It’s how Tony Robbins rolls. The entrepreneur, author and “America’s No.1 life and business strategist” (self-described) is undeniably great at sensing opportunity, and if he arrives in your particular business space, you’re probably on to something, or doing it horribly wrong.
He made a controversial splash in the financial industry last December when, coinciding with the release of his latest book, Money: Master the Game, he delivered a keynote presentation at compliance consultant MarketCounsel’s annual conference in Las Vegas.
While viewed enthusiastically by some, skeptically by others, his arrival heralded greater interest and scrutiny from the public at large into long-held industry practices. An informal survey of advisor attitudes towards Robbins in preparation for this interview found that, whatever their personal biases, all agreed Robbins’ message would generate more questions from clients, many of them difficult.
Calling it a “disruptor,” Tony Robbins recently joined America’s Best 401(k)—which bills itself as a low-fee 401(k) provider—first as a client and then as a board member and partner.
Robbins sat with 401(k) Specialist for straight talk about the reasons for the book, his plans in the 401(k) space and the “unconscionable” practices of too many industry players. As you might imagine, he had a lot to say, a portion of which is below.
What opportunity did you see in the 401K space that attracted you to it?
Financial organizations are taking advantage of people’s lack of understanding. Part of why I wrote Money: Master the Game was this idea that most people are kind of the chess pieces, not the chess players. It’s not because they are not smart; it’s because we all of have full-time jobs and we’re trying to raise our families. Some of us are trying to run businesses and be part of a career and do things in our communities. Where do you have time to be an investment expert? How do you get into the game without knowing the rules? It’s just deadly for people.
What, specifically, struck you about the industry?
I started studying 401(k)s and I really had no interest before, but I realized that this is where everyone has their money. John Bogle got me quite passionate about the impact of fees. As you well know, 96 percent of mutual funds don’t match the market over a 10-year time period. The few that do, the 4 percent that do, good luck in finding them. If you play blackjack and you get two face cards and your inner idiot says “hit me,” you’ve got an 8 percent chance of getting an ace. You’ve got a 4 percent chance of getting the right mutual fund that will outperform over the long-term. On top of it, when you put in all of the expenses and look at it, you go “this is insane.” That made me absolutely nuts.
You take a pretty hard run in the book at active managers. Why?
In the short-term, there are winners, but if you look at it empirically—and I interviewed Nobel laureates and everyone from Ray Dalio to Carl Icahn—certainly there are [portfolio managers] that can do it, but the average American doesn’t have access to them. They sure as hell don’t have access to them in their 401(k). People are living longer than at any time in history. The No. 1 fear of baby boomers is not death; death is a far distant No. 2. It’s that they are going to run out of money while they are alive. It’s a good fear because, unfortunately, it’s going to be accurate. The one thing that could change it—you know a one percent change in fees is basically a decade for the average person, 10 more years of money. To take that casually and hope that someone that statistically has never proven, consistently over a decade, that they can bring you more value for what you’re paying, is to me unconscionable. Whether you are a conservative or a liberal, I think this is just wrong. It’s sophisticated people taking advantage of people who are unsophisticated on this subject. They might be very sophisticated business owners, but they are not sophisticated when it comes to this particular subject; 401(k)s, or mutual funds or really just the whole investment industry.
Bogle, as well as Alicia Munnell of the Center for Retirement Research at Boston College, say people should not be allowed to manage their own retirement; the stakes are just too high. Do you agree with that? Do you think we need to go that far?
I’m personally a free-market guy and I think people should have their own choices, but when it comes to this area, it is a ticking time bomb, as you well know. It’s a demographic tidal wave that is going to hit us. I think it is going to hit us anyway, and I don’t think you can solve it all now. Personally, I’m normally against government regulation, but speaking as an individual, I really think—I’m trying to educate as many people as possible—but I think it’s such an important component, that there probably needs to be something of that nature. The challenge will be the devil in the details, and if it gets bastardized as people try to dive in and figure out who’s going to control it and who makes those decisions and where do people go that don’t have the skillset. I think that’s the real challenge that we face, much less getting it passed. I don’t see us getting it passed. These rules are going to be chewed up as much as possible by lobbyists as quickly as they possibly can and we’re already seeing little cracks.
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