One of the most popular radio hosts and church finance programs is Dave Ramsey. He is known for promoting debt-free living and has helped millions of people navigate personal finance. One of the investments he hates is timeshares. To be fair, most respected financial advisors also dislike timeshares as well for because of liquidity issues and lack of return. Which leads to timeshares exits.
Ramsey generally provides good advice. I can’t agree with everything he says, but he is right about most debt. Some debt is good, but that is for another article. The problem arised from Ramsey recommending a timeshare exit service and financial advisors which is causing some issues.
Recently it has been reported that many financial advisors do business with Ramsey’s organization because they pay for client leads. It unclear if listeners who are recommended to these financial advisors fully understand the relationship with Ramsey. Advisors call or email Ramsey listeners who are interested in his financial advice, so the pitch can start with something like, “Dave Ramsey let me know that you want to talk to a financial advisor.”
This leads me to ask how were these financial advisors getting approved and was Ramsey getting some kind of commission? It turns out Dave Ramsey’s deal with financial advisors is in a gray area of SEC’s rules for fiduciary and is soliciting business.
From an ethical issue, advisors using Ramsey’s referral service should disclose that they are paying Ramsey for the leads to the prospective clients. Ramsey should also disclose this to his listeners and not be buried in the fine print of his website.
From a financial advisor’s perspective (I both worked and helped manage advisors) who agrees with a lot of what Ramsey says, it has been difficult to watch friends get recommended to sub-par financial advisors because the advisor bought leads from Ramsey. I spoke to an “approved advisor” at a church event, the advisor was lacking in basic investment knowledge and portfolio management.
In 2015, Ramsey’s company paid $50,000 to the Missouri educational fund and agreed to change from having advisors pay for leads to charging for advertising.
However, a complaint filed in February by the Washington Attorney General Bob Ferguson, a company known as the Timeshare Exit Team, also known as Reed Hein & Associates, allegedly used numerous unfair and misleading business practices related to the service to leave timeshare customers. Prosecutors accuse Reed and Hein of offering a 100% money-back guarantee. The Timeshares Exit team, listed on its website, touted the idea of pulling consumers out of real estate investments.
In reality, many consumers were in difficulty in obtaining a refund and could not be reimbursed if the company did not deliver within one year.
In a video ad posted on the Timeshare Exit Team’s website, Ramsey paints a different picture of the company. Ramsey said he was initially skeptical about whether he would merge with a company involved in timeshare exits. We’re very careful with our work.
Ramsey has worked for the company for about three years, and his radio show is broadcast by hundreds of stations in the United States. In 2017, Investment News reported that financial advisers benefited from tips they received from signing up potential clients.
The consultants were part of a directory called SmartVestor Pros, and they paid advertising fees and were paid overtime for recommendations ranging from $400 per month to nearly $900 per month, based on the number of recommendations/referrals received over a given period of time.
Ramsey and his various companies are not named in the complaint, but they are mentioned several times. The “Dave Ramsey Show” website does not list how much Ramsey’s timeshare exit team has asked for the show’s endorsement, and they were not mentioned in any of the complaints. Reed Hein also favored clients who were threatened or turned away from timeshares in favor of a more profitable one.
According to Washington State, Reed Hein has provided 38,000 for timeshare exits and routinely refused reimbursements. Sadly, there 17,000 pending. Brandon Reed, CEO of Reed Hein & Associates said in an email that he strongly disagrees with the complaint.
A spokeswoman for Dave Ramsey, Megan McConnell, did not respond to multiple calls and emails seeking comment.
Financial advisors who want to continue doing business with Dave Ramsey should keep a close eye on the companies he supports and endorses.
Timeshare is a shared-ownership property and is usually sold weekly, but exit deals have increased sharply lately, with many consumers withdrawing from contracts, according to a recent report from the National Association of Realtors.
Currently, there is not any license for companies or individuals to get people out of timeshare contracts. However, financial advisors and broker-dealers should be careful not to accidentally be involved with the sale of any products and/or services not covered in their practice.
