Mutual Fund Advice to Avoid

Would you pay a Ford dealership for a recommendation on what type of car to buy?

Obviously it’s a foolish idea to consider. But, mutual fund companies charge clients regularly for this sort of advice, which most covers services they provide other investors for free.

Portfolio advice services offered by some of the largest mutual fund companies snare many investors for annual fees that one firm lists start at $4,500 annually. These services offer custom portfolio recommendations and implementation with regular portfolio rebalancing.

Investors should pause for a few seconds before handing over thousands of dollars in fees for something these firms should be offering for free. The fees charged are for absolutely nothing the company does not offer its clients already without charge, other than a fancy, personalized report, and an advisor on call for questions, a service which could be received from an independent advisor for significantly less on an as-needed basis.

What is it? A very basic investment portfolio, customized for your ‘risk tolerance’ and made up of in-house mutual funds.

Where else can you get this advice? An independent advisor, or the fund company themselves. Fund companies offer mutual fund models of their funds (for free) for your particular situation in retirement date, target-risk, and balanced fund options. Though I do not recommend these funds, if you must use a certain fund family for your investments, simply using these funds is a much better idea than paying for asset management services from a fund company.

What if I need the advice? Hire a financial advisor, either one who charges the same (or in many cases significantly less) for an unbiased management service; or, consider speaking with an advisor who will charge on an hourly rate to review your portfolio regularly.

The preceding blog was originally published by Forbes. To view the original blog please visit our blog at Forbes.


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