Don’t let the fee tail wag the dog. Here is what we mean; if you gave your friend $1 and he gave you $1.10 back a year later and you gave another friend $3 and he gave you $6 back a year later, who are you most happy with? Obviously, the $3 friend who returned you $6. The friend who gave you $1.10 back reminds you that the $6 friend is three times more expensive. You, of course, know that it is all about net of fee returns. Hypothetically, if we were to let the fee tail wag the dog for our risk money, we would have all of our clients investing in the S&P 500 ETF. The S&P index performance beats about 85% of money managers and mutual funds each year and the cost of the ETF is less than the Vanguard 500 fund. So, “efficient”, right? Well, let’s see. If you had invested $100K in the S&P 500 ETF since January 1^st, 2000 to June 1^st 2016, you would have about $188K with dividends reinvested. Also, hypothetically, if you had paid the fees to use the risk models we are using now, your $100K starting at January 1^st, 2000 would have grown to over $900K by June 1^st 2016, net of all fees.

Obviously, the focus has to be on “net of fee performance” not just on fee minimization.