The Most Overpaid Profession?
Add comment November 26th, 2007
Brent R. Brodeski, MBA, CPA, CFP®, CFA, AIFA®
Over the weekend, while drinking my Sunday morning coffee prior to church, up popped on my computer screen a link to a MarketWatch article cataloguing their top 25 most read articles on personal finance during the last 10 years. Curious, I popped it open. The top read article was titled “Ten most overpaid jobs in the U.S.” Hoping they were not referring to me, I quickly pulled up the article and went straight to the number one overpaid job. I was not at all surprised to learn it was mutual fund managers. I could elaborate on their hands-down failure to add value (most do far worse than the market) but the article’s author captured the issue quite well:
Excerpted from MarketWatch, The 10 most overpaid jobs in the U.S. | Nov. 6, 2003
“1) Mutual-fund managers - Everyone on Wall Street makes far too much for the backbreaking work of moving money around, but mutual fund managers are emerging as among the most reprehensible. This isn’t kicking ‘em when they’re down, given the growing fund-industry scandal. They’ve been long overpaid. Stock-fund managers can easily earn $500,000 to $1 million a year including bonuses — even though only 3 in 10 beat the market in the last 10 years. Now we discover an untold number enriched themselves and favored clients with illegally timed trades of fund shares. That’s a worse betrayal of trust than the corporate scandals of recent years, since they’re supposed to be on the little person’s side. Put aside what fund managers earn and consider their bosses. Putnam’s ex-CEO Lawrence J. Lasser’s income rivals the bloated pay package that sparked New York Stock Exchange President Dick Grasso’s ouster. Lasser’s take: An estimated total of $163 million over the last five years. If only we were all so fortunate.”
What the author, Chris Pummer, failed to say was that, after taxes, the manager’s failure rate is even worse. In fact, over extended periods of time, over 90% of managers fail to beat the market. While they remain gainfully (over)employed, you can take matters into your own hands and fire them by investing your own money in index mutual funds!
