An Investor Protection Plan

Does your brokerfollow the fiduciary standard or the suitability standard? Brokerage and insurance firms have been fighting the fiduciary standard with zeal. Why?

broker
broker (Photo credit: milo tobin)

Debunk Their “Expertise”A broker who loses a client to index funds typically responds with a dismissive statement indicating that he and his firm have the ability to select “market beating” fund managers. As discussed above, ask him to show you a peer reviewed article demonstrating the reliability of his methodology. In addition, ask him to provide you with a long term (10 years or more) analysis comparing the returns of the proprietary mutual funds of his firm (funds that have the name of the firm as part of the name of the fund) with their Morningstar assigned benchmark. After all, if they can pick superior managers, wouldn’t those managers be running their branded mutual funds? This is another report you are unlikely to receive.

There is an easier way to avoid becoming a victim. Don’t use any retail broker or adviser who tells you they have the ability to “beat the markets”.

If your broker or agent really could beat the market why would they need you? Another question to ask yourself is, if the big brokerage firms really knew who was going to be the best fund manager why do they have over 100 managers?

Please comment or call to discuss how this affects you and your portfolio.

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