So Phillips thinks that mutual funds have responded to criticism, to having the light shone on them-by creating better investment experiences. For example, he says that in the '90s, money management and distribution were under one roof so that leadership came from the marketing side. "We can sell this if you create it!"

Now many companies-like Merrill and Citigroup-are getting out of the fund management business, eliminating in-house rules that made funds a bad experience for shareholders. For example, the wirehouses typically required that brokers keep a majority of investor money in in-house funds. The brokers typically were paid higher commissions and higher ongoing fees for these in-house funds, all things that worked against a good investor experience by giving broker incentives to push mediocre funds.

By contrast, today fund companies are setting up "gatekeepers" to do due diligence on funds that will be offered and choosing those that can create a good investor experience rather than those that create a good salesman experience by offering brokers a higher payout. "In a real sense we have won," Phillips says. "Assets now flow to the best fund rather than the best marketing."

After praising Phillips and admitting that I am a fan, I must mention all the e-mail I got on a recent column (Financial Advisor, April 2008) from readers who felt I was promoting Northwestern Mutual Life. That was certainly not my intent, and I'll come back to clarify that in next month's column.

Mary Rowland can be reached at [email protected]. She has been a business and personal finance journalist for 30 years and has written two books for financial advisors: Best Practices and In Search of the Perfect Model.

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