[Am I getting a bad deal from my financial planner?]

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Topic Author
pepperz
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[Am I getting a bad deal from my financial planner?]

Post by pepperz » Thu Feb 04, 2016 2:50 pm

A few years back my wife and I met with a financial planner to get our financial picture setup.

At the time neither she nor I had the inclination or education to deal with this on our own. We figured paying someone else is better than not doing anything. (FYI we are now in our mid 30's.)

He set us up with insurances and accounts / planning.

Fast forwards a few years to today and we still have about $1765/month automatically coming out of our joint checking account to go towards all the vehicles he setup for us.

Here is the break down for each month:

$656.62 - permanent life insurance that builds cash value
$458.33 - wife's Roth
$400.00 - non-retirement, joint account.
$132.53 - wife's disability insurance
$125.66 - my disability insurance

Note: My Roth is not listed because I took control of it after getting involved with Bogleheads.

He also setup 20 year term life policies on each of us. (We pay those in full each year.)

.

[UPDATE: Added later because people have asked about why we have disability at such a young age...

My wife and I are both self employed so our work circumstances are different than most. Disability insurance was recommended in case one of us lost ability to work. It ensures we'd have enough to pay what's needed each month.

...

My plan initially was to take control of my own retirement accounts to prove (to my wife) that this investment philosophy is better than working with a professional.

Well, yesterday I had a shock (see separate post below) that made me question whether we shouldn't significantly change this arrangement.

Specifically I'm questioning whether that $656.62 wouldn't be better off invested elsewhere. (I'm not even clear on how much is cash value vs. insurance and what the investments are actually in.)

Also wondering if I can do better by taking the $400/month (currently going to non-retirement account) and investing that myself as well.

Thoughts please?
Last edited by pepperz on Thu Feb 04, 2016 4:44 pm, edited 4 times in total.

Topic Author
pepperz
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Re: Am I getting screwed?

Post by pepperz » Thu Feb 04, 2016 2:54 pm

And here is the shock I experienced yesterday that made me post this question:

Yesterday I logged into our non-retirement account and viewed the balance.

Here is a screenshot what I saw:

https://www.anony.ws/image/JoSM

We have apparently lost 20% of our balance in a short time... I'm not familiar with those Securities but they sure do look volatile.

So that is where our $400/month has been going for the past year.

Now I'm questioning everything and wanting to educate myself on how to handle everything myself.

Your thoughts are appreciated please.

P.S.

I panicked yesterday and e-mailed our advisor about the losses... Told him I was under the impression this was supposed to be a safe account that yields 5%.

His reply:

The non retirement account was set up as a liquid account but with investment risk. It wasn't meant for a 2 year short term bucket. I'll check the allocations though. At our review, we discussed that some was in emerging markets, which had been hit hard. You said to keep it there for now. Markets are also down 5 to 10 percent across the board for January, so a lOt of losses have occurred recently.

corysold
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Re: Am I getting screwed?

Post by corysold » Thu Feb 04, 2016 3:00 pm

Others smarter than I will give you better answers, but I'm guessing they will all be along the lines of, "Yes, you are getting screwed."

If you ask your adviser why you need two types of life insurance and his answer isn't "Because the whole life give me a huge commission." then he is lying to you.

Looking a bit further, those funds he has you in look like American Funds. I'm guessing they have high expense ratio and front loads of 5% or more. That means for every $1,000 you put in, they take $50 off the top. Not a good deal for you. They are also equity funds. So the fact they are down isn't a huge surprise, but if you were expecting that part of your investment to be "safe", it isn't set up that way.

Your "adviser" is bad news. I'm sure most will advise you to get your money out as soon as you can, read the wiki and handle this yourself with help from this forum.

Do you have any 401k options at work? Unless you don't have any other options, you might want to look at other tax deferred space available to you before putting $400/mo into a taxable account.
Last edited by corysold on Thu Feb 04, 2016 3:09 pm, edited 2 times in total.

tigermilk
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Re: Am I getting screwed?

Post by tigermilk » Thu Feb 04, 2016 3:03 pm

Your adviser was nice enough to pad his pockets first. Do you realize all those funds have a 5.75% front load? Basically if you invested $10k on day one, later on day one 5.75% of that was pulled right out of your pockets and into the pockets of American Funds and your adviser.

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ray.james
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Re: Am I getting screwed?

Post by ray.james » Thu Feb 04, 2016 3:08 pm

tigermilk wrote:Your adviser was nice enough to pad his pockets first. Do you realize all those funds have a 5.75% front load? Basically if you invested $10k on day one, later on day one 5.75% of that was pulled right out of your pockets and into the pockets of American Funds and your adviser.
Ahh that makes sense. First 3 funds are American large caps which lost only 10- 12% in volatility. Except on Op's screen-shot they lost almost 20%! I was awestruck what I was watching wrong. They have expense ratio of 0.64% and an additional management fees. So the big difference is front load.

OP, I also think your disability insurance is too much on a per month basis. But I do not know your income level/situation.
Last edited by ray.james on Thu Feb 04, 2016 3:10 pm, edited 1 time in total.
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Toons
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Re: Am I getting screwed?

Post by Toons » Thu Feb 04, 2016 3:09 pm

Broker sold funds.
Whole Life Insurance.
A big slice of the pie is going in someone else's pocket.
Term Insurance and No Load Mutual funds would be to your advantage
The recent downtrend in the market is reflected in your balances.

I am sure many more detailed replies are on the way from this forum.
Read them all carefully.
Toons is brief and to the point. :happy
Last edited by Toons on Thu Feb 04, 2016 3:09 pm, edited 1 time in total.
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livesoft
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Re: Am I getting screwed?

Post by livesoft » Thu Feb 04, 2016 3:09 pm

Yes, I think so.
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AZAttorney11
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Re: Am I getting screwed?

Post by AZAttorney11 » Thu Feb 04, 2016 3:10 pm

You're not getting screwed. It's something much worse. Have you read the Bogleheads wiki? Take a look at the recommended reading list. And read this forum a bunch, at least initially.

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saltycaper
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Re: Am I getting screwed?

Post by saltycaper » Thu Feb 04, 2016 3:12 pm

I would leave this advisor after getting your insurance affairs in order. Don't fall for the sunk costs fallacy and keep a policy just because you paid into it for a few years.

Good books to start with (also the Bogleheads Wiki): Start-up books

One important point: There is no such thing as a "safe" 5% return at the moment.
Quod vitae sectabor iter?

The Wizard
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Re: Am I getting screwed?

Post by The Wizard » Thu Feb 04, 2016 3:12 pm

Toons wrote: ...Toons is brief and to the point. :happy
Chaz was briefer...
Attempted new signature...

randomguy
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Re: Am I getting screwed?

Post by randomguy » Thu Feb 04, 2016 3:13 pm

agthx
front end load 5.75%
expense ratio: .65%

Paying front end loads is stupid in this day and age. All it does it make your broker and the fund rich. You get nothing out of it.

cheapindexer
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Re: Am I getting screwed?

Post by cheapindexer » Thu Feb 04, 2016 3:17 pm

Boy.... the replies so far are on the money, and will continue to go that way in this forum.

Don't beat yourself up.... you and your wife can do some homework and go with simple portfolios, even "three fund portfolio" that will be very likely to crush the returns of your advisors portfolio over the next several decades due to the huge cost differences.

For now hug your spouse, come up with a plan together, think long term ( so emerging markets are getting clobbered now.....who cares? think where they will be when you are 60).

good luck getting out of the lousy life insurance policy. Congrats on firing your advisor. You're very young and appear very good at living below your means, and those two things are the most important ! ( the third being keeping costs low in your portfolio!)

dc81584
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Re: Am I getting screwed?

Post by dc81584 » Thu Feb 04, 2016 3:18 pm

Yup! Fire this guy immediately.

psystal
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Re: Am I getting screwed?

Post by psystal » Thu Feb 04, 2016 3:29 pm

You're getting hosed.

Don't chase sunk costs. Get out of everything now. It's an expensive lesson, but education is valuable. Move forward from today.

Feel free to flip the guy off on your way out the door. He's basically doing the same thing to you.

Emily1980
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Re: Am I getting screwed?

Post by Emily1980 » Thu Feb 04, 2016 3:33 pm

Hi Pepperz,

I'm so sorry this is happening to you. Your instincts are right to question this "advisor," and please remember that it's not your fault. And try to feel comforted by the fact that, once you have knowledge, you can take charge of your situation.

Here is your portfolio:

FZAXX: Cash

AGTHX American Funds Growth Fund of America
(US growth stocks)
Load: 5.75%
ER: 0.65%

AMCPX American Funds AMCAP
(US growth stocks)
Load: 5.75%
ER: 0.68%

ANEFX American Funds New Economy
(Mostly US growth stocks, with some international)
Load 5.75%
ER: 0.78

ANWPX American Funds New Perspective
(Global growth stocks)
Load: 5.75%
ER: 0.75%

DWGAX American Funds Developing World
(International stocks)
Load: 5.75%
ER: 1.32%

Not only are you paying a 5.75% sales commission to your "advisor," he is investing you in redundant funds. Three of these are the US large growth stock funds, covering the same basic portion of the market. Most mutual funds do not have sales commissions. In fact, you will only pay them with "advisors" like yours, for their "advice."

This was your taxable account, right? You can probably rest assured he is doing the same thing in your wife's Roth IRA.

You are also investing in what is called Whole Life Insurance, your biggest monthly investment with this "advisor." Whole Life Insurance pays huge sales commissions to your "advisor." If he told you any account would grow safely at 5%, it would have been this one. Whole Life Insurance is sold as a way to save money at a fixed rate of return in addition to having insurance. What it is, most of the time, is highly overpriced insurance where your insurance company will invest your premiums in bond funds to make money for themselves (and share with your "advisor") and then give you some of the leftover return. And the "projected" rate (which was probably the safe 5% you were quoted by your "advisor") is never the contractually "guaranteed" rate. That rate is usually much lower. For most people, term life insurance is a better option. You pay an exponentially lower monthly fee for the same coverage and can invest the difference in your own stock and bond funds if you wish, keeping all of the return for yourself, rather than keeping only what the life insurance company gives you after they take their cut.

Again, I'm so sorry. But at least you caught it! And that means you can take the first step towards getting your financial life back!

Swampy
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Re: Am I getting screwed?

Post by Swampy » Thu Feb 04, 2016 3:41 pm

Am I getting screwed?
Yes.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

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Taylor Larimore
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Need more information

Post by Taylor Larimore » Thu Feb 04, 2016 3:47 pm

Specifically I'm questioning whether that $656.62 wouldn't be better off invested elsewhere. (I'm not even clear on how much is cash value vs. insurance and what the investments are actually in.)

Also wondering if I can do better by taking the $400/month (currently going to non-retirement account) and investing that myself as well.

Thoughts please?
Pepperz:

It is important to consider all investments as one portfolio designed to meet our goals, time-frame, risk-tolerance and personal financial situation. Accordingly, it is impossible to give you informed suggestions without more information.

If you follow the format in this link by Laura (now U.S. Ambassador to Nicaragua), you will get the best informed advice:

ASKING PORTFOLIO QUESTIONS

Thank you and best wishes.
Taylor

PS: It is my understanding that this is a taxable account. If changes are indicated, you should make the changes as soon as possible while the funds are down. The allows you to benefit from a tax-loss now instead of paying a tax on capital-gains if the funds become profitable.

Something to consider: The Three-Fund Portfolio

Best wishes.
Taylor
Last edited by Taylor Larimore on Thu Feb 04, 2016 4:05 pm, edited 2 times in total.
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BL
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Re: Am I getting screwed?

Post by BL » Thu Feb 04, 2016 3:50 pm

Perhaps you should be grateful to this market for the wake up call! I suggest it would be much worse to wait 20 years and much more money invested (with 5.75% raked off before even starting investing!)

I put one fund, AMCPX, into Google and the first thing I saw was a graph of results (not including the 5.75% you lost right at the starting line), and info like the load, ER of 0.68%, etc. I went to Morningstar to look at it, selected expense, and learned it also sends a 12b-1 kickback of 0.23% each year from the ER. So that goes to the broker, too, as well as the management fee he probably charges you.

I could buy any fund in the 3-fund portfolio for (much) less than that (under 0.20%) or even a managed all-in-one fund like Vanguard's Target Date Retirement Fund or a Life Strategy fund. There would be no load to buy, no 12b-1 kickback, and no fee to move elsewhere. Fidelity also has Spartan index funds and well-hidden target date INDEX funds at low cost, but you have to avoid the advisors with their higher cost funds and management fees. They may have a fee to leave, as you probably do, depending on which broker you have. Use the search box here to search for your brokerage to find out what has happened to others.

If it is just a few years in, I would consider dropping the whole life, or see whether there is any surrender value left. You could get an In-force illustration from the company with the guaranteed numbers for now and the future to actually see the facts.

Agree you should compare term prices at a place like termforsale and also compare disability elsewhere (maybe check thewhitecoatinvestor blog as he writes for doctors who need disability insurance).

If you need insurance, be sure to have it in place before dropping the older one.

I like this pdf for a quick read of important investment and personal finance information:
https://www.etf.com/docs/IfYouCan.pdf

guymadison
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Re: Am I getting screwed?

Post by guymadison » Thu Feb 04, 2016 3:55 pm

Emily1980 wrote:Hi Pepperz,

I'm so sorry this is happening to you. Your instincts are right to question this "advisor," and please remember that it's not your fault. And try to feel comforted by the fact that, once you have knowledge, you can take charge of your situation.

Here is your portfolio:

FZAXX: Cash

AGTHX American Funds Growth Fund of America
(US growth stocks)
Load: 5.75%
ER: 0.65%

AMCPX American Funds AMCAP
(US growth stocks)
Load: 5.75%
ER: 0.68%

ANEFX American Funds New Economy
(Mostly US growth stocks, with some international)
Load 5.75%
ER: 0.78

ANWPX American Funds New Perspective
(Global growth stocks)
Load: 5.75%
ER: 0.75%

DWGAX American Funds Developing World
(International stocks)
Load: 5.75%
ER: 1.32%

Not only are you paying a 5.75% sales commission to your "advisor," he is investing you in redundant funds. Three of these are the US large growth stock funds, covering the same basic portion of the market. Most mutual funds do not have sales commissions. In fact, you will only pay them with "advisors" like yours, for their "advice."

This was your taxable account, right? You can probably rest assured he is doing the same thing in your wife's Roth IRA.

You are also investing in what is called Whole Life Insurance, your biggest monthly investment with this "advisor." Whole Life Insurance pays huge sales commissions to your "advisor." If he told you any account would grow safely at 5%, it would have been this one. Whole Life Insurance is sold as a way to save money at a fixed rate of return in addition to having insurance. What it is, most of the time, is highly overpriced insurance where your insurance company will invest your premiums in bond funds to make money for themselves (and share with your "advisor") and then give you some of the leftover return. And the "projected" rate (which was probably the safe 5% you were quoted by your "advisor") is never the contractually "guaranteed" rate. That rate is usually much lower. For most people, term life insurance is a better option. You pay an exponentially lower monthly fee for the same coverage and can invest the difference in your own stock and bond funds if you wish, keeping all of the return for yourself, rather than keeping only what the life insurance company gives you after they take their cut.

Again, I'm so sorry. But at least you caught it! And that means you can take the first step towards getting your financial life back!

Yes you caught it, time to fire your "advisor" aka... "broker" and move to Vanguard funds for a fraction of the cost. My cost is 0.07%... compared to your 5.75% with better performing funds.

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Crimsontide
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Re: Am I getting screwed?

Post by Crimsontide » Thu Feb 04, 2016 4:05 pm

Yes, you are. You are me circa 2000... Looks like your wake up call has arrived and your tuition to the school of hard knocks has been paid in full. Go forth with this knowledge and prosper.

edge
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Re: Am I getting screwed?

Post by edge » Thu Feb 04, 2016 4:08 pm

Yes. You caught it early in life and it is water under the bridge. Get out after educating yourself on the best path forward.

Emily1980
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Re: Am I getting screwed?

Post by Emily1980 » Thu Feb 04, 2016 4:11 pm

A quick note, though: the problem with your taxable account isn't necessarily the volatility. If you choose to invest in stock market funds that are low cost, even though Vanguard, they will still not be guaranteed to produce a safe, consistent rate of return. Stocks are, by nature, volatile. It's just made much worse by the high fees.

Topic Author
pepperz
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Re: Am I getting screwed?

Post by pepperz » Thu Feb 04, 2016 4:18 pm

Wow guys I'm so glad I asked!

One question: What is involved in canceling a Whole Life policy? Some of the comments I'm reading are indicating it's a hassle or maybe something I cannot cancel?

If I tell my advisor I want to cancel it, what do I have to understand about that?

BTW - Just showed my wife your responses and she agreed to stop the Permanent Life and take control of our non-retirement Joint account... we are going to keep the Term and Disability insurances in place for now.

She also wants to keep her Roth there for now. It stresses me out knowing that but I know I'll win her over soon enough.

Thanks again.

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flossy21
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Re: Am I getting screwed?

Post by flossy21 » Thu Feb 04, 2016 4:32 pm

Pepperz,

Before you do anything you really need to post your question with more details. Someone above recommended that you got to this link on the Bogleheads site and pull together all this info in a posting -- viewtopic.php?t=6212

There are going to be tax implications to moving this moving and closing some of these accounts. You don't want to make a rash move and compound your problems by adding a big tax hit or missing out on a potential tax credit.

In general here are some thoughts...

$656.62 - permanent life insurance that builds cash value (THIS IS WHOLE LIFE - YOU HAVE TO DO SOME DUE DILIGENCE TO FIGURE OUT IF THIS IS GOING TO GENERATE A TAX HIT WHEN YOU UNWIND IT. THERE ARE WAYS TO TRANSFER THESE FUNDS TO OTHER VEHICLES. THERE ARE EXPERTS HERE THAT CAN HELP YOU FIGURE THIS OUT BUT THEY WILL NEED MORE DETAILS)

$458.33 - wife's Roth (YOU CAN TRANSFER THIS TO ANOTHER BROKER/FINANCIAL INSTITUTION LIKE VANGUARD. IF YOU CALL VANGUARD THEY CAN HELP YOU FIGURE OUT HOW TO DO SO. THERE SHOULDN'T BE A TAX HIT BECAUSE IT IS A ROTH.)

$400.00 - non-retirement, joint account. (YOU CAN TRANSFER THIS TO ANOTHER BROKER/FINANCIAL INSTITUTION LIKE VANGUARD. IF YOU CALL VANGUARD THEY CAN HELP YOU FIGURE OUT HOW TO DO SO. THIS SOUNDS LIKE A TAXABLE ACCOUNT SO THERE WILL LIKELY BE A TAX HIT. BE CAREFUL WHAT YOU DO HERE.)

$132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)

betterfinances
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Re: Am I getting screwed?

Post by betterfinances » Thu Feb 04, 2016 4:34 pm

flossy21 wrote: $132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)
I would look carefully to see if long term disability insurance is provided by ones employer. Both my wife and I have long term disability insurance through our employers.

corysold
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Re: Am I getting screwed?

Post by corysold » Thu Feb 04, 2016 4:35 pm

pepperz wrote:Wow guys I'm so glad I asked!

One question: What is involved in canceling a Whole Life policy? Some of the comments I'm reading are indicating it's a hassle or maybe something I cannot cancel?

If I tell my advisor I want to cancel it, what do I have to understand about that?

BTW - Just showed my wife your responses and she agreed to stop the Permanent Life and take control of our non-retirement Joint account... we are going to keep the Term and Disability insurances in place for now.

She also wants to keep her Roth there for now. It stresses me out knowing that but I know I'll win her over soon enough.

Thanks again.
It would be beneficial to post what fund are being used inside her Roth. Assuming they are the same ones he used outside, for every $5,500 she is putting in every year, the first $316 is going to pay the adviser. If she stays 10 more years that is $3,160 in wasted money. If she still wants to stay after knowing that, I don't know what else would convince her.

Your story is similar to many on here, mine included. No idea how investing works. Trusts "a guy". Find out they guy was screwing you. Read up on investing. Handle it yourself.

You'll be amazed at how easy it will be to set up your own Roth IRA's through Vanguard or Fidelity or a company of your choosing. You can make the whole process as easy as it is now, automatic withdrawals every month, set it and forget it. Best part is you save, quite literally, $1,000's of dollars doing it yourself.

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jriding
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Location: CO

Re: Am I getting screwed?

Post by jriding » Thu Feb 04, 2016 4:38 pm

pepperz wrote: ...we are going to keep the Term and Disability insurances in place for now.

She also wants to keep her Roth there for now. It stresses me out knowing that but I know I'll win her over soon enough.
In that case, encourage her to read some of the books recommended in the Wiki and linked above. This one was particularly helpful for me:
http://www.amazon.com/Little-Book-Commo ... 0470102101
Last edited by jriding on Thu Feb 04, 2016 4:41 pm, edited 1 time in total.

Topic Author
pepperz
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Re: Am I getting screwed?

Post by pepperz » Thu Feb 04, 2016 4:38 pm

saltycaper wrote:Good books to start with (also the Bogleheads Wiki): Start-up books
Thank you. I just ordered every single one of those Start Up books!

psystal
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Re: Am I getting screwed?

Post by psystal » Thu Feb 04, 2016 4:40 pm

betterfinances wrote:
flossy21 wrote: $132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)
I would look carefully to see if long term disability insurance is provided by ones employer. Both my wife and I have long term disability insurance through our employers.
+1

Many employers provide this, but it's not often well advertised after you have the initial HR intake.

Topic Author
pepperz
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Re: Am I getting screwed?

Post by pepperz » Thu Feb 04, 2016 4:41 pm

flossy21 wrote:$132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)
My wife and I are both self employed so our work circumstances are different than most.

The insurance was recommended in case one of us lost ability to work. It ensures we'd have enough to pay what's needed each month.

GreenGrowTheDollars
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Re: Am I getting screwed?

Post by GreenGrowTheDollars » Thu Feb 04, 2016 4:45 pm

I'd figure out how much term life insurance you need and get an appropriate term life policy in force BEFORE canceling/converting the existing Whole Life policy.

I am not a fan of disability insurance through an employer -- it goes away if you change employers, and not all employers have it. We pay (after tax dollars) for our policies and as a result, if we need it, the disability income will be tax free for us. That's good, since they limited us to 60 or 65% of our gross income.

On the good side, when that monthly stream is redirected into investments that benefit you, you'll quickly accumulate a nice investment balance.

mxs
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Re: Am I getting screwed?

Post by mxs » Thu Feb 04, 2016 4:45 pm

I would guess that similar funds (load and bad ER's) are in your wife's IRA, and that he doesn't offer anything decent for that. I had a similar situation with my Roth IRA and I called Vanguard with the account information and they pulled the funds from that account for me. I would suggest you do something similar. The question with your whole life policy is what cash value it has now and what options you have. You have likely paid a huge amount into that is now sunk (you won't get back) and the question is going forward from today what benefit are you getting from any future money put into it? Personally, I would be so angry about this that I would sever all ties (and accounts) with this person and move to Vanguard/Fidelity or other low fee company. Do get reasonable term life insurance in place for the period of time you will need it before cancelling any insurance now so you aren't caught in a bad situation in the mean time. I would seriously consider whether you think you need disability insurance also, but that is a question very dependent on your situation, work, and comfort level.

betterfinances
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Re: Am I getting screwed?

Post by betterfinances » Thu Feb 04, 2016 4:45 pm

pepperz wrote: My wife and I are both self employed so our work circumstances are different than most.

The insurance was recommended in case one of us lost ability to work. It ensures we'd have enough to pay what's needed each month.
Do you need more than what social security would pay in the event of a disability?

Topic Author
pepperz
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Re: Am I getting screwed?

Post by pepperz » Thu Feb 04, 2016 4:51 pm

corysold wrote: It would be beneficial to post what fund are being used inside her Roth. Assuming they are the same ones he used outside, for every $5,500 she is putting in every year, the first $316 is going to pay the adviser. If she stays 10 more years that is $3,160 in wasted money. If she still wants to stay after knowing that, I don't know what else would convince her.
Here is a screenshot of what my wife's Roth is comprised of.

https://www.anony.ws/image/JoUT

Thank you for the help!

corysold
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Re: Am I getting screwed?

Post by corysold » Thu Feb 04, 2016 4:51 pm

pepperz wrote:
flossy21 wrote:$132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)
My wife and I are both self employed so our work circumstances are different than most.

The insurance was recommended in case one of us lost ability to work. It ensures we'd have enough to pay what's needed each month.
You will definitely want to look at the tax deferred options for self-employed persons, there are a few different options. But that $400/mo could be getting invested tax deferred and saving you on your tax bill every year.

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Re: Am I getting screwed?

Post by Spirit Rider » Thu Feb 04, 2016 4:55 pm

betterfinances wrote:
flossy21 wrote: $132.53 - wife's disability insurance
$125.66 - my disability insurance (BOTH THESE ARE PUZZLING. YOU ARE YOUNG. WHY DO YOU NEED DISABILITY INSURANCE NOW? SOMETHING TO THINK ABOUT)
I would look carefully to see if long term disability insurance is provided by ones employer. Both my wife and I have long term disability insurance through our employers.
The OP has stated in other posts that he is self-employed.

Regardless, you are far more likely to need to use disability insurance than life insurance. Disabilities happen at all ages and are far more catastrophic financially at a younger age. You have far less assets and far more time that you need to pay expenses.

Disability policies you obtain through your work are generally for the benefit of the employer and less a benefit for the employee. The almost universally are written to exclude not to include. They are seldom "own occupation" policies. They are not adequate disability policies.

Many people are over insured for life insurance, but almost everybody is underinsured for disability insurance.

This would be the least item I would be concerned about. These policies are fairly easy to get out of and can wait for some comparison shopping. However, if you are getting screwed on everything else, it is more than likely these are not best suited for you and are not price competitive.

P.S. SS disability benefits are like SS retiree benefits, they are based on your earnings record. The OP might get a SS disability benefit something like 15% - 20% of his income instead of the 60% typical of disability insurance.
Last edited by Spirit Rider on Thu Feb 04, 2016 5:08 pm, edited 2 times in total.

corysold
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Re: Am I getting screwed?

Post by corysold » Thu Feb 04, 2016 4:57 pm

pepperz wrote:
corysold wrote: It would be beneficial to post what fund are being used inside her Roth. Assuming they are the same ones he used outside, for every $5,500 she is putting in every year, the first $316 is going to pay the adviser. If she stays 10 more years that is $3,160 in wasted money. If she still wants to stay after knowing that, I don't know what else would convince her.
Here is a screenshot of what my wife's Roth is comprised of.

https://www.anony.ws/image/JoUT

Thank you for the help!
Yep, looks like many of the same type funds. Big load charges, high expense ratios. Your wife can us a Target Date fund, which is a basic stock/bond mix, through Fidelity/Vanguard and pay .16% per year, or $8.80 for every $5,500 she invests, more or less. What she has now will cost her $50/year + $316 in load fees. $8.80 vs. $366 over many years will add up to a large difference.

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Re: Am I getting screwed?

Post by Swampy » Thu Feb 04, 2016 5:25 pm

pepperz wrote:
saltycaper wrote:Good books to start with (also the Bogleheads Wiki): Start-up books
Thank you. I just ordered every single one of those Start Up books!
:oops:

May I suggest going to the library?
It's free.

Besides, these books are not something you can just skim read. They're best read slowly and in depth, like a text book. It'll take time.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

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Re: Am I getting screwed?

Post by livesoft » Thu Feb 04, 2016 5:31 pm

Swampy wrote:May I suggest going to the library?
It's free.
These books aren't in our local libraries. Perhaps they were at one time, but I think local financial salesreps check them out and lose them.
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BL
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Re: Am I getting screwed?

Post by BL » Thu Feb 04, 2016 5:44 pm

It is unfortunate that your wife chooses to keep the account there when she could probably transfer it In-Kind (keep the same funds) to Vanguard and not pay a management fee to the broker, if any. At least be sure he doesn't have the authority to sell and buy without your permission (churning the account to generate more loads and fees).

Good about transferring the taxable account. With the load and probably taxable dividends/capital gains paid out each year and the down market, it is possible that you don't have a lot of gain overall and could sell without much tax consequence. Be sure to find out the capital gains or basis for all the funds before you move/sell, so you can figure out whether the tax cost is little or a lot, or possibly a capital loss in your taxes this year (great!).

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Re: Am I getting screwed?

Post by pkcrafter » Thu Feb 04, 2016 5:50 pm

Pepperz, you are doing what the majority of investors are doing, but luckily you now have a wake-up call. Could have been worse. Yes, you are with a high cost advisor, but you've also had the bad timing to hit a market downturn. Those are going to occur throughout your investing life.

As far as the loads go, I would be surprised if the advisor isn't waving those, which is normal if he's charging advisory fees. If he's only getting commissions, you will be put into new funds on a regular basis so he can collect new upfront commissions. Do you know exactly how he's getting paid?
My wife and I are both self employed so our work circumstances are different than most. Disability insurance was recommended in case one of us lost ability to work. It ensures we'd have enough to pay what's needed each month.
Are you aware you can open your own tax-deferred retirement account if self-employed?
My plan initially was to take control of my own retirement accounts to prove (to my wife) that this investment philosophy is better than working with a professional
.
Would your wife rather pay for the advisor's retirement or her own? If you stayed with this advisor, you would easily lose over 100k in retirement assets due to costs.
Well, yesterday I had a shock (see separate post below) that made me question whether we shouldn't significantly change this arrangement.
Absolutely you should change it. The simplest Boglehead, low maintenance portfolio would by far better.
Specifically I'm questioning whether that $656.62 wouldn't be better off invested elsewhere. (I'm not even clear on how much is cash value vs. insurance and what the investments are actually in.
That's a great question. Life insurance contracts are undecipherable by design. Bottom line is they are not good investment vehicles.
Also wondering if I can do better by taking the $400/month (currently going to non-retirement account) and investing that myself as well.
There is no question you can do better simply by holding a simple portfolio of low cost funds. Costs are simply a drag on potential returns. Here's a chart, and note, you are paying more than 0.90%.

Image

Check term life policies with a good insurance company.

http://www.clarkhoward.com/how-shop-term-life-insurance

http://money.usnews.com/money/blogs/the ... -insurance

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.

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Post by Taylor Larimore » Thu Feb 04, 2016 6:06 pm

pepperz:

You may be interested to know that pkcrafter, who replied above, is the author of this excellent, free, on-line book:

ROAD MAP FOR INVESTING SUCCESS
Morningstar: "If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Am I getting screwed?

Post by obgyn65 » Thu Feb 04, 2016 6:56 pm

Yes, it seems you are getting screwed.
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Re: Am I getting screwed?

Post by SeeMoe » Thu Feb 04, 2016 7:17 pm

When you all were discussing your wants, needs and future expectations with the CFP ,...surely the CFP took your information under consideration when formulating the finished investment plan-or plans. The products offered to you at that time evidently were in line with your earlier input , I would assume. (It would be helpful to hear the CFP's views too.)You indicate you are not pleased with the results of the CFP's portfolio now, and the current market fluctuations aren't helpful either. Why not confront your CFP and frankly discuss your views with him and his supervisors also , if possible. Take notes and discuss your wants and needs with other investment firms, preferably with no, or low, loads like Vanguard, T. Row Price, Fidelity, Etc..For Free . Or with a CFP for a flat fee?
SeeMoe.. :beer
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Re: Am I getting screwed?

Post by kenner » Thu Feb 04, 2016 7:55 pm

Here's the good news.

Many investors made the investment mistake you initially made. But they eventually learned a better, lower-cost way to assemble a superior investment portfolio. Unfortunately for most of them, the lesson was learned later in life. They unnecessarily lost hundreds of thousands of dollars to excessive fees and costs of all kinds (annual advisor fees, very high annual expense ratios, 12-b1 fees, front end sales loads, back end sales loads, onerous, unnecessary tax ramifications, annual account maintenance fees, exit fees to close/transfer their accounts, etc.).

You can avoid these mistakes in the future. Time is on your side.

Best wishes.

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Re: Am I getting screwed?

Post by Crimsontide » Thu Feb 04, 2016 8:43 pm

SeeMoe wrote:Why not confront your CFP and frankly discuss your views with him and his supervisors also , if possibe
This is exactly what I did at A.G. Edwards in 2000. Guess what was the outcome of that meeting: they blamed me for taking their advice, I kid you not :oops:

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Re: [Am I getting a bad deal from my financial planner?]

Post by LadyGeek » Fri Feb 05, 2016 12:04 am

I retitled the thread. Please be aware that we maintain a "family-friendly" environment. If you want to retitle the thread further, just edit the Subject: link in Post #1.

Is this person a Financial planner or an Investment adviser? It's important to understand the difference.

Have you done a background check? See the "Background checks" section in the Investment adviser article.
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Re: [Am I getting a bad deal from my financial planner?]

Post by jasonwc » Fri Feb 05, 2016 12:19 am

You should replace your whole life policy with a term life policy. It will be absurdly cheaper. As a healthy, non-smoking 29 year-old male with no pre-existing conditions, I purchased a $550k 20 year term policy for $24 a month.

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Re: [Am I getting a bad deal from my financial planner?]

Post by Bogle_Feet » Fri Feb 05, 2016 3:13 am

pepperz wrote:At the time neither she nor I had the inclination or education to deal with this on our own. We figured paying someone else is better than not doing anything.
So you paid him for this kind of "advice"??? Sounds like you went to a fee-BASED adviser. That means that he can double dip. He collects a fee from you AND he can turn around and sell you (expensive) products that FURTHER line his pocket book.

The problem is that these guys flash their certifications (like CFP) and people automatically think that they can be trusted. Only a fee-only fiduciary can be trusted. Fee-only means no back door commission.

If you need help it's better to go to a "light advice" company like Vanguard. Better yet, do it yourself. Investing is easy. Buy, hold and rebalance a couple of index funds. A total bond market index fund and a total stock market index fun. You will outperform vast majority of the managers. The only part that requires some serious thought is how much risk you want to take. Typically someone age 30 might put only 10% to 20% in bonds and the rest in stocks. Here's 2 helpful links...
https://personal.vanguard.com/us/funds/ ... reset=true
http://www.vanguard.com/nesteggcalculator

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Re: Am I getting screwed?

Post by celia » Fri Feb 05, 2016 3:49 am

pepperz wrote:https://www.anony.ws/image/JoSM

We have apparently lost 20% of our balance in a short time... I'm not familiar with those Securities ...
Sorry to sound harsh, but it sounds like it is partly your fault for not learning what you were buying. Would you book a vacation without knowing where you were going or for how long? Would you send your kid to a college, not knowing if they offer the major (s)he is interested in? Would you buy a house without having it inspected and reading the inspection report?
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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