How Different is Fisher Investments? Are they really outperforming the market or are they loading up portfolios with extra risk to justify their high fees?
Despite their propaganda positioning their investment strategy as being unique, they really aren't all that different from the other Wall Street bank and brokerage peers they try to contrast themselves against.
Limiting how much you pay in fees is likely the most important controllable factor in determining your investment performance - which is why WealthFactor is leading the industry at .35%.
This week, we're going to peel back the sales and marketing onion. Large well known Wall Street firms build up around themselves, fees are a big deal. high fees force risk taking. Large well known firms are built in antiquated, expensive and inefficient ways. The idea that you get more by paying more hasn't been true in investing for at least 20 years. Large well known investment businesses provide solutions that will generally track the market before fees over time. Think about it this way to be able to have your performance deviate from the overall market in material ways. You have to take positions that are materially different than the market. If these efforts don't go well, you risk losing clients. large firms don't spend their time figuring out how to outperform the market. They know this isn't practical.
Nor does it make business sense as a big misstep will likely lead to lost clients and lost revenue. Most of what we hear from a sales messaging standpoint is marketing and messaging to feed the belief that they can outperform the market. Given the complex nature of financial markets and return comparatives, there is nearly always away for an investment professional to highlight something positive. The larger the organization is, the more all of this is true. Given the commoditization of investment services, fees are likely the most important controllable factor when hiring an investment service provider. Let's take a look at a large non bank or brokerage example. Fisher Investments is an easy target for lots of reasons. I've chosen them as they are relatively local to the Portland area have over 100 billion in assets under management, and they actively sell the idea that their investment process can outperform the market.
So if we go to their website, a few observations, first, there's no sign of their performance. If you were to ask them about this, they would likely respond with a custom nature of what they do. The practical reality is, if their performance was a selling point, it would be on their website. And looking through the site thoroughly. You can even find a section for institutional investors where they clearly have standardized strategies. Even here, there is no mention of performance. Now let's look at fees. They seem to tout a simple fee structure, but the image sharing what that is, the same thing applies. If this were a selling point, it would be on here. Lastly, it's worth doing a quick internet search. With Fisher you can quickly see that the average experience with the organization is suspect at best. There is a 2.9 out of five star on average.
For those that left Google reviews next, if we look at them as an employer, we can see that in 639 reviews on Glassdoor, they received an average of 3.6 out of five stars. I don't necessarily mean to pick on Fisher specifically, but they are a stereotypical example of why most investors have a skepticism with Wall Street and the appearance of quality is more likely due to a large sales and marketing budget versus the actual services being provided.
Data sources: Google search summary on 6/12/2020