In Defense of Financial Gurus
September 23, 2011I’m writing this to stick up for Suze Orman. And Dave Ramsey. I know, they don’t need to be defended. They have excellent reputations nationally, and have sold tons of books and CD’s, and, have become wealthy and famous by giving people financial advice. So, why am I defending them and from whom?
As a Certified Financial Planner, I need to continually educate myself. First, it’s just common sense; if you don’t stay current and improve your knowledge base, you’ll quickly become irrelevant. And, in order to maintain the CFP designation, I need Continuing Education credits to keep my license. One of the ways I get my CE credits is through meetings where experts in their field (estate planning, insurance, investing, etc.) come in and talk to a group of us about the latest and greatest thoughts, trends and legislation, as well as, the always lively, Q&A session. These meetings are fun, educational and I almost always come out of them with a much better understanding of the topic. Almost always…
At one of the most recent meetings, the speaker got hung up in traffic and called the group leader to say he would be 45 minutes to an hour late. We decided to just have a conversation about what was going on in the world (national debt, politics, football season!, the nature of financial advice, etc.) and one of the financial planners in the room mentioned that his daughter just read a Suze Orman book and really liked it. At the mention of her name, many of the financial planners in the room rolled their eyes, sighed audibly, or made a derogatory comment about her. Another planner mentioned that his neighbor is a big fan of Dave Ramsey. His name being mentioned was met with the same kind of reaction that Suze Orman’s name received. My question to the group was, “Why do financial planners react that way to these 2 people?” After all, they can reach more people and change more lives in a year than our entire group of financial planners could reach in a whole career. The responses surprised me.
One of the primary issues mentioned was that financial planners need to know their clients and that “generic, basic, not-very-individualized advice” is useless. Well, I watched both of their shows and found that they get enough information about a specific situation (not the whole person) to give a relevant answer that helps solve an immediate problem. Do they know how many kids you have, or what your dream retirement looks like, or what your investments look like inside your 401(k)? No! But, for many of the questions they get don’t really require all of that information. So, maybe that reason for scoffing at Orman/Ramsey isn’t a great one.
The next thing mentioned was that their advice isn’t all that sophisticated. They tell everyone the same thing. Spend less than you make, pay off your debt rapidly, save as much as you can, protect your loved ones with estate planning documents and get insurance to cover your at risk areas. OK, maybe it’s not as sophisticated as highly creative tax shelter planning and creating charitable foundations, but most of America can’t use the tax shelter and other sophisticated planning strategies. And, what’s so bad about spending less than we make and saving money for the future? Not exactly advice that will make your life worse, huh? There were a few other complaints, but they held as much water as the others.
I think what I learned while our speaker was delayed, is that the financial planning business is filled with people who really want to be great at what they do. And they all try very hard to continually improve their skills, their knowledge, and their ability to relate to their clients. And, when people become rich and famous by dispensing very simple and sound advice, rooted in common sense, and that advice is the kind of thing that your grandfather could have told you (even if your grandfather had very little formal education and certainly didn’t have any degrees or certifications in the financial field), it challenges “modern” financial planning experts. In short, it’s just too basic to be embraced by “experts.”
It’s kind of like getting a group of highly trained doctors around a table and talking about the merits of chicken soup and sleep when you’re sick. In a world where we have very few people who know they are on track to reach their retirement goals, as seen in our latest research report, a “getting back to basics” approach (more on that in a future blog) may be just what the doctor ordered!