1.5% Financial Advisor... or index fund?

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vpotus
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1.5% Financial Advisor... or index fund?

Post by vpotus »

Hi all,

This is my first time here. I'm aware that there are many resources here that I plan to read... But I'm dying to have some feedback.

I recently inherited about $350,000 and have not done much with it as I have been settling my late mother's affairs. I'm now at the point of making some financial decisions. My wife and I interviewed a fee-only financial advisor as well as a financial management company. My wife prefers the financial management company because she thinks that they can get better returns than a Vanguard index fund; I'm not so sure that that is possible and I don't know how they can prove their track record.

The Financial advisors need to beat 1.5% by a lot to make it worth my while. If the FA company can beat and index fund by 2% it may be worthwhile... but... I know the company will eat a lot of the money over time.The FA company also mentioned that they want to have access to accounts to change allocations; that makes me a little uneasy.

I'm leaning more toward a one-time fee only advisor and then some vanguard funds.

Please share your thoughts. Thank you.

VP
livesoft
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Re: 1.5% Financial Advisor... or index fund?

Post by livesoft »

My thought: A 1.5% annual fee is a rip-off.

Your spouse may be thinking that "an index fund" is simply a fund that tracks the S&P500 index. That is just one index fund. There are many index funds: bond index, small-cap index, REIT index, total market index, int'l index, etc. Some combination of index funds will do better than the S&P500 index fund or will have more or less risk than the S&P500 index fund. The corollary to this is that advisors who do better than the S&P500 index fund are nothing special.
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Re: 1.5% Financial Advisor... or index fund?

Post by CABob »

I think it would be wrong to go with an advisor if you expect him to outperform a DIY approach by over 1.5%.
There are many good and legitimate reasons for wanting to use an advisor, but, outperformance is not one of them IMO.
A fee only advisor to prepare a plan might be money well spent, but, I would suggest you start with some self education by reading some of the books on the Boglehead list perhaps starting with one of the Boglehead Guide books and Eric Tyson's Personal Finance for Dummies. At that point you might be ready to DIY along with some help from this forum.
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Re: 1.5% Financial Advisor... or index fund?

Post by hansp »

I use a fee only advisor on an ongoing basis, but mine is charges a flat fee that is now ~ 0.15% our our assets. 1.5% is way too high. Over the long term, it is incredibly unlikely that they will make up that difference.

Again, there are legitimate reasons to use an advisor, but if you decide to go w/ one, I'd search form someone charging < 1%, ideally <0.5%. If 350K is the total you have to invest, it may be tough getting under 1% given the minimum fees. I'd suggest a flat fee advisor instead of a %. That way, as your total goes up, fees become a smaller and smaller %.

In the end, it's up to both of you to decide what makes you most comfortable. DIY @ Vanguard will almost always be the lowest expense, but that requires the interest, time and fortitude to ride out swings in the market on your part.
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Re: 1.5% Financial Advisor... or index fund?

Post by SteveNet »

Don't forget to factor in the ER average of the funds the adviser uses and add that to the 1.5% adviser fee. Then compare it to a DIY index fund or ETF ER based AA of low cost index funds.
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Re: 1.5% Financial Advisor... or index fund?

Post by mickeyd »

I'm leaning more toward a one-time fee only advisor and then some vanguard funds.

Please share your thoughts. Thank you.

VPvpotus

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Welcome here VP.

If you feel that you need a one-on-one session or two with an advisor in order get some solid advice so that you do not make a serious mistake with this stash, have at it, but make sure that you pick an advisor that is a fiduciary, that is, he/she has to hold YOUR intertests first. Also take some time to read one or more of the rccomended books listed in our wiki.

The more informed that you are, the more you will get out of any meeting with an advisor. You might also try to DIY as many of us have done. Arriving at Bogleheads forum is worth at least a session with a paid advisor IMHO.

Whatever you decide let us know how it works out.
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Re: 1.5% Financial Advisor... or index fund?

Post by KyleAAA »

I'll go ahead and say what everybody else is thinking but not saying: there is a 0% chance the manager will beat a simple indexed portfolio over the long haul on a risk-adjusted basis. Not 10%. Not 1%. 0%. You're going to have to tell your wife she's wrong. Good luck with that.
Last edited by KyleAAA on Sat May 04, 2013 7:24 pm, edited 1 time in total.
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Re: 1.5% Financial Advisor... or index fund?

Post by TomatoTomahto »

$350k is a fair bit of money; it beats getting a stick in the eye. You haven't shared your financial details, but I'm surmising that this is the first time you've had this amount (otherwise you and your wife would presumably have previously discussed advisers and such).

I would wager that if someone offered you $5250 (coincidence, that's $350k times 1.5%!) to read a couple of books, you'd pull up your favorite chair and have at the books. Why not put the money in some money market fund while you read some of the books recommended in the wiki.

Or, tell us a bit more about yourself (preferably in the BH format, but not necessarily): your financial situation, your retirement plans, special financial needs, etc. People here give great financial advice for free, and they have no vested interest in your decision beyond hoping for the best for you.

Trust me, it is not difficult to invest $350k. If it turns out that you really need financial help (which I doubt, given the clarity of your post) beyond what you can get from a book or this forum, your adviser will be more than happy to get your funds out of the money market.

As to needing help getting your wife to agree, that's above my pay grade :D
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Re: 1.5% Financial Advisor... or index fund?

Post by otbricki »

TomatoTomahto wrote:
I would wager that if someone offered you $5250 (coincidence, that's $350k times 1.5%!) to read a couple of books, you'd pull up your favorite chair and have at the books. Why not put the money in some money market fund while you read some of the books recommended in the wiki.
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Re: 1.5% Financial Advisor... or index fund?

Post by dhodson »

KyleAAA wrote:I'll go ahead and say what everybody else is thinking but not saying: there is a 0% chance the manager will beat a simple indexed portfolio over the long haul on a risk-adjusted basis. Not 10%. Not 1%. 0%. You're going to have to tell your wife she's wrong. Good luck with that.

awesome post in my view. :sharebeer
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Re: 1.5% Financial Advisor... or index fund?

Post by NOLA »

OP, you will get some fantastic advice on this site. The chances of "beating the market" by 1.5%, plus the extra ER that the advisor's fund will likely have is pretty much impossible. Also, since this investment will be in an taxable account, don't forget the trading costs that will likely add to already high expenses.

Please stick around cause you will learn a lot - just like I'm doing everyday. For me it was a little "scary" in the beginning when people gave you advice you are not used to. But the Boglehead site is outstanding.
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Re: 1.5% Financial Advisor... or index fund?

Post by vpotus »

Thank you all for you help. It is comforting to know that my thoughts are heading somewhat in the right direction.

As for me... I started with a 403b through my employer about 23 years ago. About the same time, I started Vanguard Index Fund because I didn't want to put my eggs all in one basket. I contributed to both funds through my employer until the laws were changed. Now I am only allowed to contribute to the 403b. Yet, the index fund keeps growing. In addition to my original next eggs, I recently received an inheritance.

It appears that I qualify to have some planning advice from Vanguard. Has anyone used their planning service? (I know just enough so that I am afraid to make a mistake with asset allocation, fund choice, etc.)

Thank you once again.

VP

p.s. The advice concerning my wife made me LOL.
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Re: 1.5% Financial Advisor... or index fund?

Post by JW-Retired »

vpotus wrote:Hi all,

This is my first time here. I'm aware that there are many resources here that I plan to read... But I'm dying to have some feedback.

I recently inherited about $350,000 and have not done much with it as I have been settling my late mother's affairs. I'm now at the point of making some financial decisions. My wife and I interviewed a fee-only financial advisor as well as a financial management company. My wife prefers the financial management company because she thinks that they can get better returns than a Vanguard index fund; I'm not so sure that that is possible and I don't know how they can prove their track record.

The Financial advisors need to beat 1.5% by a lot to make it worth my while. If the FA company can beat and index fund by 2% it may be worthwhile... but... I know the company will eat a lot of the money over time.The FA company also mentioned that they want to have access to accounts to change allocations; that makes me a little uneasy.

I'm leaning more toward a one-time fee only advisor and then some vanguard funds.

Please share your thoughts. Thank you.

VP
Your uneasiness is a good sign. Don't be taken in by the smooth sales pitch. These are salesmen you have been interviewing. Your wife thinks they can do better than Vanguard based on? Studies show active management will do well to tie the appropriate set of comparable indexes so you will just end up with 1.5% less investment return from here on out (+whatever other extra costs they can dream up). Can you tell us the name of this financial management company?..... possibly ex-clients here may wish to comment on what you might expect.

At least take some time and do some reading before you sign up to hand over a quarter or more of your future investment return for "advice". That will compound to a ton of money over your investing life.
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Re: 1.5% Financial Advisor... or index fund?

Post by TomatoTomahto »

I haven't used Vanguard advisers for this myself, but I think that they are far from the worst, and they don't have a significant "agenda." To be honest, I don't think that the difference between a 60/40 allocation and a 50/50 allocation is going to lead to financial ruin (or financial euphoria, either). The trick is getting an allocation and staying the course when things "get interesting." If you can do that, you're ahead of most everyone else.

As regards the wife advice, I think most of us are married or have been at least once :D
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Re: 1.5% Financial Advisor... or index fund?

Post by vpotus »

JW: The name of the firm is: ******** Fin4nci4l in CT and MA. I crunched the numbers and I'm fully aware that they will take a chunk of change. When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived. They stated that they research and use the funds where fund managers put their own money. My wife liked them because they exuded confidence and made her feel that they would make us even more money.

I kept wondering how they could research that? How much better than an index fund could they really be? It seemed too good to be true and I didn't really buy it. I thought that they were very nice and very expensive middle men.

Thank you.

VP
Last edited by vpotus on Sun May 05, 2013 1:54 pm, edited 1 time in total.
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Re: 1.5% Financial Advisor... or index fund?

Post by Toons »

Go with a three fund portfolio and pay yourself the 1.5% a year :happy

http://www.bogleheads.org/wiki/Three-fund_portfolio
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Re: 1.5% Financial Advisor... or index fund?

Post by tomd37 »

VP,

When you parachute into the ocean without a life vest that parachute is going to pull you under.........
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Re: 1.5% Financial Advisor... or index fund?

Post by JW-Retired »

vpotus wrote:JW: The name of the firm is: Br4dw4y Fin4nci4l in CT and MA. I crunched the numbers and I'm fully aware that they will take a chunk of change. When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived. They stated that they research and use the funds where fund managers put their own money. My wife liked them because they exuded confidence and made her feel that they would make us even more money.

I kept wondering how they could research that? How much better than an index fund could they really be? It seemed too good to be true and I didn't really buy it. I thought that they were very nice and very expensive middle men.

Thank you.

VP
Can't say I ever heard of that firm. Has anybody here? They do better because of no load or load-waived fidelity fund choices? IMO, this is sales gobbledygook. Fidelity and Vanguard are both no-load mutual fund companies. I don't believe either company sells any funds with sales loads. The 10 or so flavors of Vanguard index funds and the similar number of Fidelity Spartan Index funds are all no-load with extremely low expense ratios.... like less than 0.1%. I do own some of both companies index funds. I think it would be madness to tack on another 1.5% to that 0.1%.

".....very nice and very expensive middle men" says it all. There is hope for your future prosperity. :)
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Re: 1.5% Financial Advisor... or index fund?

Post by exigent »

I'm with KyleAAA. There's simply no way an advisor will be able to overcome that sort of drag without taking outsized risks.

And yeah, that bit about no-load and load-waived? They're selling you a bill of goods.
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Re: 1.5% Financial Advisor... or index fund?

Post by livesoft »

vpotus wrote: When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived.
Once again, I don't think anyone cares if they do better than an index fund. What one would like is better than an index fund on a risk-adjusted basis. I don't think that is going to happen with the fees one would pay.

Fidelity is a fine shop. My 401(k) is with Fidelity, but I use only Fidelity index funds in my 401(k). If the firm used Fidelity Spartan index funds and you paid them about 0.25% of AUM, then I don't think folks here would argue about that.
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Re: 1.5% Financial Advisor... or index fund?

Post by Clever_Username »

vpotus wrote:When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived.
Both you and your wife should know - if you don't already - that you can get many funds (both index and otherwise) that are no-load and load-waived on your own. This isn't anything special this guy brings to the table.
vpotus wrote:They stated that they research and use the funds where fund managers put their own money.
Jack Bogle has a large sum of his money in Vanguard funds - primarily in the index funds. He's the founder, not the fund manager, though.
vpotus wrote:My wife liked them because they exuded confidence
The behavior of these guys might coincide with those awful "pick up artist" tips. There's an additional joke here about what both groups are aiming to do.
vpotus wrote: and made her feel that they would make us even more money.
They wouldn't be very good salesmen if they couldn't give you this impression.
vpotus wrote:I kept wondering how they could research that? How much better than an index fund could they really be? It seemed too good to be true and I didn't really buy it. I thought that they were very nice and very expensive middle men.
I wonder what their trailing returns are. While these aren't an indicator of future performance, I wonder if they have beaten the index in the past, say, ten years total, and if not, why you should believe they will in the future.


One quick aside to JW : I don't know all the Fidelity funds, but Vanguard does have a few funds with loads. They're rare, and I think almost always (if not actually always) new funds. VTIPX is one such fund.
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Re: 1.5% Financial Advisor... or index fund?

Post by tfb »

Clever_Username wrote:One quick aside to JW : I don't know all the Fidelity funds, but Vanguard does have a few funds with loads. They're rare, and I think almost always (if not actually always) new funds. VTIPX is one such fund.
The purchase fee feels like a load but it's not. Once you are in the fund, you benefit from the purchase fee others pay, whereas you won't benefit from the load.
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Re: 1.5% Financial Advisor... or index fund?

Post by Clever_Username »

tfb wrote:
Clever_Username wrote:One quick aside to JW : I don't know all the Fidelity funds, but Vanguard does have a few funds with loads. They're rare, and I think almost always (if not actually always) new funds. VTIPX is one such fund.
The purchase fee feels like a load but it's not. Once you are in the fund, you benefit from the purchase fee others pay, whereas you won't benefit from the load.
Happy to hear I'm wrong on this. How does the fee work?
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Re: 1.5% Financial Advisor... or index fund?

Post by tfb »

Clever_Username wrote:
tfb wrote:
Clever_Username wrote:One quick aside to JW : I don't know all the Fidelity funds, but Vanguard does have a few funds with loads. They're rare, and I think almost always (if not actually always) new funds. VTIPX is one such fund.
The purchase fee feels like a load but it's not. Once you are in the fund, you benefit from the purchase fee others pay, whereas you won't benefit from the load.
Happy to hear I'm wrong on this. How does the fee work?
The fee is paid into the fund. It increases NAV than otherwise.
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Re: 1.5% Financial Advisor... or index fund?

Post by Clever_Username »

tfb wrote:The fee is paid into the fund. It increases NAV than otherwise.
Cool, thanks!
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Re: 1.5% Financial Advisor... or index fund?

Post by 2comma »

Your wife needs some convincing. Start by educating yourself (see reading list), not that hard, and show her what you are learning. Hopefully she will want to learn too and if not i bet she will decide that you know enough and trust you to manage the investments. Here is a good example:

"Honey, do you know what a 1.5% fee will cost us on 350k over 20 years? This calculator shows it would be $292,818 and if you add the high fund fees they are putting us in it will cost us..." http://www.buyupside.com/calculators/feesdec07.htm - and show her. It's real numbers, and she will have a hard time trying to convince you that their advice could be worth anywhere near that much.

Since you know to be skeptical of these guys, they (stock brokers, insurance salesmen, most financial advisors) will hang themselves - you just need to know their tricks and when they perform them you can show her it's just magic - and magic isin't real. Sometimes I think that just not making the big mistakes in life may be the real key to success.
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Re: 1.5% Financial Advisor... or index fund?

Post by structure7 »

TomatoTomahto wrote:...I would wager that if someone offered you $5250 (coincidence, that's $350k times 1.5%!) to read a couple of books, you'd pull up your favorite chair and have at the books...
Love this!
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Re: 1.5% Financial Advisor... or index fund?

Post by EyeYield »

When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived.
Ask for an example and compare it to the corresponding indexes over the past 30 years, then subtract 1.5% for the same time period and you'll have a pretty good idea of what they can do for you. If they point you to young funds with a short track record, it may look really good, but learn the phrase "reversion to the mean", it's explained with examples in a lot of books by Bogle, Bernstein, etc.

When they tell you they want to change allocations, this should mean rebalancing, which is easy for you to do yourself once a year, but it could mean that they will try to chase the top performing funds, which could lead to short term capital gains taxes on top of the 1.5%.

When you consider 1.5% over 30 years, and compound the total return of of the major indexes that you could've earned on that money during that time, you're paying out almost your entire inheritance.

The only thing you'll need is time. If you have that and read a few books, you'll have your answers. Only you can answer the important questions, like your time horizon, risk tolerance, asset allocation your comfortable with, etc.

Take your time and good luck.
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Re: 1.5% Financial Advisor... or index fund?

Post by momar »

vpotus wrote:JW: The name of the firm is: [name removed by admin LadyGeek] in CT and MA. I crunched the numbers and I'm fully aware that they will take a chunk of change. When I asked about their performance in relation to an index fund they claimed that they can do much better than those because they use funds through Fidelity that are no-load or load-waived. They stated that they research and use the funds where fund managers put their own money. My wife liked them because they exuded confidence and made her feel that they would make us even more money.

I kept wondering how they could research that? How much better than an index fund could they really be? It seemed too good to be true and I didn't really buy it. I thought that they were very nice and very expensive middle men.

Thank you.

VP
I've often read that many (most?) brokers/advisors keep their own money in index funds. Wish I could provide more than hearsay.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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Re: 1.5% Financial Advisor... or index fund?

Post by Mel Lindauer »

I've often read that many (most?) brokers/advisors keep their own money in index funds. Wish I could provide more than hearsay.
My friend, Jason Zweig, from the Wall Street Journal stated that many brokers admitted as much to him after a few beers. He said that on the recent PBS Frontline TV show on the Retirement crisis.
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Re: 1.5% Financial Advisor... or index fund?

Post by letsgobobby »

CABob wrote:I think it would be wrong to go with an advisor if you expect him to outperform a DIY approach by over 1.5%.
There are many good and legitimate reasons for wanting to use an advisor, but, outperformance is not one of them IMO.
A fee only advisor to prepare a plan might be money well spent, but, I would suggest you start with some self education by reading some of the books on the Boglehead list perhaps starting with one of the Boglehead Guide books and Eric Tyson's Personal Finance for Dummies. At that point you might be ready to DIY along with some help from this forum.
Even more to the point, the average advisor charging 1.5% will *under*perform his/her benchmark by about 1.5% per year... Plus fund expenses.

OP's idea of a fee only advisor to set things up is a good one. Or a more reasonably priced advisor of 1% or preferably much less.
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Re: 1.5% Financial Advisor... or index fund?

Post by bayview »

vpotus wrote:Thank you all for you help. It is comforting to know that my thoughts are heading somewhat in the right direction.

As for me... I started with a 403b through my employer about 23 years ago. About the same time, I started Vanguard Index Fund because I didn't want to put my eggs all in one basket. I contributed to both funds through my employer until the laws were changed. Now I am only allowed to contribute to the 403b. Yet, the index fund keeps growing. In addition to my original next eggs, I recently received an inheritance.

It appears that I qualify to have some planning advice from Vanguard. Has anyone used their planning service? (I know just enough so that I am afraid to make a mistake with asset allocation, fund choice, etc.)

Thank you once again.

VP

p.s. The advice concerning my wife made me LOL.
Which Vanguard Index Fund are you invested in? There are a ton of them.
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Re: 1.5% Financial Advisor... or index fund?

Post by SteveNet »

Just for kicks I went to that firms website, not much in the way of info there. Lots of warm and fuzzy.
They stated they had 81 yrs of experience (combined) lets see there are 8 of them listed, somehow that 81 yrs doesn't seem so impressive to me now.

EDIT... Apparently I didn't read the text so well in the write up, I just counted the team members. They include 3 advisers in that tally.

"Our team of three advisors – who have a combined 81 years of experience"
Last edited by SteveNet on Sun May 05, 2013 9:03 am, edited 1 time in total.
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Re: 1.5% Financial Advisor... or index fund?

Post by momar »

Mel Lindauer wrote:
I've often read that many (most?) brokers/advisors keep their own money in index funds. Wish I could provide more than hearsay.
My friend, Jason Zweig, from the Wall Street Journal stated that many brokers admitted as much to him after a few beers. He said that on the recent PBS Frontline TV show on the Retirement crisis.
Thank you, yes, that's who I've seen say it.
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Re: 1.5% Financial Advisor... or index fund?

Post by evenkeel »

rickmerrill wrote:... a 1.5% fee will cost us on 350k over 20 years? This calculator shows it would be $292,818 and if you add the high fund fees they are putting us in it will cost us..." http://www.buyupside.com/calculators/feesdec07.htm - and show her. It's real numbers, and she will have a hard time trying to convince you that their advice could be worth anywhere near that much...
You and your wife should both read "The Bogleheads' Guide To Investing" (at least), check out the wiki, and spend some time reading these forums. I think that will give you both the confidence in a DIY approach. That calculator should be enough to convince your wife.
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Re: 1.5% Financial Advisor... or index fund?

Post by interplanetjanet »

I'd like to add something here.

If this savings is ultimately intended for retirement or close to it, you are not currently maximizing tax-advantaged space, and the tax-advantaged space you have available does not have ridiculously high fees - consider increasing your contributions to "max out" that space, drawing down this $350k to do so. The savings may be significant in the long term, especially in your tax bracket.
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Re: 1.5% Financial Advisor... or index fund?

Post by JW-Retired »

SteveNet wrote: Just for kicks I went to that firms website, not much in the way of info there. Lots of warm and fuzzy.
They stated they had 81 yrs of experience (combined) lets see there are 8 of them listed, somehow that 81 yrs doesn't seem so impressive to me now.
I need some help with the code...... how exactly did you find them? My search under OP's [name removed by admin LadyGeek] got nothing but this thread. Searches for "Broadway Financial" got a lot but nothing relevant.
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Re: 1.5% Financial Advisor... or index fund?

Post by dbr »

JW Nearly Retired wrote:
SteveNet wrote: Just for kicks I went to that firms website, not much in the way of info there. Lots of warm and fuzzy.
They stated they had 81 yrs of experience (combined) lets see there are 8 of them listed, somehow that 81 yrs doesn't seem so impressive to me now.
I need some help with the code...... how exactly did you find them? My search under OP's [name removed by admin LadyGeek] got nothing but this thread. Searches for "Broadway Financial" got a lot but nothing relevant.
JW

[link removed by admin LadyGeek]
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Re: 1.5% Financial Advisor... or index fund?

Post by SteveNet »

JW Nearly Retired wrote:
SteveNet wrote: Just for kicks I went to that firms website, not much in the way of info there. Lots of warm and fuzzy.
They stated they had 81 yrs of experience (combined) lets see there are 8 of them listed, somehow that 81 yrs doesn't seem so impressive to me now.
I need some help with the code...... how exactly did you find them? My search under OP's [name removed by admin LadyGeek] got nothing but this thread. Searches for "Broadway Financial" got a lot but nothing relevant.
JW
Thanks dbr,

I didn't think to provide a link after I translated/guessed at the site.
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Re: 1.5% Financial Advisor... or index fund?

Post by livesoft »

But providing the link defeats the original purpose of the encoded name.
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Re: 1.5% Financial Advisor... or index fund?

Post by JW-Retired »

livesoft wrote:But providing the link defeats the original purpose of the encoded name.
Now we dense ones know the code so perhaps delete the link?
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Re: 1.5% Financial Advisor... or index fund?

Post by LadyGeek »

I removed all references to the OP's financial advisory firm (which was not present when I checked the OP's post). Please don't post any further links or the name of the firm, even if obfuscated.

It's not necessary to answer the OP's question and it stops the google search bots from linking back to this thread.
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Re: 1.5% Financial Advisor... or index fund?

Post by RenoJay »

In the first year invested with the adviser, all you'll know for certain is that you'll be paying him over $5,000. You'll have no idea if he'll deliver any kind of value. If he's so certain he can beat the markets, tell him he can keep half of the net winnings above the S&P 500 after five years.
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Re: 1.5% Financial Advisor... or index fund?

Post by retiredjg »

vpotus wrote:Now I am only allowed to contribute to the 403b.
This seems pretty unlikely. I suspect a misunderstanding.

Vanguard will give you advice on how to set up your portfolio. But you can also get advice here - for free. I'm not suggesting one or the other. You can do both and it is likely the suggestions won't be all that different. And you'll learn a lot about your financial situation and investing just by doing it. See the link at the bottom of this message for how to do that.
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Re: 1.5% Financial Advisor... or index fund?

Post by JW-Retired »

LadyGeek wrote:I removed all references to the OP's financial advisory firm (which was not present when I checked the OP's post). Please don't post any further links or the name of the firm, even if obfuscated.

It's not necessary to answer the OP's question and it stops the google search bots from linking back to this thread.
You missed one quoted by momar.
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Re: 1.5% Financial Advisor... or index fund?

Post by LadyGeek »

I got it, thanks.
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Re: 1.5% Financial Advisor... or index fund?

Post by retiredjg »

vpotus wrote:My wife prefers the financial management company because she thinks that they can get better returns than a Vanguard index fund; I'm not so sure that that is possible and I don't know how they can prove their track record.
This Frontline program, recently broadcast on PBS, addresses this issue starting about minute 34. You and your wife should watch the entire thing though because the first part is where she'd get an excellent education in the real cost of fees.

http://www.pbs.org/wgbh/pages/frontline ... nt-gamble/
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Re: 1.5% Financial Advisor... or index fund?

Post by Bogle101 »

You are posting on Bogleheads forum. Obviously, index your money. Since you are new to managing such a large amount of money, a 33% combination of Total Stock, Total International and Total bond would be best for your to begin with. You can tinker with it as you continue to read and learn about investing.
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
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Re: 1.5% Financial Advisor... or index fund?

Post by nedsaid »

You have to take into account that any good salesperson is going to be very persuasive. Otherwise, they wouldn' t be in sales.

A lot of folks claim to outperform the S&P 500 by using apples to oranges comparisons. Make sure you get true like for like comparisons.

You might compromise with your wife and go with a firm that charges much lower fees to manage the portfolio. An advisor might be the equivalent of training wheels when learning to ride a bike. At some point, you might feel confident enough to do it yourself.
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Re: 1.5% Financial Advisor... or index fund?

Post by yogesh »

Toons wrote:Go with a three fund portfolio and pay yourself the 1.5% a year :happy

http://www.bogleheads.org/wiki/Three-fund_portfolio
This has been the best advice ever ...
A simple one TR fund if tax deferred.
Or two funds (Stock+Muni) if taxable (Vanguard, please start the lifestrategy taxable funds 😃)
The money will work for you and pay that advisor fee to yourself for next 30-40 years to come.
Emergency: FDIC | Taxable: VTMFX | Retirement: TR2040
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