What You Need to Know
- While the performance of mutual funds vs. indexes is closely monitored, the same can't be said for active investment choices by advisors, she argues.
- However, this is a longstanding problem, according to Michael Kitces, who says it's hard to achieve accountability when there is no industry benchmark.
- The discussion follows the news that Vanguard acquired Just Invest, a firm that offers direct indexing tools.
Just how accountable advisors are for the active investment choices they make for clients was debated by Morningstar’s Christine Benz and Michael Kitces on Twitter.
“I can’t help but worry that accountability for investment choices is going in the wrong direction,” Benz, Morningstar’s director of personal finance, tweeted Tuesday afternoon.
“We monitor the heck out of how mutual funds perform v. indexes, but who’s there to oversee these active investment choices that advisors are making?” she asked.
She was reacting to news that Vanguard entered into a definitive agreement to acquire Just Invest, a provider of tax-managed, tailored wealth management technology, including Kaleidoscope, a direct indexing offer.
“That’s not a new problem though, Christine,” Kitces, head of planning strategy at Buckingham Wealth Partners and co-founder of XY Planning Network, tweeted in response on Wednesday morning.
“Financial advisors have been building portfolios [of] funds & ETFs for 20 years now. With no standardized measurements or accountability of how their models or client-specific portfolios are performing,” he said.