In case you missed one of the other hundred blogs all reposting John Oliver’s latest story, here you go:
We don’t feel shameless about reposting it at all, though, because in the latest episode of Last Week Tonight, John Oliver tackles an issue near and dear to our hearts: financial advisors.Let’s be clear: we think that some financial advisors can be awesome for people who need help setting up their financial plans. This can include anything from retirement planning to estate planning to setting up a trust. But not all advisors are trustworthy, due in part to the fact that job titles like "financial analyst" or "financial advisor" or "financial planner" are generic titles unrelated to specific certifications. Anyone can call themselves a financial advisor, and anyone can download a sheet of paper saying they’re a financial advisor, and there’s nothing illegal about it.
What should you be looking for is a fiduciary — a fiduciary is legally required to act in your best interests. This means not forcing you into a financial product that doesn’t fit your needs (annuities, for example), and putting most of your money in low-cost index funds. If you’re looking for a fiduciary, we suggest checking out Guidevine, a matchmaking site for people and financial advisors.The Department of Labor has issued a new rule requiring that all advisors handling retirement accounts act as fiduciaries starting next year. But financial advisors who aren’t fiduciaries are fighting back — even personal finance experts you may trust, like Dave Ramsey, are fighting against it because it goes against their financial interests.Whatever you do, do NOT listen to anyone fighting against the fiduciary rule — it is in your best interest that anyone holding your money follows that rule.
Some more key takeaways from John Oliver about retirement funds, specifically:
401(k)s can be a goldmine for financial service companies — legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finders’ fees.
Those fees can add up thanks to compound interest — since fees are expressed as a percentage, they grow as your fund grows.
There are two types of funds: low-cost index funds, which just try to match the average returns of the stock market (or other group of stock), and higher-cost actively managed funds, with experts who are trying to beat the market.
But the problem with trying to beat the market is that most people are bad at it, even the experts. Evidence shows that most managed funds do about the same or worse than the market.
The dirty secret of active managers: the people who run active funds own index funds.
Another dirty secret? Retirement isn’t actually that complicated. When you’re ready to start saving money, go back to the above video at this extra moment and hit play. Or, check out this list of five key things to remember:
Start saving now.
Use low-cost index funds.
Ask your advisor if they’re a fiduciary, and if they’re not, run.
As you get older, gradually shift over from stocks to bonds.
Keep your fees under 1%.
Need more retirement help? Check out our retirement center for tons of articles and advice on how to save for retirement.
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