One time or ongoing fees? In this episode, I'm going to address the question
fee-based versus commission-based financial advisors. What's the difference? What's better?
So, my name's Doug Andrew and I've been a financial strategist helping people plan for a comfortable
retirement for more than 47 years and I've noticed being a part of the financial services
industry that a lot of advisors seem to tout themselves as fiduciaries.
Now, what is a fiduciary? It is somebody who puts your best interest ahead of their
own. I'm all for that I've always considered myself when I was helping people with financial
advice to be a fiduciary. But sometimes I think golly there are a lot of financial advisors
that claim to be fiduciaries looking out for their clients best interest and I will ask them.
So, do you have any clients that had money in the market in 2008? Yes. Did they lose money in 2008?
Yeah, everybody did. I go, yeah the average American lost about 40 percent. A million-dollar nest egg
dwindled in value down to 600,000 but it came back. I go, yeah it took four years to come back
and by the way, none of my clients lost in 2008 and by the end of 2012 when most Americans were barely
back to break even. Many of our clients had doubled their money. A million doubled to 2 million. Where
most Americans were barely back to the million and they go, "What are you talking about?".
When I asked them do you have any clients that experienced that? Yes. I go, okay, so do you think
crashes like that are going to happen again? Yeah. So, do you want to have happen
next time to your clients or to you personally? Do you want to have happen next time what happened
last time to your money or their money? Well, no. But you know the market always comes back and I go, no.
Answer the question, do you want to have the same experience? Well, no, if I had a choice. So, what are
you doing differently with your money or what are you doing differently for your clients money? Well,
it's still in the market but the market always comes back. I go, you're not getting the point here.
You can help your clients participate when the market goes up and not lose when the market goes
down and they go, using what? I go, indexing. They go, oh, index mutual funds? I go, no. I'm not talking
about index mutual funds. They go, well, what do you mean by indexing? I said indexing is a strategy.
An index mutual fund is a commodity that you can sell your client. I'm not talking about a commodity
I'm talking about a strategy. Where you make money when the market goes up but you do not lose a
dime when the market goes down due to that market downturn and they look at me with this glassy look
in their eyes and they go, "I've never heard about this before", it's because most broker-dealers never
teach their advisors about this. But let's go back to this fiduciary concept. If you know your clients
are accumulating a lot of money they're discipline savers and you can tell that they're going to be
likely in as high or higher tax bracket when they retire. Especially based upon what's going
on with the government irresponsible government spending the printing of money and you can see
the writing on the wall that taxes will likely be higher. Are you looking out for their best interest
if you continue to defer ...to some future perceived unknown advantage? What is it? When
you're convinced taxes are going to be higher is that looking out for their best interest? Boy, they
they shut up really fast. I go, why would you do that? You really ought to get the money out the
taxes over and done with sooner than later and reposition it into something tax-free from now on
and oftentimes they go, "What's tax-free? Are you talking about a Roth?", I'm going, no... I've never
owned a Roth I never will because my favorite vehicle called the laser fund allows you to
diversify and create the foundation for a tax-free retirement. I would recommend that 40 to 60 percent
of your clients retirement income not even show up on the front page of their 1040 tax return.
You mean this is a tax loophole? No. The IRS knows they're receiving it but they
know it's totally tax-free. It's been a sacred tax-free cash cow in the internal revenue code
for over a century. Now, I usually have their interest. Let's go back to this question about.
So, fee-based versus commission base? Most of these advisors who are touting themselves as fiduciaries
say you should always choose a fee-based financial advisor a fiduciary because they do not have any
incentive to sell you a particular product. So, we are fee-based and we're far better and it's less
expensive. So, let me show you what an average fee based financial advisor does not only sometimes
not looking out for your best interest as far as market volatility or taxes over the long haul.
But especially as far as how expensive a fee-based planner can be. Are you ready? So, if this is already
intriguing you I would recommend you share this with somebody who maybe you know
that is working with a fee-based financial advisor and they have their money in the market and
they're deferring and they're doing really well and you can sort of tell they're not going to meet
a lower tax bracket when they retire. So, subscribe to this channel share and stay with me to the end
and I'm going to gift you a copy of my most recent best-selling book and you can also share the link
with one of your friends. I post an in-depth answer to a financial question almost on a daily basis
on this channel. So, let's go through and talk about fee-based versus commission base. See,
a fee-based advisor acts like well I only charge you one percent or one and a half or two percent.
Let's just use the low in one percent. Let's say that you at a particular point in time
engage with a fee-based financial planner and the advisor goes out we charge you one percent a year
on whatever your assets are worth at that point in time. This is very common. So let's say you start
out with $500,000 and so they're going to charge you 2% or
$5,000 that year to manage your 500,000. Now, let's say they're doing a really good job
for years when I had my client's money back in the market back in 1974 1980 and so forth. I was
trying to earn my clients an average of 12% but let's just come down to reality here
and say that you're earning 10%. Because I have actually helped many of my clients earn 10.07%
average net cash on cash. If you understand rule of 72 that means that you take 10% divide that into
the number 72 your money will double every 7.2 years. Well, let's say I can't come down to 9.6 because
I can actually show you where I have averaged 9.62% for over 40 years using max funded index universal
life insurance contracts and I'm talking about net cash on cash. So that means you take 9.6 divided
into 72 and your money will double every seven and a half years. So, a good fee-based financial advisor
earning 9.6. Your half a million will double to a million in seven and a half years. A million
doubles to two million in another seven and a half years that's at the end of 15 years.
In another seven and a half years this is 22 and a half years down the road the
the 2 million doubles to 4 million and then the last seven and a half years of a 30-year period
it doubles to 8 million and people say, "Is this realistic?", absolutely. I have done this for many
many people who started out with 500 grand without adding a dime. 500,000
doubled to a million, a million double to two million, two million double to four million
and four million double to eight million over a thirty-year period. So, let's say you've got a fee
based financial advisor that does that for you. If you do the math and you deduct one percent of
that balance as it goes to a million, 2 million, 4 million, 8 million.
You will have paid in fees over the 30-year period just under 1 million dollars and they say
that is an inexpensive approach. You shouldn't do a commission-based approach.
Well, let me show you the difference. My favorite vehicle that I help many many people accumulate
their money totally tax-free at average returns uh of 9.6 and even higher. But 9.6 percent is
sort of the average for the last 40 years is what I call the laser fund and it's totally tax-free.
But see, because I opted to be compensated with a commission based upon the new money that went in.
See, I never made a dime on my clients balances as they grew. I only got compensated in like a
percentage or a commission based upon the 500,000 they put in at the beginning. When that
500,000 doubles to a million, to 2 million, 4 million, 8 million, I didn't get one dime off of that growth.
Now, on 500,000 I may earn 5% maybe 6%. Let's say 6% that's 30,000.
So, I earned 30,000 one time on the front end and sometimes that was spread out over
5 years if it took 5 years to put in the 500,000. Maybe a hundred grand a year
but that was it. Would you rather pay 30 000 one time or string it out and pay nearly a million
with a fee-based advisor? Let me put it this way, if I were a realtor and you came to me
and wanted a half-million-dollar house. So, I find a house for you and I say, okay now I have
two options for you. I found you this house and i'm gonna sell you this house and I'm a realtor
and you can either pay me 6% because most realtors charge what 6%. So, you
can either pay 6% once that's 30 grand and the house is yours or here's another choice.
You can pay me one percent of whatever this house is worth every year for the next 30 years
as it goes up in value. What would you choose? Hello, why would you pay one percent? Well, the first year
it's only 5,000 but you keep paying one percent of what that house appreciates by for 30 years
you will end up showing out nearly a million dollars. So, is really a fee-based advisor
cheaper? In the long run, no. But see I get compensated with money that would otherwise go
out the window in unnecessary tax and that's what you'll learn in my most recent best-selling book.
Here's how you can claim your free copy of the laser fund. I call it the laser fund because
laser is an acronym that I've used for years that stands for liquid asset safely earning returns.
This book is 300 pages and it teaches you how to diversify and create the foundation for a
tax-free retirement. How you can have your money accumulating tax-free you can access it tax-free
when you diet blossoms and transfers tax-free. But usually, the advisors who use this get compensated
one time on the front end and the rest of the time it grows that is all purely your money without
ongoing fees. This is the most inexpensive financial vehicle in the long haul and you
will see examples in this book of how inexpensive the fees are as time goes. Even if you subtract the
cost of the insurance that the IRS says has to be there in order for it to be tax-free.
To claim your free copy go to laserfund.com or click on the link below that's laserfund.com
contribute a nominal amount towards the shipping and handling I'll cover the rest of that.
I'll fire out a copy of this 300-page book for you.
There's also options there to listen and learn and watch and learn but here's to your brighter future.