Advertiser Disclosure

Investing

3 Common Mistakes Savers Make When They Invest in Target-Date Funds

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

archer target arrow investing retirement saving

Target-date funds (TDFs) are one of the most popular investment options offered by employers because they provide employees an all-in-one portfolio within their retirement plans. To show how popular they are, more than 70% of all 401(k)s provide TDFs, and approximately 50% of participants own them. However, most employees don’t even know what target-date funds are or how they work.

So why the fuss about target-date funds? Although popular, many participants are misusing them and hurting themselves in the long run.

What a Target-Date Fund does:

A TDF is simply an investment fund that owns a bunch of index-style mutual funds. Because TDFs include funds with broad exposure to different types of assets, they allow novice investors to access countless stocks and bonds. For example, the Vanguard 500 Index Fund tracks the S&P 500, which gives investors access to 500 different stocks. A TDF may contain several funds similar to the Vanguard one.

According to a recent study by Aon Hewitt, retirement savers who choose to invest in a single TDF and no other funds had higher investment returns by over 2%. In addition, those participating in TDFs outperformed people who manually managed their retirement investments by a whopping 3%.

Here are some reasons they have been misused, how to overcome them, and why you only need one in your portfolio.

Choosing the wrong year

The name “target-date fund” means exactly what it sounds like. You choose a fund based on the year or “target date” that you plan to retire. TDFs are offered in five-year increments — 2035, 2040, 2045, 2050, and so on. Your goal is to pick a TDF associated with a date that is closest to when you expect to retire.

For example, if you’re 25 years old today and plan to retire at age 65, you would opt for a 2055 TDF option.

Why does the year matter so much? Because the closer you get to retirement, the more conservative your investments should become. This is important, because you have less and less time to bounce back from setbacks as you get closer to retirement. The way TDFs work, they tend to be more heavily invested in risky assets like stocks in your early working years.

“As the investor ages and moves closer to their intended retirement date, a target-date fund will reduce the overall investment risk,” explains John Croke, a certified financial adviser with Vanguard. This process is known as the glide path.

Choosing more than one TDF

Since TDFs are pretty straightforward, many people mistakenly think that they need to split their retirement savings among more than one TDF in order to be truly “diversified.” But the whole point of a TDF is that you only need to invest in one — it is automatically diversified among many assets for you.

“TDFs are designed as ‘all-in-one’ solutions that provide automatic diversification across multiple asset classes,” Croke says. “Owning more than one TDF is not advised or necessary.”

You shouldn’t treat your TDF as if you were a day trader trading stocks either. It’s better to invest in your TDF and keep your funds there rather than to jump in and out trying to time the market.

Paying too much in fees

Compared to traditional mutual funds, TDFs are especially appealing because they charge such low fees. In the world of investing, fees come in many different forms, but the important fee to watch out for is called the “expense ratio.” This is the amount your fund manager charges you for the ability to own that fund. Expense ratios can be as low as a fraction of a percentage or as high as several percentage points. It may not sound like much of a difference, but even a difference of one or two points can mean losing tens of thousands if not hundreds of thousands of dollars over the decades until you retire.

Also, participating in more than one fund just subjects you to more fees that are unnecessary. Why pay more when you don’t have to?

The final word

All in all, TDFs provide an easy, diversified, and low-cost means to invest for retirement. All you need to do is choose one that matches the year you plan to retire, make tax-deferred payments from your paycheck into the fund, and allow your account to grow with history proving that time is on your side when it comes to the markets.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Eric Patrick
Eric Patrick |

Eric Patrick is a writer at MagnifyMoney. You can email Eric here

Advertiser Disclosure

Investing

Review of Boston Private Wealth LLC

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Boston Private Wealth is a fee-only advisory firm serving individuals, high net worth individuals, pension and profit-sharing plans, charitable organizations and other businesses. The firm specializes in working with professionals in law, accounting and medicine, as well as executives and business owners. With headquarters in Boston, the firm has more than 70 investment advisors around the country overseeing the firm’s more than $12.8 billion in assets under management (AUM).

All information included in this profile is accurate as of December 9th, 2019. For more information, please consult Boston Private Wealth’s website.

Assets under management: $12,827,947,779
Minimum investment: $1 million
Fee structure: A percentage of AUM, ranging from 0.70% to 1.25%, depending on account size; fixed fees; hourly fees
Headquarters:One Federal Street
30th Floor
Boston, MA 02110
(617) 223-0200
bostonprivate.com

Overview of Boston Private Wealth

Founded in 1986, Boston Private Wealth is headquartered in Boston, with a number of additional offices throughout Florida, California and New York. Boston Private Wealth entered the Northern California market in 2001, the Southern California market in 2004 and the Florida market in 2014. In fall of 2019, the company announced the integration of KLS Professional Advisors Group in New York City.

The firm is a wholly-owned subsidiary of Boston Private Financial Holdings, Inc., a public reporting company, and it is affiliated with Boston Private Bank & Trust Company, a full-service private banking company. Boston Private Wealth has more than 130 employees on staff, including 72 performing investment advisory functions. Fourteen employees are licensed agents of an insurance company, though the company is clear that it earns no commissions for product recommendations. The firm currently manages more than $12.8 billion.

What types of clients does Boston Private Wealth serve?

Boston Private Wealth serves a broad variety of clients, with its largest client group being high net worth individuals. The SEC defines a high net worth individual as someone with at least $750,000 managed by a firm or whose net worth exceeds $1.5 million.

The full range of clients the firm serves includes:

  • Individuals
  • High net worth individuals
  • Trusts, estates and charitable organizations
  • Family offices
  • Corporations or other business entities
  • Banking and trust companies
  • Not-for-profit entities, including foundations
  • Retirement and profit sharing plans, including IRAs and 401(k) accounts
  • State or municipal government entities
  • Other investment advisors

We reached out to Boston Private Wealth and the firm confirmed that its minimum account requirement is $1 million. However, the firm also notes that because it views clients’ financial pictures holistically, it works with some clients who may have less than the $1 million but who are building wealth. In addition, the filing also states that of the firm’s individual clients, about six out of 10 are high net worth, although that leaves about 40% who aren’t.

Among those clients are a large number of business owners who frequently have limited liquidity as they grow their businesses. The company also focuses on professionals in private practice, such as law firms, accounting firms and medical, dental or veterinary practices, as well as executives. It offers these clients help with business financing and the management of personal income.

Although the vast majority of the firm’s assets under management ($11.2 billion of $12.8 billion) are from high net worth individuals, Boston Private Wealth also serves corporations, charitable organizations and pension and profit-sharing plans.

Services offered by Boston Private Wealth

Boston Private Wealth provides a host of services to its clients, from wealth management to trust and estate services. The firm also recently added family office services designed to handle the needs of ultrahigh net worth investors, including helping with personal accounting and net worth reporting, tax and accounting services, bill pay and mail management, and budgeting and cash flow planning.

The firm’s full list of services includes:

  • Wealth and financial planning
    • Vision statement that may include a client’s financial, philanthropic, tax and wealth transfer objectives
    • Income and retirement planning
    • Protection planning
    • Investment management planning
    • Legacy planning
    • Philanthropic planning
    • Business succession planning
    • Executive planning
    • Education analysis
    • Estate plan analysis and review
    • Insurance and risk management review
    • Cash flow and debt management
    • Compensation and benefits
    • Donor advised fund
  • Portfolio management for individuals and/or small businesses
  • Portfolio management for businesses (other than small businesses) or institutional clients
  • Pension consulting
  • Selection of other advisors (including private fund managers)
  • Publication of periodicals or newsletters
  • Educational seminars/workshops
  • Planned giving
  • Family office services
    • Personal accounting and net worth reporting
    • Tax and accounting services
    • Budgeting and cash flow planning
    • Bill pay and mail management
  • Concentrated holdings services
  • Proprietary separate account strategies
  • Investment consulting
    • Diagnostic review
    • Investment policy and governance design
    • Asset allocation services
    • Portfolio construction and implementation
    • Performance measurement, reporting and analysis
    • Custom investment solutions
  • Retirement plan advisory services
  • Wrap-free programs
  • Trust services

How Boston Private Wealth invests your money

Boston Private Wealth engages in active portfolio management, using a client’s goals, time horizon and risk tolerance to create a customized, diversified portfolio. The company prefers to use active strategies because it believes, over time, that it can outperform the market on a risk-adjusted basis.

Typical client portfolios include 40 to 60 carefully selected individual stocks, alongside a customized bond portfolio with investment-grade taxable or municipal bonds. The firm also offers access to as many as seven additional asset classes, from international large cap stocks to alternatives.

The firm uses both internally managed strategies as well as external money managers to complete clients’ financial plans.

Fees Boston Private Wealth charges for its services

For wealth management services, Boston Private Wealth charges clients a percentage of assets under management based on a tiered fee schedule, which starts at 1.25% for the first $1 million, 1.15% for the next $1.5 million and so on. For fixed-income portfolios — meaning individual fixed income securities, including investment-grade and municipal bonds — Boston Private Wealth negotiates a fee schedule not to exceed 0.75%.

For consulting services, the firm charges a flat rate per engagement, or a fee of $300 per hour, depending on the arrangement with the client, and those services include portfolio review, financial planning, asset allocation and performance reporting, monitoring and analysis. For investment advisory services to retirement plans, the firm charges a maximum fee of 0.50%, with a minimum annual fee of $5,000.

There may be additional fees and expenses beyond the firm’s set fees, including:

  • External separate account manager fees (if Boston Private Wealth uses an external separate account manager as a sub-advisor to manage a client’s assets)
  • Mutual fund and ETF management fees
  • Mutual fund transaction fees
  • Donor advised fund fees
  • Brokerage fees

Boston Private Wealth doesn’t use a wrap fee program, which is when a firm offers a bundle of services for a flat fee, but it does participate in wrap fee accounts when it place investments with other investment managers. It charges a management fee of 0.15% to 0.50% for wrap accounts.

Boston Private Wealth notes that for accounts with a portfolio value of less than $1,000,000, the effective fee may be more than 1.25%.

Boston Private Wealth Fees
Wealth Management
  • 1.25% on the first $1,000,000
  • 1.15% on the next $1,500,000
  • 0.90% on the next $7,500,000
  • 0.70% on higher balances
Fixed Income-Only PortfoliosNegotiated fee schedule not to exceed 0.75%
Consulting ServicesNegotiated flat rate per engagement or $300 per hour
Investment Advisory Services to Retirement PlansNegotiated fee schedule not to exceed 0.50% (Minimum annual fee: $5,000)

Boston Private Wealth’s highlights

  • Services for high net worth individuals. The recent addition of KLS, which is a wealth management firm specializing in law firms, attorneys and other high net worth clients, makes this combined operation one of the more sizable firms focusing on the high net worth set. The firm now manages more than $11 billion in assets from high net worth individuals, and it recently opened a family office arm devoted to ultrahigh net worth families.
  • Diverse leadership. In an industry that’s still fairly male-centric, half of Boston Private Wealth’s leadership team is female, as is 45% of its board members.
  • Locally revered. In 2013, readers of the Boston Business Journal chose Boston Private Wealth as the Most Admired Financial Institution.

Boston Private Wealth’s downsides

  • Fees are higher than average. For the non-high net worth investor, Boston Private Wealth’s rate of 1.25% on the first $1 million in assets is slightly higher than the RIA industry average of 1.17%. Asset-based fees do decrease as the amount of assets under management increases, but Boston Private Wealth notes that for accounts with a portfolio value of less than $1 million the effective fee may be more than 1.25%.
  • Potential conflicts of interest. Boston Private Wealth receives client referrals and other benefits from the Fidelity Wealth Advisor Solutions Program, TD Ameritrade’s AdvisorDirect program and the Schwab Advisor Network. These relationships raise potential conflicts of interest, as Boston Private Wealth may be more likely to suggest client strategies that benefit those companies.

Boston Private Wealth disciplinary disclosures

The firm has only one disclosure listed in its Form ADV, paperwork that firms file with the SEC. The disclosure is in relation to an advisory affiliate who was involved in a rules violation. In 2017, FINRA suspended the individual, who was with Merrill Lynch at the time, for one year for false expense reports. Boston Private Wealth itself has never been the subject of any disciplinary action.

Boston Private Wealth onboarding process

To start a relationship with Boston Private Wealth clients must complete an online form with their contact information, the services they’re interested in and the amount they currently have invested. Prospective clients can also call advisors directly to learn more about working with Boston Private Wealth.

The bottom line: Is Boston Private Wealth right for you?

Boston Private Wealth could be a good match for you whether you’re a high net worth individual. The firm’s recent moves — the acquisition of KLS and the opening of a family office group — suggest that they’re doing some gunning for the high net worth space. Additionally, the firm’s tiered fees drop below average RIA rates for assets over $1 million, making it a more attractive option for investors with seven figures to invest. Boston Private Wealth also works specifically with professionals in the areas of law, accounting or medical work, and executives in general, potentially making this firm worthwhile for anyone in these fields.

If your investable nest egg is smaller, however, you’d likely be better served looking elsewhere since the firm has a $1 million minimum. Plus, you can find advisory services for less than the 1.25% — or more — that Boston Private Wealth is charging for portfolios of less than $1 million. That said, if you’re a business owner with a larger net worth but less liquidity, it might be worth a look.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate here

Advertiser Disclosure

Investing

Review of Aspiriant

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Aspiriant, LLC is an independently-owned firm with headquarters in Los Angeles and 10 additional offices nationwide. The firm primarily caters to wealthy individuals and families, as well as a smattering of institutional investors, like charities. Aspiriant provides what it calls total wealth management, which includes portfolio management as well as a broad range of specific financial planning services. The firm has 155 employees, 86 of whom perform research or serve as investment advisors to the firm’s more than 1,700 clients.

All information included in this profile is accurate as of December 9th, 2019. For more information, please consult Aspiriant’s website.

Assets under management: $11,669,979,000
Minimum investment: No absolute minimum, but clients typically invest at least $1.5 million
Fee structure: A percentage of AUM, ranging from 0.2% to 1%, depending on account size (Minimum annual fee: $14,000)
Headquarters:11100 Santa Monica Blvd.
Suite 600
Los Angeles, CA 90025
aspiriant.com
310-806-4000

Overview of Aspiriant

Aspiriant is independently owned, with roughly 65 of its current employees owning shares in the holding companies that own the firm. Aspiriant is the product of a 2008 roll-up of the Los Angeles-based wealth management firm Quintile, and the San Francisco-based firm Kochis Fitz. Today, the combined entity, which also absorbed Deloitte’s national investment practice in 2010, manages over $11 billion in client assets and has spread its geographic footprint, with five offices in California as well as locations in Austin, Boston, Cincinnati, Milwaukee, Minneapolis and New York.

The firm’s specialties beyond wealth management include family office services and divorce consulting. Aspiriant, which has 86 investment advisors and researchers on staff, has earned spots on recent lists of top investment advisors compiled by Barron’s as well as the Financial Times. The firm’s co-founder and CEO, Rob Francais, was inducted into Barron’s Hall of Fame in 2019 for his work in the field.

What types of clients does Aspiriant serve?

Aspiriant primarily serves high net worth individuals and families, including corporate executives, business owners, foundations and family and limited partnerships. Clients typically have investment portfolios of $1.5 million or more. However, the firm does not have an absolute minimum account size requirement, and some of its clients do have more modest levels of investable assets. For particularly complex situations, however, a portfolio larger than $1.5 million may be required.

Aspiriant also provides investment management and consulting services to some institutional investors, such as charitable organizations, trusts, pension and profit-sharing plans and corporations and other businesses.

Services offered by Aspiriant

Aspiriant can manage your investment portfolio, as well as advise on other areas of your finances, including your estate, taxes, retirement, education, compensation, cash flow and philanthropic goals. In addition, the firm has certified divorce financial analysts (CDFAs) on staff to provide divorce consulting services. For each client, Aspiriant crafts an individualized investment management program that aligns to their specific needs.

Aspiriant also has an in-house, 35-person team that provides family office services, such as filing taxes, paying bills, buying insurance and planning family legacies. This team can also educate multiple generations about living with their wealth.

In addition to its services for individuals and families, the firm offers investment management services for institutional investors.

Here is a complete list of services offered by Aspiriant:

  • Investment management for individuals and institutions (both discretionary and non-discretionary)
  • Financial planning services
    • Tax planning
    • Estate planning
    • Charitable giving
    • Retirement planning
    • Education goals planning
    • Risk management
    • Expense management
    • Compensation planning
    • Liquidity and cash flow needs
    • Private foundations and business entities
    • Divorce financial consulting
  • Family office services
    • Family legacy planning
    • Estate document preparation
    • Alternative investment coordination
    • Tax and compliance filing
    • Bill paying and reporting
    • Foundation management
    • Insurance

How Aspiriant invests your money

Aspiriant creates customized plans for each client, investing their money in a mix of global and domestic stocks, bonds, mutual funds (some of which Aspiriant may advise), ETFs, real estate, cash and other instruments. The personalized plans take into consideration the client’s individual circumstances, as well as Aspiriant advisors’ market outlook for the short and long term and which asset classes they expect to perform well.

The firm starts the process by having each client speak extensively with an advisor about their goals, risk tolerance, time horizon, cash needs and expected returns. Based on those conversations, the client and their advisor will agree on an appropriate asset allocation. Aspiriant prefers the advisor to then be in charge of choosing the specific investments to meet those goals, known as discretionary management. However, some clients have non-discretionary relationships with Aspiriant, meaning the client must approve trades.

When choosing investments, Aspiriant may recommend that clients invest in the publicly-traded mutual funds that it manages. A small percentage of clients also invest in private equity and real estate funds that Aspiriant advises. A $500,000 minimum investment is required for those private funds.

Fees Aspiriant charges for its services

To manage your portfolio, Aspiriant charges an annual fee based on a percentage of assets under management, which typically starts at 1% and ranges down to 0.20% for larger portfolios. The minimum annual fee is $14,000, though the firm discloses that all fees are negotiable. Each quarter the investment management fee is automatically debited from client accounts.

Clients also will likely pay fees to third parties, such as expense ratios and trading costs, in addition to the advisory fee.

On top of your portfolio management fee, you’ll pay for wealth planning services, which can include financial planning, estate planning, tax planning, tax return preparation, expense management and bill payment services, retirement planning, risk management and philanthropy. Retainer fees range from $5,000 to $50,000, depending on the complexity of the services offered and the time involved. Clients also may pay an hourly rate for special projects and/or ongoing consulting, with rates typically ranging from $100 to $695. The firm says that these fees are also negotiable.

Aspiriant’s highlights

  • Fee-only: As a fee-only firm, Aspiriant earns money solely through the fees that its clients pay for advice and portfolio management. This means that it has no financial incentive to recommend certain products to earn commissions or referral revenue, which mitigates potential conflicts of interest.
  • Awards for its track record: Aspiriant has nabbed high marks on many coveted rankings of top investment advisors. For example, it has appeared on Barron’s top RIAs list for more than 10 years, ranking 13 out of 50 firms in 2019. Aspiriant has also made the list of the top 300 RIAs from the Financial Times since the list launched six years ago.
  • Employees hold ownership stake: Aspiriant is independently owned by holding companies, which 63 of the firm’s current employees own shares in. Aspiriant believes that this helps provide continuity for clients and a clear road map for ownership succession.
  • Access to alternative investments: Aspiriant provides some clients access to private equity and real estate funds without charging an additional fee. This allows clients to further diversify their portfolio and gain exposure to investments that may not move in lockstep with the stock market.

Aspiriant’s downsides

  • Caters primarily to the wealthy: Given the typically $14,000 minimum annual fee, many investors just starting out or who don’t have seven-figure portfolios may feel Aspiriant’s services are out of reach. Most clients who work with Aspiriant have a portfolio value of at least $1.5 million. That’s not to say Aspiriant won’t work with more modest incomes, though. About 25% of its individual clients are not high net worth individuals, who are defined by the SEC as having at least $750,000 under management or a total net worth of more than $1.5 million.
  • No published fee schedule: Unlike many other registered investment advisors, Aspiriant’s does not publish a tiered fee schedule. The firm states that clients’ fees will fall in the range of 0.2% to 1%, but you can’t easily see ahead of meeting with an advisor at the firm how much you should expect to pay or how much you need to invest to nab the lowest fee rate.
  • Additional charges for ongoing financial planning: Some registered investment advisors include financial planning and other services beyond investing in their standard asset-based fee. Aspiriant charges separately for these recurring wealth planning services, either by the hour or per project. If you decide to work with Aspiriant, make sure to ask your advisor what comes as part of their wealth planning services.
  • Private funds lock up your money: Though the private equity and real estate funds offered by Aspiriant are unique investing opportunities, they may have limited liquidity for 10 to 15 years. Additionally, the strategies that these funds pursue “are not completely transparent to investors,” Aspiriant notes in its Form ADV.

Aspiriant disciplinary disclosures

All registered investment advisors are required to disclose in their Form ADV, paperwork that they file with the SEC, any legal, regulatory or criminal action that is material to a client’s evaluation of the advisory business or of the integrity of the management personnel. Aspiriant has had no such events over the last 10 years, meaning it has a clean disciplinary disclosure record.

Aspiriant onboarding process

To arrange an initial conversation with an Aspiriant, reach out to the firm’s director of marketing, Cammie Doder, by phone at 415-371-788, or by filling out the form on the Start a Dialogue page of Aspiriant’s website. If you live near one of Aspiriant’s 11 offices, you can meet an advisor in person. If not, plan on a phone call with an advisor at Aspiriant.

For ongoing communications with clients, Aspiriant advisors typically meet with their clients at least annually, though meetings may be as frequent as every quarter. The firm also communicates with clients over email or on the phone throughout the year. Clients receive quarterly reports, typically electronically, although portfolios smaller than $250,000 receive only annual updates.

Additionally, clients will need a brokerage account with a third party to hold their assets, since Aspiriant is not a broker-dealer and does not take physical custody of your assets. Aspiriant recommends that clients use Charles Schwab, Fidelity or TD Ameritrade, though clients are free to choose other providers. Clients will receive regular statements from these firms as well.

If an advisor has discretion to choose investments on a client’s behalf, the client will need to execute a limited power of attorney granting Aspiriant permission to execute trades.

The bottom line: Is Aspiriant right for you?

If you’re willing to pay at least $14,000 annually in fees and want a professional to handle all trading through discretionary management, Aspiriant may be worth a look. The firm may also be a good fit for high net worth individuals and family offices looking for comprehensive financial planning and wealth management, as well as investors who desire access to alternative investments like private equity or real estate funds.

While Aspiriant doesn’t have a firm minimum investment requirement, it does say that most of its clients have portfolios of at least $1.5 million, and many of its services do cater to the wealthy. Plus, the firm does not publish a clear fee schedule, so it may be hard to know before you talk to a representative how much you can expect to pay — especially if you also want financial planning services, which the firm charges extra for on top of investment management.

Before you make a decision on whether Aspiriant is right for you, make sure to do your research, compare your options and, perhaps most importantly, think carefully about your own financial situation.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Avatar
Amanda Gengler |

Amanda Gengler is a writer at MagnifyMoney. You can email Amanda here