That's how I feel sometimes when I meet with new clients. We go over the principles underlying low-cost well-diversified index investing. We cover the thinking behind different asset allocation models and the importance of sticking with an asset allocation strategy through the ups and downs of the market.
Then we look at their investments. More times than not they include several bank accounts, multiple 401(k)s, IRAs and taxable accounts. The taxable accounts include inherited stock, and they look at me quizzically when I ask about cost basis.
The Funds they hold include front load, back load, and everything in between. Some hold private collective funds on which it is difficult to understand the management fees.
The bottom line is we need to go from a smorgasbord of investment vehicles to a well-structured basic asset allocation comprised of low-cost index funds. Sometimes I feel like the Maine farmer.
But usually it is best to proceed slowly. Take one account at a time. Know exactly where you are headed and take baby steps if necessary. Understand each investment. If it's a taxable account, look at capital gains - are they long term or short term? Look at the Funds - are they load Funds? Does it make sense to hold for a while to lessen the deferred charge?
If moving accounts to a new broker, can the Funds be moved "in kind"? If not, how will your overall asset allocation look over the transition period?
Sometimes it pays to have an advisor take over during this set-up period. An advisor knows how to get from where you are to where you want to go on a tax-efficient basis. In many instances, once the account is finally set up so that the asset allocation is clearly understood and assets are invested in low-cost index funds, the advisor can bow out and the client take over.
I agree that it's best to have an advisor set up the initial accounts. Helps keeps costs down because professionals know where to get the best rates.
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