Expert: Paul Henneman - 3/17/2008

Question
Hi, hope you answer this.  We need advice.  We have ~ $400k in 401k's, IRAs and CDs all over the place after many years working in different companies.  We also recently received $100k to invest.  We are looking for a planner to help us establish a portfolio.  Although we're 59 years old, we don't plan on retiring soon.  We talked to a planner who was associated with AXA and he recommended converting everything to variable annuities.  Didn't like the sound of that so we have recently talked to a planner with UBS who recommended a Pace portfolio mix of stocks and bonds.  My only concern is there is a .95 management fee yearly for their service.  Is this good or bad? Is this typical of investment planners?  I don't think I could do this myself, or can I?  What is your opinion of Pace and UBS?

Thank you for any information you can provide.  Ben.

Answer
Thank you Ben for your question!
   Yes, UBS is a good organization. However, the main issue is if you should use a financial planner or not. This is a tough question, different for everyone.  There are some very good financial planners out there, and lots of bad ones. There will always be fees associated with someone else managing your funds for you. The goal is to find a manager that understands your goals, and is successful at achieving them. Many managers will move you in the direction they want (such as the planner that wanted to put everything in variable annuities) and not listen to what you want. So I agree it was a good move to go to a second planner.
  Unfortunately I am not familiar with that Pace portfolio. In general, a portfolio of stocks and bonds is a great idea. The main problem is the actual selection of which stocks and bonds. One stock portfolio could be a nightmare, while another provides consistently strong returns. It all depends upon the skill of the person putting together the portfolio, and the process they use for stock selection.
  The goal is that you want to see performance for your portfolio that exceeds average market performance, usually measured by the S&P500 index. You can always invest in an index mutual fund to get this market average performance, so if you are going to pay a planner some management fees, it would be because the planner can generate higher than average returns, while reducing risk at the same time.  Everyone has bad years, so the planner may not exceed S&P500 performance every year. But, over a long period of time, this should be the goal.
  I would ask the planner specifically for some performance numbers, what the historical returns and risk measurements are for that Pace portfolio. Look at this carefully, and please do not hesitate to follow up with me if I can be of any additional service!

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com