relate to me, and in fact, felt they had
shared experience with me when it comes to going from having boomed to becoming
busted, at least one time in their live. Now, there’s an upside to that and that’s a healthy
dose of humility but once you’ve done that and spent years acquiring assets or wealth of
some measure as I did and then to go busted, and I’m not talking about bankrupt I’m
talking about for various reasons, losing those assets and having to go back to square one
and build back again to where you can have a meaningful well-funded retirement, it’s
quite a story and it’s been quite a story for me and I find it’s been quite a story for a
number of baby boomers.

Richard: Well, Ron all of us baby boomers have been through a very long period of adult
life thus far with a lot of changes that have gone forward in the economy, and so a lot of
people are in that boat where they have gone through a patch of time where they may
have lost everything or lost a substantial amount of their investable funds, etc. Can you
tell us what exactly did you go through and how have you dealt with it?

Ron: Well, Richard I was a very successful businessman and a developer and had several
businesses and made millions of dollars, actually, and thought I knew how to manage my
money I certainly learned how to make it, but what I learned in my experience was that
there was a real gap in my education and when I went busted, literally, loosing well over
$3 million dollars. In fact, it was well in excess of that went back to square one, I
realized that I needed to fill that gap with information and education because I certainly
learned how to make money and we all learn magically how to spend it. But I really
never had gotten sufficiently educated on how to manage my money and I did rely on
other people but as you know and as most baby boomers can attest, experts have failed us
time and again so I knew it was time for me to become informed and educated.

Richard: And certainly nobody’s going to be as motivated about managing your money
effectively and accurately and intelligently as you are.

Ron: That’s certainly true, in fact, that is absolutely the case. And, you know, one of the
things I’ve found is that even well regarded and well known economist, for example,
Mark Sandy the Chief Economist at said that he didn’t have any
formal education in personal finance and the only training he got was watching his father
pay bills and he said managing your personal finances is a daily affair it’s like brushing
your teeth. So he and many others came to the same conclusion that I did that we have to
be personally involved. In fact, when you think about it we’re the only ones that have no
conflict of interest in managing our money.

Richard: Right. And we need to have a game plan, as well, and as you pointed out it’s
hard to put together a game plan, if you have no financial education – and we don’t get
educated in finances in school, as you’ve said – it is probably certainly one of the top few
of the areas that make the biggest difference in your success and life is the ability to
manage finances successfully and yet we’re not trained to do it, not even a bit and
certainly I can say that for myself in terms of my education prior to, and even in college.
So from that standpoint, how did you begin the process? What did you learn and how did
you begin the process and why should we fire our financial planner?

Ron: Well, after my experience of having lost, literally, millions I went back to square
one and began to rebuild my finances and I decided I would be smart this time and I hired
a good friend of mine as my financial planner. He’s still a good friend of mine and after
the dot com debacle and some of the things in the earlier part of this century I did exactly
what he told me to do and what he told me will resonate with, I’m sure, many of our
listeners, he said “We’re going to put your money in mutual funds and just don’t worry
about it, maybe look at it once a year don’t worry about it, you’re in it for the long haul.”
So after a couple of years and knowing that there had been some real issues in the
economy I decided I’d go check out my portfolio. So I went to the big city and went up
the elevator into the high rise building to those beautiful office and after we chatted a
while he said “Well, let’s look at your portfolio”, and he went around to his desk, called it
up, looked up and said “Good news.” Well, that’s what I was listening for, Richard, good
news. And then he said “The markets down 38% your portfolio has only lost 30%.” I
said “Howard, you’re fired.” He said “You can’t fire me, I’m your friend.” I said
“You’re still my friend, you’re still fired.” And at that point I knew that I needed to focus
in and become very serious about being involved in the management of my portfolio and
being educated and informed and I made it my business to do that. And, in fact, I
traveled from one end of this country to the other meeting with major financial planners
and financial geniuses from all over the country some of the most renowned names in the
country going to seminars, reading their books, talking to them. And I found that while
there’s great information out there there’s also a lot of conflicting information but it did
help me to get a better grasp on what I needed to be doing.

Richard: Well, there’s not only a lot of conflicting information there’s a lot of
overwhelming information…

Ron: Yes.

Richard: …because you can start learning about technical analysis, fundamental
analysis. You can look at global trends in terms of cash flows and in terms of currency
fluctuations. I mean there are so many different factors affecting investment returns and
many different successful investors have different approaches but they have certain
things in common. Can you talk about what some of those things are so our audience can
get an idea of what can they do for themselves?

Ron: Well, of course everyone is going to tell us something that we need to do and it’s
very difficult for most people to do and that’s to take a critical unvarnished look at our
own circumstances and how we got there. That’s a difficult process. I’ve been told by
quite a few people that reading my book and reading my story has helped them come
face-to-face with that and appraise things with a more realistic approach because that’s
hard to do to admit to perhaps mistakes or bad decisions and then really looking at what
we could have done differently. As far as the management of our money is concerned
there are a number of things that we need to know that have to do with some of the
traditional investments that we sort of take for granted. For example, mutual funds and
401K’s there’re a number of issues related to them and we’ve put unbelievable trust in
these instruments which in 1980, for example, mutual funds were about $800 million
dollars. In 2001 over $6.6 trillion dollars were in mutual funds and yet a former
chairman of the SEC wrote a book called Take on the Street and his second chapter in the
book is the Seven Deadliest Sins of Mutual Funds and many people have, due to not
being sufficiently informed and educated, have lost millions in mutual funds…

Richard: What would you say some of the specific…

Ron: …and a significant portion of their investment. So we need to become educated
about how money works and determine if there’re any new and different approaches that
might help us a little bit.

Richard: You want to share some of the deadly sins about mutual funds for our

Ron: Yes, I can do that. Clearly there’s a tremendous trust that people put in them. The
high fees strangle the returns. That’s one thing. There is a tax trap which if we don’t
manage it correctly could come back and bite us and this is a terrible thing to say but
there’s kickbacks compensation that we don’t know anything about. The type of funds
that they are is often unclear. The verbiage and terminology is unknown to even serious
money managers and investors so…

Richard: Ron, when you talk about kickbacks do you mean from mutual funds to 401K
managers or administrators?

Ron: Oh, sure. Absolutely. Absolutely. And that’s legendary and extremely well
documented. Now, that doesn’t mean that there have not been some successes in mutual
funds that’s not a blanket thing, I’m just saying that people need to be informed about
those issues and those problems. Most of my losses were mutual funds. I’ll tell you one
of the biggest things, Richard that has amazed me is that so many people say I’m not
invested in stocks I’m invested in mutual funds.

Richard: So they just simply don’t understand what a mutual fund is.

Ron: That’s exactly right.

Richard: What can people do to tell the difference between a good mutual fund and a bad
mutual fund?

Ron: Well, you know what, there’s a number of things that can be done but it’s not just
average returns which is usually what is touted or the average returns of the funds more
importantly is what have been the declines and what the dips in the mutual funds and
what is the real return on your money and by that I mean, you know, if a mutual fund
loses a high percentage one year and yet it gains in some other years it could take years to
make that up. So it may tout certain average returns but that’s not the real return on the
fund and if we’re looking at it carefully it’s probably wise to read this book written by
Arthur Levitt to get a little bit more information, and also to look at not just one particular
avenue but look at a cross section of mutual funds.

Richard: So Arthur Levitt the former Chairman of the SEC.

Ron: Yes.

Richard: From a standpoint of choosing, if you’re looking at the annual historical
compound average rate of return that a fund is reporting, is that after fees? Should you
look at the fine print in terms of fees and administrative cost?
Ron: No, a lot of times that’s hidden. A lot of times that’s hidden and it’s not seen
readily by the consumer and that’s part of the problem.

Richard: Okay. What can people do? You know our audience isn’t just talking about
investing from a theoretical standpoint they’re looking at how can I have enough money
to last me the rest of my life? And how can I have a well-funded retirement if I’m
starting, let’s say, in the vicinity of age 50 plus or minus a few years? What would you
recommend to those people and what is it – let’s just start there, what is your
recommendation for people to help them get that part of their life under control?

Ron: Well, actually in my Web site on page Get Started it addresses that very thing and
the steps that a person needs to take. There are two things that can get you from Point A
to Point B and one is either put a sufficiently large sum or a larger sum of money into
your investments. And the other is to increase the rate of return that you’re getting. So
after the age of 50 we got to do something to power pack our portfolio. No matter where
we are we need to get started.

Richard: So save more and lose less or save more and have a better mix of investments.

Ron: Save more and have better growth in save investments. There are some vehicles
that provide better growth and safer investments that protect the principle, which is
obviously critical for someone over 50 and it’s a big part of what I look for in an
investment. I want to protect my principle, I’ve been through this a couple of times, so I
want to do that but then I want to maximize my returns safely. So I’ve measured my risk
reward tolerance and I know what I can bare and that’s what each individual needs to do.
And as we work with financial professionals and as we become better informed ourselves
we will know how to make those choices and that’s what I’m trying to teach people.

Richard: What are some examples of products that you think are providing a safer return

Ron: Right now there is something coming onto the market that will be here shortly that
has a very proven methodology for selecting stocks that looks at the cash and cash flow
positions of companies. I call it Operational Cash Flow per Share, OPS. I have some
reports on that and the historical returns on model portfolios using this methodology has
exceeded the returns of the S&P 500 and the basis for it are cash drawn companies.
Now, that makes a lot sense to me because I know from personal experience the way that
I have weathered storms is because I have cash reserves. That’s the only way I can do it
and that’s the only way any company can do it. So I look for companies that have strong
cash and cash flow positions. That’s what Warren Buffet does, that’s what Barry Dillard,
that’s what all the famous investors do and it’s what we should do if we want our
investments to grow safely.

Richard: But it takes quite a lot of doing in most cases. You were jus talking about a
service or a product that’s coming onto the market that does this for you.

Ron: Yes, it’s actually been developed over a period of about 15 years and is coming to
the market so that average investors will be able to access it and I’m happy to say that
I’m going to be part of the vehicle that will help announce that to the baby boomer
generation and I will have announcements regarding that through my Web site. I’ve
personally experienced these model portfolios, I know that they work. There’s no
guarantee in anything but, especially stocks, but we do know that if we can have our
investments in companies that are able to weather the storm we’re going to be better off
than if we’re in companies that have high earning per share but they don’t have a cash
basis in their company.

Richard: Well, let’s give our listeners the…

Ron: A famous example of that is Enron. All of the big houses were urging buy Enron
the week before its demise in 2001 stock dropped under $1 and we know what that did to
thousands and hundreds of thousands of investors. For every dollar of earnings per share
that Enron was showing on their balance there was $3 dollars of negative cash return –
negative operational cash flow per share. So if you had had that information several
quarters in advance wouldn’t you have been better off to have known the trend that was
happening at Enron and made the decision whether to sell out that stock and invest in
some other company that had a strong cash flow position.

Richard: Well, what I would say is that this service has the potential to feel like a cat
scan that enables you to see what’s really going on inside these companies.

Ron: That’s correct.

Richard: In terms of the lifeblood. The lifeblood is not accounting profit it’s cash and

Ron: That’s correct and it is very sophisticated computer software and analytics and
metrics that have been developed and it’s going to be served up in a very user friendly
manner so that we don’t have to become economist or stock brokers or have a PhD in
Finance to be able to use it. And if we don’t want to be bothered with it the returns are
sufficiently high that we can pay a point or our chosen financial professional and let them
manage it, but with us being able to monitor and look at it and know exactly what’s
happening. And the returns have been wonderful they’ve exceeded the S&P 500 for a
number of years.

Richard: Very interesting. Ron, let us give the listeners the address of the Web site that
you’d like them to go to.

Ron: There’s a couple of ways to get there. One of the fun ones is and Richard when they get there they’re going to find a
number of tools that will be very helpful starting with the Get Started Page. Then there
are financial calculators that are very sophisticated that are dozens of financial calculators
that will be very helpful to them. The second one on the list is How to save $1 Million
Dollars it’s a wonderful calculator and a great help to any investor. There’s also the
opportunity to access our coaching service which has been extremely well received and
individuals can opt to select a half hour or an hour coaching service. We have a special
related to that right now for the listeners on this broadcast, if I may share that.

Richard: Yes, definitely want you to.

Ron: Well, I have a lot of respect for what you’ve done Richard and my chosen and
targeted audience are my favorite people, I was born in September of 1946 so I am the
face of the baby boomer generation, sadly the body also but…

Richard: We have some other audios that you should listen to, to make your body the
body that you want.

Ron: I will look forward to that. So that is my targeted audience because I have a very
huge passion to communicate some of what I’ve learned to these folks so, you know, they
can go to the Web site and there’s a lot of useful and helpful tools there and the ability to
access the coaching session. And here’s the special that I like to offer, our normal price
for an hour session is $150 dollars, to any of the listeners to this broadcast if they will let
us know where they heard that they did hear this on the Baby Boomer Retirement Club
broadcast we will make available to them the regular one hour session plus another one
half hour session free and a free copy of my book Fire your Financial Planner.

Richard: So they’re going to get an hour and another half hour and a free copy of the
book Fire your Financial Planner by Ron Firmin all for $150 dollars. I think that’s a
very fair offer, especially for people who are just getting started or who really need to get
some perspective on how to look at all of this and how to put it all together. Ron really
glad to have you with us today. People can go to the for further
information on this and on all of those tools that Ron described. It’s been great having
you with us. Ron, you are also involved in a business that sources manufacturing and lost
cost solutions in the Far East and particular in China.

Ron: That is correct.

Richard: And we’re going to have another discussion that is going to focus on the China
Boom, which is your fourth coming book. So look for that under the investments area of
the Baby Boomers Retirement Club and we’re going to talk about how the changes in
China affect you, affect baby boomers give opportunities and also some risks and we’ll
cover all of that in our next talk. Ron again thanks so much for being with us.

Ron: Thank you, Richard.

Richard: Bye now.

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