Guidance required on separately managed accounts

I smell high fees. A high expense product you will pay someone handsomely to sell you. A Google of Curian led me to their web page, and it says that they are a division of Jackson National Life Insurance. Spend more time with this advisor and I'm thinking you're going to walk away with a variable annuity.

Read the books -

Learn about asset allocation - And understand that excess fees over the long term are a growth killer. JOE

I went to Curian's website and looked through their literature. The idea looks to be in exchange for higher fees (typical +2%), you might sleep better at night knowing professionals are managing your money. My personal opinion: the products/services offered aren't that unique -- they sound like target funds except your money is kept separate from other shareholders.

snipped-for-privacy@gmail.com wrote:

Non-insurance-selling financial advisors also pitch Curian. In fact, just such a pitch was the impetus for me to participate in this newsgroup.

I received a full workup from an FP suggesting Curian. After filling out all the survey material, I was classed as a "Very Aggressive" investor with a risk tolerance score of 95 out of 100. So far so good.

The main selling point of their plan was that I would get a better return net of expenses, despite the fact that the wrap fee they wanted to charge me was 2.4%, because of their great team of investment managers. Their fee was supposedly inclusive of all costs including trading costs and such that are not reported by mutual funds within their expense ratio. So they worked up the costs of the mutual funds I was holding at the time to show me what I was really paying. 2 out of my three funds were still less expensive than Curian's wrap rate. Hmm...

I also received a target asset allocation plan that was optimized for my risk tolerance. Their allocation plan, not surprisingly, was radically different than the allocation I had at the time (and probably now as well, I don't allocate intentionally). But if you took most of the blend allocation of the S&P 500 (when looking at a 9-cell asset allocation matrix a la Morningstar), divided it evenly, and plopped one half into the growth cells and one half into the value cells, while maintaining the allocations based on company size, you got my recommended asset allocation. That is, pretty durn near the S&P 500, except with very little of the blend category. This made me a bit nervous - paying 2.4% to get a closet S&P 500 index fund.

But maybe my account would fare better than the mutual funds I held at the time, net of expenses. After all, I did have one fund that had higher expenses, right? Well, Curian projected my future returns using their allocation and managers, before expenses, at 9%. They projected the expected return of my existing mutual fund portfolio at 12%. After expenses, even my high expense mutual fund was projected to stomp their account. Why would I use them? I didn't.

That was only two years ago and I don't know how their exact allocation performed, but my portfolio has stomped the S&P 500 since I received their pitch. And I measure the performance of my portfolio *after expenses*.

YMMV,

-Will

So my instinct was right? I don't begrudge the 1% planners their fees. But it seems to me that given the fact that fewer than half of any manager can beat the average (50% should, but after trading expenses, it would have to be less) that a 2.4% drag would shift the chances of matching market returns to something less than 45%, and over time, less than that. JOE