Dear Mr. Market:
If you follow financial news at all, you have likely been paying attention to the controversy surrounding Ken Fisher. Ken leads a firm with over $100 billion in assets under management, and he made some comments that did not go over well at a recent industry conference. Following that, the media dug up past comments of his from social media and other industry events. Institutional clients have so far pulled out over $3 billion invested with Fisher, and the company is understandably now in PR damage control mode.
Many are using this as an opportunity to bash him and his organization. Ken has rankled many in his industry, whether from his overwhelming marketing success or his “I hate annuities” stance, and it’s a convenient time to sling mud his way. As former employees of Fisher’s, it would be very easy to pile on and provide our own commentary on the company’s practices and culture. But throwing more mud is not the intention here. Instead, an event like this can be a catalyst for investors to confirm what they value in their current advisor, or one they are thinking of hiring.
Some would say performance trumps all – if returns are stellar, why worry about an advisor’s behavior or actions? Maybe, but if you are only chasing returns, prepare to have a wandering eye. The best performing areas of the market rotate almost randomly year to year, so picking the next hot area is near impossible. Outperforming a certain benchmark, or even just “the market” has shown to be a fleeting accomplishment for even most professional managers. Many investors make the mistake of buying a fund or hiring an advisor based on recent track record, and then switching to another when that one invariably underperforms their high hopes. This cycle can leave you unhappy, anxious when markets are volatile and, even worse, thrown off track of reaching your investment goals.
If you’re not chasing performance, how about integrity? This could mean personal integrity or the values of your chosen advisor – perceived or real. Fisher has lost business based on Ken’s comments, as some clients have decided his words simply go too much against their own personal beliefs. You may want to only work with someone who shares your religious, political, or other views. This might work fine, but could be limiting if too much weight is put on that factor. Say you find out your otherwise fantastic advisor voted for a candidate you can’t stand – would that be enough to call it quits with them?
One thing you should see as non-negotiable is an advisor bound to do what is truly in your best interest. This is also known as a fiduciary duty. There are a few ways to tell if your advisor is a fiduciary or not. Do they recommend products with fees beyond their annual management fee? Do they recommend products issued or strongly favored by the firm they work for? Do they earn a commission from their product recommendation? If the answer to these is “yes,” they are likely not a fiduciary. You owe it to yourself to have a trusted guide in your corner, not someone simply pushing products at you.
Ultimately, you can’t control performance and you can’t control what your advisor may say in a public forum. But you can control how they treat you and if working with them is in your best interest.