In case you aren’t obsessively plugged in to the financial web/Twitter/blogosphere, mega self-help guru Tony Robbins has a new book out on finance and investing, “MONEY Master The Game.” (I’m not going to link to Amazon because I don’t want you to buy it. But we’ll get to that.) Everyone has been abuzz this week because of Robbins’ alleged wonder-portfolio inspired by Ray Dalio’s All-Weather strategy. I would give you links to everything everyone has written about it in the last 3 days, but Tadas already did so just go there and read everything if you’re interested.
What I found was that most of us talking/writing about the book hadn’t read it, and I felt like I should give it a fair shake. Robbins was supposedly encouraging low-cost index fund investing and a fiduciary standard, which are good things. So I plunked down $12.something for the Kindle version. As it turns out, I sacrificed two evenings of actually learning something and improving myself to instead struggle through a few hundred pages of misinformation.
As one would expect from a self-help guru, the book has just seven easy steps for you to master money! Yes, just seven steps! And let me tell you all about them in just a minute! No, I am not exaggerating, this is what it is like to read the book. I’m going to skip over the roughly 40% of the book that is self-help-find-nirvana-you-too-can-be-rich nonsense and try to focus on what advice is in the book. The writing feels like reading the script of a late-night infomercial, with promises of solutions that are always led into with “but wait, there’s more!” It’s lines like this one that make it hard for me to take the book seriously:
“My promise to you is this: if you will stay with me and follow the 7 Simple Steps in this book— the steps that have been distilled from the world’s most successful financial players— you and your family will win this game. And you can win big!”
One of Tony’s recurring themes is that he is opening a door to the public that was previously closed to all but the top 1%. In general, I really hate this concept. Everyone wants to believe that rich people are getting special treatment from the investment industry, which just isn’t true. Most of the time, they are just getting gussied-up, fee laden, complex products that underperform a simple diversified portfolio. There aren’t any financial magic tricks, ok? But this theme comes up nearly every chapter. Tony really wants you to believe that he’s letting you into the secret club of the ultra-wealthy. All for just $12! He reinforces the idea that the little guy gets screwed by bringing up high-frequency trading and other misunderstood populist ideas.
“I’ve been obsessed with finding a way to help everyday people take control of their money and fight back against a system that’s often been rigged against them. The fix has been in for years, and it hasn’t gotten a whole lot better with all those so-called reforms on Capitol Hill.”
Even when there is good advice in the book, this theme is distracting.
The single most irritating thing in the book is his constant tease about this “ideal portfolio,” a Ray-Dalio-All-Weather-Lite asset mix. He references the -3.93% drawdown in 2008 at least a dozen times in the book before he ever talks about the actual asset allocation. He does things like (inappropriately) compare this -3.93% 2008 performance to the peak-to-trough decline in the S&P from Oct 2007 to March 2009. He brings it up again and again like it is a get-rich-quick secret we can learn about if we just stay tuned! I get that this is largely his gimmick but the book does not present itself as an actual tool to help people make informed decisions. When Robbins finally unveils the portfolio we find that it is generally just a long-term-bond heavy mix that performed exceptionally well over the past 30-40 years thanks to the tailwind of the longest bond bull market in our history. But Robbins doesn’t take much time to point that out, and quickly dismisses concerns over interest rate risk. In fact I don’t remember him using those specific words at all.
Another recurring theme in the book is the “experts” that Tony has “partnered” with to bring solutions to the masses. In a world where Registered Investment Advisors are the fastest growing segment of retail investment advice, Robbins singles out Hightower Advisors as the gold standard (and I am honestly not sure why). HighTower partnered with Tony’s personal advisory firm, Stronghold Wealth Management, to offer a robo-advisor-like service, and Tony pitches it hard in the book. Stronghold states that Robbins has no financial interest in the business, which makes me wonder why he presents it as the only reasonable opportunity for people to invest well. He could talk about simple Vanguard Lifestrategy funds or services from WealthFront or Betterment but he completely ignores these options, which are all less expensive than Stronghold’s offering at 0.75%. Robbins also is quick to pounce on mutual fund fees and brokers who charge commissions but doesn’t bat an eye at 1% asset-based advisory fees. He claims more than once that asset-based fee advisors provide “conflict-free” advice which I take a small issue with.
Stronghold is just one of Robbins’ “partners,” all of whom he swears are offering products and services described in the book out of the goodness of their own hearts. These include a 401(k) provider and an annuity wholesale firm.
The other recurring pitch, other than Dalio’s All-Weather portfolio mix, is Tony’s assurance that you can make money in the markets with zero downside. He teases this for some time, and finally lets on that he is a huge proponent of structured investment products. A large section of the book is devoted to the near-mythical (alleged) benefits of bank-owned structured notes, equity-linked CDs and equity-indexed annuities. Robbins reads like a schooled product salesman, touting the wonderful benefits and quickly glossing over risks and opportunity costs of these products.
One of my core tenets is that the investment world is one of trade-offs and opportunity costs. Can you get most of the upside of stocks with zero risk? Probably not. Are there additional costs such as lost liquidity and marketability of these products? Yes! If you are going to tie up your money for 7-9 years anyhow, might you be better off just taking the market risk? Most likely. Good advisors and educators bring these opportunity costs to light, they don’t parade certain products or strategies as the be-all-end-all. He does the same thing with a Roth IRA vs. Traditional IRA conversation, holding up the Roth as a wonderful gift from the IRS and not an issue which deserves some thought and a decision that involves careful assumptions about the future.
Robbins’ favorite financial product is an equity-linked annuity with a guaranteed living benefit rider. I can tell you that I personally know ZERO fiduciary advisors who would recommend such a product with any regularity. For instance, if Robbins had done any real research he would have quickly discovered that most guaranteed income benefits simply pay back investors their own money over time and offer very little, if any benefit. He would know that there is a wealth of research done about providing stable retirement income as it relates to the 4% rule, immediate annuities, low interest rates or sequence of returns risk. He could have taken five minutes to call Michael Kitces or Wade Pfau and ask about their industry-leading research instead of calling some guys who started an annuity wholesaling business. But nuance is lost on Robbins and like many others he seems to fall for silver bullet solutions.
There is a great deal of doublespeak in the book. Robbins tells people they should invest in simple index fund strategies but also that markets are treacherous and they “should be ready to lose all of their money.” He bashes Wall Street mega firms and holds up the CEO of JP Morgan Asset Management as a saint and genius. He says that investors should own index funds but turns around and claims that “many of JP Morgan’s fund managers have beaten the market” and there are asset classes where you (apparently) should buy an actively managed fund, despite all evidence to the contrary. He tells us that the investment industry is out to get us with expensive, complex products and then recommends that we buy them anyhow. He insists that you should work with a fiduciary but also that you should consider Reg D offered private placement REITs, structured notes and equity-indexed annuities, products rarely recommended by knowledgeable fiduciaries.
To this point I am making out that there is nothing of redeeming value in the book, which is unfair. Robbins does stress several points that deserve to be acknowledged:
- He stresses the importance of working with a fiduciary advisor over a broker, which I agree with wholeheartedly.
- He brings up the topic of behavioral finance and why we are so given to make the same mistakes over and over again (he even borrows a few sketches from Carl Richards!).
- He reviews the power of compound interest and the incredible benefit of saving early and often.
- He encourages readers to put their savings strategies on autopilot to give them the best chance at saving and investing regularly.
- He reminds readers to be mindful of their spending habits.
I could spend another 1000 words on the logical fallacies, misinformation, straw men and mathematical shortcomings of the book, but I won’t. In the end I think Robbins likely has good intentions, but went about this book in a really strange way. Perhaps it is because he is foreign to the world of finance that he seem incapable of understanding things like opportunity cost or liquidity penalties. He strikes me as someone who stumbled into the investment arena and “discovered solutions” that many other professionals 1) have known about for decades and 2) are capable of seeing trade-offs and shortcomings of these “solutions.” The most disappointing part of the book is the underlying assumption that Robbins is the first person to come across investments such as non-traded REITs, equity-indexed annuities, market-linked CDs and structured notes and he is doing the world a service by telling us all about (only the positive aspects of) them. As a result the book comes off as very biased, using the language of a financial salesman and not an impartial fiduciary advisor.
If an individual really wants to get ahead financially and has the will to educate themselves through reading, there are a dozen books they should start with over MONEY Master the Game. A short list would include:
- Bogle’s “Little Book of Common Sense Investing”
- Kahneman’s “Thinking, Fast & Slow”
- Zweig’s “Your Money and Your Brain”
- Bernstein’s “Four Pillars of Investing”
So read those, and pass on this one.