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The Active Versus Passive Flip-Flop

Posted by Brent Everett on Friday, August 26, 2011 in Unconventional Wisdom

I stumbled across the website of one of our local competitors yesterday and was shocked to see that this one-time purveyor of active management seemed to have done his absolute best to change into something quite different - in fact, to look as much as possible like us! Over the past few years, we've had two advisors that have posed as clients in order to get the portfolio models that we use - and now they are both using them in their practices. We've had entire portions of our website copied - word for word. While imitation may, indeed, be the most sincere form of flattery, it's also important to be honest.

Politicians are often accused of "flip-flopping" when they change their opinions to maximize their popularity. And, that just might be what's happening with our new convert to passive management. There are only two possibilities: 1. He finally decided to pay attention to the overwhelming amount of evidence that actively managed funds are a terrible bet; or 2. He thinks that he will win more business with a passive strategy. If it's the former, you have to wonder about his ability to practice critical thinking. If it's the latter, you have to wonder about his sincerity. Neither one is good.

Maybe it's time to add another question to the list of questions to use in selecting an advisor: How consistent has your investment philosophy been over time?

Tags: active management, investment philosophy, mutual funds, passive management

Brent Everett

Brent Everett founded Profisys, LLC, a fee-only Registered Investment Advisor, in 1998. While acting as Managing Director of that firm, he developed the investment philosophy and the portfolio models currently used by Talis Advisors. He earned a B.S. in Computing and Information Sciences from Oklahoma State University. Mr. Everett’s background includes experience in strategic marketing, executive management and investor relations at Texas Instruments, Samsung Semiconductor, EDI, CSCI, and his own consulting practice. Brent served on the Board of Directors for CSCI, where he helped structure and negotiate management's successful purchase of the company.

Mr. Everett has been a member of the Financial Planning Association, where he was elected to the Board of Directors of the local chapter, the International Association of Financial Engineers, the Econometrics Society, the Association of Pension Professionals and Actuaries Benefits Council, the Estate Planning Council of North Texas and Mensa. He has discussed small cap stock investing on CNNfn and his views regarding investment advisor disclosure have been quoted by several major publications. Along with Scott Maxwell, Brent has been the cohost of The Peaceful Wealth Radio Hour on CNN. He was named as one of Texas Monthly magazine's "5 Star" wealth managers in 2010 and 2011 and one of D Magazine's top wealth managers in 2010.

Mr. Everett lives in Plano with his wife and their Labrador Retreiver. He has served as a member of the Business and Professional Leadership Committee of the Plano Symphony Orchestra, and enjoys reading, fly fishing, college sports, and Formula One racing.