DIY or Use a Professional?
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That’s the focus of this week’s Ask the Expert column over at CNN Money. The reader is asking if they should turn over their $1.5 million savings over to a professional to run for a fee of $2,500 per quarter.
Basically, the question comes down to how much you want to do. The fee the financial advisor is charging is equivalent to 0.67% per year. That is on top of the fees that the mutual funds will charge. As the “Expert” points out, that’s cheap for a financial advisor but can it be avoided entirely?
As I’ve said before, I believe it can. Even if you have no idea of where to invest (if you have $1.5 million in savings you’ve done pretty well already) you can go to a fee-only financial planner that suggest where to put your money without specifically trading for you. It will be much cheaper than having the financial advisor trading for you, even if you go back every year.
Additionally, they could put their funds in a “lifestyle” fund such as Fidelity’s “Freedom” funds, Vanguard’s Target Retirement funds or T. Rowe Price’s Retirement funds. I’ve discussed these funds before (another time when the “Expert” slammed financial advisors rather than softly recommending them here) and I think they are good funds for those that don’t want to mess with portfolio allocation and similar concepts, but I believe people can do better by either researching on their own or going to a fee-only advisor.
I always suggest going with T. Rowe Price’s fund because it is more aggressive and puts more of the money in equities at every stage. Historically, returns are higher on stocks so T. Rowe Price’s fund will put people in a better position to retire than the other funds will.