Don’t Go It Alone!

Collaboration, Abdication, or Rugged Individualism?

Picture of by Dr David Phelps

by Dr David Phelps

Do not go it alone. As an investor, a business owner, and a steward of your family’s future financial security and financial freedom, it’s crucial that you find people to help you on your journey.

Navigating how to build your wealth, accumulate your retirement nest egg, and create your freedom plan on your own is not for the faint of heart.

Most of us who made it through our professional education and built careers as successful practitioners are smart and sophisticated enough to figure it out, given enough time to learn from our mistakes. But at what cost? Have we counted the cost of time, relationships and sacrifice to blaze our own trail to financial Freedom? 

The alternative does not have to be “abdication” to a financial advisor. Alternatively, I have found that finding the right people, mentors, and community can save you from those mistakes, fold time, and accelerate your path to freedom.

The Common Mistake: Letting Society Define the Path to “Success” 

We were told by well meaning teachers, parents and friends to go through school, get good grades, earn scholarships, and acquire a license through our own hard work and effort.

That's the way it is supposed to work – meritocracy. But in the real world, collaboration with other people is where you actually get to leverage the experiences of others who have already gone down a specific path (I call it “mining their experience”). They have figured out a problem and now can share the solution with you. 

You don’t have to do it “the hard way”, reinvent the wheel, or figure it out on your own. You can streamline the process it takes to accomplish what it took others longer to achieve.

With that mindset, the question becomes, how do you find the right people? It starts with finding people who have achieved what you desire for yourself. Vet out their story.  Look at the results provided to ascertain if it is in fact evidence of their efforts. 

Once you find the right few, you can continue building off of those people to get recommendations on where to proceed or who to ask for help. In my experience, I don’t get involved with anyone unless they come recommended by somebody I already know.

There is No Secret. It is Just Costly to Try to Get to Financial Freedom By Yourself.

Many hard-working, intelligent, successful by society standards, high-income professionals reach out to me because of our reputation and skill for curating alternative investments. Those who want to be more in control of their financial future, reach out to figure out what we do and how we do it.

It is not a secret. I could teach anybody to do what we do. But learning the “how” is only half the battle.  Dut do you have the time and propensity for all the hard work and heavy lifting?

I started investing in real estate when I was 22 – When I had more time than money. My time was not so valuable then and I didn't have a family or a business to put my time in. All that time I had, I put to use in learning by doing. I learned some things the hard way (trial and error) and I learned from those who have done it well (this is how I learned how to accelerate the success I was looking for).

Today, most of the people who reach out to us are already further along in their career path. They have developed a more costly lifestyle and have established families. They don’t have the same amount of time as I did in my 20s. It wouldn't make any sense for them to learn the same way I did.

That is why I started Freedom Founders in the first place. An alternate path that shows them what took me decades to learn, so they can achieve financial freedom in less time (5 years or less). 

Navigating a Market That is Turning Over – Beware the Danger!

People who reach out to me ask me questions like, “David, what kind of ROI do you at Freedom Founders receive on your capital investments? What are the entities you invest in? How do you pool the money? What do the operating agreements look like?”

These questions come from well meaning people who are trying to navigate the uncertainty of today’s market. Many have probably invested in various types of real estate syndications or funds. They have been searching in the market everywhere they can. After all,  “everybody” made money in the equity markets, financial markets, real estate markets, and private equity markets for the last 14 years. It was a great uphill run of the markets in general. But the market is now turning over.

So when someone reaches out and says “I have invested in all these things.” I ask “What is your real goal?” The person usually doesn’t have clarity, so often they just say that they are looking for a “higher ROI.”

My push back is: Is that really going to do it for you? A higher ROI, when you don't know what you're doing, comes with a commensurate amount of risk. There is a lot of risk out there in the marketplace today.

I have the opportunity to look at many syndications. Real estate syndications, primarily, but also DSO private equity buyouts of businesses such as dental practices.

The experience and skillset required to truly understand these documents is significant. They are crafted by lawyers to the benefit of the syndicator/promoter. 

Very few, if any,  doctors will take the time to read and understand the nuances of these documents  because it takes work. In all honesty, it is boring. But inside those agreements, there are details you must understand if you want to avoid trouble – which doesn't usually show up when the market is running uphill. 

It is only when the market goes through a correction that you realize, you should’ve read the fine details.

In a market correction, liquidity tightens up. The marketplace seizes. The banks no longer lend money and investors need to withdraw their money because of the reverse wealth effect – when the stock market starts to drop, everybody runs for safety. They want their money back and that is when there is a revelation of mismanagement, sometimes misappropriation of funds from DSO equity buyers and operators of equity investments.

This does happen. It is how Bernie Madoff got caught after many decades. It was a Ponzi scheme. But this could also happen due to plain mismanagement – poor management – because the market has been a rising tide lifting all boats.

But when the tide goes out, as Warren Buffett says, you find out who has been swimming naked. And there are many operators who have, even with good intentions, been swimming naked today.

If you are an investor contemplating any of those real estate or private equity DSO buyout deals and you are not getting expert advice, you may be gambling your hard-earned money. Just like in a casino in Vegas, the house is going to win every time.

So my advice persists: Don’t Go it Alone. Find people with the expertise to help you analyze any deal, any investment you are looking at.

I am not necessarily talking about a financial advisor or CPA. Those may have their place, but understand that in many cases they have a financial interest (commissions, etc) in the solutions they recommend. Nothing wrong with that per se, but it is important that incentives be aligned. 

I don't want to pretend like we have saved the day for everybody. We have, however, saved countless hard-working doctors and spouses from making bad moves in the changing marketplace right now and in the past.

We have shown them what the real story is. What is really going on in the markets? From there, they get to make the decision of their own accord. We don’t tell them what to do. We just educate and give our experience. It’s up to each of them to decide how to apply it and when.

But when you are going out there on your own, trying to steer and map out your course yourself, looking for deals, you can’t see the whole picture. You are not getting the whole story.

You are getting a version of the story from someone who has an incentive. Not a nefarious incentive necessarily, but an incentive to get you to do something (usually hand over money).

Perhaps because of the recent market upswing, operators think they can continue to generate these great results and returns. But I’ll say… that is not likely to happen.

Without understanding how the market goes through a full cycle from bottom to top and back down again, it is hard to see how an investment will play out in the current iteration of the market.

Experience of a Full Market Cycle Teaches You Caution

If you don’t have experience in studying market cycles, or if you don't have a financial advisor or team around you with that experience, then you are drifting in unknown waters without a paddle all by yourself. That is not a good place to be, particularly when you have a significant amount of your net worth either in a business you may be trying to exit or in your capital investments.

You might be thinking of putting your money into some new deal. A new whiz biz high tech or some real estate syndication. You think you have to invest in all the buzz and commotion because recency bias (you can learn more about that here) says, “Well, this has worked well in the past.” But a lot of these things have worked well in the past. That does not mean they will continue to work well in the future (think of FTX, Enron, Lehman Brothers, etc.).

Understanding how to pivot when the market is turning is a key construct of what we do in Freedom Founders. I don’t pretend to be a know-it-all. My predictions and opinions will not always be 100 percent perfect.

What I tell people is, I am a contrarian. I am counter to the herd mentality. This has served me well all my life, but does not mean I can time the markets to a “T”.

I could be leaving chips on the table if the markets still push back up a little bit longer. Sure it can go well for a bit more but I'd rather get out of the market early. I'd rather go to higher ground early because of the potential for loss.

I Would Not Risk My Money Today. Would You?

The potential loss of principle is so great in the markets (equity markets, stock markets, etc.) that are turning. I don't want to take that chance with my money. It would be a huge risk for me to try to stay in as late as possible. It is a risk that I am not willing to take.

So what if I'm wrong? The markets could go up another 20 percent in whatever you’re invested in. But what if I'm right? If you are still in the market, can you afford to risk a20-40 percent loss or more?

Which situation would you rather be in?

I’d rather position myself on higher ground, taking some chips off the table to be in a more liquid position for a while. Once the markets turn, I can then decide when to dip back into the equity side of businesses or real estate or whatever it is you invest in.

Right now is a dangerous time to be playing all out in the markets and I don't want to see people who have worked hard all their life risk their nest eggs, their life savings and their wealth, because they just did not understand the full market cycle.

I hope this is received with the intention of wanting the best for you because I have seen people, colleagues, take some big hits when it wasn't necessary.

It is all about your freedom. You have to continue to take control and stay focused on it.

To your freedom!

– David


P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :


1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest.

2. Become a Full-Cycle Investor:

There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.

3. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.

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