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Last Week Tonight with John Oliver – Retirement Episode Review

August 13, 2019


in this episode we’re going to review
and comment on a John Oliver show which is last week tonight in his episode on
retirement planning this is the all-in-one AIO financial series and I’m
bill I’m Jason and we discuss personal financial planning issues investments
insurance estate planned retirement little of everything whatever we can
think of comprehensive and this is brought to you by AIO financial a
fee-only fiduciary financial planning firm working with clients all over the
US and you can find us at AIO financial calm and thank you for joining us we are
going to try something new we’re gonna watch a video or little clips and
comment on them as we go yeah so we had a client that mentioned that the reason
that they had looked for a fiduciary fee-only financial planner was because
of this episode so we thought we’d take a look at it and kind of dissect it a
little bit for you and give you our thoughts on it have you seen John Oliver
show before I have he’s he’s funny definitely followed him back from I
think when he’s on The Daily Show yeah yeah so it’s very informative yeah it’s
a nice way to present it with some humor yep so some good information in this one
but there is something you should know about financial advisors even their name
means less than you might think the Financial Industry Regulatory
Authority warns customers to be aware that Financial Analysts financial
adviser financial consultant financial planner investment consultants or wealth
manager are generic terms or job titles and may be used by investment
professionals who may not hold any specific credential so financial analyst
is just a fancy term that doesn’t actually mean anything sort of like
brand ambassador or the John Oliver effect so yeah totally agree with the
first one really I mean the the Financial Planner financial advisor it’s
not anything that has you know legal requirement to use that title so you got
to be careful and make sure that you’re looking at their credentials got to make
sure that you know you’re understanding how they work are they a fiduciary or
not those types of things so yeah for sure
yeah the names don’t be fooled by a title ask how much experience they have
where they went to university in the main designation for personal financial
planners is a CFP a certified financial planner so that’s a good a good one to
be aware and to get a CFP it means that they’ve gone through six courses about
the basic financial planning areas they’ve taken a comprehensive exam and
they’re continuing with their continuing education yeah I don’t know otherwise
the titles are just titles I guess but you’re something good not everybody know
so it’s negative it’s a good topic to address definitely yeah together some
people might think it means yeah but they pass the test or have some sort of
certification but it doesn’t mean that yeah yeah but even many well
credentialed financial advisors are paid on Commission so if they recommend
something for you it may be because they stand to make
money in fact sometimes they’re actively incentivized not to act in your best
interest yeah this actually surprised me when I started working as a planner that
not everyone’s a fiduciary there are the majority of planners are compensated by
by commissions or different fee structures and some of the compensations
are complicated fee based advisors are getting fees and commissions and some of
those commissions are kind of hidden or not that that obvious yeah absolutely
excellent point you got to make sure you understand how your advisor your planner
is actually getting compensated because a lot of times they may be recommending
something it’s not necessarily in your best interest because of how they’re
being compensated so the one you would want to look for of course would be fee
only so that means they’re not being compensated at
all by any annuity companies mutual fund companies anything else like that the
only compensation they get is the fee that they charge you to manage your
accounts or do the financial planning service for you yeah it’s very
transparent and Knapp was the big industry for the big organization for
fee-only advisors NAPFA and that’s the the National Association for fee-only
advisor so that’s a good good question to ask are you a member and app do you
have a fiduciary duty with my with respect to my clients meaning are you
putting the client’s interests ahead of your own might not just be getting money
last year Elizabeth Warren released a report on sales perks in the annuity
industry ranging from free cruises to luxury watches to and this is true this
tacky Super Bowl style ring so this one’s I mean it’s it’s almost humorous
because it’s something that a lot of people aren’t aware of you know there’s
a good chance that you’re you know financial advisor if they’re
compensating you or if they’re being compensated rather by an annuity company
or something like that they may be getting additional compensation that’s
not just a cash payout so just being aware of that you know obviously the the
best way to avoid that is just work with somebody who isn’t compensated by them
whose fee only but yeah just something to be aware of just because they’re
getting compensated by charging you a fee they may still be getting
commissions they may still be getting other perks and bonuses so yeah just
something to be aware of for sure yeah I’ve heard of companies giving out
cruises or vacation plan I mean that there’s all kinds of incentives out
there I always cringe when a client comes in with an annuity because I know
it might not be necessarily in their best interest to have that many cut
times it’s not it’s tax deferred they’re getting no extra tax advantage and it’s
not necessarily appropriate for that person but the salesman may
some money on it yeah your money add ups adds up your fees can really add up to
assume you’re invested in a fund that is earning a gross annual return of 7% they
charge you a 2% annual fee over 50 years the difference between your net of 5%
the red line and what you would have made without fees the Green Line is
staggering you’ve lost almost 2/3 of what you would have had two-thirds of
what you would have had is gone so think of fees like termites they’re tiny
they’re barely noticeable and they can eat away your fucking future yes that’s
a great point fees are critical it’s important to look at expense ratios the
cost of the funds you have if you have funds it’s important to look at
transaction fees if you’re buying and selling either ETFs or stocks or just
all those costs and then advisor fees you want to be careful be very aware of
what you’re paying and that’s sometimes it’s difficult to sort that out because
it’s not always that transparent but you can ask what are the expenses what are
all the costs coming out and they do eat you eat up during with a lot of time
there yeah I think one little issue I had with that was kind of the way they
presented it so that was sort of based on this idea that you would be investing
everything you’re gonna invest your retirement at age 20 and then it’s just
gonna sit there and grow over time for 50 years right or 50 years or whatever
it is and of course the the further it goes you know the more time the wider
the gap is but that’s not realistic that’s not really how people save for
retirement you’re gonna be putting in a little bit as you go so the difference
of a 2% you know fee or something like that isn’t quite as much as it looks
like yeah it’s it’s very unlikely it would make that big of a difference but
yeah definitely it’s super important to be aware of the fees that’s you know one
of the beneficiaries of working with a fiduciary they’re gonna you know take
care of that for you they should be looking at what’s the cost if it’s a
mutual fund you know what’s the expense ratio yeah
should be considering that that’s one of the prime things they’re gonna look at
absolutely and then providing value for any fees that are charged so if you’re
charging a fee just to make yourself wealthy you know that that’s obviously
not in the clients best interest but if you’re charging a reasonable fee for the
the services that are offered then you know usually that’s worth it for the
client because very few people have the time the expertise and the desire to do
all their financial planning and investing on their own so you know don’t
let that discourage you from paying somebody you know a reasonable fee to
manage your your finances or create a financial plan for you but yeah
definitely you got to be careful on that and just be aware of what the the fees
are being charged are yeah but the problem with active management is that
even many Wall Street experts find it difficult to consistently beat the
market and there is sometimes embarrassing evidence of this like when
a group of professionals were pitted in a stock picking challenge against a cat
named Orlando Orlando’s method he throws a toy mouse
at a grete company is very scientific last year Orlando’s pics returned nearly
11 percent while the pros II gained just 3.5 percent
oh yeah that’s a that’s a cute cliff and that’s that’s a great point everything
I’ve read most white papers are okay that’s a that’s a cute clip very that’s
a great point because we have people coming in wanting to outguess the market
or wanting us now guess the market and really everything I’ve read followed
even the CFP coursework they really say minimize your costs
don’t try to actively go for active management it’s not worth that expense
and weave in there’s even studies that have shown that individual investors
underperform the market and that tends to be because they you know start
investing a lot or get greedy when the markets high in and get nervous when the
markets down and are not the best decision makers yeah absolutely and so I
I agree with that as well you know and I think you pulled up a the stat here so
over a 10-year period that S&P 500 index beats about 91 percent of active funds
so net can’t hit everybody you consider what they charge you to actually you
know manager within a built in a mutual fund or ETF or whatever that is so
that’s just something where you know it’s just common sense you know why
would you be paying extra if there’s you know a 90% chance that they’re gonna do
worse than just putting it all into an index so they’re an index fund yeah they
don’t make I mean they can’t show that they make the half a percent difference
right that their active funds are charging versus an index
yeah it’s just not worth paying it so definitely we agree with that so it’s a
way you can save yourself some money when you’re investing in goes back to
the fees comment from or the fees clip I guess is you know the less your pain and
fees the more it’s gonna compound over time too so yeah and it’s an efficient
market things are priced for what you know so just because you heard the news
today that’s something merged or something happened you’re probably too
late already the markets reacted to that news so trying to outperform it you
really don’t have an advantage over professional or other investors exactly
advisor although as we now know that term doesn’t necessarily mean much in
fact if you go to our website right now you can print out a free official
financial adviser certificate and there you go congratulations all right so we printed one of these out
and we thought it’s pretty funny so the idea is that basically anybody can call
themselves a financial adviser so you have to really kind of do your homework
look and you know see what is their background make sure that that matches
up something you can look forward to FINRA
has a website called broker check you can look at their history so that’s an
option too you can kind of see if they had complaints about them different
things like that and then just kind of looking at credentials you know what
sort of experience do they have what sort of educational background
certifications that have an actual you know strict code where you would have to
pass a test or certain study work in order to achieve that designation but
just somebody that calls themselves a financial adviser doesn’t really mean
anything on the surface I think also question the person you’re hiring
question their credentials question their experience and also question the
advice they give if you ask five advisers what the best thing to do in a
certain situation there’s not necessarily one clear answer people
could be you know it’s depends on the assumptions they’re making so definitely
question what advice you’re getting what direction you’re going if they’re
considering taxes and your overall retirement plan and you know what your
your goals are financially in trying to save for retirement it doesn’t need to
be this confusing the truth is as long as you remember a few key things you’re
probably going to be fine and we wanted to outline them for you so
whenever you are ready or able to save for retirement please come back and
replay this video from this exact spot enjoy most experts can give you is to do
five things number one start saving now all right so yeah definitely the sooner
you start saving the better because it’s going to build over time it’s going to
compound so definitely you know it makes a huge difference
if you can’t start saving earlier in your long term retirement savings plan
for sure yeah you want your money to work for you and so yeah the longer you
give it the more it’s gonna grow I mean it’s crazy the numbers how they work out
compound interest how it’ll grow on itself so definitely start early but
also don’t beat yourself up if you’re not following some magic plan I mean if
you have years where you’re raising kids and don’t have a lot of extra do what
you can do you can I think the big goal would be just set up a plan so that you
have some targets you can reevaluate it each year but have a plan to meet your
retirement goals absolutely we’re gonna be doing a video talking about different
ways that you can get to retirement as a millionaire so there’s a lot of
different paths there it doesn’t necessarily mean you have to start
putting away for retirement when you’re 20 so just yeah there’s flexibility
there but overall the sooner you start the better usually people like you and
let’s face it you’re very very average should probably just invest in low-cost
index funds and leave it alone you should check out it about as often as
you Google whether or not Gene Hackman is still alive about once a year
I think we covered this fees are critical you want to be clearly
understand your fees and that’s I think an advantage of fee-only fiduciary
they’re very transparent with these are the fees and you want to look at the
investments that you’re you’re gonna have in your portfolio you’d like to
have those low cost indexes know what the expense ratios are know that they’re
they’re low because there hasn’t been evidence showing that actively managed
funds are worth that extra expense yeah I can’t can’t argue with that ETFs had a
big impact on the industry with just having a much lower expense ratio so the
internal fees built into that fund versus an actively managed mutual fund
so now they do have mutual funds that have very low expense ratios as well
yeah keeping in line but yeah just you know make sure it’s
got a low expense rate and and be diversified with it I mean you it helps
stability of your portfolio and overall performance to not only have us large
companies but have midsize small size foreign develop foreign emerging you
know whole different types of asset classes that aren’t all correlated
together and you’ll you’ll improve stability if you have an advisor ask if
they’re a fiduciary if they say no run if they say yes but they’re wearing a
tacky Superbowl ring run if they say yes what they’re wearing a class ring right
right so we’ve kind of covered this already but essentially a fiduciary
that’s somebody who puts your best interests first ahead of their own so
that means whatever product they recommend whatever course of action they
recommend it has to be what’s best for you not what’s okay for you but best for
them which is the way a lot of advisors work so definitely you’ll want to make
sure your advisor or financial planner is a fiduciary for sure and fiduciaries
have to disclose any conflicts of interest so if there is any issues it
has to be disclosed and again the main organization for fiduciaries as we said
is naphtha and a PFA shift your investments from stocks to bonds
here’s a way to remember it every time they pick a new James Bond gradually
switch more of your stocks into bonds yeah definitely that makes sense your
time horizon and your risk tolerance are gonna drive how your portfolio is
constructed so if you need money in the near term whether you’re saving for a
house or whether you’re very close to retirement yeah you don’t you don’t want
to be pulling money out when the markets down and we just know anyone who tells
you they know what the markets gonna be in a couple years that they don’t you
know we don’t know where the markets gonna be it it’s priced for what we
currently know so it does make sense if you’re gonna be drawing money that money
should be more stable more secure for the next few years the stock market
money is money you can awry dips you know you have time horizon you have
time to ride out any downturns yeah and of course this may not always be the
case for everyone some people have different risk tolerances based on their
financial situation they may choose to take more risk but is a general rule
yeah more more towards bonds lesson stocks as you age yep yep finally try to
keep your fees like your milk under 1% because just like interest compounds so
do fees and even 1/10 of 1% can really fuck you like this so they covered this
already but just you know like it they said you want to keep those fees low
because it’ll eat away at you return so and you know over time it’s gonna have a
more dramatic effect when you factor in the compounding so keep these low look
for you know an advisor the charge is a reasonable fee or financial planner the
charge is a reasonable fee try to be aware even though you may not have much
of a much control over it but aware of the fees of your 401k or
employer-sponsored plan might be charging you and then things like
low-cost index funds are also you know part of that plan yeah and I think like
Jesus said earlier you know financial planners make a lot of sense for a lot
of people they’re gonna be looking at tax is gonna be considering your
retirement plan your target looking at a state plan making sure your insurance is
covering the risks that you may have and looking at those investments so it’s not
that don’t you know don’t pay for any service at any time it is something you
could learn I mean you could take the courses you could buy the software you
can do it all yourself but a lot of people work or if families or once
support they’re not an expert in in this field so if you want support definitely
look for a fiduciary be very conscious of fees but it’s it’s helpful to have an
adviser in your corner right yeah there absolutely is value in hiring an adviser
you just got to make sure that you pick the right one pick somebody who’s a
fiduciary and charges reasonable fee so yeah I why did you think of that
episode well oh I thought it was great John Oliver’s got a great platform to
kind of educate America and really bring up some issues that I think a lot of
people aren’t aware of so financial planning of course is extremely
important especially when it comes to planning for retirement so he brought up
some good points had some good advice in there so overall I thought it was good
yeah yeah I thought it I thought it’s funny it’s a nice way he delivers things
it is a little bit oversimplified and I think some people have tricky situations
divorces or or just don’t want to put a lot of effort in it but it’s great but
he really pointed out a lot of the big issues you know look for a fiduciary
keep those fees low and yeah I think he’s always got a good pretty good show
you always learned something from it for sure all right well that that kind of
wraps it up so please like and subscribe and you know if you have any questions
please feel free to put it in the comments there reach out to us we’re
happy to answer any questions you have yep you could find us at a IO financial
com yeah all right awesome take care take care see you next time bye

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4 Comments

  • Reply Expat Planners June 19, 2019 at 11:30 pm

    great insight. I really like John Oliver's show and appreciate the evaluation.

  • Reply Charitable Microfinance in Mexico by ProMex Group June 19, 2019 at 11:38 pm

    please continue reviewing financial episodes

  • Reply Al Watson June 20, 2019 at 5:17 pm

    Bill / John great review. Would like to see more of this type of show.

  • Reply David Rudge August 7, 2019 at 4:50 pm

    You are spot on about index funds, but I think the additional suggestion that one should diversify by using multiple types of index funds is questionable. For example, an index fund that tracks the S&P includes significant foreign exposure. Read J. L. Collins The Simple Path to Wealth for an extended discussion of why a single index fund might do the job, particularly if you are in the accumulation phase of your financial life.

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