Money often costs too much

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Eureka Springs resident Sheryl Garrett, a long-time advocate that financial advisors should give advice in the best interest of their clients, has recently joined the likes of founder of the Vanguard Group, the late Jack Bogel, and Charles Schwab, who heads one of the larger banks and brokerage firms in the U.S. Garrett was named an Icon by InvestmentNews, the first woman to receive that honor in a male-dominated industry. She is on the cover of its most recent issue.

Garrett is the head of the Garrett Planning Network that works to educate and assist financial advisers in setting up hourly-fee planning practices. Although she hasn’t been working with individual investors since 2005, she advocates making competent, objective advice accessible to all people.

“I’ve been shaking my head,” Garrett said. “When is my story that Sheryl Garrett is charging by the hour going to stop being a story? I figured I would run out of media cachet in a year or less. Because I’m such an odd duck, I shake my head about this award thing and recognition. This is so unbelievable. I was recognized for having changed and broadened the industry to really make people start thinking about providing advice to everyone and getting paid for it.”

Garrett was called the “hourly-fee guru” in an earlier InvestmentNews article. In the issue that came out Feb. 4, the magazine wrote, “For Ms. Garrett, 56, providing financial planning advice by the hour is not just something she pontificates on and sometimes jokes about. Charging by the hour, or even by the minute, is a drum Ms. Garrett has been banging for more than two decades.

During the Obama administration, the Department of Labor developed fiduciary regulations that would have required investment advisers to put the interests of their clients first. The regulations went into effect in June 2018, but then were shelved by the Trump administration.

“The new director of the DOL said he thought the regulations were too hasty,” Garrett said. “We had been working on them more than seven years. The opposition didn’t want that rule because they make a lot more money by not putting their client’s best interest first. Companies went to the expense of converting and starting to train their people for the new regulations.

“Some of the big financial services firms expressed how irritated they were with all the gamesmanship when they had worked to adjust their culture and change everything. And now, basically, they can go back to business as it once was. Buyer beware. They decided to take away one of the human rights, which is simply to be able to trust and really rely on the person giving you financial advice, which is the definition of fiduciary.”

Garrett feels she was young to be named an Icon, and being called a guru makes her uncomfortable.

“I don’t feel I did anything spectacular,” she said. “My vocational mission is to make competent, objective advice accessible to all. It is widely recognized inside the industry there are very few fiduciary advisors available to work for the average American. They choose to do something much more lucrative. It was a very common-sense approach to charge people by the hour. It is the way most consultants work. Ongoing money management services are a waste of money for most people. I think what people need is just-in-time advice. When I need help, I want to contact someone I can trust who is competent. Evidently that’s a revolutionary idea.”

Many financial advisors might steer a client towards a more complex product with a higher fee. They wouldn’t recommend Vanguard because it doesn’t pay a commission.

“Vanguard is one of the lowest cost investment companies in the country,” Garrett said. “Brokers wouldn’t recommend you go and pay an annual fee of less than .1 percent of your investment because they don’t get a commission for selling that. They would recommend go to an investment house that would pay 1 percent, or ten times the annual price you pay going to one of the low-cost investment vehicles. It is supposed to be disclosed how much the fee is, but sometimes that information can be buried deep in the investment document. The new regulations would have made it strikingly obvious what people are paying and how they are paying.”

With traditional brokers and insurance agents, it’s not uncommon for folks of more modest means to pay on average more than eight times the cost of what a wealthy person would.

“What the heck is that?” she asks. “That is capitalism unbridled.”

Garrett said experts from Warren Buffett on down say most people should invest in the low-cost broad market indexes. An example of one of these would be the Vanguard Total Stock Market Index. It has about 2,500 of the largest stocks in the U.S. in the fund. Broad market indexes are often safer than investing in individual stocks.

“You should have in a mixture of broad-based index funds that are diversified,” she said. “You have some asset classes that zig while others zag.”

Investing is just one aspect to financial planning. People need advice about cash flow, taxes, retirement planning, estate planning, college funding, mortgages, housing and when to start taking Social Security.

“It you don’t need the money right now, it makes a lot of sense to wait to draw on Social Security until you are seventy and get the highest payout,” she said. “It actually grows by eight percent a year if you don’t start getting it earlier.”

Garrett had another company, Garrett Registered Investment Advisors LLC, which she recently sold to her partner. The RIA, which has $100 million under management, has 30 advisers providing mostly hourly-fee services to about 800 clients.

Garrett said she stepped down from the RIA to have more time for her family including her wife, Shawnda, and daughter, Claire. She and Shawnda operate Wild Plumb Cabins vacation rental property in Eureka Springs.

Garrett will be profiled again in an article later in the year in InvestmentNews about what it is like to be a gay woman in the financial industry.