John Oliver Tells Us How We're Getting Screwed by Financial Advisors

John Oliver
John Oliver has some advice for Americans saving for retirement. YouTube

Most Americans have no idea what they're doing when it comes to financial planning. How exactly funds and fees and interest work is confusing as hell, and few have the time or energy to sort through the the implications of investing in this versus that. It's something many Americans choose to leave in the hands of professionals, but as illustrated on this week's episode of Last Week Tonight, the professionals may not always have your best interests in mind, and even when they do, they might not be much more helpful than a cat throwing a toy mouse at a grid of companies.

Americans hold a combined $24 trillion in retirement assets. If you choose to trust yours with a financial advisor, tread carefully. It may seem complicated, but it doesn't have to be.

So about financial advisors...

"Financial advisor" is basically a made-up title, just like "financial analyst," "wealth manager," "investment consultant" or whatever other name they want to call themselves. They are not accredited. They also typically work on commission, which may lead them to recommend certain investment strategies that reward them ahead of the client. For example, annuity funds are complex and only right for people with certain portfolios, but advisors recommend them frequently because they make a healthy commission from doing so. This seems like it should be illegal, but it isn't unless your advisor is a fiduciary. As Oliver says, "It's like finding out that only some restaurant waiters are forbidden from ejaculating in your soup."

Even if the assumption could be made that all financial advisors were acting on behalf of nothing but their clients' best interests, they might not be of much help. Studies show that funds that are "actively managed" don't do better—and often do much worse—than index funds, which function in conjunction with the market as opposed to the supposed know-how of a broker.

What's the deal with all these fees?

Legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping feeds and finding fees are just some of the potential added costs to investing in a 401k or other investment fund. As your investment compounds on itself, so do these fees, and at a much greater rate. Earlier this year, Last Week Tonight set up a 401k for its employees that was managed through John Hancock. The show diligently tracked how it was handled, and it was a mess. There were so many egregious fees (and at one point a costly bookkeeping error) that the show left John Hancock. Last Week Tonight had the time and resources to realize they were getting screwed, but most Americans do not.

What can be done?

Oliver enlisted Billy on the Street's Billy Eichner to outline five simple steps for financial planning:

1. Start saving now

"In fact, start saving 10 years ago."

2. Invest in low-cost index funds and leave it alone.

"Check on it about as often as you Google whether Gene Hackman is still alive—about once a year."

3. Make sure your advisor is a fiduciary.

"If they say no, run."

4. As you get older, gradually shift your investments from stocks to bonds.

"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 whether Daniel Craig is actually attractive."

5. Try to keep your fees under one percent.

"Just like interest compounds, so do fees. Even one tenth of one percent can really fuck you."