Why Tony Robbins, tax shelters and financial advisers don’t mix

Next time a self-help guru like Tony Robbins walks into a room full of financial advisers, say at an industry conference or a meeting of one firm’s advisers, think of your clients, whisper “namaste” and head to the lobby bar.

That’s one lesson gleaned from a private arbitration complaint filed a year ago by investors, Craig and Michele Waterman, who worked with and are now suing a former financial adviser, Ajay Gupta, who had close ties to Robbins.

Robbins reportedly praised Gupta in a 2015 book, and according to Michele Waterman, singled the adviser out in at least one Tony Robbins event.

Sure, it may feel grand for investment professionals to rub shoulders with the likes of Robbins, whose motivational events feature wealthy folks pumped up on endorphins walking across a bed of fiery coals.

After all, who doesn’t need a little bit of self-empowerment during tough times, particularly right now as the country emerges from the deadly Covid-19 pandemic?

But good feelings don’t lead to sound investment decisions. At their heart, those are cold and calculated, based on logic and reason — the opposite of the mind’s warm glow after a hot stone massage or self-help seminar.

While Robbins is not named as a defendant or respondent in the Waterman complaint, and nowhere is it stated that he recommended specific investments, he is mentioned twice.

A peripheral figure in the claim, he appears to have been the link between the investors, Craig and Michele Waterman, and the respondents, their former adviser, Ajay Gupta and Gupta Wealth Management, according to the complaint and an interview with Michele Waterman.

Creative Planning, which bought Gupta Wealth Management in 2016, is also cited as a defendant in the arbitration. The Watermans, who lived in northern California at the time, are seeking damages stemming from their purchase of three land easement funds, one of which was allegedly managed by Gupta Wealth.

They invested $350,000 in the three funds that bought into conservation easements in 2015 and 2016 and eventually wound up with a tax bill of $1.3 million, according to the complaint.

At no time did Gupta Wealth advise the Watermans that conservation easements were speculative, led them to a high risk of an audit, and that the IRS was starting to focus on the products’ promoters, the complaint alleges.

Looking to revive their marriage, Michele Waterman and her former husband first started attending Tony Robbins’ events in 2014 and a year later she met Gupta at another Robbins meeting, this time in Florida, Michele Waterman said in an interview on Tuesday. She had worked with traditional brokers in the past but her interest in Gupta was sparked by Robbins, she said.

“During that event, Tony Robbins was talking about investing and said his personal investment person, Ajay Gupta, had started his own company and everyone was a licensed fiduciary,” Michele Waterman said. “And a fiduciary was critically imperative to work with. We were very conservative investors and not looking for a tax strategy.”

By late 2015 and 2016, the couple had started investing with Gupta Wealth Management. Michele Waterman said they had a personal net worth of about $7 million at the time, owned a successful business and were not looking for huge gains, investing mostly in exchange-traded funds and bonds, including municipal.

A COMPLEX TAX SHELTER

The center of the Waterman claim against Gupta and Creative Planning focuses on a type of complex tax shelter investment called land easements that grew in popularity over the past 10 years.

The investments hit a huge snag after the IRS started to question the appraisals behind the land deals. The couple later faced audits from California authorities and the IRS, and they lost their invested capital and were forced to repay the tax deduction — plus interest, penalties and attorneys’ fees — for a loss of $1.3 million, according to the complaint.

Some syndicated conservation land easement deals at that time were offering investors charitable contribution deductions on taxes of eye-popping amounts, from four to four-and-a-half times the amount they invest.

That meant investors like the Watermans could turn a $100,000 investment
into $400,000 or more of tax deductions. The IRS in late 2016 raised questions about the appraisals and valuations of properties in the deals.

Financial advisers must beware of self-help gurus tripping along the sidelines of financial advice. They tap into a very powerful and personal psychic layer of persuasion.

“It’s the ultimate stamp of approval and lowers an investor’s ability to analyze an adviser’s recommendation objectively and critically,” said Joshua B. Kons, the Waterman’s attorney.

ROBBINS MUSCLES IN

Half a dozen years ago, Tony Robbins was shouldering his way into the market of financial advisers — optimists and salespeople by nature who are always looking for a new way to reach clients. 

Flanked by a couple of bodyguards, Robbins, a mass of a man at 6’7″, in 2016 sauntered into InvestmetnNews‘ offices in midtown Manhattan to make his pitch to our editors.

I did not attend that meeting but had plenty of questions. What was Robbins doing, cozying up to financial advisers? Was he hanging around the industry to sell more books? Was he seeking an open door to financial advisers’ clients?

Creative Planning, one of the fastest-growing registered investment advisers in the industry, that same year had hired Robbins as chief of investor psychology as it completed its acquisition of Gupta Wealth Management.

That didn’t work out. Creative Planning in 2019 cut ties with Robbins in the wake of a string of sexual misconduct allegations against him.

Robbins is not a party to the Waterman claim and had no comment on it, according to a spokesperson. Additionally, Robbins has repeatedly said that “his goal is to educate, not to offer financial advice.” 

“He believes financial advice and guidance should only come from a fiduciary adviser who understands the goals, needs and interests of their individual clients,” the spokesperson noted. 

The respondents, Gupta Wealth Management, Gupta, Creative Planning and others, denied all allegations, according to their answer this February to the Waterman’s complaint.

It’s easy to see how complicated the case is. For example, according to sales documents, Gupta is listed as the manager on one fund, GWM Capital Real Estate, but not the other two, Aldgate Real Estate Partners and Brentwood Real Estate Partners. Those were managed by an individual named Michael McCarthy and the Watermans invested the bulk of the money in dispute, $300,000, into those two.

The purpose of this column is not to adjudicate the Waterman arbitration but rather to ask questions about Tony Robbins’ past role and presence in the financial advice industry.

However, it is worth noting that an adviser who moved from Gupta Wealth Management to Creative Planning after the latter bought the former in March 2016 mentioned McCarthy in an email that fall. In an October 2016 note to Craig Waterman, the Creative Planning registered adviser wrote that McCarthy “manages these entities for our clients and is well versed in” the land partnership strategy.

Gupta, who Michele Waterman first met at a Tony Robbins seminar in 2015, retired from Creative Planning last year. He did not respond to a message over LinkedIn to comment. 

Creative Planning would not touch the types of land deals that the Watermans are claiming cost them $1.3 million, said its CEO, Peter Mallouk, in an email. 

“Creative Planning does not recommend conservation easements, and has never established a conservation easement fund,” wrote Mallouk. The firm has made numerous acquisitions of late, and after a deal closes, advisers are required to follow Creative Planning’s investment philosophy and strategies, he added.

Namaste means “I bow to you” in Sanskrit, and financial advisers would be wise to bow to clients, not to motivational speakers. Enjoy the seminars and hot stones, but self-help gurus and financial advice do not mix. 

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The post Why Tony Robbins, tax shelters and financial advisers don’t mix appeared first on InvestmentNews.

As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.

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