Both our coaching practice and our website design and digital marketing firm provide services to “evidence-based” advisors only. We define “evidence-based” as no stock picking, market timing or attempting to select actively managed mutual funds likely to outperform.
We adopted that policy because we only want to help advisors who put the interest of their clients first.
The research underlying our consulting work is compelling. We don’t want it used to harm investors.
In order to set up a time to discuss our services, prospects fill out a contact form. On that form, they confirm they fit our definition of “evidence-based.”
Previously, our clients have all been registered investment advisors. This is not surprising. Those advisors are legally obligated to disclose all conflicts of interest and always resolve any that exist in favor of the client.
Recently, our inquiries have included representatives with major brokerage firms. They tell me they aren’t currently evidence-based, but are interested in switching.
I’m thrilled to help these people. They are looking at the same data I’ve been writing about for over a decade. They want to do right by their clients and realize that active management is not a prudent or responsible way to invest.
They also understand investors are voting with their money.
According to Morningstar, for the year ending 2018, investors placed $207.0 billion into passive U.S. equity funds and withdrew $174.0 billion from actively managed funds. It’s likely many of these investors are not relying on their brokers for passive investment advice.
Will the trickle turn into a flood. I hope so.
The trend towards passive shows no sign of lessening. The data in favor of it is robust. The vast majority of passive funds outperform comparable actively managed funds every year, and especially over the long term. It’s exceedingly difficult to identify prospectively active mutual funds likely to outperform. When you consider higher management fees and taxes investors in active funds incur, the likelihood of future outperformance is significantly lessened, if not completely eliminated.
A business model premised on the ignorance of your clients is not sustainable. This is especially true in this Internet age where so much information about investing is readily available.
We stand ready and eager to help those advisors disenchanted with active management who want provide their clients with a superior way to achieve their retirement goals.
Resource of the week
This article by Larry Swedroe summarizes the evidence showing active management is a loser’s game.