Battle of the Best Interests: Closing Argument in
People v. The Financial Services Industry and Congress
James W. Watkins, III, J.D., CFP®, AWMA®
I recently finished reading “Throw Them All Out,” a new book by Peter Schweizer that discusses the alleged trading practices by various members of Congress using information that they may have obtained by virtue of their positions on various Congressional committees. Schweizer suggests that such practices, if committed by the public, would constitute insider trading, which is illegal.
These practices, if true, would simply provide further support for the public disdain and distrust that the public currently has for Congress and Washington. The late Betty Ford commented on the fact that she was glad that she was not part of the current Washington scene based on her opinion that today’s Congress is more interested in bipartisan politics and their own interests instead of the good of the country. A few lines from the play “1776” sums ups the current situation with Congress – “piddle, twiddle and resolve, not a damned thing do we solve.”
Congress’ alleged questionable trading also sheds a different light on their refusal to pass a uniform fiduciary standard for the financial services industry. Despite the abusive financial practices brought to light as a result of the 2000-2002 and 2008 bear markets, abuses which reportedly cost investors $5 and $7 trillion in losses, and the estimated $40 billion a year investors lose as a result of investment fraud, Congress refuses to acknowledge the inequity of the current situation and make the changes needed to protect the public.
Despite the benefit that a uniform fiduciary standard would provide for the public, Congress and the financial services industry continue to block a uniform fiduciary standard, putting forth self-serving and disingenuous arguments against the adoption of a uniform fiduciary standard. The impact of various special interest groups and PACs continue to have more influence on Congress than the welfare of the American public.
If we accept the concept of a government of the people, by the people, and for the people, I believe that we could quickly put an end to Congress’ stonewalling by putting the question of the adoption of a uniform fiduciary standard to a jury. That obviously is not going to happen. However, as an attorney, I often think of the closing argument that could, and should, be made in favor of the implementation of a uniform fiduciary standard.
Closing Argument in People v.
The Financial Services and Congress
Ladies and gentlemen of the jury, at the beginning of this trial you made certain promises to me and my client. My client and I also made certain promises to you. You promised that you would listen to the evidence presented, consider the evidence objectively, and decide this case based solely upon the evidence presented. Thus far, I believe that you have kept your promise.
My client and I promised you that we would present evidence of both past and present abusive practices in the financial services industry and that such abusive practices would establish why there should be a uniform fiduciary standard for the financial services industry, namely to better protect the public against such practices. We have presented the promised evidence, evidence which we feel clearly establishes the unfair, in some cases illegal, practices that the financial services industry has engaged in, and continues to engage in, to the detriment of investors.
The evidence has established that there are currently two standards by which the financial services industry’s practices are governed. The first standard, the so-called “fiduciary” standard, requires that financial advisers always put a customer’s interests first and openly and honestly disclose any actual or potential conflicts of interest an adviser may have, including any financial considerations that could affect the objectivity of an adviser’s advice. Investment advisers are governed by this standard.
The second standard, the so-called “suitability” standard, allows (some would argue requires) a financial adviser to put their interests, as well as those of any broker-dealer that they work with, before those of their customers. The suitability standard does not require a financial adviser to make the full disclosure required under the fiduciary standard, thereby allowing an adviser to conceal situations where an adviser is providing advice which is based on the financial benefit that the adviser will receive and is knowingly recommending actions that the adviser knows are not in the customer’s best interests at all. This is the standard that most stockbrokers operate under.
We ask you to review the evidence that we presented with regard to the losses that investors have recently suffered, in whole or in part, as a result of the abusive practices that are the subject of this trial. It has been estimated that investors lost an estimated $5.7 trillion in the bear market of 2000-2002 and an estimated $6.6 trillion in the bear market of 2008.1 The FBI has estimated that American investors lose approximately $40 billion annually due to investment fraud.2 Investment fraud is often subtle and difficult for investors to detect due to their lack of investment experience and/or their lack of investment training/ knowledge.
During the trial we have focused on a number of abusive practices which establish the need for a uniform fiduciary standard, a need to require financial advisers to treat fairly and honestly. While we ask you to consider all of the evidence during your deliberations, for now I’d like to review the evidence that we presented with regard to three specific areas of abuse: asset allocation/portfolio optimization, mutual funds and variable annuities.
Asset Allocation/Portfolio Optimization
During the trial we introduced evidence that established that two of the primary factors that determine investment success are the ability to control the volatility of one’s investment portfolio and the ability to control a portfolio’s fees and expenses. You heard experts testify that the primary means of reducing a portfolio’s volatility is by effectively diversifying the investments within the portfolio, the key words being effectively diversifying.
The concept of financial planning has become an integral part of the financial services industry. An integral part of financial planning has become the preparation of some sort of plan regarding the diversification of a customer’s assets. The process of generating the diversification recommendations, generally referred to as either asset allocation or portfolio optimization, typically results in recommendations that spread an investor’s assets among various asset classes.
The testimony established that the basic premise behind diversification is that by holding various asset classes, losses in one category may be offset by gains in other categories, providing greater stability for the portfolio as a whole. You also heard from those same witnesses that the asset allocation/ portfolio optimization recommendations provided to investors by the financial services industry are often misleading and dangerous due to the fact that they do not provide effective diversification, the portfolio protection that investors need.
You heard the experts talk about “pseudo” diversification, where the public is misled into believing that the mere fact that a portfolio is divided up between number of different asset categories, is sufficient to reduce a portfolio’s overall volatility, or risk. To inexperienced or untrained investors, this argument may seem perfectly logical.
However, from the evidence presented during this trial you now know that effective diversification depends on the quality, as opposed to the quantity, of diversification. The quality of diversification depends on the ability to combine assets that behave differently under different market and economic conditions, the extent to which assets move together in certain conditions.
Most financial advisers use some sort of computer program to generate asset allocation/ portfolio optimization recommendations. The quality of a computer program’s output is highly dependent on the accuracy of the input data used, a problem commonly referred to as the “garbage in, garbage out” syndrome.
This problem is even more troubling with regard to asset allocation/portfolio optimization software due to the fact that most of this software is based upon a process known as means-variance optimization. You heard a lot of testimony addressing the issues with means-variance optimization, ranging from “unstable,” “unreliable” and “counterintuitive” to “a garden variety terrorist.” I ask you to remember the remarks of noted expert Richard Michaud, that
Means-variance optimization presents an illusion of precision that is seductive but generally fallacious and even dangerous. The most serious limitations of means-variance efficiency as a practical tool of investment management are instability and ambiguity. Small input errors lead to large errors in the optimized portfolio.
Means-variance optimized portfolios are “estimation-error maximizers.” Means-variance optimization significantly overweight (underweight) securities that have large (small) estimated returns, negative (positive) correlations and small variances. These securities are, of course, the ones most likely to have large estimation errors. The error maximization effect is the fundamental source of the unintuitive character of means-variance optimized portfolios.3
And remember the comments of John Rekenthaler, a respected expert in the area of investments and wealth management, that
The trouble is, the means-variance optimizer doesn’t actually “know” each asset class’s inputs; instead, it must cope with an estimate. And rest assured, the estimates that it must handle are wrong, wrong, wrong. Things get worse. Because the optimizer doesn’t understand the dangers of estimation risk, it doesn’t waffle in its recommendations. The means-variance optimizer, in other words, is your garden-variety terrorist: a purveyor of fringe ideas with absolute conviction in its own rightness.4
Rekenthaler’s comments address another example of why a uniform fiduciary standard is needed to properly protect investors in connection with asset allocation/portfolio optimization recommendations. These recommendations are often presented in the form of a written document, or “plan,” with various spreadsheets and charts that are meant to create, and do create, a false sense of security and expertise to a customer. In many cases the sheer size of these “plans” intimidates customers into blindly accepting the recommendations provided due to their inability to evaluate the quality of the advice provided or a fear of appearing foolish for questioning the data provided.
However, as Rekenthaler and the evidence presented have pointed out, these recommendations are highly questionable and potentially misleading given the fact that they based upon estimates. The law requires that investment managers and investment products disclose that past performance does not guarantee future returns. And yet, most financial advisers use historical returns as their input data in generating their asset allocation/portfolio optimization recommendations.
Harry Markowitz, the Nobel Laureate who created the concept of means-variance optimization, actually preferred that estimates of future returns be used in generating allocation/optimization recommendation. Given the difficult in predicting the future, the use of such “guesstimates” creates obvious concerns.
The second misleading and fraudulent aspect of the asset allocation/portfolio optimization process has to do with the implementation of such recommendations. The software programs used to produce assert allocation/portfolio optimization recommendations typically use risk and return data for broad, general asset categories rather than the investor’s actual investments or the products that a financial adviser has recommended. You heard testimony that the use the broad, general asset categories can be misleading in that such generic data does not factor in such real-world concerns as fees and expenses.
You also heard testimony that established that this failure to do a real-world analysis of a customer’s portfolio often results in significant differences between the original asset allocation representations used to convince a customer to make changes in their portfolios, thus producing commissions and other compensation for the financial adviser, and the customer’s actual portfolio.
I ask you to remember the statements of Dr. William Sharpe, who received the Nobel Prize for his work in the area of portfolio management, who stressed the importance of investment portfolio analyses based on an investor’s actual investments. Dr. Sharpe said that the use of the two stage asset allocation/portfolio optimization system makes no sense, and that “a far more rational approach uses only one stage, dealing directly with the actual investment vehicles…”5 Dr. Sharpe went on to categorize the current “financial planning” practices in the financial services industry as worthless to the public, as “financial planning in fantasyland.” 6
To demonstrate Dr. Sharpe’s points, our experts actually went online to several websites to show you that (1) small changes in the input data could result in significant changes in the recommendations given to customers, and (2) that such changes can result in actual, real-world portfolios with are far riskier than a customer was led to believe based upon the original, generic category based recommendations. It has been suggested that these differences, and a customer’s inability to independently assess the consistency between a financial adviser’s original, generic recommendations and the customer’s actual portfolio, the products sold to him by the financial adviser, is somewhat analogous to a sophisticated form of bait-and-switch, which is illegal.
The argument has been made that current commercial asset allocation/portfolio optimization software programs do not allow financial advisers to do real-world analyses due to the data that would be required. However, you heard the experts unequivocally state that real-world analyses could be done relatively simply using Micro Excel if the advisers were willing to invest the time to gather the risk and return data for the specific investments being recommended.
So ultimately, the question boils down to how much a financial adviser cares about providing information that does not mislead and harm a customer, about how important it is to a financial adviser to put the customer’s financial interests and protection ahead of the adviser’s financial interests.
The financial services industry is fond of pointing out that no one can guarantee how an investment will perform. And that is true.
However, that is not the issue here. The issue here is whether a financial adviser, given the known issues surrounding current asset allocation/portfolio optimization software programs, should be held to a fiduciary standard and be required to put a customer’s interests first, to take the time to provide real-world asset allocation/portfolio optimization information so that customers have a better chance of effectively diversifying their portfolios in order to avoid unnecessary investment losses. When customers are often charged thousands of dollars for asset allocation/portfolio optimization analyses, is that an unreasonable request to make of financial advisers?
So, we have an asset allocation/portfolio optimization plan. What’s next? As we mentioned, most computer based asset allocation/portfolio optimization recommendation are generic in nature, leaving the task of converting the generic recommendations into product specific recommendations to the financial adviser.
In many cases, despite the fact that a financial adviser typically uses passive, no-load index funds in generating asset allocation/portfolio optimization recommendations, the financial adviser will recommend that a customer use expensive, actively managed mutual funds to implement the original portfolio recommendations. The Supreme Court has recognized that there is an inherent conflict of interest when a financial adviser is involved in the sale of investment products that will result in commissions for the adviser.
We introduced a significant amount of evidence on this issue. I realize that some of you may have gotten confused as this evidence was presented, so let’s go back and review the diagrams that we introduced into evidence. A review of the evidence will hopefully make this information more useful to you and easier to understand.
Let’s assume that we have two mutual funds. Fund A is an index fund that tracks the S&P 500 Index. Fund A does not impose a load, or upfront fee, to purchase the fund and has an annual expense fee of 0.15 percent. Fund B is a load fund that charges a purchase fee of 3.5 percent and an annual expense fee of 1.50 percent.
Fund B has an R-squared rating of 90, meaning that ninety percent of the fund’s return can be attributed to the return of the underlying index, in this case the S&P 500 Index, rather than the contributions of the fund’s management. So I could have received ninety percent of Fund B’s return for essentially ten percent of Fund B’s annual fee. In other words, I am paying ninety percent of the amount of Fund B’s fees for whatever returns Fund B earns in excess of the S&P 500’s return.
That’s an important consideration given Charles Ellis’ testimony that approximately eighty-five percent of actively managed mutual funds underperform their relevant index over the long term.7 If Fund B does not outperform the S&P 500 Index, an investor has received nothing for the excess annual fees they paid for Fund B.
Many investors may look at one percent and dismiss it as an insignificant amount of money. But remember the testimony regarding the study done by the General Accounting Office, in which the GAO estimated that every one percent of fees and expenses reduces an investor’s end return by 17% over a twenty year period.8 Based upon the GAO’s calculations, Fund B’s annual fee of 1.5% would reduce our end return by approximately 25%, or by one-fourth, over a twenty year period.
But that’s not the end of the impact of mutual fund fees on investors. You need to remember the testimony regarding a fund’s active expense ratio, a calculation created by Professor Ross M. Miller to give investors a means of calculating the true cost of the actively managed portion of a fund.
During your deliberations you will have the opportunity to review the testimony that was given in this area, including the actual formula Professor Miller uses to calculate active expense ratio. In essence, the active expense ratio subtracts the fees for a relevant index fund, in our example Fund A, from the fees of the actively managed fund being considered, in our example Fund B, and then factors in the impact of a fund’s R-squared ratio.9
The relevance of a fund’s active expense ratio is that mutual fund investors are often paying considerably more than they are led to believe for the purported benefits of active management. If a fund fails to outperform its benchmark index, an investor has paid good money for nothing, since an investor could have received a higher performance with less cost simply by investing a relative index fund. Remember that Professor Miller’s study found that a funds’ active expense ratio is typically 5-7% times the funds’ advertised expense ratio.
When I questioned members of the financial services industry during the trial as to whether they disclosed this information to customers, they testified that they did not. When I asked them whether they thought it was material information that would be useful to investors in making investment decisions, they dodged the question, saying it did not matter since they were not required to make such disclosures.
Given the fact that it only takes one or two minutes to calculate a fund’s active expense ratio and avoid potentially misleading customers, the financial services industry’s indifference to complete disclosure and the customer’s financial well-being is further evidence of the need for a universal fiduciary standard.
Now let’s look at the need for a uniform fiduciary standard with regard to the sale of variable annuities. There is a saying within the financial services industry that variable annuities are sold, not bought. As our evidence has shown, there is a lot of truth in that saying, as the number of cases involving abusive practices involving the marketing and the sale of variable annuities indicates the issues with this product.
We introduced evidence showing that variable annuity marketing usually stresses that variable annuities can provide a lifetime of income and the opportunity for tax deferred growth. At the same time, we showed you that variable annuity marketing often does not mention is that in order to receive a lifetime of income, the annuity owner has to give up control of the variable annuity, and that once an annuity is annuitized, any balance remaining in the annuity at the owner’s death goes to the insurance company that issued the variable annuity, not the annuity owner’s heirs. In short, the variable annuity issuer is hoping that the annuity owner dies shortly after annuitizing the annuity, which would result in a windfall for the insurance company.
Variable annuity marketing also often fails to mention that there are other means of achieving tax-deferred growth without the inequitable and oppressive fee structure used by most variable annuities. We introduced evidence of the unfair fee structure that most variable annuity use, a fee structure known as inverse pricing. We introduced testimony from executives in the variable annuity business that admitted that the practice of inverse pricing was unfair and inequitable to customers.
The testimony described inverse pricing as a strategy in which a customer is charged a fee that is not based on the legal benefit due from the annuity issuer to the customer, but rather on some other criteria designed to ensure that the insurance company receives a windfall at the customer’s expense, that the insurance company’s financial interests are placed ahead of those of the annuity purchaser.
With variable annuities, the issuer guarantees that as long as the annuity owner does not annuitize the annuity, the annuity owner’s heirs will receive no less that the amount of the annuity owner’s actual contributions. While there are a few variable annuity issuers that charge a low, flat annual fee, most annuity issuers base their annual fee on the accumulated value of the annuity, not on their cost to meet their legal obligation to the annuity owner. Since this can be confusing, let’s review the exhibit we produced and introduced into evidence.
As the exhibit shows, if a customer contributes $100,000 to a variable annuity and the current value of the annuity has grown to $250,000 due to growth of the investments within the variable annuity, the annuity issuer will base their annual fee on the $250,000 value even though their actual legal liability exposure to the annuity owner’s heirs would only be $100,000. The abusive nature of this fee, commonly known as the annuity’s death benefit, is further demonstrated by the testimony we introduced showing that less than 1% of annuity owners ever qualify for the benefit at all since the long-term performance of the investments within the annuity usually exceeds the amount of the death benefit.
The abusive nature of variable annuities does not stop there. We introduced into evidence a study by Moshe Milevsky, an expert in the area of annuities, in which he estimated that even thought the actual value of a variable annuity’s death benefit is only 0.10 to 0.12 percent of the value of the annuity, variable annuity issuers often charge a death benefit fee that is often ten times the value of the death benefit itself.10
But we are not finished yet. Remember all the evidence regarding the poor performance and the fee issues with actively managed mutual funds? Variable annuities offer owners the opportunity to invest in “subaccounts,” which are basically mutual funds. While some variable annuities offer variable annuity owners no or low load mutual funds as investment options, most variable annuities offer owners a heavy menu of actively managed “subaccounts,” complete with all of the performance and fee issues of actively managed mutual funds.
The impact of the excessive and oppressive fee associated with variable annuities has a significant impact on the investor’s bottom line, the effect of such fees on an investor’s overall return. If we use the GAO’s previous estimate that each 1% of fees reduces an investor’s return by 17% over a twenty year period, and apply that to the fact that the total fees associated with variable annuities generally run between 2-3% annually, a variable annuity owner could see his final return reduced by over one-third to one-half, approximately 34-51% or more, over twenty years. Given that variable annuities are considered to only be appropriate for long-term investors, this calculation takes on even more significance.
All of this information regarding variable annuities may explain why data shows that the overwhelming majority of investment advisers, who are governed by the fiduciary standard, do not sell variable annuities. It is hard to understand how an investment whose fees alone could reduce an investor’s return by one-third to one-half, an investment that charges fees so patently inequitable, fees estimated to be 10 times or more in excess in excess of the cost of the benefit being provided to the annuity owner, could ever be said to be suitable for an investor, much less ever in an investor’s best interest.
The three areas we have covered are just three examples of abusive practices within the financial services industry. Once again, during your deliberations we ask that you review all the evidence that has been presented in deciding whether to create a uniform fiduciary standard for the financial services industry.
As I sat down to prepare this closing argument, a number of quotations came to mind. Aldous Huxley said that “facts do not cease to exist because they ignored.” Aesop said that “a tyrant will always find a pretext for his tyranny.” Confucius said that “to know what is right and not to do it is the worst cowardice.”
We presented evidence regarding a 2000 Schwab Institutional study of investors’ portfolios. The study reported that 75% of the portfolios studied were poorly constructed given the portfolio owners’ financial goals and needs.11 One would think that the financial services industry would respond to the study’s findings with outrage and claims of how the study was flawed. The response, as reported in an InvestmentNews article – “we’ve always known it.”
We presented evidence of actions taken in 2005 by FINRA, the regulatory arm of the financial services industry, in which they fined a significant number of the nation’s leading brokerage firms a total of $125.4 million for failing to disclose to customers various fee sharing arrangements and/or directed brokerage arrangements that they had with mutual fund firms, arrangements that most certainly had an impact on the objectivity of the investment advice that was provided by the firms.12 The brokerage firms were apparently disciples of the old Wall Street adage – “the firm made money, the stockbroker made money, and two out of three ain’t bad.”
The financial services industry has also been aware for some time of the evidence that we have presented during this trial regarding the overwhelming historical underperformance of actively managed mutual funds and the resulting fee issues; regarding the oppressive inverse pricing issues associated with variable annuities; regarding the non-disclosure of fee sharing arrangement within the industry and the resulting conflicts of interests issues; and the potential “bait and switch” issues presented as a result of the various issues with investment recommendations generated by software programs and the financial services industry’s general failure to provide customers with real-world portfolio analyses.
It is hard to understand why anyone could honestly argue against a standard that simply requires a financial adviser to treat the public fairly by putting a customer’s interests ahead of their own. Such a requirement would not prevent a financial adviser from providing advice and making money.
The argument that the financial services industry has consistently put forth is that it would deny investors a choice and would force investors to pay fees that cannot afford. That argument is, at best, disingenuous.
A uniform fiduciary standard would not prohibit anyone from providing investment advice to customers and receiving commissions on sales of investment products. Nor would it require that customers pay a fee for investment advice. Such a standard would simply require an adviser to act honestly by putting a customer’s interests ahead of their own and to disclose information that would allow a customer to make an informed decision, particularly with regard to any financial considerations that could bias an adviser’s recommendations.
In short, a uniform fiduciary standard would simply promote a system of fundamental fairness, a system that seeks to promote a win-win situation for both investors and financial advisers. For those for whom such a standard would present a problem, good riddance.
Soon, you will begin your deliberations. So many times we hear people say that they are frustrated because they feel that they have no control over their lives and they feel powerless to protect themselves and their family. In a short while, you will have more power than you have probably ever had in your life, more power than you may ever have again. You will have the power to make a difference, not only for you and your family, but for everyone that does business with the financial services industry.
We have provided you with numerous examples of how the financial services industry takes advantage of the antiquated dual fiduciary-suitability standard to engage in abusive practices to the detriment of the public. Congress continues to bow to the financial services industry and special interest group by putting forth spurious and disingenuous excuses for refusing to protect the public by enacting a uniform fiduciary standard. They refuse to acknowledge that the issue with investment advice is one of the quality of advice provided, not the quantity of advisers providing advice.
Congress has suggested that it has been to slow to act because it wants to make sure that a fiduciary standard is needed and that it is in the best interest of the public. They keep telling the SEC to do more studies, even though the SEC recently conducted a study on these same issues. The SEC study, conducted by the Rand Corporation, indicated general confusion among the public as to the obligations of those in the financial services industry, with the majority of the public mistakenly believing that it was stockbrokers, rather than investment advisers, who owed customers a fiduciary duty to always put a customer’s interests first.13
Congress’ calls for more studies and debate are simply stonewalling tactics to avoid upsetting a major source of campaign contributions by acting to protect the public. If Congress truly wanted to do what’s right and do what the people want and need, all they have to do is conduct an informal poll by walking around Washington and asking random people the following question – When financial advisers and other investment professionals provide investment advice to the public, do you feel they should always be required to put the customer’s financial interests ahead of their own financial interests?
Now I am not a betting man, but this might be one instance where I would be willing to place a bet. If the public were privy to the evidence that has been presented in this case, I think you would see an even stronger reaction by the public, as the financial services industry’s policy of non-disclosure has kept most of this information from the public’s eye.
So now the opportunity for meaningful and much needed change, the opportunity to make a difference, falls upon you. You must review the evidence and answer the very same question that I just proposed that Congress ask the public.
You have an opportunity to send a message to both the financial services industry and Congress that enough is enough, that while financial advisers have a right to make a living, they do not have a right to do so at the expense of the public by engaging in abusive practices that violate the law and deceive and otherwise harm the public.
General Norman Schwarzkopf once said that “the truth of the matter is that you always know the right thing to do. The hard part is doing it.” That is now your charge, your opportunity.
As I was preparing this closing argument, I could not help but think of a dear old friend, “Judge” Martha Morgan. She was not really a judge and, as far as I know, she had no formal legal training. She was, however, a true and wonderful friend and a trusted confidant. She had the patience of Job and the wisdom and insight of Solomon.
We would often talk about the law and she would often pause and simply say, “the world sure would be a lot nicer and simpler if everybody just lived their life according to the golden rule.” If you strip away all the legalease and all the legal trappings of the court from this case, I think Mrs. Morgan just summarized this case perfectly.
The financial services industry and Congress do not get it and it appears they will do anything not to get it. The regulators say they get it, but so far they have done nothing to prove it. But Martha Morgan, God bless her, she got it. Hopefully, so do you.
1. “Correct: S&P 500 losses nearly $1 trillion more than 2000-02.” Available online at http://www.marketwatch.com/story/correct-sp-losses-nearly-1-trillion-more-than-2000-02.
2. Available online at http://www.fbi.gov/stats-services/publications/ fcs_report-2006.
3. Richard Michaud, Efficient Asset Management: A Practical Guide to Stock Portfolio Optimization and Asset Allocation (Boston, MA: Harvard Business School Press, 1998), 36.
4. John Rekenthaler, “Strategic Asset Allocation: Make Love, Not War,” Journal of Financial Planning, Vol. 12, No. 8 (September 1999), 32-34.
5. William F. Sharpe, Investors and Markets: Portfolio Choices, Asset Prices and Investment Advice (Princeton, NJ: Princeton University Press, 2006), 207-208.
6. William F. Sharpe, “Financial Planning in Fantasyland, “available online at http://www.stanford.edu/~wfsharpe/art/fantasy/fantasy.htm.
7. Charles D. Ellis, Winning the Loser’s Game: Timeless Strategies for Successful Investing, 5th ed. (New York, NY:McGraw/Hill, 2010), 45, 139.
8. “Private Pensions: Changes Needed to Provide 401(k) Plan Participants and the Department of Labor Better Information on Fees.” Available online at http://www.gao.gov/new.item/d0721.pdf, 7.
9. Ross Miller, “Measuring the True Cost of Active Management by Mutual Funds,” available online at papers.ssrn.com/papers.cfm?abstract_id=7469264.
10. Moshe Milevsky and Steven Posner, “The Titanic Option: Valuation of the Guaranteed Death Benefit in Variable Annuities and Mutual Funds,” Journal of Risk and Insurance, Vol. 68, No. 1, (2001), 91-126.
11. Brooke Southall, “Wirehouse accounts don’t match client goals,” InvestmentNews, March 12, 2007, 12.
12. Available online at www. stockbroker-fraud.com/lawyer-attorney-1133756.html.
13. Available online at www. sec.gov/news/press/2008/2008-1_randiabdreport.pdf.
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