Is Paying a Fee to Become One of Dave Ramsey’s Endorsed Local Providers a Conflict of Interest?

Dave Ramsey has a program where he refers people to Endorsed Local Providers. An ELP is someone who has submitted an application to get on his list. I’m not sure how stringent the application process is. However, I have read that applicants must pay a fee to get on Dave’s list.

To all us Dave Ramsey skeptics, that brings up a question:

Is it a conflict of interest to pay to become one of Dave’s Endorsed Local Providers?

I say it is UNLESS they inform prospects that they did in fact pay a fee to be on the list.

I first learned of this in this article that Dylan posted in the comments section of this post.

Anyway, what are your thoughts?

14 thoughts on “Is Paying a Fee to Become One of Dave Ramsey’s Endorsed Local Providers a Conflict of Interest?”

  1. I don’t know the details of how much the fee is or how stringent the application process is, but I don’t see how such a fee could be a conflict of interest for anyone involved…

    Is there a conflict-of-interest when YellowPages charges a fee to businesses to advertise in their phone books?

  2. I don’t think disclosing a conflict of interest resolves the conflict of interest; it just makes it known.

    I think the primary conflict of interest concerning Ramsey’s ELPs is that Dave won’t “endorse” one unless they pay him to. An ad in the Yellow pages is not an endorsement by the phone company.

    Also ELPs are marketed by Dave as “having the heart of a teacher.” The problem is that they can teach all day long, but they don’t get paid unless you buy a loaded investment product from your teacher. Do you think that will influence the lesson plan, maybe even just a little bit? Every finance professor I know teaches low-cost indexing.

  3. To answer your question — yes.

    Dave’s appeal is to the emotional side of personal finance. The whole “heart of a teacher” thing is just one amongst many examples. He does give some good advice in many cases, but his stringent rules of thumb (4 stock mutual funds for investing), his only ONLY buy term life insurance, his 12% historical stock market return (say whaaa?), and his lack of any formalized education in finance whatsoever (other than a failed real estate company and a very successful media company) make his advice somewhat jaded to say the least. The fact that you gotta pay up to get in on his gig makes it smell kinda bad in my opinion.

  4. Of course someone such as Dave Ramsey, who provides financial advise, would want to somehow financially leverage himself from endorsing advisors.

    They are paying for being marketed. Dave Ramsey is a name brand, being endorsed by a name brand will cost you and is certainly not a conflict of interest.

    One always requires due diligence when seeking an advisor at any rate.


  5. I have always said Dave is great if you are in debt. Outside that, his advice isn’t much better than getting a tip from the shoe shine boy. Nothing against him. He has a specialty, which he is great at, but his other advice is sorely lacking.

    This lack of understanding has led him to endorse folks who are commission jockeys. Folks who work on commission are usually a direct conflict to those struggling to get and stay out of debt as they only make money when customers buy products. They aren’t compensated in most cases for providing debt consolidation advice – unless they sell those services.

    I don’t think the ELPs need to disclose they pay to be part of the network. I think Dave does. He leads people to believe that these are carefully screened and endorsed folks so a listener may not know the providers pay a fee. Dave’s listeners may think differently if Dave announced on-air that these folks pay to be in the list.

  6. Shady? Yes. Conflict of interest? Not technically.

    This happens all the time. Pay $200 to a magazine or newspaper, and they will put your name on some sort of prestigious list. This is nothing different than that.

    Ethically though I’m not sure how Ramsey can do this as a Christian. By putting his “endorsement” on financial advisors he’s probably never met or even talked to seems misleading at best and morally bankrupt at worst.

    And Dylan, I disagree with your blanket statement on all advisors. At our firm, for instance, our meetings are always free and the only way we get paid is as a % of assets under management. All trades are free to the client, and cash is excluded. On top of that, we are not affiliated with any financial firms offering investments, so there are no conflicts of interest.

  7. Anybody that supports eliminating personal debts is good to me. Our country (especially our govt) could take this to practice.

    On the investment side, I probably agree…I’m very bearish on the US stock market for the foreseebale future.

  8. Dave Ramsey is in business to make money. There is nothing wrong with that but I find it disturbing that he does recommend ELPs that sell loaded funds and pay him a fee. He is great for motivation to get rid of debt but that is where the love stops for me. Even finding out he charges as much as $100 for his TMMO events just irks me.

  9. @Travis –

    What blanket statement did I make about all advisors?

    I hope you don’t seriously think you have no conflicts of interests in your business dealings. It sound’s like you mean to say you have no third-party conflicts of interest, but every business dealing has conflicts of interest. You may manage them, but they still exist. And if you operate as a Registered Investment Adviser, you have a duty to disclose them and not deny their existence.

    Does your firm provide financial planning services? Advice other than managing and supervising assets? If so, charging a % of AUM presents a disclosable conflict of interest. Don’t take my word for it, check with the SEC. Why do you think that information is required on the ADV?

  10. Funny you should bring this up as I just revisited an old fav blog (It’s Your Money/Money Musings) last week that spoke of the same thing. (The author, Michael, decided not to pay the money to be on Ramsey’s list.)

    RE: comment #8, it brought to mind conversations we had while I was taking CFP classes which discussed that if you were to have professional relationships w/people outside your own specialty…i.e. attorneys who you would recommend to do your client’s estate planning or an insurance agent for your client’s life insurance needs, etc. you would have a duty to determine they would be qualified/competent to do the work.

    Apparently, Mr. Ramsey would not be held to this fiduciary standard as he has no professional designations (or none that I’ve ever read or otherwise been made aware of…)

  11. Dylan,

    Of course there are conflicts of interest in every business if you want to get technical. I was talking about how advisors who only make money on front-loaded investments have enormous conflicts of interest versus any fee-based advisor.

    If you think about it, a fee-based advisor’s interests are closely aligned with those of the client. The better the client’s net performance, the higher their assets under management and the higher the revenue received from an advisor charging a flat .75% fee on assets under management. Especially when there are no loads, 12b-1 fees are refunded to the client, and all trades are free.

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