MONEY Master the Game: 7 Simple Steps to Financial Freedom (22 page)

When I introduced Ajay and his team at Stronghold to Elliot, it was an incredible alignment of values. What was amazing was how the sum of the whole was drastically greater than its parts. They began a monumental collaborative effort. For nearly a year, Ajay and Elliot worked together with a common goal: to democratize the best investment advice and help Americans wake up to their right to, first, know what they have been sold and then make the switch to receive transparent advice. And Stronghold Financial (a new division of Stronghold Wealth Management) was born. So in addition to serving those of high net worth, Stronghold now serves everyone regardless of how much he or she has to invest.

LOOK UNDER THE HOOD—FOR FREE!

My biggest “ask” from Ajay and Elliot was to make it possible for anyone, not just the wealthy, to be able to tap into top-tier advice, research, and planning. But I wanted them to do it for free!!!!

Most financial planners charge $1,000 or more to analyze your current investment assets, assess how much risk you’re taking, quantify your
true
fees, and put together a new asset allocation. Stronghold’s patented system accomplishes this in just five minutes—and it’s completely free! Here is a bit more how it works:

When you visit the website,
www.StrongholdFinancial.com
, the system will allow you to “link” all of your accounts (even your 401[k] and accounts you have scattered at multiple firms). It will then analyze every holding you own, every fee you are paying, every risk you are taking. It will give you a comprehensive analysis and a new asset allocation. It will also reveal some of the unique strategies we will review in section 5 and compare them to your current approach. You can take this complimentary info and implement it on your own (and the company doesn’t charge a dime). Or, if you decide to move forward, with the click of a button, you can transfer your accounts and have Stronghold manage your wealth, so long as you meet the minimum account size. For those who become clients, there is a team of fiduciary advisors that are available by phone to guide you in your journey and answer any questions you may have. There are no commissions, just a fee, which is based on your total portfolio value. So whether you have $2,500 or $25 million doesn’t matter. Advice that was previously reserved for those of high net worth is now at your fingertips! And if you would prefer to work with someone in your local area, Stronghold has a network of independent advisors in all 50 states who are aligned with the same principles and have access to some of the unique solutions we will review in the pages ahead.

I am extremely proud of what Elliot, Ajay, and I have worked together to create: a complimentary service that can impact the entire population! And, quite frankly, it exists only because we were so frustrated by a system that
often uses deceit and manipulation as weapons against investors. It’s time for a changing of the guard. So while I am not currently an owner in Stronghold, at the time of publication we are in conversations about how I can become a partner and align further with its mission of serving investors with extraordinary advice and investment solutions.

FINDING A FIDUCIARY

I don’t want you to get the impression that Stronghold is the only fiduciary. There are thousands out there, and many of them are outstanding, so I would like to give you five key criteria for finding your own fiduciary. Below you will also find a link to the National Association of Personal Financial Advisors (NAPFA). This will allow you to search the country for any fee-only advisor you choose. One caveat: just because they are on the list doesn’t mean they are skilled. Like any profession, be it a doctor or a teacher, there is a wide range of competency. In addition, in the world of independent fiduciaries, size does matter, so many smaller firms may not have the same level of access to certain investments and/or competitive pricing.

DIRECTORY OF FEE-BASED ADVISORS

http://findanadvisor.napfa.org/home.aspx

So, if you choose to find your own fiduciary, below are five key initial criteria you may want to consider when selecting an advisor:

1. Make sure the advisor is registered with the state or the SEC as a registered investment advisor or is an
investment advisor representative
(IAR) of a registered investment advisor (RIA).

2. Make sure the registered investment advisor is compensated on a percentage of your assets under management, not for buying mutual funds. Make sure this fee is the
only
fee and is completely transparent. Be sure there are no 12b-1 fees or “pay-to-play” fees being paid as compensation.

3. Make sure the registered investment advisor does
not
receive compensation for trading stocks or bonds.

4. Make sure the registered investment advisor does
not
have an affiliation with a broker-dealer. This is sometimes the worst offense when a fiduciary
also
sells products and gets investment commission as well!

5. With an advisor, you don’t want to just give them your money directly. You want to make sure that your money is held with a reputable third-party custodian, such as Fidelity, Schwab, or TD Ameritrade, which offers 24/7 online account access and sends the monthly statements directly to you.

For those who are willing, have the time, and are brushed up on proper asset allocation (more on this in section 4), investing on your own (without a fiduciary) may be a viable option, which could also result in additional cost savings. The added cost of a fiduciary may only be justifiable if they are adding value such as tax-efficient management, retirement income planning, and greater access to alternative investments beyond index funds.

BUY ENRON!

An extremely competent fiduciary in your life will do more than provide transparent advice and investment solutions. They should protect you from the marketing “noise” because history shows us that the noise from a conflicted broker, or the firm he works for, can be extremely dangerous. Let me share an example from recent history.

Remember Enron? The energy giant with $101 billion in annual revenue (in 2000) that decided to cook the books in hopes of keeping shareholders happy. The big brokers and the mutual funds that owned the majority of Enron shares were big fans of the energy giant. My dear friend and business mastermind, Keith Cunningham, is a straight shooter with a classic Texas drawl. When he speaks at my Business Mastery event, he pulls no punches when showing how brokers, with no vested interest in how their clients fare, will pour on bad advice even when the situation is dire. When he shared with me the breakdown of how brokers promoted Enron during its collapse, I was astonished!

In March 2001, just nine months before declaring bankruptcy, Enron
signaled that it was having trouble. “Anyone who was willing to look at the cash flow statement could see that they were hemorrhaging cash in spite of what they said its profits were!” Keith shouted to my audience of close to 1,000. “But that didn’t stop the big Wall Street firms from recommending the stock.” Below is a chart showing the recommendations of the big-brand firms in the nine months leading up to the Enron Chapter 11.
Notice how the recommendation to buy or hold was made until there was literally nothing left to hold—because the stock had no value; the company was bankrupt!

Needless to say, if you are getting advice from a broker, you can expect that the inherent conflicts will show up in one way or another.

LOBBYING FOR PROFITS

Putting client interests first may seem like a simple concept, but it’s causing an uproar on Wall Street.

—“WHAT’S NO. 1 FOR BROKERS?,”
Wall Street Journal,
December 5, 2010

So why hasn’t the status quo changed? Under Dodd-Frank, the SEC was required to conduct a study on a “universal fiduciary standard” across all investment firms.
You heard me right. The politicians wanted to conduct a
study
to determine if acting in the client’s best interest is a good idea.
It’s a tragicomedy played out on Capitol Hill. In my interview with Dr. Jeffrey Brown, I asked about his opinion on fiduciary standards. Who better to ask than the guy who not only advised the Executive Office of the President but was also brought in by China to advise its Social Security program. “I think anybody that is managing money for someone else—it’s very, very important that they have a legal and an ethical responsibility for doing the right thing and looking out for other people’s money. I mean, these are really people’s lives we’re talking about here at the end of the day, right?”

The industry backlash has been nothing less than intense. You can hear the gears of the lobbying machine spinning at full speed as it reminds Capitol Hill of the generous campaign contributions.

THE TRUTH AND THE SOLUTION

So now that you know the rules of the game, what’s an investor to do?

Above you have the five steps of how to evaluate and find a fiduciary if you choose to find your own. As I mentioned, you can visit Stronghold (
www.StrongholdFinancial.com
), which has a patented online system which, in just five minutes, will provide you with the following:

• Within seconds, the system will pull in and review your current holdings (stocks, bonds, and mutual funds) from all your accounts, including your 401(k).

• 
The system will show how much you are
really
paying and how much less you will have at retirement if you don’t minimize fees. Remember the effect of compounding fees we reviewed in chapter 2.3!?

• The system will show your risk exposure. In other words, how well did your portfolio hold up in 2008 and other market downturns?

• The system will provide conflict-free advice and introduce you to a number of portfolio options.

• The system will take into account your current tax situation and recommend a more tax-efficient allocation.

• If you decide to move forward, you can quickly and automatically transfer your accounts to one of the recommended third-party custodians (such as TD Ameritrade, Fidelity, or Schwab). From there, the team will implement the recommendations and provide ongoing account management and service.

• If you have more than $1 million in investable assets, you will have access to the Private Wealth Division, which has greater access to investments that are limited to accredited investors.

At any time you can also pick up the phone and speak with a member of the team who is a registered fiduciary advisor to answer any questions regarding your personal situation. Or you can ask to be connected to one of the partners in your local area.

SO WHAT’S THE PLAN?

Wow, we have come a long way! The myths we have already exposed at this point remain unknown by the vast majority of investors. In fact, even many high-net-worth individuals aren’t privy to this insider info. And now that we are gaining an unobstructed view, we need to start to look at the actual strategies we are currently using to see if they align with our goals. Let’s start with the 401(k). That little piece of tax code that changed the financial world forever! Should we use it or lose it? Let’s find out.

Though the fiduciary issue is hotly contested among some groups, surveys conducted on behalf of the SEC showed a majority of investors don’t understand what fiduciary means nor do they realize brokers and investment advisors offer different levels of care.

—“THE BATTLE OVER BROKERS’ DUTY TO THEIR CLIENTS REACHES A STANDSTILL,”
Wall Street Journal,
January 24, 2012

CHAPTER 2.5

MYTH 5: “YOUR RETIREMENT IS JUST A 401(K) AWAY”

Baby boomers have been the primary mice used in the great 401(k) retirement experiment.