Why advisors should leave portfolio management to the experts GlobeInvestor
The only real choice for advisors seeking alpha is to hire the best-armed and proven people you can find – or consider not seeking alpha at all.One aspect of my financial advisory practice that astonishes fellow advisors is that my team outsources the day-to-day responsibility of managing clients’ assets to mutual fund companies, exchange-traded fund providers and investment-counsel firms.
Looking at three widely recognized studies conducted by Vanguard Group Inc., Morningstar Inc. and Envestnet on how advisors generate value, not one points to portfolio management or securities selection.If you don’t believe we can add excess return via alpha, security selection is easy as it becomes a portfolio-management decision regarding which indexes and indexation methodologies to include.
Algorithms can trade on this information before our individual, non-networked brains have even had time to process a single number on a screen. And if you need yet more proof, listen to Patrick O’Shaughnessy’s podcast,, in which he interviews some of the most sophisticated money managers in the world. Their competitive advantages versus those of average advisors and investors are so staggering that Mr. O’Shaughnessy often jokes he should have called the podcast.
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