A mismatched comparison is not a neutral piece of information. It actively misleads, and it usually misleads in whichever direction is currently convenient.
To answer whether a result came from the decisions being evaluated or from the market the portfolio was exposed to.
That only works if the benchmark has similar exposure. Otherwise you are measuring the difference in exposure and calling it skill.
Comparing a diversified portfolio to a single large-company equity index.
The portfolio holds bonds, international exposure, and other things the index does not. The comparison tells you which asset classes did well, which you already knew.
Mismatched benchmarks look good in some conditions and terrible in others. The temptation is to present the comparison when it flatters and something else when it does not.
That is cherry-picking and it is exactly what the Marketing Rule prohibits.
Choose the benchmark before you know the answer, then live with it.
A weighted mix reflecting the portfolio's actual target allocation. More work, more explaining, and the only comparison that answers the question honestly.
Frequently not an index at all. It is whether they are on track for the thing they are saving for.
Progress against the plan is more useful to most clients than relative performance, and it does not carry the same regulatory weight.
When a client compares themselves to a single index they heard about, do not dismiss it. Explain what it holds, what their portfolio holds, and why the difference exists.
That conversation is the allocation conversation, arriving in the form of a question about a number.
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