As DOL contemplates stiff fiduciary-related penalties on advisors, NAPFA and FPA find rare concord with FSI
The more RIA-focused groups agree with the IBD trade group that holders of smaller IRA accounts will not be able to pay for advice under new rules
FPA keeps adding coaches to its pro-bono roster but quid pro quo makes the medicine go down as mom-and-pop consultants help mom-and-pop advisors
Charesse Hagan is the latest to join Financial Planning Association's 'Coaches Corner' which 'gives back' to the community, but coaches also can leverage volunteer work into paid gigs
August 2, 2019 at 12:48 AM
National Association of Personal Finance Advisors
Top Executive: Geof Brown, CAE
Financial Planning Association
Top Executive: Lauren S. Schadle, CAE, Executive Director and CEO
The problem is not having fiduciary standard, it is making it so difficult to comply with that advisors can only afford to work with the wealthy.
The issue is, we haven’t seen any of the details of the re-proposal. NAPFA’s stand on fiduciary rulemaking based on the Advisors Act of 1940 is unwavering; it defines our dedication to, and relationship with, the consumer. If no one is willing to advise the consumer of the $25k IRA, that’s a problem. This issue is part disclosure, part compliance, and a whole lot of complication. I’m not saying there aren’t creative ways to solve the compensation dilemma – but the DOL must proceed very carefully so that the consumer is not suddenly left with a void of information.
I read the referenced article about the “dark side” of the rules and frankly cannot figure out what the problem is. I was a broker for 25 years and in retrospect realize that there were far, far better solutions to rollover and other IRAs, but I was restricted by my need to meet production minimums and to make a living. For all my justification and self-induced blindness, I gradually migrated to the highest commission products. How is it that the small investor will not be properly served when the current standard is to offer the highest commission that can be legally charged?
Our problem with attempting to serve smaller accounts in our RIA is already in place. The record keeping, disclosure, and analysis standard is the same for a small account as for a large one. We have already figured out though that we could, if we wanted, make a good profit there by creating a two tiered approach in which we provide a set of standardized portfolios for those smaller accounts. The remaining problem is that we probably would not be able to handle the number of new clients we would face.
Having been a broker I can say without hesitation that vanishing few “financial advisors” would recognize the term “fiduciary” if it hit them in the face. It is a potentially very profitable area over the long term but involves some serious up-front commitment to training, software, record keeping, and standard setting. It took me four long, hard years to transition back to a reasonable profitability as I stopped being a securities sales-person and assumed the fiduciary investment advisory mantle. No, I no longer have a million-dollar house, or drive a car that will turn heads, but I now make a steady, good living that puts me in the upper 3% in America. Meanwhile I now have nine employees instead of two assistants. The firm has the same revenue today as I had as a broker in 2007, but today we are confident we are doing as good a job as is possible for a very reasonable fee. I make about 1/3 the gross income I did back then, but I have no question that what I am doing is for my clients and not to inflate the earnings of a corporation, and enrich myself.
If I were interested in forming a major company, there is no doubt in my mind that we could provide service to those $25,000 IRAs. The Mutual Fund Store, an RIA, apparently is doing that already.
If we want to ultimately be seen as a profession instead of as sales jockeys, we need to all assume a fiduciary standard. Physicians, clergy, and even lawyers are held to that standard. It can be done.
It is interesting how these issues, in the end, always boil down to money. Everyone wants to be a fiduciary — until a price tag gets put on it. For Jeff McClure, the decision, based on his values, was clear that short-term profits could take a back seat to establishing a relatively unimpeachable professional standing. It seems he is a microcosm of what the broader advisory industry says it is trying to do but really hasn’t thus far. I can see that some people will see it as practically un-American to run a business where profits are intentionally sacrificed. But that may be a shortsighted way of seeing things. It stands to reason that the pie of advisory assets could grow tremendously if investors trusted financial advisors as much as they trust other professions.
We know that the bottom end RIA limit is basically $25,000. What about the people, especially young people, who are just starting out and can only put away some monthly savings amount. As a hybrid I have some of those clients. How do we help them? A well written fiduciary standard would not exclude those people if it is truly a step in the right direction.
The bottom end of our fee scale (meaning least dollar amount under management) is 1.5% per year. We also have the option of charging a fixed fee. So, lets consider the low end of the spectrum. If a person wants to invest $200 per month, the typical broker/dealer re-allowance is about 4%. If a registered representative of that broker/dealer is seeing people with $200 per month, I cannot imagine he or she would be on more than a 75% contract. So, the b/d will get $96 and the rep will get $72 per year.
When I hear that the small investor will get left out my immediate question involves this example. The record-keeping requirements of the b/d are at least as onerous as for an RIA. The time requirements for rep and b/d are no less than an RIA could spend. The issue here is that a highly compensated professional simply cannot afford to spend the necessary time educating, disclosing, and disclaiming for that amount of money, no matter which model is being used.
The b/d model to solve this problem is to arrange to create a bigger commission. For example, many whole life/universal life insurance products have a total payout that exceeds 100% of first year premiums. With a surrender charge schedule that equates to 100% for the first several years they can afford to do that. USPA & IRA used to use “contractual” funds with a 50% commission on a “contractual” amount paid in during the first year. On our $200 per month example, that amounts to $100. They would also sell a whole-life insurance policy and would commonly convince the customer that they really needed to spend another $200 per month on that. So their solution was to arrange for the broker/dealer/insurance agency to have a gross margin in the first year of about 75%.
As I monitor the b/d community, I have seen that most broker/dealers that deal with the smaller investor have come up with perhaps less extreme, but certainly no less creative ways to separate the small investor from a very significant share of his or her “invested” money so as to be able to afford to make a nice profit on relatively poor customers.
So, let’s think about another model. The nice thing about the RIA business is that most of the rules are written by the individual RIA. No, you won’t find a set of rules from RIA in a Box that will address this problem, but if one is willing to forgo the standard boilerplate ADV and Procedures Model, I believe there is a solution. To put all of this in perspective, Vanguard, the champion of no-load investing, does not take retail accounts unless the investor has at least $3,000 to invest. So what is the client paying us for if they can use Vanguard without a fee?
I believe the Ace Hardware model is what they are paying us for. Withing a reasonable distance from our house are two big-box “home improvement” stores which are really just big hardware stores. A bit closer is an Ace Hardware store. Lowes and Home Depot have lower prices, but I have to find what I want myself. The good people there do not greet me when I enter the store and ask, “How can I help you?” The overall experience is sometimes positive and sometimes very frustrating.
At the local Ace hardware store, I am greeted at the door by a knowledgeable, friendly person who will spend half an hour helping me find a 75-cent screw. As a result of that kind of personal service I have chosen to purchase several thousand dollars of equipment, paint, and hardware there.
I use Vanguard mutual funds where they are appropriate for my clients. They pay me to read the prospectus and understand the complexity of how to properly invest. I (the rain maker in our firm) spend significant time each quarter figuring out which funds we want to use and recommend. That is part of what they pay us for.
If that small investor with $200 per month is also (as a couple) putting $500 per month into a 401(k), and the employer is matching, what we are now talking about is $14,400 in the first year and (presuming no market growth) $28,800 in the second year. A 1.5% annualized fee, charged monthly would produce $117 in the first year and $333 in the second year.
Receive $450 over two years will not pay for first class analysis and planning, but at that level of investment there are limited options. I would need to select the fund they should be using in their employer sponsored retirement plans and pick probably at most a couple of mutual funds to use in their “other” account. We might also set up a 429 as some of them will take $50 per month.
Using a full commission and not going down the USPA & IRA road (the path that leads to destruction), a broker/dealer would get about $100 in year one and another $100 in year two. Because a RIA can advise on the retirement plan, the gross revenue could easily be $450 instead of $200.
In order to afford to do that, I think we need to look to the medical profession. The last time I went in for a routine visit to my local clinic, I met with a Physican’s Assistant. There is nothing that says that a RIA cannot have a two-tiered level of service or for that matter, a three or four tiered level of service. If you are a broker/dealer rep, you are required to “know your customer” under FINRA rule 17a3, so you are required to make contact with that customer and reevaluate their needs and the product you recommend on a regular basis.
From my worm’s eye view it sure looks to me like you could do that as a fiduciary for probably twice the revenue that you are getting by using a full front-load, 12b1, and “partner fees” from the fund company. The difference is that you would “come out of the closet” and disclose what the client is paying.
So, like I said, “What’s the problem here?” From my perspective it is simple. The broker-dealer community is used to charging commissions so high that if the customer knew what he or she was paying they would flee. Yes, there is no way a fiduciary could set up a program that takes 50% of first year invested funds, but by “spreading the revenue base” and being up-front about it while actually providing real expertise and working for the client, twice the revenue is potentially available.
Brooke, if you have read this far, I think there is a story here.
I appreciate Jeff taking the time to give his opinion on broker dealers, but I have to disagree. Their are pluses and minuses to both broker dealer side and RIA. I am a hybrid and do both. Reality is that their are certain costs that have to be covered in every account. My information is that an RIA account costs about $100 year just to exist. A regular brokerage account or direct account with a mutual fun costs far less.
The simple fact is that there is no way to even break even on a $200 per month RIA account. It is thus much easier for me to use mutual funds directly or a regular brokerage account for smaller accounts. It is more cost effective for the clients and for me.
I generally use c-share mutual funds for smaller accounts figuring I will eventually grow them into advisory accounts. In doing this I am aligning myself with the client just like with an advisory account. Just because an account operates in the broker dealer FINRA world does not make it any more or less ethical than it being in the RIA SEC world.
I am for a fiduciary standard as long as it didn’t prevent me from having smaller accounts, which it will assuming they don’t do some major revisions. Not only does this hurt smaller investors, but it hurts me helping larger clients where we might need some smaller accounts as well.
I have been deep in the books and bowels of broker/dealers and now am the majority owner and president of an independent RIA. I am also licensed as a FINRA series 24 principal and am an OSJ. It was once true that an RIA client was far more expensive to maintain than a b/d customer, but not now. If anything, the reverse is true. The b/d I contract through has roughly tripled the internal staff in the past few years while adding about 30% to the number of customers. That is why small indie b/d firms are vanishing.
Again, as an RIA, we make the rules. If you have a set of standardized templates for small RIA clients and an assistant level person who can actually meet with and handle the account, those small RIA clients can be profit center. I just went though a series of small dollar value clients we have accepted because of a family relationship with a prime client. There is no question that we made a profit, albeit a low dollar value per client. On the other hand, we have found them to be very low maintenance clients. We mail them a letter each year to ask if anything has changed and update their portfolios with any fund changes on a batch basis.
As an interesting aside, in the process of reviewing those “dependent” clients I was surprised to discover that about half of them now meet our minimums for a new stand-alone client! More, some of my larger dollar value clients are people I started working with decades ago who only had a few hundred dollars per month to invest.
The back side to this is that I have seen the absolutely monstrous complexity in forms and procedures imposed on IARs by the dually registered firms. The reason for all that complexity and those detailed procedures and rules is the inherent conflict and potential for confusion by members of the public when an IAR is also a securities salesperson. The liability there goes off the scale. We absolutely do not sell new investment products to anyone, therefore we have no conflict. We state that in our firm brochure and we hold to it. That change makes having an RIA client phenomenally less expensive.
As I wrote above, on average we find having a fiduciary relationship with even a relatively small dollar value client who is investing monthly to be much more remunerative over a three year period than if we were still in the sales business. Admittedly, the net to me is smaller because we have a heck of a lot of overhead as an independent RIA. Still, with reasonable automation, it is profitable to serve small dollar clients. In fact, I believe when a relatively large number of people are involved (some will drop out, some will not continue to invest) the overall result is a good, steady income in the short term and a high dollar value in the long term.
In short, if you are really a long term investor, then bringing in those young people who are steadily putting money away each month is how you will replace the old codgers who have the big bucks today.
The commentary above and similar is almost a joke. Not one entity here has addressed what a fiduciary has to KNOW in order for there to be a true discussion.The only issue under discussion is that a fiduciary must do the best for a client- but no broker has ever been taught the fundamentals of investing (where most RIAs come from) and the designations in the industry cannot do a risk of loss, MPT is wrong, so is DCA, correlation is a complete mess and on and on.
It IS going to cost a lot to retrain 650,000 or so retail brokers to even know diversification and standard deviation.
Unfortunately the DOL personally told me that they don’t care about increasing knowledge to hault bad practice but that once the final edict is made, they will just wait for cases to evolve which will then “force advisors to take notice”. Like that will effectively work.
That appears where all this is headed and is an almost complete breach of true fiduciary duty.
Way to go, everyone.
I would love to hear Mr. Moody elaborate on his training and these fundamentals of investing that no brokers have had.
Larry- you asked
Financial Planning Fiduciary Standards under Dodd Frank (2012) is the hard copy complement to two video courses approved by the California State Bar for Continuing Legal Education
Fiduciary Standards Dodd Frank: Investments
Fiduciary Standards Dodd Frank: Insurance and Annuities
475 pages of the most indepth material anywhere. Just got it on Amazon. Ebook coming this week. Soon to be a movie (well, maybe not)
Errold F Moody Jr. PhD MSFP MBA LLB BSCE
Registered Investment Advisor
Life and Disability Insurance Analyst
The issue really boils down to something rather simple. As long as brokers were satisfied with being Registered Reps, Stock Brokers, or even “Account Executives” I think there was a general understanding that the role served was that of salesperson. A salesperson is not a fiduciary, and no one really expects that of him or her.
As soon as the industry and its sales force demanded and got the ability to call themselves “advisors” things changed. An advisor or adviser (no matter how you spell it) is perceived as a consultant in the employ of the person to whom they are rendering advice. That adviser is, by common law and in many states statute law, a fiduciary. A fiduciary must render objective, qualified advice and counsel to his or her employer. In any profession if an adviser holds him or herself forth as such and is in fact being paid by the product supplier he or she recommends then the purported adviser is committing an act of fraud. Somehow Merrill Lynch managed to get past that common-law standard and get the SEC to authorized the use of titles to be assigned to sales persons that historically only applied to fiduciary advisers.
As to the issue of what a fiduciary needs to know, that again is quite simple. Yes, it will take some education on the part of the broker/dealers, and I, for one, would prefer to see the CFP®, CIMA®, CFA®, or some similar standard set for a person to recommend the purchase or sale of securities. That would leave the order-takers in the role of providing approved, published information as they do at Vanguard, Fidelity, etc., but would distinguish those who have passed certification examinations from the order-takers.
The personal and household investment advice business is being dragged kicking and screaming into becoming a profession. There was a time when a physician, commercial airplane pilot, or attorney had minimal or no real educational or certification requirements. Today we would consider it a scandal if a person practiced law without a license, implying a law degree and the passing of the state bar examination. We would be equally offended if we discovered that a physician was receiving commissions for prescribing expensive medications or for ordering procedures or tests. Both of those professions are so regulated because errors or conflicts of interest in those areas has the potential to do great physical or financial harm to the person receiving the service.
In a time when the majority of Americans will be dependent on their own portfolio and its effectiveness to live above poverty in their old age why would we not demand a fiduciary standard? What you suggest is that the cost of educating yourself and shedding major conflicts of interest is a “joke.” I am curious if you have used, or heard used the term “trusted adviser”? I have, and it was in b/d conferences where I was instructed (as a securities and insurance salesman) to convince my customers that I should be their “trusted adviser” so that I could easily cross-sell securities and insurance. Notably, the claim was that by becoming a “trusted adviser” MY income could double. Note that there was no suggestion that my “trusting advises” would do particularly well. From my, admittedly minority, view, convincing someone to place their trust in me so that I could increase my income by selling product that cost them more is a pretty good definition of fraud.
As far as cost is concerned, I have paid the price and still do. Yes I net less than half of what I netted as a successful branch officer manager of a regional broker-dealer, but I am completely satisfied that I am provide the best advice and using the best possible investments for each client.
Oh, and as an aside, MPT is not dead. Every major pension fund uses it, and the vast majority of state pension funds are in great shape from an investment perspective. I use it and my clients have benefited greatly from its use. Markowitz’s formulas in his original paper “Portfolio Selection” work virtually exactly as promised. If you don’t understand enough about portfolio selection to read his paper then you are like a person who claims to be a physician but does not understand germ theory or an airline pilot with no knowledge of aerodynamics. As Peter Bernstein put it in his book, “Against the Gods, The Remarkable Story of Risk,” Markowitz’s theory of portfolio construction is the only specific portfolio construction theory that has proven predictive. I have yet to meet the first person who actually understands Markowitz’s theory of portfolio selection and uses it and then says it does not work. Those who say it does not work have not taken the time to read and use it .
You note, “What you suggest is that the cost of educating yourself and shedding major conflicts of interest is a “joke.”
I am not certain what that meant, but I do not consider this discussion a joke, or even “almost a joke.” I am also quite certain that every broker is required to attend a rather substantial number of hours of mandatory education each year. If my experience is similar to the industry standard, those hours are some of the most mind-numbing repetitions of last year’s mind-numbing idiocy. I have taught classes on fiduciary responsibility and have attended some as well. It is really not a difficult subject.
Very nearly every broker/dealer now has a jointly housed RIA in place. Most brokers I know are also registered as IARs. It would seem to me that teaching a fiduciary standard would be a minimum standard already. When I have suggested that as a course of action, and am able to get a honest response, I have been told by b/d executives that they hesitate to do so because it would cut into the revenue stream by causing reps to become aware of the liabilities.
You note, “What you suggest is that the cost of educating yourself and shedding major conflicts of interest is a “joke.” Where is that from? If anyone wants to address the “joke” it is that nary one person- DOL, NAPFA, et al- has ever positioned what the necessary knowledge is to be a fiduciary. It does not come from a series 7, it does not come from the CFP- and as a financial advisor, it cannot come from a CFA. Fact is, there are still a lot of CFAs that still define standard deviation as risk.
The Markowitz theory per Wikipedia- the capital asset pricing model (CAPM)
is used to determine a theoretically appropriate required rate of return added to
an already well-diversified portfolio, given that asset’s non-diversifiable risk
takes into account the asset’s sensitivity to non-diversifiable risk (also known as
systematic risk or market risk), often represented by the quantity beta (â) in the
financial industry, as well as the expected return of the market and the expected
return of a theoretical risk-free asset.
So what is the “expected” risk? And how does one address “theoretical risk”?
Nobel award winner Harry Markowitz does not believe you can use historical returns as inputs in portfolio optimization. He thinks the assumptions underpinning the capital asset pricing model are strange.
Markowitz (1952) warned against the pitfalls of using aggregations of securities in portfolio selection. Markowitz saw the investment problem as a dynamic one with an ever-changing set of expected returns, variances and covariances and a changing set of optimal investment solutions. He specifically warned against using historical returns as the basis for estimating expected returns, variances, and covariances. Sharpe (1964) proposed a capital asset pricing model where the risk premiums per unit of systematic risk are not fixed, and the mean-variance efficient market portfolio is continuously being reconstituted along with changing investment prospects.
Peter Bernstein’s focus was on the future, not the past. Further, CAPM does not address irrationality. CAPM does not address correlation- certainly as it went wrong in 2000 and 2008.
I doubt that anyone above (though some will now try) could provide the “correct” numbers (or at least the proper range) of a “well diversified” portfolio as defined by CAPM.
As for, “and the vast majority of state pension funds are in great shape from an investment perspective.” I disagree.
AS for MPT working- well how in the world could there be a 44% loss in 2000 and a 57% loss in 2008 and everyone apparently miss it. Where was the risk of loss for any portfolio given a one time move of standard deviation? If a risk of loss is not done for each consumer- and in fact can only be done by a personal financial calculator- then there is no fiduciary element.
What I am stating is that those that tout the necessity of fiduciary status- like the DOL- are not really that bright to begin with. Or they don’t care.
Education/knowledge for the vast majority of the 650,000 brokers will not occur without massive changes in instruction costing millions to provide. Ain’t gonna happen.
So far, nice words, little substance
I have a real problem with anybody starts making judgements they are smarter, better, more ethical, etc. than anybody else in a thread not even knowing who anybody else is. If you want to make a case for your opinion, go ahead, but don’t act like you are necessarily superior.
Let me assure you that no client of ours lost anywhere near 57% in 2008, so “everyone” did not miss it. I also want to point out that I did not suggest that I use CAPM, which is a good thing because I don’t. I use the original formulas from Markowitz’s 1952 paper. We have found them to be, as Peter Bernstein pointed out, predictive, and sometimes eerily so.
Indeed Peter Berstein focused on the future, that is what we are planning for. But, he noted that from the time of publication on, Markowitz’s Mean Variance Optimization has been the best, and indeed only, predictive investment theory.
I am quite familiar with Markowitz’s comments on using aggregations of securities. In that same publication and in numerous speeches he suggests using mutual funds that have as an investment objective a stated plan to hold a given asset class. We use the Morningstar Categories as asset class proxies, and with about 35 years of monthly data available have found them to be very satisfactory.
Indeed our mid range portfolio did lose money in 2008-09 during the bear market, but the percentage of loss when compared with the S&P 500 was very close to what our models indicated would be the case. We do use standard deviation as an indicator of market risk, and right beside it publish the actual market declines of the asset allocation we recommend using Morningstar Categories. If instead of standard deviation we use total month-end decline in every bear market in the last 35 years they line up almost perfectly with the systemic risk predicted by our use of the Markowitz algorithms.
Modern Portfolio Theory, that which you said was “dead” has at its foundation Markowitz’s 1952 paper. Yes, there have been other aspects added on and taken off over the years, but a dose of pure Markowitz seems to work extremely well. As to expected return, by removing inflation and measuring real-return over not only the 35 years we have from Morningstar, but for much longer periods using data from Ibbotson SBBI, a mean trend can be calculated. The standard deviation from the trend line on an asset allocation constructed using Markowitz Mean Variance Optimization is amazingly small, and it is not uncommon to have an R-squared relationship of 0.98 or even higher.
My son wrote software that allows us to set the end point on the data considered using the algorithm. If, for example, we set the cut-off date to be in 1994 it determines what the algorithm would have chosen for an optimized allocation as of that date. We can then extend that allocation forward to see how accurate it would have been. We have found that if we include an assumption of reversion to the mean in limiting the asset class choices made by the Markowitz algorithm, we have an amazingly predictive model. We then run updates each month as we get the data from Morningstar. We have found that if an asset class varies by 10% from the original allocation, a new asset allocation is mandated, so, yes, these do change. We have typically seen a need to reallocate about every two years. Some of the reallocations are relatively minor and others, as the one that the Markowitz algorithm called for in November-December 2008, are substantial.
Back testing is not proof, but since we have been doing this since the beginning of 2007 we have had an excellent opportunity to test the real-world application. Note, here that we do not use correlation tables, but run an actual MVO on each analysis, Actually we run typically five or six runs. Using a very fast and relatively high-powered personal computer it typically takes about 40 seconds to do a single MVO.
Since 1/1/ 2007 our mid-line moderate model portfolio is quite a substantial distance ahead of the S&P 500, and accomplished that at least in part by not falling anywhere near as far as the Index. Then, during the recovery, amazingly, the portfolio has quite nearly matched the Index despite having an allocation that is about 60% appreciation and 40% preservation assets.
Here in Texas, the Texas Teachers’ Retirement Fund is in great shape. My research indicates that is the norm across the country. Remember when the DOL rates those funds they do so based on a present value which is, in turn, generated from the Federal Mid-Term Rate, or a bit less than 2%. Indeed if we are to assume that the portfolio will only have a 2% return into the future, there would be a problem. In fact, the TRS portfolio has a moving average and an expected return of about 8% and has managed to stay quite close to that. Based on the reality of what that portfolio has returned over the relatively stressful last ten years, the portfolio has a substantial surplus.
I want to note here that we absolutely do not do Monte Carlo simulations. The Monte Carlo method was created to measure probabilities of nuclear interaction over very short periods of time. Nuclear interaction is a totally and perfectly random set and perfectly follows a normal distribution. Market variance is severely skewed with kertosis, which is to say that it is a non-normal distribution making the Monte Carlo not only useless but severely misleading. Human economic behavior is a sequential programing set. That means that each action and outcome will influence the next action and outcome.
Monte Carlo does a wonderful job of predicting the probabilities of a mechanical coin toss. It is going to be exactly 0.50 for each iteration. On the other hand, a Monte Carlo simulation does a horribly inaccurate job of forecasting the progress of a poker game. The actions and results in a poker game have both an immediate and a cumulative affect on future actions with some results becoming “sticky” and others ephemeral.
Sequential programing, on the other hand, can accurately predict the probabilities of play from one hand to the next. Under a sequentially dependent set, a Monte Carlo becomes less predictive with each iteration, while sequential programing analysis becomes more accurate in a time series with each iteration until the predictive ability becomes almost spooky.
The Markowitz algorithm is a sequential sequencing algorithm, even though he did not know it when he wrote it. In short, if one is using accurate data, the longer and more finely sequenced the time series is, the more accurate the Markowitz MVO becomes, and it can be enhanced with an assumption of reversion to the mean limitations.
It works. It works for us and it works for a lot of serious pension fund portfolios.