Posted by on Oct 16, 2016 in Articles & Advice, Blog, Featured, Posts, Speaking |

By Jason Zweig | Oct. 16, 2016 8:59 pm ET

Image credit: Antonio and Piero del Pollaiuolo, “The Martyrdom of St. Sebastian” (1475), The National Gallery, London



The active-management industry is starting to resemble an endangered species because its leaders too often forgot a fundamental business principle: You get the clients you deserve.

In a speech I gave in December 1999 — yes, almost 17 years ago! — I pointed out that investment firms that traded too much, slammed their investors with gratuitous tax bills, hyped their unsustainable performance, ran portfolios that acted like index funds but charged fees like hedge funds, and kept cramming new investors into their portfolios like teenagers in a Volkswagen-stuffing contest would end up getting exactly the clients they deserved.

And so they did.

As I pointed out in the speech, treating clients properly wouldn’t even be difficult:

…clients do not want to be put on a pedestal. They simply want to be treated the same way their investment managers would want to be treated if they were the clients.

Perhaps if asset-management firms had honored that wish more often, investors wouldn’t be fleeing in droves for index funds.

You can read the full speech here: clientsyoudeserve.


Source: CFA Institute conference proceedings: Ethical Issues for Today’s Firm (Dec. 7-8, 1999),