294 | Ask Hilary: What One Near-Mistake Taught Me About Doing Money Work with Integrity

[INTRODUCTION]

[00:00:34] Hilary Hendershott: Welcome to Love, your Money^®, where we’re flipping the script on traditional financial advice. This is an Ask Hilary episode where I answer your real questions about investing, tax planning, money mindset, and more. Because Ask is one of the 7 Steps to Wealth, and whether you’re asking questions that help you learn more and empower yourself or seeking out the support you need to take the next step in your wealth-building journey, asking is an essential step to building clarity, confidence, and momentum with your money. Let’s dive in.

[EPISODE]

[00:01:07] Hilary Hendershott: “Hilary, what’s one thing you had to unlearn about money in order to do this work with integrity?” So, I think that it’s a really interesting question, and the last word, which is integrity, actually leads me to have a different response than I would’ve had. I’ve unlearned a lot of things about money in order to do this work, but with integrity, I would say I had to learn how fast a well-intentioned, educated human person can get on a slippery slope to greedy mistakes. Let me tell you a story. Let me tell you a story. I’m a little bit vulnerable today. So, back in the day, 2005, 2006, there was a massive real estate boom happening. I mean, people were raking in money.

[00:01:56] It was one of those situations where like everybody and their mother was making money in real estate, and it was funny money, just like millions and millions of dollars people were making. And I got into mortgage sales, and that’s a no-commission position. And it turns out, by the way, long story short, well, the lesson learned at the end of the day, my brain is not set up for commissionable work. There are people who, we, anyway, there are people who sell things and earn commissions, and that’s fine. I can’t do it. I’m really well cut out for this comprehensive advisory relationship where I just lean in and do what’s needed, but psychologically, in 2005-2006, I was coming out of my own financial wreck, car crash.

[00:02:41] And you could say I was desperate. And desperate is very close to greedy. And I saw people around me– and by the way, greed is a term we use in behavioral finance, and I want you to separate… When I say greed, let’s not have this form of greed be one of the seven deadly sins, right? Let’s take it down a notch in terms of its significance. In behavioral finance, we talk about greed, oh, if you see an investment and you’re pretty sure it’s going to win, if you do 3X or 4X or 5X leverage, an investment professional like myself would say, “You’re succumbing to greed.” Now, greed can pay off. I don’t have a value judgment on it, but the point is, greed exists.

[00:03:21] When you see what you can have and you want more, that’s just greed. Okay. So, we took the edge off. Thank you for letting me do that. People are making money hand over fist around me. I’m writing what are called NINA loans, no income, no assets, no documentation. What do you need to do to get a loan? Oh, you just need to tell the underwriter that you have money in collateral. You just need to tell them. And we look back on this because, of course, now we’ve all been through the financial crisis, and we laugh. Although I do see some of these loans coming back, but anyway, sidebar. And one of the things that mortgage lenders would need in order to get a loan underwritten and you have to get the loan underwritten and completed in order to get paid on it, and some of these commissions are $8,000, $10,000, $15,000, more and more, depending on the size of the loan, it’s typically 1% of the loan value.

[00:04:09] So, if I’m writing an $800,000 loan, I’m looking at making $8,000, and I need that $8,000. Remember, I don’t have a paycheck. So, the underwriting rules said, in order to write this loan, you need a CPA letter. Now, the intention of the lender is that the CPA of the business owner who’s getting the loan knows the business of that borrower. They know the inner workings of that person’s financials, and they’re going to vouch. We’re not going to ask for tax returns. We’re just going to get a CPA letter. And that CPA is going to say, “This person is cool. They have money. They have funding.” And I said to my manager, “How are all these loans getting written?” And he said, “Well, they have CPAs in their pocket.”

[00:04:50] Now, we’re talking about mortgage lenders who didn’t work in my office, so like my competition. “Well, they have CPAs in their pocket, and they just write the guy a check for $500, and he writes whatever letter he wants.” And I said, “Oh,” and the next question out of my mouth, because I’m just like making it happen, trying to earn my commission, was, “Do I need a CPA in my pocket?” And he looked at me, and I still know this guy, he looked at me, and my maiden name at the time was Martin, and he said, “Martin, I forgive you for saying that. You need to go out that door and think about what you just said for a minute.” He said, “In this office, we do business with integrity.” And I was gobsmacked.

[00:05:31] I mean, I felt like I had been slapped in the face, and I felt like crying. I was embarrassed and I was ashamed, you know? And I do think he set up the conversation in order to invite what I had suggested, right? He didn’t say, “Oh, how do you get a CPA letter for someone who actually has no money, is you pay someone to lie.” Right? And then I would’ve known that he was saying, “That’s a bad thing, like don’t do that.” But I was in this environment where it was a slippery slope, and I really felt like I had got caught. Not caught in a bad thing, but I had got caught before I did a bad thing. I was grateful that my manager was there and had that conversation with me.

[00:06:15] As a result, I spent, I mean, it was a three to six-month philosophical inquiry for me about, how can I make sure that never happens again? Like, my intention is to do business with integrity. And one of the things I decided was to not work for commission. So, that’s part of the reason I became a fiduciary. I, by the way, was working part-time in my father’s financial planning business at that time. So, I was moonlighting as a mortgage lender, working during the day as a financial advisor, getting trained in the business. But I decided I was always only going to be a fiduciary and that I was never going to chase returns.

[00:06:49] But I also learned the psychology of people. I mean, I feel like if I could consider something as out of integrity as paying a CPA to lie so that a borrower can defraud a lender out of money, that all it takes is the right environment and the right set of motivations. But what was missing for me was a very clear sense of what I will and will not do. And probably 10 times in my business, I’ve had people, and of course, I dip my toes in the world of internet marketers, and people want you to do referral relationships, and they want to give you a commission for selling their thing and they want to share fees with you, and blah, blah, blah. But I have a promise to my clients that the only way I make money so that my set of incentives are clean is from them.

[00:07:38] So, I only work for them, and I’ve always declined those opportunities, and people are like, “Are you actually declining money? Like, you’re doing the work, you’re doing the partnership with me, but you’re not going to take the compensation.” And my answer is, “Yes, that’s correct.” And I’m really grateful that that conversation, where my manager said to me, “Martin, I forgive you,” that was the worst penalty I had to incur for that potential infringement of integrity. But I learned a lot about people that day. I learned a lot about myself. And I do think that the set of boundaries I set up for myself as a working professional in the financial services industry have served me and my clients over the long term.

[00:08:17] And the thing I’ve accepted is that there are people who are going to make more money than me. There are financial advisors who charge a fee and earn commissions on products that they don’t have to tell their clients are in the portfolio, right? There are people who earn three and four times what I earn on an annual basis from a client to sell a large whole life policy or annuity, and the client doesn’t know that, and they’re never going to know because there just aren’t regulations that force that stuff to be transparent. And so, I’ve accepted, there are people who are going to earn more money than me, but what I have at the end of the day is my integrity.

[00:08:53] And even though every time I open my mouth and speak, the person listening doesn’t always trust me, but I get to know that everything I say is trustworthy. I said to my husband one time, “I’m really grappling with, like as my firm gets bigger and bigger, we have more and more clients, like I’m impacting their lives. I mean, I’m not the biggest influence on their life, but I am impacting their life. Like, I don’t know if I want to take responsibility for that.” And he said, “You know, Hilary, in life, if you’re going to be a powerful person, you are going to have influence on people. You just have to get to a place where you trust yourself, that you use your power for good.”

[00:09:30] And so, I do. I trust myself and I trust my team to use our powers for good. And that is my answer to the question, “What’s one thing you had to unlearn about money in order to do this work with integrity?”

[OUTRO]

[00:09:44] Hilary Hendershott: Thanks for listening to this Ask Hilary episode of Love, your Money^®. If you’re ready to get intentional with your finances, I recommend you start with the framework we use with our clients and in our own lives every day, The 7 Steps to Wealth. You can download the free guide at HendershottWealth.com/7Steps. That’s the number 7 steps. And don’t forget, you can send your own Ask Hilary questions to hello@hendershottwealth.com or just go to HendershottWealth.com/Ask-Hilary. Until next time, keep loving your money so it can love you back.

[END]