Cover story

Where to put your money We judge advice and brokerage service at major financial companies

eposit $75,000 or more into ings or income analysis prepared by an ad- how clients seeking advice are served. And a new or existing brokerage ac- visory counsel under the supervision of a we asked major financial-services compa- count at Charles Schwab and certified financial planner. Vanguard of- nies to prepare investment plans based on you could be eligible for a new fers a free plan by a CFP if you transfer or the profiles of five of those staff members. DAndroid smart phone. Move your money roll over at least $100,000. Two independent financial planners and to TD Ameritrade and get 60 days of Whether you’re a seasoned investor, a commission-free­ online trading and a pos- newbie, or someone retesting the waters sible bonus of up to $600. Bank of Ameri- after a scary loss, financial-services com- 1 did you know? ca’s Edge has up to $500 waiting panies want your business. But aside from for anyone opening a new IRA. potential incentives, what will you get for At Fidelity and Schwab, clients can get moving your accounts? Is the service up to a complimentary investment plan created par? Is even free advice worth your time? by a financial adviser. Merrill Edge has a Consumer Reports investigated what similar offer for clients with less than financial-services companies are really $250,000 in “investable assets”—stocks, providing to their customers. We surveyed That’s the percentage of survey bonds, and mutual funds, for instance. our online subscribers about their experi- 37% respondents who selected their brokerage Establishing, transferring, or rolling over ences with their . We sent staff based on a recommendation from family, $100,000 or more to T. Rowe Price entitles members into brokerage offices in New friends, or a professional.

you to a free asset-allocation­ plan and sav- York and Washington state to experience negley keith illustrations:

20 consumer reports february 2012 their teams evaluated the appropriateness ents’ interests ahead of their own and hats and be held to the suitability stan- of the advice in the companies’ plans. disclose all conflicts of interest. Brokers dard when selling products to follow Our results reveal good news and cau- are held to a suitability standard, mean- through on their recommendations.) tionary notes. If you’re an active investor, ing only that their recommendations There’s no arguing with the price, but like most of the subscribers who respond- must be suitable for you. So a could we wondered whether free advice was ed to our survey, you can feel good about suggest a particular mutual fund that fits worth consumers’ time. So in late sum- the level of service and help you’ll get at your asset-allocation needs but has higher mer and early fall last year, seven Con- major U.S. brokerages, we found. We also sumer Reports employees in New York discovered that investors of all stripes can You’ll need to have and Washington state went as themselves get free, basic investment plans from sev- to branch offices or websites of banks and eral financial companies. But to make the an account before investment companies where they held most of that advice, you’ll need to under- accounts and asked each for an invest- stand the process and be aware of the you can get free ment plan. They didn’t mention that they plans’ limitations. investment advice. also were doing research for a CR article. Highlights of our three-pronged inves- We also sent profiles and financial in- tigation include the following: fees than other, comparable options. formation for five of the testers, who were • Our readers were very satisfied with 10 of (Complicating matters, brokers might also not identified, to four major financial 13 major brokerages. USAA’s brokerage be “dually registered” as investment ad- companies—Charles Schwab, Citibank, arm led in overall satisfaction. , visers. And as advisers, they’re held to the Fidelity, and T. Rowe Price. The companies an online broker, and Vanguard, the fiduciary standard, but they can switch received identical information but were mutual-fund giant, also scored very highly overall as well. • In our field test, participants encoun- tered some questionable sales tactics. One Pitches, hedges, and fudges: What to look out for staff member was shown a chart on a port- Whether you’re paying for advice or some other way. Ask on your first visit. folio’s performance that omitted the sig- getting it free, keep an eye out for these And once you see the adviser’s detailed nificant impact of fees. Another tester was red flags seen by our testers who investment recommendation, ask again pitched a complicated annuity product shopped recently for investment plans: for a full accounting of the fees involved though the adviser knew little about her. with purchasing the investments, holding • Plans prepared for us by Citibank and Variable annuity pitch. One tester in her them over time, and selling them. T. Rowe Price had somewhat more appro- mid-50s and focused on early retirement priate advice. Two expert financial plan- was offered a Prudential variable annuity Target-date-fund recommendation. ners analyzed 20 investment plans created at her first meeting with a Citibank If you don’t have a large retirement nest adviser. Variable annuities, marketed to egg, your adviser might suggest a for us by Citibank, Fidelity, Schwab, and preretirees seeking guaranteed income, target-date fund, which is a portfolio of T. Rowe Price, and judged them about are complex insurance products that can stock and bond funds based on your equally good. Citi and T. Rowe Price include costly embedded fees. “A variable expected retirement date. Over time the earned somewhat higher marks for the annuity has a number of tax- and asset mix shifts to favor bonds. Target- appropriateness of investment recom- investment-related features that would date funds appear to be good options for mendations. Citibank’s approach toward demand extensive analysis before a investors who want to manage their own planning was deemed more comprehen- recommendation is made,” said David accounts with little fuss. But the sive than the others’. Yeske, a certified financial planner who Consumer Reports Money Lab’s recent served as one of our project judges. If an study of 156 target-date funds found that Still, our judges found inappropriate adviser brings this up after just meeting high expenses were one drag on their advice in several plans. They also found you, find someone else. performance. Of the 26 fund families that most of the documents to be filled with have offered target-date funds for at least boilerplate language and short on real, ac- Focus on proprietary funds. Some four years, more than half had funds with tionable advice. testers received recommendations expense ratios exceeding 1 percent of that included mainly funds from the assets, on average. (Vanguard’s index- Judging the free advice investment company they were visiting. based target-date funds in our study were We learned that free investment advice No surprise there. But always ask what the cheapest, with average expenses other, similar alternatives are available, below 0.2 percent.) Ask the adviser to from financial companies is not always and at what cost; you’ll want funds with lay out the costs and alternatives. free. To be eligible, you have to have an ac- low expense ratios. Sometimes the house count, and some companies require a brand might be the best option. Silence on fiduciary duty. None of the specified level of assets. branch-office and phone advisers at the Most of the financial advisers we en- Sealed lips on compensation. Few of brokerages and banks mentioned fiduciary countered at that entry level appear to be the advisers our testers met in branch duty—that is, an obligation to act in the brokers (also referred to as registered rep- offices volunteered how they were best interest of the client. We surmise that resentatives) and not certified financial compensated. You have a right to know most were acting as brokers, who need whether the adviser is being paid a salary, only make "suitable" recommendations. planners. The distinction is important: a commission based on sales, a If your adviser doesn’t volunteer his or her CFPs pledge to adhere to a fiduciary stan- percentage of the assets managed, or credentials, ask for them. dard, meaning they must put their cli-

february 2012 www.ConsumerReports.org 21 cover story where to put your money

allowed to e-mail the participants addi- sets, or the right kinds of assets, were tional questions through a reporter. Tes- Our test subjects sometimes rebuffed. Katerina, 33, who ters also filled out the companies’ faced both subtle wished to roll over a five-figure Merrill questionnaires, which asked about their 401(k) to a Merrill IRA, found that by law tolerance for risk and other concerns. and strong she couldn’t get advice until she moved (Four companies—JPMorgan Chase, Mer- sales pitches. that money. When a tester with a Citibank rill Lynch/, Vanguard, account asked an adviser for free advice and —declined to participate.) vid Yeske, CFP, is managing director of without committing to moving additional Yeske Buie, a fee-only planning firm in money to Citi, the rep asked her, “Why What our testers found San Francisco and Vienna, Va., past chair- would I do that?” (The rep later provided Two seasoned certified financial planners man of the Financial Planning Associa- advice after the tester showed her finan- and their staffs judged the plans the com- tion, and distinguished adjunct professor cial statement.) panies sent back on a number of criteria, at Golden Gate University, focusing on fi- At Fidelity, clients with an account of such as appropriateness of investment nancial and insurance planning. any size can in theory walk into an office recommendations, ease of use, and quali- Our judges also commented on several or call an 800 number for a free consulta- ty of the overall process. Diahann W. Las- plans obtained in the field test, some of tion and guided tour through Fidelity’s sus, CFP, CPA/PFS, is president and chief which were from the four companies. (We planning software. (Fidelity says the soft- investment officer of Lassus Wherley, a sent the plans masked of identifiers to re- ware its advisers use is essentially the fee-only financial-planning­ company in duce judges’ bias.) same as what you’ll find on its website.) New Providence, N.J., and Bonita Springs, In the field, our test subjects learned But unless your investable assets are worth Fla., and past chair of the National Asso- that advice doesn’t always come easy. at least $250,000, you’re not guaranteed a ciation of Personal Financial Advisors. Da- Those without a significant amount of as- dedicated Fidelity adviser. “I would be as-

Our financial foot soldiers

The Consumer Reports employees below were part of our field test of brokerages. We also sent their profiles, with their identities masked, to the four financial-services companies that agreed to participate in this project.

Young, single man Single, midcareer woman Married, with two children Curtis, 34, wanted advice on his portfolio, At 53, Carolee is focused on paying down Thomas and Jean, ages 44 and 45, face a which outside his 401(k) consists principally of credit-card debt and building her nest egg: conundrum: fund college for their children or $26,000 in stock. He’s open to aggressive currently about $100,000, split between an focus on retirement? They make more than investing, and his plans reflected that. They IRA rollover and 401(k). She’s a financial $200,000 annually, but their cash flow is recommended from 0 to 5 percent in cash, novice with no interest in researching money hampered by credit-card debt, a second appropriate for his age. Citi’s plan—52 percent decisions on her own. Fidelity offered her two mortgage, and the high cost of living in New large-cap stock, 8 percent mid-cap, 8 percent choices for money outside her 401(k): a York. Schwab offered the couple two options, small-cap, 20 percent international, professionally managed account or a "single- one of which cut retirement savings to fund 10 percent emerging markets, and 2 percent fund approach" with either a target-risk fund education and help pay off credit-card debt. cash—was the most aggressive. With such a that allocates 70 percent of her investments “This is not the type of recommendation we small portfolio, Curtis wouldn't be entitled to in stock or a 2025 target-date fund, which would make without a lot of education a free plan in many cases. Still, Diahann shifts the asset mix from aggressive to around the risks involved,” Lassus said. David Lassus, a financial planner who judged the conservative as she gets closer to retirement. Yeske, another judge, faulted T. Rowe Price plans, faulted those companies for not Lassus suggested Carolee ask a planner to for tackling only the couple’s retirement, with addressing his cash flow or telling him how to help compare options among such funds, no mention of paying down debt, funding carry out their recommendations. which vary in expenses and performance. college, or building an emergency fund.

22 consumer reports february 2012 signed to a strategy adviser group of 75 to didn’t initially mention or were often his wife and got an initial plan after just 85 people, not to any one adviser,” noted vague about how they’d be compensated, one visit of almost 2 hours and some Carolee, a midcareer staffer, after a phone with one exception: a Citi adviser who follow-up phone calls. They discussed the consultation with Fidelity. For that group said she was “salary based.” role of diversification, asset allocation, the service, she was told she’d be charged risks associated with various investments, about 1.13 percent of her account per year. The finished product expenses and costs, tax implications, and Once in the door, our subjects faced Most of our participants received an ini- how various life decisions could affect re- both subtle and strong sales pitches. “He tial plan at their second visit. Some spoke turns. “The meeting was relaxed, not sent me pretty quickly to his recommen- in the interim on the phone to supply rushed,” Thomas reported. “He seemed to dation: a balanced, managed set of more information. David, our tester out- do a decent job of hearing our concerns.” funds,” said David, our “empty-nester,” side Seattle, was very satisfied with his That jibes with our survey results, show- after a first visit to a Chase office in subur- Schwab adviser’s research. The adviser ing that Fidelity and Schwab clients were ban Seattle, “without reviewing or com- reviewed his client’s investment state- happy with the helpfulness, specificity, paring the other options.” ments, spending records for the prior six and clarity of the advice given. The company representatives’ had ti- months, current income information, Other testers had less satisfying expe- tles such as “account executive,” “finan- and expected income in retirement. “He riences. At his third visit to the Chase of- cial adviser,” “financial consultant,” spotted immediately that our top priority fice, David was shown a historic simulation “financial planning specialist,” and “in- is not our retirement investments but the report that compared the 11-year perfor- vestment adviser.” Just three of the nine restoration of our emergency-cash re- mance of the Chase Strategic Portfolio, advisers consulted by the test participants serve,” David said. 5.98 percent, with a benchmark index’s seemed to hold a certified-financial-­ ­ In New York, Thomas, a 44-year-old fa- 3.87 percent. But the report didn’t take into planner designation. And the advisers ther of two, visited a Fidelity adviser with account Chase’s annual management fees

Our financial foot soldiers

Advice for retirees Though none of our testers was retired, any retiree’s financial plan should include these elements, among others:

1 Projections of your cash flow and return from investments. A good planner can tell you whether the common guideline—to withdraw an average of 3 to 4 percent of your assets annually—will work for your situation.

1 A schedule of when and how much Empty-nesters Preretiree to withdraw from taxable and David and Joanne, ages 55 and 61, plan to Don, a 60-year-old widower, plans to retire tax-deferred accounts. retire at different times. They’ve amassed a in the next year or two with investable 1 nest egg of more than $1 million and have assets of about $1 million and a fairly Timing of gifts to charities and little debt. But they’re leery of financial generous pension. He prefers investments family members. advisers and want to invest conservatively. that are less risky. Citi, Fidelity, Schwab, 1 A discussion of estate-planning Schwab recommended they invest almost and T. Rowe Price all recommended that concerns, including insurance, wills, 80 percent of their holdings in fixed-income Don invest 50 percent of his funds in bonds and other end-of-life documents. and cash investments. The other and cash. The judges felt that, like David companies recommended stock and Joanne’s investments, Don’s 1 An analysis of options for claiming allocations of 50 percent. Lassus said allocations were timid, considering the Social Security benefits if you haven’t a stock position of 55 percent to 65 percent inflation Don could face over so many already done so. Waiting to start was more appropriate for this couple. “We years in retirement. At minimum, Yeske collecting until after your full have a responsibility to balance what they said, he should invest 70 percent in retirement age can raise your monthly want with what we believe they need and equities. With a pension providing most of benefit significantly. So can properly design a portfolio to try and meet that his income, he could step that allocation timing a claim for spousal benefits. need,” she said. up to as much as 80 percent.

february 2012 www.ConsumerReports.org 23

cover story where to put your money

of 1.6 percent for the first $250,000 in as- sets, which would lower the portfolio’s per- 8 questions to ask an adviser formance to 4.38 percent, not much above the benchmark. Lassus told us that Chase’s Whether you deal with an independent paid up front or when I sell the fund? 1.6 percent management fee was higher financial professional or one who works at a financial institution, 1 What are the potential conflicts of than the usual 0.75 to 1.5 percent. Both make sure the adviser completely interest in the funds you recommend? judges agreed that the illustration wasn’t understands your situation, needs, What, if any, is your incentive to consumer-friendly. and goals. And get answers to these recommend one fund family over another? “Even when reporting aggregate perfor- questions: mance for all portfolios combined, we ac- 1 How do you or your firm choose the count for fees,” Yeske said. “We feel it’s a 1 How are you being paid? Is it a salary, funds you recommend? fuller form of disclosure.” commissions, fees based on assets, hourly, or a flat fee? 1 What’s your educational and In general, Lassus said, the plans gen- professional background? How much erated by advisers in the field offices were 1 What is your objective in offering a free experience do you have advising investors not as high-quality as what the corporate plan? Are you looking to sell products or is like me? offices provided. That should come as no this a loss leader to encourage me to sign surprise, given that the corporate-based on with you? 1 How will you carry out or help me carry advisers ostensibly had lots of eyes view- out my plan? Will you provide a step-by- ing their plans. Nonetheless, only one 1 What are the transaction fees and step action plan? plan from any source, a Vanguard plan expenses related to the recommended investments? What, if any, are the fund’s 1 How much follow-up will we have, created for Don, 60, considered the tax 12b-1 sales fees and loads? Are the loads and what will it cost? implications of changing his investments. “They projected estimated capital gain or loss for each transaction,” Lassus said. “This was a good feature.” Many of the plans provided only asset stocks generally have values between allocations, not more specific recommen- $1 billion and $4 billion, and small-cap Results of our corporate test dations. The plans offered us a look at each companies are valued at less than $1.4 bil- Citibank, Fidelity, Schwab, and T. Rowe company’s approach to financial plan- lion. Smaller companies generally are Price all made it clear that the plans they ning. And the companies’ plans had some riskier, though they have greater poten- were providing for our project were not features in common. tial for growth than large-cap stocks.) based on an ideal process. (Moreover, con- Plans were often long and confusing. Asset allocations tended to be con- sumers can’t access the experts in those Plans from the field and from the corporate servative. Every company hewed to an as- companies the way Consumer Reports did planners were often larded with boilerplate set allocation of 50 percent in equities for for this test.) Normally, planners would language as well as unnecessary tables and Don, our tester on the cusp of retirement. have an ongoing conversation with the cli- graphs. In general, Citi and Schwab were Yeske’s team labeled that ratio as low for ent. The back-and-forth over several ses- the worst offenders, with most plans run- such a young retiree. Even a low average sions would help the advisers fine-tune the ning more than 70 pages long. “Too much annual inflation rate of 3.5 percent would plans and gauge a customer’s reaction to to keep track of,” Yeske said. double a retiree’s cost of living in 20 years, recommendations. Even after implement- Advice didn’t always address clients’ Yeske said. For that reason, he’d recom- ing a plan, an adviser would contact the questions. T. Rowe Price’s plan for Thomas mend a young retiree, especially one like customer at least once a year to adapt the and Jean didn’t include their goal of saving Don, with a sizable pension, put at least plan as needed. “This is definitely an ongo- for college for their two children. And it 70 percent in stocks to hedge against infla- ing process,” said Brennan Miller, a Charles wasn’t able to accommodate David and tion. Maria Selca-Maher, a planner from Schwab financial consultant in North- Joanne’s plans to retire six years apart. A Citi, said her team had reduced Don’s brook, Ill., who participated in the project. T. Rowe Price planner later told us that the original equity allocation based on guid- company’s software is designed only to ad- ance from her company’s chief invest- dress retirement and asset allocation—and ment officer. “In an actual relationship,” 1 did you know? only when both members of a couple plan she said, “Don’s financial adviser would to stop work at around the same time. “It’s continue to review his portfolio and make really just a function of our systems and adjustments based upon his needs and our modeling,” she said. Citi’s investment research.” Plans left out explanations. Plans Our judges also found good advice and generally advised a mix of large-cap, mid- some nice personalized touches. Fidelity cap, and small-cap stock mutual funds, as offered some detailed recommendations well as international holdings and bond up front for all five clients. Yeske’s group 95%That’s the percentage of USAA Brokerage funds, but none explained what the asset praised Citi’s timeline to follow through Services or Vanguard customers who categories meant. (Large-cap stocks, such on its advice, as well as the company’s re- reported none of the following: as those in the Standard & Poor’s 500 in- search on long-term-care insurance op- unexpected fees, inappropriate advice, or pressure to buy an investment. dex, are major companies with market tions for Don, the preretiree. The judges values of more than $4 billion. Mid-cap praised T. Rowe Price’s reports for their

february 2012 www.ConsumerReports.org 25 cover story where to put your money

relative brevity and readability. What you should do lationship for the long term.” Yeske’s team said that the plans need If you can’t afford to pay much for invest- Following these steps will help you get to be accompanied by time-intensive dis- ment advice and you satisfy your financial- the most personalized plan possible: cussions and follow-­up. Lassus was a bit ­service company’s criteria for getting a Don’t hold back information. Most of more generous: “Individuals who are just free plan, ask for one. Just be aware of the corporate-based planners told us after- getting started might find this type of their limitations and potential strings. ward that they found it easier to plan for planning helpful in terms of the educa- “The companies are not doing the free David and Joanne, who volunteered the tion and the process,” she told us. “The plan for altruistic reasons,” Lassus said. most about themselves and their attitudes process also pushes them to think about “They are doing it to accomplish an objec- about money. Judges said they gave Citi-​ their goals and objectives.” tive: selling products or establishing a re- bank and T. Rowe Price plaudits for asking

Our readers rate brokerage firms Better Worse All the brokerages in our survey of online subscribers earned high marks for customer Ratings Discount/online brokerages 5 4 3 2 1 service, and for helpfulness, specificity, and Brokerage Reader score Survey results Account information clarity of the financial advice provided. The higher the respondents’ balances, the more satisfied they tended to be, therefore the Reader score was adjusted for account size.

The strongest predictor of satisfaction was Phone service Standard stock- stock- Standard to open account to Financial advice Financial Website usability Website Customer service Customer how much their accounts had grown. Minimum balance 0 100 commission trading Notably, our brokerage ratings appear to reflect the experience of active investors. Sixty- USAA Brokerage Services 93 &Z — &X — none $8.95 one percent of survey respondents reported Scottrade 89 &X — &X &C $ 500 7.00 having more than one brokerage account. Of Vanguard Brokerage Services 89 &Z &Z &X &C 3,000 7.00 the respondents who made trades in the past Charles Schwab 84 &Z &Z &X &C 1,000 8.95 12 months, more than half—54 percent—had 83 traded from six to more than 20 times. The TD Ameritrade &X — &X &V 500 9.99 advice those readers experienced could have E-Trade 82 — — &C — 500 9.99 been anything from a quick confirming phone Fidelity Brokerage Services 81 &Z &X &X &C 2,500 7.95 call to a full-blown financial plan. WellsTrade (Wells Fargo) 74 &X &X &C &V 1,000 19.95 USAA leads in satisfaction Merrill Edge/Bank of America 72 &X &X &C &C none 6.95 No one type of brokerage led the pack. Top-ranked USAA is part of a financial company with insurance, banking, Ratings Full-service brokerages and brokerage services. Scottrade and Brokerage Reader score Survey results Account information Vanguard, which tied for second place, are respectively an online brokerage and a

mutual-fund company. required Minimum

Wells Fargo, Merrill Edge/Bank of investment Phone service

America, and Morgan Stanley Smith Barney advice Financial Lowest-tier fee (% fee Lowest-tier Website usability Website Customer service Customer scored lower than other brokerages. The 0 100 per year) assets, of survey didn’t take into account whether Edward Jones 83 &Z &Z — &X $50,000 1.35-1.50% recent mergers affected our readers’ judgments of their service. Wells Fargo was in Raymond James 82 — &Z — — 50,000 1.25-1.75% the midst of integrating over the Ameriprise 80 &X &Z — — 25,000 up to 2% survey period. Morgan Stanley’s merger with Morgan Stanley Smith Barney 71 &X &X — &C 25,000 up to 2% Citigroup’s Smith Barney unit was unveiled in Dash (—) indicates insufficient data. 2009. Bank of America had completed its purchase of Merrill Lynch. Guide to the Ratings Within customer service, consumers had Ratings are based on a 2011 Consumer Reports National Research Center online survey of 7,327 the most gripes about how their brokerages ConsumerReports.org subscribers reporting on their experiences with brokerage firms between October had handled errors or mistakes; 37 percent 2010 and October 2011. The reader score (statistically adjusted for account size) represents overall were less than highly satisfied in that satisfaction with the brokerage firm but is not limited to the factors listed under survey results. If all category. Seventeen percent of respondents respondents were completely satisfied, the reader score would be 100; a score of 80 indicates respondents going online for help reported that they were “very satisfied” on average; 60, “fairly well satisfied”; and 40, “somewhat dissatisfied.” Differences of less than 4 points are not meaningful. Customer service and website usability are based on ratings of couldn’t find information they needed on excellence in various aspects of each service. Financial advice measures the helpfulness, specificity, and their brokerage’s website. clarity of the advice provided. Phone service reflects the percentages who reported no specific problems. Fees also irked some consumers. Ten Account information on minimums, commissions, and fees are samples because the companies offer percent of those reporting on Merrill Edge and different types of accounts. For full-service brokerages, minimum investment required shows the 9 percent reporting on Morgan Stanley said amount of assets subject to the company’s highest percentage fee. Ratings are based on the experiences they’d been charged unexpected fees. of ConsumerReports.org subscribers, who might not be representative of the general U.S. population.

26 consumer reports february 2012 FREE OFFER good follow-up questions. In theory, the more questions you answer—and ask—the ™ better your plan is likely to be. Take the time needed. Most of our participants who got plans in the field vis- ited or talked with their advisers just once or twice before receiving an initial plan. Can you tell the difference between... But to get the best plan, you’ll need to have an ongoing conversation with the adviser. Planners we interviewed said they recom- good and bad financial advice? mend revisiting the plan at least once a year with an adviser, and often much more frequently. “We talk to customers Good or Bad Advice? (Check your answers below) Good Advice Bad Advice throughout the year,” said David Olsen, a 1. The best place to stash cash now is a money market account regional planning consultant in New Eng- land for . 2. You can afford to retire on 75% of your pre-retirement income Get organized. Our testers spent from 3. Class B mutual funds are as good as no-load mutual funds Brokerage Reader score Survey results Account information 20 minutes to around 20 hours collecting all

the information the advisers needed. (The median time spent was 3½ hours.) “This has been a useful exercise already,” David There is so much “bad” financial advice out there, it makes sense to Phone service said. “This is the first time in years that we Standard stock- stock- Standard to open account to Financial advice Financial Website usability Website Customer service Customer Minimum balance Minimum balance have added up all our investments and pen- turn to the “good” advice you'll find in Consumer Reports Money Adviser.

0 100 commission trading sions to see where we really stand.” USAA Brokerage Services 93 &Z — &X — none $8.95 Consumer Reports Money Adviser is brought to you from Consumer Scottrade 89 &X — &X &C $ 500 7.00 Some plans were Reports. Like the magazine, Money Adviser is expert, independent Vanguard Brokerage Services 89 &Z &Z &X &C 3,000 7.00 and nonprofit. Charles Schwab 84 &Z &Z &X &C 1,000 8.95 larded with graphs TD Ameritrade 83 &X — &X &V 500 9.99 and unnecessary You’ll find easy ways to help keep your money safe...ensure that your E-Trade 82 — — &C — 500 9.99 financial future is secure and comfortable...boost your investment Fidelity Brokerage Services 81 &Z &X &X &C 2,500 7.95 boilerplate text. profits...and learn what your broker, your banker, your accountant WellsTrade (Wells Fargo) 74 &X &X &C &V 1,000 19.95 Merrill Edge/Bank of America 72 &X &X &C &C none 6.95 Before you visit an adviser, gather your won’t tell you. most recent investment statements, in- cluding those from employer-sponsored­ • Find a financial planner you can trust retirement plans, estimates of any expect- Determine whether you can retire early ed pension income, tax returns for the • past two years, details of your life-­ Get the best deals on credit cards insurance coverage, and six months’ • worth of spending records. (Intuit’s • What salespeople aren’t telling you about annuities Quicken and its free online cousin, Mint, Organize your will, power of attorney and estate – easily offer good ways to track spending.) • Our judges agreed that spending more time with an adviser would add the most For “good” financial advice, turn to the source you can trust. value to any plan. During those conversa- tions, insist on understandable explana- Send for a free copy of Consumer Reports Money Adviser. tions for the recommendations and the For details see the attached post-paid card. full cost of carrying them out. Get a second opinion. For a fee of a few hundred dollars, less than you’d pay for a Answers: full-fledged financial plan, you can bounce 1. GOOD ADVICE. If keeping ahead of inflation without any significant risk appeals to your adviser’s plan off of a professional you, consider a high-yield money market account for your cash reserves. planner. For example, the Garrett Planning 2. BAD ADVICE. New research shows that the old notion of retiring on 75% of your Network (www.garrettplanningnetwork.com), pre-retirement income does NOT apply to most people. A BETTER PLAN: Keep part of made up of more than 300 independent your portfolio invested in stocks, even after you retire, to generate additional income. financial advisers, offers hourly, as-need- ed financial planning and advice. In fact, 3. BAD ADVICE. Brokers will sometimes tell you – misleadingly – that B shares are just it wouldn’t hurt to let your adviser know like no-load funds. But when you redeem B shares you are charged a fee that’s higher than no-load funds. A BETTER PLAN: Avoid Class B shares. that another expert will review your plan, just to keep him on his toes. SD224A

february 2012 www.ConsumerReports.org 27