Tony Robbins: Is the game of financial freedom still winnable?

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I can still recall the day.

It was late 2010 and almost two years since the market began its 51 percent free fall.

I had just finished watching the Academy Award-winning documentary, “Inside Job,” and felt a visceral anger for the recklessness of a relative few individuals and institutions in the financial community. Having grown up in a hand-to-mouth household, I felt incredible pain for the vast majority of Americans who were knee-deep in desperation. My anger moved me to action.

I embarked on a multiyear journey to interview more than 50 of the world’s greatest financial minds, from Carl Icahn to Alan Greenspan to Ray Dalio to David Swensen of Yale, to the late legend and Vanguard founder Jack Bogle.

My mission was to answer one simple question: Is the game still winnable? Is the journey to financial freedom possible for any hard-working American (who isn’t on the proverbial inside).

The resounding answer was yes, but it came with a host of caveats.

We are now 10 years removed from the financial crisis, but ironically, after the longest bull market in history and strong economic fundamentals, many Americans still have significant anxiety and stress about both the economy and the state of global affairs.

When I wrote “Unshakeable,” my mission was to arm readers with the facts to create peace of mind in a world of increasing volatility.

There are timeless truths that will help everyone on their journey to financial freedom. Here, I want explore four of the core simple truths that we must fully grasp if we are to take full control of our future.

We all know that saving and investing early is important, yet most of us don’t save or invest at all.

Frighteningly, 60 percent of Americans don’t have $1,000 saved for retirement.

We are a nation of consumers, but if we are to collectively prosper, we must make the shift to becoming owners.

We can own iPhones, but why not own Apple?

We can have Amazon boxes at our doorstep everyday, but why not own the powerhouse retailer? Nothing prohibits us, regardless of our socio-economic status, from benefiting from the power of innovative capitalism. Anyone, with just a few dollars, can own the top stocks (i.e., the S&P 500) and be an owner of arguably the most prosperous and profitable economy in world history.

Sadly, most people falsely believe they need to hit a home run or earn a heck of lot more before they begin to save and invest.

This is simply untrue if we embrace the mindset of an owner and start investing early. Get this: A 19-year-old who saves and invests $50 per week will accumulate $2,600 per year. If she does this until age 65 and averages a 10 percent annual return (about the S&P 500 average return over the last 80 years), she will have over $2.2 million dollars at age 65.

Sure, most of us who are reading this aren’t 19 anymore, so we know we likely have to play catch-up (side note: Make sure to send this to your kids or grandkids). Therefore, you must make the decision to not be left behind and begin saving today — no matter what it takes. This is especially true for millennials who came of age during the financial crisis of 2008 and are still fearful of the markets. The Dow Jones Industrial Average is up 300 percent since 2009 and sadly, many have missed a huge opportunity to participate in this unprecedented bull market — a fact they will undoubtedly regret.

When I sat down with Vanguard’s Bogle, he spoke this wonderful phrase: “In investing, you get what you don’t pay for.” Paying excessive fees or unnecessary commissions to brokers will erode your account values.

Most Americans are entirely unaware of the fees being extracted from their accounts. A 2011 AARP study revealed that 71 percent of Americans think they pay no fees in their 401(k) plan. Nothing could be further from the truth.

So let’s take our same example of a 19-year-old saver from above to see just how fees can impact our future. If she paid 2 percent in annual fees (from age 19 until age 65), she would no longer have more than $2.2 million at retirement. She would have $1.16 million — an almost 50 percent reduction in her potential nest egg. Here is a good rule of thumb to remember: A 1 percent reduction in annual fees can allow your money to last 10 years longer in retirement. So yes, fees matter a whole heck of a lot.

Well over 90 percent of financial advisors are technically brokers. Brokers are great people. This is, by no means, an attack on their character. But the reality is, they live in a world driven primarily by compensation and, thus, commission-laden investments and more profitable proprietary (aka, name brand) funds are quite common.

The brokers typically work for mega-banks and brokerage firms that actually have a legal duty to their shareholders to be as profitable as possible, so we shouldn’t be surprised.

This conflicted sales model is not lost on consumers. The Edelman Trust Barometer released a sobering survey in 2018 showing the financial services industry as the least-trusted industry, edging out media and government.

The good news is that there is a small segment of advisors who, like doctors and lawyers, self-select to be a fiduciary. A fiduciary is someone required by law to put your interests first. Someone who doesn’t have a horse in the race when they are making recommendations. Sounds like common sense, but the truth is most advisors, although great and well-intentioned, do not fit these criteria.

So, here are two questions you can ask your advisor/broker to flesh out their motivations: Do you or your firm receive any third-party compensation for recommending particular investments? Ideally, the answer is an emphatic no. Are you an independent registered investment advisor? “Yes” means that they are required by law to be a fiduciary.

More from Invest in You:
Boost your financial IQ by answering these 10 questions
On the fence about a Roth IRA? Here’s what surprises most people
Invest like a ninja: Akbar Gbajabiamila says don’t let fear get in the way of saving

It’s no secret that the U.S. stock market has periods of immense volatility. Unfortunately, this volatility causes investors to make irreparably poor decisions (i.e., selling everything and going to cash, only to miss the recovery).

Lets explore a couple facts that will dispel your fears during tumultuous times.

• Corrections are a constant. On average, corrections happen about once per year (since 1900). A correction is a 10 percent drop — but not more than 20 percent. When I first heard this stat, I was blown away. Corrections are a remarkably regular occurrence, but they are usually nothing to fear. On average, they last 54 days and, 80 percent of the time, corrections do not turn into a bear market of a 20 percent or greater drop.

• The market rises over time despite many short-term setbacks. For example, the S&P 500 experienced an average intra-year decline of 14.2 percent from 1980 through the end of 2015. Yet the market ended up achieving a positive return in 27 of those 36 years. That’s 75 percent of the time.

• Bear markets are more frequent that you might think. There were 34 bear markets in the 115 years between 1900 and 2015. In other words, on average, they happened nearly once every three years.

More recently, bear markets have occurred slightly less often: In the 70 years since 1946, there have been 14. That’s a rate of one bear market every five years. In the 14 bear markets we’ve experienced in the U.S. over the last 70 years, they varied widely in duration, from 45 days to 694 days — nearly two years. On average, they lasted about a year.

Good investors know that bear markets are part of life. Great investors actually look forward to these buying opportunities. As my co-author Peter Mallouk likes to say, the stock market is the only thing Americans don’t like when it’s on sale.

If we all learn the tools and strategies that will guide us to financial freedom, the quality of our lives will transform.

Don’t wait for someone else to educate you. You must participate in your own rescue. You must become the chess player, not the chess piece.

Study the key fundamentals and align yourself with advisors who truly (and legally) have to put your interests above their own. You can win the financial security and freedom that you and your family desire and deserve.

TUNE IN: Tony Robbins will appear on CNBC’s “Power Lunch” today at 2 p.m. ET.

Tony Robbins is an entrepreneur, best-selling author, philanthropist and the nation’s No. 1 life and business strategist. He is also a member of CNBC’s Financial Wellness Council

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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