It's been a tough year. Every investor I know is somewhere between angry and scared. Very few advisors are having a lot of success calming them down.
We're running an event with Morningstar Investment Management on Tuesday. Their research suggests that they've found a way to outperform just enough to show clients they'd do objectively worse without you in real terms.
I talked to one of their fund managers a few days ago. We'll be talking to him again in greater depth on Tuesday. Take a look at the video and see if it's worth an hour of your time.
Beat The Random Walk
Morningstar probably wouldn't say they've discovered a new edge on index investing, a way to squeeze alpha out of what's otherwise a random walk. You know how it goes. But I'm not them.
I got Andy to admit that this approach adds about 1 percentage point a year in after-tax performance compared to the benchmark.
Benchmark to the S&P 500 and you've beaten the market. Your clients can't do that on their own by pulling their cash, rolling into Vanguard funds and steering their own ship.
Buy index funds, you get the index return. You don't beat the index. But the Morningstar approach generates real outperformance . . . enough to justify your fees in a year when index funds go nowhere good.
I could rhapsodize about the system here, but then you won't have as much reason to sign up for the show. Moreover, you won't hear from the Morningstar people . . . an all-star team bringing multiple perspectives to the problem.
Maybe I'll rhapsodize later. Realistically, though, all I'd say is what a lot of advisors have already heard endless times: tax efficiency, optimization, personalized portfolios, "direct indexing," smarter beta.
A lot of buzzwords that nobody's found a way to cut through and reveal the steak behind the sizzle, if you're pardon the carnivore metaphor.
Morningstar has the technology to make all the buzz a reality. They say it's easy. The system scales wherever you need it to go . . . up to hundreds of demanding clients, down to the mass market, wherever.
Instead of complicating your life chasing that extra percentage point, they say, it will streamline your process. All you have to do is know how it works and how to deploy it in your practice.
See you on Tuesday.
