Three Uncelebrated Edges

There are many edges for the modern money manager or financial advisor who is willing to unlearn the way things had been done in the olden days, the time before information was ubiquitous and investors had grown terminally skeptical of the industry.

The three uncelebrated edges I’m going to mention below are all immediately adoptable and ready to put into practice right away. They are not edges you’ll hear celebrated in the media because their benefits take a long time to accrue to the practitioner and their employ does not involve the kind of acrobatic feats of alpha generation that captivates a large crowd of clickers and viewers.

But, I have found, incorporating them into one’s practice and philosophy can lead to a great deal of job satisfaction and lifestyle improvement. This is because a) they are truly helpful to the recipients of your advice and b) they are promises that can actually be delivered upon, in a business where the term “guarantee” is practically a four-letter word.

1. Be boring

I did a post about how a major bank was going to open up hedge funds, private equity and venture capital to the masses with a new minimum buy-in of $100,000 for these strategies – down from the original $10 million. One of the stated purposes of this was to “increase engagement” between the wealth manager and the clients. Which is roughly translated to “keep things interesting and give people stuff to talk about.” Another way of putting it: Asset management as a form of recreation.

This will work for a little while, until the annual results of this sort of entertainment start to pile up. We call these accounts cocktail chatter portfolios and they always look worse the morning after.

An advisor or money manager in search of an edge can simply avoid building up an expectation within his or her clients’ hearts that the work they’re doing for them will be exciting, stimulating or worthy of daily discussion. I don’t have a specific academic study to site here so you’ll have to take my word for this – it strikes me as impossible that a repeated program of making cool, new allocation choices to amuse and titillate the clientele (or the salesforce) is going to be additive to returns over time.

2. Tell the truth

The holy grail that all investors start off in search of is multi-faceted. For some, it’s the pursuit of returns that are greater than those being earned by a friend, a neighbor or a co-worker. “I’m better than him, and my investment results prove it.” For others, it’s the possibility of risk-free returns – all the upside, none of the downside. Or most of the upside and very little of the downside.

You can make yourself rich offering such a thing to an audience, except you’d better raise a lot of money fast, because you can’t obviously deliver such a thing reliably and over long stretches of time. You can disguise the risks necessary to achieve all of the upside and you can even transform them into different sorts of risks, but you cannot eliminate the risks entirely. The people who are counting on you to do this will soon be handed a first-class education in one of the most basic lessons in life: Risk and reward are related. They are interlinked, and the link cannot be permanently severed.

One uncelebrated edge you can attain as a manager of other peoples money is to start off relationships by explaining this incontrovertible fact and then tailor the investment recommendations in complete accord with it. Rather than bullshit people about the risk that they must take in order to earn returns, you can relentlessly educate them about it. You can tell them the truth and then count on the message sinking in.

The thing is, you’ll have to do this more than once and in all types of environments. In great markets, you’ll have to explain why their balanced portfolio hasn’t gained more. In terrible markets, you’ll have the opposite conversation – here’s why you’ve borne some of the brunt of this decline. We like to say that diversification means always and never having to say you’re sorry. Not every update will be the Best! Talk! Ever!

But you’re going to be telling the truth, and the truth is that making money in three out of every four years ain’t so bad.

3. Add by subtracting

The natural inclination of a wealthy investor is to believe that more is more and that their status confers upon them some extra bells and whistles that they had not been worthy of in the past. “I have arrived.” 

The large wealth management departments within the trust companies and Wall Street banks specialize in catering to this wholly understandable mindset. “You sir, are in the club now. Help yourself to a Fiji water while I assemble the team of experts that have flown in from all over the country to meet with you today.” 

Showing people that all the extras are not always additive is a completely viable edge for the modern advisor who is adept at collecting data and arranging a persuasive presentation. Countering the luxury sales pitches with facts about the deleterious effects of turnover, taxes, performance fees, mean reversion, forecasts, persistence of performance, style drift, etc is only sustainable if it becomes a regular feature of the relationship. These facts, which can be found fresh-squeezed and in abundance on fine investment blogs around the country every morning, will not get through to everyone. But they will get through to most reasonable people if presented in the correct way.


None of the three edges I’ve listed above are going to lead to instant wealth and success for any of your clients. In fact, quite the opposite – in the short-term they may actually force the adherent to miss out on some opportunities that end up working out. But the advisor’s job is not to enter the clients’ accounts into a performance derby and race against all other possible allocations to finish first. It is to keep wealthy people wealthy, and to arrange their assets in such a manner that they have the highest probability of staying that way, no matter what happens in the future.

Jeff Bezos and Warren Buffett had been friends for awhile and, according to Bezos, one day they got to talking about Buffett’s strategy. “You are the second richest man in the world and yet you have the simplest investment thesis. How come others didn’t follow this?” the Amazon founder asked.

Buffett replies “because no one wants to get rich slowly.”


This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Three Uncelebrated Edges – Financial Solutions commented on May 18

    […] There are many edges for the modern money manager or financial advisor who is willing to unlearn the way things had been done in the olden days, the time before information was ubiquitous and investors had grown terminally skeptical of the industry. The three uncelebrated edges I’m going to mention below are all immediately adoptable and ready to put into practice right away. They are not edges you’ll hear cel… Source: […]

  2. Personal finance links: personal finance superpowers | commented on May 24

    […] AdvisorsThree edges that most advisor ignore because they are too simple. ( value of a (good) financial advisor is often only known in hindsight. ( because you hired a robo-advisor doesn’t mean you can stop paying attention. ( retirement pyramid including stuff you should avoid at all costs. ( much would you have earn on your investments to make taking Social Security early? ( are leaving Florida for Appalachia. ( accountsThe ranks of ‘401(k) millionaires’ is growing. (’t forget about your old retirement accounts. ( Clements, “Folks like the idea of owning a grand home and driving a new car every three years. But that doesn’t make it financially smart.” ( savings rate is far more controllable than the return on your savings. ( behavioral hacks to fight lifestyle creep. ( of the modern American home is unused/wasted space. ( financeIs your portfolio too extreme: questions to ask. ( it’s time to revisit your inflation expectations. ( questions women are often afraid to ask about money. ( a scholarship affects your plan for your 529 plan. ( proposal for ‘pension bonds’ shows how they could provide income in retirement. ( spending credit card points feels different. ( […]

  3. download on laptop commented on Sep 20

    … [Trackback]

    […] Here you can find 35793 additional Information to that Topic: […]

  4. british dragon dbol reviews commented on Oct 08

    … [Trackback]

    […] Find More Information here to that Topic: […]

  5. Electricity Plans commented on Nov 15

    … [Trackback]

    […] Here you will find 43670 more Information on that Topic: […]

  6. Matthew Erausquin CLA Legal commented on Nov 26

    … [Trackback]

    […] Find More Information here on that Topic: […]

  7. DevOps commented on Dec 09

    … [Trackback]

    […] Info to that Topic: […]

  8. influencer marketing companies commented on Dec 12

    … [Trackback]

    […] Read More Info here on that Topic: […]

  9. replica watches commented on Dec 15

    … [Trackback]

    […] Find More on that Topic: […]

  10. 토토사이트 commented on Dec 25

    … [Trackback]

    […] Find More on that Topic: […]

  11. rbc online banking login commented on Jan 03

    … [Trackback]

    […] Here you can find 75501 additional Info on that Topic: […]