Could “Reverse Churning” be Worth a Fee?

When working on commission, brokers have an incentive to make frequent trades in their customers' accounts. Done to excess, such trading becomes improper "churning." Happily, the trend to fee-based accounts removes this incentive.

But . . .ironically, brokers now may face charges of "reverse churning" – that is, loafing. If they make no trades in their customers' accounts, the SEC and FINRA wonder, why should they earn a fee?  Shouldn't they at least be pushing customers into, say,  inverse ETFs?

Maybe not. History suggests that efforts to time the market cost investors dearly. One study found that over 20 years when the S&P 500 produced an annualized return of 9 percent, the average stock fund investor earned 5 percent.

Might reverse churning actually help investors by producing higher returns?