New to Forum Questions

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Waterddd
Posts: 9
Joined: Fri Dec 18, 2015 8:17 am

New to Forum Questions

Post by Waterddd »

I am a new member here, and I feel I am too old to be confused about investing but I am.

Financial planning is still confusing and a conflicting to me. I just don't have the head for it. So i have been using a financial advisor for the last 10 years. I trust him and believe in him. But i do believe he has an interest in making a profit.

I would like to get some input about my personal financial plan from the knowledgeable people on this message board.

Info:
Age: 52 I have my own business
Wife: 44 works in the corporate world
Daughter 12 years old


Yearly income combined wife 140K plus bonus mine can be $200k to $300k 2014 was 540k with all the mutual fund



Money held with Advisor at 1% fee total of 2.2m

Asset Allocation thru all accounts
Equities 64.00%
Fixed Income 12.00%
Alternative Investments 21.00%
Cash 3.00%

Her 401K Assets: $274k From previous job switched and held with adviser
Equities
ABASX AllianceBern Small-Mid Cap Value A 5.54%
AMCFX American Funds AMCAP F-2 14.47%
AEPFX American Funds EuroPacific Gr F-2 18.75%
NYVTX Davis NY Venture A 13.94%
FKASX Federated Kaufmann Small Cap A 5.03%
ODMAX Oppenheimer Developing Markets A 4.54%
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 6.95%
EVIBX Eaton Vance Income Fund of Boston A 4.98%
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 6.54%
PAUDX PIMCO All Asset All Authority D 5.90%
GLD SPDR Gold Shares 2.12%
WABIX Wells Fargo Advantage Absolute Ret Instl 5.67%

CASH CASH 5.57%

His Simple IRa $421k currently still contributing

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.29%
AMCFX American Funds AMCAP F-2 14.09%
AEPFX American Funds EuroPacific Gr F-2 17.89%
NYVTX Davis NY Venture A 1,917.561 30.25 14.00%
FKASX Federated Kaufmann Small Cap A 4.79%
ODMAX Oppenheimer Developing Markets A 4.98%
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 8.02%
EVIBX Eaton Vance Income Fund of Boston A 4.99%
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 3.21%
CCVIX Calamos Convertible A 3.46%
PAUDX PIMCO All Asset All Authority D 6.31%
GLD SPDR Gold Shares 2.29%
WABIX Wells Fargo Advantage Absolute Ret Instl 10.16
CASH CASH 3.97%

Taxable Account $1.5m

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.52%
AMCFX American Funds AMCAP F-2 14.10%
AEPFX American Funds EuroPacific Gr F-2 18.76%
NYVTX Davis NY Venture A 13.90%
FKASX Federated Kaufmann Small Cap A 4.68%
ODMAX Oppenheimer Developing Markets A 4.73%
Fixed Income
LTNYX Oppenheimer Limited Term NY Municipal A 12.45%
Alternative Investments
ANZAX Allianz AGIC Convertible A 4.16%
CCVIX Calamos Convertible A 1.51%
PAUDX PIMCO All Asset All Authority D 7 6.56%
GLD SPDR Gold Shares 3.12%
CASH 10.49%

Large Cap Growth 15.2%
Large Cap Value 14.3%
SMID Growth 6.1%
SMID Value 6.8%
Int'l/Global Equity 17.9%
Int'l/Global - Emerging Markets 5.0%
Limited Term NY Muni 7.6%
World Bond 2.5%
High Yield Bond 1.6%
Convertible Bonds 6.2%
Gold 3.2%
Global Tactical Asset Allocation9 6.6%
Benchmark Free/Absolute Return 4.5%
Cash and Equivalents 2.5%

Wifes Current 401k 61K and still contributing held with new company

Yearly Contributions:
401K: $18k (Wife Contributions)
simple:$21K ( My Contributions)
Taxable savings 100k per year last 5 years


Insurance
Him 500k whole life currently pays for itself thru dividends.
Her 250 whole life. still paying for a couple of more years.
Her 1m 20 year term. 5 years into
Him 1m 20 year term. 5 years into
Him 1m 20 year term buy sell agreement business partner 7 years in
Currently looking into renewing term for us while we are still healthy.

Disability + Disability Supplement in place for me (nothing for my wife)

Other Assets:
$1.4m Home value: no mortgage
125k Bank accounts
60k boat
20k Stock bought this year wifes old company that went public. (she thought it would be fun)
250k Vacation home income producing property no mortgage have a partner on this.


Liabilities:
Car (2) Leases $759.00 Plus I use car from my business
21k Property tax
22k Advisor fee
50k for house budget improvements utilities maintenace insurance
life insurance policys.


My parents
77 & 73 in good health


Questions:
One of my biggest yearly expenses is the fee i pay to advisor is there a better way? I think i would like to take the yearly $100k+ and start investing it on my own but i have no idea what to purchase.

Thank you so much for any time spent responding to this.
Last edited by Waterddd on Sun Dec 20, 2015 7:26 am, edited 5 times in total.
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ofcmetz
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Re: New to Forum Questions

Post by ofcmetz »

I'll give this a bump for you. How much are you paying your advisor as far as a percentage of assets?

I don't think advisors are bad, but I think a lot will rip you off and aren't worth what they charge. It's worth learning what you can and deciding if you need one or if you want to be a do it yourself investor. I don't think it takes much work to manage an account with Vanguard, Schwab, Fidelity, etc. and to save all those fee's.

As far as being a good saver, you are a winner there. Saving is the hard part. Investing it is much easier. It's not hard to build a well diversified portfolio with a few index funds. Making a plan and sticking to that plan is where most fail. The implementation is quite simple.
Never underestimate the power of the force of low cost index funds.
Lafder
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Location: East of the Rio Grande

Re: New to Forum Questions

Post by Lafder »

Welcome here!!

You could switch all your funds to management at Vanguard and pay 60+% less in fees instantly, since they charge 0.3%. You would also save more by having lower Expense Ratios on the funds they put you in.

But, there is no need to pay any management fee. You can go with an all in one fund that rebalances for you and fits your desired Asset Allocation. Examples of such funds would be Target Date Retirement finds that rebalance for you and add a higher % bonds with age. Life Strategy funds are an option. There are many more such as Wellington, Balanced fund etc etc. It is possible to have a single fund that requires no management on your part.

To be clear, the Target Date (TD) funds and Life Strategy (LS) funds are funds of funds made up of different % of the following:
Total Stock Market Index fund
Total International Stock Market Index Fund
Total Bond Market Index Fund
Total International Bond Index Fund
(TD funds add TIPS in retirement)

The hardest parts of organizing your finances is to choose an AA and decide where to put your money. The actual moving it is less hard than that. And managing it from that point on can be done in an hour per year and is the easiest of all!

With your amount of assets, you should qualify for Flagship status at VG and if you call and tell them how much you want to move over they will suggest where to put it for no extra fee. Yes they will try to get you to agree to paying the annual FAS 0.3% but it is not necessary. You can make a plan here and check in here a few times a year to discuss where you are at and if adjustments are needed. Some people feel the 0.3% is worth the peace of mind. I think you can do it yourself if you have managed to post here and accumulate so much!


There is a general rec for age in bonds down to age -20%. For your ages I would say 30-50% bonds is within reason. You have to decide how big of a drop you would be comfortable with in a stock market crash.

There is a range of 0-50% of stocks being International that is talked about here. VG raised their rec this year to 30-50% International stocks and bonds.

For reference, we are 47 and 51 and are at 65/35, 30% stocks are International. But we have less total investment assets than you do. That could make you be more or less aggressive. And of course expenses matter as much as income and savings as far as how long your nest egg can last.

Yearly income combined $400k ((Nice! But what are your annual expenses?))

This is the money held with advisor. fee is 1% ((Ouch, pay hourly if you really want an advisor.))

I don't know the asset allocation. I can list the mutual fund symbols if needed and how they are balanced? ((You may be able to avoid calculating your current AA and just jump into a new portfolio. But I suggest you take the time to go through everything you have in this format viewtopic.php?f=1&t=6212 and list all holdings and calculate AA . It will greatly educate you and prepare you to manage your own accounts! And help you see what the current AA you are at per the advisor. Yes go through and list all holdings and the ER for each holding.

Her 401K Assets: $274k From previous job switched and held with adviser ((move to VG))
His Simple IRa $421k currently still contributing ((Move to VG if you can move, list options if you can not move))
Taxable Account $1.5m ((Move to VG))
Part of portfolio held in money market $169k ((move to VG and decide where to invest))

Total $2,2m held with advisor in mutual funds and money market ((Get out from under advisor))

((Your breakdown as listed is not helpful to me, was it helpful to you? Can you break it down to stocks/bonds, % InternationaL stocks/bonds. That is the AA we want to see))

Wifes Current 401k 61K and still contributing ((what are her options? List them all))

Insurance ((It would be worth looking at the whole life policies in more detail))
Him 500k whole life currently pays for itself thru dividends.
Her 250 whole life. still paying for a couple of more years.
Her 1m 20 year term. 5 years into
Him 1m 20 year term. 5 years into
Him 1m 20 year term buy sell agreement business partner 7 years in
Currently looking into renewing term for us while we are still healthy.

Disability + Disability Supplement in place for me (nothing for my wife) ((how much of your family income comes from her? Social security does provide some coverage for both of you as well))

Other Assets:
Home value: $1.4m no mortgage ((nice no mortgage!))
125k Bank accounts ((Is this your emergency fund or do you want to invest?))
Boat 60k ((have fun with it!, or sell it if not using it))
Stock bought this year $20k wifes old company that went public. ((Good luck! Seems reasonable to me!))

Liabilities:
Car (2) Leases $759.00 Plus I use car from my business
Property tax 21k
Advisor fee
((I am pretty sure you can find many more monthly financial liabilities to list here if you wanted to!!))

My parents
77 & 73 in good health ((Glad to hear they are alive and well!))


Questions:
One of my biggest yearly expenses is the fee I pay to advisor is there a better way? I think i would like to take the yearly $100k+ and start investing it on my own but i have no idea what to purchase.

((Absolutely there are ways to lose the advisor fees. I made more comments above. You can switch to all in one funds. Also VG will gladly make suggestions and you can come back here and we can discuss them. Another option is to manage a 3 fund portfolio yourself, but it is more work than all in one funds))

You can go back and edit your original post above to include all fund specifics and AAs.

lafder
Last edited by Lafder on Sat Dec 19, 2015 4:23 pm, edited 1 time in total.
The Wizard
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Location: Reading, MA

Re: New to Forum Questions

Post by The Wizard »

You're paying that advisor $22,000 per year to oversee your $2.2M.
That seems like a large amount to me.
It will be well worth your time to learn what you need to know to do it yourself.

Plus we don't yet know what fund families he has you in.
Your funds could have higher than average Expense Ratios and could even have (Horrors!) Front End Loads.

OP says he doesn't have the head for financial planning, but I suspect that's not really true and/or easily remedied.
The reason I say this is: financial advisors have a vested interest in making the investment process seem somewhat complicated and in need of the deft touch that they provide.

Learning what you need to know to manage your own investing can be done in a few weeks of spare time on this website and with a recommended book or two.
This includes learning what NOT to do in response to market changes, both up and down...
Attempted new signature...
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Bogle_Feet
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Re: New to Forum Questions

Post by Bogle_Feet »

And this adviser has been taking you to the cleaners. After 30 years of paying 1% per year you will have missed out on 35% in returns. That's just the tip of the iceberg. One of the things "advisers" do is to make investing seem confusing by recommending lots and lots of different funds. All you really need are 2 or maybe 3 funds. Invest in a total stock market index fund or an S&P 500 index fund and a total bond market index fund. Maybe or maybe not an international index fund. Then you just rebalance to maintain your predetermined allocation ratio. You do not need an adviser to rebalance. Any 3rd grader can do that!
And who sold you the whole life policies????? Whole life is absolute garbage -- except for the commission-hungry "advisers" who sell it to you! http://www.yourinvestmentadvise.com/who ... rance.html
And individual bonds pay advisers between 2 and 3% per year. That's nothing to ignore either.
And you were sold actively managed mutual funds which also pay handsome commissions to the advisers who sell that crap.
So basically this "adviser" is a fee-based adviser who has been double dipping on you.
I would fire this adviser immediately. Stop paying someone what you can do yourself.

"Bad advice that results from conflicts of interest costs middle-class and working families about $17 billion every year" -- Barack Obama
kenner
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Joined: Sat Mar 01, 2008 8:45 am

Re: New to Forum Questions

Post by kenner »

Waterddd wrote:Hello

I am a new member here, and I feel I am too old to be confused about investing but I am.

Welcome to the forum!

I don't know the asset allocation. I can list the mutual fund symbols if needed and how they are balanced?

Many decades of expert analysis have taught us to believe in broadly diversified, low-cost investment portfolios that meet the needs of the individual investor. To that end, it would be helpful to know the fund ticker symbols of your current investments and how they are balanced.


Her 401K Assets: $274k From previous job switched and held with adviser
His Simple IRa $421k currently still contributing
Taxable Account $1.5m
Part of portfolio held in money market $169k

Total $2,2m held with advisor in mutual funds and money market

Large Cap Growth 15.2%
Large Cap Value 14.3%
SMID Growth 6.1%
SMID Value 6.8%
Int'l/Global Equity 17.9%
Int'l/Global - Emerging Markets 5.0%
Limited Term NY Muni 7.6%
World Bond 2.5%
High Yield Bond 1.6%
Convertible Bonds 6.2%
Gold 3.2%
Global Tactical Asset Allocation9 6.6%
Benchmark Free/Absolute Return 4.5%
Cash and Equivalents 2.5%

Wifes Current 401k 61K and still contributing

Yearly Contributions:
401K: $18k (Wife Contributions)
simple:$21K ( My Contributions)
Taxable savings 100k per year last 5 years

Stock bought this year $20k wifes old company that went public. (she thought it would be fun)

Good for her!

Questions:
One of my biggest yearly expenses is the fee i pay to advisor is there a better way?

I addressed a situation remarkably similar to yours a year or so ago regarding a loved one. She had been tied to Merrill Lynch for many years - very high cost with no commensurate investment return.

At my suggestion she contacted Vanguard Personal Advisor Services, which provides advice from Certified Financial Planners, the top of the heap in terms of qualifications. She has nothing but good things to say about them. She now has a much more efficient investment portfolio and is on course to save about half a million dollars over the next 30 years compared to the 1% fee. My original thought was that VPAS could get her started on the right track and she could take over from there, but she now says she wants to continue with them.




I think i would like to take the yearly $100k+ and start investing it on my own but i have no idea what to purchase.

Thank you so much for any time spent responding to this.
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in_reality
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Re: New to Forum Questions

Post by in_reality »

Waterddd wrote: One of my biggest yearly expenses is the fee i pay to advisor is there a better way? I think i would like to take the yearly $100k+ and start investing it on my own but i have no idea what to purchase.
VTSAX (US total Market)
VTIAX (total international)
BND (total bond) or a national muni fund at your income.

It's really that simple.

I would stop dividend reinvestments and direct that and new contributions to a three fund portfolio.

I don't think the Vanguard advisory service will consider your current holdings and overall asset allocation, so I am not sure that is the solution some think it is.

I took out a Morningstar subscription, entered my portfolio, used it to monitor my positions and moved to index funds as opportunity arose (from a tax standpoint). Actually, seeing I was really overweight large cap growth, I didn't use only VTSAX at first but added some small cap and value funds to get closer to a total market approximation since I had capital gains that I didn't want to have to realize.

Aim to approximate total market. Anything you do to move in that direction will be a move in the right direction.
Topic Author
Waterddd
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Joined: Fri Dec 18, 2015 8:17 am

Re: New to Forum Questions

Post by Waterddd »

Thank you very much for all the responses great info alot for me to take in. Im stressed from all the copy and pasting that i just did editing my original post.

I added the Assett allocation for the accounts. I added all of the account holdings and symbol name of mutual furn and percentage.
I updated income and also added liabilities and assets.

So know i would like to start the process of opening a vanguard account and investing about $125k

Next question is how do i go about telling my advisor who is a friend gives me some work for my business and someone i really like and trust. I also would like to show him on paper how i will do just as good and save alot of money doing it on my own. :(
Jack FFR1846
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Re: New to Forum Questions

Post by Jack FFR1846 »

I still feel new to Bogleheads and believe me, I researched what my funds were vs the 3 fund portfolio and I moved my money over fund by fund. My portfolio is only a couple hundred k less than yours. It is in 3 funds plus I own a big chunk if savings bonds. I find zero need for a financial guy to drain my money. I see you're paying $22k to this guy to get you into a very complex list of funds (it's what financial guys do) for reasons that I can't figure out. What is the ER on each fund? It would be a good exercise to make a simple excel spreadsheet with the fund name, the ER and amount invested. Add a column that gives you the ER in dollars, then total it. Mine has this and it was what drove me to going all index funds at low ER. My entire portfolio costs me $1,237.33 per year. That's in total.

How do you tell your friend that you no longer need his services? I don't know. Buy him a going away BMW?
Bogle: Smart Beta is stupid
Topic Author
Waterddd
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Joined: Fri Dec 18, 2015 8:17 am

Re: New to Forum Questions

Post by Waterddd »

Jack FFR1846 wrote:I still feel new to Bogleheads and believe me, I researched what my funds were vs the 3 fund portfolio and I moved my money over fund by fund. My portfolio is only a couple hundred k less than yours. It is in 3 funds plus I own a big chunk if savings bonds. I find zero need for a financial guy to drain my money. I see you're paying $22k to this guy to get you into a very complex list of funds (it's what financial guys do) for reasons that I can't figure out. What is the ER on each fund? It would be a good exercise to make a simple excel spreadsheet with the fund name, the ER and amount invested. Add a column that gives you the ER in dollars, then total it. Mine has this and it was what drove me to going all index funds at low ER. My entire portfolio costs me $1,237.33 per year. That's in total.

How do you tell your friend that you no longer need his services? I don't know. Buy him a going away BMW?

Thanks Jack
I did the math on the expense ratio. It comes to a whopping $17,291 the highest ER was 1.96 the lowest was .47. My portfolio is down (4.96) for the year. But doesnt all this really depend on the performance of the funds. Even though your not paying an advisor 1% and your fees are much lower, did your portfolio perform better? My assumption is yes. But if not then this is what I am paying him for and he earned his money.
Lafder
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Re: New to Forum Questions

Post by Lafder »

Do a search on this site of how to leave your advisor, then sit back and read.

You can actually contact VG and they will help you pull the money from where it is and do all of the paperwork on the VG end.

As far as what to tell your advisor I would say something like "Thank you for all of your help over the years. I have decided to take a low cost investing path. Please do not make any additional transactions on my account."

Be prepared for the advisor to try to explain why they provide a value added service that makes more for you than they charge in fees.....in spite of the evidence to the contrary.

lafder
Hunky-dory
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Re: New to Forum Questions

Post by Hunky-dory »

Waterddd, I think before you do anything drastic you should take a step back and spend more time educating yourself on the fundamentals of investing. Folks on this board advising you to ditch the adviser and go with Vanguard are speaking from a position where they have spent a lot of time educating themselves about investing and have developed certain viewpoints on the importance of asset allocation and low-expenses (I share these views).

If you are willing and able to invest the time learning about investing, I think you will find that the fees you are paying to an adviser are not necessary and you will be able to develop your own investment plan that will evolve over time as your financial wants and needs change. If you are not willing/able to spend the time learning about investing, then with your exposure to the markets it may be penny wise and pound foolish to ditch the adviser. For example, the following quote gives me pause:
Waterddd wrote: Thanks Jack
I did the math on the expense ratio. It comes to a whopping $17,291 the highest ER was 1.96 the lowest was .47. My portfolio is down (4.96) for the year. But doesnt all this really depend on the performance of the funds. Even though your not paying an advisor 1% and your fees are much lower, did your portfolio perform better? My assumption is yes. But if not then this is what I am paying him for and he earned his money.
I think worrying about annaul returns is not the right way to think about investing. In any given year and for any given period, there will always be a portfolio that can be constructed that will beat the returns of your actual portfolio. Chasing performance is not, in my opinion, the proper mindset to begin investing. I would recommend starting with a few books from the following list:

https://www.bogleheads.org/readbooks.htm

My favorites are the books of Bill Bernstein. I truly think you will be well served by reading more about investing and ditching the adviser, but I'd be wary of ditching the adviser without the other piece. Apologies for the long post and if you already spent a lot of time doing the background homework and I've assumed your situation was different than what it was. Good luck and happy investing!
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in_reality
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Re: New to Forum Questions

Post by in_reality »

Waterddd wrote: So know i would like to start the process of opening a vanguard account and investing about $125k
Are you going to transfer current assets in-kind to Vanguard? If so, call Vanguard and inquire if everything can transfer. The Global Tactical Asset Allocation/ absolute return / gold may not transfer.

If you are going to leave your current assests in place, are you just going to remove the advisor?

Do you need an advisor on the Tactical Asset Allocation, or do the fees for the fund cover the management? It will be shifting assets depending on conditions so I am asking who is doing the shifting? At Wells Fargo private bank, the shifting was done via the advisor and not the funds they chose so when I left, my "tactical" allocation was no longer tactical - but was in an IRA easily sold.
Waterddd wrote:Next question is how do i go about telling my advisor who is a friend gives me some work for my business and someone i really like and trust.
This is the biggest issue I think. You want to leave each other still saying good things about each other's businesses.
Waterddd wrote:I also would like to show him on paper how i will do just as good and save alot of money doing it on my own. :(
Can you compare your returns to what a target retirement fund and/or balanced fund would have returned?

I'd try:

1) blame it on my wife. Get a good Bogleheads book. Get her on board. Tell the advisor she wants to go that route as it's "the trend" in the corporate world where she works and she's hoping to save on the fees to put toward charitable contributions (or daughter's benefit). Give the advisor the book to read too which explains how the cost advantage works out by not using the advisor and NOT using high cost actively managed funds. He will not agree and pretend to not understand, but hey honestly your wife wears the pants in the family and let's not pretend differently. Others may disagree with this strategy. I say obey your wife's desire to not be giving that money to your friend.

2) figure out if there is anything he can do going forward -- selling gold, advising if your plan collapses (it won't), managing individual bonds if needed (do you have any). Thank him for his help allowing you to focus on work, promise only good references on his service, and say that this is the route you need to go. Then let it fall into no contact.

Waterddd wrote: So know i would like to start the process of opening a vanguard account and investing about $125k
What's your desired Asset Allocation?

? % US equity into VTSAX
? % International equity into VTIAX
? % bonds into just about any low cost intermediate term bond fund (this may take a little more thought that the stocks due to tax issues and the fact that total bond isn't really total. A muni/total bond split might be good)

Look into a target date retirement fund or balanced fund too if they make tax sense (the bonds are taxable).

Anyway, I was over $1M in assets transferring in to Vanguard, but they wouldn't give me a flagship advisor until after the money arrived so I didn't get their handy dandy advice up front (not that I needed it though as VTSAX and VTIAX made up most of my purchases and really following the Bogleheads was all I intended to do).
krow36
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Location: WA

Re: New to Forum Questions

Post by krow36 »

Waterddd wrote:Financial planning is still confusing and a conflicting to me. I just don't have the head for it. So i have been using a financial advisor for the last 10 years. I trust him and believe in him. But i do believe he has an interest in making a profit.

One of my biggest yearly expenses is the fee i pay to advisor is there a better way? I think i would like to take the yearly $100k+ and start investing it on my own but i have no idea what to purchase.
Waterddd wrote:Next question is how do i go about telling my advisor who is a friend gives me some work for my business and someone i really like and trust. I also would like to show him on paper how i will do just as good and save alot of money doing it on my own.
Money held with Advisor at 1% fee total of 2.2m
Waterddd wrote: I did the math on the expense ratio. It comes to a whopping $17,291 the highest ER was 1.96 the lowest was .47.
It looks to me like you are paying your advisor the 1% fee of 22,000 plus the difference in the ER’s of your advisor’s selections and the ER you would pay at Vanguard. Let’s guess that a portfolio of Vanguard index funds could easily be between 0.l and 0.2%. Let’s assume an average ER of 0.2%. That would result in Vanguard expenses of about 4,400 (2.2M X .002).
Advisor——22,000 (1%) + 17,291 (ER) = 39,291
VG——————-------0 (0%) + 4,400 (ER) = 4,400
Difference in costs———————--------= 34,891

You are forgoing almost 35k per year, which is going to your advisor and the funds he has sold you. Does your advisor contribute 35k or more per year profit to your business? I guess if he does, you should consider staying with him. Over the years, those costs compound over the years. That is, the missing 35k from your assets does not compounded at the return of return of the year of your other assets. At Vanguard, the 35k is growing, compounding yearly, for you.
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in_reality
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Re: New to Forum Questions

Post by in_reality »

krow36 wrote: Advisor——22,000 (1%) + 17,291 (ER) = 39,291
VG——————-------0 (0%) + 4,400 (ER) = 4,400
Difference in costs———————--------= 34,891
Keep in mind too krow36, that the $1.5m probably has capital gains and might be locked into the higher fees. Which brings up taxes...

Waterddd, go over your taxable holdings with your accountant. These mutual funds will likely have been making capital gains distributions every year. Vanguard mutual funds (that have an ETF share class) and ETFs won't be making capital gain distributions. You will still pay taxes on dividends and will still pay capital gains taxes when you sell, but the yearly capital gains can be avoided (by virtue of how ETFs work -- and this benefit is extended to the Vanguard mutual funds with an ETF share class too) and this is a savings.

So you really need to figure out what it would cost you in taxes to liquidate (in capital gains taxes). Every year you'll have savings from the lower ER and every year you'll not be paying taxes on capital gains distributions, but it'll still be years before the move pays for itself.

Of course, selling will reset your cost basis so down the road you'll have less in taxes to pay, but it's something that needs to be thought through ... what to sell first (high ER funds, high capital gain distributions funds) and whether to sell at all -- instead taking advantage of step up cost basis when shares pass to a beneficiary [perhaps more applicable to someone your parents age].

You just have to be a little mindful if you sell piece meal of what you are selling. So if you unload ABASX AllianceBern Small-Mid Cap Value, and replace it with total market VTSAX, you will be tilting your portfolio large cap growth unless you also unload AMCFX which is large growth.

Vanguard has a tool to help you see what hypothetical changes would do to your allocation. I used portfolios in Morningstar which I found to be a little better.
heyyou
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Re: New to Forum Questions

Post by heyyou »

As a new guy, you have yet to hear the same old tired joke:
My advisor helped me put two kids through college.............................but it was his kids, not mine.
In my case, I helped my former advisor to retire at age 50.

Consider learning more about the Boglehead approach before you start moving your assets. Some points are that we know that we don't know what the markets will do next, so we just accept the daily, monthly, and annual up and down fluctuations, knowing that in the long term, the direction is higher. That sounds weak but isn't. Read the next paragraph.

So far, over multi decade periods, no actively managed mutual fund has performed better than a passively managed index fund of all of the market traded businesses. Every year there are higher than average performing mutual funds, and every year those winners are different funds than the previous winners. The financial industry knows this, including your adviser, but it is not in their financial interest to serve what is better for you. They offer a spectrum of funds knowing that one of them will shine so they can use it to demonstrate the value of their advice. Here, we are buying index mutual funds because their constant average returns make them the best performing funds over long periods. It is that simple. Just buy and hold through the good and bad times, and you will do better than other investors who buy actively managed mutual funds, often just after they had hot performance.

In retirement, history has shown that you can start by withdrawing 4% of your portfolio and boost that amount by inflation every year for thirty years. Any more than that size of withdrawal, ran out of money in the worst set of years. Consider that your advisor's 1% fee would be a quarter of your retirement income (before taxes!), doesn't that seem like too much to pay him? Why wait until retirement to remove that problem? After you learn more, you will see that your advisor's hourly rate is sky high for the little work he is doing, and that long term, his work is detrimental to your financial well being.

There are a few, very few (maybe one percent) of advisors who charge a flat annual fee of about $3000, and they put your assets into index funds. One of them in an affluent part of California says his flat fee is similar to what a CPA charges hourly for a similar amount of time. There are also some advisors that will charge a typical professional hourly rate and help you put your assets in index funds. Neither will ask you to pay them over $20K for what they do for you. It has been written that by the time that you learn enough to evaluate your advisor's performance, you know enough to do your own investing. That is what you can easily learn here, to do it yourself using index funds.
2comma
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Re: New to Forum Questions

Post by 2comma »

My guess is that your "friend" will extract $400,000 to $600,000 from your retirement funds over you and your wife's lifetime. How much will you take from him? Actually, if he was really a friend I'd expect him to tell you to read the Bogleheads website and he'd still throw business your way.

Let VG pull the money from your accounts. You will not win a discussion about why you are doing this with an advisor - they practice what to say and they get a lot of practice. No value to you in getting into a debate.

Don't forget that it's not just the fees, it's the compounded interest on those fees over a lifetime of investing (this was mentioned before but it stands repeating). Your lifetime of investing should be a very long time (when the survivor is gone).

You now have a complicated and overlapping group of investments. Moving the easy ones to VG is not the problem. The problem will be deciding how to extricate yourself from the rest that does not transfer directly. You can thank you "friend" for this and it will cause you the most work and grief.

You've got to put some time into learning but it will pay big dividends over a lifetime of investing. To get the basics down is less effort than an easy 101 level college course, way less. Once you are educated portfolio management will be a few hours per year. There is no way around it, you won't know enough to pick an advisor until you've learned enough and (also said before) by then you'll figure out you don't actually need someone to do it for you.

No matter what you'll have this forum to ask any questions you have. You'll get a full range of advice and the cost is always $0 - well worth the price!
If I am stupid I will pay.
kenner
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Re: New to Forum Questions

Post by kenner »

The following quote from Bloomberg Business is universally known in the investment advisor world (and all advisors are taught how to convince their clients to ignore the truth):

"While Washington has long been debating how to reform big Wall Street banks, Vanguard Group is quietly doing just that as the company and its army of index funds remove about $20 billion a year in revenue from the financial industry.
So far in 2015, Vanguard is leading a record $365 billion in net flows into low-cost and passively managed index funds and exchange-traded funds (ETFs), according to Bloomberg data. Meanwhile, the active mutual funds that constitute some of Wall Street's best customers have lost $147 billion, according to the Investment Company Institute. That adds up to about a half-a-trillion-dollar swing so far in 2015, which will be the most ever in a year.
Vanguard’s take of this is a phenomenal $185 billion, or about 55 percent of the total inflow, which puts it on pace to bring in more money in one year than any asset manager in history, according to Barron’s. The rise of Vanguard and other passive managers comes at a time when Wall Streeet is under intense pressure to boost its collective profits.
Vanguard’s assets now stand at $3.1 trillion, which effectively means that this year alone it will have removed more than $16 billion from the financial industry just through fees. That figure is based on the average asset-weighted fee of a Vanguard fund of 0.13 percent, compared with the 0.66 percent average asset-weighted fee of an active mutual fund.

Of course, $16 billion is merely a dent for a financial service industry that generates approximately $200 billion a year in global trading and asset management revenue, per figures from Bloomberg Intelligence. But the dent gets bigger once it includes the "hidden fees" that active managers rack up from continuously tweaking their portfolios.
Active mutual fund managers are some of Wall Street’s best customers because they spend money through trading commissions and research as they attempt to outwit the market and turn over the securities in their portfolios.
On average, an active manager has turnover that is 10 times more than a Vanguard index fund, where average annual turnover is about 3 percent to 4 percent.* One extra percent of turnover translates to about an extra basis point in cost, equating to another $3 billion or so a year in lost trading revenue.
This $20 billion dent is only expected to grow larger. It took Vanguard 32 years to reach $1 trillion in assets, eight years to get to $2 trillion, but then just three years to get to $3 trillion. At this rate, Vanguard will be removing $40 billion in revenue each year from the financial industry by 2020, equivalent to a 20 percent hit to revenue based on today’s numbers.
But it gets worse, or better, depending on which side of the active vs. passive divide you stand.
Beyond Vanguard’s direct effect, there is also a revenue decrease caused by the so-called Vanguard Effect, which sees other funds lowering their fees to compete with the rock-bottom prices on offer from the company.
Like Walmart arriving in a new town, the entry of Vanguard into a particular investment area causes a collective gnashing of teeth as other fund managers are forced to drop their prices to compete.
krow36
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Re: New to Forum Questions

Post by krow36 »

Waterdadd, you are getting some excellent advice. A lot of the folks on this forum have started out investing the many expensive ways. They are willing to give you the benefit of their experience. Some thoughts.

It would be a good idea to go slow and learn about what you have and what it’s costing you before you make any final decisions. Also you need to become familiar with what might be involved in moving some or all of your accounts to another provider. I think after you become more knowledgable about your accounts by reading threads on this forum and also by reading a few books and the wiki, you’ll find it easier to decide whether to keep your advisor.
1 You should know what the advisor is costing you every year, and long term, due to his 1% fee and the high expense ratios of the funds he has selected.
2 You should understand the cost in increased taxes in your taxable account due to the advisor using managed equity funds that have yearly capital gain distributions. (You can look this up in your tax records.) They are due to the fund itself buying and selling stocks throughout the year, unlike passive index funds with very low turnover. Managed funds often have 100% turnover per year.
3 If you decide to move your accounts to a low cost provider like Vanguard, the process is different for your different accounts.
4 Your SIMPLE IRA for your own business can be moved without any tax consequences. As has been mentioned, the easiest way to move to a new provider, e.g. Vanguard, is to have them do an “in kind” transfer, trustee to trustee. VG's Concierge Service specializes in moving accounts from other providers to VG. The process does not involve the broker. There will be fees to sell them and you can find out whether selling first and moving cash will be less expensive.
5 Your wife’s 401k can’t be moved but you/she can manage it your/herself. If you provide a list of all the funds and their ER’s that she can choose from, folks on the forum can discuss them with you and help you select the best ones. Usually only 3 or 4 funds per account are necessary to get the maximum diversification, and those 3 or 4 funds can be the same ones in each account. Since her choices may be limited, it’s sometimes works best to start with the 401k using the best choice(s) there and fill in with your SIMPLE IRA and your taxable accounts.
6 The taxable account will be the biggest challenge. You can move the funds to VG “in kind”, trustee to trustee, and sell the over time to spread out the capital gains. As has been mentioned, you should ask your advisor for the short and long term capital gains of all the funds in your taxable account. The information may be on your online account—it is on VG accounts. If you list the gains here, you’ll get advice on how to proceed. If the gains of some of the funds are too high, you could just keep them at VG, but not add to them.
kenner
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Re: New to Forum Questions

Post by kenner »

It is also disconcerting that some of the funds recommended by the advisor have front-end sales fees (loads) of 4.5%, raising questions about other hidden charges like annual 12b-1 fees and back-end load charges. Also wondering whether advisor helps OP save annually on taxes via tax loss harvesting (tax savings could be large this year).
Topic Author
Waterddd
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Re: New to Forum Questions

Post by Waterddd »

Thank you all for your very detailed and thought out responses.
I am going to read a couple of books as recommended. This is my very short term thought for the money from yearly saving 125k that is currently held in a bank account. This is money I would normally give to the advisor. This is seperate from my emergency fund. I would like to stop contributing money to advisor now. So i would like to keep my current advisor, open a new account like Vanguard and if possible open a new account for the simple going forward. Leave my existing accounts with my advisor but not contribute and new funds. Then over the course of 2016 2017 start switching over the Simple and 401k and I will be left with the 1.5 taxable account at advisor. Then i will sell off and figure out how to deal with tax implications of transfering into new accounts.
The hard part is figuring out the the new portfolio and the mix of these funds in this portfolio.

Is this possible or does it have to be an all or nothing approach?
trsk
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Re: New to Forum Questions

Post by trsk »

Writing here just to encourage you in your process of switching funds out of advisor control. This site has been very helpful with how to get it done, like having in kind transfers that Vanguard can initiate. I made one call to my former advisor to tell him my plan. They know that their costs are unnecessary so it was emotionally easier than expected, and was accepted without a debate. Just said thanks for your services so far, and now that I understand the impact of expense ratios and investing fees, I've decided to take a passive index investment route.
You are lucky to find the Bogleheads at such a young age!!! I lost another 20 years of expenses and tens of thousands more than you will. The time you invest now getting it done will be repaid very quickly. (e.g. 22,000/20 hours is about $1,000/hour for your time, just for starters this year!). After you start the transfer process, you'll see how uncomplicated it can be.
Just keep it simple, like the 3 fund portfolio; or simpler still with single fund that is rebalanced for you. I'm still learning this lesson!
Best wishes to you.
trsk
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in_reality
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Re: New to Forum Questions

Post by in_reality »

Waterddd wrote: The hard part is figuring out the the new portfolio and the mix of these funds in this portfolio.

Is this possible or does it have to be an all or nothing approach?
It's just fine to incrementally add to your new Boglehead portfolio -- especially if you use total market funds (such as Total US VTSAX and Total international VTIAX). Nobody is saying ignore taxes or do something you aren't sure of yet.

That's the beauty of the approach. Since you are holding the market, you won't have to worry if you are tilting too much growth or too much small cap or too much energy or too much health care or not enough technology or too much or not enough of anything.

A Boglehead portfolio will coexist peacefully with any other holdings and will serve to move you close to where you should be -- holding the market.

I would strongly suggest however that sooner rather than later you:

1) ditch the 1% advisor fee
2) stop reinvesting dividends and capital gains distributions and direct it to your new Boglehead porfolio.

Welcome to the group!!!
Lafder
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Re: New to Forum Questions

Post by Lafder »

Of course it is your money and you can keep the advisor for life if you choose!

Keeping over 2 million with the advisor for another 2 years will cost you over 70k in management fees and higher ERs than necessary. And, there are the front load fees that we have not really even added the total too. Your choice. Just be aware of the cost.

I understand change is scary and you do not want to make a mistake with your family's financial future.

At a minimum, I would tell the advisor I wanted to switch my account to one that they can not make trades without my permission. Otherwise, he can make trades with the high front load fees and take more money from you. Even if he rationalizes it is for your benefit and the new holding is better. It is hard for him to have a rational perspective when his profits increase with certain trades.

I suggest you go through each and every holding your beloved advisor has you in and list the ER as well as any front load fees, and then see how you feel. Do you understand a front load fee means that percent of what you invest gets pulled out of your purchase and is basically a "referral" fee to the advisor and their company? I suspect if you take the time to list these fees you will be in more of a rush to get out from under your advisor.

The stock market has done screamingly well in recent years. You may be confusing your increasing balance with your advisor's performance. That is why I am suggesting you take a closer look at the % your advisor has gotten that came from your money. It is outrageous if you look at it. And especially if you consider how few hours were realistically spent on your account for those fees.

I have some free time now, I will take a look at your specific funds and their ERs and front load fees. I just google the ticker, and usually Morningstar has the best summary. But some funds or holdings need more digging to find the fees.

lafder
Lafder
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Re: New to Forum Questions

Post by Lafder »

((Here is what I found with a simple google search. Note ER is the fee that comes out every year whether the fund has gains or not. Front load only comes out when the money goes in, so a one time fee. But entirely outrageous since there are so many no front load fee options. Looking at your ERs you might think, well at least there are some under 1. But there are funds out there that are 0.0 before any number, so a fraction of these fees. I absolutely won't invest in any over a 1 ER (unless it is the only employer retirement plan options!). But VG makes even a 0.5 look like too much. Note all of these fees are supposed to be clearly listed, and they are. But most folks never notice since you never get a statement showing how much is coming out of your account in fees. Instead, you see the statement of the growth you are having and it is misleading since it would have been much more without fees taken out. Plus the % look small !))

Her 401K Assets: $274k From previous job switched and held with adviser
Equities
ABASX AllianceBern Small-Mid Cap Value A 5.54% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.47% ((ER 0.47, no front load))
AEPFX American Funds EuroPacific Gr F-2 18.75% ((ER 0.59 no front load))
NYVTX Davis NY Venture A 13.94% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 5.03% ((ER 1.96, front load 5.20))
ODMAX Oppenheimer Developing Markets A 4.54% ((ER 1.3, front load 5.75))
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 6.95% ((ER 0.65, no front load))
EVIBX Eaton Vance Income Fund of Boston A 4.98% ((ER 1, front load 4.75))
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 6.54% ((ER 0.97, front load 5.50))
PAUDX PIMCO All Asset All Authority D 5.90% ((ER 1.65, no front load))
GLD SPDR Gold Shares 2.12% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
WABIX Wells Fargo Advantage Absolute Ret Instl 5.67% ((ER 1.17, no front load))

CASH CASH 5.57%

His Simple IRa $421k currently still contributing

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.29% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.09% ((ER 0.47, front load none))
AEPFX American Funds EuroPacific Gr F-2 17.89% ((ER 0.59, front load none))
NYVTX Davis NY Venture A 1,917.561 30.25 14.00% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 4.79% ((ER 1.96, front load 5.5))
ODMAX Oppenheimer Developing Markets A 4.98% ((ER 1.3, front load 5.75))
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 8.02% ((ER 0.65, front load none))
EVIBX Eaton Vance Income Fund of Boston A 4.99% ((ER 1, front load 4.75))
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 3.21% ((ER 0.97, front load 5.5))
CCVIX Calamos Convertible A 3.46% ((ER 1.11, front load 4.75))
PAUDX PIMCO All Asset All Authority D 6.31% ((ER 1.65, front load none))
GLD SPDR Gold Shares 2.29% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
WABIX Wells Fargo Advantage Absolute Ret Instl 10.16 ((ER 1.17, no front load))

CASH CASH 3.97%

Taxable Account $1.5m

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.52% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.10% ((ER 0.47, front load none))
AEPFX American Funds EuroPacific Gr F-2 18.76% ((ER 0.59, front load none))
NYVTX Davis NY Venture A 13.90% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 4.68% ((ER 1.96, front load 5.5))
ODMAX Oppenheimer Developing Markets A 4.73% ((ER 1.3, front load 5.75))
Fixed Income
LTNYX Oppenheimer Limited Term NY Municipal A 12.45% ((ER 0.76, front load 2.25))
Alternative Investments
ANZAX Allianz AGIC Convertible A 4.16% ((ER 0.97, front load 5.5))
CCVIX Calamos Convertible A 1.51% ((ER 1.11, front load 4.75))
PAUDX PIMCO All Asset All Authority D 7 6.56% ((ER 1.65, front load none))
GLD SPDR Gold Shares 3.12% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
CASH 10.49%

Those fees are huge compared to what is available out there. On taxable accounts you do need to pay attention to tax effects of moving. Not so with retirement accounts. It seems most if not all of these holdings could be transferred "in kind" to VG or Fidelity, and you would immediately lose the 1% management fee. In kind transfers means the fiduciary holding the paperwork changes, but you still own the same shares without a selling or buying transaction happening. That would lose the fees of 1% of 2.2 million immediately, which is a lot, while you sort out what to do. Again, it is your money and your comfort, so you can continue to use the advisor if that is most comfortable for you. I am saying you can lose the advisor fee without changing your actual holdings while you sort out what you want to do.

Here is some comparison in fees. Note VG funds do not have front load fees, so it is just the ER as your expense.

Life Strategy Moderate Growth ER 0.16
((I picked it since it has about 60% stock which is close to your holdings. It is little higher ER since it is an all in one that rebalances for you))

Here are the fuds you can make a 3 fund portfolio out of
VTSAX Total stock market index admiral shares ER 0.05
VTIAX Vanguard total international stock index admiral shares ER 0.14 ((see, a 0.1 looks high when 0.0 options are available!)
VBTLX Vanguard total bond market index admiral shares ER 0.07

Then there are the all in one Target Date Retirement funds that are basically a fund of funds with the same funds as the 3 fnd I just listed, but add international bond index, and Tips in retirement. ERs range from 0.16- 0.18

Yes it can be said bogleheads are fanatics for minimizing costs!! But when you are talking about a difference of well over a percent, and sometimes 5% of over 2 million dollars year after year, those are not small numbers by most people's standards.

I understand it is stressful to make changes. Really I do. I still hold some individual stocks since I have had a hard time making myself sell them. I agonize too much whenever I make changes. I have magical thinking that if I sell something it will jump up in value the day after I sell it, or what I buy will drop the day after. There is a psychological effect that we are overly attached and over value that which we already have. I suspect that is a huge factor in your reluctance to make changes. Check out/google and read more online about these books Nudge and Why Smart People Make Big Money Mistakes and How to Correct Them.

You came here aware of how big an expense you are paying financial advisors a year. If it was a necessary expense that would just be a cost in life. But, it absolutely is not a necessary expense! You and your spouse are smart enough to have accumulated this much. You are more than capable of "paying yourselves" to manage it by losing the excessive fees you are paying.

Welcome to Bogleheads :)

lafder
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goingup
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Re: New to Forum Questions

Post by goingup »

Waterddd wrote:Thank you all for your very detailed and thought out responses.
I am going to read a couple of books as recommended. This is my very short term thought for the money from yearly saving 125k that is currently held in a bank account. This is money I would normally give to the advisor. This is seperate from my emergency fund. I would like to stop contributing money to advisor now. So i would like to keep my current advisor, open a new account like Vanguard and if possible open a new account for the simple going forward. Leave my existing accounts with my advisor but not contribute and new funds. Then over the course of 2016 2017 start switching over the Simple and 401k and I will be left with the 1.5 taxable account at advisor. Then i will sell off and figure out how to deal with tax implications of transfering into new accounts.
The hard part is figuring out the the new portfolio and the mix of these funds in this portfolio.

Is this possible or does it have to be an all or nothing approach?
It would really benefit you to read several books. William Bernstein was mentioned and he is an excellent author. Check out The Investor's Manifesto.

I wouldn't just open a piece-meal account at Vanguard with $125K. That's only about 5% of your assets and I don't think you'll be pleased with the experience. Going from a full-service broker to a small account at Vanguard will feel like you've gone from flying First Class to Economy. Sure you'll save money but you won't be delighted.

Paying a 1% AUM for $2mill seems high to me. Your portfolio seems like an expensive collection of tax-inefficient funds. If you want an advisor I think you could do better by using someone committed to a strategy and tax-efficiency. Rick Ferri's firm Portfolio Solutions would be one to consider.

Suggest you do some reading and research before making a move. Good Luck! :beer
retiredjg
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Re: New to Forum Questions

Post by retiredjg »

Waterddd wrote:Next question is how do i go about telling my advisor who is a friend gives me some work for my business and someone i really like and trust.
Keep it very simple. If asked why there is no incoming investment this year, just tell him you have decided to start managing some of your money yourself. Do not let this lead to a discussion. It is a decision, not an invitation for discussion. You do not have any obligation to explain your decisions.

Later when you move money, do the same thing. You do not own him your business. Don't be surprised if he no longer sends you business though.
I also would like to show him on paper how i will do just as good and save alot of money doing it on my own. :(
Do not even consider doing this. No matter how the conversation goes, you will lose your friend (if he really is a friend). It can only go 2 ways. If he already knows that his "assistance" is lining his pockets more than yours, he will be embarrassed and ashamed. If he does not know it, you will never convince him. Don't go there - you will be sorry and this whole process will turn unpleasant and sour.

If he really is a friend and if he has even a semblance of manners, he will be gracious about this and not be pushy or try to change your mind. If he is not gracious he' not really a friend, just a friendly salesman.
krow36
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Re: New to Forum Questions

Post by krow36 »

The Security and Exchange Commission provides a useful mutual fund cost calculator tool. It allows one to input an investment amount, the expense ratio, the number of years, and an assumed rate of return (ROR) over the years, and find out the fund’s cost to the investor. The assumed ROR is used to calculate the opportunity costs, which are the foregone earnings on those fees paid each year.

I wanted to find the costs of your portfolio with an average fee of 1.79% and compare it to the costs of a Vanguard index portfolio with an ER of 0.2%, after 10 years and a 6% ROR. The tool can only handle investment amounts <1M, so I used 999,999. (17,291/2.2M = 0.79%; 1% AUM fee plus average ER of 0.79% = total fee of 1.79%)
https://www.sec.gov/investor/tools/mfcc/get-started.htm

costs after 10 yrs
Your Portfolio, fees=1.79%——————> $295,935
Vanguard Index Portfolio, ER-0.2%——> $35,496
COST DIFFERENCE PER 1M--———> $260,439

The cost is proportional to the amount invested, so your advisor-managed portfolio of 2.2M would have a cost difference with a Vanguard index portfolio of $572,965 after 10 years! Unbelievable, isn’t it? You can use different inputs but I think you will conclude that your advisor and the fund companies he uses have a very good deal going, for them, not for you.

You might be wondering why it’s not common knowledge that this big shift in your investments to other folks, is taking place. There are a lot of resources working to keep the status quo. However, there is an increasing movement to inform investors. The SEC and the Dept. of Labor are pushing for a required fiduciary relationship between brokers and investors. Of course the financial industry is pushing back hard. There are occasional articles in the WSJ on the topic, and the New York Times has run a series by Jeff Sommer on the topic. The folks contributing to the Boglehead forums are trying to get the word out.

Here are some of the NYT articles:

The high cost of using managed funds vs index funds. http://www.nytimes.com/2015/06/07/your- ... iness&_r=0

Why there are high expense ratios, investors are leaving high ER fund providers and heading to low ER providers like Vanguard, and John Bogle quotes. http://www.nytimes.com/2015/05/10/your- ... pe=article

Managed funds vs index funds
http://www.nytimes.com/2015/04/05/your- ... pe=article

Can a managed fund beat an index fund consistently?
http://www.nytimes.com/2015/03/15/your- ... pe=article

I second retiredjg’s suggestions regarding your advisor. Don’t try to explain to him your reasons for leaving. Make up your own mind based on what you learn. You shouldn’t try to convince him of anything other than that you’ve made your decision. It’s up to you of course if you want to let go of him slowly, but it seems to me that the reasons to take one account from him are valid for removing him entirely. Ask for help here on the forum and you’ll get responses from folks with many year’s experience.

edited to correct arithmetic
Last edited by krow36 on Mon Dec 21, 2015 4:06 pm, edited 2 times in total.
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Peter Foley
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Re: New to Forum Questions

Post by Peter Foley »

Again, welcome to the board. The personal aspect of breaking away will be the most difficult part. However, while he may be your friend, he is not providing you with particularly good service.

Very often we see individuals post here who are working with an adviser and feel they "might" really need one. Often times this is because the adviser has set up an unnecessarily complicated mix of funds in an attempt to beat the market averages and justify the commission. While this may not be the case with your adviser, I suspect it is. You have many too many funds with a lot of overlap when you think of your holdings as a single portfolio. You can get ample diversification and potentially beat the total stock market returns with a 5-6 fund approach (some here might call this a modest slice and dice approach). I don't go this route myself and I would not recommend you do so until you are much more comfortable with managing your portfolio. 3 funds is all you really need - 4 if you want to continue to invest in a commodities fund.

I like the suggestion of working with a personal adviser at Vanguard. You could do the same thing with Schwab (I use Schwab). Just let the adviser know that you are interested in a low cost index fund approach.
Topic Author
Waterddd
Posts: 9
Joined: Fri Dec 18, 2015 8:17 am

Re: New to Forum Questions

Post by Waterddd »

Thanks Again to everyone who responded. I have read each and everyone of your posts several times. My wife read through the whole thread last night and said WoW. Leaving my adviser is really not that big of an issue. But it was fun reading your exit strategy. I have ordered one of the recommended books and will start reading and researching. I seem to have the basics down already.

It has been very nice reading this site to find people with the same type of values as I do. Save money very rarely borrow and pay interest. If you want it pay for it in full and make it hurt has always been my motto. I had to figure this out on my own. I have lived below my means but also enjoyed my money. I feel I am a little behind in saving for retirement and would like to have saved some more but I am okay with it. I've come to the realization that i will save as much as i can and when its time to retire that is what i will have to live on. Running and trying to get to a number won't work for me. I have some friends that are chasing an amount and every they are readjusting the amount.

Now the hard part and the part i need the most help with (aside from my grammar) is how to pick the mutual funds.
My risk tolerance is 65% 35% I survived 2007 2008 with no problem never blinked.
Tax smarts on the taxable account is a must last year hurt with all the gains.

Thank You!
kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: New to Forum Questions

Post by kenner »

Congratulations on reaching a very wise conclusion.

Now the hard part and the part i need the most help with (aside from my grammar) is how to pick the mutual funds.

I believe picking the appropriate funds for you and your family will be relatively easy compared to unwinding the situation created by the advisor.

Here's a preview of how simple it can be:

John Bogle, in his speech, “ Investing With Simplicity, ” said: “Simplicity is the master key to financial success. When there are multiple solutions to a problem, choose the simplest one.” [7]
It is not necessary to own many funds to achieve effective diversification. A single total stock market index fund contains thousands of stocks, including all styles and cap-sizes. A total bond market index fund contains thousands of bonds of various types and maturities. In his Little Book of Common Sense Investing, Mr. Bogle recommends a simple portfolio of only two funds for many investors: Vanguard Total Stock Market Index Fund and Total Bond Market Index Fund. [8]
A simple portfolio has many advantages. It almost always lowers costs (including taxes), makes analysis easier, simplifies rebalancing, simplifies tax-preparation, reduces paper-work and record-keeping, and enables caregivers and heirs to easily take-over the portfolio when necessary. Best of all, a simple portfolio allows you to spend more time with family and friends, and less time managing your finances.
A portfolio held by many Bogleheads forum members is the three fund portfolio, which allocates investments among a U.S. Total stock market index fund, a Total International stock market index fund, and a U.S Total bond market index fund. Many Bogleheads extend the bond portion of this portfolio to include a fourth asset class, U.S. inflation-indexed bonds. The Vanguard Target Retirement and LifeStrategy funds add
international bonds as a fourth asset class.
As Bogleheads author William Bernstein says in reference to the three fund portfolio: "Does this portfolio seem overly simplistic, even amateurish? Get over it. Over the next few decades, the overwhelming majority of all professional investors will not be able to beat it."


In your case, you would be well-served by considering a portfolio structured approximately as follows:

45% Total US Stock Market (ER .05%) (VTSAX)
20% Total International Stock (ER .14%) (VTIAX)
35% Total US Intermediate Term Bond Market (ER .07%) (VBTLX)

Because it appears your marginal income tax rate is in excess of 28%, it may benefit you to use Vanguard Intermediate Term Tax-Exempt Municipal Bond Fund (VWIUX) instead of - or in conjunction with - VBTLX.

Taking it one step further, you also may benefit from Vanguard's New York Tax-Exempt Municipal Bond Fund (VNYTX) in order to receive additional tax-free income. The fund name indicates "Long Term", but it possesses an average duration that many of us find to be acceptable.


Tax smarts on the taxable account is a must last year hurt with all the gains.

Totally agreed. That will take some serious work in order to maximize your results from a tax perspective. The starting point may be to itemize the tax cost basis in each of your taxable account holdings.
krow36
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Location: WA

Re: New to Forum Questions

Post by krow36 »

Waterddd wrote:
Now the hard part and the part i need the most help with (aside from my grammar) is how to pick the mutual funds.
As has been mentioned, picking the few mutual funds that you will need will not be difficult if you decide to build a broadly diverse portfolio using a few low cost index funds. It could look something like this:

Her 401k, 274k, 13%
Select the best funds with low ER available in the 401k, so as to end up with the equivalent of:
Total Stock Mkt
Total Int'l Stock Mkt
Total Bond Mkt

His SIMPLE IRA, 421k, 19%
Total Stock Mkt
Total Int'l Stock Mkt
Total Bond Mkt

TAXABLE, 1.5M, 68%
Total Stock Mkt
Total Int'l Stock Mkt
Interm-term tax exempt bond fund
Old equity funds, sell after considering their capital gains, buy TSM
Old muni bond fund, you may want to keep, but VG muni bond funds are top-rated
Alternative investments, sell? I don't know anything about them.
Cash, invest in Total Stock MKt

You can see that picking the mutual funds for the SIMPLE will not be difficult. For the 401k, there's often an big cap equity fund with a not too bad ER. Maybe you'll be lucky and can choose an equity index fund? You can put the TISM and TBM in either (or both) the 401k or the SIMPLE.

The taxable account will take some time simplify, but you can spread the process over several years if you want. Once you decide to drop your advisor, I'd suggest you stop all reinvestment of dividends and cap gain distributions in your taxable account. Have them put in your money market fund and use it to buy the index funds. Going forward, if you invest in taxable, only use TSM, TISM or a muni bond fund, all of which are very tax efficient.
Lafder
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Location: East of the Rio Grande

Re: New to Forum Questions

Post by Lafder »

"I've come to the realization that i will save as much as i can and when its time to retire that is what i will have to live on. Running and trying to get to a number won't work for me."

That is my exact strategy too :) Though I may work longer or quit sooner depending on how comfortable I am with our nest egg and expenses.

lafder
User avatar
in_reality
Posts: 4529
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Re: New to Forum Questions

Post by in_reality »

krow36 wrote:
Waterddd wrote:
Now the hard part and the part i need the most help with (aside from my grammar) is how to pick the mutual funds.
As has been mentioned, picking the few mutual funds that you will need will not be difficult if you decide to build a broadly diverse portfolio using a few low cost index funds. It could look something like this:

Her 401k, 274k, 13%
Select the best funds with low ER available in the 401k, so as to end up with the equivalent of:
Total Stock Mkt
Total Int'l Stock Mkt
Total Bond Mkt

His SIMPLE IRA, 421k, 19%
Total Stock Mkt
Total Int'l Stock Mkt
Total Bond Mkt

TAXABLE, 1.5M, 68%
Total Stock Mkt
Total Int'l Stock Mkt
Interm-term tax exempt bond fund
Old equity funds, sell after considering their capital gains, buy TSM
Old muni bond fund, you may want to keep, but VG muni bond funds are top-rated
Alternative investments, sell? I don't know anything about them.
Cash, invest in Total Stock MKt

You can see that picking the mutual funds for the SIMPLE will not be difficult. For the 401k, there's often an big cap equity fund with a not too bad ER. Maybe you'll be lucky and can choose an equity index fund? You can put the TISM and TBM in either (or both) the 401k or the SIMPLE.

The taxable account will take some time simplify, but you can spread the process over several years if you want. Once you decide to drop your advisor, I'd suggest you stop all reinvestment of dividends and cap gain distributions in your taxable account. Have them put in your money market fund and use it to buy the index funds. Going forward, if you invest in taxable, only use TSM, TISM or a muni bond fund, all of which are very tax efficient.
Exactly!
panhead
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Joined: Fri Feb 22, 2013 10:53 am

Re: New to Forum Questions

Post by panhead »

I'm glad the OP has made a decision, and I hope he re-reads (and absorbs) the research lafder did for him below. When I looked at the ERs, and especially the loads, I threw up in my mouth a little bit.....

Advisors aren't all bad at all times for all people, especially when someone is concentrating on a business or has no interest in finance/investing. I see no problem in saying 'thanks' for the years of help, but I'm taking the helm from here.

Anyway, nice work lafder.

Lafder wrote:((Here is what I found with a simple google search. Note ER is the fee that comes out every year whether the fund has gains or not. Front load only comes out when the money goes in, so a one time fee. But entirely outrageous since there are so many no front load fee options. Looking at your ERs you might think, well at least there are some under 1. But there are funds out there that are 0.0 before any number, so a fraction of these fees. I absolutely won't invest in any over a 1 ER (unless it is the only employer retirement plan options!). But VG makes even a 0.5 look like too much. Note all of these fees are supposed to be clearly listed, and they are. But most folks never notice since you never get a statement showing how much is coming out of your account in fees. Instead, you see the statement of the growth you are having and it is misleading since it would have been much more without fees taken out. Plus the % look small !))

Her 401K Assets: $274k From previous job switched and held with adviser
Equities
ABASX AllianceBern Small-Mid Cap Value A 5.54% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.47% ((ER 0.47, no front load))
AEPFX American Funds EuroPacific Gr F-2 18.75% ((ER 0.59 no front load))
NYVTX Davis NY Venture A 13.94% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 5.03% ((ER 1.96, front load 5.20))
ODMAX Oppenheimer Developing Markets A 4.54% ((ER 1.3, front load 5.75))
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 6.95% ((ER 0.65, no front load))
EVIBX Eaton Vance Income Fund of Boston A 4.98% ((ER 1, front load 4.75))
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 6.54% ((ER 0.97, front load 5.50))
PAUDX PIMCO All Asset All Authority D 5.90% ((ER 1.65, no front load))
GLD SPDR Gold Shares 2.12% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
WABIX Wells Fargo Advantage Absolute Ret Instl 5.67% ((ER 1.17, no front load))

CASH CASH 5.57%

His Simple IRa $421k currently still contributing

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.29% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.09% ((ER 0.47, front load none))
AEPFX American Funds EuroPacific Gr F-2 17.89% ((ER 0.59, front load none))
NYVTX Davis NY Venture A 1,917.561 30.25 14.00% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 4.79% ((ER 1.96, front load 5.5))
ODMAX Oppenheimer Developing Markets A 4.98% ((ER 1.3, front load 5.75))
Fixed Income Fixed Income
BFWFX American Funds Capital World Bond F-2 8.02% ((ER 0.65, front load none))
EVIBX Eaton Vance Income Fund of Boston A 4.99% ((ER 1, front load 4.75))
Alternative Investments Alternative Investments
ANZAX Allianz AGIC Convertible A 3.21% ((ER 0.97, front load 5.5))
CCVIX Calamos Convertible A 3.46% ((ER 1.11, front load 4.75))
PAUDX PIMCO All Asset All Authority D 6.31% ((ER 1.65, front load none))
GLD SPDR Gold Shares 2.29% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
WABIX Wells Fargo Advantage Absolute Ret Instl 10.16 ((ER 1.17, no front load))

CASH CASH 3.97%

Taxable Account $1.5m

Equities
ABASX AllianceBern Small-Mid Cap Value A 5.52% ((ER 1.21, front load 4.25))
AMCFX American Funds AMCAP F-2 14.10% ((ER 0.47, front load none))
AEPFX American Funds EuroPacific Gr F-2 18.76% ((ER 0.59, front load none))
NYVTX Davis NY Venture A 13.90% ((ER 0.86, front load 4.75))
FKASX Federated Kaufmann Small Cap A 4.68% ((ER 1.96, front load 5.5))
ODMAX Oppenheimer Developing Markets A 4.73% ((ER 1.3, front load 5.75))
Fixed Income
LTNYX Oppenheimer Limited Term NY Municipal A 12.45% ((ER 0.76, front load 2.25))
Alternative Investments
ANZAX Allianz AGIC Convertible A 4.16% ((ER 0.97, front load 5.5))
CCVIX Calamos Convertible A 1.51% ((ER 1.11, front load 4.75))
PAUDX PIMCO All Asset All Authority D 7 6.56% ((ER 1.65, front load none))
GLD SPDR Gold Shares 3.12% ((stock, somewhere I found ER 0.4, but somewhere else it says fee waived))
CASH 10.49%

Those fees are huge compared to what is available out there. On taxable accounts you do need to pay attention to tax effects of moving. Not so with retirement accounts. It seems most if not all of these holdings could be transferred "in kind" to VG or Fidelity, and you would immediately lose the 1% management fee. In kind transfers means the fiduciary holding the paperwork changes, but you still own the same shares without a selling or buying transaction happening. That would lose the fees of 1% of 2.2 million immediately, which is a lot, while you sort out what to do. Again, it is your money and your comfort, so you can continue to use the advisor if that is most comfortable for you. I am saying you can lose the advisor fee without changing your actual holdings while you sort out what you want to do.

Here is some comparison in fees. Note VG funds do not have front load fees, so it is just the ER as your expense.

Life Strategy Moderate Growth ER 0.16
((I picked it since it has about 60% stock which is close to your holdings. It is little higher ER since it is an all in one that rebalances for you))

Here are the fuds you can make a 3 fund portfolio out of
VTSAX Total stock market index admiral shares ER 0.05
VTIAX Vanguard total international stock index admiral shares ER 0.14 ((see, a 0.1 looks high when 0.0 options are available!)
VBTLX Vanguard total bond market index admiral shares ER 0.07

Then there are the all in one Target Date Retirement funds that are basically a fund of funds with the same funds as the 3 fnd I just listed, but add international bond index, and Tips in retirement. ERs range from 0.16- 0.18

Yes it can be said bogleheads are fanatics for minimizing costs!! But when you are talking about a difference of well over a percent, and sometimes 5% of over 2 million dollars year after year, those are not small numbers by most people's standards.

I understand it is stressful to make changes. Really I do. I still hold some individual stocks since I have had a hard time making myself sell them. I agonize too much whenever I make changes. I have magical thinking that if I sell something it will jump up in value the day after I sell it, or what I buy will drop the day after. There is a psychological effect that we are overly attached and over value that which we already have. I suspect that is a huge factor in your reluctance to make changes. Check out/google and read more online about these books Nudge and Why Smart People Make Big Money Mistakes and How to Correct Them.

You came here aware of how big an expense you are paying financial advisors a year. If it was a necessary expense that would just be a cost in life. But, it absolutely is not a necessary expense! You and your spouse are smart enough to have accumulated this much. You are more than capable of "paying yourselves" to manage it by losing the excessive fees you are paying.

Welcome to Bogleheads :)

lafder
retiredjg
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Re: New to Forum Questions

Post by retiredjg »

Some details that need to be fleshed out as you move along on your plan.

Age: 52 I have my own business
With your own business and a high income, you need to consider if a 401k plan is better than a SIMPLE IRA. I don't think we know if your business has employees or not. If not, a Solo 401k might be appropriate. I think you can save more in a 401k plan than a SIMPLE IRA. And if you get rid of the SIMPLE IRA, you could use the back door method to contribute to Roth IRA each year.

But, a 401k plan does cost more to administer so this is not a no brainer. Just something to put on your list to learn about.

Wife: 44 works in the corporate world
You mention below that your wife has a 401k plan, but we have yet to see what is available in the 401k plan. At some point, it might be helpful to you to post that information and let us help you weave that into the overall picture.

Yearly income combined wife 140K plus bonus mine can be $200k to $300k 2014 was 540k with all the mutual fund
You need to get a better handle on this. Knowing your tax bracket helps you make decisions. You also need to know what your long term capital gains rate will be when you start fixing your messy taxable account. If you are in the highest tax bracket (39.6%) the LTCG rate is higher than if you are in a lower bracket.

In order to know your tax bracket, compare your taxable income (line 43 on form 1040) to this chart. Check for several years to see if you are bouncing from bracket to bracket.

http://www.moneychimp.com/features/tax_brackets.htm

Money held with Advisor at 1% fee total of 2.2m
When your advisor learns that you are planning to invest less or maybe leave, he may offer to lower his fee from 1% to .5% or .7%. Be prepared for this and do not let it sway you. In fact, consider asking for a smaller number than he offers. Remember this is a decision, not an invitation for a discussion. Believe me, he knows every trick and skill in the book on how to retain customers. Let him lower the fee on what he is keeping. In the long run, I believe you will move all the money away, but in the meantime, there is no reason not to reduce your annual fees.

Her 401K Assets: $274k From previous job switched and held with adviser
Since this has been "switched and is held with the advisor" it is no longer a 401k. It is an IRA (or a Rollover IRA if you prefer). If you call it her 401k assets, people will think you mean 401k. Get used to thinking of it as an IRA. If your wife investigates and decides to use the back door method to contribute to Roth IRA, she will need to roll this IRA into her 401k plan (or your Solo 401k plan if she is involved in your business) in order to get it out of the way.

His Simple IRa $421k currently still contributing
Here is a good example of how I think your friend has not served your best needs. He has you in a SIMPLE IRA, not a 401k. That is because he can offer you the SIMPLE IRA but he cannot offer you a 401k. So he is making money off the fact that he has advised you to use a SIMPLE when it might have been better for you to use a 401k. This is not illegal. In the business, it may not even be considered unethical. You figure out where you stand on that.

One thing I don't understand is how this SIMPLE IRA got so large. My first thought is that he had you roll all your previous IRAs/401ks into it. But checking with the IRS Rollover Chart, this is not allowed. How did this SIMPLE get so large? It makes me wonder if the previous paragraph is wrong - about him steering you to the wrong plan. Perhaps a SIMPLE is a good choice for you. However, what is invested in the SIMPLE are not good choices - high fees, etc.

Your SIMPLE IRA cannot be moved until it is 2 years old. How old is it?

Taxable Account $1.5m
This of course is where your biggest headaches lie. It will cost you in taxes to unravel this mess. One thing you can do now is to bargain for and accept the decrease in AUM fee that I feel sure your friend is going to offer. Also, stop reinvesting dividends and capital gains distributions - have all the money send to cash or money market. Then you remove the cash and transfer it to Vanguard (or whatever custodian you choose) and buy a stock index fund such as Total Stock Market.

Stopping the reinvesting will do 2 things. It will lower the amount of money (albeit by a small amount) that is subject to the AUM fee. And it will eliminate the small purchases - in a year all your shares will be long term and benefit from the long term capital gains rate which is lower than the short term capital gains rate.

As for untangling the account, it may take a few years. If we happen to have a good market crash and you can sell at a loss or a smaller gain than now, take advantage of that and liquidate the entire account with less or no tax cost.

One thing that I've not been clear on in your posts - are you paying the 1% AUM fee in addition to the front end loads and the high expense ratios? If so you, you are REALLY getting hosed. But it might not be that way. I know that front end loads can be eliminated without a problem. I'm unclear on how an ER could be worked around. Anyway, this is something you might want to watch for as you learn about how you are currently invested.
pkcrafter
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Re: New to Forum Questions

Post by pkcrafter »

waterddd wrote:
Financial planning is still confusing and a conflicting to me. I just don't have the head for it. So i have been using a financial advisor for the last 10 years. I trust him and believe in him. But i do believe he has an interest in making a profit.
Well, anyone would be confused when looking at that portfolio. Phew! Oh, but you will have the head for it when you realize that good investing is not actually as difficult as your advisor has lead you to believe. The light will go on.
Thank you very much for all the responses great info alot for me to take in. Im stressed from all the copy and pasting that i just did editing my original post.

Yes, that would stress anyone because the portfolio is very expansive and complex and made that way to give the impression that you are really getting something for your money. Going through the exercise of posting everything is an enlightening task.

I noticed you have some A class funds (front end commissions) and I hope those commissions were waived. Additionally, you have a few very tax inefficient funds in your taxable account. You can find tax efficiency, fund content, and lots more by putting a ticker symbol in the quote box at the top of the page.

http://financials.morningstar.com/fund/ ... ture=en-US

You can be as nice as you can about telling your advisor you have become more interested in finance and are now ready to manage on your own. You can thank him for his work, but don't be surprised he is isn't as friendly when you stop funding his retirement. Smoozing clients is part of the advisor game.

Here's a link to an online primer that you might skim through. Look at Ch 9 and see how your advisor fits in.

https://investingroadmap.wordpress.com

Take your time, learn, and develop a plan before doing any moving.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: New to Forum Questions

Post by retiredjg »

As always, I'm in agreement with what PKCrafter has said. However, I'd have to say I would not want to hold ANY the funds you have in taxable. I think you should definitely get rid of them.

The funds you have may be OK to average in tax-efficiency. Advisors rarely pay attention to this, but Bogleheads are sort of rabid about it. Eliminating unnecessary taxes is part of keeping costs low.

Why have any tax-efficiency when you can easily choose to have almost none? Well, now that you have that stuff, the only reason is there is a tax cost to getting rid of them.

I think you should get rid of them, but not helter skelter. Make a plan and get it done over a few years. It will cost you something to get there, but eventually, your yearly taxes will be lower and those high cost funds will be replaced by lower cost funds.

Here's a Wiki page that discusses this question. https://www.bogleheads.org/wiki/Paying_ ... itch_funds
Topic Author
Waterddd
Posts: 9
Joined: Fri Dec 18, 2015 8:17 am

Re: New to Forum Questions

Post by Waterddd »

Hi Again.
Here is an update and some questions.

So it has been a year and i have not done much in the way of anything except contemplating what i should do and what I'm comfortable with. So the good news is I have been saving and flipped a home and I'm involved in another one.
The bad news I have a large amount of money in a savings account and its time to make a decision give to the adviser or open a vanguard account. I am not willing to cut my relationship with my broker yet.

I would like to know thoughts on opening up a vanguard 3 fund portfolio and keeping my existing adviser and having both. I have approx 300k to invest. And if you would like to recommend the funds. If this is not crazy the next step would be to switch the retirement accounts at a later date.

Or should i just invest the money with the adviser?

Thank you all for your patience.
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Peter Foley
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Location: Lake Wobegon

Re: New to Forum Questions

Post by Peter Foley »

I think it is time for you to put your toe in the water. You have front end loads on most of your funds - there is no reason to invest this way. A very simple approach would be to invest with Vanguard using a LifeStrategy fund that is appropriate to your risk tolerance.
retiredjg
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Re: New to Forum Questions

Post by retiredjg »

I would not give any more money to the advisor. Consider opening an account at Vanguard and invest in only these 3 funds.
  • Vanguard Total Stock Index
    Vanguard Total International Index
    Vanguard Intermediate Term Tax Exempt Bond
You'll have to decide how aggressive you want it.

Until you decide to do something with your overall portfolio, it is not really possible to give more advice than that. The things above are a safe suggestion and they are tax-efficient and can't really mess up your portfolio no matter what you decide to do.
kenner
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Re: New to Forum Questions

Post by kenner »

I agree with Retiredjg's comments.

You'd essentially have "competing" asset allocations.

Who knows ? In a decade or two you may be in a position to tell us all that transferring a large portion of your family's wealth to your advisor was the best financial move you ever made.

Good luck.
Topic Author
Waterddd
Posts: 9
Joined: Fri Dec 18, 2015 8:17 am

Re: New to Forum Questions

Post by Waterddd »

HI Again,
This is the current holdings and asset allocation in my taxable account. I am trying to decipher this so I can figure out my AA for a 3 fund portfolio that would not compete with this. Any help would be appreciated. TIA




EQUITIES
ABYSX AB Discovery Value 5.99%
AMCFX American Funds 17.02%
AEPFX American Funds 17.65%
FKAIX Federated Kaufmann Small Cap I 4.77%
ODVYX Oppenheimer Developing Markets 5.03%
VVIAX Vanguard Value Index Adm 13.81%
EQUITIES TOTAL 64.26%

FIXED INCOME
ALNVX AB Municipal Income New York Advisor 11.00%
FIXED INCOME TOTAL 11.00%


ALTERNATIVE INVESTMENTS
ANNPX Allianz AGIC Convertible Institutional 4.05%
CICVX Calamos Convertible I 1.23%
PAUIX PIMCO All Asset All Authority Inst 6.58%
GLD SPDR Gold Shares 3.16%
WABIX Wells Fargo Advantage Absolute Ret Instl 6.14%
ALTERNATIVE INVESTMENTS TOTAL 21.15%

CASH
CASH CASH 3.59%
CASH TOTAL 3.59%

TOTAL
100.00%
pkcrafter
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Re: New to Forum Questions

Post by pkcrafter »

waterddd, welcome to the forum.
I am a new member here, and I feel I am too old to be confused about investing but I am. Financial planning is still confusing and a conflicting to me. I just don't have the head for it.
Finance and investing is made to appear complex because if you really knew what was involved, you would not pay someone to put you into a complicated mess of expensive funds. :happy It's good that you went through the exercise of organizing and posting your portfolio holdings. Yes, the first time is hard, but it really puts things into perspective.
Next question is how do i go about telling my advisor who is a friend gives me some work for my business and someone i really like and trust.
Here is a link to past discussions. A friend? We'll see. You have some front-end loaded funds. Are you positive he has waived those loads, which is normal with assets under management. Can you confirm? Beyond that he has you in some very high fee funds (not good) and has you in some very tax-inefficient funds in your taxable account. Would a friend really do these types of things?


https://www.google.com/search?sitesearc ... ve+advisor

I also would like to show him on paper how i will do just as good and save alot of money doing it on my own.
No, don't get into any conversations with him about moving. These guys are specifically trained to deal with such situations with the sole purpose of talking you out of it. Initiate all transfers with the company you are going with, but don't do anything until you have a complete plan that you fully understand.

Moving accounts will involve selling funds and you will be charged for that. Compare the costs of selling were the funds are now vs cost of selling at the new custodian. Also, if you transfer funds, be sure the new custodian can accept them. Use a custodian to custodian transfer.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
pkcrafter
Posts: 14394
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
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Re: New to Forum Questions

Post by pkcrafter »

Waterddd wrote:HI Again,
This is the current holdings and asset allocation in my taxable account. I am trying to decipher this so I can figure out my AA for a 3 fund portfolio that would not compete with this. Any help would be appreciated. TIA




EQUITIES
ABYSX AB Discovery Value 5.99%
AMCFX American Funds 17.02%
AEPFX American Funds 17.65%
FKAIX Federated Kaufmann Small Cap I 4.77%
ODVYX Oppenheimer Developing Markets 5.03%
VVIAX Vanguard Value Index Adm 13.81%
EQUITIES TOTAL 64.26%

FIXED INCOME
ALNVX AB Municipal Income New York Advisor 11.00%
FIXED INCOME TOTAL 11.00%


ALTERNATIVE INVESTMENTS
ANNPX Allianz AGIC Convertible Institutional 4.05%
CICVX Calamos Convertible I 1.23%
PAUIX PIMCO All Asset All Authority Inst 6.58%
GLD SPDR Gold Shares 3.16%
WABIX Wells Fargo Advantage Absolute Ret Instl 6.14%
ALTERNATIVE INVESTMENTS TOTAL 21.15%

CASH
CASH CASH 3.59%
CASH TOTAL 3.59%

TOTAL
100.00%
waterddd, you've got a problem here. Several of these funds are not tax-efficient and should not even be in taxable. If you want to investigate this, use this link to Morningstar. What you will see is Vanguard's total market index, which is efficient. Put some of your tickers into the quote box at the top of the page and compare efficiency.

http://performance.morningstar.com/fund ... on?t=VTSMX

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
aristotelian
Posts: 8233
Joined: Wed Jan 11, 2017 8:05 pm

Re: New to Forum Questions

Post by aristotelian »

Waterddd wrote:HI Again,
This is the current holdings and asset allocation in my taxable account. I am trying to decipher this so I can figure out my AA for a 3 fund portfolio that would not compete with this. Any help would be appreciated. TIA
I don't get the question. Are you looking to keep the current investments and then direct future contributions to approximate a 3-fund portfolio? Otherwise, the obvious answer would be to sell them all and move into a three fund portfolio.

You might look at Vanguard's tax managed balanced fund, which would approximate a three fund portfolio except with tax free muni bonds on the bond side. Could be good for someone in a high tax bracket such as yourself, and simple simple simple.
krow36
Posts: 2351
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: New to Forum Questions

Post by krow36 »

Waterddd wrote:HI Again,
This is the current holdings and asset allocation in my taxable account. I am trying to decipher this so I can figure out my AA for a 3 fund portfolio that would not compete with this. Any help would be appreciated. TIA
EQUITIES
ABYSX AB Discovery Value 5.99%
AMCFX American Funds 17.02%
AEPFX American Funds 17.65%
FKAIX Federated Kaufmann Small Cap I 4.77%
ODVYX Oppenheimer Developing Markets 5.03%
VVIAX Vanguard Value Index Adm 13.81%
EQUITIES TOTAL 64.26%

FIXED INCOME
ALNVX AB Municipal Income New York Advisor 11.00%
FIXED INCOME TOTAL 11.00%

ALTERNATIVE INVESTMENTS
ANNPX Allianz AGIC Convertible Institutional 4.05%
CICVX Calamos Convertible I 1.23%
PAUIX PIMCO All Asset All Authority Inst 6.58%
GLD SPDR Gold Shares 3.16%
WABIX Wells Fargo Advantage Absolute Ret Instl 6.14%
ALTERNATIVE INVESTMENTS TOTAL 21.15%

CASH
CASH CASH 3.59%
CASH TOTAL 3.59%

TOTAL
100.00%
“A 3 fund portfolio that would not compete with this”?? I think most BH viewers of that collection would NOT want to base anything on it. I think it is designed to look as if you couldn’t possibly manage that account by yourself. This is a common practice in the financial industry.

I think you should establish the 3 fund portfolio that posters have suggested. Your reading has explained that the 3 funds cover all the US and international stock markets and a wide selection of high quality municipal bonds. If you call up Vanguard, they will help you set it up. They do not work on commission.

If you decided on an asset allocation of 60% stocks and 40% bonds, with 20% of the stocks in international, it would look like this:
48% Total Stock Mkt
12% Total Int’l Stock Mkt
40% Interm-term Tax-Exempt Bond
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