Question: “I’m 67 years old living – or trying to – live on $2,200 Social Security a month. I don’t trust my financial guy. I rolled over a roughly $500,000 IRA to him without really digesting how much his 2% AUM fee would add up to. He invested in about six different funds, Class A, which cost me a lot up front. He charges 2% to add additional money. My return was 26%, but I know year to year that will vary.
He keeps bugging me for additional funds for an individual account (which I currently have in a 5% CD coming due in March). I need to get out of this situation but am woefully not very knowledgeable about investing. Even though I likely wouldn’t make a 26% return, can I roll those funds into an online Vanguard or Fidelity account? Should I let a robo investor do its thing? What if they don’t accept my funds? Do I need to hire a new financial adviser to help me and if so, what kind?”
Have an issue with your financial adviser or looking for a new one? Email picks@marketwatch.com.
‘Some airline passengers are gross’: I don’t understand why they cheat to board early. Why do they act like savages?
‘This flies in the face of my morals and ethics’: My father cut my sisters out of his six-figure estate. Should I push back?
‘DJT’ is booming. Here’s why other SPAC stocks haven’t been so lucky.
The Russell 2000 is flawed — this ETF plays it in a better way for quality
Why stock investors have been on edge over the prospects of a total sweep for Republicans
Answer: At the highest level, if you don’t trust your adviser, get out – and that may be especially true in this case, as his fee is very high. “Right off the bat, a 2% AUM fee is quite high, regardless of whether the adviser is just managing your portfolio or providing comprehensive financial planning services. To put you in loaded mutual funds, from which he or she benefits directly on top of that, is outrageous in my opinion,” says certified financial planner Bruce Primeau at Avantax. Typically an AUM fee is roughly 1%, and can sometimes be negotiated down from there.
What’s more, the load you paid for the funds is a sunk cost, says Primeau. “In other words, you won’t get that back should you decide to leave your adviser and sell those funds. My recommendation is to find an adviser that is a fiduciary for you – and not the company they work for – who will look to minimize your fees and invest your portfolio more tax effectively,” says Primeau. Basically, if you’re working with someone who tacks on a sales charge or commission, they’re not a fiduciary because there’s an obvious conflict of interest that could interfere with what’s actually best for you.