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Dave Ramsey may have helped you climb out of debt, but should you now follow his investing advice? His views on investing have come under fire lately. From his claim that stocks return 12% annually to his love of growth mutual funds, professional advisors have not been shy about their criticism. (Save Like Dave Ramsey. . .Just Don’t Invest Like Him by CNN’s Felix Salmon is just one example.)

One of the most controversial aspects of Dave’s advice is his list of what he calls “Endorsed Local Providers” or ELPs for short.

I receive questions from readers from time to time about Dave Ramsey and his well-known ELP program. I received one such question recently from a podcast listener named Ace. He writes:

“If you have time to answer, I just listened to your podcast about financial advisors. I’m curious about your take on Dave Ramsey’s ELPs. I really like Dave Ramsey and his philosophy, but when it comes to how he tells people to invest, I feel like he might not have everyone’s best interests in mind.

From what I understand, these financial managers use front load mutual funds. For someone being so big on being smart about your money, I can’t believe he would approve of this. But after doing research, I couldn’t find solid guidance on any of his websites, which are about mutual funds.

I did see where he thinks retirement savings should be put into four different kinds of funds – mostly growth stock mutual funds. Then he says not to invest any more than 15%. The rest should go towards your mortgage or savings for a house, college, etc.

Do you have any opinion on the whole ELP thing? These are folks who would teach us philosophy that I approve of, but he has got to be getting a cut for advertising for them.”

Ace’s question is a good one. Dave Ramsey is a very popular personal finance personality who has helped an untold number of people get out of debt. He has developed a cult-like following. Once he has helped folks turn around their finances, they’re probably going to listen to him pretty closely when it comes to investing advice.

That’s at the heart of Ace’s question, which I’m going to address here. First, let’s talk about what these ELPs actually are, and then will dive into the pros and cons of using an ELP.

What are ELPs

“Endorsed Local Providers” is a Dave Ramsey term. ELPs cover more than just investing. He also recommends local providers for insurance, mortgage loans, real estate and so on. Right now, we’re only concerned about the investing-related ELPs.

According to the Dave Ramsey website, it’s not easy to become an ELP. The site states that they are held to a “higher standard of excellent.” Higher than what, the site doesn’t say. An ELP does pay a fee to join Dave’s program. Again according to Dave’s site, the fee is paid “to cover website maintenance and employment costs, Dave’s endorsement is not bought—it’s earned.” I could not find a reference on the site as to how much the fee is.

Dave’s ELPs are commissioned-based brokers that sale mutual funds with front loads (known as A Shares in the business). This is consistent with Dave’s investment philosophy. He believes that you should not invest on your own, should pay a commission-based broker, and shell out 5% or more just for the privilege of investing in a mutual fund.

So are ELPs Worth It?

To understand Dave’s view on this, you need to begin with his investment philosophy, which he has published in a very detailed and thoughtful PDF document. This is where he lays out his views on investing, which including the following:

  1. You should not invest on your own
  2. You should buy A Shares of mutual funds that come with upfront fees
  3. You should use commission-based brokers instead of fee-only advisors

Let’s look at each of these.

Should you invest on your own?

The first and most important view, as we work through this question of whether or not ELPs are worth it, is that he firmly believes you should not invest on your own. Dave says that without a doubt, you should pay a pro. What’s his reasoning? He says that statistics show DIY investors are quick to jump out of funds when they begin to underperform.

I’ve tried to find data to support his claim. Conceptually, I can see why that might be true. (And, in fact, I warn my readers and listeners against this problem.) But to date, I haven’t found any hard data on that fact.

It’s certainly true that many DIYers do what he’s suggesting. When the stock market crashed in 2008, many DIY investors sold out of fear. The same is true for investors who hired a pro. I know plenty of people with investment advisors who did exactly the same thing. An advisor can’t force you to stay in the stock market. They may try to talk you out of it. They may give you their best advice. But at the end of the day, you control your money.

I’ve talked with actual investment advisors who said that they had lots of clients flee the stock market in 2008 out of fear. Some of these people just liquidated their accounts and had their advisors move their stocks to cash.

You should have an asset allocation plan and stick to it regardless of market conditions. If an advisor or another person enables you to stick to your plan, you’re better off with that person than without. But I don’t agree with Dave that just because you’re a DIY investor, you’ll automatically make bad choices when the market underperforms.

For that matter, I don’t agree that just because you hire an investment advisor means you will definitely stick to your decisions. Ultimately, you’re the one who has to make the choices for yourself and your family.

I can tell you from experience that I’ve been a DIY investor for 25 years now, and I stick to my plan. I don’t jump out when things get rough. And I don’t think I’m an exception to the rule. I talk to plenty of people who do the same. In the final analysis, I have more confidence in DIY investors than Dave does. From what I understand, even Dave doesn’t invest on his own. And he firmly believes no one else should either.

Obviously, I don’t agree that this is applicable to everyone. If you think that you need help sticking to your asset allocation plan, maybe you do need to hire an advisor. But if you can stick to your plan, DIY investing can be great. And even if you do decide to hire and advisor, that doesn’t mean ELPs and commission-based brokers are the best option.

Should you invest in A-shares?

Even though Dave thinks you shouldn’t invest alone, he does recommend specific types of investments – specifically front loaded A shares.

In the PDF on his investing philosophy, he talks about why. He says, “Generally, I recommend choosing A shares (upfront commissions). I personally do not choose fee-based planning – paying 1 to 2.5% annual shares for a brokerage account. Many financial planners suggest fee-based accounts, but I still choose traditional A share mutual funds.”

That’s his view. Not to be picky, but I personally don’t think of A share mutual funds as “traditional.” Vanguard, for instance, has been in the business since the 1970s. They’re about as traditional as it gets. And they don’t sell A shares.

But if you work through the numbers Dave is proposing, there may be some initial appeal to investing in A Shares rather than using a fee-based advisor. Sure, you pay 5.75% up front, but you don’t pay the 1-2.5% every year. So one might reason that if they leave their money there for six years, you will have broken even.

There are a couple of things wrong with this scenario. To start, let’s talk about the difference between a fee-only advisor and a fee-based advisor.

What’s the difference between a fee-only advisor and a fee-based advisor?

A fee-only advisor is someone who is a registered investment advisor. That means that they cannot make commissions off of the investments they sell you. They can’t get paid from a mutual fund to sell you shares of that fund. It’s not allowed. These people have to be paid by you and only you. Why? The rule is to ensure that they have your best interests at heart.

A commission-based broker, on the other hand, is a salesperson. They are trying to sell you something. They’ll get a commission from the mutual fund when they sell it to you.

What about the fees?

Isn’t it better to pay 5% up front than 1% to 2.5% a year forever? Probably not.

First, commissioned investment salespeople have a reputation for moving your money around a lot. Yes, in theory, if you park your money in an A class mutual fund, and you paid your 5.75% and left it there 40 years, you might do better than if you paid 1% each year.

But you have to be careful about these commission-based advisors. They call it churning the account. It means changing the investments frequently so that they clip you for another 5.75% each time you make that change. And here’s the problem. When a commission-based broker calls and recommends that you make a change, how will you know whether he or she has your best interests at heart, or theirs? You won’t.

Second, it’s important to look at the expense ratios and the actual costs of the underlying funds they’re putting your money into. In other words, on an A share fund, that up front 5.75% isn’t the only fee you’ll pay. Most of these funds are actively-managed mutual funds with higher expense ratios than a passively-managed index fund from someone like Vanguard.

I’ve looked at a lot of these funds, and, of course, you have to looks at the specifics. But, in general, the expenses for these underlying funds are going to be higher than 1%. So you’re paying a lot of money just to invest in the fund, but then you’re paying high expense ratios for the fund as you continue to invest in it.

Third, you need to consider the hidden costs of mutual funds that aren’t captured in the expense ratio. For instance, you must pay the transaction costs that the fund incurs when it is buying and selling shares. These costs are not reflected in a fund’s expense ratio. While all funds incur these costs at some level, actively managed funds typically have much higher transaction costs. For actively-managed funds, the fees not included in the expense ratio can be huge. For index funds, the hidden costs are quite low – almost nonexistent.

Fourth, not all fee-only advisors actually charge 1% to 2.5%. That’s the range I see in Dave’s investment philosophy document. And while I do think 1% is the norm, there are plenty of advisors and tools out there that charge a lot less.

For instance, I use Personal Capital. They offer a free online tool that will track all of your investments and show you their individual performance. I use that tool on a weekly basis. You can check it out here (affiliate link). I’ve been using this tool for about a year now, and I really like it. Through Personal Capital you can hire a fee-only advisor, and they charge less than 1%

Another company, Portfolio Solutions, was recently featured here on our podcast. I interviewed Rick Ferri, the founder of Portfolio Solutions. His company charges less than 1% (in fact, they charge just 37 basis points). Again, 1% is the norm, but if you shop around, you can do much better than that.

Finally, you don’t have to hire an investment advisor – whether fee-only or commission-based – if you need some help with your investment choices. You have other options, especially with the new technology that’s out there online.

Betterment is one example of this. I’ve mentioned this tool many times. Another option is the mutual fund companies, like Vanguard. Vanguard offers free help; you just need to give them a call. Other big mutual fund companies, like Schwab and Fidelity offer the same kind of assistance.

Obviously you should look at the details and costs of all of these services. But the point is that you shouldn’t assume that you must either invest in expensive A shares or hire a 1% fee-only advisor for investing. There are many other great options.

So what about the ELPs?

By now, you can probably guess what I think about Dave Ramsey’s Endorsed Local Providers for investing. By and large, I’d avoid them. I simply disagree with Dave. I just don’t think it’s smart to hire a commission-based advisor to sell you expensive A shares when you’re going to pay 5.75% up front and probably pay more expensive expense ratios throughout.

That being said, I’d love to year from those who have used or even talked to a Dave Ramsey ELP about investing. Share your experience in the comments below.

Author Bio

Total Articles: 1083
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments

Brian says:

Dave Ramsey fan here, and he helped me get out of debt, but when it comes to investing he is VERY vague. I went and met with one of his ELP’s, was not a good experience. At the end of the day I was only offered front loaded American Funds. The only bright spot from this experience was that it led me to do more research and teach myself to become a DIY investor. As luck would have it my first book was Rick Ferri’s ALL ABOUT ASSET ALLOCATION – a game changer for me.

Rob Berger says:

Brian, thanks for sharing your experience. I’ve heard a lot of people say that ELP’s suggested American Funds.

John says:

I am a big fan of Dave Ramsey. I read his book, took his course and used much of what he ‘preaches’ to get out of debt and start to save money. That being said, I never follow any one persons advice whole cloth but my own. I did much of what Dave said, but not everything. I looked at his ELPs and was not impressed so I went elsewhere.

Rob Berger says:

John, great approach. I more or less did the same thing. I used Dave for motivation, but followed my own “Baby Steps.”

Miguel says:

My wife and I met and ended up working with one his ELP’s. He put us in A shares with American Funds. We were with him for about 2 years. Later I found out that he wasn’t upfront with the fees and commissions he was making from us. Overall it was a negative experience and we wasted money and time. Ultimately though, I blame myself since I didn’t due proper research and take the time educate myself.

Rob Berger says:

Miguel, thanks for sharing your experience with an ELP. Great attitude on the whole experience. By recognizing what you could have done better, you avoid making the same mistake twice.

Larry says:

I contacted and had several visits with an ELP. I was not impressed, it was expensive, with the advise to use A-Shares, basically set and forget and continue to purchase and add to the funds. The returns were not impressive by anyone calculation. NOT impressed and I would not recommend using an ELP.

Rob Berger says:

Larry, thanks for sharing your experience.

Kevin says:

I think Dave Ramsey is great for everything except investing. In my opinion he needs to end the ELP program – it seems to creat a conflict of interest. I don’t think he will ever stop with the 12% return non-sense: if the unsuspecting investor meets with an an honest planner or broker who says that a 12% return is probably not going to happen, that investor will say “no thanks, I’ll go an ELP who can get me the 12%.” All that said, I am in complete agreement with Ramsey’s philosophy of avoiding debt whenever possible. (I don’t really believe in the theory of “good debt”. To me all debt is bad, but some are worse than others. I don’t think a mortgage is unreasonable, but even that should be paid down as quickly as possible.)

Ralph says:

I thought the 5.75% was a sales commission that goes to the broker. The annual fund fee is still tacked on to the funds you would purchase. This is the old school that should of played out in the 90’s.

My advice would be to get into a program like TDameritrade has that has a list of 100 or so basic Electric traded funds (ETFs) that you buy commission free if you meet their terms which is basically not to re-trade the funds within 30 days. These basic index funds are fundamental in that you easily pick and choose to have a good market coverage. I belive some of the other online brokers offer a similiar program.

I think most people should learn a DIY investment style. If you can’t DIY, you are so vulnerable to the wolves in the investment circles. Granted the wolves may only eat 1+% of your portfolio each year but if they don’t get superior returns on your money why not get the index fund returns that only charge 0.2% fees or less. I hear that less than 25% (and if may be more like 10%) consistently beat their indexes.

Eddie says:

Thanks for the advice Ralph. I rushed into transfering my 401k and the advisor I chose(not an ELP) put me into 6 American A-share funds. I wish I did more research before my decision. What can anyone tell me about Vanguard funds and Betterment? Also, I’m a little lost when it comes to the difference between mutual funds,index funds and ETF’s. Thanks!

Roy Stacey says:

Yes, big Dave Ramsey guy, too. When it came time to invest, his local ELP, though a very nice guy, did me a good turn, with decent advice.
As a Federal Government worker who has participated in their TSP plan from the FIRST day I was eligible, and having read John Bogle’s books, I knew the effects of high costs to my investment dollars.
Now, to the ELP’s credit, he did say what I was doing investing in the TSP was quite excellent, and he further suggested that since I seemed comfortable “investing on my own” to open up a ROTH account at Vanguard. So I did!
While there was no money in it for him, he realized he wasn’t dealing with an ill prepared investor. Since retiring from federal service 2+ years ago, I have rolled over my TSP balance to Vanguard, where my and my wife’s ROTH’s reside. When my wife retired at the end of 2013 we rolled her 401-K to Vanguard as well.
Now our total investments place us in the Voyager Select class, where some fees are even lower. Most of our holdings are low cost index funds, but we hold some some individual stocks, as well as Vanguard managed funds like Wellington, and Wellesley.
Yes, costs matter, but you need an adequate savings plan to get there, before those costs matter very much. Well, that’s my .02 cents worth.

Adam says:

That was helpful for me. Thanks.

Michael says:

One thing that hasn’t been discussed in this post regarding the load funds is that at certain amounts, the fees in most A-share funds are reduced. I pay a 2% load nowadays compared to the 5.75% when I had less money in my account. When I first started, I paid 3% by placing the money in a sweep account and then transferring it to another fund in the family of funds.

I do some investing on my own through a discount broker, but I like and trust my financial adviser and I really like my funds – they typically perform better than the S&P the past 10 years.

I think Dave is trying to appeal to the common man – not investment junkies who post to message boards. The easier he can make it for them, the more apt they are to save.

I do disagree with his recommendation to eliminate bond funds from my portfolio. So did his ELP when I met with her recently.

Scott says:

“I think Dave is trying to appeal to the common man”

Which is why he should recommend index funds with low expenses.

Rob Berger says:


Retired Auntie says:

I took Mr. Ramsey’s class last summer to check it out before paying for my two nephews’ attendance this past fall. They have school loans and credit cards, and not much financial good sense. The advice for budgeting, getting out of debt, and resistance to consumerism was well worth the tuition.

But I was appalled at the investment advice, having been a DIY investor for 30 years. I have a Morningstar premium membership, so put in a mutual fund screen which tried to find funds that measured up to Mr. Ramsey’s assertions. The screen I gave was: all domestic equity funds, open to new investors, minimum investment 10,000 or less, and in the top 8% performance rank over the past 10 and 15 year period. This screen resulted in 14 funds (out of Morningstar’s universe of thousands). Here is a sampling of the results. Only one fund came close to the 12% return. Note that the front-end load fees are not included in the calculations. This assumes that an investor would hold on through the nasty market crashes over the past 15 years. Many do not have the fortitude, and some of the funds are quite volatile. There is no fund that gives 12% returns “year after year, over decades.”

SunAmerica Focused Dividend Strategy A 15 year average 8.39%, 10 year 9.69% Expenses 0.98% Load 5.75%
Dreyfus Opportunistic Midcap Value A 15 year average 11.28% 10 year 9.85% Expenses 1.15% Load 5.75%
Fidelity Contrafund 15 year average 7.19%, 10 year 9.53% Expenses 0.66% Load 0%
Oakmark 15 year average 9.09%, 10 year 8.51% Expenses 0.87% Load 0%
Hennessy Focus Investor 15 year average 13.32%, 10 year 10.44% Expenses 1.43% Load 0%

Here are the best American Funds (none passed the above screen). I relaxed the screen’s performance rank to the top 25%. I chose American Funds because this family seems to be the choice of Ramsey’s ELPs for investment.

American Funds Fundamental Invs A 15 year average 6.81%, 10 year 8.40% Expenses 0.63% Load 5.75%
American Funds American Mutual A 15 year average 7.30%, 10 year 7.47% Expenses 0.61% Load 5.75%

So if clients expect the American Funds to measure up to the expectations that Mr. Ramsey portrays, they are going to be deeply disappointed.

For rational withdrawal strategies, that help you decide a withdrawal rate so that you will outlive your nest egg, I recommend FIRECalc: A different kind of retirement calculator. It gives realistic and sobering answers as compared to the polyanna-ish withdrawal rates espoused by Mr. Ramsey.

Rob Berger says:

Thanks for the thoughtful comment and FIRECalc recommendation!

Erik Taylor says:

Big Dave fan because he’s taught me how to budget and quit wasting money. What better place to learn to invest than with him. So I met with one of his ELP’s.

My girlfriend was less impressed than I was, and after reading this article and everyone’s comments I understand why. I just opened an IRA and he told me to not go with vanguard and to go with the A-share American Funds.

As a new investor I think I’m going to contribute to a Vanguard Target Retirement account. I also have a TDAmeritrade account that I’ll do some perusing and dabble in my own stocks.

Rob Berger says:

Erik, thanks for sharing your experience here. And welcome to the club!

rwphonics says:

My ELP used to work for Ivy Funds then went independent although he still heavily pushes Ivy. Once I educated myself a bit I called him up and said I wanted to invest in index funds. The response was ‘no’. When I asked why his response was ‘Dave Ramsey says we can’t.’ I laughed and haven’t given him anymore money.

jane says:

So waht does a beginning investor do? I’m not an investment junkie and need someone who knows what they are doing to teach me.

Rob Berger says:

Jane, what I did was read, read, and read. Books I recommend include All About Asset Allocation by Ric Ferri and the Little Book of Common Sense Investing by John Boogle. If you need somebody to manage your investments, I like Vanguard’s investment advisory services that charge just 0.30%.

Jane says:

Thank you for taking the time to reply. I met with an ELP on the 24th and was suprised to find he would be acting as a fidcuciary. I’m not sure I’m confident enough to do it on my own and I’m late to the game. I am getting the Boogle book so at the very least I can participate in investment conversations about my money with better knowledge.

Thank you again. I really appreciated your reply.

Jane says:

I also wanted to add that he did not recommend American Funds. He was leaning toward Fidelity (no A shares.)
Given that it was just him and me in a conference room, I was keenly aware that I had no idea of the validity of his statements. I felt better when he presented the items related to services, etc. in writing.
I met with an ELP years ago who presented me with a multi-page packet of suggested investments within the first 2 minutes of meeting me. This person didn’t do that. He asked me more questions than I asked him, which was a plus in my book.
I think I am going to meet with a non-ELP advisor, see how that goes, and make a decision from there.
Thanks again for providing a space to ask questions and get input. Really appreciate it.

Rob Berger says:

Jane, great idea to get a second opinion. Best of luck.

Brandon says:

When I met with Dave’s ELP, the guy handed me a packet as well with the “best fund” I could invest in. He never new my age or anything besides my name and phone number before meeting him. He really didn’t want to talk much about my existing accounts or anything else besides the fund he was pushing. He told me to put all my money in this one fund. I went home and researched it and thought about it. I never went back. I meet with a non ELP advisor, she told me to focus on saving (accumulating) then start diversifying. I took that advice, but didn’t use her either. I decided to use Vanguard no load, index funds and have done so for the past several years.


Thanks for the article. Full disclosure: I am a fee-only advisor. However, I formed my own firm and waited tables until I had enough clients to survive. I could not stomach the thought of working for a commission-based company. It’s not ethical in my opinion.

I had a couple of quick points to make.

The first concerns mutual fund expenses. In addition to charging annual expense ratios, the funds have transaction costs, which are costs for buying and selling securities. A practice known as soft dollars allows a mutual fund to charge you (the fund investor) extra for trades without listing that cost. Essentially, a soft dollar arrangement is where a brokerage firm gives a mutual fund some service such as research reports, computers, etc. In exchange, the mutual fund uses that brokerage firm to trade and pays higher trading costs than they would elsewhere. You, the fund investor, pay for the increased trading cost. Some studies estimate the transaction costs to cost an additional 1 to 1.5%, and none of that is reported in the fund prospectus.

My second point is this. Dave Ramsey will not refer business to fee-only advisors. I theorize this is because any fee-only investment advisor has to give prospective clients a document that outlines their solicitation practices. So, if I were to become an ELP, I would have to give every client a document that fully detailed the arrangement between Dave Ramsey and myself, including the fee I paid to that program for referrals. Dave doesn’t want people to know that it’s a for-profit program. Anyways, that’s my theory.

Third is my own philosophy. Brokers are not financial advisors; they are salespeople. You wouldn’t take $30,000 to a car dealership and ask a salesman what car to buy. Why would you take $500,000 to a broker who operates the same way?

Cory says:

I have not read through all the comments here so maybe this question has already been answered.

My wife and I recently switched our IRAs to an ELP who talked us into American. I’m not smart about any of this stuff at all and it doesn’t stuck well when I try to learn it.

That being said, should we get out of American? If so, how? Thanks.

Retired Auntie says:

You asked if there is any data on people’s tendency to dump their MF shares in bear markets, and reinvest in bull markets, and the consequences.

There is, and it’s on Morningstar. They publish the mutual funds annual returns (as reported by the fund company, and assumes a buy-and-hold strategy) and actual investor’s returns, based on estimated inflows and outflows of funds. I haven’t done a comparison of broker-sold mutual funds, but American Funds Growth has at 10 years a 6.85% Investor return, and 8.72% fund return.
Morningstar’s article on the subject is a great one to read.

Joe Visor says:

I like Dave’s advice but abandoned the market in 2008 except for my 401K money which I rolled into an annuity with downside protection.

I tried an low cost brokerage in 2012 with a “money manager” who just churned buying and selling stocks and lost 3% when the market went up 11%. I cut my losses. Since then I’ve spoken to two ELPs. Both have been unable to keep appointments. I’m talking about a net worth of $2.5 million and a portion $1 million to for new investment and they can’t keep appointments!

I’m good at saving/earning and lousy with investing.

I don’t think Dave checks them out either. One of the them has a questionable track record, FINRA disclosures and multiple locations in 3 states and lot of unemployment in his background. Very fishy.

I’m thinking of switching to real estate or just using Exchange Traded Funds. Seriously – Dave Ramsey needs to do a better job checking out his Investing ELPs. I hope I do better with the real estate folks. There are a lot creepy financial “advisers” out there.

Joyce says:

Your recommendation of Portfolio Solutions sound great, however I just found out they only work with investors with $500K or more, which is very disappointing.

Are there similar firms that will work with people with a lot less assets like $50K (we are the people who really need help!)?

Thank you!

Rob Berger says:

Joyce, Vanguard is an excellent option.

Kay says:

I really appreciate your article, Rob, and the comments. Have just one thought to add: I have taken Dave Ramsey’s Financial Peace University class and listen to him on the radio regularly. Has been very helpful. One of the points he makes, that I think is a good one, is that many people don’t know what to do about investing, and they either don’t have the time or interest to become really knowledgeable about the subject, so they do NOTHING–for years and years. And, Dave says even if you pay someone to help you you will come out ahead as compared to doing nothing, especially if you start young enough. So he is making a service available to try to ensure everyone has a chance to get their retirement taken care of somehow, instead of relying on Social Security. He quotes the % of the population that is not prepared for retirement, and I don’t recall the number but it is a LOT of people. This is what he is trying to address (in addition to getting Americans out of debt), which I think is pretty great. For those who are willing and able to put in the time to learn, my take is he has no problem with that. It’s just that a lot of folks don’t/can’t and never will. And, he’s trying to take care of those people.

Todd Caldwell says:

Kay, superb points! Spot on!

Charles Andrew says:

In full disclosure I am a Tax ELP, I don’t and will not, guide my clients in making investment decisions other than very general advice, I will refer them to a qualified planner, the client makes the decision. My experience in over 35 years in practice is that most DIY investors do a poor job investing their own funds, they do not take the time nor have the expertise to handle their own investments, that is why mutual funds make sense for many investors. However funds operate, they all have expenses that must be paid, front load provides less money to invest but the name of the game is is total return, net of expenses. The fact that some funds appear to be “no load” or low cost does not insure a solid return over time. There is nothing wrong with American Funds, they are a fine family of funds, but so is Vanguard and many others, it depends on which funds an investor is in and how he is positioned in the market. Classic fund allocation works well for many, if you like Index or targeted funds, go for it. The only cautionary tale I tell is that for the average investor, which includes many otherwise smart people, a good financial planner can and should do better. Do you homework selecting a high quality adviser and follow his advice, but be involved and ask questions. From time to time have your retirement/portfolio reviewed by an independent adviser if you are not achieving the goals that you have set out.

Kay says:

Rob, thank you for suggesting Bogle’s The Little Book of Common Sense Investing. Although Dave Ramsey has helped me a lot to this point, I am one of those people that is interested in learning about investing, and this little book is a gem. Much appreciation!

Rob Berger says:

Kay, glad to hear you liked the book. I wish everybody would read it!

Tammy says:

I am following Dave Ramsey’s advice now. We completed his FPU course and we’ve met with a few different ELP’s…1 for investing. That particular person recommended AGAINST A shares and has a MUCH lower fee percentage than any other “broker” I’ve read about (including lower than the percent you wrote about in this article). We will be investing with the firm we met with. It seems they really don’t care about the ELP status in the long run, but are using it to gain customers as needed.

Rob Berger says:

Tammy, it sounds like you’ve found a go advisor. Thanks for sharing this.

Jennifer says:

I found this article and the comments all very helpful. Thank you for the book recommendations. I am in the process of finding an adviser and/or learning how to invest myself. I have listened to Dave quite a bit on the radio and have even spoken with his national ELP quite extensively and while he seemed very knowledgeable, I wanted to learn more as I was not completely comfortable with the big push for American Funds when there is so much out there to choose from.

Josh says:

Re: I’ve tried to find data to support his claim. Conceptually, I can see why that might be true. (And, in fact, I warn my readers and listeners against this problem.) But to date, I haven’t found any hard data on that fact.

You’re looking for Dalbar’s Quantatative analysis of Investor Behavior.

kevin campbell says:

I have been a ELP for five years. They recently rolled out the smart investor pro. They were very selective of who they let in back then. Now they diluted the existing ELP”s by adding a total of ten in your area. It is quite obvious why they did this . They are now taking anyone who will pay $750 per month. The program has been badly tarnished

JuLow says:

I’m not sure if giving names of financial firms is PC here- but I’d like to ask an elementary question about Ameriprise Financial. 1) Where do they rank in the continuum of ‘advisors’? And
2) if one has little time and knowledge of the ‘funds’ and ‘loads’- and cannot do DIY, but has cash, which is the smartest route? Are there advisors out there that are trustworthy to diversify and invest, while charging the lowest fees? I just don’t have time to DIY, but don’t want to pay unnessesary fees!
Thank you for this. You guys have saved me from investing with an ELP! I listen to Dave, but honestly I was already a saver and have a relatively high net worth in cash alone.

Kim says:

I love Dave Ramsey’s Baby Steps, we budget, and am debt free except for our home. We just dumped our investment ELP. My husband and I each opened a Roth. It just doesn’t seem worth the money. After two years we have approx. $40,000 combined, our accounts are worth only $200 more than the amount we have invested. I thought investing with a professional would have helped us gain more than that after two years. We are switching to a to a TIAA CREF targeted date fund. It just seems like a better option for us.

Ron says:

My wife and I called some ELP’s because we were looking at buying a home. One couldn’t help us and the other two gave us bad advice. Next we called Church Hill Mortgage because I wanted to get advice on buying a home if we pay off our debt and get a credit score of 0. I spoke with the man and he asked my credit score. I told him my score at the time was around 620. He then proceeded to tell me how to get my credit score. I thought they only worked with people with a 0 score. Dave is great when it comes to helping you get our of debt using common sense approaches, but the ELP’s, Church Hill and investing seem to be a joke. Also Zander Insurance agents don’t seem very professional. I gave up on them because they kept asking for info I had already given them. I wonder if the FPU class is worth the $100 if you are already working the budget like he explains?

Crystal says:

I’m a long time Dave Ramsey follower, but not exclusive on ALL his advice(but most). I’ve spoke with Church Hill Mortgage before and they’re basically there for the 0 credit score/non-determinable credit score or the really high score. I’m well on my way to being on the zero credit score end and they’re just one of the ones who can manually underwrite a loan.
On the investing front, I did start investing with one of his investing ELP’s from the old program and as nice of a guy as he is, the American Funds that we chose together have preformed by less than half of what the other funds I’ve chosen on my own through my Vanguard 401K and my kids 529 college savings plans have. This is very unsettling for me. I’m very anxious about it, but I’m really trying more and more to be my own DIY investor.

Cathy says:

I just came across your article. I recently signed up for FPU and the Dave Ramsey emails. I was surprised to be bombarded by this ELP stuff. FPU has such a great reputation, it is sad to see greed overtake what was a good beginning. I am only taking FPU because I am engaged and want to go through the program with my fiance so we can learn to budget together. I agree with all the postive comments about Vanguard. DO NOT pay an advisor if you can help it, I learned on my own and if you just stick some money in the Vanguard S&P 500 or Total Stock Market fund you are making a great start. Morningstar is an awesome resource too. There are great mutual fund companies out there (Fidelity, T Rowe Price, etc) to choose from and they all have guides to help you decide how to invest. You can even call them for advice on which fund to is best for you in their portfolio. Vanguard has excellent educational resources. It’s worth taking the time to educate yourself and be in charge of your own money.

Brandon says:

Well said!

thomas f haws says:

I have listened to Dave Ramsey for 10 years. He provides some benefit for people to get out of debt but his advice on credit cards is bogus and his advice to use debit cards is silly since the money is instantly removed from your account and the hassle factor if someone uses your crd is enormous. But his most ridiculous advice regards investments. His silly advice regarding American Funds and a 5.75% front end load is totally absurd. He also claims you can receive a 12% annual return after this outrageous up front fee. Also, no mention of any conflict of interest on any ELP or any fund he recommends. How about a Vanguard index fund which charges no load either way and no taxes in the meantime. Dave Ramsey’s investment advice is a cruelty joke. Tom H



M. Clemens says:

You need to do some homework on American Funds versus Vanguard Funds. Many of the American Funds have averaged north of 11% and some north of 13% – net of all fees -including the upfront cost and the internal expense ratio. Vanguard has netted less than American Funds over the years. Look up the info. Do not step over dollars to pick up pennies.

Steve says:

Could you provide links to back up your statement? I’m a Vanguard devotee but when it comes to $$$ I’m quite open-minded.

Andrew Creme says:

This article is getting a little bit outdated, but I think the points raised are valid. So I’m an avid Dave Ramsey guy and think what he stands for is phenomenal. I personally met with two ELP’s and wasn’t impressed by them. I then invested with a non-ELP and found they put us in very high commissioned funds that well underperformed in the market. Fast forward a few years and now I’m getting into financial planning and have my general lines insurance licenses as well as my series 65 in securities. I have been doing a lot of interviewing with firms and can tell you that some of the SmartVestors are really great in what they are doing and I’m hoping to join on of them.

With the DOL changing the rules, I believe that the A shares will be going by the wayside. What’s way more unscrupulous are the “financial planners” who are pushing annuities to younger people and cash value life insurance policies as a person’s only future security.

While I think there is a place for fund advisor services and robo advisors, I think there will always be a place for people who get to know you and your family personally and help you to achieve your goals and plan accordingly for life events. I personally had a Vanguard account that I closed because it took me an hour on hold just to be able to talk to someone.

Dave Ramsey’s investor affiliation program may not be perfect, it definitely helps the everyday person to be able to wade through the muck that exists in the field and that is in the best interest of his listeners.

Thanks again for the article. Would love to hear an updated viewpoint with DOL considerations.

Robin Hutchison says:

Awesome comments. My husband and I are looking to find an honest SVP in our area that has low fees in passively managed class A shares. We are invested with a financial planner who charges $45 annually for each account and is commissioned based. He mentioned SB-1 fees that are rebated back to us and still not sure of his expense ration and hidden fees even with all my questioning. We want to add Aggressive and International to our portfolio as we have Growth and Growth and Income with America and Van Kempen. Any advice in the 36564 area code would be welcome. We want someone close.

Brandon says:

Thanks for the article. I really enjoy watching and listening to Dave’s shows. However, I have always had trouble with his claims of 12% and mutual fund approach. I really haven’t hear him talk about fees. I enjoyed hearing Tony Robbin’s Money series books and talking about fudicaries. I am trying to start to follow Phil Town’s principles and doing the investing on my own. I think it is important for everyone to get their own financial education and read as much as they can about it. There is no reason to have front loaded funds these days and have an advisor taking 2-3% from you. Be careful out there and do your research before investing with a professional. I lost a lot in the 2000 bust with a financial advisor who had us in Enron, WorldCom and a bunch of crap.

Camille - Financial Planner says:

I too like Dave Ramsey, particularly for his great approach on eliminating debt, but I’m with you in regard to his support of commissions-based brokers; it’s hard to know who you can trust. And the fact that his Financial Peace University strives to inspire, in part, financial independence, I am very surprised at his negative view of investing on your own. If you’ve learned to be debt-free, you can most certainly learn how to invest wisely (learning to let your portfolio ride the waves of ups and downs) and not pay a fortune to do so.

Sc says:

Your article is somewhat accurate but you are incorrect on what kind of advisors participate in the Smartvestor program. Some, like myself, are Fee-Only NAPFA- Registered Financial Advisors. Consumers must still do their due dillegence to find the right advisor or service for their situation. It is important to ask about the advisor’s experience & certifications, what services they provide, the depth of the firm’s resources and research, how they get paid, are they a fiduciary, how do they avoid conflicts of interest, etc. NAPFA and the FPA both provide some great questions to ask any prospective advisor.

Robin Hutchison says:

We have investments in class A mutual funds (Growth, Growth and Income with American and Van Kempen) with Pershing. We are looking at adding Aggressive and International and we are looking for questions to ask our present adviser or a new adviser once questions are answered. Do you have a good list of questions to ask our custodians?

Leslie says:

What are you r thoughts on UMA’s? I am currently at odds with my planner. Who is also charging 1.27 %

Rob Berger says:

1.27% is way too high.

Brock says:

I tried the Dave Ramsey SmartVestor pro program and was very disappointed with my experience. I was told one thing and they did another. They did not customize my plan they just threw all my funds into the same five mutual funds. I gave them a chance and the returns were good, but there was the quarterly fees which ate up some of the returns. I finally bailed and am going back to doing my own investments through another company

Becky McAnally says:

After expressing interest in Dave Ramsey’s advisors, I as inundated immediately with at least a dozen advisors, all who were more interested in selling me annuities and other insurance products. I’m an insurance broker so I can do that myself. A big waste of time.

Ann Greer says:

Can anyone tell me about the wisdom of meeting with an ELP in order to buy Long Term Care Insurance? I am 63.

Disillusioned says:

Rob, thanks for an interesting article. I’m actually one of Dave Ramsey’s SmartVestor Pros (used to be ELPs). I’ve been a fee-only investment advisor for over 20 years and have my CFP. I have to say that I’ve become very frustrated with the Dave Ramsey program. First of all, I’m paying $750 a month to be a SmartVestor Pro. Second, Dave claims that they do a lot of vetting on who they allow to become SVPs. That couldn’t be further from the truth. My entire phone “interview” lasted all of 10 minutes. There was never a question of whether I have a clean record in the industry or the like. They just wanted to make sure I didn’t sell permanent insurance, which I never have and never will anyway. In fact, one of the other SVPs in my area has had two complaints from clients in the last few years that he had to pay out over $10,000 for. When I asked my contact at Dave Ramsey if that’s allowable and if those are the sorts of folks (admitting that I didn’t know the details of the complaints) they want representing Dave, he didn’t really answer. Finally, several of these SVPs don’t actually do the follow up with clients. Rather, they have someone else in their office do that. While that might not seem like an issue on the surface, I consider it an issue since that person has not been vetted by Dave at all (even for the limited amount of vetting they do) and haven’t agreed to adhere to any sort of code of conduct.

In the end, it’s pretty obvious that Dave has the SVP program to pad his pockets. If you can fog a mirror and your check clears, they’ll let you in. I think Dave has done a lot of good for folks when it comes to helping them get out of debt and getting their financial lives in order. I just think he needs to stick with that, FPU and his podcast and leave the profiting from folks for a sham to others.

tom says:

Dave is OK for getting out of debt even though I must say that his whole “GETTING OUT OF DEBT” philosophy is just common sense so I have no idea why anyone would even listen to him on this debt philosophy since it has been available for centuries from your grandmother. However, his investment philosophy and his ELPS are really absurd. For novice investors the only way is to go to index funds(Vanguard is a good choice) . Anyone with a severe conflict of interest (Dave Ramsey) that recommends 5.75% front load funds that also have high ongoing fees and claim that they are the best for their audience has committed an unpardonable sin. DR’s severe conflict of interest should be recognized and condemned without reservation. His ELPS pay him kickbacks to recommend ripoff front loaded funds which underperform index funds (because all actively managed funds underperform index funds) and Dave Ramsey uses his platform to influence some ill informed people to use ripoff funds so that he can enjoy kickbacks. It is very unfortunate that many people actually trust this guy.

Barry Jennings says:

I will admit that everything said here may be accurate. I am a Ramsey Preferred Coach, formerly a Ramsey Solutions Master Financial Coach. What this means is very similar, but very different from an ELP or Smartvestor. The point I am going to make is not in support of or against anyone. Dave Ramsey’s approach has worked for millions of people over a long period of time. That must mean something. I want to point out that he never says his is the only way, everyone can do what they want. He also warns against investing in things that aren’t understood. ELPs, Smart Vestors, Financial Coaches, and grocery stores are all the same. It is a matter of finding one you trust and leaving when they are no longer needed. The question is motivation. Are the service providers empowering or disempowering?

Kevin says:

I did not read all 60+ responses, but I did want to make it known that not all Dave SmartVestor Pros are commission based advisors. My business partner and I are both SmartVestor Pros and neither of us is commision based. We are both independent, fee only investment advisors. We are fiduciaries. So if you are looking for a good financial planning services, please do take a look at Dave’s SmartVestor Pros, but do use caution to make sure you are finding truly independent, fee only advisors who will help you invest in a portfolio that suits your risk profile and long term investment goals.

Michael says:

Is this new? I was told ELPs had to have a Series 7 license. But, that was several years ago.

Margu says:

Fee based advisors usually have their series 7 licenses as stocks and bonds are often part of managed portfolios. Not all fee based advisors are RIA only. Know your facts.

both sides says:

I agree. Also a fee based advisor in the program. I have my 7 and am dual registered but all investments are fee based, capped at 1%.

Bruce Pierce says:

When Warren Buffet says that the best strategy for the average investor is to get a low cost ( .25 – .50%) index fund, like Vanguard, that mirrors the stock market, such as an S&P type fund, what else do you need to know??? Jim Cramer of CNBC echoes this emphatically. I am disappointed that Dave is saying (and profiting) from “marketing” something else.

Jay says:

Dave is awesome for the get out of debt message! Where he fails big time is right here- the endorsed local providers who most often work for HIGH FEE firms! Why doesn’t Dave preach low cost Index fund investing of Jack Bogle and Warren Buffet? The heck with smaller investment firms- check out Vanguard, Fidelity, or Schwab! Clark.com is SO much better on investment advice!