ETFs versus Assets Under Management

Hired a  financial advisor who has claimed to be fee-only for a plan as we are 2-5 years away from retirement.  Wanted help with projections but especially with two areas:  amount and timing of conversion to Roths and 2.  real estate as we contemplate a new or second place.   Worried I received an annuity salesperson/asset manager in disguise as the first recommendation is to "simplify" our 401ks (almost all in Schwab target ETFs) with the creation of two funds---one actively managed (presumably by them) because they "can do better" and the other to a Prudential Flex Guard account.   One criticism of ETFs they have made is:
"Expense Impact:
Funds can add an unnecessary layer of
expense, as opposed to direct ownership of
securities through separately managed
accounts.
In addition to the fees, the clients could run
the risk of embedded cap gains that
precede their ownership. When securities
significantly appreciate, managers will
rebalance portfolio positions and taxable
gains may be realized by the investor."

I understand there is a relatively low cost to manage these ETFs but had not heard of the cap gains issue.

And as far as the FlexGuard product---are not target date funds managed to hedge as they get closer to the target date?

 

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