By Nicholas W. Stuller
Marie has worked for over twenty years since graduating from college. She contributed to her past employers’ 401(k) accounts consistently but never had an advisor during her working career. In her forties, she married and had children and started to think more seriously about retirement. She had many IRAs and 401ks from multiple employers and investment firms, but had no idea where to start.
She has a friend who is knowledgeable about investments and financial advice and he recommended she get an hourly or flat-fee financial planner to look at her current investments and make sense of them. He provided her with a short list of hourly financial planners to contact. She contacted them and chose the one that she felt most comfortable with based on how their initial phone conversation went.
The planner charges by the hour and is fee-only, meaning she receives no compensation from any fund company. The planner wanted to meet in person and sent a list of things Marie would need to bring to the meeting. At the meeting, the planner reviewed all of Marie’s statements and accounts and asked about her desires for the future. There were two main messages the planner gave Marie. First, she needed to save much more money each year to ensure a comfortable retirement. Second, she needed to consolidate all the disparate accounts into two retirement accounts, a Roth IRA and a Traditional IRA, and move all the disparate funds into one lower cost target date fund.
The new fund is sponsored by a very well-known large fund company that has many low-cost, well performing funds. However, Marie was not given a clear indication from the planner on the exact annual cost savings the new fund would provide, versus the former funds she has. The planner gave instructions on exactly how to open the two new accounts and transfer the funds from the current mutual funds into the new fund. The instructions were sent via email and, in retrospect, were not well organized and not completely clear. It took Marie a number of hours and several weeks to get all the monies transferred and turned out to be a fairly frustrating process, as each fund company had slightly different procedures for transferring money out of their companies.
For some firms, the funds would be sent directly to the new mutual fund company. For others, they would only send the check to Marie, who in turn had to send that check to the new fund company. After a few weeks, the entire process was completed. Marie spent three hundred dollars for two hours of the planner’s time and now has just two accounts to focus on, with the same fund company. She is relieved that she has consolidated her accounts and now her focus is to work on saving more.
This story first appeared in my book THE TRUTH SHALL SET YOUR WALLET FREE: Secrets to Finding the Perfect Financial Advisor, published in 2018 by Post Hill Press.
Nicholas W. Stuller is the Founder and CEO of MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors using personalized data, proprietary algorithms, and deep industry experience.