On page 186 of STANDUP to the Financial Services Industry, the tools necessary for advisor accountability meetings are referenced for you. Those tools and resources are listed here.
Projection Assumption Guidelines, Nathalie Bachand, Martin Dupras, Daniel Laverdiere, A. Kim Young
These are updated annually in the spring as the recommended return expectations that planners should be using when providing clients with long term projections. Note that on pages 9 and 10, there is an explicit reference to the need to lower the assumed returns by the amount of costs the investor will incur – both from their advisor and for the products they are investing in.
On Persistence in Mutual Fund Performance, Mark Carhart
While there have been many studies regarding the (lack of) persistence of past performance, the Carhart Study is the one that is most cited. Note that it is more than a generation old and that all prospectuses since it was released have carried a disclaimer that past performance may not persist and should not be relied upon. Perhaps it would be clearer if disclaimers were to read: people who make investments based on past performance are fooling themselves.
The Professional Financial Advisor, John J De Goey
I have written four editions of TPFA. The first came out in 2003 and each update coincided with the most recent round of regulatory reforms (Fair Dealing Model; CRM I and CRM II). It is a useful resource for those who want to do a deeper dive, because much of the logic and rationale for a more professional, transparent and evidence-based approach is laid out in it.
The Performance Of Mutual Funds in The Period 1945-1964:Michael Jensen
Even though the Carhart study is the gold standard of persistence research, it should be noted that the Jensen study was the first on the subject. Note that the timeframe for the research goes back more than 55 years. Anyone who says the idea of non-persistence is new is clearly fudging facts.
The Misguided Beliefs of Financial Advisors, Brian T. Melzer, Juhanni T. Linnainmaa, Alessandro Previtero
Originally published in late 2016, this paper was updated in the middle of 2018 with irrefutable evidence that Canadian mutual fund advisors chase past performance, are too concentrated in their recommendations and pay little or no attention to product cost. Meanwhile, there is copious evidence that all those things are harmful behaviours most of the time. Of note is that the study looked at over 4,000 advisors who were working with nearly a half million client families and that the advisors even engaged in these harmful activities in their own accounts after they retired from the business. They were not trying to swindle their clients; they honestly believed that what they were doing was appropriate!
S&P Dow Jones Indices : SPIVA
Twice a year, the people at Standard and Poors release data on how the average mutual funds in markets all over the world do in comparison to their benchmarks over 1, 3, 5 and 10 year timeframes. The evidence changes somewhat for every period based on actual experience, but the same trend holds true: over longer timeframes (5 or 10 years), most active strategies lag their benchmarks. The other trend is perhaps even more disconcerting. The likelihood of outperformance diminishes as the timeline is extended. In other words, not only is it unlikely that active management will outperform a benchmark, it is also increasingly unlikely the longer one tries to do so.
The Arithmetic of Active Management, William F. Sharpe
This is a simple, but peer-reviewed academic paper written by a Nobel Prize winner. The message is simple: it is absolutely certain that in all asset classes, in all market environments and over all timeframes, the average actively managed product must underperform the average passively managed product.
Dalbar 2018 QAIB Report
Every year, the consulting firm Dalbar releases a report called the Quantitative Analysis of Investor Behaviour. Whenever the new report is released (for a fee), the old report is made publicly available for free. As such, free reports are always at least one year old. These have been released for many years and the consistent finding is that the average investOR consistently underperforms his investMENTS. In other words, people consistently buy high and sell low, which is contrary to what they should be doing. Those who buy and hold would almost always have a better investment experience. Since many (but not all) of the people in the study work with advisors, it appears much of the blame for these performance and behaviour gaps can be traced back to advisors making misguided recommendations.