Financial advisors at fund firms can help you invest less in fees

Times Staff Writer

When Sam Ahmed needed help investing the proceeds from the sale of his overnight-delivery business, he didn’t want to hire a pricey advisor or rely on generic information from the Internet.

So he turned to a financial planner at Vanguard Group Inc., who recommended a slate of mutual funds. Because Ahmed’s portfolio exceeded $500,000, the advice was free.

“It was an excellent middle ground for me,” the 55-year-old Missouri resident said. “I didn’t have to pay $2,000 or $3,000.”

Aware that even the hardiest do-it-yourselfers want occasional hand holding, fund companies such as Vanguard, Fidelity Investments and T. Rowe Price Group Inc. offer individualized portfolio advice at modest prices.


“We fully believe this is critical to our business,” said Michael Mitchell, who manages Fidelity’s Century City branch.

The programs provide basic investment advice and access to financial planners for people who don’t need, or believe they can’t afford, the detailed work-ups done by traditional planners.

The services appeal especially to people who have been investing on their own but want a professional looking over their shoulder now that they’ve accumulated a substantial nest egg.

The fund-company planners analyze a client’s investment mix and recommend specific mutual funds -- a benefit for people who are paralyzed by the welter of choices available.


Although each fund family would prefer that you buy its mutual funds, the planners do not have the direct conflicts of interest that often plague the investment world, with advisors basing their recommendations on which investments pay them the largest commissions.

And the fees can’t be beaten -- ranging in most cases from free to $250 for a financial plan.

The programs make “financial planning available to a large population that we as financial planners don’t touch well,” said Judi Martindale, a certified financial planner in San Luis Obispo. “You’re getting a third-person professional view of your finances for a reasonable price.”

But the services aren’t for everyone.


For one thing, the advice is aimed largely at people investing for -- or in -- their retirement. If you need help in complex areas such as insurance or estate planning, you’ll probably want a higher level of assistance.

“It’s decent investment advice [and] it’s going to be good enough for most people,” said Eric Toya, a planner at Leonard Wealth Management in Redondo Beach. “But it’s not a [full] financial plan, and it’s not necessarily the best investment advice.”

In addition, the investments recommended by Vanguard and T. Rowe Price are primarily culled from their own line-ups -- but that’s not surprising or necessarily bad considering that the firms have broad and well-regarded menus of funds.

Discount brokerage Charles Schwab Corp., which sells thousands of funds including some that it manages, picks from among all the funds. Fidelity, which runs a similar clearinghouse of third-party funds, says it also recommends outside funds. Both firms say they vet the quality of the third-party offerings.


“Sometimes Fidelity funds are the best fit,” Mitchell said. “Sometimes they’re not.”

Another drawback is that the fund companies typically don’t recommend specific investment options for your 401(k) or college savings plan -- crucial areas for many investors. Although a planner will discuss these issues with you, you might have difficulty applying the formal recommendations to the plans in which you have money invested.

(Vanguard will recommend funds in a 401[k] based only on a suggested asset allocation, not other attributes of the funds, such as their fees or managers.)

The firms say their services are designed to give customers a solid financial footing.


“A lot of the industry is out there trying to make this seem like rocket science because that’s how they can make money on it,” said Eric Daugherty, head of Vanguard’s financial-planning unit. “We don’t think it needs to be that complicated for most people.”

Schwab offers a free advisory service known as a portfolio consultation as well as full financial plans for $2,000.

Casey Mervine, a Schwab financial consultant in Torrance, said the company doesn’t push customers toward the more expensive option.

Clients “come in and they say, ‘Am I doing this right?’ and we don’t say, ‘You need a $2,000 financial plan,’ ” he said.


The services ask you for basic financial information, including your total savings, long-term goals and risk tolerance, and feed the data into a computer program. Planners can tweak the resulting recommendations based on your specific needs and goals.

The firms say they have no preset limits on the number of conversations or in-person meetings with a planner.

At Vanguard, a client typically has one 45-minute conversation with a planner, Daugherty said.

“Most of our clients are well-served with one,” he said.


At T. Rowe Price, investors have an average of three conversations, with the initial talk lasting about an hour, according to the company.

“If it takes two hours to talk to a client, that’s OK too,” said Christine Fahlund, a T. Rowe senior financial planner.

You can talk with your planner by phone or, if you prefer an in-person meeting, at a branch office.

Fidelity and Schwab each have a number of locations in Southern California. T. Rowe Price has a Century City office. The closest Vanguard office is in Scottsdale, Ariz.


Ahmed said the advice from his planner at Vanguard, who recommended a portfolio of about 10 funds, was just what he needed.

“They take the time to explain it to you, and they go through it thoroughly,” he said. “They don’t push you. They let you make the decision yourself.”