“Do it yourself retirement plan” not working

Question: My husband and I are considering working with a young man who is a financial advisor at our bank. He seems like a nice person and is close to our age. But my husband is worried that we will pay too much in commissions for any investments we make. I hate to put you on the spot, but is working with someone like this a good idea?

Answer: Two rather depressing pieces of journalism have crossed my desk in recent weeks.

The first was a somber warning by a "do-it-yourself" (DIYS) pundit. The DIYS wing of financial journalism is empowered by the notion that somewhere, someone is going to make money off you.

They are also well-funded by advertisers of various "no load" investment companies that extol the virtues of saving money by being your own advisor. Since you don't have an advisor, you have to buy their book/magazine/tape program to know what to do.

The warnings given by the DIYS journalist were not new or surprising: beware of paying a sales commission to an advisor; the advisor may not be as well educated as your lawyer or CPA; the advisor has a built-in conflict of interest to sell you something; the advisor may have a limited scope of focus: usually investments.

And he summed it all up by saying advisors are just too darn expensive.

OK. I've read that stuff before by DIYS journalists before. God love 'em, they are on a mission to feel like they are saving money every chance they get. I have not paid a lot of attention to them since most folks instinctively know they need help in areas in which they lack expertise, and see the value in paying for it.

When it really started bothering me this week was when I read the second piece that crossed by desk.

It was a summary of the Employee Benefits Research Institute's 16th annual Retirement Confidence Survey. It reported on the dismal job Americans have done to prepare for retirement.

The facts presented were not for the faint of heart: One in three 45- to 54-year olds has less than $10,000 saved anywhere. Two out of three over the age of 55 have less than $100,000 saved anywhere.

That means that the vast majority of Americans will enter retirement almost totally dependent on Social Security and other government funded programs to live.

Do-it-yourself journalism of all sorts had its birth during the anti-authoritarian 1960's and the "me generation" 1970's. Baby boomers who will soon be retiring have been the consumers - hook, line, and sinker - of this brand of self-congratulatory blather.

Now we are seeing the results of a generation of "I can do it myself" financial planning. For most baby boomers, it has meant "I'll can it myself…tomorrow."

When I put these two articles together, I thought, "What if a baby boomer had worked with a very mediocre, conflicted financial advisor from the very early days of his career?"

Assume the advisor was really commission hungry, so he got his client to invest regularly so the advisor could make regular commissions. And he put him in some real dog mutual funds - funds which badly underperformed the stock market. Using very conservative assumptions about what Mr. Boomer earned during his career, it's easy to see how he would have over $500,000 today, which would put him in the top 10 percent.

Maybe working with a better advisor, using better investment models and strategies, this same guy would have $1,000,000 - that's not my point and that is impossible to know.

My point is - work with SOMEBODY.

Doctors don't operate on themselves. Attorneys who represent themselves in court have, as the judge once said, fools for lawyers.

Sure there are advisors out there who are better than others - same with any profession. But chances are that even a mediocre, conflicted advisor will do a better job than you do all by yourself.

Ask for references. Ask the president of the bank if he believes in this guy. If you get green lights, give the guy a chance.

It beats the DIYS-aster of doing it yourself.