Mutual Fund Management and Estate Planning Education

Estate planning courses can train you to understand how to measure mutual fund growth and performance. It can be complicated to handle estate planning, especially when you are uncertain about the best ways to take full advantage of the estate's value. An estate planning education can show you how to reduce expenses and handle wills, trusts, and other important legal documents. It's important to understand mutual funds and their performance as it is a part of an estate.

For example, it is commonly understood by fund advisory services, that past performance is not necessarily indicative of future returns. If you are going to be handling an estate, you must understand the funds involved with the estate. It's important to know that most fund ratings are based primarily on past performance. As you may also learn in estate planning courses, the evidence of predictive value in fund ratings is uneven.

However, some conflicting research has been found regarding mutual fund performance. A number of studies have found that funds that have performed well in the past tend to continue to perform relatively well, with some reservations. Past performance may be useful in selecting the better performers among, say, large-cap growth funds. Of course, the ratings primarily reflect the recent relative performance of the funds, so it is difficult to see any need to transform recent fund performance into a rating system. The transformation may create a salable proprietary product, but it does not necessarily improve the usefulness of the information delivered to investors. Some research suggests that investors would be as well served with simple past performance comparisons as with formal ratings.

An estate planning education will prepare you for the research and work it takes to manage mutual funds and trusts in estate planning. As an advisor or an estate planner, one aspect you will be responsible for understanding is fund evaluation. Estate planning courses can usually explain how fund evaluation models work. The fact that most fund ratings emphasize performance relative to a peer group of funds is the most significant weakness of most fund evaluation models. Every investor would not necessarily have (or want) access to the peer group funds that a fund evaluation service selects for its comparisons. Furthermore, it is usually possible to invest in an asset class or category without using any of the funds in a mutual fund peer group. ETFs and structured notes are alternative vehicles, for example. Even if comprehensive fund peer group ratings are sometimes useful to investors, the appropriate way to evaluate a fund varies as costs, fund holdings, fund structures and investors' objectives change.

To illustrate how an adviser might develop and use detailed fund information effectively, consider how to enhance an investor's or an adviser's understanding of the elements of fund performance. Even if a fund-rating calculation considers a fund's ability to do better than its peers during the most recent bear market, the performance measurement that dominates most ratings is a single performance number for each fund for each year or quarter. A breakdown of how and why the performance of the fund was achieved in that period is a better guide to what the future might hold for that fund than a simple historic return calculation or a longer-term comparison of returns among a group of funds.

For example, good performance achieved by consistent implementation of a stock valuation strategy with patient trading is likely to be more sustainable than performance achieved by a single major allocation shift or by moving from equities to cash and back again in an attempt to predict market direction. It is essential to look beyond ratings and rankings and into the manager's actions for better ways to identify funds with superior investment processes and prospects and to develop comprehensive information that will improve fund choices.

Estate planning courses will illustrate a few points about fund managers: 1- active fund manager "value-add" is obscured by combining good results for true active managers with poor results from closet indexers who are charging active management fees to their investors but not delivering value, 2- The ability of fund managers to value securities and make performance-enhancing portfolio transactions can be obscured and overwhelmed by flows of investor funds into and out of mutual funds, 3- Portfolio transaction costs for funds exceed the fund's expense ratio on average, but funds add value with some of their discretionary transactions. Transactions made to accommodate investor flow into and out of a fund and transactions larger than the average trade size in comparable competitive funds will hurt performance, and 4- Managers with superior stock selection skills can be identified and their skills persist over time. Past performance may not be a reliable indicator of future results, but it is not meaningless.

Overall, it's important to know that an estate planning education can fully prepare you for a successful career as a manager. You will feel confident in your abilities to manage many funds, trusts, and mutual funds with ease. Estate planning courses can help you learn useful information about the financial and legal aspect of the responsibilities you may face. You will develop the skills necessary to efficiently overcome any obstacles that may be in the way of a very successful career and future.

Cory Bowman is Director of Ops at the Institute of Business & Finance. IBF has helped thousands of members of the financial services industry attain designations. For more information about estate planning education, estate planning courses. visit

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