The Evidence-Based Investor

#SFTW: The new man in the hot seat at Morningstar

Posted by Robin Powell on February 24, 2017



Last week I had the pleasure of interviewing Kunal Kapoor for the TEBI Podcast, and introducing him on stage at Morningstar’s Game Changer Investment Summit in Brussels.

Kunal Kapoor has just taken over as CEO of Morningstar from the company’s billionaire founder Joe Mansueto. It’s one of the biggest jobs in global investing; Morningstar enjoys huge influence among investment professionals, advisers, journalists and end investors, employing more than 4,200 people around the world. Whatever happens in the investing industry over the next 20 years, Kunal Kapoor is likely to be one of the movers and shakers.

Kapoor’s background is in analysing and rating actively managed funds and, as you would expect, his views on the value of active management differ from my own. I was, however, encouraged to hear that he does share a very similar perspective to TEBI’s on such critical issues as fees and charges, the rôle of financial advice and the importance of putting the interests of consumers first.

Listen to the podcast here


What the FCA & SEC can learn from energy regulators

I can’t speak for other countries, but my experience as a UK consumer of water, gas and electricity is that regulation has been a good thing. Suppliers are required to be much more transparent than they were about how much much they’re charging (and exactly what they’re offering in return), so that customers can easily compare different services and switch providers if they want to. Nowadays, if you’re paying more than you need to for your basic utilities, you only have yourself to blame.

If only financial consumers were afforded a similar level of protection.

A recent study that caught my eye was one entitled Does Feedback on Personal Investment Success Help?, produced by academics from Goethe University and Leibniz University in Germany. It’s well known that retail investors who buy and sell individual stocks generally perform very poorly, that they overestimate their returns, and that those who trade most frequently do the worst. What the researchers wanted to find out was whether confronting clients of stockbroking firms with the actual results they are achieving can improve their behaviour and, consequently, their net returns.

Read the full article here


TEBI’s response to the FCA report

Last Monday was the deadline for commenting on the interim report by the Financial Conduct Authority on competition on UK asset management. Here is TEBI’s response.

Read our letter here


The investing equivalent of junk food

Of all the silly things said in defence of active fund management and conflicted financial advice, I wonder whether the silliest words of all emanated from the mouth of Gary Cohn, the new director of the White House National Economic Council, the other day?

In an interview with the Wall Street Journal about the fiduciary rule, Cohn is quoted as saying that the rule was “like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”

I say silly, but only in the sense that Mr Cohn was shooting himself in the foot. The analogy is, in fact, very appropriate.

Read the full article here


Also worth reading

21 questions to ask about investment fees (Ron Lieber)

Five things you need to know about estate planning (Vanguard)

Passive investing is winning despite the fog of war (Monevator)

The fiduciary rule genie is already out of the bottle (Barry Ritholtz)

What are you waiting for? The earlier you start investing the better (Value Walk)

Things change faster than you can adapt or see the changes coming (Josh Brown)

Only a third of Americans are putting money in their 401(k) plans (Ben Steverman)

Stress-related depression — another huge cost of bad financial advice (Susan Antilla)

Media “experts” don’t know anything about your personal financial situation (Dan Danford)

Warren Buffett is going to win his 10-year bet against hedge funds (Nicole Friedman)

“There are a million ways to get rich. But there’s only one way to *stay* rich” (Morgan Housel)

The biggest advantage you have as an investor is the ability to think and act for the long-term (Ben Carlson)

Wall St & the media like to make investing complicated. It’s in your interests to keep it simple (Peter Lazaroff )

Investors would be better off if they spent less time thinking about the perfect portfolio (Michael Batnick)

Research shows a predisposition to some #investment biases may be genetically hardwired (Larry Swedroe)

Out of 1,034 US large-cap funds, not one has managed to beat the S&P 500 three years in a row (Crystal Kim)

“(Without it) I wouldn’t have lived to see my dreams realized” — Jack Bogle on his heart transplant (Erin Arvedlund)

How does the performance of Dimensional funds compare to that produced by active managers? (Mark Hebner)

One of the biggest problems investors face is the sheer number of financial products out there (Charles Rotblut)

Underperformance by active managers is a global problem. Here’s what’s happening in Australia (Tim Stewart)

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Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector. Regis Media.

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