By ANNA PRIOR
Wes and Pat Snyder used to dread the start of each month, when a barrage of statements from numerous brokers, fund companies and banks clogged their mailbox. Between them, the couple had eight financial accounts, and what would start as an inch or so of paperwork at the beginning of each year would grow to a foot-high, Jenga-like tower by year's end. "We didn't really know what we had," says Wes Snyder, 57, a commercial real estate appraiser, who ultimately got help from a financial adviser.
In the postcrash era, more Americans are keeping a closer eye on their financial statements, but that's producing its own sort of headache: a mounting pile of various accounts, from 401(k) plans and IRA rollovers from different jobs to brokerage accounts with a handful of mutual funds. The number of 401(k)s left behind by former employees has grown steadily, from 19 percent of all accounts in 2005 to 22 percent in 2009, according to the Profit Sharing/401k Council of America. And 37 percent of investors with $100,000-plus in investable assets have multiple IRA accounts with at least one investment firm, according to Cambridge, Mass. based market-research firm Cogent Research. Reasons for the paper chaos vary, of course, but experts say the demise of the traditional pension plan and growth in self-directed retirement accounts are having an unintended side effect. Planners say it's not uncommon to have clients walk in with a dozen accounts scattered among several firms making it tougher to keep track of what proportion of assets are in stocks, bonds or cash. "You lose sight of the overall portfolio," says Meredith Lloyd Rice, a senior project director at Cogent.
While good planners will ask investors if there's any way they can make things easier, don't expect too much help from your broker. Though brokerages often advertise easing the 401(k) rollover process and, of course, some would benefit from investors deciding to consolidate business with their firm few bring small, inactive accounts to their clients' attention. As a result, some small accounts just fall off the radar screen of many financial-services firms, experts say. The definition of small can vary, but at a full-service brokerage, an investor isn't likely to get much attention if he or she has less than $250,000 in an account. Even if you have $500,000-plus in investable assets, there's no way for a brokerage to know if you have just one small, inactive account in the mix, says Bing Waldert, a director at Boston-based research firm Cerulli Associates.
Still, experts say the solution to all these hassles is fairly, well, simple: simplify. The Snyders, for instance, sat down with a financial planner and pared down those eight accounts to four, all held at Vanguard. A recent survey by Cogent found that 13 percent of investors with more than $100,000 in investment assets have closed at least one account in the past year, more than double the number that have done so in the past five years. The pros say most individuals can get away with just three accounts: a 401(k) at their current employer, a traditional or Roth IRA, and a taxable nonretirement account.
Advisers say investors should pick a low-cost account with lots of flexibility and a robust menu of investments, and consolidate assets there. And once things are simplified, it will take some work to keep it that way. As the Snyders' financial planner, Michelle Goldstein of Dallas-based Goldstein Financial Future, puts it: "It's like cleaning out your closet."