By Mark Miller
CHICAGO, April 11 Gary Zeiger could have used an
investment adviser back in the 1990s. As a young techie at a
software company, he got swept up in dot-com stock fever and
lost two-thirds of his 401(k) portfolio when the bubble burst in
The remainder evaporated later, when a layoff forced him to
tap the account to cover living expenses.
"It would have been beneficial if the company had some kind
of financial planning or training back then," he says.
More than a decade later, few retirement savers are going
for professional help. The 2013 Retirement Confidence Survey
released by the Employee Benefit Research Institute found just
23 percent of workers had obtained investment advice.
The cost of advice is often a turn-off, and few advisers are
eager to sign up clients with small account balances. As an
alternative, many savers, including an older and wiser Zeiger,
are turning to websites that offer low-cost investment guidance.
Now 47, Zeiger works at the Jacksonville, Florida, campus of
the renowned Mayo Clinic, where he's been an information
technology professional for the past five years. He's been
rebuilding his retirement savings, with $44,000 salted away in
Mayo's 403(b) plan.
Zeiger is using FutureAdvisor, a free online service that
accesses his accounts online, analyzes the investment choices
and makes recommendations for adjusting his portfolio and
following up with quarterly rebalancing.
Zeiger's wife Tonya, who also works at Mayo Clinic, has
about $80,000 saved, and they have implemented FutureAdvisor for
her portfolio, too. The Zeigers also will benefit from Mayo's
defined benefit plan, which will generate $4,800 in monthly
income if they both retire at 65 years of age.
The advice they are getting includes asset allocation
recommendations for all their plans - legacy workplace plans,
Individual Retirement Accounts and taxable accounts.
FutureAdvisor is one of several services available on the
Web, including MarketRiders and JemStep, that offer advice but
don't directly handle assets. There are others that can manage
non-workplace account assets directly, like Wealthfront,
Betterment or Personal Capital.
These services cut through the complexity of retirement
investing by focusing on the two most important success factors:
expense and asset allocation.
Investors often assume that stock or mutual-fund picking
drives outcomes, but professionals will tell you that allocation
is far more important. Balancing your portfolio appropriately
between equities, fixed income and cash investments to match
your goals, tolerance for risk, and investment time horizon.
Fees also are critical. A Morningstar study published in
2010 found that fees trumped even its own vaunted star rating
system as a predictor of success; low-cost funds reviewed by
Morningstar had much better returns than high cost funds across
every asset class over a five-year period.
In the Mayo Clinic 403(b) plan, Zeiger must navigate a long
list of more than 50 fund choices - everything from rock-bottom
cost index funds to expensive actively-managed funds. Employees
also are automatically enrolled to receive advisory services
from Financial Engines - a major player in third-party advice
for workplace plans - unless they specifically opt out.
Two-thirds of Mayo Clinic employees are using Financial
Engines, typically paying an annual fee of 0.03 percent of the
holdings, says Frank Allen, an in-house financial adviser at
Since Financial Engines typically steers workers toward
low-cost index funds, the average employee fund expense is 0.33
percent, he says - for a respectable total cost of 0.66 percent
Zeiger opted out, choosing to push his costs down further
still by using the free FutureAdvisor service. He currently has
66 percent of his portfolio in low-cost, large-cap domestic and
foreign funds; 12 percent in emerging market funds; 15 percent
in real estate investment trust funds (REITS), and the remainder
in bond funds. His total expense on the funds he holds is just
The difference between that and the Mayo Clinic average may
sound small, but paying those fees regularly - quarter after
quarter - adds up to real money.
A 2006 report to Congress by the U.S. Government
Accountability Office found that a 1 percentage point increase
in fees reduced return over a 20-year period on a typical
portfolio by 17 percent.
In Zeiger's case, a rough calculation shows that cutting
expenses from 0.66 to 0.21 percent could generate $15,000 in
additional assets at retirement, assuming that he continues his
current practice of contributing 6 percent of salary, and earns
an average annual market return of 4 percent.
Although he's used FutureAdvisor for just a year, Zeiger
likes what he sees, so far. "The market has been a rollercoaster
and so have my funds, but they follow the Dow - sometimes I'm
up, sometimes I'm down."