Today, I spoke to Ric Edelman, who ranks among America’s 100 top financial advisors by Barron’s, and is the #1 New York Times best-selling author of The Truth About Money (4th edition). In this interview, Ric discusses how he got started in the business, how he differentiated himself from other financial advisors, challenges people have with their money, and more.
How did you get started as a financial advisor?
My degree is in communications. I entered the field in the early 1980s, writing for a publication in the financial trade press called Financial Product News. I didn’t realize it at the time, but I’ve come to since realize, after years of conducting training sessions for thousands of financial advisors, that I benefited from having a journalism background instead of a business degree. I’ve discovered that most financial advisors merely repeat what they’re told by their college professors. As a result, they tend to offer the same advice without questioning whether that advice is valid. It reminds me of all the physicians who engaged in blood-letting merely because some other physician told them it would cure a fever.
In journalism school we’re not taught about subject matter. Instead, we’re taught how to ask questions about any subject – the most important question being, of course, “Why?”. We’re then taught how to explain the information we’ve gathered in plain English. Most advisors, I’ve learned, struggle with conveying complex financial topics in ways that their clients can understand.
It was my writing about financial products that got me started in this field. It occurred to me that my wife Jean and I should get advice, so on the recommendation of a friend, we met with a local financial advisor for help with buying a home and investing. What a disappointing experience! The advisor gave me the stereotypical responses that anyone recites after taking economics or business classes, but I wasn’t buying it. When the advisor said that I should pay off my mortgage as soon as possible, I asked, “Why?” and he couldn’t give me a good answer. So I did my own research – and discovered that the common advice he and others in the financial community offered was completely wrong. That’s when Jean and I decided to find the right answers for ourselves, and then we built our own financial planning and investment management practice so we could share what we’d learned with others.
Consumers regularly regard my advice as common sense, practical and easy to do. But I’ve been branded by the advisor community as “unconventional” and “controversial” because my advice differs so sharply from them. One trade magazine that profiled me acknowledged I am perhaps the most successful advisor in the country – but asked, “Is that a good thing?” So I’ve gotten used to being branded as different from other advisors, and I credit my journalism and communications training for that.
Since there are so many financial advisors, how did you differentiate yourself and rise to become the #1 advisor by Barron’s?
We believe strongly in providing substantial amounts of financial education. This approach has always been an integral part of our service – even from our beginnings. Back in the 1980s, when our practice was new, my wife Jean and I presented college planning seminars to elementary school PTA groups. We had to convince each organization’s president why parents of young children needed this information, because they thought college planning wasn’t important until students reached 11th grade!
We expanded our educational efforts dramatically over the years. We now provide a nationally syndicated radio show every week, as well as dozens of seminars and a web site filled with financial information and education. I’ve also written seven books on personal finance (two won Book of the Year awards and one reached #1 on the New York Times bestseller list), and this Spring, we are launching a new weekly series for Public Television. We’re also actively involved in the financial literacy movement, including Jump$tart Coalition for Personal Finance Literacy and the American Savings Education Council. I’ve testified several times before Congress and was appointed by two U.S. Presidents as a delegate to all three National Summits on Retirement Savings. I don’t believe any financial advisor devotes as much effort to improving financial literacy as we do.
Although we regard our work in this area to be important for the nation and a service to the community, our activities have probably helped our firm grow. Although most of our clients come to us via referral from other happy clients, there’s no question that some people come to us after seeing me on TV, hearing me on the radio, attending a seminar, visiting the web site or reading one of my books. Few other advisors are active in these areas.
It’s important, though, to make an important distinction. Although our educational activities might cause a consumer to contact us, those efforts are not the reason why people choose to hire us, or to stay with us for so many years. The real reason our firm has become successful is because my colleagues and I deliver outstanding financial planning and investment management services. We not just selling investments to generate commissions like brokers do. Instead, we earn a single management fee – our clients pay no brokerage commissions or trading expenses – by providing our clients advice to help them achieve their financial goals. We listen carefully and use our deep understanding of today’s economic issues to offer comprehensive advice specifically tailored to each client. And most importantly, we work as a team, assuring each client that they advice they receive is the same that they would receive from me.
There’s one additional reason we’re different from other advisors. Most require that clients invest $500,000 or $1 million, but we make investing available to people who are not as wealthy. Although many of our clients invest millions of dollars with us, we welcome those who have as little as $50,000 per household. We actually accept individual accounts as low as $3,000 – and we know of no other advisory firm in the nation that has such a low minimum.
The Edelman Managed Asset Program® brings clients our successful long-term methodology, featuring extensive diversification, dynamic security selection and a daily rebalancing review. As a result, our clients’ portfolios are comparable to the ones used by big institutional investors. Even though you might not have millions of dollars to invest, you still get to enjoy the same opportunity: lower costs, reduced volatility, greater consistency and competitive returns. This great combination has helped make us one of the largest and most popular independent investment management firms in the nation.
What are people’s biggest challenges with managing their money?
- Procrastination. It’s easy to put this off until tomorrow, and many people do. But it’s equally important to get started now, because time is the most important tool you have to help you achieve your goals.
- Being overwhelmed. Between the number of investment choices, the unknowns of the future and all the opinions you constantly hear, some people just give up instead of sorting through it all.
- Acting emotionally when making financial decisions. People got greedy during the tech boom of the ‘90s and they panicked during the recent credit crisis – essentially buying high and selling low. People also make emotion-laden decisions when dealing with cars, college, homes and mortgage – pretty much every decision is influenced by emotion, and most of the time those emotions cause people to make bad decisions.
For all these reasons, people should hire an independent, objective financial advisor instead of trying to do it all by themselves.
When your first book was published, how did it impact your business?
It took me three and a half years to write first book, and it was rejected by every publisher I sent it to. I couldn’t even get an agent to represent me. Everyone said the book was too long and that no one was interested in personal finance. At the time, I was teaching personal finance at Georgetown University, and G.U. Press agreed to publish the book – after telling me the book wasn’t long enough! (I had to add several more chapters!) When it was released, it became an instant #1 bestseller, and remained on the best-selling list for 70 weeks. It set several publishing records and was named Book of the Year by Small Press magazine. After that, publishers started knocking down my door, as they say, and I had no trouble finding a terrific agent to represent me.
There’s no question that being the guy who wrote what many consider the “classic” in personal finance has helped my credibility. The book is unfettered by time and space, so I can say everything without worries that a commercial is approaching (like radio) or that I’ve reached the text limit (like my newsletter). The long form lets readers get to know me, and that helps them decide if they’d like to hire us.
Having said that though, I’d like to offer two important caveats to advisors thinking of writing a book. First, it’s incredibly time consuming, so make sure you can devote the time it needs. Second, make sure you’re a very good writer – because if you’re a bad writer, people will assume that you’re a bad advisor. This is another example of how my communications and journalism training has served me well.
You have a large platform. Why did you select a radio show as your main platform? How does it help your brand?
I love all forms of mass communication; each has its advantages. Talk radio is called “theater of the mind” because you get to use your imagination since there is no visual element. But television is great because the video lets me illustrate concepts that are difficult to express verbally. Books are wonderful because I have all the space I want to make a point. Newsletters are current, and don’t become out of date like a book can. And seminars are perhaps my favorite because I get to connect immediately and constantly with the audience, something I can’t do in other media. But nothing can replace the joy and value of meeting one-on-one with a single client, working with them for years as they get their kids through college, and as they enter and enjoy retirement. Of all my activities, that is by far the most fulfilling.
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Ric Edelman ranks among America’s 100 top financial advisors by Barron’s. In 2009 and 2010, Ric was ranked the #1 independent financial advisor in the nation by Barron’s*. In 2004, Ric was inducted into the Financial Advisor Hall of Fame, ranked the #1 advisor in the nation by Research Magazine for his focus on the individual client and ranked #42 on Registered Rep magazine’s list of “America’s Top 50 Advisors.” Inc. magazine three times named the firm the fastest-growing privately-held financial planning firm in the country. Ric is the #1 New York Times best-selling author of The Truth About Money (4th edition). His other books include Ordinary People, Extraordinary Wealth and his latest book, Rescue Your Money. The Truth About Money with Ric Edelman can be heard on radio stations throughout the country.
