Rescuing Investors


Twice a year, the founding partners of RWM take a day away from the office to think “deep thoughts.”

During our offsite, the four of us discuss the state of everything: We review data, brainstorm ideas, think long-term. We analyze what we are doing well, we consider all the myriad areas we can improve in. We discuss the financial services industry, where it is heading, and our role within this problematic industry. We each leave with a to-do list that will be executed over the next 6 months — until the next offsite.

I highly recommend the process of getting away from your usual routine and into a different environment to see things with a fresh perspective. The day-to-day work has its own urgency, and it is easy to see how people lose sight of the bigger picture within those confines. Kris is a wizard at organizing our agenda, and moving us along.

The four of us have different backgrounds, but we all are passionate about educating and helping investors. It is a compulsion to rescue people from all the many ways Wall Street has devised to separate them from their money. It permeates everything we do, and how our firm has grown. If this was not a primary driver of our behavior, we could easily be 3X our size now, but at a cost of our company culture and mission. That is something I have refused to allow.

This advocacy on behalf of investors is not merely around the edges, but manifests itself in deep meaningful ways: We push for the fiduciary standard on behalf of all investors (not just our clients); we advocate for an evidence-based, low cost approach to investing; we provide a massive, daily run of free, smart, analysis that is incredibly useful to investors; we continually work to make media more educational and accountable to investors. We try to make print, tv and radio financial journalism better; we love to highlight the best examples of all of the above.

But most of all, we believe our role is to rescue people from the many threats to their financial well-being. The three biggest threats we see each day in particular:

Transactional business: The old business model for wirehouse brokers is surprisingly robust (still). I have been wrong about the imminent demise of transactional stock brokers for over 20 years now. You might think the rise of Vanguard and Blackrock and the shift to low cost passive would signal the end of this — but no. We still see portfolios filled with expensive junk, over-concentrated in the flavor of the day, and not serving a broader plan or purpose relative to the investors’ needs.

– “Sexy” Investments: For cocktail party chatter, you can’t beat private equity, venture investing and hedge funds for sheer lascivious appeal. Sure, 99% of you cannot get into the superstar funds with great track records, but still, getting into the 2nd or 3rd tier firms in this space gives you bragging rights. Never mind the winner take all performance distribution, where a handful of outsized winners means everyone else lag — the buzz factor makes up for it! (not)

Themselves: Investors have the very human tendency to do exactly wrong thing in the capital markets at the worst possible moment. If advisors did nothing else, they earn their keep by protecting investors from themselves. Add the ability to execute on cumulative, incremental improvements (tax loss harvesting, rebalancing, asset location, etc.) that create 10 or 20 bps of performance gains each. Add all of it up and this advisor alpha can creates 50-100 basis points a year of value over and above fees.

The single biggest impact any of us might have on someone’s life is making sure these threats do not impact their long-term plans. Lots of our offsite discussions relates to that idea — our financial advisors serving as Lifeguards, making rescues to save investors from a variety of dangers.

It feels like we are on ocean duty, working against the surf and the tide, the sharks and the rip currents, as swimmers risk getting dragged out to sea. You want to rescue everyone, and if you cannot do that, then at least throw them a life preserver, to help everyone have a chance to get safely back to shore.

That is our charge. It is what motivates all of the blog posts and TV appearances and podcasts and columns. This is why we produce such a prodigious amount of material for public consumption. Everyone in the firm feels the same way, we have all drank the Kool-Aid.

We know that almost everyone who reads us will never become clients; we understand that of those who do reach out to us, we are a good fit for only some (and vice-versa). Regardless, we are committed to rescuing as many people as we possibly can from the dangers to their financial well being.

The thrill of investment excitement, getting lost in the daily noise while ignoring the signal; not understanding how hard investing is, how unlikely you are to outperform over time, ignoring evidence, succumbing to emotions — these are some of the themes I keep hitting on, and are some of the dangers we have to RESCUE investors from.

Good investing is supposed to be boring — be it Indexing or long-term Buy & Hold or global diversification. Its much cheaper to pay for your excitement elsewhere, while letting your portfolio quietly compound over time. Here is the best advice I can give you today, with red all over the screen: Buy short-term Excitement elsewhere, let Boring pay you long-term.


If you want to learn more about what we do, or if you think you might need a financial lifeguard, please contact us. Send an email to Info-at-RitholtzWealth-dot- com; or call 212-625-1200.


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