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Hidden fees and half-truths

What is your financial advisor not telling you?

What do you see yourself doing when you’re 75 years old? Many of us have plans for a worry-free retirement, but, sadly, the fees that most people are paying could make that an impossibility. There is a hole in the boat, and it could very well sink, without an emergency fix.

If this sounds dramatic, that’s because it is. In Unshakeable, Tony reveals the truth about the hidden fees that most financial advisors and fund managers won’t talk about: they have a dramatic impact on your net returns and your financial security, without giving you any added benefit.

In Chapter 3 of Unshakeable, Tony and co-author Peter Mallouk take an in-depth look at the real impact fees have on the average person’s retirement savings and why these fees often go unnoticed. Overpaying in annual fees on your mutual funds takes an enormous bite out of your nest egg. The worst part is, you’re not paying for better results — as 96% of all actively managed mutual funds fail to beat the market. The average investor is simply overpaying for underperformance.

In this episode of The Unshakeable Podcast, Tony and Peter explain the severe impact hidden fees and taxes can have on your financial future, why the industry makes it difficult to uncover these fees, and how you can remove hidden fees from your investment strategy — putting more money directly into your pocket.

SHOW NOTES

[00:43] Excessive fees are eroding Americans’ nest eggs, and destroying their financial futures
[01:45] If the fees are too high, you don’t just have a hole in your boat — half the boat is missing
[2:27] Jack Bogle: When you overpay in fees, you’re giving up two-thirds of your returns to someone who is just picking a set of stocks (mutual funds), which you could do yourself
[3:13] Most people put their money in mutual funds, but 96% of all mutual funds fail to match the index
[3:54] Tony gives the analogy of a game of blackjack
[4:07] Fees control your future
[4:24] Peter: Your expense ratio might say 1%, but there are other fees: tax cost (1%), cash drag, and transaction fees all add up to detract from your net returns
[5:30] Most people think the bottom line cost is the expense ratio. How would they even find out about these hidden fees?
[5:50] “Have fun reading a prospectus.” Peter explains why it’s often difficult to find your hidden fees.
[6:46] A mutual fund’s past performance does not indicate its future performance – but there is a correlation to the fees it charges
[8:00] Overpaying by 1% in fees is equivalent to a decade’s worth of income
[9:00] Richard: So most people should aim to match the market, and pay as little in fees as you can
[9:27] The market is moving toward accessibility and lower prices
[10:15] Paying a year’s worth of taxes on something you held for two weeks
[10:40] Tax efficiency is often overlooked
[11:10] Example of 3 people investing 100k in the market at age 35 – vastly different outcomes when paying 1%, 2%, and 3% in fees
[11:46] Baby Boomers are afraid of running out of money
[12:53] It’s not what you make; it’s what you keep
[13:06] For 99% of people, you should be looking at fees and taxes very closely
[14:06] Hedge funds – it’s not its own asset class!
[15:35] Brokers cannot legally advise you on taxes.
[18:27] How do you overcome the resistance to simplicity, and loyalty to old systems & decisions?
[19:17] Tony: When we show people their actual fees, we see very little resistance
[19:36] The financial industry is one of the only ones in the world with no transparency
[20:57] The industry is counterintuitive, but once you show people what’s going on, they’re very open to changing their strategy to avoid these fees
[21:30] In the financial industry, it’s not “the more you pay, the more you get”
[21:41] People usually only pause to look critically at their portfolios after major crises – 9/11, tech bubble, beginning of 2016
[22:33] Unshakeable gives you the knowledge and tools to do this yourself, or with your financial advisor

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning.

Team Tony

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