The timing of the BHB "newsflash" coincided with the growing ability of individual investors to by stocks on line at heavily discounted pricing models. The direct result found the nations retail stock brokerage firms suffering from dramatic reductions in trading revenues.

Being "in the business" at the time, I witnessed the enthusiastic reception of the flawed BHB study touted as the basis for the sale of WRAP accounts wherein investors paid an annual fee for asset allocation based money management services. The result was an avalanche of revenue into the coffers of large brokerage firms like Merrill Lynch and Pru Bache. These asset allocation fees offset the loss of income from stock trading. And, the BHB authors, in particular Mr. Singer (if memory serves), built a large money management firm capitalizing on the findings of their flawed study which more gifted mathematicians stated served only to measure the mathematical "noise" represented by minor variations in the quarterly returns of a handful of very large pension funds.

The debate seemingly was put to bed by the Morningstar study of its universe of stock based funds managed by a wide range of professionals which backed the findings of the BHB challengers. I recall a Pru broker friend sending me a copy of an internal memo cautioning its brokers against using the 90% statement with clients, referencing the Morningstar study as debunking the conclusions of the BHB study.

Even the least informed among financial services professionals recognizes that any allocation heavy in equities will over longer terms outperform any fund heavily invested in fixed income instruments. The greater the allocation of equities versus fixed income instruments the truer this is. To that extent, and absent the need for complicated mathematical formulas, asset allocation does account for the level of returns earned. However, that is not worth charging clients a fee based on a percentage of assets under management the true goal of which is to provide the provider of the service with an assured and ongoing income. Truth be known.