How do I stop beating myself up about this financial mistake and fix it?
February 9, 2015 3:47 PM   Subscribe

So, in an attempt to get our financial lives in order in some very basic and fundamental ways (making a budget, sticking to it, identifying priorities, making sense of our retirement funds and plans) my husband and I went to a recommended financial planner. She was not one of these lauded "fee-only" financial planners but she came recommended by numerous people in my expanded social circle so we gave her a shot. While there were many positive things that came out of this, we did something that I am still very unsure about other than feeling certain that we made an utterly idiotic mistake.

This planner works for a company that rhymes with Ameri-fries and the big mistake seems like where we consolidated all our retirement funds (which were scattered about) into one of their funds. There was a fee structure where you do one-time up front or a graduated amount over a series of years. The one-time up front was less but "locks you in" for 5 years. Yeah, that's where I feel like an idiot. Sure, take a whole bunch of money off the top and lock us in. Yeah, seems like a good plan.

Anyway, this is a done deal. Or so I think? How do I get a second opinion on this scenario that is unbiased and who can outline options if it was a bad move? In my search for a fee-only financial planner I haven't been able to turn up recommendations from friends. I suspect this is because this kind of professional tends to serve a crowd that is somewhere above my current cohort. They seem to have an incredibly expensive hourly rate on par with lawyers. Anyone have experience with this?

I will say, that this representative did an amazing job of helping my husband and I cut through some of the grey areas of our finances, provide a language for he and I to talk about money in a way that significantly helped our relationship*, and helped us to prioritize in a clear way that has had significant payout. There was a small ongoing fee with her (very manageable and reasonable for the time that she spent with us) that seemed very worth it for the regular meetings we had with her and the progress we made. I can see why so many of my friends liked working with her.

However, I just can't seem to get over this near-crippling anxiety that consolidating our retirement funds was a bad idea, very detrimental to us, and stupid. But I don't really know what to do about it either.

*My new advice for couples these days who are having trouble: first hire a cleaning service then get financial planning advice. If you're still fighting after that, then get a marriage counselor. How much do couples fight about money and housecleaning? A lot. And, hey, if worse comes to worse, at least you have a clean house and your financial life in order.
posted by amanda to Work & Money (7 answers total) 4 users marked this as a favorite
It depends on the details of the plan. What is the annual fee / load for their fund? (It should be very low, like <1%.) If you're still worried, get a 2nd opinion. Consolidating all of the funds is usually a good idea, since it's easier to keep track of one fund than a lot of funds.
posted by sninctown at 3:58 PM on February 9, 2015 [4 favorites]

The one-time up front was less but "locks you in" for 5 years. Yeah, that's where I feel like an idiot. Sure, take a whole bunch of money off the top and lock us in. Yeah, seems like a good plan.

If the fund isn't going to take chomps out of earnings through annual fees (expense ratio), then lock-in isn't necessarily a bad thing for a retirement account. At least some degree of "set-it-and-forget-it" is likely to work out better than getting twitchy about the balance and having too much leeway to fiddle around with it before the magic of compound interest kicks in.

Is this an "all eggs in one basket" anxiety or a "what if in three years..." anxiety?
posted by holgate at 4:08 PM on February 9, 2015 [2 favorites]

There's a huge difference between not making the absolute best possible move (something that is impossible to do without hindsight anyway) and making an "utterly idiotic mistake." An example of the former are paying too much in mutual fund expense fees, while an example of the latter would be entrusting all your retirement money to a Nigerian prince who sent you a strangely worded email.

It sounds like you got some good value out of this in terms of the advice and benefits to your relationship. If you compare the extra fees you'll be paying over the next few years to the cost of a marriage counselor, you might well still come out ahead!

Going forward, it would pay to do your research as to whether you want to invest your future retirement contributions in these funds or put them in lower cost funds.
posted by zachlipton at 4:16 PM on February 9, 2015 [11 favorites]

can you link to the fund here? Looking at the fund's details might provide evidence it wasn't a major mistake - depending on the whether it has a "load" and what the expense ratio is, and what the fund invests in. If the details instead reveal it's as bad as you think it is - more motivation to get it changed.

Also - you need to know what sort of agreement you made that locked you in to this. Did you sign some sort of contract with them? There's presumably some way out, probably for another fee, but in order to judge how worthwhile breaking the contract is, you need to know what the cost is and how bad the deal you're in is to weigh the decision of when or whether to move your money.
posted by treehorn+bunny at 4:31 PM on February 9, 2015

In line with what others have said, this is more of a rookie mistake and not a horrible, idiotic blunder. So don't beat yourself up about it. Just resolve to make better choices in the future.

And to be a bit more specific about what some others have already said above, what you are probably faced with is a mutual fund load, which is essentially a fee for buying or selling the fund. Why should you have to pay a fee for such things? Isn't that a ripoff? Yes it is, and I left an IRA provider for dumping me into such a fund when I was young and naive. Again, live and learn.

If you can't find a better financial planner and want to stick with this one for a while, you may politely insist that she only suggest "no load funds" to you in the future. Preferably "no load, no transaction fee" funds - I am not sure if Ameriprise has these, but many brokerage services do. She may not be happy about it, but if she gives you a really hard time or even refuses to put you in any no-load funds, she is bad news and you should move along. Note that the next fund will probably have another minimum investment, so you may need to save up a couple thousand bucks before you can start with that new one.
posted by Joey Buttafoucault at 4:54 PM on February 9, 2015

This is very reassuring. I'm so, so glad that it doesn't seem like as big a blunder as I thought. And I really appreciate the details for helping me figure out next steps and figure out how to assess this deal. I have concrete things to follow up on now.
posted by amanda at 7:20 PM on February 9, 2015

I am an evangelist for fee-only financial planning and no-load mutual funds. But sninctown is right that consolidation is a really good thing, in general. It's much harder to make good decisions about investment goals when you are split among a half dozen locations, each with its own set of choices. So that part was almost certainly a good thing. It will make it easier to move if you decide to.

Others are correct that you're almost certainly not locked in, there are just multiple versions of the same fund with different characteristics, including a front-end load (what you likely bought) and no-load (but have higher annual expenses). The long and short is that you can move the funds if you want. Ameriprise offers its own funds under the Columbia label, but also funds from many other companies, so we can't tell you what you have just from the description given. If it were me, I'd move if the total expense ratio (including 12b-1 fees) was over .50%. Vanguard's Target Date funds are dead simple to operate (the "set it and forget it" of funds) and have expense ratios that are less than half that. It sounds small but the difference is huge over time. If the ratio is over 1%, you are getting seriously ripped off.

One comment on the high hourly rates of fee-only planners. The one you found almost certainly got paid big bucks for getting all your funds moved. I'm not privy to the details, but a commission of the first year's expense ratio wouldn't be out of line. That could be $1000 from a $100K investment. $300 for an hour of financial planning suddenly seems pretty cheap, doesn't it? We got a checkup with one, he charged us $300, told us to make a couple changes, and then basically fired himself.
posted by wnissen at 8:32 PM on February 9, 2015 [3 favorites]

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