No-Loads Now Control 61% of all Mutual Fund Dollars

At year-end 2007, 61% of all mutual fund dollars were of the no-load variety. That is up from 49% just two short years ago This staggering number should get the attention of every financial consultant and the firms they represent.

Why would so many investors, understanding the critical role a quality investment portfolio plays in their financial future, feel capable of doing their own investing?

Why the Disrespect?
When I speak around the country, I begin the lecture by asking the investment professionals in attendance “Of the financial consultants you know, how many would you let manage your own money?”

Over the years, the answer has been the same everywhere I go — uproarious laughter! Sadly, why would so many in our own business think that licensed financial advisors, except for themselves, bring so little to the table? Why the disrespect?

A Failing Strategy
When it comes to mutual funds, I believe that far too many investment professionals use a failing strategy of touting past performance as the main ingredient in fund selection and subscribing to the industry’s self-serving buy-and-forget investment philosophy.

• The growing legion of do-it-yourself investors believe they have the ability to pick funds based on past performance, and there is no shortage of media help with the process. 
• Belief in a buy & hold philosophy can lead do-it-yourselfers to quickly conclude that they have the necessary time to devote to managing their investment portfolio. After all, how long does it take to buy them and put them away for safe keeping? 
• Many clients lost significant amounts of buy-&-hold money during those many gut-wrenching, second-guessing months of the recent market crash. Certainly, many of them felt they could lose that much money all by themselves, and save the professional expense.

A Better Way
Until financial consultants and their firms convince clients and prospects of the following points, the growth of no-load do-it-yourself investing will continue:

• Past performance has little, if anything, to do with the fund selection process.
• Successful fund selection consists of a sophisticated set of professionally selected criteria and benchmarks, the least of which is past performance.
• Successful investing does not involve a buy-and-hold strategy, but rather time consuming, ongoing and active management, which includes a constant exam of buying and selling responsibilities.

Only if this metamorphosis takes place will the trend toward no-load investing reverse itself.