NEW YORK, Sept. 15, 2016 /PRNewswire/ -- For loyal clients of Ritholtz Wealth Management ("RWM"), the third year is a charm. In celebration of its anniversary, the firm is set to reduce management fees for clients as they complete 36 months with the firm. Announced last year, the firm estimates its groundbreaking Milestone Rewards program to save clients, on average, 16% per year. The firm believes this may be the only program of its kind in the Registered Investment Advisory space.
Inspired by its own commitment to planning and investing for the long-term, the firm wanted to send a powerful message of encouragement to clients: It's not easy to avoid being emotional and irrational in investing, but there are rewards for those who stick with their plan. Even if investors need to wait for the markets to cooperate, the firm is giving its own incentive to clients to help them stay focused.
The benefits of such a program go far deeper than the actual dollar amount saved, according to Joshua M. Brown, CEO and co-founder of RWM:
"Yes, the program gives clients a quantifiable reward; but, the conversion from reacting to short-term market events to adopting a long-term mindset has profound implications for their future financial well-being. Helping clients control their behavior and rein in their emotions requires understanding them. Building this trust takes time. When clients fully commit to the planning process, it enables us to serve their needs better, manage their anxieties and help them pursue their true life goals."
The seed for this program was planted by long-time Wall Street Journal columnist, Jason Zweig, who wrote "Why Mutual Funds Should Pay Investors for Loyalty" (June 5, 2015). Citing the absence of customer loyalty programs for investors that consumers enjoy at supermarkets, airlines, and hotels, he challenged the financial services industry to show their clients similar appreciation. He asserts that perhaps the key to getting investors to stop chasing performance in good times, and fleeing the markets in bad times, is to encourage patience.
According to Dalbar's 22nd Annual Quantitative Analysis of Investor Behavior, over the last 20 years, equity mutual fund investors have rarely stayed invested in their funds for more than four years. The study identifies nine harmful behaviors investors engage in, such as reacting to media reports and following the herd. Dalbar estimates that this behavior gap reduces the average investor's total return by as much as much as 4%, annually.
Michael Batnick, CFA® and Director of Research at Ritholtz Wealth Management, recently wrote about the damaging effects of short-sightedness on his blog, The Irrelevant Investor ("Distractions Cost Investors 115%" August 10, 2016):
"The S&P 500 is now up 270% from the lows made in March 2009, but how many people were actually able to harvest those gains?" he asks. As for the cost of impulsivity, he is armed with these alarming statistics: "Since March 2009, the largest S&P 500 ETF, SPY, grew at an annualized 18.08%. But over that time, investors in SPY earned just an annualized 11.82%. The difference between 18.08% and 11.82% over 7.5 years is a whopping 115%!"
Barry Ritholtz, Chairman and Chief Investment Officer of RWM, believes that it may take some coaxing to get investors to stay the course, but that's understandable. "We are asking clients to ignore the primal instincts that allowed the species survive from prehistoric times. It is a tremendous leap of faith but, because we act as a fee-only fiduciary, it is our obligation to not only do what is in the best interests of our clients, but to educate them. If this incentive encourages clients to stay the course when they need to the most, we have done well by them."
As the firm celebrates many more anniversaries in the years to come, RWM expects the number of participating households to increase significantly. It is this type of business expense the firm will gladly bear; and, it looks forward to seeing grow.
About Ritholtz Wealth Management
Ritholtz Wealth Management is a national Registered Investment Advisory firm with over $400 million in assets under management. Based in New York City, the firm offers a full suite of financial planning and asset management services to high net worth households, corporate retirement plans, endowments and charitable foundations. The firm's core principle is bringing value-added investment and financial planning help to its clients as a fee-only fiduciary advisor. For more information, please visit www.ritholtzwealth.com and follow us on Twitter @ritholtzwealth
SOURCE Ritholtz Wealth Management