On his February 5th radio show, financial expert and guru, Ric Edelman, responded to a query from a man named Robert who called the show to confirm the validity of a claim by Vanguard (which happens to be a direct competitor of Mr. Edelman) that one of their mutual funds has a total annual expense of 0.06 percent. Mr. Edelman’s response was that the claim by Vanguard was “a little disingenuous.”
Mr. Edelman then went on to explain to the listening public that all mutual funds have other hidden costs, averaging about 1.4 percent annually. The guru added, in conclusion, “So in addition to the 0.06 percent, add another 1.4.” Essentially, Mr. Edelman accused Vanguard of lying – after all, who else is more qualified to do so than the star of a radio show called The Truth about Money?
Critical Take-Aways
Of course fees matter – a lot – as I recently indicated. In fact, Ric Edelman brings up an important point regarding the hidden costs associated with most (I didn’t say all) mutual funds.
Now, having said that, Ric Edelman’s characterization was completely bogus, ridiculous, and misleading! Why would I say such a thing? Because the specific mutual fund which he basically discredited does indeed have a total annual expense of 0.06 percent – with no other hidden fees. Mr. Edelman completely dropped the ball (as do several other so-called industry experts) by playing, quite frankly, the irresponsible-generalization game.
As I noted couple Mondays ago, one area where this generalization nonsense must be avoided at all costs is in the arena of personal finance/investing. Shouldn’t financial professionals of any caliber know that two mutual funds, or insurance policies, or annuity contracts, or mortgages, or any other financial products for that matter, are NOT the same – even if they are in the same category or sold by the very same provider – unless they have specific data to back up such a claim?
One can only wonder if Mr. Edelman’s response to Robert’s question has something more sinister to do with the fact that the mutual funds he actively markets to his clients charge much higher fees than the one he discredited without any basis whatsoever? The answer: of course it does.
Personally, I wonder why the first thing on Mr. Edelman’s website (in the largest font size) are the words: The Nation’s #1 Independent Financial Advisor, while the equally critical piece of information about the criterion for that status is – in my opinion – hidden in the footnote section (in the smallest font size)? Is it because that #1 status is based on factors like “contribution to the firm’s profitability,” and “the volume of assets overseen by the advisors and their teams” without any mention of actually having customers who are successfully achieving their financial goals? You’d think it would be all about the client, wouldn’t you? The site also references the radio show on which this incident occurred: “…answers your questions, giving you comprehensive, educational advice that is both entertaining and useful…” You are smart, so you make that call.
The Bottom Line
Whichever financial product(s) you decide to own is/are guaranteed always to come in three forms: terrible, so-so, and great.
Stay as far away as you possibly can from anyone who makes unintelligent statements such as: “Mutual funds are bad/good,” or “So-and-so product is terrible/awesome.” Savvy investors (and true professionals) know that until you have a specific case in front of you, with a side-by-side comparison, you are simply blowing smoke. A truly serious professional would take your specific scenario, analyze it, give you specific, factual, and realistic evidence, supporting or otherwise, about a specific product – not a class of products. Once they do so, you as the investor can make your own decision. You see, the reason some investors are as confused as heck is because of these baseless, emotionally charged, and quite often, untrue and self-serving opinions.
Don’t fall for the hype. Empty barrels usually make the most noise. And the most vocal people are not necessarily right, are they? I must point out, though, that after taking some pounding, Mr. Edelman’s show has since removed his statement that Vanguard was basically lying from its podcast of the show. Looking back at the radio show’s description which I referenced earlier, it doesn’t claim to be unbiased or objective. So maybe we shouldn’t assume that it is.
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Contact us today for a complimentary, unbiased information session about your personal investments and retirement plan. Laser Financial Group or 301.949.4449.
well said and thoughtful reporting as usual Samuel. thank you for your perspectives
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