Executive Counseling Services

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boglebob321
Posts: 17
Joined: Mon Oct 14, 2013 3:26 pm

Executive Counseling Services

Post by boglebob321 » Wed Dec 04, 2013 1:05 pm

Noob Here... I recently discovered this amazing website about 3 months ago after getting some conflicting information from an “expert” and wanting to do some research on my own. Recently, I have read “The Boglehead’s Guide….” and utilized “Common Sense on Mutual Funds” as a reference. Previously, Scott Burns has kept me on the correct path to investing for the last 25 years with his columns discussing Couch Potato investing.

I haven’t found anything about this on the website, so I thought I would bring it up. My wife recently became a VP for a Fortune 100 company. As a part of the “package”, her Company requested that our income taxes be completed by 1 of 2 companies that provides executive counseling services. The Company will pay for the tax preparation services (the services are treated as income). However, for an additional annual fee of $3500, a full package of financial planning services is offered. Some services we have already used include: retirement planning, review of insurance policies, creating a trust, and creation of a doomsday book.

They also do investment advising and this is where there is conflict. A few of the concerns I have include recommending Hedge Funds and High Yield Bonds in our portfolio, as well as having to sign a “conflict of interest” statement. Our current advisor indicates he is paid a salary, and receives no commissions. I didn’t ask if he receives a bonus. He works off a list of approved funds through Fidelity with ER’s ranging from .5% to >1%. We’ve had the discussion that passive funds do better than active funds over 70% of the time. He said that his active funds are better than average as his company continually monitors the funds and adds/deletes funds as needed to insure a good return. When I ask for a low cost passive fund, he indicates that he can only recommend funds on the approved list, as he does not have time to monitor 10,000 funds.

Our advisor has a wealth of knowledge regarding the Company’s deferred compensation plan, supplemental benefits plan, retirement plan, stock options, etc., so I want to continue with the services, at least for now.

My question is, can anyone familiar with this scenario offer insight or have suggestions? Could the active funds really be as good as he says they are? What is this advisor's motivation to sell us funds with high ER's? We will most likely retire in 8 years. I am currently attempting to “Stay the Course” using the Three Fund Portfolio, for the most part, as our Asset Allocation. Thanks for your help in advance.

Stan Dup
Posts: 762
Joined: Fri May 10, 2013 10:25 am

Re: Executive Counseling Services

Post by Stan Dup » Wed Dec 04, 2013 5:43 pm

Your insticts are correct. Stay the course. Smile and say "no thank you".
"The tyranny of compounding expenses is the eighth deadly sin." - George Sisti

barnaclebob
Posts: 2707
Joined: Thu Aug 09, 2012 10:54 am

Re: Executive Counseling Services

Post by barnaclebob » Wed Dec 04, 2013 5:54 pm

How have their picks done in the past? You should stay the course, I'm just curious. In a funny way its not in a companies best interest for their top talent to do really well in the market, they may retire sooner.

Also if you ask for index funds and he says he cant recommend them because he doesn't follow them then how can he compare how his picks are doing.

sport
Posts: 6843
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Executive Counseling Services

Post by sport » Wed Dec 04, 2013 6:09 pm

No one needs to follow an index fund. It does what the index does (minus the ER) .
Jeff

FafnerMorell
Posts: 686
Joined: Mon Sep 15, 2008 10:27 am

Re: Executive Counseling Services

Post by FafnerMorell » Wed Dec 04, 2013 7:29 pm

Must be tough being a financial adviser when you're too busy to be aware of the S&P 500 or Russell 2000. Bet he's heard about the Dow though. I think I'd stick with your Couch Potato-inspired portfolio rather than impose on such a busy person. Luckily Scott Burns isn't too busy to follow the passive index funds.

Infinity
Posts: 83
Joined: Thu Aug 08, 2013 1:58 pm

Re: Executive Counseling Services

Post by Infinity » Wed Dec 04, 2013 11:04 pm

^ Lol

Having an advisor who regularly reviews and switches you in/out of the best performing actively managed funds sounds like a good idea at face value.

But here's the problem with that. Past performance does not guarantee future performance. Oftentimes managers will have a good year, or maybe 3 good years, and then underperform the index. Sometimes managers will completely fall apart, a la Bill Miller (look at the graph of LGOAX).

So predicting which fund managers will outperform their index - particularly for extended periods of time - is not at all easy to do.

I think you could make a case for low-cost active management. Some actively managed funds have been consistent performers well over the years -- for example Vanguard's Wellington (VWENX) or T. Rowe Price's Capital Appreciation (PRWCX). But chasing performance is just not very productive.

robertalpert
Posts: 445
Joined: Wed Aug 22, 2007 10:09 pm

Re: Executive Counseling Services

Post by robertalpert » Thu Dec 05, 2013 12:21 am

boglebob321 wrote: He said that his active funds are better than average as his company continually monitors the funds and adds/deletes funds as needed to insure a good return.


If an active fund is truly worthwhile, then one would only rebalance ---- that is sell some when up; buy more when down. Anything else would either be market timing or performance chasing and would be a looser's game.

boglebob321
Posts: 17
Joined: Mon Oct 14, 2013 3:26 pm

Re: Executive Counseling Services

Post by boglebob321 » Thu Dec 05, 2013 9:14 am

Thanks for the replies and giving me the confidence to Stay the Course.

Here's my biggest rub: If I were to pay an attorney $3500, he would represent my best interest. I'm paying these people $3500 and I'm not (to me) getting my best interest represented. He's not even willing to help us follow our existing AA.

If I told this to our Financial Planner, he could legitimately say he "is" representing our best interest, and he could argue that. However, I think that us having to sign a Conflict of Interest statement says it all.

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bottlecap
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Location: Tennessee

Re: Executive Counseling Services

Post by bottlecap » Thu Dec 05, 2013 2:05 pm

boglebob321 wrote:If I told this to our Financial Planner, he could legitimately say he "is" representing our best interest, and he could argue that. However, I think that us having to sign a Conflict of Interest statement says it all.
He's not a planner, but basically a glorified sales rep for Fidelity. I know a guy who is fairly high up in our regional Fidelity office, he's always touting that such and such a fund of theirs has beaten the market. We've engaged in good-natured arguments many times. Finally, he acquiesced, but probably just so he could end the need to defend himself. They are very well-trained to be convincing and have an answer for *almost* everything.

JT

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