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"Rent Your Mutual Funds?"
Old 04-16-2005, 09:00 AM   #1
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"Rent Your Mutual Funds?"

Hello everyone,

Newbie here. I have a couple of questions that I have not seen on any of the retirement forums. I am retiring in a few months with a respectable nest egg from my employee profit sharing plan. I have never done any investing but have tried to educate myself during the past few years with classes and a lot of research on the Internet. At this point, I am considering splitting the money among three IRAs: Edward Jones, H.R. Block, and a Self-Directed for me to play with (maybe Fidelity.) I suspect that most people here would recommend doing it yourself and saving on fees. However, I am leaning toward a couple of guys to see if the return and handholding is worth the extra money.

Although I have seen very little comments on specific financial companies here, I have a couple of questions about H.R. Block. I hope someone might be willing offer an opinion or insight. H.R. Block bought Olde Discount Corp. in 1999 (renaming it H.R. Block Financial Advisors Inc.) with the intention of making it a national financial services company. Here are some items from a recent article in the Kansas City Business Journal.

1. The company is laying about 70 employees (15% of its non-field staff) in its Kansas City & Detroit offices.
2. Its 2004 fiscal year pre-tax loss was $64.4 million and they expect it to be 25% higher this year.
3. Analyst Alexander Paris, Jr. of Barrington Research stated that promises to turn the company around might include drastically downsizing the unit or positioning it for a possible sale.

Question #1. If the company is sold or declares bankruptcy, would that pose any danger to funds invested through them or make it difficult to recover your money?

As I understand it, H.R. Block Financial Advisors apparently have agreements with a large number of Mutual Fund Companies to sell Type A Shares without a load. The catch is that if you terminate your account with them, you have to sell the shares back to the Fund Company at current prices. I have never heard of this type of arrangement. It almost sounds like you are renting your funds rather than buying them.

Question #2. Have you heard of this policy before and what do you think about it?

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Re: "Rent Your Mutual Funds?"
Old 04-17-2005, 06:51 AM   #2
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Re: "Rent Your Mutual Funds?"

No doubt others will echo these sentiments, but I really cannot imagine getting enough value out of Ed Jones to make up for the fat fees they will charge. I would suggest that you just pick a balanced fund (like Wellington or Wellesley) or do a very simple split of your money into cheap index funds (1/3 total stock market, 1/3 bond index, 1/3 MSCI EAFE) and rebalance once a year.

If you really feel the need to get some hand-holding, I would suggest a fee-only planner who will charge you a set hourly rate, help you set up a portfolio, and then leave you alone (and not charge you) until you need more help.

Finally, whatever you do, stay away from H&R Block. Sleazy shop and in financial trouble. Not likely to be a recipe for good performance.

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Re: "Rent Your Mutual Funds?"
Old 04-17-2005, 07:06 AM   #3
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Re: "Rent Your Mutual Funds?"

I would not trust H&R Block to do your income tax let alone mine. My cousin thought that she might like to do income tax in the winter for them and the course they gave her was totally inadequate for even simple returns. Same with their investment services.

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