Keep Financial Advisor or move to 3 Fund Portfolio?

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cmoneymillz
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Keep Financial Advisor or move to 3 Fund Portfolio?

Postby cmoneymillz » Thu Mar 02, 2017 8:20 am

Hi All!
Quick bio:
-26 yrs old
-Make $160k/year
-6% 401k match (maxing it out since 2013 - $105k currently in there)

I've been using a family trusted financial advisor for the past 3 years (since starting work full time), until I decided I would do some research / due diligence myself. Came across this forum and 3 fund portfolio - seems easy enough!

Looking at my 3 year record using a FA, I've given him $75k and currently have $80k in my account, for roughly 6% return.
While I'm happy to have made some money, I wonder if I'd be better off switching to a 3 fund portfolio instead, especially after seeing the expenses in the primary funds I hold (pocax, kdhax, gcasx). I know a lot of family/friends who are well off and swear by this guy, but I can't help but be a little skeptical, wondering if I'd be better off on my own :greedy

livesoft
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby livesoft » Thu Mar 02, 2017 8:56 am

You would be better off on our own. And there is only one way to find out for sure.
This signature message sponsored by sscritic: Learn to fish.

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nedsaid
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby nedsaid » Thu Mar 02, 2017 9:08 am

Going out on your own with a 3 fund portfolio will be cheaper than what you are doing now. A three fund portfolio is simple and easy to maintain. Also at 26 years old, your life is probably not all that complicated.

POCAX is Pacific Funds Portfolio Optimization Moderate A which has a 1.41% expense ratio and a 5.5% front end load. It is a 60% stock/40% bond balanced fund. Morningstar rates it as a 3 star. Not horrible but it is an expensive fund.

KDHAX is Deutsche CROCI Equity Dividend A. This fund has a 1.07% expense ratio and a 5.75% load. This is a two star fund. Performance looks horrible.

GCASX is Gabelli Small Cap Growth A, it has a 5.75% load and a 1.39% expense ratio. One thing I like here is a very low turnover at 4%. This is a four star fund as rated by Morningstar and performance is pretty good. Mario Gabelli is a Wall Street icon.

But really and truly, a 60/40 balanced fund is meant to be an all-in-one type of investment. Not sure why this would be matched with a Large Value Dividend fund and a Small-Blend Growth fund. I suppose the advisor is mixing a more conservative dividend fund with a more aggressive small-cap fund. I don't see anything special with this mix or this advisor. You have made about 2% a year which you could have done in a bond fund. Not impressive as 2016 was a great year for U.S. stocks.

I think I would move on and do it yourself here.
A fool and his money are good for business.

ddurrett896
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby ddurrett896 » Thu Mar 02, 2017 9:13 am

cmoneymillz wrote:I've been using a family trusted financial advisor for the past 3 years (since starting work full time), until I decided I would do some research / due diligence myself. Came across this forum and 3 fund portfolio - seems easy enough!


I was in your same boat a few years ago.

Family financial advisor working for American Funds setup my Roth when I was 21. I contributed to his advise and didn't put much thought into it. Around 26 I got more interested and started reading into my funds/etc.

The 4.5% front load fee never seemed like much, but compounding it out over the next 40 years added up. That got me thinking. Then I looked at the expense ratios and I was sold on moving my money out. Came across this forum and shopped different brokers and settled on Vanguard.

Having the financial advisor was a blessing and a curse. I'm blessed he pushed me to setup a Roth, but mad I paid those exorbitant fees. I guess it's a small price to pay only being a 5 years run I still have another 35 years until retirement. He's retired now and my parents have moved to Vanguard and happy with the simplicity.

Being worried about fumbling on your own is natural. The solution is to buy a target date fund and forget about it. In my case, the different between expense ratios was about $70,000 over the life of the investment. That didn't included the 4.5% fee and the compound interested I would have made on that. I'd estimate that to be at least another $70,000. We he worth $140,000? No - Vanguard was the solution!

aristotelian
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby aristotelian » Thu Mar 02, 2017 9:17 am

You should not only fire your financial advisor but also sue him for malpractice. Have you also been paying a portfolio management fee on top of the loads and annual expenses of the funds he chose?

Look at the loads as the cost of getting some early financial advice and lessons learned. With "only" 75K (as opposed to $750K), those % loads don't add up to that much. At age 26 and over $100K, you have lots of time to make up the lost ground. I believe you will be better off on your own, especially with the advice you will get here.

ponyboy
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby ponyboy » Thu Mar 02, 2017 9:20 am

Ditch the financial advisor. Investing is not difficult at all. You're in it for the long haul...set it and forget it. Go with the vanguard 3 fund portfolio. For your 401k if you're intimidated just go with a target fund...same with your roth ira...go with a target fund.

Jack FFR1846
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Jack FFR1846 » Thu Mar 02, 2017 9:26 am

nedsaid wrote:But really and truly, a 60/40 balanced fund is meant to be an all-in-one type of investment. Not sure why this would be matched with a Large Value Dividend fund and a Small-Blend Growth fund. I suppose the advisor is mixing a more conservative dividend fund with a more aggressive small-cap fund. I don't see anything special with this mix or this advisor. You have made about 2% a year which you could have done in a bond fund. Not impressive as 2016 was a great year for U.S. stocks.


I'm sure why.

If he was only in one fund, it would be impossible to see when churning to get more of those tasty 5.75% loads occurred. I would expect that as your portfolio value grew, so would the number of funds to the point where you'd have 15 to 20 funds designed to do one thing. That would be to provide a platform where your advisor could churn away and generate as many fees as possible while making no real change in your investments. It's easier to spot when there are only a few funds. Harder with more.

Dump this clown by going to a house (Vanguard, Fidelity, Schwab, TDAmeritrade) and have them pull the money out.
Bogle: Smart Beta is stupid

TSWNY
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby TSWNY » Thu Mar 02, 2017 9:49 am

Cut and run.....Now! My wife was in a similar situation with her advisor on her 403b. Fired him! I was in a similar situation with a "trusted" family advisor at Morgan Stanley.....Fired her too! I switched almost everything over to Vanguard in a 3 fund portfolio and we couldn't be happier. The most satisfying part of it all was having the conversation with these FA's and letting them know that I had finally done my homework and figured out their game. The phone went silent when I told them we were moving to ultra low cost index funds at Vanguard and they just could not compete. The young kid my wife was using tried for a minute, but when I cut him off and told him to just do the math he literally couldn't find the words to rebut.

cmoneymillz
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby cmoneymillz » Thu Mar 02, 2017 9:52 am

I just switched Chase checking (did not like the $15k minimum w/o fees) to Schwab checking (main perks being no ATM fees and I frequently travel, no minimum fees, free checks). With Schwab, the checking is automatically linked with a brokerage account - my $$$ should be ready any day now to place into some Schwab funds! Hoping for better APY than 0.01 with chase :mrgreen: :oops:

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Taylor Larimore
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Taylor Larimore » Thu Mar 02, 2017 10:28 am

cmoneymillz:

Welcome to the Bogleheads forum!

the primary funds I hold (pocax, kdhax, gcasx).


In my opinion, you should leave your financial advisor as soon as possible. This is the 10-year cost per $10,000 in each fund the advisor put you in (source Morningstar):

pocax: $2,206
kdhax: $1,896
gcasx: $2,148

Compare this to the 10-year cost of the most expensive fund (VBTLX 10,000 minimum) in The Three-Fund Portfolio:

vbtlx: $77

In every single time period and data point tested, the average low-cost funds beat high-cost funds. -- Morningstar


Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

retiredjg
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby retiredjg » Thu Mar 02, 2017 10:40 am

I wonder if I'd be better off switching to a 3 fund portfolio instead, especially after seeing the expenses in the primary funds I hold (pocax, kdhax, gcasx).

If those funds represent the type of portfolio he has set up for you, you can probably do better on your own. Not only are you giving him more than 5% of your money each purchase, you are paying an annual fee (high expense ratios) that is far above what is necessary.

anil686
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby anil686 » Thu Mar 02, 2017 10:41 am

I would also manage my own - and to add another reason besides investment costs (which alone is a good enough reason) is taxes. My understanding is that you are holding these funds in a TAXABLE account. Most actively managed funds (maybe 95% or more) are less tax efficient than total market index funds. You would be wise to follow a three fund portfolio and even wiser to read Common Sense on Mutual Funds by Mr. Bogle and learn about tax efficiency. At your age, the compounding of costs would be a problem - especially tax costs. The wiki also has good suggestions on tax efficient fund placement

https://www.bogleheads.org/wiki/Tax-eff ... _placement

Hope it helps...

Artisan
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Artisan » Thu Mar 02, 2017 10:57 am

Many people have been or still are in your situation.

Here is an excerpt from William Bernstein's "If you can" pamphlet

"To summarize, you are engaged in a life-and-death struggle with the financial services industry. Every
dollar in fees and expenses you pay them comes directly out of your pocket. (Be aware that you’re
often getting charged far more in mutual fund fees than that “expense ratio” listed on the prospectus or
annual report, which is often exceeded by the “transactional costs,” that is, adverse price changes that
result from moving around millions of shares, much of which accrues indirectly to the fund company.)
Act as if every broker, insurance salesman, mutual fund salesperson, and financial advisor you
encounter is a hardened criminal, and stick to low-cost index funds, and you’ll do just fine."

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BL
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby BL » Thu Mar 02, 2017 11:20 am

You would do well to follow above suggestions about moving. Once you start looking at what it could and should have been, you will and should never go back.

It does look like you have been putting 18k into 401k each year, that is good.

Are you also putting 5.5k into Roth IRA via "Backdoor Roth" (search Wiki here)? If you don't have any traditional IRA that is pretty easy. Also see IRS Form 8606 and instructions for record-keeping instructions. There are also threads here about it.

The booklet mentioned above is excellent: https://www.etf.com/docs/IfYouCan.pdf

Dottie57
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Dottie57 » Thu Mar 02, 2017 11:28 am

One of my biggest mistakes I've made is letting a financial advisor lead me by my nose. My 401k languished, but my 401k flourished ( I made the picks myself). Thank the deities My employer has good funds available.

cmoneymillz
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby cmoneymillz » Thu Mar 02, 2017 12:19 pm

Wow - thank you all for the replies.
Been doing a lot of research, looks like im leaning toward 85% stock / 15% bond allocation.
Since I have a Schwab account now, likely will stick with them & do something like this:
65% SWTSX
20% SWISX
15% SCHZ
while continuing to max out 401k through work.

anil686
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby anil686 » Thu Mar 02, 2017 3:53 pm

cmoneymillz wrote:Wow - thank you all for the replies.
Been doing a lot of research, looks like im leaning toward 85% stock / 15% bond allocation.
Since I have a Schwab account now, likely will stick with them & do something like this:
65% SWTSX
20% SWISX
15% SCHZ
while continuing to max out 401k through work.


You may want to look at holding all your taxable bonds in your tax advantaged accounts and holding equities in your taxable account - JMO - but you should read tax efficient placement on the wiki first and make up your own mind...

retiredjg
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby retiredjg » Thu Mar 02, 2017 4:49 pm

Remember that you will likely get more help if you post fund names, not just the tickers.

It appears you plan to hold a taxable bond - SCHZ which is a total bond index - in your taxable account. This is ok if you are in the 15% tax bracket and might be OK in the 25% bracket. I think you are beyond that.

I'd hold all the bonds in some tax-advantaged account. Some would use a tax-exempt bond in taxable. Not sure what Schwab has in that category.

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blueblock
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby blueblock » Thu Mar 02, 2017 8:08 pm

cmoneymillz wrote:Looking at my 3 year record using a FA, I've given him $75k and currently have $80k in my account, for roughly 6% return.


Good Lord, that's appalling. Get out now.

Congrats on figuring this out at your young age.

While I'm comfortably retired, one of my few regrets is not maxing out my 401K earlier than I did. You are in a terrific position to minimize such regrets.

Best wishes to you.

Nekrotok
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Nekrotok » Thu Mar 02, 2017 9:44 pm

blueblock wrote:
cmoneymillz wrote:Looking at my 3 year record using a FA, I've given him $75k and currently have $80k in my account, for roughly 6% return.


Good Lord, that's appalling. Get out now.

Congrats on figuring this out at your young age.

While I'm comfortably retired, one of my few regrets is not maxing out my 401K earlier than I did. You are in a terrific position to minimize such regrets.

Best wishes to you.


FYI, a standard 60/40 portfolio would have returned 24.2% in the last 3 years. Your $75k investment would have grown to over $93k. The 65/20/15 portfolio you are considering would have returned 23%. 6% total return is very low for the last 3 years.

https://www.portfoliovisualizer.com/bac ... tion3_2=15

CyclingDuo
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby CyclingDuo » Thu Mar 02, 2017 11:06 pm

cmoneymillz wrote:I've been using a family trusted financial advisor for the past 3 years (since starting work full time).
Looking at my 3 year record using a FA, I've given him $75k and currently have $80k in my account, for roughly 6% return.


Are we reading that right? You gave a financial advisor, on average, $25K per year each of the last three years on an account worth $80K? :shock: Did that include cigarettes after the act?

Is there a typo in there? :?

Brucie
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Brucie » Thu Mar 02, 2017 11:26 pm

It seems most people "like the family and friends" you reference don't want to take the time, to learn and understand personal finance.
Then they swear by "their guy" advisor, never even looking at thinks like load's and expenses.

It is well worth your time to learn personal finance. Mr. Bogles books are great. The lightbulb for me was Charlie Ellis book, Winning the Loser's Game. A great blog is Oblivious Investor, the writer Mike Piper is a young CPA, who often contributes here on Bogleheads.

You are clearly headed in the right direction since you are on this site!

Phineas Gage
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Phineas Gage » Thu Mar 02, 2017 11:35 pm

Sounds like your head is in the right place. Fees will eat you alive and most advisors are salesmen/scam artists. They are in the business of making money off what should be a very simple service this day in age. Move the money out to some form of a 3 fund portfolio but don't let perfect be the enemy of very good. You can be paralyzed looking for perfect options but first step is to take back control and slash fees. A target retirement fund or a robo advisor would definitely be better than what you're in right now.

KeepItSimple78
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby KeepItSimple78 » Fri Mar 03, 2017 12:25 am

I'd definitely consider the 3-fund... it's very low fee, will produce steady returns while minimizing risk, and is easy to manage yourself.
Avid reader of personal finance/investing literature; however, no formal training in this area. My comments are always well-intended, and most often well-informed.

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TinkerPDX
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby TinkerPDX » Fri Mar 03, 2017 12:33 am

Ditch the advisor.

All those folks who use him and are doing well are most likely doing well because they earn and save a lot of money--enough to do well in spite of the advisor putting them into high-cost funds, not because of it. You're all paying a high price for underperformance.

Unless you want to save for his retirement, his kids' college, etc., then definitely go for the 3-fund. You'll be more diversified, and over the course of your career, you'll save a whole lot more.

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BL
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby BL » Fri Mar 03, 2017 2:20 am

I think it is important to do some recommended reading or at least watch some videos after starting "Getting Started" in the Wiki here until you are convinced this is the way to go. Otherwise you may be persuaded to change yet again. No one likes to admit that he is wrong, so your friends and family will resist considering if they have been mistaken. We have learned that you can't convince, until they are ready, someone who is unwilling to face the possibility they could be wrong, so it is almost useless to try to convince others even though we would like to help them save money. (Kind of like religion or politics.)

Here is a little pdf booklet to get you started. Maybe start with Hurdle # 5 about advisors and other salespeople who want a share of your money.
https://www.etf.com/docs/IfYouCan.pdf

cmoneymillz
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby cmoneymillz » Fri Mar 03, 2017 1:47 pm

Once again - big thank you to all those who have contributed towards reaffirming my switch to self management and a 3 fund strategy.

It looks like I have a lot more reading and research to do, specifically regarding optimizing tax efficiency. In 28% bracket now, soon to be 33% after my June wedding (165k salary plus wifes 105k salary).


Short term plan:
-immediately move all of my money from FA, put most into SWTSX and let it ride, adding ~ $1k per month to it.
-continue maxing out the 401k through ML (up 5% ytd woo!) maybe add bonds here (tax advantage)
-look into setting up a traditional IRA / backdoor Roth
-continue educating myself on here

retiredjg
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby retiredjg » Fri Mar 03, 2017 4:04 pm

Looks like a plan. :thumbsup

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BL
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby BL » Sat Mar 04, 2017 10:15 am

It looks like I have a lot more reading and research to do, specifically regarding optimizing tax efficiency. In 28% bracket now, soon to be 33% after my June wedding (165k salary plus wifes 105k salary).


You should be able to stay under
28% - $153,101 to $233,350

with deductions, exemptions, and 401k contributions.

Better2bWise
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Better2bWise » Sat Mar 04, 2017 10:39 am

With a little time educating yourself, serve yourself and your future. http://whitecoatinvestor.com/how-much-c ... -cost-you/

retiredjg
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby retiredjg » Sat Mar 04, 2017 11:45 am

BL wrote:
It looks like I have a lot more reading and research to do, specifically regarding optimizing tax efficiency. In 28% bracket now, soon to be 33% after my June wedding (165k salary plus wifes 105k salary).


You should be able to stay under
28% - $153,101 to $233,350

with deductions, exemptions, and 401k contributions.

I too think you might end up in the 28% bracket. But 28% or 33% - you should use tax-exempt bonds if you decide to hold bonds in taxable. I think the best place for bonds is usually the work plan instead of a taxable account.

pyld76
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby pyld76 » Sat Mar 04, 2017 12:26 pm

1. Dump financial advisor.
2. Read "If You Can" https://www.etf.com/docs/IfYouCan.pdf.
3. Read all the "homework" it assigns.
4. Come back here and browse the Wiki to fill in the gaps.

Immediately, moving to a three-funder with care taken for tax efficiency (place your bond allocation in your 401k or an IRA if at all possible) is very much in your best interests. I suggest you also adopt Jack Bogle's "don't peek" challenge. In the alternative, only look at your statements once a year on your birthday, and only then for the purposes of rebalancing if necessary. Don't concern yourself with "letting it ride" or how much you are up/down until you are ~10 years from retirement (and maybe not even then, if you know your expected returns combined with your savings rate will fund your retirement).

The one situation in which a fee-only advisor (not the one you are with) makes sense is to keep you from making emotional and/or irrational decisions which end up costing you. If you feel you have to peek or you have the urge not to let something ride, you are somewhat likely to make mistakes which cost you more than what a good low-fee advisor who puts you in a proper allocation with low-fee index funds costs you.

Good luck.

SHAYLA
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby SHAYLA » Sun Mar 05, 2017 4:36 pm

Wondering how switching your Pacific Fund went? I have PODAX with Edward Jones. I just filled out the paperwork to mail in tomorrow to Vanguard. When I punch the fund into Vanguard website is says this "This fund is not available for purchase or transfer".

I'm freaking out since my advisor has been putting all my money in this stupid fund for a few years now. Has anyone encountered this?

Thanks!
Shayla

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Toons
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Toons » Sun Mar 05, 2017 4:38 pm

You would be fine with 3 funds on your own.
And there would be more money in your coffers. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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StevieG72
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby StevieG72 » Sun Mar 05, 2017 5:33 pm

Drop the advisor.

You want your money working for you, if you use an advisor your money is working for two.
Fools think their own way is right, but the wise listen to others.

cmoneymillz
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby cmoneymillz » Sun Mar 19, 2017 7:33 am

Thanks all!
Been reading up on "transfer in kind" vs cashing out and bringing the money over.

Most of my funds should transfer but he just put $10k in a TRANSAMERICA Life Insurance policy - wondering how difficult or what fees would be incurred with this transfer, which has netted +$450 so far.

Calling Schwab next week to transfer it all and see if they could help with this question, super excited!
Thanks again for the needed advice!

hulburt1
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby hulburt1 » Sun Mar 19, 2017 8:18 am

I'm a simple man. You can do it. I'm at 2m right now. Never made more then $80,000 w/m.
live with in your means. I make it on $60,000. Now if I paid some 5% load that's 100000. Ok year and a half what I live on for a year now. that 1.34%
a year is $29,000 a year. in 10 years that about $300000 for him. from me. I just paid for 2 of his kids college. Just read and check out this page. I don't own much bond and no internationals. I'm 64 next month. do it yourself....

dbr
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby dbr » Sun Mar 19, 2017 9:59 am

cmoneymillz wrote:
Most of my funds should transfer but he just put $10k in a TRANSAMERICA Life Insurance policy - wondering how difficult or what fees would be incurred with this transfer, which has netted +$450 so far.



How did "he just put" $10K in a life insurance policy without you signing papers to buy a policy? You should demand he back this out and also make sure you deny him any discretion to trade anything.

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bertilak
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby bertilak » Sun Mar 19, 2017 10:25 am

I agree with all those above who say to leave your advisor. To most of us it is a no brainier, but that's because we've been there before.

If you want to put yourself in a more confident state of mind, make a list of all the reasons you should stick with your advisor. Go through the list one-by-one to see if you can justify each. Starter list:

  1. Advisor can pick the best funds, with best meaning the highest return for level of risk. You will need to learn exactly what risk is, or what it means to you.
  2. Advisor can spot market trends and keep you in the right sectors/industries or move you in and out of the market as opportunities or dangers arise.
  3. Advisor can "beat the market," making you a winner. (Who are the corresponding losers on the other side of all your transactionss?)
  4. Advisor can customize advice to your personal situation.
  5. Advisor can keep you from making mistakes. What would constitute a mistake?
  6. Advisor understands the subtle complexities of investing so you don't have to bother.
  7. Advisor can execute trades on your behalf, saving you more trouble.
  8. More?
If you want to add to the list, look at other online investment websites. Follow the experts (like Jim Cramer).

Bring your thoughts to Boglhead's "Investing - Theory, News & General" forum.
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supernova
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby supernova » Sun Mar 19, 2017 10:28 am

I had the same situation. I realized something was amiss when my 401k (where I picked the funds) outperformed what my FA (Edward Jones, of course) picked over a long period. I realized that if I, who knew nothing about the market, could crush him in fund selection, why am I using him? And then I read more and learned about the fees and how terrible load fees and such really are.

That was 3 years ago and I am not looking back. You will be in a much better place doing it on your own.

Mr.BB
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Mr.BB » Sun Mar 19, 2017 10:31 am

Just look at your numbers. I think you answered your own question.

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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby pkcrafter » Sun Mar 19, 2017 11:12 am

Can you really trust a "friend" that would put a friend into high cost front-end commissioned funds (A class) and ongoing commission (C class) funds. :confused

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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby Lobster » Sun Mar 19, 2017 11:21 am

cmoneymillz wrote:It looks like I have a lot more reading and research to do, specifically regarding optimizing tax efficiency. In 28% bracket now, soon to be 33% after my June wedding (165k salary plus wifes 105k salary).


Here's the tax efficient placement cheat sheet:

- Bonds in tax advantaged (401k/IRAs) up to your 15% target
- Index funds in taxable

Aim for an 85/15 across your whole portfolio, not in each account.

Rebalance by putting new contributions towards whichever asset class is out of balance. You can do actual rebalances without tax penalty in the 401k, but at your age I would avoid it in taxable. However to get to your 3 fund allocation it will be worth it in the long run to take a tax hit to get out of those expensive funds (as illustrated by their very poor performance compared to the market).
Submit to the relentless rules of humble arithmetic and have the wisdom to avoid the tyranny of compounding costs.

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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby livesoft » Sun Mar 19, 2017 11:27 am

dbr wrote:
cmoneymillz wrote:
Most of my funds should transfer but he just put $10k in a TRANSAMERICA Life Insurance policy - wondering how difficult or what fees would be incurred with this transfer, which has netted +$450 so far.



How did "he just put" $10K in a life insurance policy without you signing papers to buy a policy? You should demand he back this out and also make sure you deny him any discretion to trade anything.

He just put $1,000 into his own pocket. Did he need some cash to pre-book a vacation?
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silvercertificate
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby silvercertificate » Sun Mar 19, 2017 12:22 pm

Nice job making the move. You are doing the right thing and it will save you thousands in fees over the course of your investing lifetime. As mentioned before, condition yourself not to tinker with your portfolio. Pick your asset allocation, make regular contributions, rebalance yearly, and go live your life!

deltaneutral83
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby deltaneutral83 » Sun Mar 19, 2017 1:12 pm

pyld76 wrote:1. Dump financial advisor.
2. Read "If You Can" https://www.etf.com/docs/IfYouCan.pdf.
3. Read all the "homework" it assigns.
4. Come back here and browse the Wiki to fill in the gaps.


I just read that and it looked like toward the end he had investing as 1) 401k up to the match 2) Roth 3) Taxable. I thought 3) should have been invest 401k up to legal amount per year (18k for this year) even if it has high ER's because you can't beat the tax treatment which is far better (hold you nose) even with the 1%-1.5% ER's against taxable account? Then 4) taxable accounts.

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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby harvestbook » Sun Mar 19, 2017 1:31 pm

supernova wrote:I had the same situation. I realized something was amiss when my 401k (where I picked the funds) outperformed what my FA (Edward Jones, of course) picked over a long period. I realized that if I, who knew nothing about the market, could crush him in fund selection, why am I using him? And then I read more and learned about the fees and how terrible load fees and such really are.


Me, too. After becoming self-employed, I rolled my 401k into an Edward Jones IRA and we also bought a college fund and my wife's IRA there. I literally didn't know any better--I didn't even know you could actually buy stocks on your own! I thought you had to give your money to somebody in a suit and they grew it through some mystical alchemy.

Luckily I discovered Vanguard, Bogle, etc. and only then started doing some reading and math--the EJ "adviser/broker" of course kept everything cloudy so I never saw the actual costs of funds or underlying investments. I left that money there, opened a Vanguard account to test the waters, and kept both going for a couple of years, and then became convinced of the advantages of simplicity, broad diversification, and low cost.

I finally moved everything out of EJ into Vanguard last year and have never looked back, and it was only when I was able to crack into those funds that the true horrors revealed themselves. I mentioned Vanguard to the "adviser/broker" and he was like, "I don't know who you've been talking to but..."

You're lucky you caught this at such a young age. My mistake was only for a few years but it probably cost me six months' worth of retirement, but I still feel I got off cheap because the lessons of ignorance could have cost much more. Good luck.

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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby bertilak » Sun Mar 19, 2017 2:24 pm

Why you need an Investment Advisor:

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pyld76
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Re: Keep Financial Advisor or move to 3 Fund Portfolio?

Postby pyld76 » Mon Mar 20, 2017 8:22 pm

deltaneutral83 wrote:
pyld76 wrote:1. Dump financial advisor.
2. Read "If You Can" https://www.etf.com/docs/IfYouCan.pdf.
3. Read all the "homework" it assigns.
4. Come back here and browse the Wiki to fill in the gaps.


I just read that and it looked like toward the end he had investing as 1) 401k up to the match 2) Roth 3) Taxable. I thought 3) should have been invest 401k up to legal amount per year (18k for this year) even if it has high ER's because you can't beat the tax treatment which is far better (hold you nose) even with the 1%-1.5% ER's against taxable account? Then 4) taxable accounts.


It depends upon how bad your 401k's expenses are and what your tax bracket is at present and projected in retirement. It's not impossible for some folks with things like "bad 403bs" and the like to bet better off in the taxable funds at much lower cost.

In you case, it's probably 401k to the match, Roth, Fill 401k, Taxable (in that order). If you have an HSA, and especially if you think you will be able to max the 401k, IRA, and HSA then place the HSA after the 401k match and before the Roth.


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