In Part Two, we return to our friends at Beat the Market Investors (‘BTMI’), the former active money manager of FSIA-client ‘Jack’. It was an associate at BTMI who posed the question to Jack as he was in the process of transferring his assets, ‘if you’re going passive, why pay anyone at all’?
Having charged Jack fees for years without delivering on their presumed expertise in beating the market, BTMI also left Jack on his own when it came to non-investment financial concerns.
One of the more subtle benefits of ‘paying for passive’ is that it shifts the focus of the typical investment conversation away from the unknowable (i.e. what’s the market going to do over the next six months) and the pointless (i.e. why is this active manager better than that active manager), to more substantive and valuable discussions.
With an investment focus on appropriate portfolio risk, tax efficiency and diversification, the conversation can move to other real life questions such as, what is the best way to save for college, how much income can we generate in retirement, do we have enough life insurance and should we refinance our mortgage.
The real value in investment advice is not in hollow promises of market outperformance but rather it is in guiding clients toward effective investment and financial decisions that can ultimately improve their lives.
is the founder and principal of Westchester, New York-based, Fifth Set Investment Advisors LLC, a Fee-Only, SEC registered investment advisory firm. Following a career in equity research, an examination of competing investment management approaches led Ian to create Fifth Set to offer clients customized wealth management strategies built on a foundation of evidence-based financial theory.