ICE… Innovation, Competition, Entrepreneurs

March 2021 brings daylight saving time, the start of spring — and the one-year anniversary of a new bull market. On March 18, 2020, I (incorrectly) marked my calendar with “Market Bottom.” The actual low came two days later, on March 20. My reasoning had been based on coronavirus news from China, which reported only one new case the day before. While that data was difficult to fully trust, I assumed that hiding significantly higher case counts would be challenging. I also hoped we might learn from China’s e…

Beyond expecting a market turnaround, I anticipated a strong recovery. “Recovery” might even be the wrong word — I expected new all-time highs. While it’s well known that bear market bottoms can present great buying opportunities, the speed with which the market reached new highs following such widespread damage raised an important question: Why?

My answer? The power of efficiency gains — especially those forced by recessions and accelerated by the pandemic. Innovation, competition, and entrepreneurship are all converging to create a high-growth, low-cost environment for consumers and businesses alike.

These efficiencies aren’t limited to recessions — they’re happening all the time, and likely at an accelerating pace. Some industries pass their savings along to customers; others don’t. In our case, we do—and we believe it has made a meaningful difference.

Independent Registered Investment Advisors, like us, are legally required to use a custodian to safeguard client assets. In our case, that custodian is Fidelity Investments. Their role is to ensure accurate recordkeeping and protect against fraud or theft (think Bernie Madoff, who lacked an independent custodian). Custodians often handle trade execution and processing. They used to charge commissions — but thanks to competition, those have been replaced by small fees, often around one cent per share.

This fee may seem tiny, but it’s meaningful at scale. Fifty years ago, daily trading volume was around 4 million shares. Today, it exceeds 4 billion. Automation has slashed the cost of executing trades, and with volumes up a thousandfold, even a penny per share adds up.

Lower trading costs have allowed firms like ours to redirect resources into research. We believe that investment has delivered real value.

Katz Family Financial