I always knew that the reason Dave Ramsey gave horrible investment advice to his listeners by advocating loaded mutual funds over low cost index funds was because he made money off the referral fees. However the actual amount he makes is staggering…
Advisers are paying about the same amount under the new program as they were under the old one. Fees range from $400 per month to close to $900 per month, based on the size and population of the territory, as well as the number of referrals that come in over a period of time.
Back of the envelope math shows that the former referral program and the current advertising program have been cash cows for Mr. Ramsey. If each of the 1,000 advisers in the program paid on the low end, $400 per month, that would translate into $400,000 of monthly revenue. If those same advisers paid on the high end, about $900, Mr. Ramsey’s business could see revenues of as much as $900,000 per month from adviser advertising.
…so basically he makes around 5-10 million a year in his pocket by giving this horrible advice and if you listen to his show he has really double and trippled down hard on his position as noble prize winning research, popular culture, and his own listeners are becoming educated and have factually proven that index funds outperform loaded mufual funds over 80% of the time.
In a show this week he says, “i dont perform surgery on myself i go to a professional. So why would i do it myself with investments, thats just stupid”
No dave…paying a commision stock broker 5.75% off the top to get a high fee underperforming activly managed fund instead of an index fund is the real stupidity.
“Its difficult to get a man to understand something, when his salary depends on his not understanding it.” -Upton Sinclair
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