Throughout the years we’ve come to appreciate the different perspectives held by firms and service providers within the financial services industry that vary from ours at CCM. We believe that varying viewpoints lead to meaningful conversations that ultimately produce better advice, products and service for our clients. This point is timely this week, as The Wall Street Journal story, “DFA Funds Are Booming, but That Adviser Fee Matters,” rightly highlighted the benchmark beating performance of three of Dimensional’s equity funds, but missed the mark on the conclusions that were drawn from other data points, and in our view, also missed the mark regarding the value of working with an advisor.

As you can read, the three funds that were cited in the article all provided returns to their investors over the last 15 years that surpassed their respective benchmarks. In fact, more than 85% of Dimensional equity funds with 15-year track records have met this mark. When contrasting that figure to the approximately 17% success rate of the industry as a whole,1 you can understand it is no small feat.

At CCM, we have a keen understanding of the ways in which “costs matter” and are committed to keeping our clients’ portfolio costs extremely low. One of the reasons for their strong performance, and why Dimensional funds continually appear in our portfolios and make it through our fund screening process, is that 99% of their funds currently rank in the lowest quartile for costs within their peer group.2 

One of our concerns with The Wall Street Journal article arose from some of the data that was published in the story based on Morningstar® Investor Returns™. We believe that the author misunderstands or misrepresents the meaning behind this data point. This calculation does not and is not intended to represent the actual returns of investors in the funds or the returns of the funds themselves, and we believe clients are better suited viewing annualized returns and considering their own actual investment results within their own portfolios.

In addition, the author’s calculation deducts from the investment return an advisor fee, without attributing any value to the tax savings, rebalancing, estate planning, philanthropic planning, cash flow analysis, retirement planning for which an advisory fee is assessed—in essence, any value accreted by having a trusted partner alongside a client is dismissed from consideration.

Of course, since it is the mission of our firm and our colleagues to help our clients use their wealth as a tool to accomplish what is important to them, we do believe strongly in the value that our advisors, and the whole of our team, provide for clients. Our method of delivering financial planning, proactive tax management, estate planning, risk management, and investment management as a holistic package delivers so much more value for our clients than simply a portfolio solution.

  1. “The Mutual Fund Landscape,” Dimensional Fund Advisors, 2016. U.S.-domiciled mutual fund data is from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago. The information is derived from such database.
  2. “Morningstar Fee Level % Rank – Distribution,” Morningstar Direct as of March 6, 2017.

NOTE: The information provided in this article is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional adviser familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.