A reader forwarded in “The Study of the Decade (PDF).” An excerpt:
Over the next few years, you will be hearing a great deal about a ground-breaking new study that is just now starting to receive nationwide attention. The only notice of it that I have seen in the public media just appeared in a popular money magazine: “A new study compares the cost and performance of more than 4,000 mutual funds–some sold by brokers, some selected by people on their own–from 1996 to 2002. The people won.” In other words, do-it-yourselfers outperform financial advisors. Was the difference trivial? In another section, the article stated, “Estimated annual amount by which funds that people bought on their own outperformed broker-sold funds: $8.8 billion.” The number $8.8 billion was in very large type. Those are fighting words. But more and worse is to come from the popular media. This monumental study will surely be misinterpreted by some in the media. Clients could be outraged. A few may vote with their feet. The questions we must ponder is, “How do we defend ourselves? How do we establish our economic value?” The vast majority of all financial advisors have long assumed they helped their clients achieve financial goals. At least when it comes to mutual fund investing (the most common service financial advisors offer), this study implies that financial advisors add no value.