Why Can’t I Speak Directly to my Advisor about Investment Performance? (Part 1)

I want to be able to communicate with the entity responsible for investing my money. Like First Ascent, though, the Envestnet website says “for investment professionals only.” It is not intended for private investors. Private investors interested in their investment services are told to contact a financial professional.

I asked First Ascent about this and got the following response:

     > We aren’t able to provide performance directly to clients
     > without an advisor. Because we do not work directly with
     > retail clients, and offer our strategies only through FAs, an
     > advisor is required to… present gross-of-fee disclosures
     > regarding advisory fees along with performance.
     >
     > If you are interested I’d be happy to have a call and answer
     > any other questions that you have.

I prodded further and asked why they would not discuss performance with me directly.

     > I apologize that we can’t provide performance directly. The
     > reason is that the SEC requires performance be presented in
     > a one-one-one conversation by an IA who can provide
     > prospectuses of funds used and information regarding the
     > structure and fees of the underlying ETFs and mutual funds.
     >
     > Our strategies may also vary in their underlying holdings
     > based on the requirements or preferences of the advisors we
     > work with, and some strategies are restricted to advisors from
     > specific organizations, so performance may vary.

See my comments on separately managed accounts.

     > Because of this we prefer to distribute performance directly
     > through the advisors we work with who can provide these
     > disclosures and make sure they are providing performance
     > for the appropriate strategies that they use.

This actually seems like a decent argument to me.

     > If you are interested in working with a financial advisor I
     > am happy to provide the names of some firms that utilize
     > our strategies in your area.

I give them kudos for being courteous.

All of this reminds me of behind-the-counter (BTC) products at the pharmacy. BTC has been controversial since 1984 when a proposal was filed to change ibuprofen from prescription to over-the-counter (OTC) status. Opponents argued the switch could cause patient harm. Instead of being granted OTC status, many suggested the drug be placed in a new class of medications to be sold only in pharmacies despite not requiring a prescription for purchase.

Proponents of BTC argued that pharmacist counseling would add a layer of safety.

BTC opponents included the pharmaceutical industry and clinical physicians. The former claimed pharmacist counseling would not benefit the consumer. The latter argued counseling and gatekeeping BTC drugs were tantamount to practicing clinical medicine, which pharmacists are not properly trained to do.

In the same way that I believe pharmacists can provide necessary education and enhance public safety by dispensing BTC products (e.g. insulin, Sudafed), I also believe it makes sense to have a financial [literate] professional [without underlying motives] present performance information to put it in the proper perspective.

I will continue next time.