David Bach Has Some Advice for Advisors

David Bach displaying his latest book, “The Latte Factor.” (Photos: Courtesy FinishRich Media)

“A latte spurned is a fortune earned,” proclaims bestselling financial author and media personality David Bach in his new book, “The Latte Factor” (Atria-May 2019).

It’s aimed at teaching millennials how to build a million-dollar nest egg by giving up nice-but-not-necessary daily outlays — for frills like fancy coffee, a bagel with a shmear, taxi rides — and instead, saving the money and watching it grow through “the miracle of compound interest.” The former financial advisor discusses all that and serves up stern advice to FAs in an interview with ThinkAdvisor.

As for the 52-year-old Bach himself, he made a million dollars by age 30 — and then much more — not by salting away a few bucks a day but largely by making shrewd investments. He talks about two of his most recent successful ventures in the interview.

Bach is best known for writing nine consecutive New York Times bestselling books, starting with “Smart Women Finish Rich” (1999). “The Automatic Millionaire” (2004) was his breakthrough work, residing on The Times’ bestseller list for 31 weeks. Further, as a public speaker, a series of “FinishRich” seminars remain intrinsic to his enduring success.

The self-described “crusader for women’s financial empowerment” argues that his new book, told, surprisingly, in story format — about a fictional female magazine editor, 27 — is not aimed at women but at millennials of any gender.

Indeed, that’s the demographic FAs must connect with right now for “the security of [their] business,” Bach contends. He strongly recommends that they meet clients’ children and even host events for them.

Moreover, the marketing master is open to partnering with a major financial services firm so its advisors can hold his FinishRich seminars for clients’ kids and millennials in general.

Apart from helming FinishRich Media, the former 8-year Morgan Stanley Dean Witter FA is director of investor education at AE Wealth Management, a flourishing RIA he co-founded in 2016. The company is a subset of insurance and annuity marketers Advisors Excel. Both the FMO (field marketing organization) and RIA are based in Topeka, Kansas.

With more than $7 billion in assets on its platform, AE Wealth already has 313 investment advisor representatives (IARs) and 119 registered investment advisors (RIAs) — none are acquisitions — in more than 200 markets.

Bach moved into financial services in 1993, joining his father Martin Bach’s advisory practice at Dean Witter, in California. Within 60 days of joining DW, he delivered his first seminar, to which he invited the elder Bach’s female clients. He came up with the idea after sitting in on Dad’s meetings with traumatized widows who had no clue about handling finances.

In 2001, Bach, by then a $1 million producer, handed over his practice to sister Emily Bach and ventured forth to write books and hold seminars to help women get money-smart.

His mega-successful career seems to have had only one misfire: a brief stint as vice chairman of Edelman Financial Services (now Edelman Financial Engines), 2014-2015. The fit proved less than perfect. Three years after he left, Ric Edelman reportedly threatened to sue him for allegedly appropriating proprietary information. In our interview, Bach declined to comment.

But he had lots to say about “The Latte Factor,” which was co-authored with multi-award-winning writer John David Mann and is No. 2 on The Wall Street Journal’s bestseller list as of May 19. The personal finance expert insists that this is his final financial book: “I’ve written 13 books [including updated editions]. I feel I’ve said the things I need to say when it comes to money.” Maybe.

ThinkAdvisor recently interviewed the Moraga, California-born celebrity author, speaking by phone from his New York City office.

Here are highlights of our conversation:

THINKADVISOR: Your new book is called “The Latte Factor.” What’s “the latte factor”?

DAVID BACH: It’s a metaphor. People spend small amounts of money, like $5, $10 or $20 a day, on little things — what I call latte factors. Instead, they could save and invest that money. It’s figuring out what you have to give up to get up. You have to come up with how to find the money to save.

Like, not buying cups of fancy coffee?

You can make your own coffee at home for 20 cents.

You first started talking about “the latte factor” on Oprah Winfrey’s TV show about 15 years ago.

And I haven’t impacted coffee drinking at Starbucks! But I’ve impacted savings habits.

Well, it takes self-discipline to give up little pleasures with which people reward or soothe themselves. You’re asking a lot.

We know that discipline doesn’t work: You need to save money taken right off the top of your paycheck and then live off the rest that’s coming in. The message of this book is pay yourself first: Save money automatically. Use your 401(k) plan. And that’s not just for millennials — it’s for all people.

You’ve invested in Acorns Securities. Does that company relate to your “latte factor” concept?

The moment I saw Acorns in 2015, I said to myself, “This is the latte factor made automatic.” Acorns came up with a platform solution to help anyone invest their change in minutes using their phone: You round up your change and put it into a diversified portfolio of ETFs. So the second I saw that, I thought, “This is genius!” Millions of people can invest literally a dollar automatically off their phone.

And that idea prompted you to invest in the company?

Yes. I met with the founder and said, “I want to write a check and invest in Acorns.” At the time, the company had, I think, less than 500,000 accounts. Today it has over 5 million. Acorns is one of the fastest growing financial service companies in America. They’re changing the way people save and invest money automatically. They have competitors, but they’re certainly the leader.

Generally, what sorts of enterprises attract you to invest in?

When I see companies that are aligned with my values and what I’m excited about, I’ll often proactively reach out to either invest in them or invest in being an advisor to them. A lot of super-exciting companies are really changing how people track, save and invest their money.

What’s an example of another company on you’ve bet on?