Adam Bold founded his registered investment advisory (“RIA”) firm called the Mutual Fund Store in 1996. in order to provide fee-only mutual fund advice to individuals. A worthy goal and possibly a needed service for many, but does Bold’s Mutual Fund Store deliver?
First of all, why would anyone want to use this service? It would be the same reason that people use any type of investment advisory service: they want help with their investments… and they are willing to pay for it. The mutual fund store says there are three reasons that people come to them: They don’t either don’t have the time, the interest, or the expertise to manage their own investments.
So the idea behind the mutual fund store is sound, but what about the execution?
Mutual Fund Store Historical Results
If you look through the website thoroughly… you can’t find any historical results. The only example of results and suggested allocations come from other sources. Here are a couple of examples:
Len — paying close to $2,000 per year on his account — said that they claimed they picked the best funds for him but most were rated 2 or 3 stars by Morningstar, and the advisor had no explanation other than “You can read the prospectus if you want to know more…” When he asked what he was paying for, the mutual fund store advisor said “We allocate your portfolio” and got flustered when Len said he could do that himself.
Here’s another case: A $112,000 portfolio that had returned 6.8% annually over the previous five years (while paying less than .35% in total management fees annually). When presented with this, the Mutual Fund Store advisor suggested changing the portfolio to funds with over 1.28% in management fees, higher turnover, and a return over the previous five years of 2.8% (vs. the 6.8% that had been achieved with the lower cost funds!). And this didn’t include the Mutual Fund Store 1.5% management fee.
In order to find out which funds have been recommended, you have to fill out and then submit a form…which is found on the “Mutual Fund Show” website, and NOT on the Mutual Fund Store website.
Mutual Fund Store Fees
Well… if you watch the video on the website, you’ll learn that a $50,000 account is different than a $5,000,000 account, and that “generally” the bigger account will pay a smaller percentage fee. No specifics are listed.
Other sources state that the fees run in the range of most other registered investment advisors: 1% to 1.5% annually, paid on top of and in addition to the management fees and turnover costs of the mutual funds in the portfolio. Your total? Figure somewhere in the 2.5% to 5% range after calculating the total cost of turnover, mutual fund fees, and the fees charged by the store.
Mutual Fund Store – The Conclusion?
It seems that the Mutual Fund Store is a typical RIA trying not to be. In other words, they look like a typical RIA, they gather assets like a typical RIA, they do asset allocation like a typical RIA, but the advisors say that they are different because they only charge a “small fee.”
And like every other RIA, brokerage firm, bank, insurance company (or any other type of financial services company), there will be people who are very happy with the product and service, others that are moderately happy, and others that think they stink.
Let’s close with a quote from Scott Capace, filling in for Adam Bold on the Mutual Fund Show radio program, who said: “I will always choose a fund with higher fees, more risk, and less return”.
(I’m guessing this was edited out of the Mutual Fund Store podcast!)