Score deemed useful in fund selection process by the Center for Financial Planning & Investment at California State University, Northridge
The Fi360 Fiduciary Score®, a transparent and objective investment rating system used to evaluate open-ended mutual funds, ETFs, collective investment trust funds and group retirement annuities, helps financial professionals demonstrate a prudent investment selection and monitoring process. The score is engineered by Fi360, a provider of fiduciary-related education, designations, training and tools.
Economists affiliated with the CFPI evaluated the score in its new research paper titled, “Analysis of Fi360 Fiduciary Score®: ‘Red is Stop, Green is Go.’” The research focused on the color groups used as predictors of funds’ future performance, and confirmed that the top groups (green and light green) provided statistically better median results than other groups (yellow and red). The Fi360 Fiduciary Score® ranges from zero to 100, with zero being the most preferable: zero to 25 (green); 26 to 50 (light green); 51 to 75 (yellow); 76 to 100 (red).
In addition to higher returns, the research concluded that funds identified in the green quartile also tended to have lower levels of risk (as measured by return standard deviation and semi-deviation). Funds marked as green were also more likely to remain in that category over one‐, three‐ and five‐year time horizons. The score was also found to help advisors avoid bad investments – funds in the red quartile were far more likely to remain there or to stop trading than to improve.
The Fi360 Fiduciary Score® is not meant to be a stand-alone investment selection tool – it is intended to be advisor enabling. The score is often used by advisors to eliminate the wrong funds, and then use his/her own assessments to select the right investments from those remaining.
“At Fi360, we recognize the critical role financial advisors play in making investment selections that are appropriate for each client’s account – our score helps them target a better set to select from,” says John Faustino, Chief Product and Strategy Officer at Fi360. “The predictive results observed by CFPI validate the use of the Fi360 Fiduciary Score® as part of an advisor’s prudent fund selection process.”
Fi360 helps financial intermediaries use prudent fiduciary practices to profitably gather, grow and protect investors’ assets. Since 1999, the firm has provided financial professionals with the education, designations, training and tools necessary to act as a fiduciary in their work with investors. Headquartered in Pittsburgh, PA, Fi360 is the home of the Accredited Investment Fiduciary® (AIF®) designation, the Fiduciary Focus Toolkit™ and the Fi360 Fiduciary Score®. Fi360 is also the parent company of Ann Schleck & Co. and CEFEX.
The Fi360 Fiduciary Score® is a peer percentile ranking of an investment against a set of quantitative due diligence criteria (nine factors) selected to reflect prudent fiduciary management. It is calculated on a monthly basis for investments with at least a three-year history.
The mission of the Center for Financial Planning & Investment is to promote and develop financial planning and investment education and to better prepare students for careers in the financial planning and investing industry, for life-long learning and for service to their communities. The Center is committed to building valued community partnerships and mutually beneficial relationships with financial planning and investment companies, the financial planning and investment industry, and the broader community served by the University and the College of Business and Economics.