Many investors are still in the dark about fees despite new disclosure rules requiring retirement account advisers to act in their clients' best interest.
Staffing a free financial planning session in Akron, Ohio, recently, financial adviser Kristen Kuzma spoke with a man in his 50s who wanted a second opinion about the fees he was paying his adviser.
The man thought he was paying $135 for the financial adviser's time but, in fact, was paying 1.35 percent of his assets every year for the advisor. And his money was invested in relatively expensive mutual funds that were underperformers, some with additional sales charges over-and-above the expense ratios, said Kuzma, a certified financial planner with Fairway Wealth Management in Independence, Ohio, who does pro bono work through the Financial Planning Association.
Throughout October, the association is hosting free financial planning sessions where the public can walk in and speak with advisers who hold the CFP designation, considered one of the more rigorous in the field. Check out dates and locations at www.financialplanningdays.org. Cities hosting events include Chicago, Los Angeles, Baltimore, Indianapolis, Cincinnati, Phoenix, Sacramento, Calif., San Antonio, Texas, St. Paul, Minn., and Atlanta.
"We get a lot of people who don't understand the fees they're paying," Kuzma said. "They'll say family members have told them they are paying too much or that they're in investments that are inappropriate, but they don't really know what to do."
As for the fees, she counsels investors to understand what they are paying and what the alternatives are, she says, including finding advisors who charge lower-percentage fees or ones who charge by the hour or by the project.
Many times, she says, people come in holding paperwork for annuities or life insurance that they didn't really need, which typically isn't something an adviser can help fix in a brief conversation, Kuzma said.
"That's the challenge in only being able to talk with people for a few minutes," she said. "In reality you can't just look at annuities on their own or taxes." Everything in a financial life works together, or doesn't, she said, and getting people to understand they need a comprehensive strategy can be challenging.
Of course, free events like these can come across just as self-serving as the free steak dinner seminars advisers sometimes use as marketing gimmicks.
But savers can certainly use the sessions to test out their own knowledge or get a second opinion on their retirement strategies. This year, for example, Kuzma said advisers were boosting the recommended amounts of money that clients keep in emergency reserve funds, particularly in markets where it's taking longer to find jobs.
People also frequently ask questions about splitting assets in divorce situations, she said. And like a lot of other detailed financial situations in life, there isn't always a quick, satisfactory answer.
"We always get quite a few people at these events that are going through a divorce and are completely blindsided by what is happening," she said. "Often someone will say she's been saving diligently and the soon-to-be ex- has been blowing through money, so is there any way she can keep what she's saved. And the answer is usually, 'Probably not.'"
