I write this as a warning. If you are an advisor or a client. Do. Not. Be. This. Guy.
Part of the wave of revolution happening in the financial services right now is the movement from Mutual Funds to Index Funds, like ETFs. For years, I was a pariah in my old firm for advocating such indexing efforts. Recently Bob Seawright did a fantastic job answering, Why do clients need an Adviser if they index?
And now Morningstar is out with its latest edition of MorningstarAdvisor on the Urban Myths of Mutual Funds. Although it’s not quite the back-slap you’d expect from the leading Mutual Fund ratings company…
One urban myth circulating among investors is that mutual funds have hidden fees of 140 to 200 basis points that are omitted from expense ratios. When these hidden fees are added to a fund’s stated expense ratio, they presumably bring overall annual fund expenses to something in the 2.5% to 3% range. When the additional toll of taxation is taken into account, the total cost of fund ownership is supposedly close to 5% for some funds. It’s enough to send shivers down your spine.
While the terror of taxation on fund shares one continues to hold is real, the 140 to 200 basis points in hidden costs are largely fiction. The idea does have a basis in reality, however. Mutual funds do omit the cost of trading securities from their expense ratios…
The article is chock full of Chupacabra-busting…
When I first shared the news with Josh Brown about BloombergBlack (behind the scenes) it created a much bigger stir than I ever anticipated, especially inside of the wealth management industry. Josh aptly dubbed Bloomberg’s movement into the online advice space, as Coming to Disrupt the Financial Disruptors.
I don’t know how it is in your house, but around mine — the kitchen is the heart of our home. And that 10-year-old faded & nicked Ikea black Bjursta kitchen table is sort of the aorta; endlessly beating through… Art projects and gift wrapping. Laughter and tears. Fart jokes and spilled milk.
“In this country, first you get the money, then you get the power, THEN you get the woman.” -Scarface
My good friend, Scott Krisiloff, over at Avondale has a great graph on Apple, comparing its Market Cap & Enterprise Value to some other crappy, more mortal companies:
Famed bond-king Bill Gross and his trusty sidekick, Mohamed El-Erian, of Pimco are super smart. And rich. Really rich. Did you know Bill Gross is worth 2.1 Billion? Dollars. US. Dollars. And, did you also know the bond king actually collects stamps? — The more you know.