Why I Switched Mutual Fund Companies

Brent Pittman —  09/17/2012
Railroad switch

Sometimes a different path is needed. Credit Mark Fischer

It is always a good idea to evaluate your investments every so often. I’m no fanatic and I invest for the long term, 5 or more years, but I do examine at few areas: earnings, fees, and the rate of return compared to the market.

Generally I only look at my quarterly statements, so I don’t freak out on days when I’m up or down thousands of dollars.

After a recent examination of my mutual fund portfolio I decided to make a change. I’m not alone; in fact million of Americans have switched mutual fund companies in the last few years. [This is not a recommendation to shift your investments, this is simply my story]

Why I Switched My Mutual Fund Company

1. I hate paying fees. I especially hate paying fees when a service looses money vs. their peers. I was paying yearly maintenance fees and also a hefty sales charge with each dollar invested (front load). As our portfolio grew the fees dropped, but it was still high.

2. Bad Performance vs. S&P 500- The markets have had a tough few years and I realize this. Yet, my old mutual fund family was lagging behind the S&P 500 and its peers. Apparently my managed funds as a whole haven’t had a good run, while index funds fared better.

3. My NonExistent Broker- For the last few years, my wife and have been fortunate to max out our Roth IRAs. Our broker earned commission on our ROTH IRA + Rollover 401K to IRA yet he was nonexistent.

Our broker didn’t call, email, send a newsletter, or follow up to see if we were going to max out again like the past few years. I’m sure he has bigger fish to fry, but a quick email or an ounce of client attention would have gone a long way.

My New Mutual Fund Company

1. I don’t pay yearly fees if I opt in for online statements. My sales fees are now some of the lowest in the industry. Over the lifetime of the investment, this will translate to thousands in cost cutting savings.

2. The majority of my mutual funds are now in index funds that will ensure I keep pace with the market. I won’t beat the market, but then I won’t dip below either. I’m OK with this.

3. Now there isn’t a broker getting fat of my regular investing. I only have myself to blame for improper allocation of funds.

That is why I use tools such as the Morning Star Instant X-Ray to break down my choices. I also plan on paying an fee based independent broker for a portfolio assessment when I hit a predetermined dollar amount.

Have you made any changes to your investments in recent years? Have you examined your mutual fund family to determine if it is still the best fit for you? 

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
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  • Mutual Fund was not my first choice as an investment. Even some experts suggested me for this but I was not hundred percent confident about it. I started to invest in forex market but recently switched to stock market with parallel investing in forex.

    • Shawn, seems you enjoy risk. Those investing in Forex have a huge failure rate. Very few make money over the long term. I also invest in the stock market, but through mutual funds so my risk is spread out among many stocks. I’m playing the turtle’s race–not the hare.

  • AverageJoe

    It’s funny. I used to give talks to new advisors and point out #3. If you actually care about your client, they MIGHT look past points #1 and #2 (although captive advisors aren’t something I ever wanted to be a part of….). Even if you get #1 and #2 right, most will STILL LEAVE because of point #3.

    • Uncle Joe, I find it crazy that this industry can’t provide basic customer service. I bet a simple quarterly newsletter would increase retention 10%+. An automated sequence of emails from Aweber a few times a year would at least let me know they remember who I am…instead all I get is a few mandatory disclosures in the mail.

  • I’m with Krant and stick with Vanguard. They have some very low fees and decent performing funds.

    • Good family…I believe they are the now the largest.

  • krantcents

    I stick with Vanguard, Fidelity and TIAA-Cref for mutual funds. Expenses are important and will affect your fund performance over time.

    • Those fees were like wasp stings that were affecting my long term performance.

  • maria@moneyprinciple

    Well done for switching and good luck with the new company. It seems this is one of the things we should watch closely.

    • The switch was fairly easy…it was doing the research and pulling the trigger that I had to get the courage to do.