About 18 months ago, life coach and business strategist guru Tony Robbins argued that he assuredly was not gearing up to enter the retail financial services industry. Ten weeks ago, he became part of it, a move that the seminal seminar showman and entrepreneur details in an interview with ThinkAdvisor.
Named this past April Chief of Investor Psychology for Creative Planning, the nation’s No. 1 wealth management firm, according to CNBC, Robbins, 56, has already begun training the firm’s team of some 140 financial planners, and has designed and funded interactive online prospecting tools to attract an expanded clientele: investors with modest liquid assets as low as $50,000.
Creative, with AUM of $18 billon-plus, previously targeted high net worth and ultra-high-net worth clients exclusively. Now the firm has assigned a discrete team offering a “streamlined” version of its service model too.
Just what qualifies Robbins as an investor-psychology chieftain? After all, he’s neither an advisor nor a psychologist. Here’s a clue: “Tony’s genius is his ability to deconstruct what drives certain behaviors,” trader Paul Tudor Jones, whom Robbins has coached for more than two decades, told Fortune in 2014.
But what prompted Creative and Robbins to partner up? The firm’s president-CIO Peter Mallouk, Barron’s rated as America’s No. 1 independent advisor, was aiming to be the industry’s leading advocate for change by promoting the fiduciary standard for all advisors. (Perhaps ironically, when Mallouk started out at New England Securities 15 years ago, he was dually registered.)
Meanwhile, with publication of his 2014 book, “Money: Master The Game,” Robbins had also become a vocal proponent of the fiduciary standard.
Mallouk, 46, wanted to raise his firm’s profile. And with Robbins aboard, he saw a way to accomplish that. He and the famed coach announced their alignment on April 5. At around the same time, Creative acquired the RIA, Gupta Wealth Management. Top financial advisor Ajay Gupta, Robbins’ personal FA for years, is now Creative’s Chief Investment Strategist.
Robbins, chair of a holding company with 18 diverse businesses and a philanthropist who shares his wealth to feed, shelter and educate the impoverished, is out to make waves as a consumer advocate by alerting folks about issues such as broker conflicts of interest, transparency and the benefits of RIAs over advisors who are dually registered, a standing he unwaveringly does not support.
Robbins, who has counseled leaders and idols, like Bill Clinton, Oprah Winfrey and Serena Williams, collects many millions per year coaching CEOs worldwide; in addition, he garners a cut of their firms’ gains. As an independent contractor to Creative, he is compensated as a member of the Board of Directors and, separately, for generating new business. He says he is donating all that to the charity, Feeding America.
Two-and-a-half years ago, Robbins’ book, a how-to about achieving “financial freedom,” shot to the top of The New York Times business bestseller list even as it set many a detractor astir, if not atwitter. They saw Robbins as a financial services interloper and sneeringly speculated that he would soon launch his own financial advisory. Further, they razzed that his 656-page tome was laced with inaccurate or biased information about investing.
Robbins retorted, in an interview with ThinkAdvisor in December 2014, that such folks were “taking pot shots” at him and that the notion of his opening a financial practice was “the biggest bulls— on the planet!”
Now he’s published a paperback updated version of “Money: Master the Game” (Simon & Schuster) – 664 pages long. He continues to tout hedge fund founder Ray Dalio’s All Seasons Portfolio, a strategy that some advisors dissed when he promoted it in the first edition.
“Attacking Ray Dalio – for God’s sake! People might have been sincere, but they were sincerely wrong,” Robbins grouses in the new interview.
Consumers flock to Robbins’ rousing self-help seminars, paying the likes of $3,000 to $5,000 a pop for his annual six-day event. Now comes a documentary film that goes behind the scenes of one such spectacular “Date with Destiny.” The revealing look, called “Tony Robbins: I Am Not Your Guru,” will premiere July 15 on Netflix.
ThinkAdvisor recently held separate phone interviews with Robbins, speaking from his Palm Beach, Florida, residence, and Mallouk, in Leawood, Kansas, where Creative is headquartered. The two discussed Robbins’ new financial services role, the DOL’s fiduciary standard rule, annuities, Ken Fisher, and how brokers treat clients, among other topics. Here are highlights:
ThinkAdvisor: You’ve said that “brokers are selling for the house and that the house always wins” because brokers are looking out for themselves first and the client second. Why do you hold brokers in such low esteem?
Tony Robbins: I have nothing against brokers. Most of them sincerely care. But they do what they’re trained to do: they’re working for the house. The wirehouses are big corporations; and it’s their shareholders they want to take care of first, not the customer.
How does that impact clients, then?
TR: They have no clue what they’re being pushed into. They’re taught to give up control to somebody who doesn’t necessarily have their best interest in mind. Products and advice should be separate. That’s why I’m promoting the fiduciary standard.
Your new title, Chief of Investor Psychology, implies that you’re an expert in investments and/or that you’re a trained psychologist. What qualifies you for this role?
TR: I’m not trying to be a financial advisor. I’m an educator. But when it comes to psychology, I don’t think anybody who knows anything about my work for the last 39 years in 100 countries and with 50 million people would argue that I don’t have the chops to give anyone advice. I’m trying to add value in a way that the average financial advisor can’t because they don’t have my experience.
Do you keep an office at Creative Planning in Leawood, Kansas?
TR: No, no. I have 18 companies! We do $5 billion a year in sales. This is one of many ventures that I’m involved in.
What sort of education are you providing to Creative’s financial planners?
TR: How to figure out what people’s deepest psychological needs are so they’re not just getting a financial plan but that their individual emotional needs are being met.
Less than two years ago, you told me you had no plans to enter the financial services industry. But here you are!
TR: Yes, I am. Peter reached out to me and said, “I know you’re a big supporter of the fiduciary standard, but there are some gray areas I’m sure you’re not aware of.” We met, and he told me about them.
TR: Some advisors are duly registered: one moment they’re wearing a hat saying, “I’m a fiduciary”; but in the middle of the conversation, they can flip hats and they’re a broker. I was dumbfounded that the law has that loophole. Then Peter shared what’s going on with proprietary products. The combination of those two pieces pushed me over the edge.
What do you mean?
TR: After talking in more depth, I said, “If you’d be interested in partnering with me, I’d love to bring people to your world. But I want you to [serve] individuals that don’t have a million dollars. Would you be willing to create a division to provide a free [service], where anyone could get a second opinion on their portfolio?” I got him to agree, and I said, “I’m all in.”
Peter Mallouk: I’d been trying to get the word out about the fiduciary standard, but I didn’t have a very big megaphone. Now I can accomplish more in one day with Tony than I did speaking for the previous 12 years. It’s disgraceful that [brokers] aren’t required to act in the client’s best interest. That’s probably the biggest attraction that Tony and I had to each other.
Tony, what’s the main reason that your deal with Elliot Weissbluth (HighTower founder-CEO) fell apart? You and he promoted the original edition of your book together.
TR: We never had a deal. We were just great friends and still are. He really helped educate me about the fiduciary space. But I never committed to having a partnership with his firm specifically.
What are the most troubling behavioral biases that investors should overcome?
TR: The biggest is that they get fearful and greedy. So they sell when they should buy and buy when they should sell. The average person has no clue what’s really going on in the marketplace. My goal is to increase transparency. Where else on the face of the earth is there so little transparency about something that people are so confused about?
You’re a partner in America’s Best 401K, which, you write, is “…a revolutionary company that…create[s] an unparalleled and cost-effective solution.” Given your new role, and as an educator, isn’t owning that firm something of a conflict of interest?
TR: I’m totally transparent. I tell people I’m an owner of the company and a board member. There’s nothing hidden in what I’m doing in that area whatsoever.
In your book, you make the point that “there’s clearly a place for effective annuities in many people’s financial plans” and later state that you’ve partnered with Advisors Excel “to build and promote additional products and services that will help create a guaranteed lifetime income plan for…millions of Americans…” So, you’re educating…and you’re selling?
TR: Advisors Excel is doing fixed annuities, which can be a useful tool provided someone’s asset allocation is at a certain stage in life.
Advisors Excel offers, among others, fixed index annuities, vehicles known for their high fees and commissions. FINRA issued an investor alert explaining fixed index annuities’ complexity and the possibility of losing money in them. In your book’s first edition, you wrote that they were “an elevator that can only go up.” Now you write: they [have] “the upside without the downside.”
TR: They aren’t expensive if you go with the right ones. You’ve got to know what your real costs are; otherwise, you’re going to get hurt, as with anything else you invest in in the financial area. That’s why you should have these annuities analyzed.
How will the DOL fiduciary standard rule affect advisors who sell variable annuities?
TR: Salesmen can say to customers, “The government is taking away your choices; but if you sign this document [BICE], I can offer you these additional choices.” A lot of people are going to fall for that, unfortunately.
What’s the “unfortunate” part?
TR: Variable annuities don’t make sense for the vast majority of people because they’re paying the insurance cost plus the brokerage cost.
I thought you were in favor of annuities.
TR: Annuities are valuable tools. But the idea of selling someone a variable annuity, with all those fees and tying up so much money, doesn’t make an ounce of sense. And the Department of Labor has no real enforcement for the fiduciary rule. So you’d have to sue [for example] Morgan Stanley yourself. Good luck!
Does Creative’s free online second-opinion service, Portfolio CheckUp, cover all types of investment vehicles?
PM: We’ll review whatever people upload. We’re not licensed to sell annuities; but if appropriate, we might recommend moving an expensive life insurance [product] to a Vanguard annuity. An immediate annuity makes sense in limited circumstances. Variable annuities aren’t appropriate unless you’re transitioning something from somewhere else under special circumstances.
Tony, in the paperback, you criticize Fisher Investment’s advertising campaign, ‘I Hate Annuities…and So Should You! [now headlined, “What Your Annuity Salesman Doesn’t Want You to Know”]. You say that Ken Fisher’s “recommended alternative is a portfolio of his stock picks” and that these – though you indicate only one mutual fund that he manages — “have underperformed the market in dramatic fashion.” What’s your point?
TR: I was dumbfounded that Mr. Fisher is promoting at the level he has when he’s been underperforming the market. All I’m suggesting is that you’ve got to look under the hood and know what your real costs and real risks are.
Peter, you also referenced Fisher in a similar context in your bestseller, “The 5 Mistakes Every Investor Makes and How to Avoid Them” (Wiley 2014). What were you trying to show?
PM: I was giving examples of high-profile active traders. My understanding is that Ken has a pretty broad contempt for annuities. I think most are inappropriate most of the time, but I certainly don’t think all of them are bad all of the time.
Are you competing with Fisher in giving folks second opinions on their annuities?
PM: No, not at all. I consider us competing primarily with brokerage houses and banks, places filled with conflict. I’m not getting up every day thinking about Fisher Investments, and I’m sure they’re not getting up thinking about Creative Planning.
Why do you have a disclaimer on Portfolio CheckUp stating that information provided as a result of using your interactive device shouldn’t be construed as personal, individual advice?
PM: The system isn’t perfect. This is the same issue with robo advisors. The idea that you can just upload stuff and make every decision off that is crazy. We’re saying: Give us the information you want us to have to evaluate your portfolio, but [don’t] re-shuffle things based only on that — because we don’t know for sure that we’re getting all the information.
Tony, you grew up poor; had an abusive childhood and were homeless at 17. Not long thereafter, you had $13 to your name. Then you became successful, rich and famous. Any effects of those early years that show up today?
TR: When I see somebody hurting, I act. I suffered so much that when I see suffering, I’m compelled by a tremendous hunger to do something to help.
Who have you helped most recently?
I gave a group of French nuns in San Francisco who were going to be evicted [from their soup kitchen] $50,000 to take care of them for the next year. Then I bought them a homeless shelter for $800,000 so they don’t have to worry for as long as they live. And I’m paying the rent for the next two years at least for a 100-year-old woman in Palm Springs who was being evicted.
So you step in where you see someone in straits.
It’s not a promotional tool. It’s part of who I am. You don’t have to trust how my lips move; all you have to do is watch how my feet have moved for the last 39 years, and you know who Tony Robbins is. I don’t want to wait till I die to make a difference.
What do you do to kick back and relax?
I spend two weeks a year at the resort I own in Fiji. I go scuba diving, snorkeling, hiking, and I play squash. I also like to snowboard. I do a lot of crazy things. I’m an active guy.
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