I am a CFA level III candidate and a CFP working in personal wealth management for 8 years with high net worth families. I actually work for an institution which is reputably known for low fees and offers both self directed and full service options to customers.

This experience has given me an interesting view on fees, performance, and value that many in the industry do not experience. Most investment professionals working in asset management have no experience with investor behavior, only security behavior and benchmarks. Most full service advisors have little experience in the personal performance of low cost , self directed investors particularly because they don't cater to those clients.

I get to see both on a daily basis and have reviewed planning with 100s of both self directed ( low cost) investors and clients that pay management fees for continued advice and planning.

My findings are that, on average, the typical investor will under perform their appropriate benchmark given time horizon, risk tolerances, and income needs in comparison to clients that are willing to pay for continued guidance. Why?

If we know. 95% of the variance of a portfolio comes from the allocation and we can keep more of our return with lower fees, then why is this the case? Simply stated, investment behavior and lack of education on proper understanding of asset allocation, contribution rates, rebalancing, sub asset class weighting, and tax sensitivity. The individual will often not understand how to properly manage a portfolio of, index securities or active,and is often set off course on greed and fear. Return chasing, fad investing, and flights to cash when news breaks or volatility picks up are common.

Even those who are in our business are guilty of this! I work with clients with IB backgrounds and investment management experience and have seen similar behaviors and resulting poor performance.

I enjoy often times listening to these individuals regurgitate the low fee, don't pay anyone anything, do it all yourself philosophies that they read in money magazine or heard their neighbor tell them. I then simply pull their personal performance and show them their opportunity cost in comparison to what would be an appropriate investment allocation. Net of fees, the managed assets are more times than not better performing over, not a year, but usually 3,5,10 and since inception.

I don't have an issue with index funds, etfs , low commissions as it is a very important consideration in making investment decisions. In fact, these products represent a large percentage of the volume and revenue our firm produces. However, I am tired of the "low fee fad" that is largely responsible by the media and articles like this one . It is easy to look at benchmarks and say that, as assets continue to correlate, over the long term, indexes often times outperform active managers. It's harder to think about all the people who are very novice in their investment understanding, have considerable wealth planning goals and needs who would greatly benefit from a fiduciary relationship with an investment firm, instead making avoidable, poor investment decisions based on the great "advice" like that presented in the contents of this article. Lastly, my money, is professionally managed as well!