There’s a lot to like about Dave Ramsey’s program, but don’t drink the Kool-aid just yet. Recently a couple of clients have come to me after attending one of his programs. I’ve read several of his books before, but this time I took a good look at his website and promos. There are a few, er, issues there.
Ramsey is what I’d call a conservative Christian, and therefore a lot of churches sponsor his programs, or religious organizations use his group to present programs for employees. But, as generations of journalists have been told, “If your mother says she loves you, check it out”. Don’t believe financial advice just because someone is a friend, or a brother-in-law, or claims to be religious. All scoundrels prey upon trust.
I’m not saying Ramsey is a scoundrel. I think he gives excellent advice on budgeting, and has a nifty tool on his website that takes your income and instantly assigns amounts to his recommended spending categories. His recommendation of 10% to charitable donations may be a little high for some people, but hey, it’s a good goal.
I have nothing but admiration for his method of getting out of debt (the “debt snowball”) and recommend it when clients have that issue. He has lots of good info on his website about purchasing a car for cash, managing a budget, etc. Or get one of his books out of the library: there are a bunch and they basically all say the same thing.
Gosh, the guy even emphasizes the need to work with a professional planner, which I gotta love, right? Um, not so much. There’s a tab called “Dave recommends” and, well, these folks are just plain advertisers. Maybe Ramsey likes them, but they’re paying for the endorsement. And what about the financial planners (he calls them ELPs—endorsed local providers)? They’re salespeople. How do I know? Because the first requirement is that the “advisor” be regulated by FINRA. FINRA regulates the brokerage industry. Fee-only financial planners are regulated by the SEC or the State (depending on the size of assets managed). If you go to a financial “advisor’s” website site, scroll down the page to the tiniest print you (can’t) see. If it says “Securities offered through [blah-blah]. Member FINRA, SIPC” well, you’re about to be socked with commissions or some dumbo wrap account. You are NOT looking at the website of a fee-only financial planner.
How in good Christian conscience Ramsey can recommend “advisors” who are going to cost his stressed or frugal clients huge management fees, significant commissions, and nightmares transferring accounts when they finally wise up, is beyond me. Look for advice from people who have no financial interest in selling you some crap (check out bogleheads.org, for example), or who are paid by you and are legally obligated to work for you in your best interest (fee-only advisors).
Dave needs to go to confession.