Unshakeable: Your Financial Freedom Playbook

by Anthony Robbins

the Department of Labor recently passed a new regulation requiring advisors to put their clients’ interests first in one specific situation: when handling 401(k) and IRA retirement accounts. But even then, there are still major loopholes.

In addition, with the recent election of Donald Trump, his advisors are all talking about rolling back the new regulations before they’re even implemented. So by the time you read this, those protections may not even exist!

this system is so riddled with conflicts of interest that it puts you in a hig...

I’m not suggesting that it’s impossible to find talented, trustworthy brokers who do a fine job. But playing a game where the odds are so heavily stac...

David Swensen, Yale’s investment guru, warned me that no matter how much you may like your broker, “Your broker is not your friend.”

Registered Investment Advisors

approximately 10%—are registered investment advisorsIV (also known as RIAs or independent advisors). Like doctors and lawyers, they have a fiduciary duty and a legal obligation to act in their clients’ best interests at all times.

To give you a sense of how strong the laws are, if your RIA tells you to buy Apple in the morning, and he buys it for himself at a cheaper price in the afternoon, he has to give you his stock!

In addition, before doing business with you, your RIA must disclose any conflicts of interest and explain up front how he or she is paid. No hocus pocus, nothing hidden, no tricks, no lies, all cards on the table!

Another reason why so many people use brokers is that RIAs are like rare birds: there’s only a one-in-ten chance of spotting one.

How come there are so few RIAs, if this is such a superior model? The most obvious reason is that brokers tend to earn a lot more money.

RIAs don’t accept sales commissions. Instead, they typically charge a flat fee for financial advice, or a percentage of their clients’ assets under management. It’s a cleaner model that removes awkward conflicts of interest.

Dually Registered Advisors

it seemed obvious to insist on working with an independent advisor who’s legally obliged to act as a fiduciary. I thought of fiduciaries as the gold standard. But then I discovered that this subject is murkier than I’d realized!

Here’s the problem: the vast majority of independent advisors are registered as both fiduciaries and brokers. WTF?! In fact, as many as 26,000 out of 31,000 RIAs operate in this grey area where they have one foot in both camps.

only 5,000 of the nation’s 310,000 financial advisors are pure fiduciaries. That’s a measly 1.6%. Now you know why it’s so hard to ge...

how these “dual registrants” actually operate. One moment, they play the part of an independent advisor, reassuring you that they abide by the fiduciary standard and can provide you with conflict-free advice for a fee. A second later, they switch hats and act as a broker, earning commissions by selling you products. When they’re playing this broker role, they no longer have to abide by the fiduciary standard.

These dually registered advisors have good intentions, but they get caught between two worlds, trying to be honorable while also having to make compromises. It’s not the fault of the individuals; it’s that the industry is structured so that selling products is the easiest way to make good money and pay the bills.

What are you left with? Thousands of independent advisors who are legally obligated to act as fiduciaries.

But you still have to tread carefully. Why? Because conflicts of interest can arise even when you’re working with an independent advisor—typically involving clever but legal schemes to make additional money off you while you’re looking the other way.

Here are three tricks of the trade you should...

The Poison of Proprie...

Here’s how it typically works: the advisory firm has two arms, one of which is a registered investment advisor that offers independent advice. So far, so good. But the firm’s second arm is a sister company that owns and operates a bunch of proprietary mutual funds. The RIA pretends to offer impartial advice but actually recommends that you buy the overpriced funds sold by its sister company!

Most clients aren’t even aware that they’re buying funds owned by the same firm. That’s because the fund arm and the advisory arm typically operate under different brand names.

An Additional Fee for Doing Nothing

Here’s another scheme that’s become increasingly common: you pay an advisor a fee to manage your money—let’s say, 1% of your assets. The advisor then recommends a “model portfolio” (he may even give it a fancy name like the “XYZ Portfolio Series”), which has its own additional fee—let’s say, 0.25% of your assets. This fee is over and above the cost of the underlying investments in your portfolio.

If an advisor charges a money management fee for selecting investments, that should be it. End of story. Why should they be able to add another fee for pooling those investments together? I’ll tell you why: because they can. Because you might not notice.

“I Can’t Accept a Commission, So Let’s Just Call It a ‘Consulting Fee!’ ”

Some independent advisors make private deals with investment firms that enable the advisor to earn commissions without you knowing it. Here’s how it works: your advisor recomme...

the ingenious advisor approaches the fund company and asks instead for a “consulting fee.” The fund company gladly pays this fee, and everyone lives happily ever after. Except for you, the client, who just got duped into thinking that you were actually getting “independent” advice.

If it walks like a duck and talks like a duck, it’s probably a duck. Or a broker.

HOW TO FIND THE BEST ADVISOR FO...

It’s not enough to find someone who’s legally obliged to put your interests first. You also need someone who is financially sophisticated and highly skilled.

When you’re selecting and vetting them, you can apply the following five criteria:

1. First, Check Out the Advisor’s Credentials. You need to make sure that the person, or someone on her team, has the right qualifications for the job you need done.

If you’re looking for planning help, make sure the advisor has a certified financial ...

If you’re looking for legal help, make sure there are estate planning ...

Looking for tax advice? Make sure there are C...

These credentials aren’t a guarantee of high-level skills. Even so, it’s important to know that any advisor you’re considering has reached the minimum level of compet...

What you really need is someone who can help you as the years go by to grow your overall wealth by showing you how to save money on your mortgage, insurance, taxes, and so on—someone who can also help you to design and protect your legacy. That might sound unnecessary right now, but it’s important to have this breadth of expertise, since taxes alone can make a difference of 30% to 50% in what you retain from your investments today!

It’s best to start with a person you’re going to grow with through time. So make sure he has the resources to grow with you even if you’re starting small. Also keep in mind, size does matter. You don’t want to end up with a sincere but inexperienced advisor who manages only a relatively tiny sum for a few dozen clients.

You Want to Make Sure Your Advisor Has Experience in Working with People Just Like You.

Does she have the track record to prove she’s performed well for clients in your p...

if your main focus is on building wealth so you can retire, you want a real exper...

46% of advisors had no retirement plan of their own!

Make Sure That You and Your Advisor Are Aligned Philosophically.

does he recognize that the odds of beating the market are low, leading him to focus on selecting a well-diversified portfolio of index funds?

Some advisors might meet your need for a true fiduciary but still fall short because they’re determined to pick stocks.

Personally, I’d run a mile from any advisor who claims to beat t...

Find an Advisor You Can Relate to on a Personal Level.