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Speaker 1

00:00

We'll be right back. -♪ ♪ -♪ ♪

Speaker 2

00:04

Money. You know, the thing everyone likes to think they're good with, despite the evidence provided in every episode of The Suzy Orman Show.

Speaker 3

00:12

Tina, what do you want to buy?

Speaker 4

00:14

Hi, Suzy, Thanks for taking my call. I'd like to buy a Mercedes E550.

Speaker 3

00:19

It's about $1,400 a month. That is true. You are denied.

Speaker 3

00:23

Oh.

Speaker 4

00:24

I want to get a Louis Vuitton to the L'EPM bag.

Speaker 3

00:28

So denied. So denied. It's not even funny.

Speaker 3

00:31

I'm going to deny you again.

Speaker 4

00:33

I would like to buy a study abroad in Iceland. I want to go to the famous elf school in Reykjavik and get a certification as an elf spotter.

Speaker 3

00:44

Here's the thing, I'm denying you.

Speaker 2

00:47

Yeah, of course she is. Because no 1 should be spending $4,000 to get an elf spotting qualification. In fact, if you go to lastweektonight.com right now, you can print out a free official elf spotting certificate, which I promise you is every bit as valid as the most expensive elf-spotting education.

Speaker 2

01:06

Now go spot some elves. Now, 1 of the big reasons that Suzy Ullman denies so many people is because she thinks we should all be saving for our retirement. And before we go any further, it is important to acknowledge there are people who just do not have the money to do that for systemic reasons that we've addressed on this show before and will doubtless address again on Johnny O's sad-tastical circus of misery and math. But tonight, let's talk about those who can save for retirement, the target audience for ads like this.

Speaker 5

01:39

We asked people a question. How much money do you think you'll need when you retire? Then we gave each person a ribbon to show how many years that amount might last.

Speaker 6

01:47

I was trying to, like, pull it a little further, and I was trying to stretch it

Speaker 7

01:50

a little bit more. Got me to 70 years old. I'm gonna have to rethink this thing.

Speaker 2

01:55

That's actually a pretty creepy ad. Because it's basically people walking toward the date of their own death. The only way it could have been creepy is if at the end of their ribbons, it said exactly how each person was going to die.

Speaker 2

02:10

But look, it is true. It is true that as we all live longer, you should absolutely save for retirement if you can. And many do. We currently have around 24 trillion dollars sitting in retirement assets.

Speaker 2

02:22

And that figure doesn't even include the wealth we have in stockpiled beanie babies. So, let's call it 24 trillion and 32 dollars. -$32. -$32.

Speaker 2

02:31

And a lot of that money is in the hands of financial services companies. So let's talk a little about how they work, which I know sounds boring, but as a favor to your future self, it is worth watching this for 20 minutes, because you could easily make small mistakes which could seriously cost you down the line. So let's start with financial advisors. They are the wholesome, friendly-faced experts that you see in ads like this 1 from Chase.

Speaker 8

02:57

Through all life's milestones, your trusted advisors are with you every step of the way. Congratulations.

Speaker 5

03:03

Thanks for helping me plan for my retirement. You should come celebrate with us. I'd be honored.

Speaker 8

03:08

Plan for your goals with advisors you know and trust.

Speaker 2

03:11

Wait. That is a clear example of deceptive advertising, because nobody invites their financial advisor to a wedding. If cousin Barbara finds out that she didn't get an invite but your chase guy did, she's gonna flip her shit on you!

Speaker 1

03:27

-♪

Speaker 2

03:27

Yeah! ♪ -But there is something you should know about financial advisors. Even their name means less than you might think. The Financial Industry Regulatory Authority warns customers to be aware that financial analyst, financial advisor, financial consultant, financial planner, investment consultant, or wealth manager are generic terms or job titles and may be used by investment professionals who may not hold any specific credential.

Speaker 2

03:52

So, financial analyst is just a fancy term that doesn't actually mean anything. Sort of like brand ambassador, or the John Oliver effect. Meaningless. Completely meaningless.

Speaker 2

04:04

But even many well-credentialed financial advisors are paid on commission. So, if they recommend something for you, it may be because they stand to make money. In fact, Sometimes they're actively incentivized not to act in your best interest. Take annuities.

Speaker 2

04:21

Now, certain types of those can be very complicated investment products that have high fees and would only be appropriate for certain types of portfolios. But, some financial advisors push them hard. Just look how Suzy Ullman reacts when a caller who had just inherited $80,000 asked for some advice.

Speaker 4

04:38

We have talked to a financial advisor and he recommended that we put it in an annuity.

Speaker 3

04:43

I knew it. I was going, Before you said that,

Speaker 8

04:46

I was gonna say, wait, wait, let me tell you, I can tell you what the financial advisor said. Did they, did

Speaker 3

04:52

that advisor also say to you that if you put that $80,000 in there, I'm gonna make about $4,000 of commissions? Did he or she happen to tell you that as well?

Speaker 2

05:02

Ooh, he or she. Thank you, Suzy Orman, for pointing out disingenuous financial swindlers can be women too. Hashtag lady crimes, hashtag feminism.

Speaker 2

05:12

--LAUGHTER, APPLAUSE --And, yeah, why not? And... And brokers pushing annuities may not just be getting money. Last year, Elizabeth Warren released a report on sales perks in the annuity industry ranging from free cruises to luxury watches to, and this is true, this tacky Super Bowl-style ring, which is absolutely ghastly, but I guess, at least it makes it easy to spot brokers that you shouldn't work with.

Speaker 2

05:39

Hey, nice ring, Irwin, but I'm gonna guess that you didn't get that playing runny back for the Green Bay Packers. Now, generally, it is currently legal for financial advisors to put their own interests ahead of yours, unless, and this is interesting, they are what's called a fiduciary. Because not all financial advisors are bound to act in your best interest, but fiduciaries are. Which is a bit weird.

Speaker 2

06:03

It's like finding out that only some restaurant waiters are forbidden from ejaculating in your soup. Hey, why is it up to me to ask you which kind you are? I'm sending this chowder back. I'm not risking it.

Speaker 2

06:16

You take it back. But financial advisors are just 1 part of this. If you are lucky, your job offers a 401K retirement plan. And if it does, you should probably take advantage of it.

Speaker 2

06:29

But you should also know they can be a goldmine for financial service companies. And while it's not unreasonable for them to get paid for providing a service, there can be a lot of different fees.

Speaker 9

06:40

There are legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finders fees, and the list goes on and on.

Speaker 2

06:49

I honestly wouldn't be surprised if they also had an elf-spotting fee, but remember, thanks to your new certification, you no longer have to pay it. Go spot some elves. And look, seemingly tiny fees can really mount up thanks to something called compound interest.

Speaker 2

07:07

Now, whenever retirement companies like Prudential mention that, it's always as a positive, that if you start with a really small investment, by the time you're ready to retire, it will have substantially grown.

Speaker 5

07:18

It's hard to imagine how something so small can help with something so big. But if you start putting that toward your retirement every week and let it grow over time for 20 to 30 years, that retirement challenge might not seem so big after all.

Speaker 2

07:41

Holy shit! Is it just me, or did that last domino fall really hard? That might be the most upsetting commercial involving dominoes that doesn't involve the phrase, -"Cali Chicken Bacon Ranch." -$1.50.

Speaker 2

07:54

But compound interest works both ways, meaning while your money adds up, your fees can really add up, too.

Speaker 10

08:02

Assume you're invested in a fund that is earning a gross annual return of 7%. They charge you a 2% annual fee. Over 50 years, the difference between your net of 5%, the red line, and what you would have made without fees, the green line, is staggering.

Speaker 10

08:19

You've lost almost two-thirds of what you would have had.

Speaker 2

08:23

Two-thirds of what you would have had is gone. So think of fees like termites. They're tiny, they're barely noticeable, and they can eat away your f-king future.

Speaker 2

08:34

And 1 place where your 401K can be full of termites is the funds themselves. Generally speaking, you can choose between low-fee index funds, which basically just try to match the average returns of the stock market, or for a higher fee, you can get an actively managed fund, with experts who will pick and choose stocks for you, trying to beat the market. And companies that sell active funds really believe in themselves.

Speaker 11

08:58

At MFS Investment Management, We believe active management can protect capital long-term. Active management can take calculated risks. Active management can seek to outperform.

Speaker 11

09:13

Because active investment management isn't reactive, it's active.

Speaker 1

09:18

-♪ 0000000000000 ♪ Okay. -♪ 000000000000000 ♪

Speaker 2

09:23

That's not so much a coherent commercial as it is a drinking game where you do a shot every time he says the word active. But the problem with active management is that even many Wall Street experts find it difficult to consistently beat the market. And there is sometimes embarrassing evidence of this, like when a group of professionals were pitted in a stock picking challenge against a cat named Orlando.

Speaker 12

09:46

Orlando's method? He throws a toy mouse at a grid of companies. Very scientific.

Speaker 12

09:51

Last year, Orlando's picks returned nearly 11%, while the pros, he gained just 3.5%. Oh, my God!

Speaker 2

10:01

Let's all agree that the Wolf of Wall Street would have been way better starring that cat. Of course, you know, instead of drugs, there's a plot hole, because instead of drugs, his downfall would come when someone busts out a laser pointer in a meeting. But that cat wasn't a complete anomaly.

Speaker 2

10:21

There is growing evidence that over the long term, most managed funds do no better and often do worse than the market. It's basically the plot of Charlie and the Chocolate Factory. If you stick around doing nothing while everyone around you f**ks up, you're going to win big. And the thing is, this is not a secret.

Speaker 2

10:41

Even some of the people charging those fees know that this is the reality.

Speaker 6

10:46

1 of the ultimate dirty secrets of the fund industry is that a lot of people who run other fund companies own index funds in their own accounts and don't talk about it. Unless you put a couple of beers in them.

Speaker 2

11:06

Wow. Sometimes I invest in index funds, might be the least interesting secret anyone has ever divulged while drunk. It's right up there with, my favorite movie is The Constant Gardener. And 1 time in college, I got totally wasted and read the entire Wikipedia page for rope.

Speaker 2

11:25

So... So... So don't tell anyone. Don't tell anyone.

Speaker 2

11:31

So... So between financial advisors, high fees, and underperforming active management, the entire retirement plan industry is a potential minefield. And you need to pay attention. And the reason that we know about this is earlier this year, we actually decided we wanted to set up a 401K for our employees.

Speaker 2

11:51

And you might want to learn from our experience, because here's what happened. We reached out to the production company behind this show, Avalon Television, and we asked them to take care of it. A couple of months later, they told us, we have your plan, it's provided by John Hancock. And we said, okay, fine, and we went back to work.

Speaker 2

12:07

By which I mean, we went back to Googling teacup pigs eating ice cream. But, but then, but then, in March, Representatives came to our office and gave our staff presentations on their new plan. It's the kind of thing no 1 in their right mind wants to sit through. Honestly, most of us spent it on our phones, Googling teacup pig, comma, top hat, comma, shopping, comma, beer, and boom.

Speaker 2

12:31

Boom. We hit the f*****g jackpot. But, unfortunately for John Hancock, our researchers started going through the documents and started adding up the fees, which came to a combined 1.69%. And that was before we paid a $24 per person per year fee and the fees on our funds.

Speaker 2

12:51

So, they asked John Hancock why the fees were that high. And we were told that it was normal for a start-up plan at a new company and Hancock gave us a lower number that it would come down to over time. And we said, okay, okay, that sounds fine. And our researchers said, wait, no, that is not fine.

Speaker 2

13:08

That number is still higher than experts have told us that we'd want it to be. Look, leave this, we'll figure it out. Why don't you all just go back to Googling teacup pigs in teacups, or whatever the fuck it is that you do all day," and we went, -"Oh, my God, is that a thing that exists?" And yes, it was! Yes, it was!

Speaker 2

13:25

That was the rest of our afternoon right there. Meanwhile, our researchers took the Hancock contract and sent it to financial experts who flagged an intermediary fee to a broker. 1 percent the first year and half a percent after that. And remember, that could add up.

Speaker 2

13:43

We did some very rough estimates and with 35 employees contributing just $6,000 a year, after 30 years, half a percent could add up to roughly a million dollars. That number was so high, you'll never guess what happened. Janice in accounting actually gave a f**k. I'm serious!

Speaker 2

14:02

She's a changed woman now. She bought cupcakes for the break room yesterday, and she adopted a kitten. She named him Tuppence. So, anyway, we asked, who the fuck is this broker?

Speaker 2

14:15

And it turned out he was a guy Avalon had agreed to pay to help them set up and support our plan. And we asked him, why didn't you present us with low-cost, low-frills plans, like the 1 from Vanguard, and what are we paying you so much for? And He said, well, first of all, our plan was probably too complicated for Vanguard, and that he did a lot of things for us, like acting as our financial advisor. Although, as we now know, that term doesn't necessarily mean much.

Speaker 2

14:41

In fact, if you go to our website right now, you can print out a free, official financial advisor certificate, and there you go. Congratulations. You are 1 too. Well done.

Speaker 2

14:52

Well done. And although our broker has other credentials, when we asked if he was a fiduciary, he, unsurprisingly, said no. As for his fees, he said they would come down, and last night he sent us an Excel spreadsheet showing how they could come down as our fund assets grew. Unfortunately, in that spreadsheet, he made an error which meant that our fund's interest didn't compound correctly.

Speaker 2

15:16

And when we pointed that out to him, he sent a second sheet showing that his original math had been off by more than 10000000 dollars. Which does not inspire confidence in the man who, as he repeatedly reminded us, was helping us navigate our very complicated plan. Now, our lawyers at this point say that I have to tell you that both the broker and John Hancock claim their fees would come down, that they're competitive within the industry, and worth it for the services they provide. Although you should know, We decided early on to pay almost all of the fees for our employees, because we were so...

Speaker 2

15:49

...Embarrassed about the situation that we got them in. And we're going to be leaving both Hancock and the broker, and I'm guessing after they've seen this show, they will be happy to let us go. Just so you know, we'll be replacing both of them with that stock-picking cat, because he seems to really know his shit! The whole point of telling you this...

Speaker 2

16:12

The whole point of telling you this is If you don't pay close attention, all of this can really get away from you. But here is the good news. It doesn't actually have to be that complicated, and it might be getting simpler. Back in April, the Department of Labor issued a final rule requiring that all advisors handling retirement accounts act as fiduciaries beginning next year.

Speaker 2

16:34

And that is great, because the financial services industry fought this rule hard. They even launched terrible attack ads. You might have seen 1 like this on TV.

Speaker 7

16:44

It's these new regulations they're pushing in Washington that worry me. They want to make it really hard to get advice from our financial advisor.

Speaker 12

16:50

No more help from Ann? Even with our IRA and 401K savings?

Speaker 7

16:54

Well, only if we want to pay a lot more.

Speaker 12

16:56

Oh, we'll never get the information we need. We're gonna call our senators.

Speaker 2

17:01

Okay. Okay. To be honest, my only takeaway from that ad is that that guy is definitely f*****g Anne. It's so obvious.

Speaker 2

17:09

It's... You need to leave him non-threatening wife character. Kick him to the curb! And while the rule has gone through anyway, 5 lawsuits have been filed by financial services groups attacking it, and legislators in the House and Senate have passed a resolution trying to overturn that fiduciary rule.

Speaker 2

17:28

Although, just a few days ago, the president did veto it. And by the way, that is something I think we're probably going to be seeing a lot more of, because President Obama's last year in office seems to be moving from bipartisan solution to, buy Felicia. And... And look, I am not saying all of this is not complicated.

Speaker 2

17:48

We spent weeks just trying to understand our own 401K plan. But for your average person trying to save for retirement, it doesn't need to be this confusing. The truth is, as long as you remember a few key things, you're probably going to be fine. And we wanted to outline them for you.

Speaker 2

18:05

So whenever you are ready or able to save for retirement, please come back and replay this video from this exact spot. Enjoy.

Speaker 13

18:16

Hi, I'm Billy Eichner, and I'm here with a bunch of f***ing ribbon. And I'm using it to show people how much money they needed to save for retirement. Aww, look at you!

Speaker 13

18:25

You're so precocious. 1 tiny thing? These are fees. That's your record keeping fee.

Speaker 13

18:31

That's your rap fee. That's your monthly participation fee. That's your 12B-1 fee. That fee goes to some middleman you don't even know about.

Speaker 13

18:38

And that's your fee for not knowing about a fucking fee fee. And here's what you've got left to retire on.

Speaker 5

18:43

Try ribbon dancing with this.

Speaker 13

18:45

You look like an idiot. The problem is that idiots like Karen here make shitty choices when it comes to what to do with their money. Karen, if you had $4,000, would you invest it in your 401K or would you go to the elf school in Reykjavik?

Speaker 13

18:56

Elf school? No, you put it in your 401K, you idiot. The only elf you should be studying is Kristen Chenoweth. She's a delight!

Speaker 13

19:03

Come on out here, Kristen Chenoweth!

Speaker 8

19:05

Hi, Billy. I love elves. And who wouldn't want to go to Reykjavik?

Speaker 13

19:08

Okay, it's not the Tony Awards. Go. Shoot.

Speaker 13

19:10

Shoot. That was Kristen Chenoweth. The point is, The best advice most experts can give you is to do 5 things. Number 1, start saving now.

Speaker 13

19:21

In fact, start saving 10 years ago. Invent a time machine, use it to go back, and start saving money. Then... Kill baby Hitler.

Speaker 13

19:31

Next, average people like you, and let's face it, you're very, very average, should probably just invest in low-cost index funds and leave it alone. You should check on it about as often as you Google whether or not Gene Hackman is still alive. About once a year. And he is!

Speaker 13

19:47

He's still alive! He's writing novels now! Third thing, if you have an advisor, ask if they're a fiduciary. If they say no, run.

Speaker 13

19:56

If they say yes but they're wearing a tacky Super Bowl ring, run. If they say yes but they're wearing a class ring, run!

Speaker 5

20:02

That has nothing to do with this. I just think it's very strange

Speaker 13

20:05

when a grown man is wearing a class ring. Fuck is a fiduciary. Number 4, as you get older, gradually shift your investments from stocks to bonds.

Speaker 13

20:13

Here's a way to remember it. Every time they pick a new James Bond, gradually switch more of your stocks into bonds. Then go back to wondering if Daniel Craig is actually attractive. What do you think, Doris?

Speaker 8

20:24

Oh, he's so handsome.

Speaker 13

20:25

No, he's not. He looks like a blonde chimpanzee in a tux and you know it. Ugh, I wish this was veep.

Speaker 13

20:35

Finally, try to keep your fees like your milk under 1%, because just like interest compounds, so do fees. And even 1 10th of 1% can really f*** you. Like this. Oh, shit.

Speaker 13

20:54

Kristen, watch out!

Speaker 8

20:55

What?

Speaker 13

21:03

Oh, that reminds me. 1 last tip. Don't forget to die.

Speaker 8

21:07

Billy, I'm not dead.

Speaker 13

21:09

Oh, Kristen, you're even shorter now. Ugh, stop coughing. Disgusting.

Speaker 13

21:14

Excuse me. Retirement. No Christian channel was harmed to the filming of this piece.