#SFTW: The new man in the hot seat at Morningstar
Posted by Robin Powell on February 24, 2017
SOMETHING FOR THE WEEKEND
Last week I had the pleasure of interviewing Kunal Kapoor for the TEBI Podcast, and introducing him on stage at Morningstar’s Game Changer Investment Summit in Brussels.
Kunal Kapoor has just taken over as CEO of Morningstar from the company’s billionaire founder Joe Mansueto. It’s one of the biggest jobs in global investing; Morningstar enjoys huge influence among investment professionals, advisers, journalists and end investors, employing more than 4,200 people around the world. Whatever happens in the investing industry over the next 20 years, Kunal Kapoor is likely to be one of the movers and shakers.
Kapoor’s background is in analysing and rating actively managed funds and, as you would expect, his views on the value of active management differ from my own. I was, however, encouraged to hear that he does share a very similar perspective to TEBI’s on such critical issues as fees and charges, the rôle of financial advice and the importance of putting the interests of consumers first.
What the FCA & SEC can learn from energy regulators
I can’t speak for other countries, but my experience as a UK consumer of water, gas and electricity is that regulation has been a good thing. Suppliers are required to be much more transparent than they were about how much much they’re charging (and exactly what they’re offering in return), so that customers can easily compare different services and switch providers if they want to. Nowadays, if you’re paying more than you need to for your basic utilities, you only have yourself to blame.
If only financial consumers were afforded a similar level of protection.
A recent study that caught my eye was one entitled Does Feedback on Personal Investment Success Help?, produced by academics from Goethe University and Leibniz University in Germany. It’s well known that retail investors who buy and sell individual stocks generally perform very poorly, that they overestimate their returns, and that those who trade most frequently do the worst. What the researchers wanted to find out was whether confronting clients of stockbroking firms with the actual results they are achieving can improve their behaviour and, consequently, their net returns.
TEBI’s response to the FCA report
Last Monday was the deadline for commenting on the interim report by the Financial Conduct Authority on competition on UK asset management. Here is TEBI’s response.
The investing equivalent of junk food
Of all the silly things said in defence of active fund management and conflicted financial advice, I wonder whether the silliest words of all emanated from the mouth of Gary Cohn, the new director of the White House National Economic Council, the other day?
In an interview with the Wall Street Journal about the fiduciary rule, Cohn is quoted as saying that the rule was “like putting only healthy food on the menu, because unhealthy food tastes good but you still shouldn’t eat it because you might die younger.”
I say silly, but only in the sense that Mr Cohn was shooting himself in the foot. The analogy is, in fact, very appropriate.
Also worth reading
21 questions to ask about investment fees (Ron Lieber)
The fiduciary rule genie is already out of the bottle (Barry Ritholtz)
Warren Buffett is going to win his 10-year bet against hedge funds (Nicole Friedman)