Index vs alpha

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Feb 25, 2007 11:01 am

if you do an ETF wrap, do you try for your own alpha (not just buy and hold) to justify YOUR “exp fee”? can you get a lot of new clients by saying “let me index for you?”-- or do you need to try to time a sector rotation or something (or at least tell the prospect that you plan to do so) in order to open the acct?

Feb 25, 2007 1:00 pm

History tells us timing is futile.  Clients pay us for advice not to time markets.  They should be paying us to keep THEM from TRYING to time the mkts. 

Feb 25, 2007 1:05 pm

[quote=gad12]They should be paying us to keep THEM from TRYING to time the mkts. [/quote]


Feb 25, 2007 3:27 pm

Agreed. Too many clients want us to “make them rich” with a bunch of silly

investing ideas. I usually tell them to go open an E-trade account on their

own. They have unrealistic expectations. I actually have people tell me - “I’ll

give you some of my money and see how you do over the next month or so”.

]Uhh, OK. Yeah, I’ll take that bet. Right.

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Feb 25, 2007 10:00 pm

I do some wrap business with etf’s using the core/satellite approach…worked well.

Feb 26, 2007 2:53 pm

Asset allocation and re balancing is where the majority of returns come from.

So, they pay me to determine the appropriate asset allocation for them based on their goal, risk tolerance, and time horizon.  Then, on an on going basis, you MUST rebalance.

That is why fee based accounts work best for most of my clients.

No charge to purchase ETF, very low internal expenses ratio, great asset allocation and annual re balancing for a fee.