Few financial advisors have managed to sell their practice much less buy it back. Neither do most advisors have a national following. Yet, Ric Edelman did the former and built the latter and now advises on $8 billion of client assets. He also thinks the days of mutual funds are numbered, reports Index Universe.

Edelman prefers ETFs to mutual funds. Yet, he does use the mutual funds of Dimensional Fund Advisors [profile] as a key part of his practice. His use of DFA mutual funds paired with his prediction of the end of the mutual fund era does set him at odds with DFA founder David Booth.

Booth told a gathering of mutual fund executives at the Tiburon CEO Summit in New York last month that he has no interest in adding ETFs to the Dimensional product line.

Based on the Index Universe interview, Edelman feels differently than Booth:

There are several advantages ETFs have over traditional retail mutual funds, which is what we had traditionally been using for the first 15 years of our practice. Retail mutual funds operate in a manner that is not in the best interests of investors.

He then goes on to criticize the "retail fund industry" claiming that it "engages in a wide variety of deceptive business practices that are designed to increase the profitability for the funds’ sponsors and manufacturers as opposed to the shareholders who are investing in those funds."

"I'm not just talking about high expenses. I’m talking about outright fraud," said Edelman.

Edelman explains that he is referring to practices that "came to light in 2003 when Elliot Spitzer revealed the mutual fund scandal." Those practices are a theme of Edelman's book -- "The Lies About Money" -- that he characterizes as "an exposé on the retail mutual fund industry."

"The retail mutual fund industry is a dinosaur and won’t exist in 10 or 15 more years, as investors are realizing the incredible opportunity to lower their cost, lower their risks and improve their disclosure by virtue of ETFs compared to mutual funds" predicts Edelman.

Edelman shares more of his views on passive investing, ETFs and other issues in the rest of the interview. 

Edited by: Sean Hanna, Editor in Chief


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