401-k / IRA question

**Petunia 100** · 02-24-2014, 11:20 AM

You don't pay fees when you withdraw, you pay fees as you go along. In addition to any transparent fees (custodial fees, account maintenance fees, etc.), you are paying fees which aren't so transparent. All mutual funds have expense ratios. Sometimes, there are 12b-1 fees included, which may indeed be going on with your situation, in order to compensate both KMS and Fidelity. But this is purely speculation on my part, I don't know.

Do you know the ticker symbols of your funds? If so, you can learn more info about them, including their fees, by looking them up here: www.morningstar.com If you don't know your ticker symbols, ask your account representative.

**humandraydel** · 02-24-2014, 02:05 PM

Originally posted by Crispy97 View Post

Question #1: Do you see any red flags with what I elected to do? Is KMS FInancial a good place to manage my IRA? Potential fees concern me.

I don't know anything about KMS but I would be concerned about fees for any full service advisor. 1% might sound small, but compounded over years and years the 1% can add up to a significant sum at retirement. My only real recommendation to you is to manage your investments yourself with a low cost brokerage (like Vanguard, Fidelity, Schwab) and buy lost cost index funds. It will probably be overwhelming at first but would be well worth it in the long run (cost wise).

**mholl95** · 03-03-2014, 10:16 PM

Hi Crispy...I think there are a couple of things you can do to gain a bit of confidence about your situation. First, compare your current investment returns against the S&P 500. By some estimates, 75% of all mutual funds don't beat the S&P 500, which is basically a no-brainer barometer.

I don't know all the investments you have in your accounts, but knowing how the S&P has performed can give you a sense of whether the account executive is really doing a bang up job. If her suggestions aren't beating the S&P, then you can decide whether to continue with her or go in a different direction.

Second, request a breakdown of all fees. Talk to Fidelity, KMS, and the adviser. If they try to stonewall you, smack them around ;-) They should be able to answer all your questions, most of which seem very specific to your particular situation.

If mutual funds are involved, there will certainly be management fees. But there could also be commissions, 12b-1 fees, and more. Then come back here or research online to determine if those fees are reasonable. I tend to get a little leery about any costs beyond basic mutual fund management fees. But then again, your account executive may be providing other valuable services for you.

As far as rolling over the 401k funds into the IRA, it's hard to say without knowing how well the 401k was performing. But, the benefit of having the IRA is the flexibility to invest in a wide variety of instruments that probably weren't available in the 401k plan.

Cheers
Michael

**Crispy97** · 03-08-2014, 07:35 AM

Thanks guys. I appreciate all the great input.

**jIM_Ohio** · 07-24-2014, 05:49 AM

Originally posted by Crispy97 View Post

Hello,

I have a 2 part question..
First, FYI.. I'm 41 and my wife is 37.
I left a job in 2003. I rolled my 401-k into an IRA through "KMS Financial Services, Inc. - Pershing LLC as custodian" based out of Seattle WA. and was given an individual account executive. I've spoke with her a few times, face to face once. She seems to know her stuff and seems to have my best interest. My funds have done pretty well, and my balance has grown a decent amount.
Question #1: Do you see any red flags with what I elected to do? Is KMS FInancial a good place to manage my IRA? Potential fees concern me.

My wife left her previous job in 2008. I immediately told her we had to roll her company 401-k into an IRA, but I'm not sure we needed to or should have.. Her company 401-k was though Fidelity. We created an account through KMS, (with the same account executive I have). Again, we've met with her a few times, and she seems to know her stuff. my Wifes funds have done pretty well, too, and her balance has grown nicely, but all our statements she receives are still through Fidelity.. All the funds are Fidelity funds, but there's a KMS FInancial Services stamp at the top of the statement.
Question #2: Should we have just left her 401-K with Fidelity? Are we going to have to pay double fees upon withdraws to both Fidelity AND KMS? Should we move her 401-k somewhere else? If so, will we have to pay "exit" penalties or fees to current managers? I asked our executive this, but she didn't really have a straight answer for me� Maybe she just didn't know, or maybe she's not looking out for my best interest, and just wants her cut come withdraw/fee time..

Any input would be greatly appreciated.

Chris

KMS financial should be disclosing fees to you. If you think they did, they did not go a good enough job.

Ask a very simple question (and be sure to word it this way) to your representative:

"What is the total compensation from all sources you earn from me investing with KMS financial?"
There is likely a wrap fee or a fee for AUM (assets under management)
There might be a sales charge (a load). If shares are A, B or C, this is the case (and the load is usually in place of the AUM fee, but not always the case).
There might be 12b1 fees
and the mutual funds might also compensate advisors another way

It is OK to pay for financial advice, the important thing is to know what you pay, and know how the advice makes its way to you as a client. For example if Fidelity pays the advisor, there is likely a reason you are invested in Fidelity funds.

FYI Pershing is a common custodian.
KMS is paying Pershing to use them as Custodian

The best custodians are etrade and td ameritrade (both are independent) and schwabb is not far behind. Fidelity makes the list, but I don't trust them (they steal clients from advisors which use them).

FYI, I own my own financial planning firm, and I choose to use etrade as my independent custodian because they do not charge me to keep client assets there, and they have NTF options which keep client fees down.

401-k / IRA question