Mutual Fund Firms Fall Short in Providing Wealth Transfer Tools and Education

Alan Maginn, a senior analyst at Corporate Insight and the study's author, says that making apples-to-apples comparisons among the companies is difficult because of the great variety of information and services available through the websites. But the report, in total, points up the need for enhanced content at most of the portals. The additional resources, Maginn observes, are not only for advisors' benefit.

"If a client dies, and the [estate] beneficiary takes money to his or own broker, the money is leaving not only the advisor but also the mutual fund company," says Maginn. "That's a key issue here — keeping assets under management. "If [asset flight] is not a major issue for advisors today, it will be within the next decade."

Clanton says the firms especially need to focus on withdrawal techniques and distribution modeling. He cites, for example, dollar-cost averaging, a method of building assets by investing a fixed amount of dollars in securities at set intervals. While the technique lends itself to the accumulation phase of lifecycle planning, Clanton says it may "not [be] a good discipline to follow" during the withdrawal phase because assets can be drawn down faster than the client would otherwise desire.

He adds that the fund firms can also lend greater assistance in determining the appropriate sequence of withdrawals from retirement accounts. Advisors have long advocated that clients withdraw first from taxable accounts, then the tax-favored vehicles: the traditional IRA, Roth IRA and/or 401(k). But Clanton says that conventional wisdom may no longer hold.

Not all advisors see the mutual fund companies — or at least those with which they do business regularly — as lagging. Michael Puls, an advisor with Arbor Financial Services, Pasadena, Calif., asserts that two of his broker-dealers, Commonwealth Financial Network and AllianceBernstein, are at "the leading edge" of the market with respect to provisioning estate and distribution strategies and educational services, including seminars. In the aggregate, he adds, the fund companies are more sophisticated in their treatment of wealth transfer planning than in years past.

Carol Fisburn, a financial planner and principal of Brentwood Advisory Group, Los Angeles, agrees that the firms have improved their support, but she draws a distinction between institutional and retail services. And, like other planners, she questions the advisability of relying on the firms' recommendations alone.

"On the institutional side, firms like Fidelity and Charles Schwab have really stepped up support for independent, fee-based advisors, like me," says Fisburn. "But would I depend on the mutual fund companies for specific wealth transfer solutions? No. I would definitely have to hire professionals to feel comfortable that the final recommendation [for the client] is accurate and appropriate."