Real Estate Investing with Kenny Wolfe

Are Financial Planners the WORST?

January 18, 2023 Kenny Wolfe
Real Estate Investing with Kenny Wolfe
Are Financial Planners the WORST?
Show Notes Transcript

Did you lose money in the stock market this year, but your financial planner made money?  Are financial planners worth the cost?  I cover that in this episode.

My name is Kenny Wolfe and I’ve been a real estate syndicator and investor for over eleven years; in this time, I’ve built a successful real estate investment firm, Wolfe Investments. If you’re new to the show, make sure to subscribe so you’re notified when a new episode comes out. 





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Did you lose money in the stock market this year, but your financial planner made money? Are financial planners really worth the cost? I cover that in this video.

 Welcome to Real Estate Investing with Kenny Wolfe, the show with weekly topics designed to help you learn how to build your ideal life through real estate investing. My name is Kenny Wolfe and I've been a real estate syndicate and investor for almost 12 years now. And in this time, I've built a successful real estate investment firm, Wolfe Investments. If you're new to the show, make sure to subscribe so you're notified when a new episode comes out. 

Financial planners win either way. When the stock market is up, they win, and when it's down, they win, and you lose even more. I recently had a phone call with one of our investors, where he was venting about financial planners. In this last stock market drop, he was down a million dollars in value, and on top of that, his financial planner made off with $80,000 worth of fees. Not only did his stock holdings lose money, but his losses were compounded by having to pay extra fees. He was adamant about swearing off financial planners, as this was the third one that he was on, and that person was the third one who convinced him that they had a winning strategy. Each time he was let down by his financial planner, where they didn't protect his downside with their winning strategy, then charged their fees on top of the losses. That's added salt in the wound, paying a lot of money for no downside protection. On top of that, the question is, can that financial planner really make more money than the market average when times are good? Now, the financial planner space will continue to be a strong industry, as I'd say most people don't enjoy managing their own personal finances, and those folks should definitely pay the extra price to have someone manage their investments for them.

Having some management is way better than no management at all. You won't be near as efficient than managing that themselves, but if they aren't good at investing or prefer to spend their time elsewhere, then maybe the financial planner makes sense. Do financial planners really know more than you could know on investing? There are even loads of psychology studies that show people trusted doctor in a lab coat way more than if that doctor were wearing street clothes. In a similar way, when a financial planner comes at you with their strategies for getting better gains than the S&P 500 index fund, and then you see all the letters behind their names, with all the credentials that they have behind them, it is very tempting to believe them. Warren Buffet made a bet with a hedge fund manager in 2008. That bet was over 10 years that an S&P 500 index fund would beat an active trader that has a lot of fees that are passed on to those that they're managing their money for.

Warren Buffet ended up winning the bet in the long run. The first year the hedge fund was ahead, but from 2009 to 2014, Buffet won every single year. At the end of 2016, the S&P 500 index fund had gained 7.1% a year, or the hedge fund only hit 2.2% a year. You gotta watch out for those lab coats. I personally enjoy managing my own investments, and that's really why I started Wolfe Investments, where we bring commercial real estate investment offerings to folks who normally wouldn't have access to those kinds of opportunities. We've beaten the S&P 500 with our real estate investment offerings handily over the past 12 years, and what sets us apart as well, is the structure of how our company is rewarded. Wolfe Investments only makes money when our investors make money, so that means that we're always aligned with our investors.

If a property of ours wasn't performing, then no one makes money. By structuring our investment offerings this way, it ensures that Wolfe Investments is always soundly aligned with our investors--which makes it so our investors and our company are always pulling in the same direction. Financial planners typically can only offer products where their firms can make money off those sales. What does that mean? That means if you use a financial planner, you are not seeing all the investment offerings that are out there in the world. A financial planner is only incentivized to sell you products where they gain a fee. They typically can only offer investment products that are publicly traded, so you're automatically playing in a much smaller sandbox of all the bigger sandboxes out there with much more investment offering types. I've had investors of ours fight with financial planners over the benefits of investing in real estate, and I have a very sneaky suspicion that the lack of the financial planner's ability to make fees off that real estate investment is why that financial planner was steering them away from private placement offerings.

Again, those that need or want someone else to manage their finances for them, just need to know going in, that you're going to be missing out on a wider range of assets and only be plugged into investments where that financial planner makes fees. Using the Warren Buffet bet above, you can see that just investing in the S&P 500 index fund would be a better option for investors who just focus on the stock market as to where to invest their money, and who want a very hands-off approach. For those that do want to take charge of their investing, you have more investment options outside of the publicly traded options that are out there, and diversification will be added to your portfolio, which is always a great investment tool. Financial planners manage a lot of money for investors, but are they really worth it? They hem you in with what investment offerings they can show you, and they make their fees whether you make money or not. Be better than that and take charge of your own financial future. 

This has been real estate investing with Kenny Wolfe. Thanks so much for listening.