RPF0439-Unshakeable_Book

00:00:00.000 | A few minutes ago, I posted a message in the Radical Personal Finance Facebook group that

00:00:05.400 | reads this, said, "I'm about to record my review of Tony Robbins' new book, Unshakeable.

00:00:11.920 | Should I do it in my current mood as ticked off angry Joshua and rip it to shreds or should

00:00:16.080 | I do it in my calm, collected, and intellectually neutral voice, carefully presenting the good,

00:00:23.560 | the bad, and the ugly?

00:00:26.880 | What do you want?"

00:00:27.880 | Well, the responses were mixed, but in general, the voting was, "Give us the real version,

00:00:38.640 | but we're happy with angry."

00:00:40.000 | So I got a hot mic, a theme song, and a book to review.

00:00:43.440 | Let's see how this goes.

00:00:45.880 | You're going to find out with me.

00:01:04.240 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,

00:01:08.160 | skills, insight, and encouragement you need to live a rich and meaningful life now while

00:01:13.000 | building a plan for financial freedom in 10 years or less.

00:01:16.000 | My name is Joshua Sheets, and I am your host.

00:01:18.400 | And today, we review Tony Robbins' new financial book, Unshakeable, your financial freedom

00:01:23.680 | playbook, creating peace of mind in a world of volatility.

00:01:36.560 | Way back in episode 109 of Radical Personal Finance, I reviewed Tony Robbins' other money

00:01:44.240 | book called Money, Master of the Game, Seven Simple Steps to Financial Freedom.

00:01:48.800 | And that interview was pretty large and pretty epic.

00:01:51.960 | I called it a comprehensive review and critique of the book.

00:01:56.400 | And I think it was about three hours.

00:01:58.200 | Very popular show, but it was about three hours.

00:02:00.560 | And in that one, I went through the good, the bad, the ugly, all of it, and kind of

00:02:06.440 | demonstrated how the book was.

00:02:11.420 | And in many ways, Unshakeable is almost exactly like Money.

00:02:17.200 | In many ways, there are parallels between the content.

00:02:22.040 | Unshakeable references Money.

00:02:24.280 | He treats Money as a quicker version of the book.

00:02:32.920 | He creates Unshakeable as a quicker version of the Money book.

00:02:35.740 | He says in the beginning of the book, there are three reasons why he wanted to write this

00:02:39.140 | new book.

00:02:40.140 | Number one was to reach as many people as possible with a shorter book than Money, also

00:02:44.540 | because of seeing fear all around, and to show you how to avoid getting eaten by sharks.

00:02:50.900 | And so the books are complementary.

00:02:52.620 | Now today, I will not do a three-hour critique of this book.

00:02:55.740 | I don't think it's – it just doesn't merit it.

00:03:00.740 | I'm just going to do kind of a quick overview, tell you what I like about the book, also

00:03:05.300 | tell you what I don't like about the book.

00:03:08.920 | Details on all of that in just a moment.

00:03:10.420 | But first, sponsor of today's show is You Need a Budget, the budgeting software that

00:03:14.320 | I use.

00:03:15.320 | And one of my biggest disappointments with Tony's books is he focuses on the things

00:03:18.620 | that I think are mostly irrelevant to many people's financial lives.

00:03:23.900 | If we were to talk about the importance and the value of investing and having the most

00:03:29.580 | perfectly allocated portfolio versus the importance and value of budgeting, I think you got to

00:03:35.420 | start with the importance and value of budgeting.

00:03:38.180 | The portfolio is important but the portfolio is only important once you have a lot of money

00:03:42.100 | saved up.

00:03:43.540 | However, you'll never get there if you don't master budgeting.

00:03:47.340 | So let me try to set a stronger foundation for you by encouraging you to download a free

00:03:53.380 | 34-day trial of the YNAB You Need a Budget budgeting software.

00:03:57.460 | Do that at RadicalPersonalFinance.com/YNAB, again, RadicalPersonalFinance.com/YNAB, free

00:04:03.460 | 34-day trial of the beautiful budgeting software that the YNAB team has created.

00:04:10.620 | Really Jesse Mecham, the founder of YNAB, has created the most useful and powerful financial

00:04:15.580 | planning tool because it actually allows you to plan what to do with the money in your

00:04:21.020 | account, in your checking account.

00:04:22.900 | It solves the fundamental problem of budgeting which is not knowing how to allocate the money

00:04:27.260 | that's actually in your checking account.

00:04:28.740 | The way that most people approach budgeting is broken because they start with this perfect

00:04:32.980 | month and then they kind of make this the model sample month and they have no tracking

00:04:36.700 | mechanism.

00:04:37.700 | YNAB solves those problems.

00:04:40.140 | Best thing you can do for your financial health is to start, if you're not already using

00:04:43.740 | it, at RadicalPersonalFinance.com/YNAB, download the free trial, free 34-day trial, and in

00:04:49.900 | addition, take the free classes on how to use the software.

00:04:53.940 | The software is powerful but it's also a little bit unique and you'll want to learn how it

00:04:58.940 | works by taking all the free classes.

00:05:01.940 | Probably the best financial move you could make if you're not already using it, RadicalPersonalFinance.com/YNAB.

00:05:05.900 | All right, the book, Unshakeable.

00:05:10.300 | Big promise up front, your financial freedom playbook, creating peace of mind in a world

00:05:14.100 | of volatility.

00:05:15.100 | Let me just get straight to the opinion that I have of this book.

00:05:20.100 | The book is divided into three distinct parts, three sections.

00:05:23.620 | Section one is called Wealth, the Rulebook.

00:05:26.640 | Section two is the Unshakeable Playbook and section three is the Psychology of Wealth.

00:05:32.740 | Now perhaps unsurprisingly, Tony is better at different parts of this than others.

00:05:39.260 | I'd like to say the good, the bad, and the ugly but it starts the other way around.

00:05:42.820 | I'll call it the ugly, the bad, and the good.

00:05:45.380 | Section three, the Psychology of Wealth, is actually quite good because that's where Tony

00:05:50.620 | Robbins is a real expert.

00:05:52.500 | He seems to be that.

00:05:54.140 | Either he's an expert and it's very good or I just don't know enough about psychology

00:05:57.860 | to spot the flaws, which is very possible, where I do know enough about money and financial

00:06:02.800 | planning to spot the flaws.

00:06:04.300 | But the third section of the book is excellent, the Psychology of Wealth.

00:06:08.140 | In that, and let me lead with a strong, he talks about two chapters here, silencing the

00:06:12.460 | enemy within, six biggest mistakes that investors make and how to avoid them.

00:06:17.900 | Here they are.

00:06:18.900 | Mistake number one is seeking confirmation of your beliefs, why the best investors welcome

00:06:24.200 | opinions that contradict their own.

00:06:26.020 | This is something we're all guilty of.

00:06:28.340 | We like to engage in confirmation bias and find people that agree with us so that we

00:06:33.660 | feel really good about ourselves and feel really good about our opinions.

00:06:37.740 | Unfortunately, this is really bad as a practice if you want to learn and make progress.

00:06:43.700 | You have to ask harder questions.

00:06:46.220 | So it's good to always find people that disagree with you and listen to them and to their arguments.

00:06:51.220 | Mistake number two is mistaking recent events for ongoing trends, why most investors buy

00:06:56.260 | the wrong thing at exactly the wrong moment.

00:06:59.180 | Here he goes into the concept of recency bias.

00:07:01.940 | It's very easy for us to take our recent history and try to extrapolate that out and say, "Oh,

00:07:07.700 | hey, this is always going to be this way."

00:07:09.980 | And so one of the most important things you need to train yourself to do is to have a

00:07:12.740 | long-term time perspective, to recognize that seasons come and seasons go.

00:07:18.620 | If you're in the middle of a crisis, it won't always be this way.

00:07:21.780 | And if you're in the middle of a euphoric, phenomenal experience, it won't always be

00:07:26.080 | this way.

00:07:27.080 | And that applies without question to money and to investing.

00:07:31.100 | Mistake number three is overconfidence.

00:07:33.540 | Get real.

00:07:34.540 | We're trading our abilities and our knowledge as a recipe for disaster.

00:07:37.660 | No question this is absolutely true.

00:07:40.980 | We are so prone to overconfidence.

00:07:44.100 | And he makes a point here in his research that men are especially prone to overconfidence

00:07:49.540 | when it comes to investing.

00:07:51.240 | Men traded 45% more than women, reducing their net returns by 2.65% per year because of worse

00:07:59.260 | trading.

00:08:01.060 | That rings true to me based upon my experience.

00:08:05.020 | We have to be very careful to guard against overconfidence.

00:08:08.700 | One of the best ways, and the solution, get real, get honest, he applies that in terms

00:08:13.600 | of actually asking yourself, "Do you actually have a special advantage when it comes to

00:08:18.540 | investing?"

00:08:19.540 | The answer is probably not.

00:08:20.940 | I'll expand that to say one of the best ways to overcome the mistake of overconfidence

00:08:25.660 | is to get good data, is to get good data on your actual performance.

00:08:30.740 | Easier said than done.

00:08:32.160 | Mistake four is greed, gambling, and the quest for home runs.

00:08:35.140 | It's tempting to swing for the fences, but victory goes to the steady survivors.

00:08:39.820 | It's a marathon and not a sprint.

00:08:41.900 | And good investing absolutely is... you need to learn that when it comes to good investing.

00:08:49.120 | You really don't need Tony Robbins to tell you this if you're a Bible reader.

00:08:52.540 | King Solomon taught us that about 3,000 years ago when he, in the book of Proverbs, chapter

00:08:57.900 | 13, verse 11, King Solomon wrote, "Wealth gained hastily will dwindle, but whoever gathers

00:09:03.660 | little by little will increase it."

00:09:07.140 | Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.

00:09:12.580 | So no question, it's a marathon and not a sprint.

00:09:15.420 | And it's very important to focus on steady growth, a concept we consistently talk about

00:09:22.380 | here on the show.

00:09:24.200 | Mistake number five, staying home.

00:09:25.400 | It's a big world out there.

00:09:26.540 | So how come most investors stay so close to home?

00:09:30.460 | Here at mistake five, Tony's just talking about the...

00:09:34.820 | There's a name that the investment psychologists use for this, familiarity bias or something

00:09:39.940 | like that, where we usually think that if you're a US American listener, the United

00:09:44.200 | States of America is the best place in the world to invest.

00:09:46.660 | We usually look to buy real estate right next door to us instead of being willing to look

00:09:52.360 | in a town across the state or another state or another country.

00:09:56.520 | And so the solution here is to expand your horizons and have a broader perspective.

00:10:01.940 | Mistake number six, negativity and loss aversion.

00:10:05.180 | Your brain wants you to be fearful in times of turmoil.

00:10:08.220 | Don't listen to it.

00:10:09.560 | And here the advice is, if you're prepared for times of turmoil, then you can be ready

00:10:14.800 | to shop.

00:10:15.800 | And this really is so valuable.

00:10:17.840 | If you've done your homework on the market that you're in, you can approach, especially...

00:10:22.780 | Let me rephrase.

00:10:23.780 | If you've done your homework on the market that you're in, and if you've prepared for

00:10:28.180 | disaster in your own personal life, in your own personal finances, then at that point

00:10:33.740 | in time, you can position yourself to be greedy when others are fearful instead of being fearful

00:10:40.980 | when everyone else is fearful.

00:10:43.120 | And that's something that you can teach yourself to do.

00:10:46.260 | No question.

00:10:47.260 | In chapter nine, Real Wealth talks about the importance of simply recognizing the gratitude

00:10:52.380 | of life.

00:10:53.380 | And so frankly, this third section of Tony's book is good.

00:10:57.380 | It's pretty good.

00:10:58.700 | Good stuff in here.

00:10:59.700 | Good.

00:11:00.700 | I like the mistakes and I like the solutions.

00:11:02.780 | So that is the good.

00:11:04.420 | Flipping back to the middle section, section two, here's what he calls the unshakable playbook.

00:11:09.500 | He gives four...

00:11:10.500 | He gives what he calls the core four, four principles that can help guide every investment

00:11:15.160 | decision that you make.

00:11:17.020 | Now, let me give you these four principles.

00:11:20.040 | These principles are useful in concept and incoherent in application.

00:11:27.460 | Core principle one is don't lose.

00:11:30.700 | Here of course, referring to the most famous of ideas that rule number one with money is

00:11:36.940 | not losing money.

00:11:38.340 | And he very much focuses on...

00:11:41.820 | But the best investors are obsessed with avoiding losses.

00:11:44.860 | Why?

00:11:45.860 | Because they understand a simple but profound fact.

00:11:47.500 | The more money you lose, the harder it is to get back to where you started.

00:11:50.980 | So without question, this is an important one to focus on.

00:11:54.500 | Core principle number one, don't lose.

00:11:56.460 | The reason this is incoherent is nowhere in the book are we taught how to avoid losing

00:12:02.740 | money.

00:12:03.740 | On the next page, page 98, Tony writes, "But in practical terms, how can you actually avoid

00:12:07.980 | losing money?"

00:12:08.980 | Well, for a start, it's important to recognize that financial markets are wildly unpredictable.

00:12:14.420 | The most successful investors recognize that none of us can consistently predict what the

00:12:18.540 | future holds.

00:12:19.540 | With that in mind, they always guard against the risk of unexpected events and the risk

00:12:23.180 | that they themselves can be wrong regardless of how smart they are.

00:12:26.580 | And basically here he talks about how asset allocation is a guarding against being wrong.

00:12:31.700 | So don't lose money is a really nice concept.

00:12:34.420 | I love it as a concept.

00:12:36.060 | But practically speaking, you can have a great asset allocation plan and all that means is

00:12:40.240 | you lose money in some corners of your portfolio and not in others.

00:12:43.940 | So big idea, big principle, incoherent in application and nowhere in the book are we

00:12:48.780 | taught how to actually do this.

00:12:52.260 | Core principle number two, asymmetric risk and reward.

00:12:56.500 | According to conventional wisdom, you need to take big risks to achieve big returns.

00:13:00.260 | But the best investors don't fall for this high risk, high return myth.

00:13:04.220 | Instead, they hunt for investment opportunities that offer what they call asymmetric risk

00:13:09.460 | and reward.

00:13:10.460 | A fancy way of saying that the rewards should vastly outweigh the risks.

00:13:14.620 | In other words, these winning investors always seek to risk as little as possible to make

00:13:18.120 | as much as possible.

00:13:19.940 | That's the investors equivalent of nirvana.

00:13:22.260 | Now I love this idea.

00:13:24.060 | I love the idea of asymmetric risk and I love the idea of reducing risk across the board.

00:13:31.420 | But once again, incoherent in that there's no application given that can actually be

00:13:35.740 | applied to you and me as an individual.

00:13:38.380 | And here's where I'll get to, let me just air here, one of my biggest complaints about

00:13:43.660 | this whole book.

00:13:45.660 | These concepts are great.

00:13:48.180 | They're not well suited to the stock market.

00:13:51.300 | And this book is in essence a sales pitch for utilizing Tony's company services to help

00:13:58.140 | you invest your stocks.

00:14:01.700 | And I'll get to that in a moment because that's section one.

00:14:05.780 | These principles are so great, but they're incoherent because they're trying to be applied

00:14:10.700 | to the stock market.

00:14:12.580 | And there's no possible way that you and I as individuals are going to get an asymmetric

00:14:17.220 | risk and reward as individual investors in index funds.

00:14:21.700 | You know the person who gets the asymmetric risk and reward?

00:14:25.340 | The financial manager.

00:14:27.660 | The person who runs the portfolio.

00:14:29.840 | When I handled portfolios before, I got an asymmetric risk and reward.

00:14:34.700 | I would get paid fees based upon the management of client assets.

00:14:39.660 | I had no risk because it wasn't my money, but I had an asymmetric potential for reward

00:14:45.500 | in the fact that I was able to gain from the growth of my client's portfolios.

00:14:55.980 | That's how you get asymmetric risk and reward.

00:14:59.020 | You don't get it from buying index funds.

00:15:01.660 | It doesn't happen.

00:15:03.780 | You get it from writing books to get people to buy index funds.

00:15:06.580 | And we'll get to the brilliance of Tony here in his book in a moment.

00:15:10.900 | Core principle number three, tax efficiency.

00:15:13.980 | As we discussed earlier, taxes can easily wipe out 30% or more of your investment returns

00:15:18.200 | if you're not careful.

00:15:19.200 | Yet, mutual fund companies love to tout their pre-tax returns, obscuring the reality that

00:15:25.100 | there's only one number that truly matters, the net amount that you actually get to keep.

00:15:32.060 | Now, without question, tax efficiency is massively important.

00:15:37.660 | And tax efficiency in your investments is massively important.

00:15:42.680 | And tax efficiency of index funds is an incredible advantage that they have over active funds.

00:15:50.680 | But this paragraph illustrates everything that makes me so angry about this book.

00:15:56.620 | It's the conflation of two ideas that are not logically connected.

00:16:01.180 | This is – I am more and more convinced that if you want to study anything and if we want

00:16:06.140 | to teach our children anything, one of the most important things to do is to teach our

00:16:12.100 | children logic and to teach the study of logic.

00:16:16.420 | Because if you study logic and you just study – and it doesn't take a lot.

00:16:19.340 | Just memorize and learn a dozen or two dozen logical fallacies and start to look for them

00:16:24.940 | and you'll see them everywhere.

00:16:26.240 | Because this paragraph right here with regard to tax efficiency is a classic – in my opinion,

00:16:33.340 | a classic definition of a non sequitur, the non sequitur logical fallacy.

00:16:38.300 | Non sequitur means I think does not follow literally in the Latin – the Latin definition

00:16:43.400 | doesn't follow.

00:16:45.160 | And a non sequitur is an inference that does not follow from the premises where – or

00:16:52.100 | a statement that does not follow logically from or is not clearly related to anything

00:16:56.560 | previously said.

00:16:57.960 | And I'll give you some more just horrifying examples of that in this book.

00:17:01.580 | But just right here as I'm trying to get through the simplest of principles, we have

00:17:05.100 | to tackle it.

00:17:06.380 | As we discussed earlier, taxes can easily wipe out 30% or more of your investment returns

00:17:10.720 | if you're not careful.

00:17:12.100 | Stop.

00:17:13.100 | Is that true?

00:17:14.100 | Yes, it is.

00:17:16.980 | That's an easily true statement.

00:17:18.380 | That's a valid and true premise.

00:17:20.520 | Yet mutual fund companies love to tout their pre-tax returns.

00:17:24.660 | Stop.

00:17:25.860 | Does that relate to the 30% – to the 30% statement before that?

00:17:33.280 | The point that he's trying to allege here is that because index funds are more tax efficient,

00:17:39.900 | because the portfolio managers don't trade the portfolio as quickly and when you're

00:17:46.700 | managing a mutual fund portfolio, anytime you trade a stock, you buy or sell, you're

00:17:51.220 | going to incur taxation on a gain or you're going to recognize a loss which can offset

00:17:55.880 | some of your other gains.

00:17:57.320 | But you realize taxes when you sell and mutual funds don't sell as much because there are

00:18:06.060 | far fewer fundamental transactions in the portfolio.

00:18:11.060 | So that's the point that he's trying to make.

00:18:13.460 | But you're supposed to infer from that that this is all a game, that mutual fund companies

00:18:18.380 | love to tout their pre-tax returns in order to, as he continues, have the effect of obscuring

00:18:26.220 | the reality that there's only one number that truly matters, the net amount that you

00:18:30.180 | actually get to keep.

00:18:32.960 | That is a silly, silly inference to draw.

00:18:37.920 | The reason that mutual fund companies tout their pre-tax returns is because mutual fund

00:18:45.860 | companies are pass-through organizations which don't pay taxes at the entity level.

00:18:52.940 | The individual investor pays taxes on their profits and it's the individual investor's

00:18:58.460 | tax rates and tax decisions that will affect what the actual level of taxation is, thus

00:19:04.780 | affecting the actual returns of the portfolio.

00:19:10.540 | That's the fundamental truth.

00:19:11.980 | So how on earth could a mutual fund company give their post-tax returns when they don't

00:19:18.420 | pay taxes at the entity level, when the taxes are pass-through?

00:19:23.300 | They charge a management fee.

00:19:25.040 | The individual organizers and managers of the fund pay taxes.

00:19:28.740 | But the fund itself does not pay tax at the entity level.

00:19:33.340 | That's why you report taxes on a pre-tax basis.

00:19:38.700 | It's exactly the same thing.

00:19:39.980 | Think about this.

00:19:41.580 | Salaries.

00:19:43.460 | If you go and you're applying for a job and job A offers you $100,000 per year salary

00:19:51.500 | and job B offers you a $200,000 a year salary, are they trying to hide the amount of money

00:19:57.980 | that you're going to pay on taxes or are they using the only basis of comp comparison that

00:20:02.880 | they can use to offer you the job?

00:20:06.940 | They don't know how much you're going to pay in taxes.

00:20:09.180 | They don't know what your deductions are, what your credits are.

00:20:11.420 | They don't know your other income.

00:20:13.420 | They don't know how much unearned income you have.

00:20:15.660 | There's no possible way that an employer can say, "Well, we're going to offer you here

00:20:19.900 | an $82,000 per year post-tax salary."

00:20:23.580 | And the other employer can say, "I'm actually going to offer you $147,000 per year post-tax

00:20:28.520 | salary because I've calculated your state and federal income taxes."

00:20:32.380 | This is stupid.

00:20:33.720 | This is utterly stupid.

00:20:35.220 | It's trying to find malice in an area where there's not.

00:20:39.140 | Now, if I'm wrong, I'm wrong, but I can't find any way that I am.

00:20:42.560 | You prove me wrong if I'm being too strong in my allegation.

00:20:46.200 | But this is a non sequitur.

00:20:47.500 | This is a logical fallacy.

00:20:49.100 | This is the connection of two things that are not fundamental related.

00:20:53.620 | There's not a causative relationship here and you can't prove from the fact that mutual

00:20:57.660 | fund companies advertise pre-tax returns, you can't prove that there's malice and malintent

00:21:03.260 | in their heart any more than you can prove that two employers who are publicizing pre-tax

00:21:08.540 | incomes for you are trying to rip you off somehow.

00:21:13.020 | Core principle number four, diversification.

00:21:15.300 | The fourth and final principle in the core four is perhaps the most obvious and fundamental

00:21:19.220 | of all, diversification.

00:21:21.540 | In its essence, it's what almost everyone knows.

00:21:24.380 | Don't put all your eggs in one basket.

00:21:26.580 | But there's a difference between knowing what to do and actually doing what you know.

00:21:31.220 | As Princeton professor Burton Malkiel told me, there are four important ways to diversify

00:21:35.300 | effectively.

00:21:36.300 | One, diversify across asset classes.

00:21:38.580 | Two, diversify within asset classes.

00:21:40.740 | Three, diversify across markets, countries, and currencies around the world.

00:21:44.740 | Four, diversify across time.

00:21:47.980 | Now, is there anything wrong with that?

00:21:51.220 | No.

00:21:52.220 | Diversification is a fundamentally valuable principle.

00:21:55.160 | It is crucial to the management, the excellent management of a portfolio.

00:21:59.740 | You've got to diversify your portfolio.

00:22:02.860 | But the reason why this angers me is because the entire section one was talking about stocks

00:22:10.140 | and there was no mention of diversification.

00:22:12.500 | Rather, all of the data that's presented is about stocks.

00:22:15.940 | All of the data is about basically the US market.

00:22:18.980 | All of the graphs are of the Dow Jones Industrial Average and the returns of the S&P 500.

00:22:24.420 | You throw an entire wrench into section one when all of a sudden in section two you start

00:22:28.080 | talking about diversification.

00:22:30.080 | Now all of a sudden when you were talking about having a 0.05% expense ratio on a Vanguard

00:22:35.580 | massive stock index fund in the US stock market, you get all destroyed when all of a sudden

00:22:41.020 | you have to start calculating expense ratios on a bond fund, indexed or not.

00:22:46.300 | All of the arguments about how obvious it was that everybody should buy index funds

00:22:52.460 | completely fall apart when you start talking about bond funds and you try to figure out

00:22:57.860 | bond index funds and is there a value in an actively managed bond fund versus a passively

00:23:02.660 | managed bond fund.

00:23:04.060 | And the argument is not nearly as strong, but we're just going to skip that whole thing.

00:23:07.740 | Or what about real estate?

00:23:08.740 | How do you diversify into real estate but still do it with a 0.05% expense ratio?

00:23:14.720 | So once again, incoherent.

00:23:16.460 | It's a good principle, it's valuable, but it came after section one.

00:23:22.500 | Now let's go to the ugly.

00:23:24.460 | Section one is, when I got to the end of it, a few pages in I was angry and then when I

00:23:29.900 | got to the end of it I was very close not being able to finish the book.

00:23:34.940 | It's a rare book that I don't finish.

00:23:37.260 | I'm good at finishing books that I don't like.

00:23:40.620 | But in this case, and I'm glad I did finish it because section three was good.

00:23:45.440 | Section one is very frustrating.

00:23:47.940 | He gives here a few basic things.

00:23:51.580 | There are five chapters in section one.

00:23:53.140 | Section one is, chapter one is unshakable power and peace of mind in a world of uncertainty.

00:23:59.660 | Chapter two, winter is coming, but when?

00:24:02.140 | These seven facts will free you from the fear of corrections and crashes.

00:24:07.540 | Chapter three, hidden fees and half-truths.

00:24:09.860 | How Wall Street fools you into overpaying for underperformance.

00:24:13.620 | Chapter four, rescuing our retirement plans.

00:24:15.980 | What your 401k provider doesn't want you to know.

00:24:18.780 | And chapter five, who can you really trust?

00:24:21.460 | Pulling back the curtain on the tricks of the trade.

00:24:25.700 | So let's talk about these chapters because the simplest way for me to do it is to give

00:24:29.700 | you my chapter titles.

00:24:32.620 | Chapter one, unshakable.

00:24:34.580 | There are problems and the financial industry is the problem and you the investor of the

00:24:38.860 | problem, but we can solve it if you'll keep reading.

00:24:41.740 | I wasn't very angry with chapter one, although I was a little bit, which we'll get to in

00:24:46.460 | a moment.

00:24:47.460 | But there are, that's my chapter one.

00:24:50.980 | Chapter two, winter is coming, but when?

00:24:53.340 | AKA, let me sell you that you should invest in stocks even though they're very volatile.

00:24:58.420 | Let me sell you on the idea that you should invest in stocks even though they're very

00:25:01.860 | volatile.

00:25:04.100 | Chapter three, hidden fees and half-truths.

00:25:05.920 | My version.

00:25:07.840 | Chapter three, let me sell you on the fact that you should only ever invest in index

00:25:11.900 | funds, not in actively traded funds.

00:25:15.600 | Chapter four, by the way, nothing wrong with that, but that's an accurately titled chapter.

00:25:21.860 | Chapter four, rescuing our retirement plans.

00:25:24.160 | Let me sell you on the fact that you should use America's Best 401k, which is a company

00:25:30.740 | that I'm a financial partner in and it's the best company for you to use for your manager

00:25:35.220 | 401k.

00:25:37.120 | Chapter five, who can you really trust?

00:25:39.180 | My title.

00:25:40.220 | Chapter five, let me sell you on the fact that you should use my company, Creative Planning,

00:25:45.460 | for your personal investment portfolio management, because that's what's sold in each of these

00:25:51.220 | chapters.

00:25:53.540 | There is nothing wrong with that sale.

00:25:58.300 | I am slightly envious of Tony Robbins, a marketing genius, because if I still owned a financial

00:26:08.460 | planning firm, he is doing exactly what I would do.

00:26:13.700 | The thing that made me so angry when I was a licensed financial advisor was that so many

00:26:18.460 | other people seemed to be able to create good marketing programs that brought clients to

00:26:23.260 | the door.

00:26:24.460 | But my industry was stuck in this model from 1947 where you pick up the phone and you randomly

00:26:29.740 | call people constantly and you don't have any way to make them come to you.

00:26:34.900 | I studied the world of marketing.

00:26:36.740 | I studied the world of direct marketing and I said, "Look, this can be done completely

00:26:40.340 | differently.

00:26:41.340 | Why am I spending time, my time, my hours, sitting here in a system that was built 60

00:26:49.300 | years ago, wasting time individually reaching out to individuals?

00:26:53.100 | Why don't I build a marketing machine that does the work for me?"

00:26:59.460 | I saw other people doing it.

00:27:03.180 | I saw so many other people doing it, but I wasn't allowed to do it.

00:27:07.740 | That drove me nuts.

00:27:09.700 | I don't think there's anything wrong with either of the approaches.

00:27:11.980 | I have nothing but respect for Tony and I think this book is a brilliant business move.

00:27:20.300 | It's very possible that someday I will copy exactly what he's done with it because what

00:27:26.460 | he's done has been absolutely brilliant from a business perspective.

00:27:33.260 | Absolutely brilliant.

00:27:34.260 | I hope this is not creating cognitive dissonance for you because I admire it.

00:27:37.500 | I'm just giving you a review of the book.

00:27:39.380 | Just because it's a brilliant business move doesn't mean that I think it's a great financial

00:27:42.820 | book.

00:27:43.820 | Now, more reasons on why I don't think it's a great financial book in a moment, but that's

00:27:49.980 | what this is.

00:27:50.980 | This book is a 220-ish page brochure for his various financial planning firms, the ones

00:28:01.140 | that he's a partner in.

00:28:03.260 | That doesn't make it bad, but just that you need to know what it is.

00:28:08.180 | In many ways, you could compare this to the mutual fund brochures that are published by

00:28:14.820 | the various mutual fund companies.

00:28:17.620 | Ideally mutual fund brochures are educational pieces.

00:28:21.140 | I used to like some of these when I was an advisor.

00:28:23.580 | When I was an advisor, the wholesalers come, the mutual fund salespeople, they're called

00:28:27.260 | wholesalers.

00:28:28.260 | They wholesale the funds to the advisors.

00:28:29.900 | They would come and they give the brochures.

00:28:31.540 | These brochures are very, very valuable because they teach clients a lot of valuable information.

00:28:37.020 | For example, some of the charts that he uses in here, he uses in the middle of the book,

00:28:42.140 | he talks about how the damage if you missed out on some of the best days in the market,

00:28:48.740 | how bad your returns are if you just miss out on the top 10 days.

00:28:53.900 | It's pretty sobering.

00:28:58.340 | The S&P 500 index, the data set here is the index annualized total return from 1996 to

00:29:05.700 | 2015 from the Schwab Center for Financial Research.

00:29:11.860 | The S&P 500 index returned during that 20-year time period from '96 to 2015, 8.2%.

00:29:21.220 | But if you weren't invested on the 10 top days of the market, that return dropped to

00:29:26.180 | 4.5% showing how bunched the returns are, especially the positive returns.

00:29:32.180 | If you weren't invested on the top 20 days, your 8.2% return drops to 2.1%.

00:29:38.500 | If you missed the top 30 days, your 8.2% return dropped to 0.0%.

00:29:46.220 | If you missed the top 40 days in the market, only 40 days out of a 20-year time period,

00:29:51.100 | your 8.2% positive return dropped to a negative 2% return.

00:29:56.900 | Now obviously, no investor is ever actually going to hit that number because who sells

00:30:02.820 | on day one, misses the next day, and then buys back in on day three.

00:30:07.020 | This is silly.

00:30:08.020 | It's a dynamic exercise to prove a point that the returns in mutual fund and in stock market

00:30:12.380 | investing are bunched.

00:30:13.860 | But this exact same chart used to appear in the brochures that I would use for various

00:30:18.000 | mutual funds to display them to clients.

00:30:20.140 | I would use them as teaching tools to try to teach these exact concepts.

00:30:24.420 | And what Tony has done in the sales process here is exactly the sales process that I used

00:30:30.460 | to do for my individual clients.

00:30:32.540 | It's fantastic.

00:30:34.260 | The man is a master of psychology.

00:30:36.220 | He's so good.

00:30:37.220 | Chapter 1, Unshakeable, is all about getting you to visualize what you want, which is financial

00:30:43.020 | security and financial freedom, but then to also bring in and cause you a sense of concern

00:30:48.720 | over what you might not know.

00:30:50.460 | And the fact is there are big dangers, and I can help you with that.

00:30:53.920 | Number two is to sell on the idea of stocks, even though they're very volatile.

00:30:57.340 | I've done that sales presentation so many times using the same data and the same approaches

00:31:01.060 | that he uses here.

00:31:02.660 | Section three, hidden fees and half-truths.

00:31:05.580 | Talk about the problems.

00:31:06.840 | This is where you get into differentiation.

00:31:09.300 | This is exactly what a financial advisor needs to do, is talk about why you're different.

00:31:14.780 | When I closed my previous firm, I filed paperwork to start and set up my own RIA, Registered

00:31:20.660 | Investment Advisory firm.

00:31:21.900 | I never actually got it distributed because Radical Personal Finance started to experience

00:31:25.460 | success, and I realized I couldn't do both well at that time.

00:31:27.980 | I may do it in the future.

00:31:29.180 | You never know.

00:31:30.180 | But I couldn't do it well at that time, and so I shuttered it.

00:31:33.940 | And my plan was I was going to be a fee-only advisor of fiduciary, which is what he sells

00:31:43.100 | in chapter five, Who Can You Really Trust?

00:31:45.300 | And I would have sold my clients on why you should work with me as a fee-only fiduciary,

00:31:49.560 | what the benefit was.

00:31:50.560 | My firm was called Fiduciary Financial Consulting, for crying out loud.

00:31:54.200 | And then I would have – in that term, I had decided to use a DFA, Dimensional Fund

00:31:59.400 | Advisors platform, which is exclusively index funds with a slight difference from the standard

00:32:06.080 | Vanguard approach.

00:32:07.560 | And so I would have sold my clients on why they should invest using index funds in that

00:32:11.880 | particular situation.

00:32:13.360 | I didn't have any plans to work with – his chapter four is about America's Best 401(k).

00:32:18.480 | I didn't have any plans to work with specific retirement plans.

00:32:25.720 | But who knows?

00:32:26.720 | Maybe one time and I would have found a provider to work with as well.

00:32:30.680 | So my hat's off to him.

00:32:31.840 | It's a great brochure.

00:32:33.840 | But you as a reader need to know this is a brochure.

00:32:36.440 | Now if you aren't familiar with reading mutual fund brochures, you probably should

00:32:39.600 | read a book like this.

00:32:40.600 | And I think there will be a lot of good that comes out of this book.

00:32:44.280 | I really do.

00:32:45.400 | Because Tony has such a massive footprint.

00:32:47.420 | He gets people excited about reading books on money, which is fantastic.

00:32:51.320 | We need lots and lots of people to read books on personal finance.

00:32:55.280 | And he's very good.

00:32:57.120 | All the information is really good.

00:32:59.120 | I don't have any problem with any of the data or the facts or even the conclusions

00:33:03.080 | that he draws in this entire book.

00:33:05.200 | I have very few quibbles.

00:33:07.580 | My quibbles are about style.

00:33:10.040 | And that's what I want to teach you now in terms of how you obfuscate the truth.

00:33:14.520 | Just like I'm doing using a word like obfuscate.

00:33:16.540 | You conceal things and you make allegations and you commit logical fallacies because of

00:33:24.260 | – just you don't tell the other side.

00:33:28.500 | Now I don't accuse the author of malice.

00:33:31.220 | I think he's got a good heart.

00:33:33.060 | He wants to help people.

00:33:35.660 | But maybe it's malice and incompetence.

00:33:38.820 | As he says, it's possible to be sincere and to be sincerely wrong.

00:33:44.540 | And again, he's not wrong.

00:33:46.340 | Tony Robbins has great advisors.

00:33:47.700 | He's got great people.

00:33:49.500 | I don't think he's wrong.

00:33:50.740 | I just think I hate this like twisted presentation of stuff.

00:33:55.300 | Let me give you an example.

00:33:56.300 | From page 13, reading here – and let me start on page 12.

00:34:03.020 | Avoid the Sharks is the title here.

00:34:05.460 | And you need to know.

00:34:07.580 | It's possible that I have still a continuing bias because I've come from the financial

00:34:12.940 | advisor industry and I have spent so many years getting dumped on.

00:34:16.500 | It's possible that I'm a little bit more sensitive than the average person to this

00:34:21.500 | stuff because it's a very hard industry to work in ethically and uprightly.

00:34:26.780 | So you should know that about me.

00:34:28.740 | I think that probably does affect me.

00:34:30.660 | But it just does make me very sensitive to make sure that the information is presented

00:34:34.620 | accurately as I understand accuracy.

00:34:37.740 | My third reason for writing this book is that I want to show you how to avoid getting eaten

00:34:41.300 | by sharks.

00:34:42.940 | Stop.

00:34:44.300 | Psychological technique.

00:34:45.300 | What has he just done?

00:34:47.500 | He's labeled his opponent as a shark, which is something that inspires fear.

00:34:54.400 | He didn't say, "My third reason for writing this book is that I want to show you how to

00:34:58.260 | save money and be careful in case you meet an unscrupulous and unethical financial advisor."

00:35:02.580 | No.

00:35:03.580 | He said, "My third reason for writing this book is that I want to show you how to avoid

00:35:06.540 | getting eaten by sharks."

00:35:07.980 | Fair.

00:35:08.980 | Okay?

00:35:09.980 | I'm not using psychologically strong language.

00:35:11.260 | I'm doing the same thing right now by using an emotive, emotionally engaged, intense form

00:35:16.340 | of communication here where I'm emotionally engaged in my speech.

00:35:20.020 | No problem.

00:35:21.020 | Just recognize it for what it is.

00:35:22.700 | If you're reading a book like this, you should write, "Emotional attack," blah, blah, blah,

00:35:27.340 | labeling your opponent.

00:35:28.780 | As we'll discuss later, one of the biggest obstacles to achieving financial success is

00:35:32.020 | the difficulty of figuring out who you can and cannot trust.

00:35:36.860 | True statement.

00:35:37.860 | "There are plenty of fantastic human beings working in the financial field, people who

00:35:42.460 | always remember their mom's birthday, who are kind to dogs, and who have impeccable

00:35:47.060 | personal hygiene."

00:35:48.180 | Stop.

00:35:49.380 | Does any of that have to do with the fact that they're working in the financial field?

00:35:52.820 | No.

00:35:53.820 | An accurate statement would be an accurate charitable, magnanimous statement that seeks

00:35:59.640 | to be conciliatory and give as much benefit to the doubt as possible would be this.

00:36:04.060 | "There are plenty of fantastic human beings working in the financial field who are hardworking,

00:36:08.900 | knowledgeable, and care deeply about their client's best interests."

00:36:13.020 | But no, the allegation here is they care about their mom's birthday, they're kind to dogs,

00:36:16.220 | and have great hygiene.

00:36:17.220 | "But they're not necessarily looking out for your best interests."

00:36:21.140 | True statement.

00:36:22.660 | Most people who you think are providing unbiased financial, in scare quotes, "advice" are actually

00:36:30.360 | brokers, even if they prefer to go by other titles.

00:36:35.620 | Stop.

00:36:36.620 | Is that true?

00:36:40.180 | I don't know whether the first part of that statement is true.

00:36:43.420 | Most people who you think are providing unbiased financial advice, I don't know that any of

00:36:47.220 | us can provide unbiased financial advice.

00:36:48.900 | I don't think it's possible.

00:36:50.900 | But I'm happy to allow and be generous and say, "Okay, this is a true statement."

00:36:56.040 | People are actually brokers, even if they prefer to go by other titles.

00:36:59.060 | That is true.

00:37:00.140 | The majority, the vast majority of financial advisors are indeed brokers.

00:37:06.860 | Continuing on.

00:37:07.860 | "They make hefty commissions by selling products, whether it's stocks, bonds, mutual funds,

00:37:15.820 | retirement accounts, insurance, or whatever else might pay for their next trip to the

00:37:21.820 | Bahamas."

00:37:27.100 | The big question here is that somebody's selling whatever they want in order to make their

00:37:30.220 | next trip to the Bahamas.

00:37:31.220 | We're going to come back to that list in a moment.

00:37:33.620 | Next sentence.

00:37:34.620 | "As you'll soon learn, only a tiny subset of advisors is legally required to put your

00:37:41.460 | best interests ahead of its own."

00:37:44.340 | That, again, is a textbook non sequitur.

00:37:52.500 | Statement one is, "They make hefty commissions by selling products, whether it's stocks,

00:37:56.180 | bonds, mutual funds, retirement accounts, insurance, or whatever else might pay for

00:37:59.140 | their next trip to the Bahamas."

00:38:00.820 | That is true.

00:38:01.820 | "As you'll soon learn, only a tiny subset of advisors is legally required to put your

00:38:05.520 | best interests ahead of its own."

00:38:07.140 | That's also true, but these statements do not necessarily connect because a fiduciary

00:38:13.700 | advisor who is legally required to put your best interests ahead of its own also sells

00:38:19.260 | stocks, bonds, and mutual funds.

00:38:21.580 | It's just that they have a different compensation structure that allows them to be compensated

00:38:27.380 | in the form of fees rather than in the form of commissions.

00:38:31.540 | And also a fiduciary advisor also takes trips to the Bahamas which are paid for from the

00:38:38.980 | fees that they earn from their financial planning clients.

00:38:42.580 | So once again, this is all shell games.

00:38:47.500 | But by association rather than any kind of actual evidence presenting something that

00:38:52.260 | says, "Here's the number of people that were ripped off.

00:38:54.700 | Let's talk about that.

00:38:55.700 | That would be a good thing to do."

00:38:57.860 | After writing Money Master the Game, I saw once again how easy it is to get fooled by

00:39:00.980 | Wall Street.

00:39:01.980 | Peter Malik, a certified financial planner and attorney whom I respect tremendously,

00:39:06.980 | arranged a meeting with me to share what he cryptically described as "some crucial information."

00:39:12.900 | Okay, what's the crucial information?

00:39:17.460 | Let's continue on.

00:39:18.940 | The investment magazine Barron's rated Peter and his company Creative Planning the number

00:39:24.060 | one independent financial advisor in America in 2013, 2014, and 2015, while Forbes named

00:39:31.140 | it the top investment advisor in the United States in 2016 based on 10-year growth, and

00:39:35.900 | CNBC ranked it as the number one U.S. wealth management firm in 2014 and 2015.

00:39:42.380 | That's a big mouthful, isn't it?

00:39:45.060 | Does it have anything to do with the cryptic and crucial information?

00:39:48.260 | No, but it is an appeal to authority, another logical fallacy.

00:39:53.400 | The idea is because of somebody's authority, this is why we should listen to them.

00:39:57.420 | Now here's – I don't think there's anything wrong with that.

00:39:59.980 | I'm a certified – I'm a – I have to say I'm a certified financial planner.

00:40:04.200 | My license – my certified financial planner – because I didn't finish my CE this year

00:40:08.620 | and so I need to catch up and reinstate it.

00:40:11.020 | I was formerly a certified financial planner, Chartered Life Underwriter, Chartered Financial

00:40:14.840 | Consultant, blah, blah, blah, blah, blah.

00:40:17.060 | What does that mean?

00:40:18.060 | Well, that means that I have some knowledge that's applicable to the subject matter at

00:40:23.820 | hand.

00:40:24.820 | But the fact that Peter's company is highly ranked by Barron's and Forbes doesn't have

00:40:29.220 | anything to do with the crucial information.

00:40:31.020 | Thus, it's a fallacious appeal to authority, not a proper appeal to authority.

00:40:38.420 | For example, if you need coaching on how to manage a football team and Bill Belichick

00:40:46.600 | is brought to you, somebody will introduce him to say, "This is Coach Bill Belichick.

00:40:51.240 | He is a winning coach who has won however many Super Bowls and has a huge, tremendous,

00:40:58.440 | incredible winning record with football.

00:41:01.400 | I have no idea.

00:41:02.400 | I don't watch – I don't care about – I don't watch sports.

00:41:04.520 | He's a good coach, right?"

00:41:05.960 | So there you have – the authority is connected to the task at hand and you need help on coaching

00:41:11.260 | on how to win a football game with regard to how to coach a team.

00:41:17.060 | Now if somebody brings you and says, "Here, Robert Kraft is the owner of the New England

00:41:21.700 | Patriots which has won all these Super Bowls," well, Robert Kraft might be able to give you

00:41:30.220 | good advice and help on how to run a team, how to work with a head coach, but he's probably

00:41:37.180 | not the person that you want to give advice to you in your actual management of the football

00:41:43.840 | game.

00:41:44.840 | So that's what you got to look out for.

00:41:46.100 | When somebody is trying to establish authority, is the authority relevant to the question

00:41:50.100 | being asked?

00:41:52.380 | And here, the authority credentials which are bolded about how successful his company

00:41:56.600 | is, all these things mean that he's had a tremendously successful company.

00:42:02.020 | That's great.

00:42:03.060 | But guess what?

00:42:04.580 | Merrill Lynch beats the pants off of him in terms of size.

00:42:09.940 | Morgan Stanley or whatever it's called now – it's still Morgan Stanley, right?

00:42:12.660 | They beat the pants off of him in terms of the size of their company.

00:42:16.380 | Bank of America is way bigger.

00:42:18.580 | So the appeal to authority here is fallacious because the fact is he's trying to paint

00:42:23.300 | him as a great guy, but on those terms, the CEO of Bank of America is a far more important

00:42:29.740 | person to listen to.

00:42:32.540 | Continuing on, "When someone with Peter's expertise and reputation reaches out to me,

00:42:36.340 | I know that I'll learn something of real value.

00:42:39.020 | Peter flew specially from his home in Kansas to meet me in Los Angeles where I was conducting

00:42:44.020 | an Unleash the Power Within event."

00:42:45.820 | OK, this is normal.

00:42:48.580 | When I want to meet someone, I fly across the country to meet them.

00:42:52.060 | This is common, especially when you're Tony Robbins.

00:42:54.980 | I'll get on the plane tomorrow to do a business deal with you and I'll pay for it myself.

00:42:59.100 | You don't have to fly me there.

00:43:00.940 | Of course, that's normal.

00:43:02.300 | "It was there that he dropped the bomb, explaining how some 'financial advisors'

00:43:11.060 | who market themselves as straight shooters were actually exploiting a gray area in the

00:43:17.580 | law to sell products that benefited themselves.

00:43:21.280 | They claim to be fiduciaries, a small minority of advisors who are legally obligated to put

00:43:26.860 | their clients' interests first.

00:43:29.220 | In reality, they were unscrupulous salespeople who profited by misrepresenting themselves."

00:43:36.300 | Now, I worked as a professional financial advisor for six years and for the last going

00:43:42.100 | on 10 years to nine years, I've been in the financial advice industry.

00:43:46.660 | The last four years, three years as a pundit, kind of a public commentator, I guess, and

00:43:53.820 | six years as an advisor.

00:43:54.820 | I had no idea what he's talking about.

00:43:57.700 | I had no idea what he was talking about.

00:43:59.980 | I put this out on Twitter.

00:44:00.980 | I was like, "Does anyone know what he's talking about?

00:44:02.980 | What is he talking about that unscrupulous salespeople are misrepresenting themselves?

00:44:07.020 | I don't know what they're talking about."

00:44:11.620 | And a couple of people said, "Well, he's talking about the dual standard and dual registration

00:44:17.380 | where you're registered as a broker and also registered as a fiduciary advisor."

00:44:22.020 | I thought, "Oh, okay.

00:44:23.380 | That's probably what it is."

00:44:24.380 | Well, that's confirmed on page 82.

00:44:26.900 | And I think here we have the fundamental problem with Tony Robbins' money books.

00:44:35.420 | Here on page 81 and 82, we're right in the middle of a chapter where he's talking about

00:44:39.260 | the fiduciary standard.

00:44:41.400 | I'm going to ignore the chapter on that just for the sake of time and to stay on point.

00:44:46.460 | I'm not doing a three-hour review of this book.

00:44:48.860 | I need to do a show on the fiduciary standard.

00:44:51.500 | But in the middle of the chapter, he talks about dually registered advisors.

00:44:55.780 | He says this, "When I first learned about the difference between brokers and registered

00:45:00.420 | investment advisors, everything seemed so clear and simple to me."

00:45:06.780 | Here he's talking about what he wrote about in Money Master the Game.

00:45:08.940 | "Everything seemed so clear and simple to me.

00:45:11.800 | You undoubtedly want someone who will act in your best interests, right?

00:45:15.720 | So it seemed obvious to insist on working with an independent advisor who's legally

00:45:19.900 | obliged to act as a fiduciary.

00:45:22.600 | I thought of fiduciaries as the gold standard, but then I discovered that this subject is

00:45:28.160 | murkier than I'd realized.

00:45:30.640 | Here's the problem.

00:45:32.040 | The vast majority of independent advisors are registered as both fiduciaries and brokers."

00:45:40.640 | WTF?

00:45:42.640 | "In fact, as many as 26,000 out of 31,000 RIAs operate in this gray area where they

00:45:52.120 | have one foot in both camps.

00:45:55.680 | That's right, only 5,000 of the nation's 310,000 financial advisors are pure fiduciaries.

00:46:03.520 | That's a measly 1.6%.

00:46:06.420 | Now you know why it's so hard to get unconflicted and transparent advice.

00:46:12.480 | When I wrote Money Master the Game, I became a champion of fiduciaries only to discover

00:46:17.640 | this inconvenient truth about dual registration, first brought to me by Peter Malik."

00:46:25.560 | Now when I had originally read the previous quote I read from the first chapter, I wrote

00:46:29.040 | beside it, "When?

00:46:30.200 | When did this meeting happen?"

00:46:32.620 | My guess, I don't know the answer, I can't prove it, it's not recorded in the book, my

00:46:35.640 | guess is that this meeting happened after he wrote Money Master the Game, but I don't

00:46:38.600 | know that, maybe not.

00:46:39.600 | Maybe it was before when he's editing, I don't know.

00:46:43.200 | Continuing on, one more paragraph.

00:46:44.200 | "It infuriated me to learn how these dual registrants actually operate.

00:46:49.200 | One moment they play the part of an independent advisor, reassuring you that they abide by

00:46:53.760 | the fiduciary standard and can provide you with conflict-free advice for a fee.

00:46:59.760 | A second later they switch hats and act as a broker, earning commissions by selling you

00:47:04.520 | products.

00:47:05.600 | When they're playing this broker role, they no longer have to abide by the fiduciary standard.

00:47:10.720 | In other words, they're sometimes obliged to serve your best interests and sometimes

00:47:15.400 | not.

00:47:16.400 | How warped is that?"

00:47:19.880 | That's the silliest analysis of the fiduciary thing that I've ever heard.

00:47:29.280 | It has to be too strong, I don't know.

00:47:32.480 | You wanted the show emotional, I try to be very careful with my words.

00:47:36.480 | It's just so silly.

00:47:38.480 | The fiduciary standard and the suitability standard are legitimate legal problems that

00:47:44.760 | have to do with ongoing service and the legal requirement on a financial advisor to maintain

00:47:53.640 | a portfolio for the benefit of the client on an ongoing basis.

00:48:01.920 | It is an important discussion.

00:48:05.320 | I don't have an opinion on it.

00:48:11.240 | I struggle to know what's right.

00:48:13.200 | When I was a financial advisor, I was a duly registered advisor for the last couple of

00:48:18.040 | years when I was still licensed.

00:48:20.000 | I was registered with my brokerage and I was registered with my advisory company.

00:48:26.160 | I was duly registered as both, but I just always tried to do what's in the best interest

00:48:32.320 | of my clients.

00:48:33.320 | I think most advisors are in the situation.

00:48:35.520 | The problem with the registered investment advisory system is you can't earn commissions

00:48:41.280 | and some products only pay their income on commissions such as insurance and some products

00:48:48.080 | only work – and some products are best paid income in the form of commissions.

00:48:55.040 | That's where the argument is if you're going to – if I were going to provide – one

00:48:59.600 | of the arguments that the financial advice industry makes about the fiduciary standard

00:49:03.440 | is if you put the fiduciary standard on us across the board, we're not going to work

00:49:06.960 | with poor people.

00:49:07.960 | That's true.

00:49:08.960 | Maybe all those poor people should go to Vanguard, but I would not – I wouldn't – I would

00:49:13.720 | not spend any time when I was an advisor.

00:49:16.240 | I would not spend any time servicing somebody who has $50,000 of investable assets if there

00:49:23.460 | weren't a potential to make a commission of some kind because the revenue into my practice

00:49:29.240 | is not worth it.

00:49:30.880 | It is not worth my time to deal with difficult clients.

00:49:34.300 | Poor clients are the hardest to work with usually because they're insecure and unconfident

00:49:38.200 | for good reason, right?

00:49:40.880 | And there's not a lot of potential revenue and you can't do a lot to help them.

00:49:44.520 | It's not like working with an affluent – an affluent business owner has lots of

00:49:50.120 | things that you can do to work with to help them.

00:49:52.680 | So those clients probably should go and it would be great if everyone would just go buy

00:49:56.400 | index funds.

00:49:57.400 | I don't know how to solve that problem.

00:49:59.520 | I see it from both sides.

00:50:02.240 | But back to paragraph – or chapter one where he talked about this.

00:50:06.080 | So now I know that was what he was referring to was unscrupulous salespeople.

00:50:09.600 | It's nothing unscrupulous.

00:50:10.600 | That's how the business works.

00:50:12.160 | That's like by definition.

00:50:14.840 | That's how it works.

00:50:20.000 | They make hefty commissions by selling products.

00:50:23.080 | Listen, whether it's stocks, bonds, those are saleable on commission.

00:50:32.240 | If you want to buy stocks, you're going to pay a commission, either a very small commission

00:50:36.120 | to an online brokerage or a commission to a Main Street advisor.

00:50:41.440 | Most of them don't do that anymore.

00:50:42.880 | But you can only buy stocks and bonds on commission in terms of to have them there.

00:50:49.320 | You can get advice on them in a registered investment advisory account, yes.

00:50:52.800 | Mutual funds, yes, sometimes sold by brokers, sometimes not.

00:50:57.640 | Mutual funds are not always sold.

00:51:02.480 | You can go direct to fund and not deal with a commission salesperson.

00:51:06.480 | Retirement accounts, retirement accounts are not saleable unless we're talking about contracting

00:51:10.600 | with a third-party administrator, in which case you're buying something that's – is

00:51:14.640 | that – you're buying a retirement account?

00:51:16.280 | You can't buy a retirement account.

00:51:18.760 | Insurance, insurance is always sold with commission.

00:51:22.360 | I'm not aware – maybe there is someone.

00:51:24.320 | I'm not aware of any insurance policy still.

00:51:26.320 | I think I had a listener who commented one time and said there was one, but I checked

00:51:30.600 | it out.

00:51:31.600 | I couldn't figure out whether it was true.

00:51:32.600 | Insurance, to the best of my knowledge, is always sold on commission.

00:51:35.960 | So an advisor can't sell insurance.

00:51:37.560 | There's where we go to wrap up here.

00:51:39.540 | So what I did – so this book is a great brochure.

00:51:42.960 | It is brilliant sales brochure for the two companies that Tony has financial – that

00:51:52.560 | he's a partner in.

00:51:53.560 | He's an investor in and a part owner.

00:51:55.320 | The two companies are America's Best, 401(k), and a firm called Creative Planning.

00:52:00.720 | Now America's Best, 401(k) is a company that handles 401(k) accounts.

00:52:06.640 | I looked them up.

00:52:07.640 | They are not a registered investment advisory firm.

00:52:09.560 | They're a service provider in the – at least I couldn't find that they were.

00:52:13.080 | However, they have the identical address as the firm Creative Planning at 3400 College

00:52:22.120 | Boulevard, Leawood, Kansas.

00:52:24.160 | So they're using exactly the same address.

00:52:26.000 | I haven't researched this beyond this and I'm not going to.

00:52:28.360 | I just found this, at least this.

00:52:30.080 | So they are at least connected in some way.

00:52:32.000 | I don't know if they're the common ownership.

00:52:34.040 | I couldn't find the information on America's Best, 401(k).

00:52:37.360 | So I don't know about common ownership.

00:52:38.560 | I don't know what the financial interests are of those involved.

00:52:42.400 | Tony does say that he's a partner in America's Best, 401(k), so he's a part owner.

00:52:47.280 | I don't know if Peter Malik is involved in America's Best, 401(k).

00:52:50.280 | I don't know who – what the financial interests are.

00:52:53.920 | But Creative Planning is a registered investment advisory firm.

00:52:57.800 | As a registered investment advisory firm, that means that they have what's called a

00:53:01.360 | form ADV.

00:53:02.360 | If you want to cut past all the marketing junk on websites, just find the firm's form

00:53:09.960 | ADV.

00:53:11.560 | This is the form that gets filed with the regulatory organizations that tells you exactly

00:53:20.140 | what's happening.

00:53:21.140 | It's a legal document.

00:53:22.860 | It has to be accurate.

00:53:23.860 | It has to be comprehensive.

00:53:25.320 | It has to say exactly how your business works.

00:53:27.360 | I know because I wrote one.

00:53:28.720 | I wrote mine from scratch when I was opening a firm.

00:53:31.520 | So this is the form ADV, Part 2A, the disclosure brochure.

00:53:35.560 | Now here are the key things you need to be aware of, and this is what annoys me, is this

00:53:40.560 | entire book is trying to paint the industry as unethical, a bunch of charlatans and hooligans

00:53:49.300 | and sharks.

00:53:53.180 | Page 14, Creative Planning, Inc., form ADV.

00:53:58.840 | I've gone through the different sections here.

00:54:02.400 | Tony Robbins is listed in the ADV.

00:54:05.620 | Two things I wanted to say.

00:54:06.620 | First, let's talk about fees, and then we'll go to page 14.

00:54:10.080 | Big giant chapter on fees.

00:54:12.120 | Big deal.

00:54:15.000 | It's a big deal, not big deal.

00:54:17.480 | It's a big deal.

00:54:18.820 | It's important.

00:54:19.820 | Fees are a big deal.

00:54:21.880 | However, the analysis is, "Look, index funds have this tiny expense ratio.

00:54:27.440 | Vanguard, you can buy a fund with a 0.05% expense ratio."

00:54:30.880 | And then later we talk about the value of funds.

00:54:33.000 | I'm with him on that.

00:54:34.740 | But what annoys me is when people don't talk about the fees for financial planning.

00:54:39.340 | So right here on the material changes, section two of their ADV, update to their annual fee

00:54:46.400 | calculation for creative planning.

00:54:49.440 | 1.20% on the first $500,000.

00:54:55.320 | 1% on assets of $500,000 to $2 million.

00:55:04.200 | That's exactly what I used to charge when I used to do this business.

00:55:08.680 | 0.85% for $2 million to $5 million of assets, 0.8, and it goes on from there.

00:55:15.280 | The point is this, fees matter, and we should be very careful with fees.

00:55:20.160 | But don't use as your...

00:55:21.400 | It's a straw man comparison.

00:55:22.680 | There's another logical fallacy.

00:55:23.920 | "Well, look, index funds are really cheap, but you should go and choose creative planning."

00:55:28.760 | I'm with you.

00:55:30.200 | Good index funds are valuable in a portfolio, but don't compare 0.05% and ignore the fact

00:55:36.000 | that we're also going to be paying financial planning fees.

00:55:39.200 | Financial advisors should earn their money.

00:55:43.000 | If you don't think they can earn their money, you shouldn't hire them.

00:55:49.520 | But don't use straw man arguments to make false comparisons.

00:55:53.640 | At least if you're going to talk about fees, talk about comparable fees between different

00:55:58.300 | advisory firms.

00:55:59.960 | Page 14, and I'm done with this review.

00:56:03.000 | Insurance activities through creative planning risk management, creative planning benefits,

00:56:07.080 | and creative planning property and casualty LLC.

00:56:09.960 | Remember, anytime when you run an RIA, your ADV has to reflect any forms of compensation.

00:56:15.600 | Now, Robbins just spent all this time talking about the sharks and how working with a fee-only

00:56:21.280 | advisor is the only way to go, and fees are the only thing, and commissions can't be paid.

00:56:25.680 | And I maintain this is an important discussion, but it's a red herring.

00:56:31.320 | Ah, another logical fallacy.

00:56:33.300 | It's a red herring because it's trying to indicate that somehow you can do it without

00:56:37.680 | paying commissions, and you can't.

00:56:41.400 | Creative planning has three related insurance agencies.

00:56:44.680 | This is what you have to do, is you have to set up a separate insurance agency as a separate

00:56:50.200 | entity, and you have to collect your fees through the context of that insurance agency,

00:56:57.720 | your commission, sorry, your commissions in that insurance agency so you don't mess up

00:57:02.000 | your RIA.

00:57:03.840 | Creative planning has three related insurance agencies.

00:57:06.960 | Creative planning risk management provides individual life, disability, and long-term

00:57:12.120 | care coverage through various insurance companies.

00:57:15.780 | Creative planning benefits provides group health benefits through various insurance

00:57:20.400 | companies.

00:57:21.520 | Creative planning property and casualty LLC provides property and casualty coverage.

00:57:29.600 | Agents of creative planning may be referred to a related insurance agency.

00:57:37.760 | Creative planning does not receive a referral fee.

00:57:41.280 | However, some of creative planning's personnel that are insurance agents may receive commissions

00:57:52.600 | for the sale of insurance products.

00:57:58.120 | The receipt of insurance commissions is in addition to any advisory fees charged by creative

00:58:06.120 | planning.

00:58:08.520 | Employees of the insurance agencies may refer clients to creative planning.

00:58:14.840 | In these cases, creative planning will pay a referral fee by paying the insurance company

00:58:21.800 | up to 20 basis points, which is .20% of the total fee charged by creative planning to

00:58:30.040 | the client.

00:58:31.680 | Please refer to item 14, client referrals and other compensation.

00:58:38.080 | Clients are never obligated or required to purchase insurance products from one of our

00:58:41.200 | affiliated insurance companies and may choose any independent insurance agent and insurance

00:58:45.720 | company to purchase insurance products.

00:58:47.880 | Regardless of the insurance agent selected, the insurance agent or agency will receive

00:58:51.140 | normal commissions from the sale.

00:58:53.080 | Please refer to item 14, client referrals and other compensation.

00:58:55.960 | For more information, you get the point.

00:58:58.640 | The point is this.

00:59:00.360 | This is a bunch of...

00:59:02.360 | I hate to use the word crap.

00:59:05.040 | I really do.

00:59:06.240 | I don't know of another word.

00:59:07.440 | Yeah, some of you thought I was going to...

00:59:09.400 | No.

00:59:10.400 | I hate the word...

00:59:11.400 | I try not to use...

00:59:12.400 | I'm trying...

00:59:13.400 | Worked very hard to purge the word crap, but it's hard to have another word that expresses.

00:59:18.660 | We just spent a whole bunch of pages in a book talking about how, in your words, duly

00:59:25.200 | registered advisors are unethical and they're misrepresenting themselves, basically accused

00:59:31.760 | of misrepresentation, which is one step short of lying.

00:59:35.100 | What a load of crap.

00:59:37.140 | Creative planning does exactly the same thing.

00:59:39.540 | They just have set it up on an entity level instead of with the individual advisor.

00:59:45.360 | I have no idea how many of their advisors are duly registered here.

00:59:48.160 | I don't know.

00:59:49.760 | But it's a bunch of shell game.

00:59:52.020 | The problem is the stupid regulations in the financial industry that lead to this stuff.

00:59:57.840 | Most financial advisors that I have known don't care how they're compensated.

01:00:01.800 | A bunch of them are charlatans.

01:00:03.480 | Yes, I have all kinds of beefs to pick with the financial advisor industry, but this is

01:00:07.720 | the wrong way to represent it because it's...

01:00:17.740 | You get the point.

01:00:19.300 | Here's what I would do if I were you.

01:00:22.360 | If you're new to financial books, read Unshakable if you like it.

01:00:25.640 | If you like Tony Robbins, great.

01:00:27.100 | Read Unshakable.

01:00:28.240 | Tony Robbins has access, because of his status, he has access to the world's greatest leading

01:00:35.600 | minds on this subject.

01:00:38.000 | That makes these books worth the price of admission.

01:00:40.520 | I bought this thing on pre-order.

01:00:42.200 | I pre-ordered it when I saw that it came out because I knew it would be a big deal and

01:00:46.440 | I forgot about it and it showed up on my mailbox.

01:00:50.200 | These things are worth the price of admission because of the quotes and because of the access

01:00:55.660 | that he has.

01:00:58.260 | He's also brilliant at conveying concepts.

01:01:00.840 | You should read them.

01:01:01.840 | If you care about money, you should read it because the man is a master of psychology.

01:01:05.580 | That's really good.

01:01:06.820 | If you've not been exposed to this stuff before, you should read this book in order to be exposed

01:01:11.720 | to the conflicts and the things, problems in the financial advice industry.

01:01:15.920 | But more than anything, my encouragement to you is twofold.

01:01:20.120 | Once again, I sound like a broken record.

01:01:21.960 | Once again, study what people do, not what they say.

01:01:28.520 | Here's what Tony Robbins says in chapter two.

01:01:31.180 | He says, "Our capacity for pattern recognition is also the number one skill that can empower

01:01:37.400 | us to achieve financial prosperity.

01:01:41.000 | Once you recognize the patterns in the financial markets, you can adapt to them, utilize them,

01:01:45.480 | and profit from them."

01:01:46.480 | Nonsense.

01:01:47.480 | "The number one skill that you can develop to achieve financial prosperity is the skill

01:01:54.240 | of earning a lot of money by building a massive business and income.

01:01:58.440 | That's the biggest thing."

01:02:00.640 | Page 26, "The single best place to compound money over many years is the stock market."

01:02:08.440 | Nonsense.

01:02:09.440 | The single best place to compound money over many years is in your own massive and growing

01:02:17.640 | business, because that's what Tony Robbins did.

01:02:22.280 | I don't deny that he has a lot of money in the stock market.

01:02:25.840 | I don't deny that the stock market can be great, but that is not what's going to make

01:02:29.980 | you a mega, mega millionaire with a private jet and a house in Sun Valley, Idaho, and

01:02:35.040 | a house in Palm Beach, Florida.

01:02:37.520 | You cannot get there from here.

01:02:41.320 | You cannot put aside 10 or 15 or 20% of your income and be really, really wealthy the way

01:02:47.720 | that Tony teaches.

01:02:48.720 | What you need to do is skip this stuff and go take his mastery courses, because there

01:02:54.080 | he pulls apart the business, business mastery, and all of his other stuff.

01:02:58.040 | That's the stuff that matters.

01:02:59.520 | The man started off completely broke, raised by a single mom in poverty, and he's transformed

01:03:07.100 | himself into a mega, mega millionaire, but it wasn't because of investing in stocks.

01:03:15.440 | It was because he worked his tail off for years.

01:03:20.480 | He established a reputation.

01:03:23.160 | He chose a business that has massive leverage opportunities.

01:03:28.960 | He played to his strengths.

01:03:31.540 | He became the best in the world at what he's good at.

01:03:34.980 | He built a huge business that he took public, which diversified his risk asset allocation,

01:03:40.120 | but not in the way that it's taught in the book.

01:03:41.760 | He built a huge business that he took public, built a massive lifestyle and still keeps

01:03:48.360 | part of it.

01:03:49.360 | I'm sure.

01:03:50.360 | I don't know what his arrangements are, but keeps plenty of it to make money.

01:03:53.400 | He's engaging along the way in more businesses by partnering with other people who are experiencing

01:03:59.640 | the benefits of asymmetric risk and reward, which are the people running the businesses

01:04:07.120 | like Creative Planning and America's Best 401(k).

01:04:14.160 | Don't listen to what he says other than to do what he says with a percentage of your

01:04:20.040 | wealth, which is what he would do.

01:04:21.960 | He'll probably, I don't know.

01:04:22.960 | I have no idea.

01:04:23.960 | There's no way that I could know, but let's say that 15 or 20% of his wealth is in stocks.

01:04:28.920 | Great.

01:04:29.920 | He's got a great advisor.

01:04:31.000 | I think that's really smart, but he also owns a resort in Fiji and he has interest in all

01:04:35.960 | these different companies.

01:04:37.700 | That's where the money comes from and that's where I would put my life savings on a bet.

01:04:43.040 | I would put my life savings on a bet that the vast majority of his money is invested

01:04:48.880 | in his own private enterprises, not in publicly traded New York Stock Exchange listed stocks.

01:04:59.880 | Sure he has some money there, but man, I would fall off my chair if it were more than 25

01:05:04.880 | or 30% of his wealth.

01:05:06.880 | I really would.

01:05:09.240 | It's hard for me to imagine it being more than 20%.

01:05:15.320 | That's what frustrates me about this whole stupid personal finance business.

01:05:23.360 | That's what frustrates me is nobody tells the truth.

01:05:27.680 | Now I'm not accusing him of being a liar.

01:05:29.760 | Hear me clearly.

01:05:30.760 | I'm just saying, watch what he does and go take his business mastery stuff.

01:05:36.480 | Skip this stuff.

01:05:38.320 | Finally, watch what he's done with the sale of this book.

01:05:43.680 | He built a huge, huge platform.

01:05:49.400 | You've seen this man's face everywhere in the last month.

01:05:53.600 | If you pay any attention to this, he has a team behind him that is second to none, that

01:06:01.440 | gets him on every single media outlet and he's brilliant at it.

01:06:09.480 | He markets the book.

01:06:12.640 | Look how he markets the book.

01:06:14.360 | He markets the book as knowledge, which is true.

01:06:18.360 | Books are going to be one of your best investments you can make.

01:06:21.360 | They're so packed and they're so cheap to buy if you read them.

01:06:25.840 | He markets the book.

01:06:28.220 | As he's marketing the book, he talks about the fact that he's not profiting from the

01:06:34.640 | book.

01:06:36.080 | This is a big deal.

01:06:37.920 | Right in the front of it, find it.

01:06:40.320 | I can't find it.

01:06:42.200 | He markets right in the front where he's giving away all the profits of the book to feed hungry

01:06:46.240 | families.

01:06:47.240 | That is great.

01:06:48.440 | But notice what he's doing.

01:06:49.820 | Notice the tax planning.

01:06:51.980 | Royalties from the sale of a book create income.

01:06:55.240 | He doesn't need more income right now.

01:06:57.900 | What he does need is tax deductions.

01:07:00.420 | By earning the royalties from the sale of the book and giving it all away, he creates

01:07:04.860 | a charitable tax deduction to offset his other forms of income.

01:07:09.160 | But what he does is from the sale of the book, he profits from the sale of the book because

01:07:13.720 | it's a brochure which sends clients to his other firms and which attracts other clients

01:07:20.040 | to his other businesses.

01:07:21.840 | In those other firms, he's a partner who has an equity stake.

01:07:25.360 | His equity grows in value because the firm grows in value.

01:07:28.720 | He doesn't realize any income, so he pays no current taxes on the growth of those assets.

01:07:35.840 | He can defer those taxes over time.

01:07:37.920 | Why?

01:07:38.920 | That's because taxes matter as he talks about in section 2 where he talks about the core

01:07:46.560 | four.

01:07:47.560 | Taxes matter.

01:07:48.560 | So notice what he's doing to plan for taxes which is donate the charitable income from

01:07:54.080 | the royalties – donate the royalties of the book as charitable income because that's

01:07:58.040 | not really going to make any difference in his lifestyle.

01:08:00.040 | He doesn't need it and the charitable tax deduction is valuable.

01:08:04.600 | That said, profit from the growth of the value of the firms and from his other companies,

01:08:10.680 | profit from those where you don't incur taxation and that's a very, very efficient

01:08:15.040 | business.

01:08:20.120 | Copy what he does, not what he says.

01:08:26.800 | The book is unshakable, your financial freedom playbook creating peace of mind in a world

01:08:30.220 | of volatility.

01:08:32.560 | Go forth and do thou likewise.

01:08:35.280 | Peace out.

01:08:37.420 | This show is part of the Radical Life Media Network of podcasts and resources.

01:08:43.060 | Find out more at RadicalLifeMedia.com.

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