Considering Recommended Funds

Q. I am considering rolling over my 401K from my prior employer in an IRA. I am 40 and the 401K has $170,000. I met with an investment consultant (who is a CEEP) and she recommended #### variable annuity or 3 mutual funds. I am going to stay away from the variable annuity after reading your articles. The funds she recommended are Fidelity Mid Cap II, Fidelity Diversified International, and John Hancock Classic Value.

My 401K currently consists of Columbia Acorn Z (67%) and Morgan Stanley Emerging Market B (33%). I have not commited to this financial consultant and am looking to maximize my returns over the next 25 years.

What do you think about these funds?

A. The first thing you need to think about is what type of advisor do you want to work with long-term? From the investments that she is recommending, it is obvious that she is a commission-based advisor. Even if she is fee-based for the mutual funds, your will still be paying the underlying fund expensed plus her fee or commission.

More importantly, you want and need the flexibility to change your investments based on your situation and changing market/economic environment. Most advisors put you in an investment and move on to the next person. Will she actually be managing your money after the sale? If so, what processes and procedures does she have in place that insure her systematic attention?

For instance, my clients expect me to look after their money. They want it to grow when the market is good but they want me to protect it when the market is bad. This won't be done if I just throw them in an investment and forget about it. This can't be done if I review their account quarterly. That's why I've developed systems that monitor every investment in every account on an almost continuous basis.

If situations arise such that profits should be harvested, action taken to protect the client from loss of principal or take advantage of an opportunity, I am alerted and make the decision. As a result, when my clients see the market dropping like it has so far in October, they don't have to worry because they know that I am closely monitoring their investments and am taking action to protect their gains.

I believe the advisor you use will affect your return and your satisfaction much more then the specific investment.

Currently, I am researching ways to open up my money management services to a greater number of people at costs that are 50% less than those typically associated with an advisor. This may happen in the next several months. This is a long-term decision you are making. For now, you might consider staying where you are at until you explore other options.

Your posted comments on this and other questions are welcome.
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