I happened on a fascinating exchange between Rick Kahler, CFP®, MS, ChFC, CCIM and YouTube followers of Dave Ramsey, and I think it’s an extremely instructive example of the dangers for blindly following gurus. First, some background.
For those who haven’t heard of him, Dave Ramsey is an entertainer who discusses financial planning on a talk radio show. He also has a TV show (I believe), and is very popular in the evangelical Christian subculture. From what I’ve heard of his show, he tends to focus on removing debt (not only paying it off, but never taking any on ever*) and building large savings and investment accounts. He has a step-by-step plan for improving finances, and one of the later steps is investing for retirement. At this step he recommends you invest equally between four types of mutual funds: growth, growth and income, aggressive growth, and international. This is also the step that makes some financial planners (especially me) squidge up with concern.
It’s also important to note that I have listened to the Dave Ramsey Show off and on for at least three years, and yet I have never heard Dave’s advice change. It’s gotten to the point where I can almost predict what he’s going to say before he says it, or at the very least, what his talking points are going to be in the conversation with a caller. He’s suspiciously consistent.
So, back to the Dave’s investment advice philosophy, excuse me, philosophy. A financial planner of national repute, Rick Kahler, calls Dave Ramsey out. Of course, he was called out in a charitable, genteel and well-reasoned article, because that’s how financial planners of national repute roll.
Rick subsequently made a YouTube video of the article. Now, cue the horde of Dave Ramsey fans. I will give them credit, they are far better at spelling and grammar than your average YouTuber. Unfortunately, they aren’t very adept at listening to the point Rick was making. The point is that, while Rick respects Dave’s work on saving, spending and real estate, he is provably wrong on the advice, excuse me, philosophizing he gave at that time involving REITs.
So, of course Rick makes another well-reasoned, cultivated response to the frothing YouTubers. His point being that it’s best to get personalized financial planning that passes your own test of common sense, and not blindly follow an advisor talk show entertainer. He makes the point that a guru is supposed to teacher, not an idol. (Well put!)
So, what’s the danger of following gurus?
The danger is that finance gurus are primarily entertainers. They are not your financial planner. Your financial planner’s job is to look at your unique situation and goals, then work with you to create and implement a plan that is customized for your needs. A financial entertainer’s job is to build a large, dedicated following to whom they can sell products and services. Their job isn’t to advise you or educate you, it’s to sell you things. The advice and education component is how they build up the credibility to sell those products. It’s easy to mistake a finance guru for a financial planner, because they sound very similar.
The danger, to be more precise, is that you’ll start to simply obey what the guru says instead of thinking for yourself. It’s easier to obey a trusted guru than to work through the logic and complexity of a customized financial plan. Instead of doing the hard work correctly, a guru’s follower can just do what the guru says and have faith that what the guru says is right for them. Sometimes that works out. Sometimes it doesn’t.
How Can I Tell If I’m Too Deeply In a Guru’s Thrall?
My personal indicator for having too much trust in a teacher is an inability to stomach criticism of said guru. If I have faith in someone, that faith can’t stand up to any evidence that the person in which I have faith isn’t worthy of that faith. I suspect that’s what we’re seeing in the vitriolic YouTube comments. There are a lot of people who’ve put their faith in Dave Ramsey, and dare not have that faith shaken. Enough lay psychoanalyzing. I think the question, in the end is:
How Do You Know When You Are In A Guru’s Thrall?
I can’t answer that one for you. You’re have to do the introspection to answer it. But if you don’t, there’s a risk that you’ll end up as one of the YouTube hotheads, and nobody wants that. That’s just another, uglier, danger of following a guru.
*The only exception I’ve heard him make is for a 15-year fixed mortgage for a primary residence that has payments less than 25% or household income. Other than that, he condemns all other debt, including credit cards, vehicle loans and even student loans.