Mitch Tuchman, second from left, the man behind MarketRiders, with members of Rebalance IRA in New York, Jan. 15, 2013. More companies are popping up to help the vast majority of people who have several hundred thousand dollars at most to invest when they retire. From left: Charles Ellis, Tuchman, Scott Puritz, Jay Vivian and Burton Malkiel.

Robert Caplin, New York Times

Now there's retirement advice for the rest of us

  • Article by: RON LIEBER
  • New York Times
  • January 26, 2013 - 5:35 PM

If you're perfectly capable of running your own retirement savings, selecting the right mix of low-cost investments, rebalancing at the right time and not buying and selling out of fear or greed, then good for you.

But the majority of people -- maybe the vast majority -- are not like that. They may be smart enough to do the right thing, in theory, but they forget or slip up or are taken in by well-meaning friends bearing stock tips or annuity-peddling scoundrels who make nice to them over free steak dinners.

For people with more than $500,000 or so to invest, finding first-class help is hard but not impossible. If you have more than $1 million, you'll have your choice of many of the best financial advisers in town. But until recently, it was tough for people with a few hundred thousand dollars or less to find reasonably priced assistance.

This month the latest entrant in an increasingly crowded field of services trying to serve this customer is introducing its offering, which is called Rebalance IRA. As the name suggests, it exists only to help you with your individual retirement account, perhaps one that you'll fill with money that's been sitting around in several 401(k) or similar accounts at previous employers.

Rebalance IRA representatives will talk with you about your goals, invest your money in a low-cost collection of index funds that don't try to make big bets on individual stocks, and rebalance the investments when necessary. In exchange, you agree to hand over one half of 1 percent of your assets each year, with a minimum annual fee of $500.

The company's single-minded focus on retirement savings makes sense given how much money is at stake and how badly many people mess things up when they do it on their own.

To start with, large numbers of people make extreme bets. At Vanguard, 10 percent of retirement plan participants invested only in stocks in 2011, while 8 percent had no stocks at all. Then, there are the emotional challenges. To stick with the mix of investments you've selected, you need to sell things that have done well and buy investments that have lagged recently. That's hard to do.

And there's a lot at stake. There is more money in IRAs than in any other type of retirement vehicle, according to estimates from the Investment Company Institute. IRA balances totaled $5.3 trillion at the end of the third quarter of 2012. That's more than the $5 trillion in 401(k), 403(b) and other similar plans; the $4.8 trillion in government retirement plans; and the $2.6 trillion in traditional pensions.

All of this suggests there's a market for low-cost investment advice. Still, it wasn't immediately obvious to Mitch Tuchman, the man behind Rebalance IRA, who started a service for do-it-yourself index investors called MarketRiders in 2008.

A former software entrepreneur, Tuchman had a midlife conversion to passive investing and not trying to beat the market, and he wanted to help others invest in the same way. "We thought we could build such great software that we could turn everyone into a do-it-yourselfer," he said. "And people said they didn't have time or they didn't care to do it themselves."

MarketRiders charges subscribers $150 a year for instructions on how to adjust their portfolios and when, and it will continue to exist. Tuchman, who had also started managing millions of dollars on the side for friends and family who simply could not be bothered to do it themselves, eventually realized that his sideline was where the real mass-market opportunity lay.

So why would you let this guy handle your money? It's a perfectly reasonable question, and plenty of start-ups in the money management space don't do a particularly good job of answering it.

"It's surprising to me how many entrepreneurs go on and on about the lack of trust in big financial institutions," said Grant Easterbrook, a senior research associate at Corporate Insight who published a guide to money management start-ups. "But they're not putting forward the people behind the product who actually make the investment decision. Who am I trusting if the euro breaks up or we mint a trillion-dollar coin?"

Tuchman has anticipated this concern and he and his co-founder, Scott Puritz, rounded up an investment advisory board that includes Burton Malkiel, the emeritus Princeton economics professor who wrote "A Random Walk Down Wall Street" among other books; Charles D. Ellis, author of "Winning the Loser's Game" and a former Vanguard board member; and Jay Vivian, who once ran IBM's retirement plans.

There are other, cheaper ways to find someone to put your money in a portfolio like those at Rebalance IRA and run the money for you. A company called Wealthfront, which has also put Malkiel to work, will do something similar for about 0.25 percent annually.

Investors at Betterment, which slashed prices last year, now pay about 0.3 percent on average, and the company has taken in nearly $100 million since it cut its fees.

Tuchman is betting that his portfolios and service can be as good as what TD Ameritrade, Schwab, Vanguard and Fidelity offer, without charging quite so much for it. Even if he fails, someone else is going to seize on the formula and succeed with it.

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