Home Well-BeingPersonal Finance What Your Financial Advisor Isn’t Telling You

What Your Financial Advisor Isn’t Telling You

by Dr. David Phelps

Traditional advisors love to parrot that the stock market has averaged 10%+ returns over the last 100 years. Unfortunately, this pernicious lie (a half-truth should be called a lie) is catching up with decades-long hard working professionals.

If such large returns were the norm – why has the average retirement age for dentists risen to 69.7 years old? Shouldn’t high income professionals be able to create Freedom far sooner than that? What are the mega-trends affecting your ability to create sustainable wealth beyond your practice?

1. The “Law of Averages” doesn’t play nice

As any statistician worth his slide-ruler will tell you – averages can be very misleading. Take a look at the average stock market returns by decade over the last 50 years. The 100 year “average” is heavily weighted by prosperous decades. Yes, the law of averages suggests that, in a market downturn, unrealized losses will eventually come back if you wait long enough. But what if you don’t retire in sync with a market peak?

A good friend of mine lost 42% of his portfolio in the crash of 2008, just as he was preparing to retire from dentistry. That story is all too common. If your lifestyle overhead depends on withdrawals according to the 4% rule (the guideline popularized by the 1998 Trinity Study) you may be forced to realize losses at an inopportune time – or else keep working for years through a downturn.

We have had an extraordinary bull run over the last 10 years. The painful lows of 2008 are long forgotten. This upward trend can hardly continue. In the words of top analysts at Charles Schwab & Co, Inc., “Market returns on stocks and bonds over the next decade are expected to fall short of historical averages.” Even Jack Bogle (founder of Vanguard) has expressed concern with “By decade’s end… I expect an annual rate of return of 4% for the U.S. Stock Market.”

If you’re in the 2nd half of your career, the law of averages is no longer your friend.

2. The 401k experiment is failing

In infancy, 401k plans were championed by large corporations who quietly hoped to shift the responsibility for retirement planning (once built upon pensions and defined benefit plans) back onto the individual investor.

The effort was successful – the days of lifetime pensions are gone. Today, 401ks are sold en masse by CPAs and financial advisors. They love to remind you how much they’ve “saved” you in taxes. But what good is earning a high income if you lock up large chunks of that income in a golden cage? Wealth that can’t be controlled or enjoyed becomes little more than numbers on a spreadsheet.

(Obviously, your financial advisor benefits from having large amounts of your wealth locked away under their management for decades to come.)

Unfortunately, an entire generation is reaching the sunset of their career only to realize that the 401k experiment has not delivered on the promise of financial freedom.

3. Efficiency reduces opportunity

Market efficiency limits opportunity. Wall Street has become hyper-efficient, run by supercomputers and “big data”. Regulation and oversight limit the rules of the game. For the lone investor, trying to do enough research/analysis to truly “beat the system” is like a gambler trying to outwit a casino.

To illustrate the effect of efficiency on markets: Consider the purchase of a single-family rental property. That investment purchase is extremely inefficient. There are a host of factors (location, condition, age, local economy/regulations) that limit the ability of the big players to systematize and scale. Unlike on Wall Street – having “insider information” is perfectly legal on Main Street.

But that doesn’t mean that real estate is a “golden ticket”, by any means. There are a host of challenges facing those who venture beyond the conventions of Wall Street.

4. The lone “mark” investor in a sea of sharks

As real estate and alternative markets near a peak, there are syndicators and deal sponsors hawking “opportunities” to anyone with a checkbook and a copy of Robert Kiosaki’s latest book under their arm. Investors find themselves walking the plank off the pirate ship into a sea of sharks.

A lone investor has no leverage to negotiate terms, or the time, experience, and financial acumen to complete meaningful due diligence. They are forced to simply take what’s offered – a dangerous place to be.

All may be well as “the rising tide lifts all boats”, but as Warren Buffet aptly quips: “When the tide goes out, you find out who is swimming naked.’’ A lot of lone investors will be left high and dry when the markets recede (and they always do).

The Future of Financial Freedom

For the calculated and industrious, change CREATES opportunity. In the words of the great Wayne Gretzky, “Skate to where the puck is going”. There are key opportunities rising in this new market landscape for those who…

Take Ownership Of Your Wealth Building

One of the biggest enemies to wealth-building is wishful thinking. Too many dentists work themselves to the bone as a top income-earner, only to casually hand that wealth over to financial advisors and hope for the best.

Success belongs to those who are willing to take extreme ownership of their wealth, have the courage to honestly assess their options, evaluate the results of those around them, and choose the path less traveled.

Choose Your Network Wisely

I’d wager that many of my dental colleagues are wealthier than their financial advisors. Why would you take financial advice from someone who has not achieved what you seek?

Wouldn’t it be better to find those who have achieved what you desire and learn from them? Join their “tribe” and become their student. In the world of alternative investing, remember this: The right deals come from the right people.

Be An Action Taker

Dentists are notorious over-analyzers (I am one). Behind the chair, we MUST have flawless attention to detail – those of us who survived dental school possess that trait in spades. But it has its downsides. In the world of business and investing, we become caught in “paralysis of analysis” – an eternal loop of research and hesitation.

My advice? Push yourself to grow beyond this. Be careful, yes. Do your due diligence, but don’t settle for the perceived “safety” of the status quo by default.

There are tremendous opportunities in today’s investing marketplace for those willing to take ownership of their wealth building. If you surround yourself with the right network, and if you have a bias for action – financial Freedom might be closer than you think.

Dr. David Phelps


A former practicing dentist, today David Phelps is a nationally recognized speaker on creating freedom, building real businesses and investing in real estate. He authors a monthly newsletter, “Path to Freedom” and hosts “The Dentist Freedom Blueprint” podcast. The Freedom Founders Elite Mastermind Community provides the pathway to freedom for professional practice owners.


Leave a Comment

Related Posts