Why Do Suzie Orman and Dave Ramsey Trash WL So Much?

[LGilmore]

"So, if you earned 10%... what you'll really get is 8%."

Err ahh, no. Fund expenses and fees are taken in advance of total returns posted. A consumer does not have to add in the "cost" of owning a MF when viewing their total return.

The thing about both these gurus, is that they never talk about margin for error. They lay out plans that really require a static environment to work. Life simply doesn't work that way. That is why you aren't seeing too many successful Ramsey and Orman students. Likewise Arthur Williams success stories. You have to have some flexibility built into your plan to adjust for what life throws at you.

 

[DHK]

I agree with you on that... but it's harder to explain it that way to investment clients. Gotta keep it understandable in order to communicate how things work.

A consumer SHOULD know about their fees. It is there in the prospectus - A, B & C shares. It is not line-itemed on a statement, but it is there and disclosed in the prospectus.

In any case, these expenses are a 'drag' in their investment performance.

 

[Newby]

I wouldn't even go that high. 2008 wiped out 50% of most people's portfolios... AND if they had to take out income??? If your portfolio goes down 50%... what rate of return would you need to get back to where you were? In other words, you had $100,000 (to keep the math easy) and you lost 50%. You now have $50,000. What rate of return do you need to get back to $100,000? 100% I'd love to assume 10% per year... and if a client wants to assume that, I won't stop them. But I also know it's not that reasonable itself. For withdrawal rates, I wouldn't go any higher than 5%... and hopefully, we can have that guaranteed and secured by an annuity. Now, don't forget portfolio management fees. Generally about 2% of your returns (and losses) are going to be affected by about 2% per year. So, if you earned 10%... what you'll really get is 8%. If you lost 10%, you'll actually lose 12%. This goes on for as long as you have your money in these kinds of wealth management "portfolios". No 'fees' in an index annuity... except for perhaps a lifetime income rider fee each year. I have a life insurance illustration that is my "This is why Suze & Dave hates life insurance" illustration because it is a 'minimally funded' permanent life policy. I'll show them exactly why it doesn't look good and get the client to agree with me. Then I show them how *I* structure life insurance policies so that the client can get the most out of it from year one and for as long as they are alive.

I just moved quite a bit of money that I had left alone for 15-years that was invested at Edward Jones which I assume charges about the same fees as Dave's a Endorsement providers. It was in the normal EJ mutual funds Lord Abbott, American funds, etc. I quit putting any new money with them about 8-years ago but left that portion there.

After you subtracted the cost basis of my money it had made less than $1,000. The cost basis was around $175,000. This is crap. I think this is common but they make it overly complicated for the consumer to really understand what his money has earned because you are adding more to it all the time and many of your gains are just recovering from previous losses.

I'm indexed annuities all the way now. I can understand those. And I never lose. This is the product that was invented for people exactly like me. I don't care if I might earn more elsewhere. I like safety and guarantees and low fees.

Dave makes indexed annuities sound riskier than mutual funds. He's very biased. If he explained them both properly and with no bias, many people would choose index annuities if they are very low risk takers and not worried about the possibility of missing out on large gains in exchange for no losses.

Dave is a good motivational speaker but that is it.

 

[xrac]

I just moved quite a bit of money that I had left alone for 15-years that was invested at Edward Jones which I assume charges about the same fees as Dave's a Endorsement providers. It was in the normal EJ mutual funds Lord Abbott, American funds, etc. I quit putting any new money with them about 8-years ago but left that portion there.

After you subtracted the cost basis of my money it had made less than $1,000. The cost basis was around $175,000. This is crap. I think this is common but they make it overly complicated for the consumer to really understand what his money has earned because you are adding more to it all the time and many of your gains are just recovering from previous losses.

I'm indexed annuities all the way now. I can understand those. And I never lose. This is the product that was invented for people exactly like me. I don't care if I might earn more elsewhere. I like safety and guarantees and low fees.

Dave makes indexed annuities sound riskier than mutual funds. He's very biased. If he explained them both properly and with no bias, many people would choose index annuities if they are very low risk takers and not worried about the possibility of missing out on large gains in exchange for no losses.

Dave is a good motivational speaker but that is it.

If Ramsey were licensed in California he would be on trial.

 

[DHK]

Only if he was touting annuities...

 

[Rearden]

I just moved quite a bit of money that I had left alone for 15-years that was invested at Edward Jones which I assume charges about the same fees as Dave's a Endorsement providers. It was in the normal EJ mutual funds Lord Abbott, American funds, etc. I quit putting any new money with them about 8-years ago but left that portion there.

After you subtracted the cost basis of my money it had made less than $1,000. The cost basis was around $175,000. This is crap. I think this is common but they make it overly complicated for the consumer to really understand what his money has earned because you are adding more to it all the time and many of your gains are just recovering from previous losses.

I'm indexed annuities all the way now. I can understand those. And I never lose. This is the product that was invented for people exactly like me. I don't care if I might earn more elsewhere. I like safety and guarantees and low fees.

Dave makes indexed annuities sound riskier than mutual funds. He's very biased. If he explained them both properly and with no bias, many people would choose index annuities if they are very low risk takers and not worried about the possibility of missing out on large gains in exchange for no losses.

Dave is a good motivational speaker but that is it.

At the end of the day, it just sounds like those selling annuities should focus on finding people with your type of mindset and quit trying to "sell" them on why guarantees make sense in an investment portfolio.

I would go further and figure having to "sell" someone on the basis for income/investment guarantees is not positive sign of a qualified buyer anyway.

I am not an annuity salesperson.

 

[agentjhc]

Nice post, in my F.A. days compliance made us use eight and four. I know Buffet said 7% was about the best one can get.

Buffet recommends the avg investor out their money in indexed funds and specifically mentioned Vanguard.

 

[KidsGotHeart]

I just moved quite a bit of money that I had left alone for 15-years that was invested at Edward Jones which I assume charges about the same fees as Dave's a Endorsement providers. It was in the normal EJ mutual funds Lord Abbott, American funds, etc. I quit putting any new money with them about 8-years ago but left that portion there.

After you subtracted the cost basis of my money it had made less than $1,000. The cost basis was around $175,000. This is crap. I think this is common but they make it overly complicated for the consumer to really understand what his money has earned because you are adding more to it all the time and many of your gains are just recovering from previous losses.

I'm indexed annuities all the way now. I can understand those. And I never lose. This is the product that was invented for people exactly like me. I don't care if I might earn more elsewhere. I like safety and guarantees and low fees.

Dave makes indexed annuities sound riskier than mutual funds. He's very biased. If he explained them both properly and with no bias, many people would choose index annuities if they are very low risk takers and not worried about the possibility of missing out on large gains in exchange for no losses.

Dave is a good motivational speaker but that is it.

That is what really irks me with Dave. He knows the pros and cons of each product, and if he does not it would be easy for him to find out. Yet he lies on purpose and destroys lives to make his system look better. Most people that read Dave’s book get sucked in with the budget and debt management aspects and believe he really is trying to help them; that it makes it easy for Dave to pull the wool over their eyes.

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Buffet recommends the avg investor out their money in indexed funds and specifically mentioned Vanguard.

What he does not do is recommend you build a strategy on 12% growth and 8% withdraw. Notice what Buffet thinks one can gain in the market is less than what Dave says people should be withdrawing from their portfolio each year.

 

[DHK]

At the end of the day, it just sounds like those selling annuities should focus on finding people with your type of mindset and quit trying to "sell" them on why guarantees make sense in an investment portfolio.

I would go further and figure having to "sell" someone on the basis for income/investment guarantees is not positive sign of a qualified buyer anyway.

I am not an annuity salesperson.

What's the difference between selling and explaining? Most people have no idea what's really out there. With simple explanations, people with either buy into the concept... or they won't.

If they don't... no problem. A person convinced against his will... is of the same opinion still.

But waiting to "find people" with a certain mindset... unless they answered an ad or filled in a card... is nearly impossible. Just share the concept and let them buy in, or not.

 

[Rearden]

What's the difference between selling and explaining? Most people have no idea what's really out there. With simple explanations, people with either buy into the concept... or they won't.

If they don't... no problem. A person convinced against his will... is of the same opinion still.

But waiting to "find people" with a certain mindset... unless they answered an ad or filled in a card... is nearly impossible. Just share the concept and let them buy in, or not.

By "selling" I was referring to "hard selling."

I would not want to hard sell someone who doesn't get the benefits annuities provide after I have properly explained to the prospect the advantages and disadvantages.