>>>>In a New York Times op-ed, chief investment officer for the Yale Endowment, David Swensen, chronicles the inherent conflict mutual fund companies have between their obligations to produce profits and to produce returns for investors and how, during times of exceptional market volatility, the problem is exacerbated to produce below-market results for investors and market-beating profits for fund companies.
In short, the industry encourages the type of buy high, sell low behavior that results in investor returns underperforming investment returns and profits from the churning this results in.
Swensen offers three ways to improve the situation:
- Investors should be well diversified in low-cost index funds
- SEC should use regulation to encourage low-cost index funds
- SEC should extend an authentic fiduciary standard to the mutual fund industry
Knut Rostad of the Institute for the Fiduciary Standard further expands on Swensen’s fiduciary standard argument by pointing out in a letter to the editor two examples of how the suitability standard does little to discourage this type of behavior.
>>>>We’d also like to direct our audience’s attention to a new website. SROIIA, the Self-Regulatory Organization for Independent Investment Advisers, went live with their new site last week. SROIIA is attempting to lay the groundwork as an alternative to FINRA as the regulator for investment advisers should the SEC authorize self-regulation.
Their new site includes a newsroom and blog for the latest updates on adviser oversight. Along with the launch of the site came the official press release that fi360 has agreed to partner with SROIIA on the development of a fiduciary exam.
Now on to the rest of the best links from the past week:
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