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Several years ago, making an extra effort to find a gas station selling gas for a few cents less than the competition made sense. Gas at $1.80 was a notable reduction over gas at $1.86 (roughly a 3% savings). Driving an extra couple of miles to get to the $1.80 station was worth the time and trouble. 

At today’s average of $3.35 a gallon, however, a six-cent price difference barely registers. A longer drive for $3.35 gas versus a nearby station offering a gallon for $3.41 just doesn’t make sense if the distance involved burns any significant portion of a gallon of gas.

A closer examination of the posted prices for gasoline reveals yet another issue: the $3.35 price per gallon is actually $3.36. To be fair, it’s $3.35 and 9/10s. No matter where you travel in the U.S., all gas stations tack-on the additional 9/10s. 

When the retail gas station first sprang into existence, the price of a gallon of gas was 10 cents. At this price point, paying 11 cents a gallon equated to a 10% surcharge. Few retailers would risk charging 10% more than the competition, but a few tenths of a cent difference in either direction was a reasonable range.

Even if it made a difference to consumers, there is no gas station today offering gas at $3.35 and 3/10s. The only value in continuing to use the 9/10s method is to potentially convince someone that they are paying one penny less for each gallon of gas.

We are then, to a large extent, repeating practices because we’ve grown accustomed to them – not because they actually add value -- or because they make sense.

The investing world is ripe with similar examples. Take, for example, the prospectus. This document has long been held out as the final resting place of all data that an investor in a mutual fund should consider prior to investing.  The prospectus, which was written by lawyers to befuddle other lawyers, is a required part of any transaction involving the purchase of a new mutual fund. 

Unfortunately, there are a few problems with the prospectus. First, it’s not written in English, at least such that any regular investor can make sense of it. Second, many of the finer points have been removed from it and placed in yet another voluminous document: the statement of additional information. Third, and most importantly, no one reads them. They are akin to the “I agree” box required to gain access to a website or a software program. 

Another example of a much repeated practice that adds little value is the word “fiduciary.” The ranks of those using this term as the basis of their marketing grows at a pace exceeded only by the number of new definitions, and sub-definitions, of what the word actually means. The only part of the investment world actively fighting the fiduciary phenomenon is brokers, who currently only have to meet the lesser “suitability” standard for their clients. After wading through all of the vagaries and disclaimers attached to those claiming to be some kind of fiduciary, I am beginning to think the brokerage community might be on to something. 

Lastly, there is the notion of ratings. Many things can be rated: the financial footing of companies, the overall economic health of governments, individual stocks, bonds and, of course, mutual funds. The common denominator for the various folks providing the ratings is that they can do a terrific job of evaluating the specifics risks and the potential upside – as long as you are looking for this information about a month after something bad happens to the instrument or entity being rated. 

We continue to pay homage to things like ratings, over-blown fiduciary claims and prospectuses for the same reason that we continue to put up with gas being priced with the 9/10s kicker: we’re used to it.

The investing world might be a significantly better place if we eliminated or dramatically revamped the usual practices in exchange for new ones that investors can understand, and that actually add value. Part of this change needs to come from investors. It is, after all, investors who continue to accept the status quo in terms of disclosure, disclaimers, conflicts-of-interest, deficient investments and equally deficient ways in which to evaluate them. If enough investors demand real change, and they back those demands with their investable dollars, anything is possible.

I, for one, am willing to cough up that extra 1/10 of a cent to get the ball rolling.

Marshall J. Cobb, CRSP, is president and founder of Cobb Retirement Solutions, LLC., an independent, fee-only firm offering qualified plan analysis and oversight exclusively to corporations and organizations. Cobb’s first-hand knowledge as a veteran representative of retirement plan vendors beginning in 1990 gives him a unique perspective as he advises his clients.  Cobb runs his office -- based in Houston, Texas -- with employees and clients across the country.