The Derivative Project

It’s Financial Literacy Month: Ignore Wall Street Workplace Curriculum

It’s Financial Literacy Month:  Ignore Wall Street Workplace Curriculum

It’s Financial Literacy Month: Ignore Wall Street Workplace Curriculum

Bloomberg, New York Times, CNBC and your workplace 401k/403b “financial education curriculum” are all designed to keep the the financial services industry booming, on your Nickel.  Control of the media message, Congress, billions of dollars of advertising and the workplace curriculum have prevented normal supply and demand forces to operate in the financial services marketplace.

The best products (money managers) are not getting to the end user, the retirement investor.  Why?  There is an information imbalance.

In honor of financial literacy month, we share with you a recent counterpoint to a Bloomberg Opinion piece published April 9th, that apparently sheds too much light on the reality of the lack of audited performance standards by those investing your retirement nest egg—- to allow Bloomberg to publish a counterpoint to encourage healthy debate.

Here is the email sent to Bloomberg on April 9th:

Dear Editors:  Please publish this response to Barry Ritholtz’s Opinion piece, “The Average Investor Needs Some Help: Ritholtz Chart”.

Yes, no response from the Bloomberg Editorial Staff, we now share it with you:

RIA In a Box:  Is it the Emperor’s New Clothes On Wall Street?

RIA In A Box


A recent Bloomberg Opinion piece, by Barry Ritholtz, “The Average Investor Needs Some Help: Ritholtz Chart” left us thinking life and money management is substantially different on Main Street than on Wall Street.  Mr. Ritholtz paints a picture of an “undisciplined” performance chasing” average investor who has only averaged 2.1% annualized returns over the past 20 years.

To the contrary, within the Polar Vortex, we have exceeded the JP Morgan “diversified chart” by over 2.2%, after all fees.

On Main Street, our money manager:

  • Exhibits the same, very defined investment style, year after year.  We understand their investment strategy.
  • Has always had low management fees and low overall expense ratios.
  • Does not have any load or 12B-1 fees.
  • As a true fiduciary, portfolio turnover is very low, to minimize trading costs.
  • Stays for a very long time.  They are all CFAs and focus strictly on asset management and typically do not counsel us on how to achieve everlasting happiness.
  • Seeks to create sustainable economic value and operates in society’s best interest, based on the companies they choose to invest with.
  • Ensures short-term results are not the goal.  Here on Main Street, we focus on long-term performance, through a consistent investment style, that has withstood the test of time.

On Wall Street, the focus is on:

RIA in a Box, with a packaged, bundled product that provides no audited performance results, but promises everything from:

  • Happiness, with “comprehensive” planning
  • Marriage counseling before retirement
  • Get-rich quick, derivative-based smart beta ETF schemes, that typically blow up the world, as in 2008
  • Double fees (1) to the money manager who does the actual stock, ETF, or mutual fund picking/management and (2) to the RIA in the Box who charges an additional 1.5% to 3% to provide a “bundled service” to ensure your happiness and that you do not performance chase or get too greedy.
  • RIA pronouncements that their behavior coaching is more important than performance results, may be why they offer only “bundled products” to obscure their performance, after all fees.
  • With RIA in a Box, everyone is now eligible to manage your 401k/403b, in just a few easy steps.

All these goodies are delivered for a simple, bundled, annual assets under management fee, with no audited performance results.

You be the judge.

Compare Mr. Ritholtz’s hypothetical results (based on Modern Portfolio Theory)—to an actual Main Street money manager’s audited performance results, filed with the SEC.

The annualized returns published for the past 20 years, in Bloomberg’s recent Op Ed, and the depiction of the “average investor behavior” in the “The Average Investor Needs some Help: Ritholtz Chart” are both quite misleading.

The Results:

Ritholtz Chart:                         5.72%  (7.72%, less Mr.Ritholtz’s advisor fee of 2%)

Main Street Money Manager:    10.16%  (SEC Audited, Filed Returns)

Main Street Chart:  Minnesota Money Manager – Audited Performance Results

Do It Yourself (DIY) Retirement Investing  on Main Street is simply investing directly with the top money managers, who have diversified portfolios, approved as Department of Labor qualified default investment options (QDIA) for 401k/403B plans.

(There is an entirely new group of “advisors”, RIA’s in A Box, that are now in workplace retirement plans, with no history of audited performance results, providing “Managed Accounts.”  It is a new crisis waiting to happen.  Individual participants have no choice but to take charge of their workplace nest eggs.)

Our Main Street investment typically stays with our manager(s), untouched, for many years.  The experienced money manager team handles the re-balancing and portfolio positioning based on various economic scenarios, as divergent as the exceedingly low interest rate environment today impacted by Federal Reserve quantitative easing or the very high interest rate environment in the early 1980′s.

On Main Street, our simple, balanced fund outperformed JP Morgan’s Analysis by 2.44%.  Do not forget to subtract Mr. Ritholtz’s RIA firm’s assets under management fee of 2% (as filed at the SEC, assuming a portfolio that is less than $500,000) from the project JP Morgan diversified return of 7.22%.

The Ritholtz proposed portfolio would thus cost the average investor, through excess fees and opportunity costs, over $22,000 annually or $440,000 over the next 20 years, compared to simply placing your money directly with one of the top US Balanced Fund managers.

We are disciplined here on Main Street.  A $440,000 opportunity cost means something to each of us.  We place our money directly with the proven money managers, only after we have reviewed their audited performance figures, filed with the SEC and only after we understand their management style and selections of investments that promote sustainable economic development for society overall.

We stay the course here on Main Street.  We are confident in our money managers.  Fear, greed and “performance chasing” seem to be a phenomenon outside the heartland.

With the advent of RIA’s in a Box, popping up all over the East and West Coasts, in workplaces, we now view, alarmingly, scare tactics that mimic the fright of a young child, when he first sees Jack pop out of the box.