"I think Mark is a very bright guy. But many of us are getting too focused on investment returns and not on what we're supposed to be doing first and foremost, which is planning," says John Sestina, a CFP licensee with his own firm in Columbus, Ohio. He argues that no one can ignore benchmarks, but that they should be used carefully and on a limited basis.
Sestina says he constructs individualized benchmarks for clients to ensure that popular benchmarks such as the S&P 500 don't distort their expectations. Sestina also warned that planners should not be money managers. "I make money for clients as a planner, not as a money manager," Sestina says. He cautions that, if planners insist on managing money, it is inevitable that "even the best of us are going to have a down year."
"Then what do you tell clients? Even Warren Buffett, even Peter Lynch, can have down years," Sestina adds.
"The problem is not the use of benchmarks. It is the inappropriate use of benchmarks," says Harold Evensky, another CFP licensee with his own firm in Coral Gables, Fla.
Evensky says using benchmarks can sometimes make sense for a planner when he is working with a money manager, but that planners should not be running money. Evensky sometimes uses some of the standard benchmarks plus another one: Every year he wants to see most of his clients beat the Consumer Price Index (CPI).
"This is the only one that always makes sense," said Evensky, another critic of many of the standard benchmarks. "By targeting the CPI, we're not trying to make you rich. We're not trying to make you poor. We're trying to make sure that you can sleep at night."
Stanasolovich agrees: "What's most important is how much a client earns at the end of the year over inflation."
Still, Spangler's clients probably aren't the ones suffering from insomnia these days. And he also has colleagues who applaud his maverick views.
"What he's doing makes so much sense. I applaud him," says J. Michael Martin, a CFP licensee with his own practice in Columbia, Md. "More planners should be doing exactly that. We generally ignore benchmarks in our firm. One never makes money for clients based on relative returns."
"Relative returns can often make for relative losers," Martin continues. He adds that his practice will inconspicuously mention benchmarks in its literature, but it has nothing to do with evaluating the performance of client portfolios.