Reverse Churning

The term "churning" applies to the number of transactions your financial advisor makes on your behalf. Typically, the term is used as an accusation; an advisor is "churning" if they make excessive or unnecessary trades just to generate commissions for themselves.

Reverse churning, as you might guess, is the opposite practice. Doing nothing. Just letting your portfolio sit there. Think about your cousin, who's been playing video games in his parents' basement, ostensibly "working on his screenplay" for the past 15 years. Reverse churning.

So...is that bad? If too much churning is bad, than reverse churning must be good, right?

No, not really. While you don't want an advisor getting crazy with their activity, you aren't paying them to do nothing. They take a fee for their services. If you wanted someone to do nothing, you could have invested the money yourself and saved the fee. (Or just had your screenplay-writing cousin add "investment advising" to his daily to-do list.)

Reverse churning suggests that your advisor is taking all the fees they collect and heading to the golf course every day.