Hello Reader,

Don’t take this personally. But chances are I hate the financial institution that’s managing your retirement account.

It’s not you. It’s them.

In many cases I suggest clients consider using Vanguard funds to manage their investments, including retirement funds. I’m also a fan of Betterment.

Neither of these financial institutions is perfect. You still have to do your diligence and understand what services they’re offering and what fees you’re paying.

But in most cases, I think they do a very solid job.

But a lot of folks I work with have their investments housed at other financial institutions.

Not a big surprise - there are a lot of financial institutions out there. You have a lot of choices.

So frequently I get asked if the investment guidance I’m offering could be implemented at a different financial institution.

And I always want to say, sure, we can probably figure that out.

But it seems I always run into… some issues.

I have one particular case and one particular financial institution in mind, but they’ll remain nameless. Their legal budget is probably a lot larger than mine. (Understatement of the millennium.)

Here’s how the story goes.

The investment advice I give is always some variation on the same theme: buy and hold a highly-diversified, passively managed portfolio of low-cost funds.

Contrary to a somewhat popular belief, investing in the lowest cost option isn’t always the most appropriate choice. But finding reasonably priced investments is always one of the most important factors.

And reasonable cost is where things tend to go south.

There are several, very well known financial institutions that offer an array of extremely low cost mutual funds.

But wait - that’s only some of their funds!

Just when you’ve become convinced that this financial institution is one of the good ones - that they offer all these amazing choices of low-cost mutual funds. That’s when you’re in trouble. That’s when they sucker punch you with this one (heavily promoted) fund that seems just perfect for you.

And has perfectly insane annual fees attached to it.

But that’s ok - they also have this special type of account. That account is eligible for discounts on those (insanely) high mutual fund fees.

Yah sure, that special account does have additional fees of its own. But, you know, you gotta spend money to make money. Or something like that. Right…?

So now, we’re trying to understand at least three different sets of fees: the base mutual fund fees, the additional fees of that special account type and then the discounted mutual fund fees.

All of this gives me a headache and frankly makes me mad.

Call me a cynic, but to me it feels like engineered complexity to confuse you into parting ways with more of your hard earned money.

But then, this is the financial system we’re talking about. Engineered complexity, hidden fees, and bilking unsuspecting investors has been part of the game for centuries.

What’s the solution?

The solution I frequently tell folks is that we should just move their investments to Vanguard or Betterment.

(That may or may not be the right move for you, btw. Don't take anyone's advice, including mine, until they've thoroughly understood your personal financial situation.)

Yah, it’s a pain to move your investments. But you know what’s a bigger pain? Constantly having to be on guard to changing fee structures.

I wish I could say just move to Vanguard or Betterment and rest easy.

But of course, it isn’t that simple.

I’ve had mostly positive experiences with Vanguard and Betterment. I think both companies are run with good intentions. But that doesn’t make them perfect. They’ve both made mistakes.

The - perhaps sad - reality is that when dealing with the financial and investing world, you sorta can’t let your guard down.

It helps - a lot - to be working with a financial institution that has a good track record of fair dealing and low costs. That’s why I typically recommend Vanguard and Betterment. You’re starting from a better position.

But mistakes still get made.

There is still a lot of complexity to navigate. (Sometimes seemingly innocuous choices create a bit of a mess.)

And companies and their policies change.

So yah, you have to stay engaged.

It feels a bit harsh, but perhaps - yes, you need to keep your guard up. Just a little.

This reality is just one of the reasons the only way to ensure your financial security is to develop the practice of consistently engaging with your money world.

Money will be a life-long partner of yours. You, me - all of us - need to spend time nurturing that relationship — and building the skills to ensure the relationship with money is a healthy one.

Sometimes having a trusted partner to help you navigate this complex financial world is invaluable. That partner doesn't need to be a professional - but they could be.

That’s why I work as a fee-only financial planner. Fee-only means the only money I earn is from what my clients pay me directly. I never earn incentives or commissions from any product I recommend - whether that’s an investment, insurance policy, bookkeeper or online course. (Insanely, btw, a ‘fee-based” advisor is entirely different — they DO earn those hidden incentives and commissions from their recommendations.)

Not everyone needs to work with a financial planner. But everyone does need to have an ongoing money practice. For some, a financial planner can be an invaluable partner to make that lifelong money practice a bit easier - a bit more manageable.

Anyway, I’ll step down off my soap box for now. Be careful out there!

Best,
Dave