John Mauldin’s latest missive - Deep Inside The Dow contains advice from Richard Russell on ‘How to Succeed at Writing’:
“I’ve been asked a thousand times, ‘What’s the secret of success in the advisory business?’
(1) You’ve got to be an obsessive nut to start with.
(2) You have to be able to write in a way that people understand and like to read.
(3) You can’t come across as a phony who knows it all. Readers know that nobody knows it all.
(4) It helps if you have a long life and don’t want to retire.
(5) You need a wife who can put up with a husband whose head is full of the markets 24 hours, day and night.
(6) Woody Allen said the 90% of success in life is just showing up. If you can show up for the markets 250 days a year, you’re ready to start an advisory service (but I wouldn’t wish this business on my worst enemy — it’s the closest thing to absolute madness. No wonder nobody else has lasted in the business 50 years).
(7) This is a lonely business. So be prepared. Need a friend? Get a dog. Need two
friends? Get two dogs.
(8) One last thing — you must have thick skin, because no matter what you write, some
subscriber will send an e-mail calling you a moron or brain-damaged, and the scary thing
is, that makes you think, because they may be right.”
That’s as transparent as it gets from a financial advisor - not something that you see on CNBC every day. Now consider this second piece of rarity - from the mutual fund management world:
Report on Business: The manager who gave back his fees
Unhappy at the returns he has generated for clients, money manager Francis Chou is refunding almost all the management fees collected by his Chou Europe fund since it opened for business in September, 2003.
It’s not only unique for a fund company to give back fees it has collected, it’s also difficult because of the need for regulatory, legal and accounting advice. “When you go and give back money, you sometimes have to jump through hoops to get it done,” Mr. Chou said.
Mr. Chou’s take: “I look at it more that you have to earn that fee rather than have it given to you. If I feel I earned it, I take it.”
What ?!? Refund management fees? Because he didn’t perform upto expectations?
Can you even imagine something like this coming from mutual fund managers in India? The only thing most of them would be willing to jump through hoops for is to extract more blood fees from retail investors.
Let’s do so simple math - assets under management (AUM) for Indian mutual funds were ~ Rs 5 lakh crore durong 2008. Of those, equity mutual funds accounted for ~ Rs 1.5 lakh crore. Assume average management fees of 2% (this includes marketing fees, annual expense fees, marketing fees, and what not). That works out to management fee revenue of ~ Rs 3000 crore.
Given that the majority of funds usually trail the market indices, and given that almost all funds lost money in 2008, shouldn’t a big chunk of this Rs 3000 crore be clawed back?
What are the chances of a fund manager in Mumbai returning management fees for poor performance? About the same as the chances of me becoming the next Prime Minister of India.