'Should I dump my financial adviser?'

@Money September 4, 2012: 6:24 PM ET

(Money magazine) -- My grandfather opened an account for me with an investment firm that emphasizes face-to-face personal service. I've recently realized, however, that I'm paying a lot in fees, but talk to my financial adviser maybe only once a year. Should I switch to another company? -- Joel, Fort Worth, Texas

It sounds like you and your grandfather want different things from an investment firm. He apparently values the personal touch -- and, as long as he's getting decent advice, he should stay where he's happy.

But if you're not taking advantage of this personal attention, I don't see much sense in sticking around. It's not as if one firm has such superior investing insights that you'd be relegating yourself to subpar performance by leaving. If anything, shelling out less in fees would mean more of your money could go toward actual investing.

The only real issue is what you should do once you've said goodbye. As I see it, you have three choices:

You can fly solo: Since you rarely speak to your adviser anyway, you may be more comfortable investing on your own. It's really not that difficult. You can get a completely diversified portfolio of stocks and bonds appropriate for your age by investing in just one target-date fund.

If you prefer to build a portfolio on your own, you can easily assemble one from the stock and bond index funds on our MONEY 70 list of recommended funds. Just buy a total stock market index fund and a total bond market index fund and, voila, you own a fully-diversified portfolio of U.S. stocks and taxable bonds.

If you want to get fancy, you can throw in a total international stock index, and you'll have foreign stock exposure, as well. You should be able to pull all this off at a cost of less than 0.25% of assets a year.

If you're unsure about how much to put in each of these funds, check out our asset allocation tool for some guidelines. And if you feel you'd like to bone up a bit on the basics before you jump into the markets, read our MONEY 101 lessons on investing.

You can go to a more affordable adviser. If you're not quite ready to go it alone, you can always switch to a firm that offers less hand-holding and lower fees. That way, you still get investment advice, but don't pay for costly face time.

Your best option here is most likely a managed account of some type. Basically, the investment company assesses your goals and risk tolerance and then puts you into a portfolio of stock and bond mutual funds that fits your situation. You'll pay an annual investment advisory fee, plus the mutual fund's underlying expenses, the combination of which might run, say, 1.5% or so, depending on how much you invest and the specific funds recommended for your portfolio.

Many well-known mutual fund and investment firms offer such accounts, although some may require a minimum investment of $100,000 or more. Fidelity and Schwab have $50,000 minimums, and the minimum drops to $25,000 at Schwab for an IRA.

You can take a hybrid approach: You could hire a pro just to help you choose some mutual funds and set up your portfolio, then take it over from there.

The hitch is finding an adviser who's okay working with you on a one-shot basis. Most advisers are looking for long-term relationships (and ongoing fees). Fortunately, there are some advisers who are willing to charge for their services on an hourly basis (usually $150 to $250 an hour) or take on projects for a flat fee.

By working with such an adviser, you should be able to come away with a simple but effective portfolio of low-cost index funds for a one-time charge of no more than a few hundred bucks, plus whatever modest fees the funds themselves charge. Once the heavy lifting of building the portfolio is done, you would monitor its performance and periodically re-balance to make sure that the stocks-bonds mix the adviser originally set doesn't get too far out of whack.

Of course, if you feel the need for some more advice or guidance down the road, you can always hire the same adviser again or a different one for an hourly fee. As long as you're not constantly running back to the adviser for help every time the market wiggles, this can be a very cost-effective way of getting advice when, and only when, you need it.

One final note: As a courtesy to your grandfather, give him a heads up if you decide to close the account he opened for you. Who knows? After you explain your reasoning, maybe he'll want to consider new options, and you can explore them together. To top of page

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