The World's Most Honest Money Manager Tells All

8. Should investors even wait for white knights in Washington to sweep in and reform everything?

Make no mistake: The pressure has got to come from the clients -- the money.

The individual investors -- the odd lot, as we used to call them -- can best serve themselves and the reform efforts by voting with their wallet. Go to the people that give you a fighting chance, the Vanguards and DFAs and other low-cost money managers who look out for your interests.

9. It has been estimated that more than 90% of money managers engage in soft-dollar commissions in one form or another. Why doesn't Aronson, and how have you been able to thrive without them?

Please don't think I think I'm smarter than other money managers on the issue of soft dollars. Every money manager worth his salt knows that economical trading is important.

In a way, we were lucky. Back when we started in Aronson in 1984, we just decided we would clear the decks of anything conflicted and stay above board.

Was the appeal of soft dollars tempting? Oh, yeah. You can use soft dollars to pay for anything. We could've booked tens, hundreds of thousands of moolah. When institutional crossing [electronic-communication trading networks] was invented in 1987, we learned we could twist it and use it for our own active trading. Since we didn't engage in soft dollars, our costs were low. So, here we are, because of our dumb decision to play it straight. Plus, I realized we get the additional benefit of being able to say to clients, "No soft dollars here! Never have, never will."

Look, we don't think we're better than a Morgan StanleyMWD or a Goldman SachsGS. But the low estimate on the cost of soft dollars is $1 billion. That's a big slush fund. Add in 12b-1 fees and other stuff, you're talking about $10 billion. That's a big number.

Why do others use it? I think it's obvious.