While other advisory companies are thought to have a hidden agenda of trying to capture higher earnings by earning higher margins on proprietary products, Assante continues to seek out the world’s best managers for use in it’s customized portfolio solutions.
Every so often, certain ideas take hold –for better or worse- regarding some companies and their philosophies toward running a business. Take the company I work for- Assante- as an example. Many people assume that since Assante is a wholly owned subsidiary of C.I. Funds, that the company will be a proponent of active management exclusively. Not so. Does this bit of news surprise you? It shouldn’t.
For about five years now, one of the most prominent sub-advisors for Assante’s mid-tier (over $100,000) and high-end (over $500,000) wrap accounts has been Dimensional Fund Advisors (DFA) out of Santa Monica, California. People in the know fully recognize DFA as the standard-bearer for the Efficient Market Hypothesis (EMH). That’s the academic theory that suggests active management is a waste of time and money. In short, EMH posits that for purposes of investing, capital markets are “efficient” and the present price of any security is about right so that no one can reliably make money in trying to exploit any mispricing anomalies. The proponents of EMH believe that “the market works” and that the added cost of trying to “beat the market” is simply being wasted, lowering investor returns in the process. It is an enlightened worldview that is shared by too few people in the industry.
I sometimes have people ask me about the “real motives” behind some of Assante’s proprietary product solutions and business strategies, as if something more nefarious is at play. Assante’s advisors have known about DFA’s excellent track record for many years. I often have my colleagues tell me that one of the reasons they prefer our company’s wrap account solutions is due to the excellent sub-advisors that have been assembled for our use in purposeful portfolio construction. Newly released marketing material even features CEO Joe Canavan extolling the virtues of Assante’s many “best of breed” managers, and DFA figures prominently in the mix.
While other advisory companies are thought to have a hidden agenda of trying to capture higher earnings by earning higher margins on proprietary products, Assante continues to seek out the world’s best managers for use in it’s customized portfolio solutions. The presence of DFA’s index funds in Assante’s wrap accounts is a clear example that no such ulterior motive exists.
In the interest of full and plain disclosure, I should also mention that the MER on the DFA pools is about 3.10% plus the fee for the Asset Management Service (AMS), which is extra. While available on a stand-alone basis, these pools are really intended to be used as part of the larger wrap account program, with an eye toward total portfolio integration, including tax optimized portfolios featuring risk adjusted returns that are maximized within each client’s specific tolerance for volatility.
At the end of the day, people will still talk. Everyone has an opinion on who does what things and for what reason and there’s just no telling why some ideas take hold. Perhaps it’s the media. Maybe a few disgruntled journalists are just angry, misinformed or both. I simply want to take this opportunity to set the record straight- there are no ulterior motives at Assante.
John J. De Goey is a Senior Financial Advisor at Assante Capital Management Ltd., member CIPF and author of The Professional Financial Advisor. The views expressed are not necessary shared by Assante.