Beware Expensive Funds (and Those Selling Them)

This morning, a post over at Free Money Finance pointed me to a USA Today article on expensive mutual funds. The article brought to mind my first (and only) meeting with the investment advisor my employer personally suggested talking to when I first qualified for the SIMPLE plan offered at work. My employer didn’t necessarily suggest investing via this advisor – he has certain qualms with the aggressiveness (or lack thereof) of the investment style this guy uses – but he thought it might at least be useful to spend some time talking over how I might like to allocate my investments.

I wasn’t really sure what to expect, since I’d never met with an investment advisor before (mostly because before, I had nothing to invest!). But I assumed we’d discuss what my goals were, what I was currently invested in and at what level, risk tolerance, and so on. So I did a bit of research before our meeting, gathered together some recents statements from our (ok, my wife’s) retirement accounts, chatted with the wife about what her opinions were on what we should do with these monies, and, overall, was fairly excited to have a conversation with a supposed professional concerning a fairly important aspect of my financial future.

What’d I get for my preparation? A half hour of the gathering of my personal information, even though I stated fairly explicitly at the outset that I wasn’t sure who I’d be investing through. Followed by having him ascertain how much I had to invest initially, and how much more would be coming in monthly. And then hearing him talk up a variety of funds that he felt I should buy into, based not on my goals, risk tolerances, or missing aspects of my current retirement plan (as he didn’t have a clue as to what was in my current retirement plan, since he didn’t bother asking me question one about that), but on, well, I’m not exactly sure what. I never did discover the rationale. He did have some pretty explicit suggestions though: a nice little group of expensive Class C funds and a smattering of high front load Class A’s, all from a single fund family from which, I’m going to presume, he receives especially tasty fees. All the while hyping the last 3 years earning data on those particular funds.

Let’s just say I felt fortunate that I had done that bit of research before the meeting, and didn’t think twice about foregoing his advice!

[tags]investing, front load, mutual funds, risk tolerance, do your own research[/tags]