40. Harold Pollack on Why Managing Your Money is as Easy as Taking Out the Garbage

Steven Levitt (0:05)

Financial advisors charge their clients more than $1 trillion in fees each year. That's trillion with a T.

But my guest today, Harold Pollack, says, everything you need to know to manage your own money fits on an index card. Can it really be the case that a trillion dollar industry is adding essentially no value?

Morgan Levy (0:24)

Welcome to People I Mostly Admire with Steve Levitt.

Steven Levitt (0:33)

Harold Pollack is the last person you would expect to be leading the charge against the wealth management industry. A soft-spoken public policy professor, his research is about health care and crime, not finance. He's just a regular guy who through a series of unlikely events has become the spokesman for taking back control of your own portfolio. Deciding not to hire a money manager or to fire the one you already have, might turn out to be the single most important financial decision you ever make. Let's see whether Harold can convince you that it's a good idea.

So do you still have the lazy boy recliner that launched you on your path to being a personal finance guru?

Harold Pollack (1:19)

I do. It turned out to be a good investment. It was extremely expensive, but it's still in our house doing its thing.

Steven Levitt (1:24)

Okay, so what does that chair have to do with anything?

Harold Pollack (1:27)

I basically never paid any attention to personal finance at all until I was age 40

Steven Levitt (1:33)

Wait, let me stop you, Harold, because you're a public policy PhD. You're a professor at the University of Chicago.

How did you get to the age of 40 without understanding how to manage your own money?

Harold Pollack (1:44)

Well, it's not that I never understood it. It's that I never bothered to take the time to actually do it. Those are two different things. There's nothing super complicated about managing your money properly, but you actually have to give it due attention and priority.

Steven Levitt (1:58)

No, it's interesting because my background is completely different. My father enjoyed investing in sport or gambling.

When I was eight, he taught me about options, so option trading. We would have the Wall Street Journal delivered to our house, and then I took finance in college and more finance in graduate school. So it's just interesting that we come from totally different perspectives, and that's obviously, I think, going to be important when you describe what happens next, which is that you had essentially a family crisis that led you to buy a Lazy Boy chair.

Harold Pollack (2:30)

Yeah. That Lazy Boy recliner played an important weird role in my life, in focusing my attention on how I should actually manage my money. I was a professor of public health at the University of Michigan, and I moved to the University of Chicago.

And a couple of months after we arrived, my mother-in-law died suddenly and tragically. And my wife's brother Vincent, who lives with this intellectual disability called Fragile X syndrome, he had to move into our home. And my wife torpedoed her own career aspirations in that moment pretty significantly. We started assuming the obligations for taking care of him. And he was 340 pounds when he moved in. He didn't fit on our furniture. We had to go out and buy a Lazy Boy Chair that could accommodate 340 pound man. And it was really expensive. It was $750 or $900.

And I thought in a very matter of fact way, I am going to hemorrhage all my money. I was tenured professor at the University of Chicago, but I was certainly not a super affluent person. You know, I contributed to my 401k, but I really hadn't saved my money much at all. And in fact, the University of Chicago had to help me with my down payment when I moved as part of the recruitment. And there's a gentleman at Harris Bank who, at the time, I was very rude to, and then I realized after the fact, was one of the best and most generous financial professionals I've ever dealt with. When we went to buy our house, I went to the bank and I basically described, you know, the Taj Mahal house that I wanted to get. And I had just gotten tenure, so I was in that complete, don't you know who I am phase? I don't know if you went through that, but I went through that. And I start describing all these things. And at some point, I stopped to take a breath and he says, Dr. Pollack, you're not a good customer. You're 40 years old. You have no money of your own. All the money that's going into buying this house is coming from the University of Chicago.