We believe that it is very important that our clients have realistic expectations about how investments work. From time to time we meet people who are in search of an adviser that will promises to deliver them with the highest returns. 

We never promise high double digit returns because we can’t but what is more important is that we educate our clients that we don’t deliver high returns, the investment markets do.  The Australian stock-market has delivered compounding returns of over 20%pa for the past three years (to September 2007).  We don’t deliver the returns to you; we just show you where to go to get the returns and how to do it for the lowest possible cost.

Much of our approach is unconventional, well at least unconventional if you read most magazine covers.  We recommend an indexing strategy to our clients which these magazines rarely discuss because if they did they would go out of business.  Scientific marketing surveys determined that a magazine cover that read “Index Funds: Still The Best Choice!!!” every single month wouldn’t sell as many copies as magazines that promise “Our BRAND NEW 10 Best Mutual Funds To Buy RIGHT NOW!”.  It’s sad but it’s true.

One hundred percent fee for service independent advisers are exceedingly uncommon, but this is the only type of adviser likely to recommend an indexed strategy because indexing doesn't pay commissions.  Our message about indexing is backed up by overwhelming evidence from all the financial research journals.

Much of what people read about investment is pseudoscience, demonstrably false yet widely believed. The advice you hear on television and read in various popular investment magazines and multitudes of newspaper columns is often worse than useless, it is often downright misleading.

It is a personal hobby of ours to expose everyday examples of this, which is featured in our Blog and research library.

Why doing things a little differently can be very profitable

We are committed to promoting financial education for a number of reasons.  Some of them altruistic and some related to our business.

Altruistic reasons include the fact that we are genuinely disturbed at the total lack of knowledge people have about investment. They lose fortunes again and again because they do things that are reckless and stupid. We are including many financial advisers in this, even professional financial planners rarely have a clue about the “Costs Matter Hypothesis” we advocate.

We clearly have a strong marketing interest in making sure that people learn about investment. The more the real truth gets out, the less appealing our many competitors will look. They have more money to spend on marketing than we do, but we’re not trying to attract tens of thousands of clients.  This is good news for our competitors, because it means they can continue to sell the Australian financial services consumer risky, overpriced and underperforming investments, bad news for investors though.

It is partly because of our completely unconventional approach that we are also vulnerable. Many people seek safety in numbers, and they do wonder, "if indexing and the “Costs Matter” approach are so good, why doesn't everyone do this?"

The simple answer to that is that the old ways are more profitable to advisers and the funds management industry. Our approach relies to a great extent on low cost financial products, which means our approach is less profitable to the industry itself. Many of the funds we use charge less in total fees than most active funds pay out to advisers in trail commission. Of course the beneficiary of these lower fees is the consumer, but this is hardly something you would expect the industry to promote.

If you want verification of what we’re saying, then read about our investment strategy and refer to our research library and Blog. The deeper you dig, the more convinced you'll be.

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