My wife Stacy and I just came back from a short trip to New York City visiting my sister and 15-year old niece. We had a great time seeing some sights and just hanging out with friends and family.
While I was there I ended talking with a client about rebalancing their retirement portfolio. I took a look at my client’s portfolio, which was set up by a highly regarded professional financial advisor.
What I found was astounding… and not on the good side!
She was invested in 31 different funds!
I couldn’t believe it! Most of the funds overlapped each other in terms of investments and investing objectives, and had fees that ranged from .06% to 1%.
And unfortunately, this had been going on for over 25 years…
To make things worse, her account was setup for highly aggressive growth primarily in stocks, and she was within 10 years of retirement.
That financial advisor should be fired immediately and never be allowed to touch people’s money. The damage done to my client’s portfolio value over the last 25 years is high. Guess who profited the most from this portfolio allocation? Wall Street, not my client.
I estimate that over $100,000 was lost to fees and expenses from my client’s portfolio allocation vs. solely investing in low-cost index funds over the last 25 years.
So what did we do? We immediately got rid of all the high-expense funds with the exception of three low-cost index funds. These were the funds with the .06% expenses, which is fantastic. All the other funds were investing in the same stocks and bonds as the index funds, but only with much higher expenses.
We also reallocated her stock exposure to a lesser level to account for her age and risk tolerance.
I asked my client about how her account came to be setup this way, and she said, “My job keeps me too busy to deal with my retirement account. That’s why I hired a financial advisor. I figured they knew what they were doing…”
So there’s the lesson: You have to pay attention to your money. A little investing education over the years would have done wonders for my client – to the tune of around $100,000 more in her account today.
Don’t let this happen to you. Take control of your money and your financial future by getting a financial education!
Tomorrow’s post will go into some specifics of what you can do to create a retirement portfolio that enriches you, not your financial advisor or Wall Street.
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