Updated: Mar 10, 2020
By: Raheel Younas
In the industry that we’re in, people tend to turn up in a full suit even when the dress code explicitly states ‘Business Casual’, and I have always wondered if this norm would change eventually. That was until I ran a quick screen for mutual funds. Even though I had previously come across countless mentions of the absurd number of investment funds that fail to outperform the S&P500 index, the first-hand realizations I had in the screening process made me realize the true importance of suits. My simple screening criteria was to return only the funds that generated total returns greater than those of the S&P500 index. The result? Out of 9,492 US mutual funds with AUM greater than 1 billion, only 1,052 generated total returns greater than the index over the last 12 months. That leaves us with 89% of the funds underperforming the index. And yet, somehow the average person still seeks for the ‘investment professionals’ for returns on their hard-earned money.
However, an accelerating number of people today realize that picking a good fund to invest in offers no better odds than picking good stocks, making them turn to index funds instead. It seems plausible to me that suits are part of the reason for active management not losing some of the investors to indexing. When a person walks into their local bank asking for an investment advisor to help them allocate their funds, most likely a well-spoken and suited up investment professional would appear to guide the client in picking the best fund for them. The person would then probably walk out of the branch delighted by the thoughts of retiring wealthy. It was the sharp suit that the investment professional had on that vouched for their competency and symbolized prosperity.
In certain industries, such as Tech, there is an emerging trend of people dressing casually at workplaces without seeming unprofessional, and more importantly, incompetent. But I’m not positive if the client would have been too convinced and relieved that they have chosen the correct fund if their investment advisor had a hoodie on with the latest Jordan sneakers to match. Perhaps it is only right when the aspiring young investment professional always turns up in a suit. And maybe that $2,000 Hugo Boss suit that you’ve been eyeing may not be such a bad investment after all. If only the Mrs. were as gullible as some of the fund investors, however.