Equius Principles: Maintain Focus

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For most of my life, my experiences with doctors, nurses, and medical administrators have been consistently first-rate and professional. I could always expect to enter an office that had an air of seriousness that revealed the motivations of everyone there—to provide state-of-the-art medical services with state-of-the-art tools, delivered with a caring focus on the tasks at hand.

I’m not sure that’s the case today. Physicians across the country have increasingly been driven to give up solo or small group practices and join massive corporate medical enterprises by forces they can’t control. Giant pharmaceutical companies sell directly to governments while limiting their liability and capturing vast market share. As a result, I think professionalism, personalization, and integrity have been sacrificed to some degree. Constant skepticism, the lifeblood of science, has given way to groupthink and conformity. Trust has been compromised.

Sound familiar? Although never representing a true profession, the investment industry has charted this same course. “Wall Street” (my catchall term for old-school investing schemes) has been denying the full science of financial markets and investor behavior while promoting groupthink and conformity with great success for decades.

Robinhood, ironically, is the latest creation of this tired old mindset. Firmly moored to old-school Wall Street ways, it advertises to a new generation with: “Commission-free investing, plus the tools you need to put your money in motion. Sign up and get your first stock for free” (my emphasis). Sure, a handful of meme stocks, constant trading, groupthink, speculation with your family’s savings, “putting it to the big boys.” All good, right? And it’s free!

When Equius was founded, we wanted to create the same atmosphere and to honor the same kind of professionalism I saw with medical services. We wanted the firm to be a successful business, of course, and marketing our services was essential to survival in the early years. But it was how we built the business and marketed it that was so important to our peace of mind and that of our clients. We knew it could be done, but we also knew it wouldn’t be easy.

Well-funded and established elites in finance and the media promote a self-serving narrative to cure investors’ ills. The cure (active management) would often work for a year or two, but its effectiveness faded very quickly and investors would be off searching for a new cure from those who controlled the messaging. Skeptics were often shamed and always diminished. But the skeptics won out, as Robin Wigglesworth describes so well in his new book Trillions. His book is essentially a history of Equius.

Fiduciary advisory firms like ours are increasingly run by career executives, not investment people. They are paid to be laser-focused on the firm’s bottom line, not the client’s. The best science is either ignored or manipulated to develop and promote strategies designed to make clients “stickier” rather than more financially successful. This is a slow but deliberate slide back to 1980s-style investing for investors—when looks meant more than results.

This is not our course at Equius. We’re still laser-focused on the best evidence a diverse and growing set of reputable financial scientists can provide. And as we listen to clients and their concerns, we’re still seeking the best answers. ESG (environmental, social, and governance) investing is an example. Working with Sam Adams, an Equius board member and the former head of Dimensional’s advisory efforts in Europe, and his wife, Sarah, Equius is working toward a solution for interested clients consistent with our core asset class investing principles.

We will discuss our take on ESG investing soon in an upcoming Asset Class. In the meantime, if you have an interest in the topic today and wish to discuss it further, please let us know.

As outlined in Trillions, Equius has been on the right side of financial history for three decades, inspired and mentored by the best. Rest assured that our focus is to remain there in the future.

Have a very happy and healthy Thanksgiving!

Equius Partners, Inc. is a Registered Investment Advisor.

Past performance is not a guarantee of future results. The data and information set forth herein are provided for educational purposes only and should not be considered tax, legal or investment advice; a solicitation to buy or sell securities; or an opinion on specific situations – as individual circumstances vary. There is no guarantee an investing strategy will be successful. Investing involves risks, including possible loss of principal. Diversification does not eliminate risk, including the risk of market or systemic loss.

Please consider the investment objectives, risks, and charges and expenses of any mutual fund and read the prospectus carefully before investing. Indexes are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

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