Invest1 distinct publisher3 min readUpdated
Over the decade the figure was 13%. The defensible part of an advisory business is tax, income and estate work, and the fee schedule should say so out loud.
The Investor · Invest desk
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In the 12 months to June 30, only 27% of active managers of large-cap stocks beat passive funds built to track indexes such as the S&P 500, and across the decade ending the same day active funds came out ahead just 13% of the time on average, according to American Banker's reading of Morningstar's latest data [1][2]. That is not a bad year to be explained away in a client review; it is 87% of the decade spent failing at the thing many fee schedules are still implicitly priced on [20].
Start with the flow of money, because it has already voted. Passively managed ETFs and mutual funds held $21.88 trillion in the United States at the end of June [4]. The bargain in active management was always higher fees in exchange for higher returns, and investors and advisors have been pulling money out of active funds for decades [16]. Randy Bruns of the RIA Model Wealth told the publication he is "shocked" by how many advisors still use active portfolio management, and that "we have decades of evidence showing how difficult it is to consistently beat an index after fees" [6][5]. His explanation for the persistence is distribution rather than performance: large banks and brokerages build their own products and employ "armies of financial advisors incentivized to sell them" [7].
The defence of active management is narrower than its market share, and it is worth stating precisely. In small- and mid-cap stocks, where coverage is thinner, active managers' hit rate against passive counterparts rises to nearly 50%, per Morningstar [8]. Michael McMeans, president of Silverling Financial in Columbus, Ohio, argues that active work pays where public data is scarce, and large caps are the most analysed segment of the market [10]. Private investments, often under no obligation to report publicly, go further: "Firms are staying private much longer, and that means there is a lot more work to do in determining what to own," he said [11][12]. Monica Dwyer of Harvest Financial Advisors in Ohio makes a related point about benchmark risk: recent index gains have been driven by a small number of tech companies, semiconductors especially, so beating the S&P 500 has required a concentration most fiduciary advisors would not accept [c13a][15]. Her portfolios are lighter on technology because of concerns about an AI bubble and are still in line with the index year to date, which she calls excellent on a relative basis [13].
Read those defences together and the operating conclusion is uncomfortable for anyone billing a flat percentage on assets for large-cap selection. The roughly 37-point gap between the small- and mid-cap hit rate and the large-cap decade figure says the skill premium exists in specific, illiquid, poorly covered corners, not across a client's whole equity sleeve [21]. Everything else is a manufacturing decision better solved with a cheap index fund. Bruns puts the value elsewhere entirely: "tax planning, retirement income strategy, Social Security and Medicare decisions, and estate planning" [18]. Those are deliverables with dates, documents and measurable dollar outcomes, which makes them billable on their own terms rather than smuggled into a 1% wrap.
What to watch: whether firms actually unbundle. At least one academic paper disputes the standard reading of post-fee active underperformance, and scores of firms still sell managed portfolios built in house or bought from outside providers [17][22]. The tell will be fee documents that name planning work explicitly and price selection only where the data thins out [8][12].
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Monica Dwyer, wealth advisor and vice president at Harvest Financial Advisors in West Chester, Ohio, said: "Our portfolios have a lower concentration in technology because of our concern over a potential AI bubble. But we are still in line with the overall S&P 500 return [year to date], which means our performance relatively speaking is excellent."
Dwyer noted that many index increases in recent years have been driven by a relatively small number of tech-related companies, with semiconductor manufacturers responsible for much of the gains.
In the year leading up to June 30, only 27% of active managers of large-cap stocks beat passive funds designed to mimic widely cited indexes like the S&P 500.
Beating the S&P 500 in those circumstances would require a higher-than-usual concentration in tech-related companies, and most fiduciary advisors would be leery of such heavy exposure to one industry.
Bruns said active management retains a foothold in part because "large banks and brokerage firms create their own products and have armies of financial advisors incentivized to sell them."
According to Morningstar, when active managers tended to small-cap and mid-cap firms, their success at beating their passive counterparts rose to nearly 50%.
Evidence-backed comparisons of source perspectives and observed adoption signals. Read the methodology
Which Builder, Operator, and Investor concerns the observed source mix emphasized—not a truth score.
Evidence, demonstrated adoption, hype gap, incentives, and confidence are assessed independently, each on its own current evidence. How these are measured.
Recognized dataset, reported second-hand by one outlet
The core performance numbers are attributed to a named data provider (Morningstar) and are internally consistent across three windows, and the practitioner claims are on-the-record from named advisors at named firms. But the cluster has a single publisher, the Morningstar report is never linked, dated or described methodologically, the acknowledged academic counter-evidence is unnamed, and the fund-flow assertion carries no figures.
Passive scale is large and quantified; active persists in practice
Adoption is unusually well grounded for a single-source story: $21.88 trillion of U.S. passive fund and ETF assets at end-June is a hard scale figure, and the article documents that active delivery persists in the field through captive bank and brokerage products, scores of firms offering managed portfolios, and at least one RIA managing some assets actively in-house. The deduction reflects the absence of active-side asset or flow figures for comparison.
Statistics land squarely; the prescription runs ahead of them
The performance figures are stated plainly and match the cited data, so there is little numerical inflation. The mild positive gap comes from the leap to prescription — that tax, retirement income and estate work is the defensible part of an advisory business and should be priced as such — which rests on one advisor's assertion with no fee, margin or client-outcome evidence, while the acknowledged post-fee rebuttal and the segments where active wins nearly half the time are given less weight than the headline.
Commercial interests explicit on both sides of the argument
Incentives are visible in the material itself: the article names captive product manufacturing at large banks and brokerages with sales forces paid to distribute it, and every practitioner quoted has a commercial stake in how advisory value is framed — the fee-skeptical RIA principal benefits from a planning-led pricing story, while advisors defending active management sell or run active strategies, including in private and thinly covered assets. The publisher also serves an advisor trade audience.
Moderate: solid numbers, thin corroboration
Confidence is limited chiefly by cluster structure — one publisher, one article, no primary document — rather than by the plausibility of the claims. The quantitative spine is specific, attributed and mutually consistent, and adoption is quantified; the prescriptive and flow-related elements are weakly evidenced, and one relevant counterargument is left unexamined.
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1 article · August 17, 2026