The Road Not Taken

michael edessesI shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged within a wood, and I—
I took the one less traveled by,
And that has made all the difference.
Robert Frost

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The investment management industry and advice profession have chosen the wrong model as the centerpiece of their theory and practice.

In a previous article, I indicted the securities industry – that large part of the financial industry that includes investment management and advisory services – for spreading “a web of deceptions that have become conventional wisdom.” But I said that a small part of the industry does provide products and services that are beneficial and necessary.

After the article was published, Bob Huebscher, Advisor Perspectives’ founder and publisher, suggested that I write about those things that do benefit consumers. He suggested index funds, options, annuities, and Treasury Inflation Protected Securities (TIPS) ladders.

More on those suggestions later. But in thinking about this, I realized that the industry could have gone in a much better direction, a direction that would have made it not the spreader of a web of deceptions, but the locus of a rich and sound body of theory and practice. In fact, I advocated this direction from the first time I entered the industry – in part because of my mathematical background – but to no avail. The wrong road had already taken a firm hold. The better road could, however, still be embraced. But it would require jettisoning all the baggage with which the wrong road has burdened us.