8 Advantages to Starting Your Marketing Career in Investment Management, and 2 Disadvantages

For years, you’ve honed your marketing skills in the investment management space. Sure, you’ve gazed at the greener grass of more creative or bigger-budget sectors on occasion. Keep your chin up. Your training has prepared you for success in more ways that you realize–particularly in the B2B world. Here’s 8 lessons that indicate that you’re on the right path.

Credit: epSos.de via Flicker

1. You know that time = money

You may have had to call a meeting with a portfolio manager, a trader and a product specialist for a major product launch or next quarter’s road trip. Knowing full well that some markets somewhere are open, you’ve made a habit of keeping those sessions fast and infrequent.

A friend of mine working in New York told me that each time the head of trading would call an all-hands-on-deck meeting, he always began with a simple statement. “This meeting is costing the company X hundred thousand dollars per minute, so only speak up if it’s worth it.”  Needless to say, little time was wasted.

2. You’ve got more launches under your belt than NASA

It’s true. Yes, theirs are more complex (even if it doesn’t always feel like it). But you’ve got way higher numbers. NASA launched 135 shuttle missions in 30 years. According to Statista, there were more than 110,000 open-ended funds in 2016, with somewhere between 2000 and 6000 new funds launched in each of the past 5 years. Plus, when you’re not launching, you’re working out a new or refreshed product line-up to showcase for an upcoming event or campaign. However…

Rodin’s The Thinker.
Photo credit MustangJoe via Flickr.

3. You know that product launches aren’t enough

A marketing team that’s only doing product marketing is barely treading water. You know that to cut through to your audience, you have to go beyond the product and make a genuine connection. Thought leadership is the real battlefield in investment management. Investors want to be prepared for what’s to come, even if, in the words of Yogi Berra, “it’s tough to make predictions, especially about the future.”
4. You know how to weigh pros and cons to make a sale

Successful investing is about getting the risk/return equation right. There is no single, perfect investment for everyone. Rather, you position and pitch the product for a select investor type and give a full account of what they can expect, ‘warts and all.’ Why? Because you’ve spent countless hours with your compliance team. (Also, you believe deep down that honesty is the best policy.) Post-MiFID, you know that every communication must be ‘clear, fair and not misleading.’ Being forthright and setting proper expectations tends to translate into credibility gains down the line. Speaking of compliance…

5. You can accommodate a very robust compliance framework

All that time spent with the folks in compliance and legal? It wasn’t swapping recipes. It lead you to develop a set of terms that highlight your firm’s offer while respecting clear limits–and made your communications more deliberate and purposeful as a result. One clear downside: the phrase, “Past performance is no guarantee of future results” has been etched forever into your subconscious.

6. You understand the B2B mindset

It turns out that fixed income investors are not the only ones analyzing the breakevens. No one, no matter what business they’re in, wants to run the risk of losing money. So they look to see how much cushion there is available, and under what circumstances they would still come out without a loss. It’s the same story with maximum historic drawdown.

7. You know that decision making is a team sport

When you’re gearing up to launch the next big thing, you know that you can’t do it alone: business-to-business means bringing together your colleagues to address the client, the influencers, the gatekeepers and stakeholders to achieve maximum impact. So, of course you’ll line up RFP, consultant relations, sales and PR team to bring a consistent message to market. Anything else would just be silly.

8. You take the very long view

In this business, there is no impulse buying. You’re not trying to sell a few more candy bars at the cash register. Instead, you’re accustomed to working through a decision-making process in the 9 to 24 month range. From discussions with sales teams, you have a fairly good idea which of the largest institutional investors in your markets are due to put out requests for proposals in the next year–and you’ve quite possibly already started working on them.

While that’s all well and good, there are a couple of drawbacks. For instance…

Disadvantage 1. It’s one of the few sectors where you need a master’s degree in order to be qualified to update a slide deck.

Disadvantage 2. Regular-sized number become meaningless in a professional context. You’re either dealing with millions, billions, or basis points. Anything else is a ratio.

Did I miss anything? Add your thoughts in the comments section.



Define Thought Leadership To Get Ahead

Successful pursuit of a thought leadership strategy means first defining your ambition. Start with this sound definition.

Are we on the same page?

I approach the topic having been involved in thought leadership efforts for a number of financial service companies that had varying levels of success with their thought leadership programs, where messages worked very well or less well, and the cultural and linguistic issues were identified and managed to different degrees. Perhaps the most important lesson I’ve learned from the experience is that a thought leadership effort requires a common understanding/definition of thought leadership. Otherwise, problems can arise.

One clear challenge for organizations that have either embraced or are intending to embrace thought leadership is to nail down exactly what kind of thought leadership they want to produce and identify their intended audience. The fact that the definition of the term ‘thought leadership’ remains elusive, and does not translate easily into foreign languages can severely hamper efforts in multinational firms to agree on a course of action. Even in situations where everyone speaks the same language, thought leadership often means different things to different people.

Also known as…

As far as business jargon goes, thought leadership is not the worst term out there. It does however lend itself to considerable confusion and misinterpretation due to its seemingly straightforward meaning. Variants on the term ‘thought leader’ exist, and range from equally serious constructs such as opinion leader or guru, to the more vernacular rock star or even ninja.

Pictured: Teenage Mutant Thought Leaders? By 専門店の即時から via Wikimedia Commons

Coming to terms

For my money, it’s hard to beat the definition provided by Clayton Christensen, professor at Harvard Business School, who in an interview stated:

“I would define a thought leader as someone who stands above subject-matter expertise and is an authority in their field. And they have to be able to prove that expertise with a track record. Think of it this way: subject-matter expertise resides within a company. Thought leadership resides within an industry. Thought leaders provide clarity, especially to industries that are in flux. They teach.”

At face value, the term ‘thought leadership’ suggests being at the forefront of innovation and the ability to offer new ideas. But this is a narrow view that–while fairly clear for an individual–hinges too much on a single person and thus makes it harder to apply to an entire company. To anchor thought leadership in a wider organizational context, I offer the following definition:

Thought leadership (n): the practice of achieving an ongoing dialogue using educational content that influences how your audience thinks in order to achieve recognition as a trusted expert in your field.

A thought leader plays 3 roles: 1) recognized expert, 2) valued communicator and 3) muse.

1. Recognized expert

It’s widely agreed that the designation of ‘thought leader’ is socially defined–that is, it’s a function of being perceived by others as such. The definition calls out the social nature of the concept by identifying an audience along with the role to which one aspires–that of trusted expert. It implies a relationship just as leadership does between leader and follower(s). Note that obtaining recognition as a trusted expert is the goal or stated objective here (‘in order to achieve’) which gives it a sense of purpose.

2. Valued communicator

This definition also offers an indication of how this occurs: through an exchange of ideas–educational content–that are both helpful (people find a use for it) and compelling–meaning that the audience values it so highly that they  strongly embrace and even shared it with other. It’s important to distinguish the kind of content that’s transmitted as thought leadership content from more garden-variety content such as product specifications or advertising which companies produce in abundance.

3. A muse

Describing the nature and impact of the type of content that is transmitted defines what kind of thought that we’re dealing with here. The message must be formulated in such a way that it leads the audience to change their way of thinking (influences or significantly alters the way they think)–that is, in receiving the message the audience cannot help but react, though how this is accomplished will vary. It may be done by re-framing a familiar issue and portraying solutions in a new light, offering up data that shocks or surprises, advocating actions that run counter to current practice, etc.

Now head that direction

This definition provides guidelines as to the actors, mechanics and purpose of thought leadership. As you can see, this interpretation strips away the sheen of thought leader as innovator or contemporary Einstein that consistently churns out groundbreaking ideas one after the other–a difficult if not impossible task.  By highlighting the audience and the nature of the content, it shifts the focus to that of a strategic communicator acting as a guide to prospective and existing clients. It also places thought leadership squarely in the realm of content marketing.

Leverage Your Market Sizing to Raise Your Profile in 5 Steps

If you already do market sizing, use that as fuel for content that raises your firm’s profile.

When it comes to business, certain bits of information are essential for us to put a firm or its products into context. The size of the market is one such tidbit. It allows us to grasp how a firm ranks versus its competitors, shows whether its share of the pie is growing or shrinking, and how the pie itself is growing or shrinking.

Picture of pie
Pictured: The pie (that I made myself that was every bit as delicious as it looks)

Show me the pie

Market sizing is curious activity. It can consume a lot of resources and serve as a key input for strategy and investment discussions. It’s also closely guarded and rarely communicated outside of the company. There is, however, a reason to use key figures from the exercise: namely, to gain credibility with stakeholders including clients, prospects and the media.

Minimum required information

In some cases, the size of the market is a basic data point that you have to provide prospects in order to gain their custom. In financial services, investors will want to know how an asset class compares to what they already hold in their portfolio. Institutional investors are looking to gauge capacity issues. Any basic case for investment type of material will detail both the primary and secondary market volumes: the first in total outstanding and the second in yearly amounts. In other sectors, clients may be completely indifferent to these considerations–though you can still leverage the data to gain an advantage.

Here are a few tips for turning market size figures into thought leadership:

1. Choose the market

You have 2 options: either size the market for your product (choose 1 category) or for your clients’ products (again, choose 1 category). With the former, you position yourself as being knowledgeable about your own activity–a step down the path of demonstrating expertise and later thought leadership. With the latter, where your clients compete globally and their production volumes (supply) have an impact on prices (demand)–you’re offering them a kind of customer service to help them better understand their industry and competitive context (B2B service).

Pick one. I’ve seen either work for different firms.

2. Confirm the target

I meant to do that.

Is there a common understanding of annual market turnover? For a product such as smartphones, the answer is clearly yes. Those manufacturers release regular reports on the number of products sold. For public firms, it’s a clear factor for revenue and earnings projections closely followed by analysts. No mystery there.

If you’re tackling more of a niche sector that may be highly fragmented and there doesn’t appear to be a trusted source of this data, that’s a sign you have an opportunity to build a common reference point for the industry. (Bear in mind that consultants and market research firms will also be fishing in these waters).

3. Pull back the curtain

Is anybody out there?

Share some of your key figures with the outside world. Start with where you’re at today, or perhaps fill in the past few quarters or years to provide context and show a trend. Be descriptive. From there, you can begin to discuss trends and factors that influence them. It’s an opportunity to speak to clients about those trends, and for you to solicit their views. For highly regulated or compliance-sensitive sectors, it gives you the chance to talk about something other than product when you have a public platform (live event, webinar, etc.).

4. Be bold

If you’ve got the courage and internal support, give your views on where the market is headed in the future. Make a projection. Caution: this one can be intimidating for many folks. If you can stomach it, you’ll benefit from the anchoring effect. In essence,  Being the first to put a number out will tie the discussion around your reference point. Clients and journalists may go around asking your competitors for their views/estimates, but largely to compare with your figure. You gain the lead.

5. Rinse, repeat

The source of all marketing strategy, less dandruff

Marketing basically follows the instructions on your shampoo bottle. Repetition is key, so insert your market figures into discussions with clients, journalists, etc. And if you gain traction, plan to repeat the exercise on a regular basis (probably quarterly or yearly). Good luck.


Copycat Marketing Drives Uniformity within Industries

Recent observations of companies all copying the leader in their field suggest that bland marketing will haunt some sectors for decades.

What’s the first rule of marketing? It’s hard to say. But differentiation clearly goes to the heart of the matter. If brands and products are all alike, then they’re commodities. Customers then buy strictly based on price, personal relationship, or other considerations. When that happens, you can drop your marketing budget to zero and let your team go (just make sure someone’s left to stock the shelves or maintain your e-commerce presence to keep product moving). Margins suffer. Followers become vulnerable.

So, why do some companies try so hard to mimic exactly what their competitors do?

Copy & paste strategy spotted

When I developed an editorial style guide for a particular company–a clear leader in its industry–I thought that it would help the firm’s employees to produce more consistent and grammatically correct content for their audience. That worked. Within a few months, however, one of the firm’s competitors began using many of the conventions that were being applied to external communications: rather unusual, brand-specific ones that would not otherwise find their way into written materials. What’s more, several competitors began to ape the key messages the firm had honed in recent years. The materials from various outfits became similar as to be indistinguishable. The firm’s sales force even mistook competitors’ media pieces for their own.

Not by the book: herd mentality over differentiation

As any student of business will tell you, standing out from the herd is key to competing successfully. If you can’t be the leader, find a niche and excel. While there will always be a cost-cutter trying to undermine the market on price, that’s a losing strategy (at least in theory).

Following the leader may save a company money in terms of R&D and marketing innovative new products to the world, but ultimately leaves those firms vulnerable, having considerably weaker margins. There are plenty examples of dominant leaders. Think Apple, Amazon, Google. Who’s second to those firms? Don’t worry if names don’t come to mind. An industry-leading firm arguably commands a higher market share and margin today than in previous decades.

Copycat survival: long zombie march

If the copycats are vulnerable, how long can they survive? I would contend that these follow-the-leader types can hang on for decades. The greatest risk lies in periods of market consolidation. (The activities of companies such as 3G Capital, known for swallowing big fish and implementing strict cost-cutting, suggest that even publicly-listed leaders are at risk.) If they can navigate that difficulty, the future looks pretty bright. In high-trajectory industries with habitual double-digit growth (yes, they exist), there’s enough money to be made that simply aping the number one can be a profitable business. From what I’ve seen, this entails offering the same product/service claims at a somewhat lower cost. From a marketing perspective, I can only lament the lack of excitement and creativity when companies eagerly play “me too” to exhaustion. Creativity, please!

Please add your comments. Have you seen any egregious copycat marketing?

Why Your Next Investment Writer Will Be a Machine

The next time you need an investment writer, don’t bother calling HR. That was BEFORE. Before a firm in Chicago made software to report out baseball game stats. Before artificial intelligence began writing stories. Before AI went from sports to finance. Before algorithms jumped from high-frequency trading to monthly reports.

Generating stories at the click of a bottom based on deep data sets–that’s NOW–and Chicago-based Narrative Science has been a pioneer and the most visible face of this fin tech gadgetry since 2010. ‘Gadgetry’ might be the wrong term, since this development promises to upend asset managers’ reporting processes and force a rethink of the investment writing function, along with the need to hire an actual human being for an investment writer role.

 An umbrella for reporting season

With this new tool, Narrative Science CEO Stuart Frankel says producing something like an investment strategy [pooled fund or SMA] report “goes from the job of a small army of people over weeks to just a few seconds.” As anyone familiar with the month-end and quarter-end rush periods knows, this represents a dramatic improvement over the status quo.  The firm says that their asset manager clients have been able to ‘reduce the number of days spent producing portfolio commentaries by 50% to 75%’ delivering reports that are marketing-approved and compliance compliant.

If it all sounds to good to be true, that’s not the word I would use. In my opinion, it’s something else entirely: eery. I actually got chills watching the 3-minute video below on how Narrative Science’s Quill is being used to expand Credit Suisse’s investment research coverage. The algorithms identify trends and report in plain (analyst) language what’s going on with a given company (eBay in this case).


(For website owners, you can enjoy Quill Engage –their Google Analytics app for site analytics– for free.)

 The new wave

Turning data and analytics into stories clearly has momentum. In March 2014 the Financial Times reported that Fidelity was testing technologies offered by Narrative Science and Kensho, among others. Narrative Science counts American Century Investments and Nuveen Investments along with T. Rowe Price, Credit Suisse, and USAA among its clients. The firm’s portfolio commentary tool for equity strategies had 15 clients by November 2014. A fixed income version was recently made available. (Personally, I’m curious how the package handles non-benchmarked strategies in either asset class).

 Welcome, our new robotic overlords

Kensho’s software, Warren, may be more ambitious in that it allows investment firms to test ideas by unleashing what CEO Daniel Nadler calls ‘a quant army.’ With these technologies, it would seem to follow that the need for flesh-and-blood investment analysts, writers and editors would be reduced significantly. That’s a bit premature. Adoption will take time. Piecing together the headline story on a stock from a bunch of data is impressive, but it doesn’t provide a buy/sell/hold value judgment. It will clearly reduce the need for manual low value-added tasks such as number crunching and descriptive writing considerably. It appears that Narrative Science has for several years been combating the perception that their technology will enable firms to kick workers to the curb. In 2013 Frankel said “It’s less about replacing people, and more about leveraging those folks that are already there.” To be fair, I know some veteran writers and analysts who are overworked and looking for more challenging, creative tasks. Perhaps these new tools will help them make that shift.

Tomorrow, the world

No doubt the AI technology will improve as time goes on, and there are several areas for development. For one, I have yet to see any information about multi-asset or alternative strategy capabilities, though that’s probably just a matter of time. Second, while English is hands down the lingua franca of finance, asset managers highly active in Europe and Asia would have a hard time refusing a reporting tool that delivers material in multiple languages with speed and precision. Once the technology overcomes these hurdles, you can expect to see it implemented everywhere. The question will then become whether these tools become victims of their own success. For reporting, it’s easy to imagine the entire industry racing to reduce cost pressures and improve competitivity. But when it comes to testing investment ideas, it’s hard to believe that firms will be willing to use the same testing environment as their competitors and run the risk of all using the same playbook.

Considering an Investment Firm Merchandising Strategy? Really?

It’s not uncommon for consumer-oriented firms to launch a merchandising strategy. People who purchase a shirt or a hat and wear your company’s logo pay for the right to advertise, something you probably shouldn’t discourage. But it’s nearly unheard of in the investment industry.

Now, Vanguard has made a merch strategy a thing for investment firms–and the Valley Forge, PA-based company is quite likely the first-mover in this space. As announced on Twitter today:

Financial firms have been throwing goodies and giveaways at clients for decades. But never (to my knowledge) have they opened an online store like the one Vanguard has. It’s brilliant because every firm already has a gift procurement function–this move allows for a bit more volume buying to offset at least a tiny bit of the cost of all that free stuff.

Of course, it’ll never be a money maker–but that’s not the point. It demonstrates the ridiculous strength of their brand in a sector with hundreds of players that struggle to differentiate themselves from one another. So for most firms, a merch strategy falls way down on the list of marketing priorities.



Scaremongers, Be Afraid

A lot of B2B sales pitches boil down to the traditional problem/solution framework. While most firms put their focus on differentiating their solutions from competitors, some take another route and choose to embellish the problem. Portraying a client’s problem as treacherous, insurmountable and otherwise extreme leads to certain and horrible doom. The really awful kind of doom that’s bad for business.

One company’s claim jumped out at me today: in 97.5% of all cases worldwide the problem (for which they happen to offer a product) is present. That’s a ridiculously large number. I can’t even think of a problem so common that is essentially impacts everyone on the planet. (Not that everything is perfect: nearly a quarter of the global population is considered impoverished according to one multidimensional measure). It baffles me to try to understand why someone would depict a problem as so omnipresent. The probable answer: the company feels outgunned in terms of their product offering vis-à-vis the competition, so they turn to scaremongering in hopes of drumming up greater and more urgent demand.

Scared CTA-less

A big issue I have with the scaremonger approach is that it, by definition, incites fear–a stress response. There’s already enough of this in the press and elsewhere polluting society. It can also be counterproductive. While a little bit of anxiety or concern can motivate people to take action, faced with something REALLY big and REALLY frightening, people tend to freeze. Think deer in the headlights. No one wants to try and tackle a problem that cannot be solved. Think global warming. So instead of driving people with a call-to-action, scaremongers actually sow inaction.

Oddball perspective

The reality is that scaremongering can work really well in just one circumstance: when the entire market does it. If every player in the industry tells clients that tomorrow is a hopeless wasteland, there’s a chance that after enough time and repetition, they’ll start to believe it. But if most firms define the problem in narrow, realistic terms that clients understand and can themselves quantify then the doomsayer quickly earns a shiny, new tinfoil hat and is discredited in the marketplace. The more you insist that everything is terrible and clients’ experience dispels that myth, then the more credibility you lose in the eyes of your audience.

Be very afraid

Over the long term, scaremongering is a losing strategy. Firms that use this tactic may garner more attention initially, only to see their brand’s credibility plummet. Engaging clients based on their real situations and an honest appraisal may not always be easy, but it builds a brand reputation that people will value.

Don’t Differentiate Yourself Into Irrelevance

Most companies strive to prove how they’re different from the competition. Sometimes, the impulse to be different eclipses the need to be something much more important for clients: relevant.

A while back a marketing exec from the fund industry recounted her firm’s efforts to set their new product apart from similar ones in what was, at the time, a relatively new category. First observation: the whole thing was very product-centric. There’s nothing wrong with selling product–it pays the bills. But after enough years of content marketing, going out with a message like “buy this now” makes me a tad bit nauseous.

Making a list

Second observation: she rattled off a laundry list of product features that separately and taken together were expected to make their product different. This is where things began to disconnect. On a technical level, each of the features was sufficiently unlike what the competition had. But those features didn’t matter because they didn’t connect to clients’ needs.

An answer

“Different’ doesn’t sell. It doesn’t sell because it doesn’t get to where it should go: to the customer. Differentiation at the product feature level is great, when you can get it (not everyone can–and there brand and client service can prove pivotal). But what really matters is the outcome. Think better, not different.

In the end

Customers need reasons to purchase, so firms toss up unique selling points (USPs) in hopes that something sticks. Better performance, better client outcomes–cheaper, longer lasting, more effective–what have you–these are differences that count. It’s about time that firms stop drawing distinctions without difference, and focus on what matters to clients.

My $1,169 Roth IRA Mistake

It’s not much fun to admit a mistake, especially when it cost me $1,169. If anything, sharing the story will hopefully help you avoid the same fate. You see, back in the late 90’s I put some money into a Roth IRA account holding mutual fund shares that focused on tech stocks –if you can believe it– because, yeah, it was the 90’s.

Quick reminder: a Roth Individual Retirement Arrangement is a retirement vehicle that allows individuals to invest non-deductible (taxed) income now in order to make qualified tax-free withdrawals at the age of 59.5 (subject to certain restrictions, see the IRS’ webpage for more info).

My investment faced some real headwinds with the tech bubble burst, the early 2000s recession and the 2008 global financial crisis all playing havoc with the basically nonexistent returns. After an extended lost decade my investment has finally made some small gains thanks to U.S. stock market performance since 2013.

SPX daily 5y

No one can control the market. Arguably, it would have been advantageous to time my investments better by going in and out of the market at various points or choosing the securities bought more carefully–though, to be fair, market timing is notoriously difficult even for professionals while also incurring greater transaction costs and pretty much every asset class or instrument available took a hit in 2008 leaving few, if any, safe havens.

In fact, my big mistake was paying excessive charges. On my initial investment of $3000, I paid $1,169 in fees and expenses that could have been completely avoided. Let’s do the math.

Account fee

I opened the Roth with a financial advisor which seemed like a good idea at the time since I was just finishing high school and knew next to nothing about finance or investing. The account was subject to a $40 annual maintenance fee for each of the 15 years for a total of $600. The advisor put the money into a mutual fund where, as it turns out, the same fund company would have only charged a $10 annual maintenance fee with a $10 one-time setup charge–which would only amount to $440 wasted except for the fact that many brokerage firms and asset managers offer no-fee Roth accounts. Amount wasted: $600.


I ended up in a retail investor share class with a high front-end load of 5.75% on the $3000, or $172.50–most of which goes right into the fund management company’s pocket. There are circumstances where a front-end load may be appropriate when used by the fund company to cover upfront transaction costs of buying securities in certain markets. This was not one of those situations. In fact, the same firm offers a no-load advisor share class although my financial advisor, a full-service brokerage firm, did not opt for it. (The two share classes had nearly identical expense ratios, so all things being equal this was the poorer choice). Cumulative amount wasted: $772.50.

Mutual fund expenses

The asset management industry is highly competitive and the rise of passive index-tracking strategies has put further pressure on fees. By and large, investors are better off paying less in fees and expenses when possible. While mutual fund annual expense ratios vary anywhere from 0.08% to 2%, the average annual expense ratio for target-date funds (a set-it-and-forget-it one fund solution for many investors) is 0.84% according to Morningstar.

My financial advisor put my $3000 into a large cap growth fund that coincidentally charges 0.84%. However, having done my own research (because my advisor only showed interest in running transactions on my account and not providing advice–as described here) I found a diversified target risk growth fund of which I’m rather fond for only 0.18% or 18 basis points. Having instead invested the money in the less expensive fund would have generated cost savings of $301.50 based on a rough asset-weighted estimate of the cost differential (66 bps) over 15 years.

I’m not naming the funds here because it’s an apples-to-oranges comparison, and that would be unfair. Performance-wise, the large cap growth fund slightly outperformed the diversified target risk fund over 15 years, although the former is down -3.40% year-to-date while the latter is up 0.53%. Personally, I had to opt for the broader diversification that comes with a mixed stock & bond portfolio and international exposure. Cumulative amount wasted: $1,074.

Exit fees

If it’s not yet clear, I am decidedly underwhelmed with my soon-to-be ex-financial advisor which is why I moved into a no-fee Roth with my preferred asset manager. I’m not sure if the feeling was mutual because, lo and behold, the advisor had a parting gift for me: a $95 termination/distribution fee tacked onto the end of our relationship. Termination fees can range from $50 to several hundred dollars. The best way to avoid them is to pick a good provider and stick with them for the long haul. Total amount wasted: $1,169.

A pricey lesson

While my experience cannot be generalized, over the years researchers have noted that bringing financial advisors into your investment decision-making can reduce performance on both an absolute and risk-adjusted basis (lower returns and lower Sharpe ratios) while incurring higher costs. Essentially, the best way for many of us to get the most from our investments is to do the homework ourselves.

Outrageous Question From My Financial Advisor

So I was speaking with my financial advisor about an account. I expressed an interest in moving out of the current mutual fund and into a more risky asset class with a more cost efficient investment strategy.

Here’s what I can piece together a snippet of that discussion:


Me: “I’d like to move out of the current strategy. I’m more interested in small caps, real estate and frontier/emerging markets. I’d be happy with an ETF or a mutual fund provided that the fees are low. Would you mind sending me a few suggestions?”

Advisor: “So, if I understand correctly, you’d like something more aggressive?”

Me: “Yes, aggressive–that’s it. I’m comfortable taking on more risk.”

Advisor: “Well then, I can take care of that for you. If it’s okay for you, give me the go ahead and I’ll provide you with a trade confirmation.”

Me (quite surprised): “No, that’s not necessary. I’d like to decide or at least sign off on where my money’s going. If it’s too much trouble for you to put together a proposal, I can do the research and make the selection myself.”


There are no gaps in this transcript–in a few short exchanges (admittedly after exchanging initial pleasantries) the conversation veered into action mode  — the advisor had jumped the gun and was ready to trade, no questions asked. It just felt so wrong.

I had asked for a few suggestions and the advisor offers to move my money into new products without telling me upfront which ones he’d select. I’d been fairly specific about which asset classes I’d consider and wanted have the advisor’s opinion. But the advisor’s WAY ahead of the game–ready to send me the trade confirmation –deal done, game over– without any hint as to what will be in the new portfolio. No indication of the asset class(es), which asset manager(s), ETF vs. mutual fund, active vs. passive strategy or total expense ratio.

Is this really how advisors provide advice these days?