If there’s one thing almost all financial experts agree on, it’s that low costs favorably impact returns. In this article, Morningstar concludes: “firms with high fees are unlikely to offer above-average performance. Low-fee funds give investors the best chance of success over the long term.”
What Dan Writes
Our brains are basically lazy. When you evoke images, you engage others. If your words don’t generate powerful images, the brain has to work hard to “decode” what you are trying to convey.
I get depressed whenever I read an article about advisors who lose a large amount of money belonging to athletes. This one is typical. An ex-financial adviser apologized for losing $43 million of his clients’ money. All of his clients were NFL players.
There’s a quote attributed to Sean Lennon (the son of John Lennon) that reflects my current thinking about the future of the advisory business: “We live in a pretty bleak time. I feel that in the air. Everything is uncertain. Everything feels like it’s on the precipice of some major transformation, whether we like it or not.”
If you’re a regular reader of my blog posts, you know I espouse “evidence-based” investing. This term refers to investing supported by peer-reviewed articles in respected financial journals.
Here’s the uncomfortable reality missing from the discussion about differentiating based on value: There may be no way for advisors whose primary value is investing in index funds and coordinating with other service providers to justify their asset-based fees.