I don't listen to Ramsey's radio show. The last time I listened to Dave was in a PF class in high school; I think we watched every single one of his FPU videos. I've caught a few interviews of his on the topic of annuities in which he just tells people to invest in "a good growth stock mutual fund" and then something about "12% returns...yadda, yadda." I specifically remember a YouTube video where he's on TV telling someone who is very close to retirement age to keep 100% invested in stock funds rather than a variable annuity. No mention of any fixed-income exposure at all. Dangerous advice.

Finally, there is not a single tangible difference between a fee-only adviser and a commissioned adviser as it relates to Dave's rationale for using commissioned advisers. He states that people should use a commissioned adviser because it means that they have to speak with their adviser before buying or selling a fund. That is in no way different from the experience with...say, a fee-only RIA. The only tangible difference is that Dave would face tougher disclosure rules, and he likely wouldn't make nearly as much money (money which comes directly from his followers' savings) referring people to fee-only advisers.

Again, rejecting mathematics on a $10,000 consumer debt is a bit of a novelty - it's no big deal. Rejecting mathematics and logical decision-making on a multi-million dollar event (retirement) is foolish. It is even more foolish to PAY a supposed "professional" to make poor decisions on your behalf. Why pay a professional fee for what is the most amateur of advice?

Please let me know if you get in. I'd be interested to hear what funds you intend to sell to referrals. 

I assure you I was not intending to mislead anyone on this forum. I have no incentive to do so. As far as my comment: "this is a very normal thing". I stand behind it. A majority of mutual fund companies have A share mutual fund options. I definitely should have mentioned the no-load options though.

As far as my comment "I'm sure Dave has paid the same amount for his mutual funds several times over", I can see this coming across as misleading. Let me clarify. I believe that Dave has purchased in his portfolio, "A" share mutual funds. Dave believes in finding mutual funds with successful long track records. I'm guessing he probably isn't buying a whole lot of index funds. Why would he mention a good track record if the majority of index funds correlate with each other? If you're looking through track records, then that leads me to believe he is paying for a managed mutual fund. The cheapest (semi-liquid) long-term managed mutual funds are A shares. The reason I didn't mention break-point sales is because the original poster was talking about amounts under 50K. What I meant was that I believe Dave paid the up-front sales charge, not that he got the exact same percentage sales charge as the original poster. Also, when I said "several times over", I meant each chunk of money he put in, he paid the sales charge for. Not that he moves his mutual funds around all the time and keeps paying 5% each time he feels like making a change (that would be silly).

@JT_Mcgee

I think I have a different definition of "ELP Adviser" than you do. From what I know, an ELP adviser is someone who advises the ELP. They do not do direct business with the clients. I think there might be more than one program if that up there is your definition of an ELP adviser. If I were to become and Investment ELP, I would not have to sell American Century products. In fact, the guy I talked to at the Dave Ramsey Show asked to make sure we didn't have a set of products at my broker-dealer that we had to sell exclusively.

Also, I would never sell a client a fixed annuity, unless they were deathly, deathly risk averse. Why give them a guaranteed income of 2-3% (barely even keeps up with inflation) when you could guarantee them 6% income with a variable annuity product? Average inflation in the past 30 years is around 3.5%. You are LOSING money with a fixed annuity. I would hardly call it a cornerstone of financial planning. Sounds like it's a good way to "go broke safely".

If you watch the DR FPU DVD about insurance products, Dave doesn't say variable annuities are bad. Is he saying something different on the radio? Also, I rarely if ever see a mutual fund that is more expensive than a variable annuity.

Side Note on Dave Ramsey's Financial Philosophy:

Dave's advice is based on behaviors of human beings, not on what is mathematically most efficient. For example, when he wants you to pay off debt, he wants you to pay the lowest balance credit card off first. Not because it has the highest interest rate (which would be the most efficient), but because you get a positive reward (feeling of success/endorphins) when you pay that low balance card off fast. That success causes you to keep pushing toward your goals. He tailors his advice to get results, not to be the most mathematically sound.

I'm a Dave Ramsey "trained" counselor and he wanted to charge my firm for being a Coaching ELP last year. Our original agreement before that was that "coaches" didn't have to pay a fee and we did receive leads from Dave Ramsey for about 4 years under that agreement. Years ago we chose not to be the investing ELP because we didn't want to pay him a fee and we were on his site anyway (for free) for the coaching side of things.

 

That said, his stance on upfront commissions is pretty simple: he believes that if you stay in the SAME funds for 10-15 years then the upfront commission isn't a big deal. The other option is paying a fee-based advisor something like 1% a year for all of your assets, every year. Over the same period of time you'd pay the fee-based advisor 10% (over 10 years) OR if you went with the commission advisor and never changed funds you'd only be charged 5.33% as in your example.

 

That's his thoughts on the deal...

 

I just read Pret's post and he's right on with all of those class A, B, C shares. Frankly, we're a fee-based firm and I think some people get taken advantage of when they get charged up-front commissions. Typically, in those scenarios if you decide to sell and buy a new mutual fund, you'll get charged the commission all over again.

Interesting and makes sense re: the classes.  I read the initial post very quickly and didn't tie the fee together with the load - thinking it was simply the adviser's fee for some reason... My brain is a bit slow today I think... 

I haven't listened to his show in a long time, or flipped through his books in years. I should take a closer look at his site and figure out his exact investing advice. I know he pushes "growth mutual funds" but I'm not sure if he talks about index funds or expense ratios.

I listen pretty frequently - he does talk about index funds (mutual funds but not ETFs).  Incidentally, he includes S&P 500 index fund as a "growth mutual fund" (he's mentioned it a few times).  I haven't heard him mention expense ratios.

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over 5% is pretty crazy

LOL @JT.

 

I agree completely with the annuity thing. We're "Dave Ramsey coaches" and I speak at FPU classes a lot and meet with a lot of Dave Ramsey fans. If we're working on a retirement plan for somebody and I know they're a Dave Ramsey plan I have to be VERY careful of what I say about annuities because they all have a per-conceived notion about them because 'Dave says they're bad.'

 

It's unfortunate people can't learn to think for themselves and instead form their opinion based on somebody else's thoughts.

It's personal for me. Finance already has an absolutely terrible stigma attached to it. So to see Dave Ramsey rip on variable annuities on the basis of expense (where the expense actually gives you some kind of value: insurance on the performance of the financial markets) and then refer people to high-fee funds (where the similarly-sized fees add absolutely nothing at all) is sickening.

That being said, I do want to one day be a Tax-ELP for Dave as it is great marketing. :)

I agree completely with the annuity thing. We're "Dave Ramsey coaches" and I speak at FPU classes a lot and meet with a lot of Dave Ramsey fans. If we're working on a retirement plan for somebody and I know they're a Dave Ramsey plan I have to be VERY careful of what I say about annuities because they all have a per-conceived notion about them because 'Dave says they're bad.'

It's unfortunate people can't learn to think for themselves and instead form their opinion based on somebody else's thoughts.

1. Advisers participating in the ELP cannot be RIAs. And the reason for this is one of disclosure. If Dave Ramsey were to accept RIAs into the program, Dave would have to make the financial relationship between him and advisers much more transparent. This is all kinds of shady. Keeping the program closed to people who operate a fee-based firm is not doing his followers any favors, but it does allow him to more easily hide his financial relationship with ELPs.

2. ELP "advisers" agree to sell only four different mutual funds from American Century, which are front-end loaded. Anecdotal reports all over the internet say the "advice" is really just a "sign here" kind of meeting where funds are thrown into 4 different funds with different styles with no attention paid to any kind of asset allocation relative to the saver's future retirement timeline.

3. Front-end sales loads do nothing to align the goals of the person seeking advice with the advisor.

4. Dave suggests that people pay a front-end load so they won't be tempted to move money around too frequently. This is the worst excuse for fee-grabbing that I've ever seen. It's like telling someone who is doing a FSBO to sell their home with a real estate agent so that they take a financial hit and are not tempted to move around too frequently. Ironically, up-front loads only encourage advisors to move funds around.

He positions himself as someone looking out for people, particularly when it comes to often misunderstood annuity products that the public sees as expensive. He foolishly makes blanket statements like "never buy a fixed annuity or equity-indexed annuities" even though fixed annuities are a cornerstone to a post-retirement plan, especially for people who got a late start to planning (arguably his core audience).

If I'm going to go full-circle and get it all out, the conspiracy theorist in me thinks he purposefully oversimplifies issues for his own benefit. If Dave Ramsey were truly interested in helping people out, he'd send people to fee-only advisers and just stop commenting on retirement planning alltogether. It''s a topic that''s way over his head. 

It's one thing to make blanket rules that reject mathematics when it comes to paying off small amounts of consumer debt. The loss is a rounding error. To make blanket rules about a million-dollar issue for most people (retirement) is just nonsense.

/rant

The fee that you are most likely talking about is a front load sales charge on a mutual fund. This is a very normal thing. I'm sure Dave has paid the same amount for his mutual funds several times over. This is common practice among every, single mutual fund company. A little something about mutual funds: you can choose the share type when you buy them (A shares, B Shares, or C shares).

As a financial advisor for 16 years, I'll tell you that I hope you know you're telling 1/2 the story, which is misleading people following this thread. There are also "no load" mutual funds out there which don't have the alphabet soup of "A/B/C shares. So your statement that "this is a very normal thing" and "I'm sure Dave has paid the same amount for his mutual funds several times over" isn't correct (especially since Dave has enough money that he would receive a break point discount on these fees if he's investing over a certain amount of money--typically over $50k (which I'd guess Dave would have). Here's the FINRA website page on breakpoints.

Although I believe sales charges pay professionals for their work, they most definitely aren't "a common practice among every, single mutual fund company."  Very common companies like Vanguard and T.Rowe Price don't engage in this practice, but wouldn't use Ramsey advisors to sell their funds, either (to keep costs low they aren't sold through typical broker channels).

I can imagine the other ELPS have similar circumstances, requirements, and interviews. There is no scandal, just a paid referral system. 

Sense to Save, I'm not sure about the 5.33% fees...is that just the fee taken out of your initial mutual fund investment? If you get over 50K does that % go down? 

If you have a problem with the fees. You can always DIY or go with Index Funds. 

His investment advice is pretty good actually to get you started if you plan on investing for the long term, but his main focus is on debt reduction. 

On his site they say: "Each ELP goes through a monthly performance review."

Also, it says: Do ELPs pay a fee? Yes. For ELPs, the program is a form of local advertising. It’s a way for them to attract clients who love The Dave Ramsey Show just like they do. We use the fees to fund the large staff and technology required to operate the ELP program.

It also says that they basically only use one ELP per city, per category. This is encouraging because it means not anyone, or everyone, can get in.

That said, his stance on upfront commissions is pretty simple: he believes that if you stay in the SAME funds for 10-15 years then the upfront commission isn't a big deal. The other option is paying a fee-based advisor something like 1% a year for all of your assets, every year. Over the same period of time you'd pay the fee-based advisor 10% (over 10 years) OR if you went with the commission advisor and never changed funds you'd only be charged 5.33% as in your example.

That's his thoughts on the deal...

I just read Pret's post and he's right on with all of those class A, B, C shares. Frankly, we're a fee-based firm and I think some people get taken advantage of when they get charged up-front commissions. Typically, in those scenarios if you decide to sell and buy a new mutual fund, you'll get charged the commission all over again.

State Life insurance license, Series 63 (State securities license), Series 6 (Federal securities license for mutual funds and variable annuities), Series 7 (Federal license for Stocks and Bonds), Series 65 (Investment adviser License. I can legally charge a fee for investment advice).

I have voluntarily facilitated several Dave Ramsey FPU classes, but have no monetary interest in promoting him (yet). I have applied to be an ELP. I actually found this forum while trying to figure out how much it costs to be an ELP.

If you really must know, I can private message you my CRD number so that you can look me up on the FINRA website to confirm all my licenses, but I'd rather not give out my name on a public forum.