Rewarding Well Behaved Investors

[dungoofed]

http://www.ritholtz.com/blog/2015/09/milestone-fee-reduction/

"The big breakthrough insight came from Michael and Kris – a discount as an incentive for good investor behavior. The goal is to avoid the sorts of issues which plague nearly all investors: Don’t get emotional, don’t try to market time, don’t chase the latest hotness, create a financial plan and follow through with it, stay the course despite when things get volatile like last month or today. It is really just following good, solid, basic long term investing strategies.

We looked at the costs against the long term benefits to the client — and we decided it was worth it. Compounded to the investor, savings over time can add up.  Hence, “Milestone Rewards” was born.

Clients who are with RWM for 3 years, complete and maintain financial plan, and don’t engage in the sorts of self-sabotage we see all too often will qualify."

Is this the sign of things to come? A great innovation? Or just another way of justifying fees?

For me personally, I got a cold shiver when I read the article. It's scarily similar to the investment vehicle that made me choose this username. There were all sorts of loyalty bonuses etc for staying the course, which actually work to lock you in.

[nobodyspecial]

If they have the margin to reward you in any way - they are ripping you off.

[Saving in Austin]

Their automated investment program charges 0.4% per year.

I wouldn't do it.

That being said I like the way Barry Ritholtz analyzes the markets in the Washington Post and Bloomburg.

His blog is here: http://www.ritholtz.com/blog/

[Indexer]

Long term investors are already rewarded. They get the returns.

The type of people who self sabotage don't get the long term growth. That is why it is called self sabotage! 


On this particular article I'm torn. I don't like the idea of loyalty bonuses. I also think a primary duty of a good financial planner is to educate clients and reinforce these good behaviors. Most clients shouldn't be freaking out anyway.

However I also recognize that the client who calls in constantly every time the market moves 10% is eating up time and resources that the buy and hold "I get it" investor isn't. The same can be said for selling mutual funds in a panic. That is more trades the manager has to do, and it can raise costs and hurt performance for the other investors. So if this is a way of passing on savings to the good long term investors I am 100% in agreement.

What if Vanguard created new admiral+ shares of their mutual funds with even lower expenses but you could only get them by owning the fund for 5+ consecutive years. Would that surprise anyone? Vanguard is run at cost, and clients who don't freak out and want to trade or go to cash every 6 months are a whole lot lower cost to manage. Shouldn't those clients get lower costs? Why are they subsidizing other client's bad behaviors?