Tony Robbins & Stronghold Financial: A Conflict?

Whether you love him or hate him, it is impossible to deny that Tony Robbins has a larger-than-life personality. Many clients credit his books and workshops with transforming their lives, and his passionate followers are open to any advice he offers.

Needless to say, an endorsement from Tony Robbins can turn a relatively successful business into an industry leader overnight.

In November 2014, Robbins published his guide to financial freedom – the 600+ page Money: Master the Game. He outlined his seven steps to financial freedom, promising readers that his advice would benefit people at any level of income. It wasn’t just geared to his wealthy clients.

One of the biggest takeaways from Robbins’ book is that financial freedom depends on creating income for life. According to Money: Master the Game, indexed annuities are key to implementing this strategy.

Robbins named Ajay Gupta’s Registered Investment Advisor (RIA) firm Stronghold Financial as an example of a firm doing things right – that is, looking out for the best interests of clients, not trying to make a profit at clients’ expense.

This referral ignited a storm of controversy – along with a massive influx of new clients for Stronghold Financial. After a few attempts at managing the rapid expansion of his business, Gupta elected to transition the Stronghold Financial RIAs to Peter Mallouk’s Creative Planning, Inc., another SEC-Registered Investment Advisor that serves clients in all 50 states. Gupta joined the Creative Planning board as Chief Investment Strategist.

Robbins and Mallouk also share a tight bond, and in February 2017 they published a new financial self-help guide that they co-authored – Unshakeable: Your Financial Freedom Playbook.

Today, Robbins is the Chief of Investor Psychology at Creative Planning, which gives him financial incentive to refer new investors to the firm.

This presents an interesting question for investors. Is Creative Planning’s success a result of exceptional client-focused service, or is it primarily due to Robbins’ ability to attract clients based on his name alone?

Does Tony Robbins Have a Conflict of Interest?

When Tony Robbins called out Stronghold Financial by name in Money: Master the Game, industry analysts had a lot to say. Their first concern was his plan to invest in the firm. As he received feedback about the potential conflict of interest that could result from any profits he earned, he decided not to move forward with his proposal.

However, when Stronghold Financial merged with Creative Planning, his concern about conflicts of interest evidently evaporated.

Instead of merely investing, he went so far as to assume a C-Suite role in the business. This could arguably present a clear conflict of interest that requires a disclosure any time Creative Planning uses his name or likeness to promote products and services.

Specifically, any marketing involving Robbins notes that he receives compensation for serving as the Chief of Investor Psychology at Creative Planning, as his participation results in increased business for the firm. This gives him a financial incentive to refer clients and fans to Creative Planning.

Is Tony Robbins Right To Recommend Creative Planning?

When he agreed to the partnership with Creative Planning, Robbins inserted a caveat: Mallouk had to design a package of services for small investors that offered the same quality and value as the package offered to wealthier clients.

Mallouk agreed to this condition and followed through on his promise, resulting in one of the partnership’s biggest benefits for average people – the ability to access the same sort of investment advice available to major players in the stock market.

This complements the underlying theme of Robbins’ financial strategy for the average person, which is to get into the market with the help of a financial advisor who is committed to acting in your best interests.

From this perspective, Creative Planning makes sense. RIAs are legally required to act in a fiduciary capacity, unlike brokers who may push whichever product brings in the most commission.

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Robbins goes on to emphasize that the best advisors are those that keep fees low. However, many question whether Creative Planning lives up to this guiding principle. RIAs are increasing their market share, and some of the newer firms offer advisory services at lower rates.

Perhaps more importantly, critics state the premise that all investors need an advisor is flawed. There are a variety of options for online trading that charge minimal per-transaction fees. With a bit of research, beginning investors can save a substantial amount on advisory fees by choosing their own trades.

The Pros and Cons of Buying Indexed Annuities

Any analysis of Robbins’ financial advice must include a discussion of his admiration for indexed annuities.

In Money: Master the Game, Robbins presents indexed annuities as a no-downside solution to ensure lifetime income.

After all, indexed annuities guard against loss of principal by investing in bonds that will pay out when the annuity matures. In addition to the bonds, the insurers that sell indexed annuities help investors enjoy the benefits of stock market growth by purchasing stock options on their behalf.

While this sounds simple and risk-free in theory, the truth is much more complicated – so much so, that the Financial Industry Regulatory Authority put out an investor alert on this product category.

It is, in fact, possible to lose principal when investing in an indexed annuity. Annual expenses and surrender charges can rapidly deplete the value of your portfolio.

Some investors are also concerned by the fact that they can’t realize the full value of any improvements in market conditions. Many plans cap the amount an investor can earn in a single year. Others only pay a percentage of market gains.

The bottom line is that Creative Planning may be the right choice for some investors – and indexed annuities certainly have advantages. However, as with any investment decisions, it is critical to do comprehensive research before committing to any firm or investment strategy. That means gathering information and feedback from sources other than Tony Robbins.