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Over-Reliance on "Education"

"No amount of education is going to solve that particular problem."

Key Takeways

Investors rely on fund managers to make proper investment decisions.
Most alternative investments are ineffective. Many are correlated with stocks, do not provide downside protection, and typically have higher fees and taxes.
It is unproductive to battle against the reality of human behavior. Instead, investment products that balance valuable performance with simple and understandable concepts can help investors remain happy.

Transcript

Eric Crittenden: I've noticed this phenomenon in the industry is this over-reliance on the word education. We need to educate investors. The issue is education. We need more education. You hear this over and over ad nauseam year after year. What I've found is that people pay us to make good decisions and to manage money in a prudent manner. They don't pay us to create a boatload of homework for them.

This hiding behind the word, that it's just an education problem, I think doesn't solve anything. Yes, we should try to educate people that want the education, and they should have a minimum level of understanding about what they're getting involved in, but really we just need to do a good job first and foremost, and fill in the gaps with education rather than hiding behind that word.

How does this relate to what we do? Alternative investments have had a lot of disappointment and frustration, and I hear people saying, "Well, we just need to educate the clients more. They need to understand it more." When the truth, if we're being just completely honest, they just don't like this experience. This isn't what they were looking for. They don't want something that has high fees, high taxes and can go down 30% when the market's down 40%. No amount of education's going to solve that particular problem.

The all-weather approach in my opinion goes a long way towards solving that problem by bringing in true diversifiers, things that are truly independent from stocks and bonds and blending them together with-- doing a good job of portfolio management, doing a good job of real diversification. Maybe you won't trigger those clients into being upset all the time, and then you won't have to hide behind the word education.

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