If you’re ready to accelerate your path to prosperity, Louis Llanes’ new book, Financial Freedom Blueprint, lays out a proven system for planning and investing to secure your financial independence. Designed specifically for busy professionals who want to retire early with enough financial security to last a lifetime, the book walks you quickly and easily through everything you need to know to speed up that process.
You’ll also discover a reliable, seven-step framework for building real and lasting wealth. You’ll learn how to invest and plan your portfolio to stay ahead of the herd and you’ll unlock key strategies for protecting your money during rough markets and developing systems and insights you’ll need to tackle large financial decisions to wind up a winner.
Hey Listeners, my name is Drew Appelbaum and I’m excited to be here today with Louis Llanes, author of Financial Freedom Blueprint: Seven Steps to Accelerate Your Path to Prosperity. Louis, thank you for joining, welcome to The Author Hour Podcast.
Louis Llanes: I’m really glad to be here, thank you.
Drew Appelbaum: Kick us off Louis. Can you give just a brief rundown of your professional background?
Louis Llanes: Sure. Well, I’ve been in the investment management business for well over two decades and I’ve been in a lot of different parts of the field. I started off as a broker for a big wirehouse and then I moved up and became an analyst for a hedge fund. I did a lot of scrubbing of data, balance sheets, financial forecasts and then I moved on the trading side, and then as a portfolio manager for a major bank for the ultra-high net worth people for the firm.
I’ve been on a lot of parts of the business in terms of what I’ve done, so that gives me kind of a broad perspective of Wall Street, as well as financial planning and investing.
Drew Appelbaum: Why was now the time to share the stories in the book? Were you inspired by something out there? Is there something happening in the market today that you just want to bring up? Or did you have an “aha moment” like, this is your time?
Louis Llanes: That’s a really good question because I really want to help people be in a winning financial position right now because we are in unprecedented times economically. There are so many different things that are happening right now. It’s not like you can invest like your parents did. If you’re a younger person and you’re starting to invest, there are so many different economic trends that are happening that are really requiring people to plan and invest in a different way. We can kind of go down those points, but I really want to help people with their mindset in terms of how to invest and then the mindset of how to plan, given what’s happening right now in the economy.
Basically, we have a lot of innovation that’s happening at a rapid pace that we’ve never seen before. The technological developments are affecting all the industries now. A lot of the companies that you thought of as being the stalwarts, the investments that made a whole lot of sense in the past no longer make sense anymore. We also have a very different government situation now where we have lots of debt, low-interest rates, and potentially higher taxes, and this is really requiring investors to change how they tactically manage their finances for the future.
Financial Freedom Blueprint: Steps for the Beginner and Experienced Investor
Drew Appelbaum: Now, this usually happens with authors that they have the idea of the book— you want to help people invest, you want to help people invest wisely, and then when you actually sit down to write the book, you actually discover something new, you end up pivoting or you just have a really big learning or breakthrough. Do you have any of these major breakthroughs or learnings in your writing process?
Louis Llanes: During the process of writing, I think it really was clarifying in terms of articulating exactly how to organize your thoughts and that’s when I came up with— really formalizing more in an organized fashion— the seven steps to accelerate your path to financial independence.
I’ve been doing this for a long time; you have a process but when you actually write it down for people, it makes it even more organized and it also helps you connect some dots that were not there. For example, one of the dots that I connected was the fact that Wall Street is trying to sell packaged products that are cookie-cutter out there.
There’s a lot of people that are at a great advantage. You, as an individual investor, have a great advantage over Wall Street if you tune out their pitches, and instead, you can be more of a nimble investor in diversifying and protecting your investments against some of the things that are happening on Wall Street.
A part of the book discusses that. I didn’t intend on talking about that, but it became really important that that point be raised, because so much of what the advice in the book is, is surrounding some of these problems with just the stuff that’s happening on Wall Street.
Drew Appelbaum: When you sat down to actually write the book, in your mind, who were you writing this book for? Is this for the average investor out there, is this someone really looking to retire soon? Or just someone new that’s doing their, maybe, first investments?
Louis Llanes: Here’s the thing with that. The first part of the book talks about what you need to do if you’re new. It talks about mindset and the second part of the book talks more about some of the decisions that people are making that have already generated a significant amount of wealth. It kind of walks you through that.
If you’re somebody who is just starting out, the first half of the book would be a great primer and path for you to get on the right track. The reason why I brought that up in the whole book is because, literally, we run into investors all the time that are extremely wealthy but they are missing a lot of the key elements of those seven steps that I talk about in the book.
It really helps people refocus on some things that will really help them later down the line. It really applies to everybody but I would say that the first half of the book is probably more geared towards somebody who is just starting out and it’s really designed to help an executive who wants to retire early and wants to attain financial independence or maintain it.
Drew Appelbaum: Now, for everything inside of the book, was there a lot of outside research done or a lot of these were just lesson-learned in education you’ve had and experienced throughout your career?
Louis Llanes: This entire book is experience as well as research. Early in my career, I spent a lot of time doing quantitative analysis, backtesting, portfolio simulation. Those are just fancy words for saying, “What do the numbers say?” A big part of my career has been evidence-based investing, looking at what the evidence would say you should do so that you could have the highest probability of success.
Part of this book is driven by years of experience of research as well as actual hands-on experience managing money for people. People ranging all the way from everyday mom-and-pops like you and me, to CEOs of major corporations. It’s a combination of experience and research.
Navigating Your Investment Strategy
Drew Appelbaum: I like that you talked about in the book, you started off with talking about your early days on Wall Street, which is in the mid-90s, you were a financial analyst and you talk about the .com bubble which— if you weren’t familiar with it, is [when] people were investing in these tech companies that really weren’t showing any revenue or profit. Is that comparable to sort of what’s happening with the tech boom today? Has anything changed in that regard?
Louis Llanes: There’s a lot of comparisons that are the same, we recently did a screen, a quantitative screen, and there’s been a ton of initial public offerings or IPOs recently and the vast majority of those companies are not making a dime. There has been a huge amount of speculation in special entities that are designed, or kind of like, blank check companies that you basically go public, raise this money, and then you go out— this company is designed to go out and buy other companies.
This kind of speculation has really risen to the surface and gotten— it’s very similar. The other thing I would say that’s similar to the .com is that the valuations. You look at earnings and assets and growth rates and the fundamentals of the businesses right now and you compare that to the price of what you’re paying for it.
Like, “I’m paying a certain dollar amount, what am I getting in earnings?” for example. Those numbers are at very unattractive levels. What I learned in the past is that these things can go on for a while and the stock market can go way beyond what you think it could do, it could go a lot higher from here even though you can make a strong case that the valuations are not attractive in the stock market today. There are a lot of similarities.
One of the things that’s very different right now is interest rates are near zero now whereas back then, interest rates were not near zero. Alan Greenspan was the Fed chairman at that time and there was definitely a different economic backdrop. Another thing that’s happened since then is we are now much higher in debt as a nation, we have a lot of different globalization situations. In other words, there’s a lot of businesses being done overseas with China, et cetera.
That has changed our supply chain and there’s just a lot of crosswinds that are implying that we’re going to have a lot of change, in terms of how we’re structured as an economy. That’s partially what I talk about in this book and how you navigate through those types of changes.
Drew Appelbaum: Speaking on that and continuing that line, what is the best way to protect your capital these days? I got kind of a laugh in the book you’re talking about, “You should take it out of your underwear drawer. You shouldn’t store it in your closet, it isn’t really protecting it.” If you had to suggest a few other ways besides those, what is the best way for investors you say as to protect themselves?
Louis Llanes: It really is a combination of things. The first thing is, “What are you going to invest in first?” I think that— I talk about this formula, the ADP criteria. Basically, it’s criteria for the types of companies you should be looking for in your portfolio and they have to be adaptable, they have to have desirable products. It’s a very important thing to start off with what you’re going to do, so it’s a process of elimination.
You don’t want to own those companies that are really from the past and there’s still a lot of those companies out in the market. The second thing is that, when you invest, one of the first things that’s most important is to determine, “What is my uncle point, at what point am I going to say I’m wrong?”
One of the things that a lot of people have a hard time with— and this is just human nature, we’re wired this way— it’s hard for us to admit when we’re wrong but one of the biggest things to success, the biggest criteria that helps people make more money, is to be able to cut your losses short and to let your winners run.
That concept is called asymmetry and so, a lot of what I talk about in the book has to do with not only what you pick, but how you actually invest in it. There’s times where you just need to size correctly. In other words, invest the right amount so if an investment is really risky, you want to invest less money in it. If the investment is more secure, you want to put more money into it, then you also want to have that point in time where you predetermine where you’re going to say, “I’m going to be out of this investment whether I still like it or not,” keeping in mind that you can get back into investments.
The reason why this is so important— and I’ve talked about this in other interviews about this concept of, you can be really arrogant thinking that you know everything about this investment and then lose a ton of money. You know, I have seen people who are actually CFOs of companies do that. The markets don’t care who you are, sometimes markets are going to sell things off whether you still like the company or not.
Other times, the market is going to reward certain companies even though the fundamentals don’t make any sense, and then eventually that stock will go to zero, or go down a lot, but it may take a long time. So, you have to kind of balance. It’s actually a humbling thing. You have to balance what you know about a company, or about an investment, versus the need for diversification, as well as the ability to say, “I’m wrong. The market is telling me I’m wrong”.
Drew Appelbaum: What I like about the book is that there’s several step-by-step plans to, as you just mentioned, the ADP criteria to identify companies that you should consider to invest in. You have another formula for what stocks to focus on and you also have your seven-step planning process to guide the investing and I’d love to hear a little bit more about that last one, the seven-step planning process.
Can you talk about what went into choosing just these seven and maybe shed some light a little bit more on a few of them?
Louis Llanes: I’ve talked about these seven because these are the ones that you have to do. Everybody in my opinion, in order to have a solid plan, has to do all seven of these. If you miss anyone of them then you have an incomplete plan. The other point I wanted to make about this is that an investment strategy without a plan is not a good idea. You need both.
You need to have your personal plan because a lot of your return has to do with making the right choices about your plan; what type of account to put it in, whether or not you are maximizing your savings and taxes. There is a lot of other elements to it but the seven steps are really designed to walk through trying to get it more right closer to the best optimal thing for you personally.
There is a lot of people out there that will give you advice about just general— about “the market is this”, “this is a good stock” or “that is a good stock”, “that’s not good enough”. You really need to say, “Okay, what are my objectives? What am I trying to do?” Identify and prioritize your objectives and then do that gap analysis to say, “Here’s where I am, here’s where I need to go” and then designing that strategy with the investment policy to move forward.
What I like about the seven steps is that if you just go through these things and think about these seven steps, you’re going to be much further ahead than most people are, because a lot of people just do things ad hoc and don’t have any clear direction.
Tailoring Your Strategy To Fit Your Needs
Drew Appelbaum: What happens when an investor gets overconfident? You could see a little bit of this now because the market is on fire. It is at an all-time high so I think folks can seem like they think they can’t lose, but they can lose.
Louis Llanes: For sure. When you get overconfident that’s when you lose a lot of money. In fact, some of the best traders in the world— and I have been lucky enough to talk to some of the very best traders in the world— many of them will tell you that, “I lose the most amount of money after I’ve had a big winning streak because I forget my basics. I forget the basics of protecting my capital”.
I think a lot of people are in that mode right now. Well, I know they are because all I have to do is look at the portfolios we’re seeing now. Many portfolios we’re seeing coming in the door, they’re people that are boat-loaded up in tech stocks, they don’t own any international stocks— and the international stocks are arguably better values but yet nobody owns them— so yeah, we’re clearly seeing overconfidence right now.
Drew Appelbaum: You do talk about risk assessment in the book, and you actually have some suggestions on how folks can look at their profile, look at their goals and decide how much and how risky they want to invest, how to play it loose, or slow and steady. For the average investor out there, what questions should they really be asking themselves to assess their risk profile?
Louis Llanes: Well, one of the things we like to do and I like to recommend to people, is to think about the next six months and ask yourself the question, “How much in dollar terms would my portfolio go down before I would feel really uncomfortable, like say over the next six months?” And I use the timeframe ‘six months’ because that timeframe is psychologically very well-known to be about the amount of time that people really feel the pain from movements that are going down in their portfolio.
We want to see like, “How much can your portfolio go down before you’re not going to be comfortable?” and a lot of people will overshoot that amount. They’ll kind of want to say, “Well, I can handle 25%” but then when it really happens at 15% that’s when they really get uncomfortable. There’s basically three questions or three things that we want to answer. The first is, never to take more risk than your finances can withstand.
You never want to put your whole finances on the line, that’s number one. The second thing is you never want to risk more than you can psychologically endure, so there is a psychological element because a lot of people will sell out at the bottom. So, you want to keep your risk profile such that you won’t get past that comfort zone. And then there’s the last one, which is, you have to match your goals to your risk tolerance.
There are a lot of people that unfortunately need to take more risk in order for them to get the return that they need to achieve their goals and that’s the hardest part. The hardest part is when somebody needs to earn say 9% or something like that to reach their goal, but their temperament is such that they can’t handle any volatility at all. That’s when you can really run into some problems.
Drew Appelbaum: When someone decides, “Hey, all of this is too much” or “This clearly needs a lot of my time and I just don’t have the time” or, “I just don’t want to deal with the pressure” and they want to go to a professional, all professionals and financial advisors are not created equal. What are some questions they should be asking a potential financial advisor before they sign on with them?
Louis Llanes: Well, the first thing is you really want to work with a fiduciary advisor, somebody who is legally obligated to be on your side of the table. It is generally not a good idea to work with like the agent-type of advisor, and there are different setups. Independent registered investment advisors, I think, are a better place to look for advice because there at least you know that those people are actually on your side of the table from a legal perspective.
Then the second thing I would look for is to try to avoid conflicts of interest with regard to commission-based advisors because I think a lot of times bad advice is generated from advisors who sell annuities and things like that where there’s high commissions. You really want to kind of avoid that, so fee-based is generally better and I would look at the designations and experience.
Designations don’t necessarily mean everything but it can give you a little bit of a clue. In the investment industry, the charter financial analyst is the gold standard, if you will, the toughest most rigorous designation to get, so that’s a good start if you want somebody who’s more investment-focused. If you want somebody who is more planning-focused, a certified financial planner is a good start.
Then if you want more tax involved, obviously a certified CPA would be a good place to go. But that’s not enough. You also need to have somebody who’s got the experience or a firm that has the experience of navigating the ups and downs of the market. A track record of doing well across over time and talk to some of the clients. Talk to some of the clients to see what their experience is.
People that have been working with them for some length of time— that’s more than just the last five years because the market has been great lately, right? You want somebody who’s been through some ups and downs. That’s my personal opinion anyway.
Drew Appelbaum: For sure. You actually provide resources in the back of the book and also to a companion website to the book. Can you, one, give us the website, and two, describe what we will find in the back of the book and on that site?
Louis Llanes: You could go to wealthnetinvest.com and we have a lot of resources there. You can see the podcast, we have a podcast called The Market Call Show, where we talk about different things that are happening in the market and with financial planning in the financial planning world. Then at the end of the book, there are some worksheets on how to set goals and which documents to get together when you’re starting to make your own plan.
I also have a website for my book, it is louisllanes.com [at time of publication the website was updated to pathtorealwealth.com], that’s my name. It is a little bit hard to spell my last name, that’s Llanes, you can read more about my book.
Drew Appelbaum: Well, Louis, we just touched on the surface of the book here, but I want to say that writing a book where you’re helping folks invest wisely and just see the big picture around their finances is no small feat, so congratulations on having your book published.
Louis Llanes: Thank you very much.
Drew Appelbaum: I do have one question left, it is the hot seat question, prepare yourself. If readers could take away only one thing from the book, what would you want it to be?
Louis Llanes: That’s an easy one to me, it’s you can’t control what is happening around you in Washington or any of the external things, but you can control your own actions. Get educated about what you can do given your situation specifically and try to avoid messages from the media and really talk to experts and do your research.
Drew Appelbaum: Perfect. Louis, this has been a pleasure and I’m excited for people to check out the book. Everyone, the book is called, Financial Freedom Blueprint, and you can find it on Amazon. Besides checking out the book and the website Louis, where else can people connect with you?
Louis Llanes: I’d like you to check out my podcast, The Market Call Show. You can get that on Spotify or any podcast platform that you prefer. We interview different people with different expertise and talk about really all things about your money and how to maximize your financial wealth.
Drew Appelbaum: Great. Well, Louis, thank you so much for coming on the show today, and wish you nothing but the best of luck with your new book.
Louis Llanes: Thank you very much, glad to be here.