An investor, fiduciary, and plan administrator walks into a bar on Wall Street. He wakes up an hour later with a huge bump on his head and his wallet gone . . .

Ba dum-cha! I know, bad joke. When is someone going to raise the bar for investors?

Somebody stop me.

Seriously though. How do plan administrators, fiduciaries and even plan participants protect themselves from being leveled by the Wall Street statistics machine?

Charlie Ellis, academic and investment analyst, says this about Wall Street: “Wall Street spends millions of dollars each year convincing clients that luck is skill.” They do this using stats.

I also like this one: “Figures never lie, but liars figure.” (Mark Twain helped make this popular, but no one seems to know who coined it.)

In this business of investing, statistics abound. The industry tracks about everything from the age of investors to the age of their investments and everything in between.

Average U.S. equity investor performance can be tracked through DALBAR, Inc. These results are troubling and almost every investment firm in the world uses this data in their promises to fix their clients’ investing woes.

Mutual fund manager performance can be tracked with the help of Morningstar, Inc. Morningstar has their “star performers” banquets each year where it gives out the awards for those fund managers who have outperformed all others over the previous 5 or 10 year period. It’s a once-in-a-lifetime distinction (literally) and if it happens to you, quit because statistics say you’ll never do it again.

Popular market benchmarks are tracked with the use of Indexes. For example, the S&P 500 tracks large companies found in the United States. For small U.S. Companies, we have the Russell 2000. There are many others that will track nearly everything that moves in this industry by how much, in which direction, and when.

I have a good question: How are the clients of particular investment firms performing while working with those investment firms? This is a very good question. So who tracks this?


GIPS stands for Global Investment Performance Standards. It tracks the actual performance of every client of an investment firm and yields an average return for investors. It takes into consideration everything you do with your money while you are a client – when you invest, when you withdraw, when you have a “greed moment” and when you hit the panic button.

It’s one thing to convince an investor that the market gets a great return over time, or even that your firm has funds that have achieved and even beaten that market return. But it is altogether something else to show an investor the returns of that firm’s average client after all clients are actually and fully considered.

Nothing gives an investor or a 401k provider assurance of performance like a company who is willing to submit to the rigors of getting rated by GIPS. Ask yourself: Why wouldn’t an investment firm get GIPS rated?

Never work with one who hasn’t been.



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