Over the 4th of July weekend I made it a point to unplug and reflect. I do some of my best thinking when I’m off the digital grid. As Pure Portfolios approaches its one-year anniversary, I have more conviction than ever that there is an enormous opportunity to create a more client-centric investment management industry.
At present, sales-focused firms operate off the same antiquated and lucrative playbook, but don’t do much to promote investor outcomes. Interestingly, clients of brokerage firms accept their arrangement as par for the course. These clients might have an inkling or even an understanding they’re paying up for lackluster service or crappy net of fee investment results, but the fear of change outweighs the desire for making an optimal decision. It’s not their fault. They have been conditioned to think a certain way by the establishment. Fortunately, there are progressive investment firms that are blowing up the traditional model and creating a more transparent, client centric approach.
As we look to the future of Pure Portfolios, our challenge is to educate and empower investors, while establishing partnerships with like-minded professionals that share our vision for higher standards within financial services. We want to distinguish our firm from the pack (that’s why our name and logo doesn’t read Pure Wealth Management) and push the limits on technology, client service, and educational content.
For some “light” summer content, we thought it would be appropriate to gather quotes from investment management visionaries that share our passion for disrupting a stale and self-serving industry:
“If you talk to customers and ask them, ‘What do you want from your financial adviser?’ They don't say, ‘We really want someone who is going to be there for me during a downturn.’ That's a very industry-oriented way of thinking about justifying your value as a financial adviser. It's not really what customers care about or want. They want performance. The reason they hire us is because we maximize their money. That is core to our value.” John Stein, Founder of Betterment
“I honestly think that if you are a financial consumer and you are dealing with a brokerage house, you are just out of your mind. Here is the bottom line: compensation drives behavior.” Peter Mallouk, Founder of Creative Planning
“The transfer of Wall Street from private ownership to public ownership has been a big step backward.”John C. Bogle, Founder of Vanguard
“Many of the problems in the investment world stem from poorly aligned incentives and ingrained organizational cultures.” Ben Carlson, Ritholtz Wealth Management
“With fund houses closing and cutting staff, managers, aren’t just fighting for their bonuses anymore; they are, quite literally, are fighting for survival.”Robin Powell, Evidence-Based Investing Blog on the flailing mutual fund industry
“Clients pay us for reassurance, and if they don’t trust that you’re acting in their best interest, or that the information you’re providing to them is accurate, you deserve the client exodus that’s coming your way.”Michael Batnick, Irrelevant Investor Blog
“Before you pat yourself on the back for all the money you’ve earned in mutual funds lately, you need to recognize that you’re not the only one making out like a bandit. So are the fund companies that sold you your shares. Worse, many funds are collecting outlandish fees for mediocre investment performance.”Jason Zweig, Author and Wall Street Journal contributor
I’ll save my favorite for last. This is a non-financial quote, but it applies brilliantly to issues that taint financial advice:
“It is difficult to get a man to understand something when his salary depends on his not understanding it.”Upton Sinclair