Since our Take the Long View® strategy calls for a level-headed mindset and evidence-based rationale, I am disciplined about keeping emotions out of the mix. But sometimes, even I have to vent. For example, my outrage seems well-placed when it comes to exposing dark players who pose as financial “advisors” while they prey on those who can least afford it. When that happens, the real damage is done if we calmly ignore what’s going on.

We work in an industry with an insanely low bar to entry. As I covered in my book, Odds On, I’ve personally witnessed how many of the big-name brokerage firms prize their sales quotas over solid client care and education. In any industry, a convergence of greed and incompetence is ugly. In wealth management, it can be life-shattering.

That makes me mad. Through our own experiences and in speaking with investors, we see the damage done far more often than you’ll read about in the papers. Yes, regulators have been known to levy millions, if not billions of dollars in fines against the worst offenders, but is it working?

Consider this recent article from personal finance columnist Tara Siegel Bernard. It makes me sick to my stomach to read that a “sandwich generation” daughter had to discover her ailing mother’s broker was quietly extracting roughly 10% in annual commissions from Mom’s account (compared to an industry norm of closer to 1%). In financial speak, that’s known as “churning,” or buying and selling just to turn a profit at the investor’s expense.

Worse, at least when Bernard published her piece, the offending broker was still employed at the same firm. The firm’s response? Bernard reports: “In a statement, [it] said, ‘The client agreed to an appropriate resolution of this matter in June.’ The firm said it was committed to doing the right thing for its clients, and was ‘disappointed when any feel their expectations haven’t been met.’”

What a ridiculous response!

Through the years, I’ve heard from many in our industry with their own tales, which sync with my experiences. The common thread is selfish salesmanship. Today there are thousands of independent investment advisory firms, all of whom are held to a fiduciary standard. While even that can’t prevent a criminal bent on malfeasance, it’s a step in the right direction.

Things are getting better, but it’s time more investors start choosing true financial advocates, not just the family relation, nice neighbor or daughter’s affable softball coach. It’s time to fire the entrenched, big-name brokers who don’t have to (and often don’t) represent your highest financial interests. It’s time to lead with questions such as: Is our relationship always fiduciary?

If the answer is anything besides, “Yes, always,” or if the written version is accompanied by an asterisk and a bunch of fancy legal footwork, it’s time for you to say no. You deserve better.

PS: Check out our related press release about Hillfolio, and how we’re working hard to bring “better” to an even wider range of investors.

There are a myriad of financial talking heads crowding the airwaves with baseless predictions. How do we find the few worth heeding? We look for intellectual curiosity – a thirst for understanding what is right and true, regardless of where it may lead. Inside of Hill Investment Group, we savor the voices who stand out in this way. We point you, our tribe who are committed to Take the Long View®, to AQR Capital Management’s new podcast channel “The Curious Investor.” We are especially impressed by its third episode, “Active versus Passive,” featuring a conversation between Vanguard founder John “Jack” Bogle and AQR managing and founding principal Cliff Asness. As the father of the world’s first publicly available index fund, Bogle personifies passive investing like nobody else can. In contrast, Asness has structured AQR on the premise that he and his team can add value to investors’ portfolios by identifying opportunities to apply evidence-based methodology. He’s our modern “active” aficionado, as we’ve described in earlier posts. You’d think the podcast would be a vigorous debate between these two legends. Instead, it exemplifies the considerable common ground and respect they share. Bogle explains:

“We do things very differently from an investment standpoint – to which I would say: So what? … [W]hat I’ve always admired about Cliff is his intellectual soundness. … I’ve always admired that in anybody. And it doesn’t matter whether their intellectual ideas align with my own or not.”

See what I mean? Especially when it comes to the science of investing, nobody has everything figured out. Even if we did, markets evolve over time, generating new insights, possibilities and questions – new subjects to debate. That’s one of the reasons I love what we do. PS: Here’s the iTunes Podcast channel link, if you’d like to “App it.”

“Recency” is one of the most insidious behavioral biases that can impact an investor’s ability to Take the Long View® with their investments. The name alone suggests it’s the opposite of what we’re about here at Hill Investment Group.

Those ruled by recency will disregard decades of data, and instead allow only the latest, relatively random data points to skew their view. A prime example occurs whenever purveyors of traditional active investing revisit a perennially misleading script that goes something like this: “If too many investors invest in index funds (i.e., if the market is left to run on auto-pilot), there will be nobody left to set proper pricing. Investors should revert to an active investment strategy, before it’s too late.”

Again, the argument is nothing new; if index funds were the only investment available, markets would indeed stop functioning. But with every new season, the traditional active camp seems to come up with a fresh batch of stats that supposedly signal that the end of index investing is nigh.

Recently, the focus has been on index investing inflows – or, more accurately, their reduced volume. So far this year, the deluge of dollars mostly heading out of active investing and into index/passive funds has decreased to a more orderly flow compared to 2017.

Is index investing on the wane? In this related piece, we share a quibble we do have with index investing, and why we typically favor a similar, but more direct approach for capturing scientific sources of expected return. But before anyone concludes it’s time to get more active at timing and selecting specific stock picks, here are three, recency-dispelling reads we suggest:

“Index Funds Are Going to Be Just Fine,” Barry Ritholtz, ThinkAdvisor

Our favorite excerpt: “Why must we complicate what is otherwise a simple explanation? Investors have become a little more financially literate; indexing is maturing as an investment style. Those who are hoping for a major reversal of a trend that has been 40 years in the making are very likely to be disappointed.”

“Indexing Fuss Unwarranted,” Larry Swedroe, ETF.com

Our favorite excerpt: “While it’s certainly possible that, at some point, passive investing could reach such a dominant share that price discovery would be limited, clearly, we are nowhere near that level, and almost certainly won’t be there for a very long time.”

“The growth of index investing has not made the markets less efficient,” The Economist

Our favorite excerpt: “Perhaps the growth of indexing has robbed the world of outstanding stockpickers. But it seems more likely that it has put a lot of bad managers out of business … And it is not as if the buying and selling of stocks by informed investors with opinions has ceased. The turnover of stocks has actually increased over time. Active investors are more active than ever.”