Target-date funds are well-suited for some clients, but not for others.

Lewis Altfest is not a fan. He runs Altfest Personal Wealth Management out of a Park Ave. office in Manhattan and manages the assets for a large number of wealthy individuals. The problem with target funds, he says, is that “they don’t allow you to select funds based on the skill of the portfolio manager.” Instead you choose based on the reputation of the fund company.

Altfest says the allure of targets for some people is that they don’t require them to do any thinking—the diversification is already provided for them. But it’s not an efficient diversification, he maintains. They do offer a form of diversification—but among fund brands and images, not among winners.

The fee-only CFP says this type of fund also fails to differentiate among different types of investors. Regardless if they’re aggressive or conservative, they all get the same funds based on their retirement date. And that, he says, is actually a very conservative approach.

“Why should someone change their investment strategy as soon as they retire?” he asks. You may want a client to get more conservative as they get older, but you don’t want them to get too conservative—so he questions the target date, which he feels is an artificial one.

Maureen Whelan, a fee-only CFP with offices in Garden City, Croton on Hudson and Tarrytown, N.Y., has a very different view. She thinks target-date funds are well-suited to her client-base of people with modest savings who have limited time and interest to spend on their investments. For clients like these, she says, targets provide a relatively simple and affordable way to manage their assets.

When it comes to choosing a fund, low-costs are her first consideration. Whelan also tends to be more conservative, and some target asset allocations may be more aggressive than her clients might expect, she says. She looks for information on the fund’s performance during the 2008 meltdown and its aftermath to determine if her clients could tolerate that.

To achieve a better mix of safety and aggressiveness, she encourages some clients to shift their savings into a more conservative fund and put their ongoing contributions into a 401(k), for example, into a more aggressive fund.

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