Q. I have two questions. First, my wife's financial planner has her IRA invested in a fund (ticker: FABGX) that has a 5 percent back load, a management fee, and a 12b-1 fee. I say that's bull. Of the total, $20,000 is in a money market fund which at her age of 46 is also bull. The remainder of the $400,000 is spread over various funds that contain C shares. Bull again. Second, what constitutes a breach of the client's best interest, and where can you get sound advice concerning these issues?

---H.H., by email from Nashville

A. You wife is receiving the "standard of care" that prevails in the financial services industry. It could be improved.

The fund you mention, Fidelity Advisor Growth Opportunity, B shares, has an expense ratio of 1.90 percent a year, including the 1 percent annual 12b-1 charge. I sympathize with your concern, particularly since the performance of the fund has been less than stellar. According to Morningstar, the fund has ranked in the 89th percentile against its large growth peers over the last 10 years. That means 9 out of 10 funds have done better. Over the last 5 years, however, it has ranked in the 25th percentile, leaving 75 percent of its competitors behind.

Now let's compare it to an index fund in its peer group, Vanguard Growth Index. The Fidelity fund has done better than the Vanguard Growth index over the one year and three year periods, but it has trailed over the last 5 and 10 year periods. Here are the figures:
Benchmarking a Fund
This table shows the annualized returns over different periods for a managed fund, a leading index fund in its peer group, and the average of all funds in its category. Figures in bold type indicate the best of the three for that period.
Fund 2005 3 years 5 years 10 years
Fidelity Advisor Growth Opportunity B 7.80% 13.69 (1.17) 3.99
Vanguard Growth Index 5.09 12.36 (0.93) 8.52
Average Large Growth Fund 6.47 13.92 (3.21) 7.02
Source: Morningstar, 12/31/2005 data
As you can see, the index fund beats both the Fidelity fund and the category average over the long term. Costs are a large part of the advantage. The index fund has expenses of 0.22 percent, while the average large growth fund has expenses of 1.48 percent, and the Fidelity fund has expenses of 1.90 percent. The long term performance certainly makes you wonder what your wife is getting for all the extra expense.

The issue here is simple. Is there some point where commonly accepted expenses do more harm than good for the client? This is a particularly important question when the client has to pay two levels of charges, one for the mutual fund and another for the advisor who selects the funds.

At some point, the level of expenses also starts to influence asset allocation in ways that may be harmful to the client. Most of the money in variable annuity sub-contracts, for instance, is in equity funds because it's pretty silly to invest in bond funds yielding 4 or 5 percent before average fees of 1.94 percent for fixed income sub-accounts.

The remedy--- and the answer to your second question--- is to seek the advice of a fee-only financial planner and ask that planner if he or she holds himself to a fiduciary standard. That's likely to produce lower expenses and a portfolio mix whose risk isn't biased upward by fees.

Q. I've heard that it is now possible to own antique gold coins in an IRA account. Is this true? Do you think it would be a good idea?

---R.H., by email from San Antonio, TX

A. Not true. If you download IRS publication 590 and go to page 44 you'll see that the IRS discourages holding collectibles in IRA accounts. Specifically, it says: "If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay a 10 percent additional tax on early distributions, discussed later."

Collectibles are considered: "art works, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, and certain other tangible personal property."

There is, however, one exception.

You can own "one, one-half, one-quarter, and one-tenth ounce U.S. gold coins, or one ounce silver coins minted by the Treasury Department."

As a practical matter, you can invest in gold indirectly in your IRA through mutual funds that invest in gold mining companies. I think this is a better way because the mutual fund retains liquidity--- it can be easily sold at any time.