\u00a0<\/span><\/p>\n[00:00:00]\u00a0<\/span>Kate:<\/b>\u00a0My parents have always taught me that money is evil, so there’s a lot of shame and a lot of emotion wrapped up in my parents and their expectations.<\/span><\/p>\n[00:00:08]\u00a0<\/span>Keith:<\/b>\u00a0I started just doing math. I couldn’t understand why we weren’t looking at $5 million.<\/span><\/p>\n[00:00:12]\u00a0<\/span>Ramit:<\/b>\u00a0Overall, looking at this trust, I am absolutely flabbergasted at the returns over the last 30 years. It’s cost you millions.<\/span><\/p>\n[00:00:20]\u00a0<\/span>Kate:<\/b>\u00a0I still don’t feel like I have control over it.<\/span><\/p>\n[00:00:23]\u00a0<\/span>Keith:<\/b>\u00a0This power dynamic has her acting as if she’s a 12-year-old girl.<\/span><\/p>\n[00:00:28]\u00a0<\/span>Ramit:<\/b>\u00a0Kate, do you know why you don’t have millions and millions of dollars more?<\/span><\/p>\n[00:00:31]\u00a0<\/span>Kate:<\/b>\u00a0I don’t know.<\/span><\/p>\n[00:00:31]\u00a0<\/span>Ramit:<\/b>\u00a0You’re an adult, fully fledged adult. You run a business. But the minute it comes to this, you revert back into childhood.<\/span><\/p>\n[Narration]<\/span><\/p>\n[00:00:39]\u00a0<\/span>Ramit:<\/b>\u00a0I discovered something shocking last week when we met Kate and Keith. They earned $30,000 a year, and Kate recently got access to a trust fund that was set up by her parents. It’s worth roughly a million bucks. That trust fund was set up when she was a teenager.\u00a0And if that money was invested in simple index funds, it would be worth around 6 million.\u00a0But today, more than 30 years later,\u00a0it’s only worth 1 million. What happened to the 5 million?<\/span><\/p>\n[00:01:12]\u00a0In order to help this investigation, I asked our partners at Facet\u00a0to dig into the portfolio using all the information we could gather, and then to help create a personalized roadmap to help Kate and Keith create their Rich\u00a0Life. But first, let’s figure out why the trust has barely grown in 30 years.<\/span><\/p>\n[00:01:35]\u00a0Facet is an SEC registered investment advisor. Investing involves serious risks,\u00a0and past performance is not a guarantee of future performance or success.\u00a0My opinions are included and should not be interpreted as a recommendation or research regarding any investment or investment strategy, legal or tax advice.<\/span><\/p>\n[00:01:51]\u00a0The\u00a0Facet-provided scenarios discussed are based on inputs provided by Kate and Keith and are based on industry standard assumptions. The information is for illustrative and educational purposes only.\u00a0I am not a member of Facet and have an incentive to endorse Facet as I have an ongoing fee-based contract for cash compensation based on this endorsement. All opinions are my own and not a guarantee of a similar outcome.<\/span><\/p>\n[Interview]<\/span><\/p>\n[00:02:12]\u00a0<\/span>Ramit:\u00a0<\/b>What’s the current value of the trust?<\/span><\/p>\n[00:02:14]\u00a0<\/span>Kate:<\/b>\u00a0This is what I think is really bizarre because the current value is a million.<\/span><\/p>\n[00:02:16]\u00a0<\/span>Ramit:<\/b>\u00a0What? 20-plus years later?<\/span><\/p>\n[00:02:18]\u00a0<\/span>Kate:<\/b>\u00a0Mm-hmm.<\/span><\/p>\n[00:02:19]\u00a0<\/span>Keith:<\/b>\u00a0It’s almost 30 years.<\/span><\/p>\n[00:02:20]\u00a0<\/span>Ramit:<\/b>\u00a0Okay. Hold on. Do we have access to this? Can we open it up?<\/span><\/p>\n[00:02:24]\u00a0<\/span>Kate:<\/b>\u00a0We can.<\/span><\/p>\n[00:02:26]\u00a0<\/span>Ramit:<\/b>\u00a0All right. Show that on screen. I got to find out what is up in this– where is this trust invested in? Holy\u00a0[Bleep]. Can you just imagine, as you’re pulling that up– 30 years. So if it was 800k, let me just do the math. 800, 1.6, 3.2, 6.4. That’s seven. Basically, it should be a\u00a0[Bleep]\u00a0ton of money. Where is it? Holy\u00a0[Bleep].\u00a0What in God’s name is this? Oh my God. Oh, how nice. Just a tiny bit in the Vanguard Fund and the rest is in a bunch of horse\u00a0[Bleep].<\/span><\/p>\n[00:03:23]\u00a0<\/span>Kate:<\/b>\u00a0This is a financial advisor who specializes in sustainable investing.<\/span><\/p>\n[00:03:30]\u00a0<\/span>Ramit:<\/b>\u00a0Okay. So what do you see when you look at all this stuff just off the top?<\/span><\/p>\n[00:03:36]\u00a0<\/span>Kate:<\/b>\u00a0I see so many different numbers that don’t make sense, that it makes me feel like, well, good thing I have a financial advisor, because I don’t know what this means.<\/span><\/p>\n[00:03:45]\u00a0<\/span>Ramit:<\/b>\u00a0I’ll tell you what I see. What I see are a crazy amount of funds and individual investments, most of which have fees, expense ratios. Probably some of them have front end or backend loads. I’d have to look. But basically they’re like way too many. This is like walking into somebody’s living room and there’s 75 different toys. What the\u00a0[Bleep]\u00a0is happening in here? Can we just organize? Do we need this?<\/span><\/p>\n[00:04:14]\u00a0It’s just way too much\u00a0[Bleep]. Most people can have one target date fund or three index funds to get general broad representation of the market. You have 30 investments. Let’s go to activity. I’m willing to bet we see a bunch of trades which incur trading fees, taxes.<\/span><\/p>\n[00:04:30]\u00a0<\/span>Keith:<\/b>\u00a0$2,500 service fee.<\/span><\/p>\n[00:04:32]\u00a0<\/span>Ramit:<\/b>\u00a0Oh. Where’s that?<\/span><\/p>\n[00:04:34]\u00a0<\/span>Keith:<\/b>\u00a0Down toward the bottom.<\/span><\/p>\n[00:04:36]\u00a0<\/span>Ramit:<\/b>\u00a0Oh my\u00a0[Bleep]\u00a0God. Click that. Hold on. I’m about to have a heart attack. Everybody, listen, if I die on this\u00a0[Bleep]\u00a0podcast, you know that I went out well. I did what I was meant to be doing, which is blasting these godforsaken wealth managers taking people’s money through fees. Let’s take a look. A advisory fee, $2,573. How interesting.<\/span><\/p>\n[00:05:03]\u00a0Beginning value of your portfolio, 1.02 million. Total value, 1.02 million. Change in value– let’s just look at this. 2021, it dropped from 1.2 million, and in 2025, it’s 1.0. Who the\u00a0[Bleep]\u00a0performs like this? I literally could take a armadillo and get better performance from this armadillo than this investment manager. What does this mean to you, Kate, when you look at this page?<\/span><\/p>\n[00:05:35]\u00a0<\/span>Kate:<\/b>\u00a0Frustration.<\/span><\/p>\n[00:05:36]\u00a0<\/span>Ramit:<\/b>\u00a0Okay, that’s true. That’s what you feel. But literally, what do you see on the page? What does it mean to you?<\/span><\/p>\n[00:05:44]\u00a0<\/span>Kate:<\/b>\u00a0I feel like there’s something missing. I don’t understand why things aren’t moving in a better direction. And so it feels to me like, okay, what’s missing that is the reason for why it’s not performing well?<\/span><\/p>\n[00:06:00]\u00a0<\/span>Keith:<\/b>\u00a0I just don’t understand because when Kate and I first got together and some numbers came up in conversations, the first thing I thought of was a book I’d read eons ago about the rule of 72. And I started just doing math just like you did. And I couldn’t understand why we weren’t looking at $5 million.<\/span><\/p>\n[00:06:21]\u00a0<\/span>Ramit:<\/b>\u00a0Exactly. Or much more. Do you know the answer to that?<\/span><\/p>\n[00:06:26]\u00a0<\/span>Keith:<\/b>\u00a0I understood that there was a percentage getting taken out for the management fees, but beyond that, I couldn’t fathom why it wouldn’t be so much more money.<\/span><\/p>\n[00:06:37]\u00a0<\/span>Ramit:<\/b>\u00a0There’s one other important point. Kate, do you know why you don’t have millions and millions of dollars more?<\/span><\/p>\n[00:06:42]\u00a0<\/span>Kate:<\/b>\u00a0Something that you just mentioned that I hadn’t considered were fees through trading. But I wouldn’t imagine that would be what you were looking for.<\/span><\/p>\n[00:06:52]\u00a0<\/span>Ramit:<\/b>\u00a0The other thing is your investments are probably dog\u00a0[Bleep]. If you’re talking about the rule of 72, we generally apply that to the S&P 500. If you have a bunch of funds that are underperforming the market, a lot of them, and they are just underperforming for years and years and years, it doesn’t get better.<\/span><\/p>\n[00:07:16]\u00a0It just gets worse and worse and worse. You’re basically compounding down, not compounding up. Plus you’re paying fees. Now, I’m not here to beat you up. I actually think that, looking at this, I have a lot of compassion because this\u00a0[Bleep]\u00a0is confusing. It’s not clear what any of this means. And the way that it’s set up makes people feel stupid and, oh, okay, at least they’re like managing it. But it’s obviously not serving you. Would you agree with that?<\/span><\/p>\n[00:07:43]\u00a0<\/span>Kate:<\/b>\u00a0Yeah, absolutely.<\/span><\/p>\n[00:07:44]\u00a0<\/span>Ramit:<\/b>\u00a0Okay. You mentioned something about this person is an expert in ESG. Can you explain that to me?<\/span><\/p>\n[00:07:50]\u00a0<\/span>Kate:<\/b>\u00a0He’s supposedly taking what our values are and divesting from any investments that would be paying into things that we don’t agree with. So we outlined a number of things that were important to us. We didn’t want to be investing in fossil fuels or guns or private prisons. And so he went through a number of the investments and divested some of those into moving away from that stuff.<\/span><\/p>\n[Narration]<\/span><\/p>\n[00:08:20]\u00a0<\/span>Ramit:<\/b>\u00a0I just\u00a0want to\u00a0jump in here and explain that\u00a0ESG stands for\u00a0environmental, social and governance. It’s basically a way for people who want to have a way to screen for investments so that they are environmentally sound.\u00a0Now\u00a0I\u00a0want to\u00a0tell you how ESG is perceived in the investing world. It’s been critiqued a lot because companies will do something called greenwashing.<\/span><\/p>\n[00:08:44]\u00a0They’ll basically create a fake environmental department and they’ll start reporting on their environmental success often just so they can be included in these ESG stocks.\u00a0But a lot of it is just marketing. It’s not often substantive change. It’s also important to note that the performance on ESG has not been great. So in the investment world, ESG is unpopular. It’s basically laughed at.\u00a0And most sophisticated investors don’t really take it seriously.<\/span><\/p>\n[00:09:11]\u00a0But I deeply understand the desire to invest in ethical companies.\u00a0Let me tell you another way.\u00a0Another popular way that people do this is to simply invest in a diversified portfolio,\u00a0like an\u00a0S&P\u00a0500 index fund,\u00a0then they simply take the gains they get and become extremely targeted with their philanthropy or their charity.<\/span><\/p>\n[00:09:31]\u00a0You can create your own scholarship. You can donate to local charities in your area, libraries, schools.\u00a0That’s something that I might highly recommend.\u00a0And this really comes down to the question of how much do your beliefs cost you? It’s like, yeah, I want to invest in ethical companies. Okay, that might cost you $2.6 million over the course of your life. Or if you flip that, you could have 2.6 million more to be able to donate however you like.<\/span><\/p>\n[00:09:59]\u00a0This is in part what’s happening with Kate’s portfolio,\u00a0and it has left a lot of money on the table. So listen as I challenge Kate to think about the repercussions of this investment strategy.<\/span><\/p>\n[Interview]<\/span><\/p>\n[00:10:13]\u00a0<\/span>Ramit:<\/b>\u00a0Are you willing to invest in ESG if you get a lower return than the market?<\/span><\/p>\n[00:10:24]\u00a0<\/span>Kate:<\/b>\u00a0It is an interesting question, and I appreciate it because I guess there’s two ways of thinking about it, and which is the right answer? There’s one approach that we move away from ESGs because we can do better and then make a commitment to then taking our money that we make and putting it towards areas that we feel strongly about. And so that’s one option. And the other option is, we might not make as good investments, but we’ll commit to not investing in things that don’t align with us.<\/span><\/p>\n[00:10:57]\u00a0<\/span>Ramit:<\/b>\u00a0Right. So what’s the answer to my question?<\/span><\/p>\n[00:10:59]\u00a0<\/span>Kate:<\/b>\u00a0I guess I’ve been moving more towards investments that result in a higher yield and then having the flexibility with what we take out of that to then put towards the things that align with our values.<\/span><\/p>\n[00:11:13]\u00a0<\/span>Ramit:<\/b>\u00a0I respect that you want to be environmentally sound and you want to put your money where your mouth is. I always appreciate that. The question of how to do it, especially as the amounts get large, can turn out to be surprisingly complex.<\/span><\/p>\n[00:11:26]\u00a0Overall, looking at this trust, I am absolutely flabbergasted at the returns over the last 30 years. It’s cost you millions, and we can’t do anything looking back, but we can understand what happened in this trust, which I think your parents set up when you were a teenager.<\/span><\/p>\n[00:11:44]\u00a0Technically, they should have known better. They should have been better advised. They should have been more tenacious about their representation. But here we are today, and we can make sure that everybody listening and watching this never lets their money be managed this way. And let’s not forget, you two are young enough to let this money compound a lot.<\/span><\/p>\n