My Take

What is your financial advisor keeping from you?

Sullivan Capital Management’s View on Investing

Most Americans don’t feel confident about their ability to manage their investments. Stocks, bonds, ETFs, mutual funds, money markets, fees, dividends, and interest rates are confusing. Who has the time or energy to sort through all of that? It's something many Americans choose to leave in the hands of professionals, but the professionals may not always have your best interests in mind, and even when they do, they might not be any more helpful than a blind monkey throwing darts at a stock list. Many investment professionals are incentivized by their firms to make profits for the firm and themselves rather than the client.
Americans hold a combined $29 trillion in retirement assets. These assets represent the degree of comfort and freedom you will enjoy when you retire. But, if you’re like most Americans, you completely ignore your retirement account. Because it’s a complex bit of business with lots of jargon, many choose to hire someone to invest for them. But honest, ethical investment advice can be hard to find. If you choose to trust your retirement funds with a financial advisor, tread carefully.

So What Is A Financial Advisor?

"Financial advisor" is basically a made-up title, just like "financial analyst," "wealth manager," "financial consultant" and many others. In spite of lofty titles or years of experience, they are not always accredited, experienced, or knowledgeable. Most so-called investment professionals are really salespeople with little first-hand experience in anything that resembles portfolio management. They are generally pleasant salespeople with great personalities and are fun at parties. But, they also typically work on commission which provides a strong incentive to recommend investments that reward themselves or their firm rather than you. For example, annuity funds, packed with fees and restrictions are complex contracts written by lawyers and insurance brokers such that no one can figure out what they mean. Many financial advisors recommend annuities because they make big commissions from them. This seems like it should be illegal, but it isn't unless your advisor is a fiduciary. Remember that word and Google it to understand how important that word is to your retirement security. Go ahead, Google it now, I’ll wait.
Even if you assume that all financial advisors were acting on behalf of their clients' best interests, they might not be of much help. Studies show that most actively managed mutual funds don't perform better—and often do much worse—than index funds. An index fund tracks a market sector like the Dow Jones Industrials or the S&P 500 (these are the biggest US companies).

And, then there’s the issue of fees

Legal fees, trustee fees, transactional fees, custody fees, bookkeeping fees, insurance fees to name a few. Just finding these fees in a 401(k) Plan or other similar retirement plans could take you weeks. As your investment grows, so do these fees, and at a much greater rate. Studies show you could give away half of your retirement nest egg (a little bit at a time) in fees over a 20 year career.

The “excessive fees” problem is a big deal because investment firms often hide or poorly disclose the fees they charge. I consider that unethical behavior. There are dozens of fees that are routinely hidden from clients. These fees can reduce your retirement balance by half over your working career.

The 401(k) Plan system - for most Americans is a disgrace, a Rip-Off and will ruin more retirements than it helps. This same story plays out all over America and has affected several members of my family and my extended family.

What can you do? The answer is simple.

Start saving now! Pay yourself first. Make your budget balance “after” you stash 10% of your income to a savings or retirement account AND consult a fee-based RIA who is legally obligated to act in your best interest.

You get what you don’t pay for.

A clever way of saying you get to keep what you don’t pay in fees.
Don’t pay for the high rise office, custom leather furniture, and priceless office decorations.
Invest your money in yourself and your own happiness. Those Flashy offices and suites cost money,
Your money!

Low fees lead to bigger returns for you!

Consulting a Fiduciary, RIA is the lowest cost and most conflict-free way to invest.
All RIA's are registered and monitored by the Security & Exchange Commission or state securities regulators.

These regulators can shut down an RIA if they fail to act in the best interest of their clients.

Sullivan Capital Management