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Wachovia Securities - "FundSource"

My advisor has given me some information on a relatively new program they have for managed accounts through Wachovia. Is anyone here familiar with their "FundSource" program? It seems to me that it is essentially using Wachovia as your money manager as they "manage the managers." The fees I've been quoted are 1/2 of 1% per year. Our assets are in a "conservative growth" allocation, with 70/30 equities/fixed income, with the 70% of equities being broken down (of the total 100%) 15% international, 15% large cap, 25% mid cap, and 15% small cap.

Plus, they used this software simulation called "Envision" to map out our risk tolerance, plug in our incomes and retirement and education goals, and see what the resulting FundSource asset allocation and risk model should be.

It all sounds good. Plus, as I read this, I think its saying that this 1/2 of 1% is the only fee - no 12(b)(1) fees, no transaction costs, etc. I was told it normally is closer to 1% but got a break in the "points" for the size of the account. We've interviewed two other financial planners and this was our favourite of the three.

Anyone with experience with this please advise. This is my first time not just pumping funds into American Funds in my SEP, wife's IRA, 529 plans for the kids (American Funds 529 of Virginia, 25% Capital Income Builder, 75% Growth Fund of America, I believe, which we max out), or the after-tax account. I've gotten pretty significant breaks in American Funds' A share fees for size of amounts, but I think they have the added fees associated with them. I think they rebate/refund the fees charged and only take the

1/2 of 1%.

Not that I'm trying to be cheap - the fee sounds reasonable for someone who's managing assets. If they don't make a profit on me the world doesn't work, so I'm not trying to get something for nothing -- just want to know if anyone has experience with FundSource.

Thanks in advance,

Jason

Attorney, CPA Sherman, Texas

Reply to
Jason W. Richardson, Esq., CPA
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I don't have experience with the program, but it sounds reasonable to me -- with one caveat. If someone has (say) $1 million to invest, paying $5000 for a financial plan and good asset allocation advice may be reasonable, if they act on the advice. But a long-term asset allocation should not, by definition, change much from year to year. Why pay $5000 a year -- you can rebalance the portfolio yourself. Ask yourself (or them, if you are brave :)) how many hours a year it really takes to manage your allocations, and consider if the resulting hourly fee is reasonable. If not, try to pay for advice on an hourly basis.

Financial planners often criticize the use of actively managed mutual funds because of the higher expense ratios resulting from management fees. I think that managing a stock portfolio well takes more effort, ability and time than allocating assets or managing managers. Spending money on talented stock pickers -- if you can find them -- makes more sense to me than paying ongoing fees to a financial planner for things you can do yourself.

Of course, lots of people, left to their own devices, will make basic blunders in managing their finances, such as not saving enough, leaving all their money in a checking or money market account, or failing to take advantage of tax-advantaged savings opportunities. For them, a

0.5-1.0% annual fee can be worth it if the planner keeps them on track.
Reply to
beliavsky

Jason, I'm not familiar with their program but I'd be very surprised if you can get a managed portfolio of funds at a total cost under 100 basis points (jargon for 1.00% per year). I'll bet the 0.5% annual fee is on top of the expenses of the underlying funds. You should ask them for a copy of their Form ADV Part II which is the disclosure document required for every fee-based advisor. It will tell you all the costs involved. If the mutual fund costs are not built in then you'd need to look at the prospectus for each mutual fund to see what they would be.

As part of that you can also see if the 0.5% is their only compensation or if the funds they use compensate them in other ways (12b1's).

I'm not clear from your post, you may already know this. And you may decide that 0.5% is a fair price for mutual fund selection and periodic reallocation - I imagine that's what the fee covers.

-Tad (fee advisor, not affiliated w/Wachovia)

Reply to
TB

I don't think this is a good idea.

You are paying fees on top of the fees you already pay for the underlyiong mutual funds.

If you want to find high performing funds, subscribe to a newsletter. Hulbert Financial Digest publishes ratings of newsletters and it might be in your local library.

I have a "managed account" at Wachovia but it has individual stocks, not mutual funds. So I only pay once.

Frank

Jas> My advisor has given me some information on a relatively new program they

Reply to
FranksPlace2

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