The Free Steak Dinner

I went to one of those free dinner seminars last fall. You know the kind. Nice restaurant. Open bar. A guy in a blue blazer with a slideshow about “protecting your retirement.”

I didn’t go because I needed advice. I went because the guy sitting across from me at poker said he was going, and I wanted to see the pitch for myself.

Forty-five minutes later, I watched a room full of smart, successful men line up to hand over their contact information. The man next to me was already filling out a form to schedule a “free portfolio review.”

I drove home angry.

Not at the presenter. He was doing his job. I was angry because the men in that room didn’t know the questions they should have been asking. And nobody in their life had ever told them.

That’s what today is about.

The word is fiduciary.

A fiduciary is legally required to put your interests ahead of their own. That sounds like it should be obvious. It isn’t. Most of the people calling themselves “financial advisors” are not fiduciaries. They operate under something called the suitability standard, which only requires that what they sell you is “suitable” for your situation.

Suitable is a low bar. It means the product isn’t wildly inappropriate. It doesn’t mean it’s the best option. It doesn’t mean there isn’t a cheaper version that does the same thing. It just means it won’t get them sued.

Ask anyone giving you financial advice one question: “Are you a fiduciary?” If they hesitate, hedge, or change the subject, you have your answer.

Most advisors charge about 1% of whatever they manage for you. On a million-dollar portfolio, that’s $10,000 a year. Every year. Whether the account goes up or down.

But that’s just the fee you see. Inside the funds they pick, there are expense ratios—the cost of running the fund itself. Some charge 0.03%. Others charge 0.80% or more. Over twenty years on a million-dollar account, the difference between a cheap index fund and an expensive actively managed one can cost you over $100,000.

Then there are the products with fees baked into the structure. Variable annuities are the worst offenders. Surrender charges of 7% to 10% if you try to leave in the first several years. Mortality and expense charges. Rider fees. Some of these products carry total annual costs north of 3%.

Nobody tells you this at the steak dinner.

▸ They lead with fear. “The market is about to crash.” “You’re going to run out of money.” Fear is a sales tool. Good advice starts with your numbers, not your nerves.
▸ They push one product. If every conversation leads to the same annuity or the same insurance policy, you’re not getting advice. You’re getting a pitch.
▸ They won’t show you what they earn. A good advisor tells you exactly how they get paid—before you ask. If you have to dig for it, that’s a problem.
▸ They use words you don’t understand on purpose. “Principal protection strategy.” “Structured income vehicle.” That’s not expertise. That’s camouflage.
▸ They discourage second opinions. “You don’t need to shop around.” “This opportunity won’t last.” Any advisor who doesn’t want you to compare them to someone else is telling you something important.

Fee-only. That means they make money from what you pay them—not from commissions on what they sell you. There’s a difference between “fee-only” and “fee-based.” Fee-based still allows commissions. Fee-only doesn’t.

A CFP—Certified Financial Planner—is held to the fiduciary standard by their own board. That’s a good baseline. Not all CFPs are perfect, but the credential means someone is watching.

The best advisors I’ve worked with charge a flat fee or an hourly rate for a financial plan. You pay them like you’d pay a lawyer or an accountant—for their time and their thinking, not for moving your money into their products.

And they tell you things you don’t want to hear. That’s actually the most reliable sign. A good advisor will tell you no. A salesman will tell you whatever gets the signature.

Sit across from whoever manages your money and say this:

“Show me every dollar I’m paying you—your fee, the fund expenses, any commissions, any insurance charges. All of it. On one page.”

A good advisor will have that page ready. Some will hand it to you before you ask.

The ones who shuffle papers, change the subject, or say “it’s complicated”—that’s your answer. It’s not complicated. They just don’t want you to see the number.

You wouldn’t hire a contractor who wouldn’t show you the estimate. Don’t hire an advisor who won’t show you the bill.

The guy from poker—the one who went with me—called me the next week. He’d gone to the “free review.” They wanted to move his entire IRA into a variable annuity with a seven-year surrender charge.

He asked me what I thought.

I told him to ask one question: “Are you a fiduciary?”

He did. They weren’t.

He kept his money where it was. Found a fee-only planner the following month. Saved himself a seven-year trap and about $40,000 in fees he never would have seen.

The steak was good, though.

— Walter