Hi MJG. As an RIA, I have always disliked the Assets Under Management as a way to bestow competence. You are exactly right. $2 billion vs. $350 million has no bearing on the competence of an advisor. Unfortunately, using rate-of-return information is problematic, too. The numbers, if available, are for specific models the advisory firm uses. So unless there is specific model information provided (strategies used, specific allocations, fee schedules, etc.), comparison is impractical if not near impossible. Then you have a lot of investment companies that do not use models, or use them for only a specific group of clients, or use them and choose not to go through the SEC requirements for publishing them. Are these companies less competent than the ones who do publish their model numbers? Of course not.
I would suggest that a more logical process is to select an advisory firm that starts with the calculation of the return you actually NEED to achieve your long-term goals, factoring in risk profile, longevity, ability to save, projected lifetime income needs, how long you intend to work, or whether you will continue to have earned income in retirement, what your Social Security or pension benefits might be, etc. This, then, results in an allocation that targets that return. Without this process, you may be taking on much more risk than necessary, or not being aggressive enough, or any number of other factors.
As I have suggested many times on this discussion board, most investors base investment decisions on how well a fund does compared to the S&P 500. Ignoring the fact that the S&P is often an inappropriate comparison, this approach is backwards. We want to know how a manager handles market sell-offs and periods of high volatility. This may be just as important as how they do in bull markets over a long time period. Most investors like to brag to their friends when their investments have a good year. But privately, they are much more concerned about hanging onto dollars in down markets. Your comments above regarding these things are spot on. Thanks for the contribution.

Hi Guys,
Rather than the basic finding from this research project, which is not particularly a shocking or recent observation, I am more concerned with the fundamental cause for this shortfall without falling too deeply into the weeds.
My conclusion might well be too simplistic, but I am a True Believer that most folks are financially illiterate because of mathematical innumeracy. Many of my MFO postings are directed at addressing and/or improving this shortcoming.
One long standing demonstration of this actionable shortfall is the Cognitive Reflective Test (CRT). I’ve posted this test earlier, but here it is once again:
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. 
How much does the ball cost?
2. If it takes 5 machines 5 minutes to make 5 widgets, how long would it take
100 machines to make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. 
If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake?
Take the CRT if you wish. I’ll provide the answers at the end of this post. Just a little algebra and some patience will generate a perfect 3 score.
The reason I included the CRT is because it is a common test administered to a large body of diverse groups. Scores are typically very disappointing.
When the inventor of the test, Professor Shane Frederick, initially gave it to 3500 victims, only 17 % answered all three questions correctly, whereas 33 % got all three wrong. The best group score of 3 correct answers was registered by 48 % of MIT students. Financial folks recorded 3 correct at the 40 % level. That’s not especially encouraging if you seek advice from that cohort.
Using Daniel Kahneman’s “Thinking, Fast and Slow” decision making concept, the lesson here is that far too many folks use too much of their reflexive brain elements and not enough of their reflective mind components when problem solving. The Behavioral researchers might classify this as an overconfidence bias. Regardless, our reflexive overuse tendency puts our wealth and retirement at risk.
The fundamental flaw is that most citizens are not adequately educated in the mathematical discipline. Their tool belt doesn’t contain enough mathematical skills. As one wag told it: “Most can not distinguish between Monte Carlo and Monty Python”.
I will continue the march to encourage investors to slowdown, and to do a little independent analysis. The power of “The Wisdom of the Crowd” is compromised when that independent analysis and deliberate thinking is abandoned in favor of mob rule. That’s one of the primary causes of bubbles and panics.
Enough said. I’ve wandered far from the referenced article's chief conclusion.
As promised, here are the answers to the CRT quiz: (1) 5 cents, (2) 5 minutes, and (3) 47 days. I’m sure many MFOers scored a perfect 3. For those few who didn’t answer all 3 questions correctly, don’t be discouraged; many financial advisors are also in this category. The good news is that if you patiently apply a little algebra that goal is easily achieved. Good luck to all.
Best Wishes and Happy New Year.

Be careful of what you ask for. US economy is built to a large extent on financial illiteracy and serious lack of future planning. Trying to change that will have significant impact on the economy requiring a redesign of consumption based economy, the treatment of capital vs labor, etc.
Every one of us here who are benefitting from the capital markets and depending on it for retitement are doing so arbitraging the inefficiencies of illiteracy. Good news is that educating the masses is not an achievable goal.
In a world where financial literacy is the norm:
1. Real estate markets would collapse when people really understood leverage and effective rate of return without being hindered by emotional feeling regarding home ownership.
2. Retail economy would go into deep recession as people realized how little they can afford to spend the way they are spending now and realize how they can live with much less so they can sock away more and convert human capital to financial capital as quickly as possible to play the only game in town.
3. Favored treatment of capital over labor in taxation and policy would be reversed as masses realize how depending on human capital for retirement was futile and that everyone cannot acquire sufficient financial capital unless they earned more and not just saved more. Margins for consumptive goods would collapse as companies get a double whammy - increasing labor costs and decreasing consumption. Apple would go out of business.
4. Industries based on managing other people's money would collapse as only a few would feel the need to outsource it.
5. Retail banking as it exists would be destroyed as people deleveraged and started to live within their means and demand for loans and credit disappeared.
6. Technology sector would be decimated as venture capital would find itself over invested in companies with no exits and advertising that requires financial illiteracy to create value would no longer support companies' business models. Teens would no longer idle away their time on social media as they learnt the financial value of time. Snapchats would themselves become ephemeral as companies.
The world after getting through the above might be a better place than what we have but getting through that will be worse than living through a nuclear war for a whole generation.
But the chances of that happening are miniscule since mass financial literacy is an unachievable goal. You should be thankful for that.

Reply to @MaxBialystock:
Good. You are moving towards a more balanced portfolio. We all make mistakes and some of them are only so in retrospect so don't dwell to much in the past, learn and move on.
For me your portfolio is too small for retirement. I know you are semi retired but I would seek for opportunities for gainful employment as long as possible.

FYI:
Regards,
Ted
http://www.miamiherald.com/2013/12/29/v-print/3842133/ap-impact-the-world-braces-for.html

Hi cman,
Thanks for the recap. Most of the funds I put money into recently ... I was able to add money around the middle of December just before the upward Santa bounce hit and the fed's announcement to taper. I have thus far only purchased a sum equal to about one half of one percent of my total equity allocation. I am holding off until mid January as Congress will have to address the National debt limit. I am thinking another entry will appear on my screens on or about this time. I most likely will not add to all twelve funds that I hi-lighted but they are my current watch list ... and, who knows, a nice pull back might be forthcoming and I can then do some good shoping. I usually position in by raising in a quarter of a percent to one half of a percent of my overall equity allocation at a time. A good buying opportunity would be adding up to a full percent and reducing cash by a like amount(s). I had wanted to get back to a full allocation (45%) to equities, currently at about 43%. Then with anticipated capital appreciation dial the allocation back as equities advance much like I did last year. For every 25 point increase in the S&P 500 Index I would dial by equities back by about one percent. This did two things, it kept my equity allocation form getting to far from its target allocation and it increased my cash allocation as I moved into retirement. I now hold about 20+% cash and the + percent is what I am looking for opportunities to put to work and since I am 95% of my target allocation to equities. With this, this is the area I am looking to raise. Not a lot, just a couple percent.
Thanks again,
Old_Skeet

This has been a busy week.
Finally gave up on ARIVX...it wasn't so much the cash stake, but the precious metals bets. Thanks to expatsp who highlighted this earlier in the week.
Swapped this for more BERIX....also established a foothold in RSIVX. By year end, my equity positions will be complete as I add to and complete the allotments for YAFFX, FPACX, and ARTGX. This is a shift of a slug of cash into equities, putting me in my ideal position (for me) of about a 67% equity position leading into what I hope is my year of retirement...maybe.
PRESS

SFGIX has over 50% of its holdings in emerging markets, which likely are dragging it down. I have two EM funds, ODVYX which is up 6.3% ytd and ABEMX which is down 8.1% ytd, very different from each other. I suspect emerging markets is similar to "large cap" or "small cap" each manager performs differently unless they are strictly following an index, in which case just buy the index and don't pay the higher fees. It seems when one of them starts to zig, the other zags. Emerging market is not for the faint of heart . It represents only 4.5% of my retirement portfolio ( my largest componenet). My developed market funds did much better OAKIX, at 26.4% ytd. If you bought it to give you diversification, hang onto it, its going to be a bumpy ride at times.

Reply to @Mark:
Even for 20 year olds, I think some amount (say 20%-30%) in bonds is good.
From his own website
http://www.merriman.com/PDFs/UltimateBuyAndHold.pdf
returns in a relatively long recent period (1970-2012) are 8.5% annualized for 100% stock vs. 8.4% for 60:40 portlio with a little reduced risk. Younger investors
are inexperienced and regardless of the advice they get, it is very likely they will
sell at exactly the wrong time (when the market tanks) if they are 100% in equities.
They also have the advantage of having a longer time till retirement, which means
if they invest early enough in a steady balanced fund like FPACX, OAKBX or even
a Vanguard balanced index fund, they can achieve their retirement goals more easily. Younger persons can also have some shorter term expenses (higher
education, marriage, home purchase) which means a portfolio with reduced volatility (without sacrificing returns too much) would be better. Why take more risk when you don't need to? For my daughter, I created a brokerage account (including a Roth) when she started making little money working part-time during high school
and college. She is invested in FPACX and ARTHX, and already has close to
mid-five-digit portfolio at graduation. It also helped that she started investing
closer to the bottom of the market :-).

Since we are on the subject of groupthink, the link below, for better or worse, pretty much sums up its definition. I guess I am a disruptor of the unifomity of the crowd here. Albeit, I have always agreed with Ted that the fewer the better.
As for performance chasing, had I not been a performance chaser, I would be looking at a meager to non existent retirement nest egg and most likely working as a parking lot sweeper at my local Walmart in my old age.
http://psychology.about.com/od/gindex/g/groupthink.htm

Hi Guys,
There has been much MFO hot ink spilled over Paul Merriman’s purportedly controversial proposal for an all equity diversified portfolio during the accumulation phase prior to retirement.
This is not an entirely new idea or strategy. It has been long advocated by folks with a cast iron constitution who do not panic when adversity erodes their portfolios. These folks tend to not monitor their portfolios too closely and have a deep rooted faith in the equity market’s resiliency. They trust that volatility over the long haul is not worrisome, and that the superior returns of an all equity position outdistances untimely and unpredictable late-period disappointments. Is that trust warranted?
The MFO commentary over Merriman’s proposition has been mostly sensible, but contaminated just a little with nonsensical assertions and opinions.
Surely there is no shortage of assertions and opinions. Most are made of solid stuff, but some are composed of mirrors, smoke, misrepresentations, misunderstandings, and misinterpretations. But something has been completely missing from the exchange. What story does the data tell? Where are the analyses?
Here is my attempt to fill that void.
I ran a few Monte Carlo simulations using the Flexible Retirement Planner’s version of that useful tool. I surely do not claim that my analysis is exhaustive. It definitely is not. The entire sequence of calculations that I completed took about 15 minutes. That’s one of Monte Carlo’s most attractive powers. It enables a host of what-if scenarios and sensitivity analysis that permits the user to explore various aspects of the problem quickly. The code runs thousands of random simulations per case.
I hypothesized two alternate portfolios: an all equity portfolio, and a 60 % equity, 40 % fixed income mixed portfolio. For the all equity holdings, I postulated a reasonable 10 % annual average return with an 18 % standard deviation. For the mixed portfolio, I postulated a 7.5 % annual average return with a calculated 12 % standard deviation. I say “calculated” because I needed to assume a 0.4 correlation coefficient between equities and fixed income for the study period.
On the personal data level, I presumed a starting age 0f 35, a planned retirement age of 65, and a life expectancy (combined husband and wife) of 95. So there is a net wealth accumulation period of 30 years and a balancing net retirement phase of 30 years. For the retirement phase, I postulated a portfolio of only fixed income positions with a 4 % average annual return and a 6 % standard deviation. These are reasonable inputs and easily changed.
Initially, I assumed an annual accumulation phase savings rate (in non-taxable accounts) of $15,000 (15K) per year. You’ll see that that saving level is totally inadequate given that I parametrically explored portfolio survival likelihoods for 30K, 40K, and 50K yearly withdrawals during retirement. The Monte Carlo code adjusts these inputs internally for inflation. For the purposes of this analysis, I assumed an average inflation rate of 3 % with a 1 % standard deviation.
For the all equity portfolio, the survival probabilities were 55 %, 40 %, and 28 % for the 30K, 40K and 50K drawdowns respectively. None of these are acceptable and speak volumes for plan revision.
For the 60/40 mixed portfolio, the survival rates were only 22 %, 14 %, and 6 %, respectively for the same drawdowns. This finding is even less acceptable than the all equity portfolio.
With its enhanced net worth at the retirement date, the all equity portfolio delivered superior survival prospects during retirement when the retiree was assumed to convert to fixed income holdings.
The Monte Carlo simulator is a great tool to parametrically examine the impact of optional pathways.
For example, what happens to survival likelihoods if the savings rate is increased from the initial 15K to 20K per year? For the all equity portfolio survival rates increase to 71 %, 56 %, and 43 % for the 30K, 40K, and 50K withdrawal levels, respectively. That’s an improvement, but still far to risky for a comfortable retirement.
At this juncture, I said “forget about the 40K and 50K retirement withdrawal rates; they’re not realistic”. Focusing now on the 30K annual retirement spending requirement, I asked the following question: “How much annual pre-retirement savings is needed to reach a comforting 90 % retirement survival probability?” The retirement planner yielded a 31K per year reply.
You might not like the analysis or the resultant outcome numbers, but those are the hard numbers. They do not include any assertions or opinions. They are simply the output from thousands of calculations that did require a set of guesstimate inputs. Nothing new here when forecasting future outcomes.
The inputs can be easily changed to accommodate personal preferences and beliefs. Their influence on the robustness of the analytical findings becomes self-evident with additional calculations. Parametric analyses of this sort allow the pre-retiree to explore his options, and provide guidance for needed directional shifts in terms of time scale, savings level, and likely post-retirement spending limitations.
The Flexible Retirement Planner code does not model Fat Tails or Black Swan events, so it is slightly optimistic in its projections. I say “slightly” because I considered such limitations when I generated my own Monte Carlo simulator about 1990. I did include some Fat Tail modeling in my version of that tool to test sensitivity to that modeling shortfall.
The necessary program changes are relatively modest, only requiring a few additional lines of code. Basically, instead of using a single log-normal distribution for returns, two distributions are programmed with a break point at the extremes of what the user believes is the usefulness of the conventional log-normal distribution.
I tested break points at the 1.5 and 2.0 standard deviation levels. One obvious problem is that the choice of the second distribution is rather arbitrary given the paucity of real world data in this regime. I did examine a few Fat Tail distributions that I selected based on historical Black Swan events and outlier returns data. These did change the projected survival rates somewhat, but NOT in any decisive, decision reversing way, especially in the context of the overarching uncertainties of future market returns.
The Black Swans are rare. outlier events, and are statistically overwhelmed by the more common happenings. Waiting for Black Swans is a loser’s game. Nassim Nicholas Taleb discovered that when his earlier barbell investment style suffered weekly losses while waiting and waiting and waiting for the hammer to drop. His coworkers said it was like dying from a thousand small cuts.
It is my conclusion that Monte Carlo tools, even with their admitted shortcomings, are a superior way to address long term highly uncertain happenings. Many academic, military, and industry wizards who are tasked to predict the uncertain future would support me in that assessment.
I hope this post is helpful It is meant to be. I invested about 5 times more effort in writing this summary than I invested in actually doing the Monte Carlo number work.
I’ve posted this Link previously, but if you have an interest in pursuing the Monte Carlo tool, here is a Link to the simulator that I referenced and used:
http://www.flexibleretirementplanner.com/wp/planner-launch-page/
Good luck. This retirement planning tool will reduce the need for luck, but you will still need a healthy dose of it.
Best Wishes and Merry Christmas.

Reply to @BobC:

But when you combine a 4-5% annual withdrawal in year one of retirement with a bear market, it has the makings of a disaster for long-term survival. Think about starting retirement and withdrawing 4-5% in 2007 and 2008, and combine that with what happened to the markets then.

Great comment! Sometime I wonder where Mr. Merriman comes up with these ideas.

This is radically awful advice...put everything in equities? I can tell you from actual experience that unless someone has way too MUCH money, they will not be able to handle the volatility of an all-equity portfolio in retirement. And I also know that folks who don't NEED to generate big returns are often the worst at handling bear markets. Perhaps, just perhaps, it might be ok if a person was taking no withdrawals. But when you combine a 4-5% annual withdrawal in year one of retirement with a bear market, it has the makings of a disaster for long-term survival. Think about starting retirement and withdrawing 4-5% in 2007 and 2008, and combine that with what happened to the markets then.
Obviously Mr. Merriman has either too much money himself, which would allow him to be 100% in stocks (50% in international), or he has never advised real-life, ordinary investors. I have been in this business for almost 30 years, and I am looking at retiring in 5-7 years. I can tell you even I would not follow Mr. Merriman's advice, and I have a lot more risk tolerance than all of our retired clients.

FYI:
Regards,
Ted
http://www.marketwatch.com/story/9-radical-recommendations-for-your-retirement-portfolio-2013-12-18/print?guid=0921CEF4-4E99-481A-BBCD-197E7380AF5F

It seems there is a tendency in finance to consider empirical results as natural laws. Some of these work for a while as a self-fulfilling prophecy. If enough people believe and act on an indicator, the indicator remains valid. Happens with TA all the time, not because of any natural laws. Something works until, it doesn't work any more.
Markets are continually evolving "organisms" subject to massive paradigm shifts. The generational inflow of money into retirement plans in the 90s completely changed the valuation equation because average risk overhang went up. The increasing prominence of indexing instruments increased correlations between stocks and decreased price discovery for individual stocks in the index. Increased use of derivatives have made even some fundamentals moot.
There is no new normal any more than there was an old normal. There is just a snapshot at any time of what the markets respond to. Attempts to divine some laws that guide the markets and worse predict seem like exercises in religion to explain the unknown than science.

I’m investing in MISGX, and I invested in MERDX last month. I’m doing it the old fashioned way: I’m sending my check by mail [most of my “core” fund investments were made directly with the funds I own, so I’m less inclined to sell when the market is in a panic and, in some cases, I obtain a lower cost structure.]
I’ve been a longtime holder of MVALX and MEIFX, so I was intrigued by the change in management. I’m adding some seed money to MISGX and MERDX to round out my investments with Meridian. I qualify for “Legacy shares” because I’ve been a Meridian fund holder. Morningstar ran a recent article touting the new managers as a “good fit,” but Morningstar also points out that the new classes of shares will be a bit expensive. The prospectus gives this guidance on the fees that can be expected on a $10,000 investment:
Legacy Class Shares: year 1, $127; year 3, $456; year 5, $ 808; year 10, $1,800
Institutional Class Shares: year 1, $137; year 3, $499; year 5, $ 886; year 10, $1,969
Advisor Class Shares: year 1, $163; year 3, $576; year 5, $1,016; year 10, $2,237
Retirement Class Shares: year 1, $188; year 3, $652; year 5, $1,144; year 10, $2,497

Thank you, David.
Now that Arrowpoint took over Meridan, I am not sure how individual investors like us can invest in Meridian funds.
I do not see an application n their website either.
The prospectus says that there are 4 classes: Legacy, Institutional, Advisor, and Retirement.

Hank noted: "In Michigan the state has really put the onus on the fiduciary to do mandatory withholding and the state's requirements appear more rigid than what the Federal government requires."
Not unlike many tax rules in place; there are any number of "however" and related modifying words for various circumstances.
One such provision for Michigan is what Hank noted about mandatory withholding at "x" percentage rate that applies to each monthly pension or retirement monies one receives. 'Course, this is a sweet deal for the state, as the tax monies arrive upfront and every month. Any "overpay" of taxes becomes a possible refund to the taxpayer some 14 months later.
However, one twist for the mandatory tax withholding that is in place; is the pension or retirement distribution comes from a payer that also resides in the state of Michigan.
If one receives their pension/retirement distribution from an out of state payer, the mandatory portion of taxation may be waived by the retiree. Whatever tax is due, is payable when filing the previous year tax forms. A penalty for underpayment can take place. But, this would have to be calculated against and include all other household income to determine whether underpayment of taxes will happen.

Here is a link that might help ...
http://taxes.about.com/od/Withholding/a/Withholding-On-Retirement-Plan-Distributions.htm
Old_Skeet

Thank you for the welcome. Excited to participate after listening for many months. She started a Roth this year after some recent prompting and has maxed out her yearly contribution. There are other retirement accounts with ongoing contributions which were also just set up, but her rainy day fund is substantial and could be better used.