Clients First

As you evaluate investment providers, whether financial advisers or fund companies, you should understand their business practices.  In short, they should be designed to put your interests first.

  • The business model should maximize transparency.  You pay each service provider directly for the tasks they perform—an adviser for financial planning and investment advice and management; investment companies for fund management; a third-party custodian for securing your assets and executing transactions—so you can see clearly the fees each charges.
  • Fees should align providers’ interests with your interests.  They should be straightforward and low relative to industry standards.  Firms should share economies of scale with their clients in lower fees.
  • Advisers should not make commissions or share fees from third party funds they use for client portfolios.  They should select these funds purely on their ability, in an uncertain world, to maximize the probability of successful outcomes forclients.
  • Mutual funds should have no “loads” or sales charges and ideally no 12b-1 (distribution) fees.  So, all of your money is put to work, without any up-front or back-end commissions or other distribution payments.
  • Mutual funds ideally should have a single share class, with the same low fee charged to all investors.  They should regularly reduces fees on many of its funds, as the firm shares its scale advantages.
  • Fund managers should not use “soft dollars” to pay for research and other investment-related products and services. Their fee should cover these expenditures. So, as they buy and sell stocks and bonds in their portfolios, they strive for best execution at the lowest possible price per share.  This will help the returns of our portfolios slightly, and more importantly results in maximum transparency.
  • Fund managers should undertake their best efforts to have trades executed on exchanges and other trading venues protected from predatory high-frequency trading practices.
  • Financial advisers and fund managers should eat their own cooking.  They should invest their discretionary personal financial assets in the same way they invest client portfolios or the funds they manage, respectively.

Bottom line, as they face decisions with respect to how to conduct business, they should always put themselves in your shoes.