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A recent Twitter dispute between Larry Swedroe and Rick Ferri reignited the debate about financial advisor fees.
A recent dustup on Twitter between Rick Ferri and Larry Swedroe both well-known and opinionated financial advisors once again brought around the topics of financial advisor fees, how those fees are structured, what advisors actually do and whether they are paid too much to do it, or too little.
Both got their licks in, and clearly there is no love lost. Ferri, a well-known disciple of Jack Bogle and author of numerous books and articles on the superiority of index investing, claims that if financial advisors are to be true fiduciaries to their clients, they need to decouple advice from portfolio management and stop charging clients a percentage of assets managed because portfolio management is not where an advisor’s value lies.
Opinion
Why small cap investing has underperformed over the past decade - and what Canadian investors can do about it Published December 16, 2020 Bookmark
In theory, an investment strategy with a focus on small cap and value stocks should result in returns superior to the major market indexes. After all, smaller companies have greater flexibility to respond to opportunity or adversity and their growth runway is much longer once they have a winning product or service. Plus, a screen for value should reduce the negative impact of torpedo stocks that can unexpectedly blow a hole in the portfolio return.
So much for the theory. The reality for the past decade is that both of these factors have been a drag on portfolio returns. In Canada, for the 10 years ended Dec. 1, the big cap dominated S&P/TSX Composite Index has delivered an annual total return of 5.9 per cent, while the S&P/TSX SmallCap Index total return has been 1.3 per cent over the same period. There are multiple def