John Oliver Retirement Rant Was Spot On – But Missed One Important Point

Updated : Nov 14, 2019 in Articles

John Oliver Retirement Rant Was Spot On – But Missed One Important Point


All right, so John Oliver’s epic rant
about retirement, the financial industry and financial advisors was hilarious and
spot-on. But he left out one important detail. And it’s a detail that saved one
of my clients hundreds of thousands of dollars – in one moment. Find out what that
is coming up. Hey folks, I’m Patrick King, financial planner and host of
Transformative Television. Here on this channel, we have a soft spot for people
who are going through the divorce process, who have lost a spouse or a
loved one or people who are just trying to transform their lives for the better.
If that’s you or you’re in one of those situations, please consider subscribing
for more videos like this. And if you need financial help through one of those
situations, please don’t hesitate to give me a call. But in this video, what I want
to do is pick apart a little bit of John Oliver’s epic retirement rant and share
my thoughts on that and talk about the one thing that I think he missed that
saved one of my clients hundreds of thousands of dollars in one moment. “Take annuities. Now certain types of
those can be very complicated investment products that have high fees and would
only be appropriate for certain types of portfolios. But some financial advisers
push them hard.” Oh man. Annuities. Man, I see these annuities all
the time. They get so many fees and they’re impossible to get out of. One
thing all the time I find myself working with new clients to figure out ways to
get out from under some of these annuity contracts. And the commissions that
these “advisers” – brokers, insurance agents get paid on these annuities are up to
10% – maybe even more – of the contract value up front. So if you’re selling
someone a million dollar annuity, you’re gonna get almost a hundred grand. Stupid.
No wonder why these folks have an incentive to sell you these things. “Now
generally, it is currently legal for financial advisors to put their own
interests ahead of yours unless – and this is interesting – they are what’s called a
“fiduciary”. Because not all financial advisors are bound to act in your best
interest, but fiduciaries are.” All right, so here we are with fiduciary again. Y’all
are gonna get sick of hearing me talk about fiduciaries, right? There you go. “But
compound interest works both ways. meaning while your money adds up,
your fees can really add up too.” Man. Fees. Fees! All the time – all right so I did the
math behind this particular example using the fees from their retirement
plan and compared them to the fees from a from a fee-only fiduciary financial
advisor (my fees in this case) and what the difference would be for a $1,000,000
investor. Let’s say you retired with a million dollars and both portfolios grew
the same – let’s say 7%. Just the difference in fees alone over the
30-year retirement would be $1.6 million Check the math, it’s in the show
notes below. It’s absolutely ridiculous. Fees matter. Fees matter and they’re
hidden a lot of times, so always check for that stuff.
“But the problem with active management is that even many Wall Street experts
find it difficult to consistently beat the market.” Man, active management. So
active management, if you actually pay attention to the math, it doesn’t really
hold up, you know? So there are studies that have shown that over a fifteen year
time period only 17% of the mutual funds that start that time period beat their
index or their benchmark. 17%! And to give you an idea how bad those odds suck, over
that same course of time only 48% of funds survived!
52% went out of business! So you’ve got a better chance of picking a fund that
goes out of business than you do a finding one that’s gonna beat the
benchmark. Good luck with that! All right, at the end, you know the
one thing that I really love that they touched on was, you know they mentioned
working with fiduciary advisor. They worked with – to invest in low-cost index
funds, Vanguard funds they mentioned in the in the video. But I think the thing
that kind of got left on the cutting room floor (along with Kristin Chenoweth)
was, is there a difference between people who work with an advisor and
people who don’t? You know, is there a benefit of working with a fiduciary
advisor? And there was a study done by none other than Vanguard on this topic. And what they found was that the clients that worked with a fiduciary advisor
tended to see 3% more return than those that didn’t in a given year. Now of
course, individual years varied, but what they saw is, over time, they averaged
three percent more per year. Now we talked about the little bit in fees
that made a huge difference. 3 percent is ridiculous. So you know what were the
factors that were involved in this 3 percent? What were those things
that those advisors were doing to get that extra 3 percent that the clients
that work with them saw? Well the two biggest were behavioral coaching and
spending strategy in retirement, the biggest being behavioral coaching. So
this, I think, is the most important point of working with an advisor that wasn’t
mentioned in the video. So to give you a quick story of why I think this makes
such a big difference, I want to share with you the experience of a client of
mine. Obviously can’t name names but this gentleman – he was an older
gentleman – this was back in the financial crisis and he came in, he
almost picked them up bottom of the market. This was March 2009, so obviously
he’s scared. You know, recessions and and corrections are a normal part of
investment but we’d never seen anything like that before.
Stock market’s down a lot, but you know his portfolio didn’t have a whole ton of
stocks in it. It was down a little bit but, you know, it was not nearly as
down the market in general. So he came in and
he wanted to go to cash. He couldn’t take it anymore. He had been watching the news
and reading the headlines. And so he’s like, “You know Patrick, we gotta go to
cash.” But as unusual as those circumstances were, we stuck with our
strategy. We had a strategy for a reason. And again, he didn’t have 100%
stocks, but we stuck with it. And if he had gone to all cash at that moment he
would have locked in his losses forever or until he decided to get back in “when
it was safe”. So we stuck with the strategy. Fast-forward a year later, he
comes back in, his portfolio is way up. And we’re talking hundreds of thousands
of dollars. But in that one moment we decided to stick with our strategy, we
kept his his money invested and it allowed him to participate fully in that
recovery when the market bounced back in March of 2009. And of course it did
nothing but go up with a couple of blips since then which has been kind of
ridiculous. So not only did he did he benefit by NOT locking in hundreds of
thousands of dollars of losses in that one year, but that growth also compounded
over time too, as the market continued to go up and he continued to participate in
it. So that behavioral coaching thing is the biggest benefit as evidenced by the
Vanguard study and it could be worth hundreds of thousands of dollars. So
that’s where that “advisor alpha” comes from and, I think, one of the important
points of working with a fiduciary family advisor
that wasn’t that wasn’t included in that video. Of course that story’s not quite
as hilarious as his but it’s a true story and it’s real dollars. So all right
folks, thank you so much for watching. I hope you enjoyed this video, If you did
click like below, consider subscribing, leave us a comment. Let me know what you
thought. Until next time I’m Patrick King. This is
Transformative Television. Take a deep breath. You got this! You know, I totally have an elf-spotting
degree now. Thanks, John Oliver!

1 Comment

  • i will be honest, with the advertisement approach of this video I was expecting this to be a not so subtle contradiction piece. I am glad it wasn't. I am currently on the job market and Financial Advisor companies are recruiting HARD and with very opaque approaches. Should someone who values ethics over his personal profit avoid these companies? I want to make money but not while waltzing on the backs of trusting clients

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