July 26, 2018
OVERALL INVESTOR EXPERIENCE
1. How do you pick funds? What information do you want to know when you make an investment in a fund? What publications or websites do you review? What tools, online or otherwise, do you use? Do you look at the SECs website?
How do you pick funds?
Makeup/holdings of the fund and costs (fees) associated with the fund(s).
What information do you want to know when you make an investment in a fund?
Makeup/holdings and costs (fees).
More importantly, the makeup/holdings and costs (fees) need to be clearly and easily explained. This information cannot be buried in a wordy prospectus that often gets overlooked (or disregarded altogether). All costs (fees) should be disclosed (expense ratios, ME charges, etc.) upfront so that the investor knows EXACTLY what annual headwinds will be hindering the performance of their investment(s) and this information CANNOT be overshadowed by graphs, charts, etc. promoting past performance, hypothetical future performance (ex. Monte Carlo), and the like. These things paint an unrealistic picture in the investor's mind, creating a false certainty of the future and are often dotted with asterisks throughout that are wordily explained (and in many cases further confused) in the prospectus. "Performance comes, performance goes. Fees never falter."
What publications or websites do you review?
Wall Street Journal, Morningstar, Yahoo Finance, JasonZweig.com, Money Magazine, New York Times, Vanguard.com, Mad Money (Podcast), Investing Insights from Morningstar.com (Podcast), We Study Billionaires - The Investors Podcast (Podcast), The Planner and the Geek (Podcast)
Do you look at the SECs website?
Yes, mainly to review Investment Adviser Representative Summaries.
2. Do you read current fund disclosure documents? Do you understand them? Is there information you do not receive from the fund that you would like to get?
Do you read current fund disclosure documents?
Yes (the devil is in the details).
Do you understand them?
At times. Other times (and I feel this is done so purposefully), they are incredibly wordy and feel as though they are talking in circles.
Is there information you do not receive from the fund that you would like to get?
I'm sure it's all in the disclosure documents, somewhere. In my opinion though, it would be more clear and succinct for the investor. Don't make the investor sift through countless amounts of paperwork to find answers that could easily be compiled and available in a one page document. Makeup/holdings of the fund(s), costs (fees) associated with the fund(s), and a description of the fund(s).
3. How well do current fund disclosures (such as a summary prospectus, prospectus, or shareholder report) help you pick an investment? Is it easy to compare different funds? Are there technology-based tools that could make fund comparisons easier? What helpful features do those tools have?
How well do current fund disclosures (such as a summary prospectus, prospectus, or shareholder report) help you pick an investment?
If you take the time to read them thoroughly (the devil is in the details) they are very helpful and informative. Unfortunately, they are INCREDIBLY wordy and often times can create confusion.
Is it easy to compare different funds?
Depends on the firm who is providing the information and how transparent they want to be.
Are there technology-based tools that could make fund comparisons easier?
I'm sure there are. However, firms are going to skew these comparisons to make their products outshine whomever they're comparing themselves against.
What helpful features do those tools have?
I focus on costs (fees), and thus do not utilize the "features" offered by these "tools".
4. Do you use the advice of a financial professional? Does a financial professional's help affect whether and how you use fund disclosures?
Do you use the advice of a financial professional?
Yes, solely that of a Registered Investment Adviser who works for the firm where I have my investments.
Does a financial professional's help affect whether and how you use fund disclosures?
Not really. Knowing the importance of the information contained within fund disclosures, the financial professional's "help" will only (and should only) provide support for the information contained within the fund disclosure.
DELIVERY
5. How do you prefer to receive communications about fund investments? For example, do you prefer mail delivery, email, website availability, mobile applications, or a combination?
How do you prefer to receive communications about fund investments? For example, do you prefer mail delivery, email, website availability, mobile applications, or a combination?
For the sake of "being green" I prefer any electronic form. Full disclosure: I do print off some communications (or parts thereof) due to the wordiness and size of the communications/documents.
6. What types of fund information do you prefer to access electronically? What types of fund information do you prefer to receive in paper? Are there other wayssuch as by video or audio, you would like to receive fund information?
What types of fund information do you prefer to access electronically?
See above reply (#5).
What types of fund information do you prefer to receive in paper?
See above reply (#5).
Are there other ways such as by video or audio you would like to receive fund information?
Any medium that can more clearly, succinctly, and transparently get fund information to the investor would be encouraged.
7. How can the SEC better use technology and communication tools to help investors focus on important fund information?
How can the SEC better use technology and communication tools to help investors focus on important fund information?
An implementation of some form of the Fiduciary Rule I feel would greatly help investors. This may not be answering the question specifically, but putting the interest of clients' first is paramount in creating a solid (and essential) foundation of transparency that is crucial to (and for) investors.
DESIGN
8. Is there too much technical writing in fund disclosure? Would you prefer more tables, charts, and graphs? Would these graphic displayes be in addition to, or in place of, text-heavy disclosures?
Is there too much technical writing in fund disclosure?
Far too much.
Would you prefer more tables, charts, and graphs?
Yes, as long as they are clearly and succinctly explained with transparency. A table, chart, and/or graph become useless if they are dotted with asterisks that require additional explanation this is provided in a lengthy footnote, disclosure, and/or prospectus.
Would these graphic displays be in addition to, or in place of, text-heavy disclosures?
Trim the fat and replace the text-heavy disclosures with something that is clear, succinct, and transparent. A text-heavy disclosure immediately raises a red flag for me that the disclosure (and whomever is supplying it) is trying to hide something (or many things).
9. Do you prefer to receive shorter 'Summary' disclosures, with additional information available online or upon request?
Do you prefer to receive shorter "summary" disclosures, with additional information available online or upon request?
I want whatever I'm receiving to be clear, succinct, and transparent with my interests put first (not the firm (or person) that is trying to get my money). The "summary" should in essence be the entire disclosure because it IS NOT text-heavy.
10. Should fund disclosures be more personalized? For example, should disclosures show the amount of fees you paid or your actual investment returns? If so, how?
Should fund disclosures be more personalized? For example, should disclosures show the amount of fees you paid or your actual investment returns? If so, how?
ABSOLUTELY In my opinion, the more personalized the better as investors (and their situations) are all different. And, personalizing the disclosures would aid in making them more clear, succinct, and transparent.
CONTENT
11. Do fund disclosures make the fund's strategies and the level of risk clear? How can funds improve these disclosures? Would a risk rating, such as a numerical or graphical measure of risk, be helpful?
Do fund disclosures make the fund's strategies and the level of risk clear?
Yes, but I feel it could be helpful to put it in more in layman's terms.
How can funds improve these disclosures?
For sake of a better term, "dumb it down" and put it more in layman's terms.
Would a risk rating, such as a numerical or graphical measure of risk, be helpful?
Yes, it seems to be working well for Morningstar.
12. Fund fees and expenses can significantly affect a fund's investment returns over time. Do you think funds clearly disclose their fees and expenses? How could funds improve the disclosure of fees and expenses? Would a comparison of your funds fees against other funds fees help?
Do you think funds clearly disclose their fees and expenses?
ABSOLUTELY NOT Funds costs, fees, and expenses are not accurately disclosed to investors, nor are they conveyed to investors by brokers, "advisers", salesman, "helper"s, and the like. This alone I feel is a HUGE reason why investing (and those who involved with, and in it) in general have such a poor reputation.
How could funds improve the disclosure of fees and expenses?
Be clear, succinct, transparent, and honest. All this can be accomplished (or at least legally adhered to) with a Fiduciary Rule that is in place. At an extreme, it could be argued that any financial adviser should be an Registered Investment Adviser (RIA), period.
Would a comparison of your funds fees against other funds fees help?
Perhaps, but without transparency throughout (firms offering the funds, brokerages offering the funds, and advisers recommending the funds) and a Fiduciary Rule protecting the investors who are evaluating the funds being presented. Any comparisons (and subsequent fund fees) are going to be skewed if an individual (adviser, broker, salesman, helper, etc.) is getting paid more to recommend/sell one fund over another fund (ex. 12b-1 fees).
13. Do you consider the past performance of a fund when making an investment decision? How could we improve the presentation of performance information?
Do you consider the past performance of a fund when making an investment decision?
Only if I want to add insult to injury for not getting into a fund earlier. "Performance comes, performance goes. Fees never falter."
How could we improve the presentation of performance information?
Past performance creates a false sense of security and paints a fictitious picture of what the future will look like. No one has a crystal ball and predict the future. Provide more clear, succinct information about what an investor is potentially investing in, with the intention of teaching and educating.
FINAL THOUGHTS
14. Aside from this questionnaire, are there other ways the SEC can engage with investors, like you, on key topics? Is there anything else you would like to tell us?
Aside from this questionnaire, are there other ways the SEC can engage with investors, like you, on key topics?
Find a way(s) to make yourself more familiar. Let people know what you do, who you stand for, and how you can help them.
Is there anything else you would like to tell us?
I think I've exhausted my views in my prior responses, but once more can't hurt. In order to sell securities, there should be a fiduciary standard (or Fiduciary Rule if you would) in place whereby all individuals are Registered Investment Advisers (RIAs). An ill-informed insurance agent who obtains a Series 6 Series 66 should not be able to recommend/sell/peddle mutual funds, variable annuities, etc. offered by the investment division of their insurance company to prospective clients and be rewarded with a commission(s) and/or other incentives (trips, awards, etc.). By no stretch of the imagination is that putting the interests of the client first. These people are being trusted with people's life savings, their financial livelihood, and how they will live in retirement. And, these things are far too important to be clouded over by the distraction of receiving a larger commission, or getting one's passport stamped as a result of receiving an exclusive trip for reaching a sales goal where you're going to accept a plaque. Makes me think of the wonderful phrase, "Where are all your customers' yachts?"