In his Wealth Report, Robert Frank comments on estimates that $1 trillion in investment wealth moved out of banks (broadly speaking) that disappointed their clients or simply died.In whose hands will much of this investable wealth end up, assuming it doesn't stay in home safes?
[T]he real question isn’t so much who gets the money but who gets the business model. The wealth-management industry is in turmoil as it tries to figure out how to win back client trust and guide them through a drastically different investment landscape–one in which municipal bonds are the new hedge funds.***That "most important" requirement is interesting. It can be met in two ways.
The winners will be the firms that are committed to independent advice, deliver on the services they promise and (this is the most important) actually understand the products they are selling to their clients.
1. The David Swensen way: Yale's endowment seems to have flourished (until the current fiscal year) thanks to rigorous, sophisticated analysis of varied and complex asset classes and those who manage such assets. If you have the brains, the team and the resources needed to understand almost any investment, you can invest in almost anything.
2. The Warren Buffett way: He missed the tech boom of the 1990s because he didn't understand tech and didn't want to try. He also missed the dot.com bust. If you limit your choices to investments you can understand, you're not blindsided by investments you didn't understand.
Will both models coexist? Which will prove sexier to market?
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Also the John Bogle way: just stick with index funds or target retirement fund to keep costs down.
An ordinary investor can learn from all three. In fact, I advice my clients to do just that.
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