Why should it matter to you whether you are working with a fiduciary advisor and not a broker?
Here’s what Tony Robbins, long an advocate for a level playing field and transparency in the financial industry has to say about it: Give him the full 2 minutes. Your eyes are about to be opened. ACI is one of only about 5000 single registration advisors nationwide that are true fiduciaries (less than 2% of advisors) with no broker affiliation or registration. This will make sense shortly.
Your investment account is really a side business that you own. It’s purpose is to help make you wealthier over time, and to do so in a way that doesn’t take away from your main business or job – after all, that’s what is paying the bills. Ideally, this side business makes you money without taking up much of your time – that’s why you hire a manager for the business – to deal with the problems and challenges of operating your side business without bugging you about it.
Now pretend that your side business is a car dealership. What if you found out your lot manager paid an extra $20,000 of your money to Toyota for cars, and then Toyota paid him about $18,000 of that back in commissions, plus $500 a month as long as their cars are on your lot, whether they are selling or not?
He never mentioned the $18,000 Toyota paid him.
Hondas sell just as well, and cost you $20,000 less.
What would you think about your manager doing that in a business you own?
That’s legal in the investment industry. This compensation is called sales load and expense ratio, and it’s a form of hidden fees. 100% legal. This is the bread and butter of most of the industry.
You might be thinking you don’t mind paying for performance, but;
- at just 6%, that $20,000 a year lost to unnecessary fees turns into $140,000 in just 5 years.
- Could you or someone in your family benefit from that $140,000 instead of the manager that snuck that money out the back door of your account?
- Would your life or the life of someone important to you be better with that money in your pocket instead of your financial advisor’s?
What would you say to your car lot manager if you found out his Toyota deal cost this much in just 5 short years, and that most of that money wound up in his pocket?
If you’ve got a million dollar investment “side business”, or even just one worth a couple hundred thousand, don’t you think the person you hire to run it should be working for your best interest, and not for the extra dollars he can get for recommending products?
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