What’s your track record?

Every advisor gets the question from a prospective client in some form or fashion.  On the surface, I understand.  An investor shopping around for an advisory relationship is looking for ways to compare advisors s/he has interviewed. If not referred to this advisor, what do they have to go on? A website, some marketing material with pictures of people on a beach and some pseudo-science gibberish about the investment process? So, the question comes out.

“What’s your track record?”

So, here’s my answer.

“It’s not my job to deliver investment performance.”

Now, that’s a little strong.  But I need to re-frame the conversation.  You see, I am not some dark wizard that conjures investment returns from the deepest corners of the netherworld. That’d be great, but I’m not.

Sadly, not me.

Sadly, not me.

You see, markets deliver returns.  Not advisors, brokers, or mutual fund managers.  Capitalism delivers returns, and investors access those returns through the stock and bond markets. Stock picking, tactical investing (aka market timing), private placements and trading strategies don’t deliver long term returns.  Markets do.  My job is to help clients gain exposure to the long term returns of the stock and bond markets in the most cost effective and tax-efficient manner possible.  My job is to work with clients to develop an informed and appropriate long-term asset allocation for their portfolio and keep them focused on these long-term goals. (More on that here).

So my answer remains: it’s not my job to deliver investment returns.  The markets do that. Investors using a passive approach will earn market returns commiserate with their risk and allocation, less costs. By doing so, they will outperform the average investor and the wide majority of investors trying to beat the market through active strategies.

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