Passive, In Reality Is Active, Sometimes RADIOactive.

The ‘passive’ revolution we’re witnessing is to provide a portfolio solution which is based on the demand for the products, regardless of how expensive the products may be.

To be clear, I’m an advocate for index investments and lower internal portfolio costs. I was one of the first financial professionals at my former employer to use market cap weighted exchange-traded funds in client portfolios to replace mutual funds.

My beef is how indexing is perceived by unsuspecting investors as safe and insidiously branded or allowed to be positioned by the buy-and-hold faction, as the ultimate never-sell strategy.

Not because it’s best for the investor; well, that’s a convenient half-truth. Mostly, it’s optimum for the adviser under pressure who can offer a pretty asset allocation solution in a package and move on to the next notch on the sales belt.

The front-line consultant of a publicly-traded big box financial retailer is under never-ending intense pressure to increase margins for shareholders. The performance of the stock price is the priority. I was provided this wisdom, which I have never forgotten, from a former regional manager at Charles Schwab – “It’s shareholders first; then follows the rest of us, including clients.”

If passive is what clients want, passive is what they shall receive, but in a manner that can be delivered and scalable by a financial retailer in a CYA/fiduciary manner. It’s time efficient to get cash fully invested in an asset allocation at once; buy full in to the story that it’s time in the market not timing the market, regardless of current valuations or expected returns, especially as corrections appear more as distant memory than reality.

The asset allocator factory box designers are diligent at work, creating neat, easy-breezy investment packages positioned as products or “solutions,” thus forging a path perhaps we haven’t walked so passionately before.