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Financial Planning > College Planning

Ric Edelman — Media-Savvy Advisor: The 2017 IA 25

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Ric Edelman is possibly the only financial advisor known by people who don’t work with one. He has a syndicated radio call-in show, a TV series on public television and nine books to his name, many best sellers.

Most important for financial advisors, he’s run his financial advisory firm for 30 years, growing it from a small firm that he founded with his wife, Jean, to a financial powerhouse. The firm manages about $18 billion in assets distributed among almost 77,000 accounts belonging to over 30,000 clients and sponsors seminars across the country. It employs about 125 advisors working in roughly 40 offices across the U.S. and serves, in addition to individual investors, 401(k) plans and institutional investment accounts.

Along the way, Barron’s named Edelman the No. 1 financial advisor three times since 2009, as well as the No. 2 advisor and No. 3 advisor one time each. Edelman took his firm public, then private, selling a majority stake to Lee Equity Partners, which subsequently sold its stake to another PE firm, Hellman & Friedman – the firm that helped take LPL Financial private.

(Related on ThinkAdvisor: Edelman Financial Services Names Former LPL Exec as CEO)

Last May, Edelman, who remains the firm’s largest single shareholder, gave up his role as CEO to become executive chairman and focus on financial education and advice. Ryan Parker, a former LPL executive, became the new CEO.

The latest move by Edelman, now 58, is not surprising given his focus on the individual investor and putting clients first. He started his career as a financial journalist and investor frustrated by his search for a financial advisor, which might also explain his commonsense approach to financial advice.

“I did something in the 1980s and early 1990s that can’t be done today,” says Edelman, who recalls that when he started in radio with his own show in the early 1990s after guesting on others, he became a member of the SAG-AFTRA and was paid for his show.

“That model doesn’t exist now,” says Edelman. “The radio industry sells that air time as an infomercial.” In other words, an advisor today would have to pay to have a radio show, not the other way around.

Edelman recommends that rather than trying to become a “media broadcaster” like himself, an advisor today should be a “narrow caster,” specializing in a certain type of client

“Decide you will be the expert of financial planning for plumbers,” says Edelman.” Go to their conventions, write articles for plumbing magazines. Over time you will develop a reputation for expertise in that specialty.” That’s the key to long-term success, says Edelman.

He also suggests that advisors have specialists in their own shops. “If you don’t have the skill set of a communicator, hire someone who does.” Edelman has writers, meeting planners, graphic designers and digital experts as well as financial planners working at his firm.

As for the future success of the financial advisory business, Edelman says that “human advisors have to adopt technology to deliver outstanding financial services, and robo-advisors have to provide more than just asset allocation,” adding human advisors to their offerings.

(Related: Bionic Advisors: Envestnet and the Kasparov Principle)

Edelman himself is heavily focused on financial education, in addition to running his business. His firm holds seminars around the country on retirement and webinars on related topics including Social Security, estate planning and retirement planning, as well as on how emotions impact financial decisions and how holding a large long-term mortgage can help borrowers achieve long-term security.

The latter is an example of what Edelman calls his “unconventional wisdom.” Contrary to what others might suggest, Edelman recommends that homeowners avoid paying off a mortgage early and instead take the money that would have gone toward those payments and invest it in a low-cost, passive diversified portfolio.

The same rationale is behind his contention that retirement savers not convert a traditional IRA into a Roth IRA. Paying taxes on the converted amount now in order to save taxes later “won’t increase your wealth, so why pay a tax right now that you don’t have to pay?” writes Edelman on his website.

(Related on ThinkAdvisor: Ric Edelman Unveils Novel Social Security Supplement Plan)

The most recent – and public – example of Edelman’s unconventional views is his proposal for the T.R.U.S.T. Fund for America (Tomorrow’s Retirement for the U.S. Today Fund ) to support the Social Security Trust Fund, which will run out of money by 2034 if no policy changes are made. In that scenario, retirees would still receive Social Security because workers will continue to pay into the program, but benefits could be reduced by about 20%.

Under Edelman’s proposal, the federal government would set aside $7,000 for each child born in the U.S. and repeat that annually for 35 years. At the current birthrate, that would cost the government almost $28 billion annually.

The money would be placed in an investment portfolio determined by a blue-ribbon panel appointed by the president and Congress and, after 35 years, the government would be paid back its initial outlay, which would fund a program for children born during the second 35-year cycle. Edelman says the program would cost less than $1 trillion, compared to over $12 trillion for the program proposed by the Bipartisan Policy Center’s Commission on Retirement Study.

Another example of Edelman’s outside-the-box thinking, at least for financial advisors, is his latest book, “The Truth About Your Future: The Money Guide You Need Now, Later and Much Later.”  It focuses on technology, specifically “exponential technologies” like artificial intelligence and nanotechnology which, he says, will affect how people work, invest, save for college and plan for retirement, and how long they live. These technologies will impact businesses, including financial advisory firms and their clients’ financial plans, which is why Edelman recommends making multiple financial plans: for now, later and much later.

— Read Frontrunners: The 2017 IA 25 on ThinkAdvisor.


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