Wife's Money - 50K - Her Advisor vs My DIY - Help

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confusedinvestor
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Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Mon Apr 17, 2017 10:55 pm

Folks, My wife and I went to an local adviser to get a portfolio recommendation on investing her 50K Moderate and guess what ? Advisor suggested Indexed-Universal-Life Insurance (IUL) and convinced my wife that it is a better product as it will not go down if market goes down yet it will go up if market goes up , will act as LTC, death benefit etc...oh well...this 50K is not part of our EFund or Retirement,..

We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?

Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits. Please help on my DIY suggestion to my wife and her advisor...

AA: 60:40 50K

60% Stock:

30% VOO - Vanguard S&P 500
10% VB - Vanguard Small-Cap
10% VEA - Vanguard FTSE Developed Markets
5% VWO - Vanguard FTSE Emerging Markets ETF
5% VNQ - Vanguard REIT

40% Fixed:

15% CMF - CMF–iShares California AMT-Free Muni Bond (Investment Grade California Municipal Bonds)
10% BND - Vanguard Total Bond Market ETF
5% VCIT - Vanguard Intermediate-Term Corporate Bond (US Investment Grade Corporate Bonds)
5% VGIT - VGIT–Vanguard Intermediate-Term Government Bond (US Treasuries)
5% BNDX - Vanguard Total International Bond (International Developed Country Bonds)
Last edited by confusedinvestor on Mon Apr 17, 2017 11:11 pm, edited 1 time in total.

aristotelian
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by aristotelian » Mon Apr 17, 2017 11:08 pm

This is one piece of your portfolio. There is no need to slice it further into 10 sub-slices. That 5% in VMBS is going to add a .001% tilt to your overall portfolio, so why bother? What are your goals with this money, and how does it fit into the rest of your portfolio? Pick one fund that suits your risk tolerance. (If this is a taxable account, take a look at Vanguard Tax Managed Balanced).

That said, I prefer your portfolio to the advisor's. But you already know what he is going to say. The question is what is she going to say. It is really between you and your wife, not you and your wife's advisor.
Last edited by aristotelian on Mon Apr 17, 2017 11:11 pm, edited 1 time in total.

Christian NY
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Christian NY » Mon Apr 17, 2017 11:10 pm

confusedinvestor wrote:Folks, My wife and I went to an local adviser to get a portfolio recommendation on investing her 50K Moderate and guess what ? Advisor suggested Indexed-Universal-Life Insurance (IUL) and convinced my wife that it is a better product as it will not go down if market goes down yet it will go up if market goes up , will act as LTC, death benefit etc...oh well...this 50K is not part of our EFund or Retirement,..

We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?

Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits. Please help on my DIY suggestion to my wife and her advisor...

AA: 60:40 50K

60% Stock:

30% VOO - Vanguard S&P 500
10% VB - Vanguard Small-Cap
10% VEA - Vanguard FTSE Developed Markets
5% VWO - Vanguard FTSE Emerging Markets ETF
5% VNQ - Vanguard REIT

40% Fixed:

15% CMF - CMF–iShares California AMT-Free Muni Bond (Investment Grade California Municipal Bonds)
10% BND - Vanguard Total Bond Market ETF
5% VCIT - Vanguard Intermediate-Term Corporate Bond (US Investment Grade Corporate Bonds)
5% VMBS - Vanguard Mortgage-Backed Securities (US Securitized Bonds)
5% BNDX - Vanguard Total International Bond (International Developed Country Bonds)


Amazing! I am working on the exact same thing right this moment and mine looks surprizingly similar!
I am a complete beginner but I hope you don't mind if I add my thoughts--
VEA generated a return of 0.55% per year over the last 10 years. I understand it's recommended according to modern portfolio theory but that's still pretty scary!
"10% VB" - I am curious why do some people choose VB and others choose VBR? What should this decision be based on?
You could consider eliminating BNDX. There are international bonds to the tune of 6% in BND if I am not mistaken and most people I talked to say international bonds are not necessary. Just a thought.
I guarantee someone is going to post that it's too granular and using VTI for stock and VXUS for Intl is better. What are your reasons for splitting them up? BTW, I am doing the same thing, except even more split up: VOO 30%, VOE 8%, VBR 12%.
Last edited by Christian NY on Mon Apr 17, 2017 11:25 pm, edited 2 times in total.

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Mon Apr 17, 2017 11:14 pm

thank you, i made a mistake.

I meant 5% VGIT - VGIT–Vanguard Intermediate-Term Government Bond (US Treasuries) vs VMBS Mortgage Backed Securities.

Yes, it is Taxable, that's why I put California Muni as we are in CA.

Thanks you for the Vanguard Tax Managed Balanced recommendation !

aristotelian wrote:This is one piece of your portfolio. There is no need to slice it further into 10 sub-slices. That 5% in VMBS is going to add a .001% tilt to your overall portfolio, so why bother? What are your goals with this money, and how does it fit into the rest of your portfolio? Pick one fund that suits your risk tolerance. (If this is a taxable account, take a look at Vanguard Tax Managed Balanced).

That said, I prefer your portfolio to the advisor's. But you already know what he is going to say. The question is what is she going to say. It is really between you and your wife, not you and your wife's advisor.

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Mon Apr 17, 2017 11:33 pm

Great points,

- Yes, I'll replace
-- VOO by VTI
-- VEA by VXUS
- Sure, will remove BNDX

No idea why folks here tilt Small Value vs Small Blend

Here is the updated:

60% Stock:

30% VTI - Vanguard Total
10% VB - Vanguard Small-Cap Blend
10% VXUS - Vanguard Total International
5% VWO - Vanguard Emerging
5% VNQ - Vanguard REIT

40% Fixed:

20% CMF - CMF–iShares California AMT-Free Muni Bond (Investment Grade California Municipal Bonds)
10% BND - Vanguard Total Bond Market ETF
5% VCIT - Vanguard Intermediate-Term Corporate Bond (US Investment Grade Corporate Bonds)
5% VGIT - VGIT–Vanguard Intermediate-Term Government Bond (US Treasuries)

What do you think now ?

Christian NY wrote:
confusedinvestor wrote:Amazing! I am working on the exact same thing right this moment and mine looks surprizingly similar!
I am a complete beginner but I hope you don't mind if I add my thoughts--
VEA generated a return of 0.55% per year over the last 10 years. I understand it's recommended according to modern portfolio theory but that's still pretty scary!
"10% VB" - I am curious why do some people choose VB and others choose VBR? What should this decision be based on?
You could consider eliminating BNDX. There are international bonds to the tune of 6% in BND if I am not mistaken and most people I talked to say international bonds are not necessary. Just a thought.
I guarantee someone is going to post that it's too granular and using VTI for stock and VXUS for Intl is better. What are your reasons for splitting them up? BTW, I am doing the same thing, except even more split up: VOO 30%, VOE 8%, VBR 12%.

Christian NY
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Christian NY » Mon Apr 17, 2017 11:38 pm

confusedinvestor wrote:Great points,

- Yes, I'll replace
-- VOO by VTI
-- VEA by VXUS
- Sure, will remove BNDX

No idea why folks here tilt Small Value vs Small Blend

Here is the updated:

60% Stock:

30% VTI - Vanguard Total
10% VB - Vanguard Small-Cap Blend
10% VXUS - Vanguard Total International
5% VWO - Vanguard Emerging
5% VNQ - Vanguard REIT

40% Fixed:

20% CMF - CMF–iShares California AMT-Free Muni Bond (Investment Grade California Municipal Bonds)
10% BND - Vanguard Total Bond Market ETF
5% VCIT - Vanguard Intermediate-Term Corporate Bond (US Investment Grade Corporate Bonds)
5% VGIT - VGIT–Vanguard Intermediate-Term Government Bond (US Treasuries)

What do you think now ?

Christian NY wrote:
confusedinvestor wrote:Amazing! I am working on the exact same thing right this moment and mine looks surprizingly similar!
I am a complete beginner but I hope you don't mind if I add my thoughts--
VEA generated a return of 0.55% per year over the last 10 years. I understand it's recommended according to modern portfolio theory but that's still pretty scary!
"10% VB" - I am curious why do some people choose VB and others choose VBR? What should this decision be based on?
You could consider eliminating BNDX. There are international bonds to the tune of 6% in BND if I am not mistaken and most people I talked to say international bonds are not necessary. Just a thought.
I guarantee someone is going to post that it's too granular and using VTI for stock and VXUS for Intl is better. What are your reasons for splitting them up? BTW, I am doing the same thing, except even more split up: VOO 30%, VOE 8%, VBR 12%.


Ok, please don't make changes so fast just because I said something - I am a complete beginner working on setting up my portfolio myself. I was saying I actually prefer the way you did it as VTI to me is giving up too much control-wanted to find out what your reasons are for splitting market capitalization categories.
If you do decide to change to VXUS I believe you'll want to remove VWO also as that's in there but please wait for an expert member to comment on this.

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APB
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by APB » Mon Apr 17, 2017 11:43 pm

We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?

Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits.


I'd caution you to re-read over the posts on this site that involve financial advisors; it's almost entirely horror stories. I believe you'd be better off with a 3-fund portfolio and reading the right book or two. "The Bogleheads Guide to Investing" is the best summary (right breadth and depth) I've found of proper financial advice.

Could you clarify whether your financial advisor is a fee only fiduciary? If not, run. He's like a professional salesman, not advisor. He also may be getting kickbacks on the annuity.

Some individuals may benefit from a fee only fiduciary, but given your post count, you probably frequent this site, and I would instead focus on cultivating your DIY ability. Final plug: 3-fund portfolio!
My posts represent my own opinion and do not constitute financial advice. I am simply a hobbyist. :)

galectin
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by galectin » Mon Apr 17, 2017 11:49 pm

Too complicated for me, but I am a three fund guy, not a slice-and-dicer. Since you say that this not part of your EF or retirement, what is the investment goal for this $50K? Comparing your and the advisor's recommendations is like comparing apples to oranges: Index stocks/bonds vs. life insurance. That is why you and your wife need to discuss the goals for this investment.

If your wife is making this investment decision, you need to convince her, not the advisor. He has a financial interest in his recommendation because he makes more fees and because it is HIS advice. If you come up with the plan, he is not needed.

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BL
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by BL » Mon Apr 17, 2017 11:54 pm

It sounds like your "advisor" is an insurance salesman, is that correct? Insurance companies want to sell insurance, and are not known as a good place for investments. Hopefully you didn't sign anything, and I recommend you don't without at least a 6-month cooling off period for such a big commitment. Also you should ask for a copy of the contract to take home so you can read every word, calculate every cost, fee, charge, and whatever else they may call it. You probably should have a lawyer vet it as well.

Anyway, the salesman gets a big commission for selling the policy. Guess who ends up paying for it? It also means if you change your mind and want to get your money out, they will charge a large surrender fee for 7-10 years since they have to recoup the money they paid to the advisor you paid to give you good advice such as to buy an expensive insurance policy.

If you need life insurance, buy term insurance (see term4sale.com for estimates). If you want to invest, put your money in a low cost brokerage like Vanguard, Fidelity, etc., and buy only low-ER INDEX funds with no loads and no AUMs. (Do e-statements at V to avoid low account charges.)

Both of you should read this 16-page pdf booklet by a recommended author before/if you go back. Especially read Hurdle #5 carefully on "advisors".
https://www.etf.com/docs/IfYouCan.pdf

Also the 3-fund portfolio is in there, in Taylor's long thread here, and in the Wiki page (search for it). Total Stock Market, Total International Stock Market, and Total bond market (or maybe a muni bond in taxable) is all you need. A single Target date fund, Life Strategy fund, even the active Wellesley or Wellington funds would each be a suitable one-fund solution. Keep it simple, especially if you are trying to convince your spouse. I wouldn't go for a whole bunch of funds if I were her. By the way, REITs should not be in taxable because they generate too much dividends each year that you have to pay tax on.

I would absolutely not invest with anyone who urges you to buy an insurance policy. I am afraid you may lose lots more than your $500 if you go back to this salesman (not "advisor"). If he is a good salesman, and it sounds like your wife thinks so, he will be very convincing. Remember what a person says has no legal binding, only the contract you sign counts. This is why you must study the actual contract very carefully; he may be very reluctant to let it go without your signature on a contract (with how many pages that you are signing that you have read and understand completely?)
Last edited by BL on Tue Apr 18, 2017 12:06 am, edited 2 times in total.

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Tue Apr 18, 2017 12:01 am

Hi There,

- I'm complete beginner too....i'm finishing up reading the BH Wiki..

- Given we are beginner, we went with an advisor and look, I feel like, we already lost $500

- For some reason, i feel like tilting (Small Cap Blend + Emerging) vs 3 Fund Portfolio = I have no idea what will really happen in future, may be i will lag vs 3 Fund

- I've tested this Small-Blend+Emerging tilt in Portfoliovizulir and seems my "complex" slide-dice reduces Std Deviation (risk) with less Draw down for 2008 and negligible better sharp ratio vs 3 Fund

- Maybe i will realize in next 5 yrs, just to go with 3 Fund when i will see my slice-dice lags vs 3 Fund

Christian NY wrote:
confusedinvestor wrote:Ok, please don't make changes so fast just because I said something - I am a complete beginner working on setting up my portfolio myself. I was saying I actually prefer the way you did it as VTI to me is giving up too much control-wanted to find out what your reasons are for splitting market capitalization categories.
If you do decide to change to VXUS I believe you'll want to remove VWO also as that's in there but please wait for an expert member to comment on this.

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Tue Apr 18, 2017 12:05 am

Here is our advisor we went to...

http://www.comprehensiveadvisor.com/

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Tue Apr 18, 2017 12:17 am

Goal is to invest for mid-term (10 yrs buy-hold) with distributions over 5-10 yrs after 5-10 yrs hold for her shopping, our 2nd vacation etc...if we loose 30%, we wont go to our 2nd vacation until it recovers...

galectin wrote:Too complicated for me, but I am a three fund guy, not a slice-and-dicer. Since you say that this not part of your EF or retirement, what is the investment goal for this $50K? Comparing your and the advisor's recommendations is like comparing apples to oranges: Index stocks/bonds vs. life insurance. That is why you and your wife need to discuss the goals for this investment.

.

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BL
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by BL » Tue Apr 18, 2017 12:18 am

This sounds like her money, not yours, for whatever reason. I would wait and do the slice and dice when you put money in your Roth or wherever. Until then, perhaps you two can work together to come up with a simple, diversified, low-ER portfolio like the 3-fund or an easy-to-do balanced fund. I believe couples need to compromise and also their investing styles often conflict but complement each other: one may be too conservative and one may be too aggressive while a compromise might actually work out better in the long run.

confusedinvestor
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Tue Apr 18, 2017 12:33 am

Good advise.

Yes, you are so right on - I'm bit aggressive, given i am 40, my bonds = age - 20 = my AA is 80:20, she is conservative. We went to an advisdor so she better understands investments .... she is mom of twins with a job and no interest in investing yet she ask to invest vs putting $ in checking...

Is there a tax-managed 60:40 Vanguard fund ?

Tax managed Balanced is 50:50

BL wrote:This sounds like her money, not yours, for whatever reason. I would wait and do the slice and dice when you put money in your Roth or wherever. Until then, perhaps you two can work together to come up with a simple, diversified, low-ER portfolio like the 3-fund or an easy-to-do balanced fund. I believe couples need to compromise and also their investing styles often conflict but complement each other: one may be too conservative and one may be too aggressive while a compromise might actually work out better in the long run.

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BL
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by BL » Tue Apr 18, 2017 2:01 am

confusedinvestor wrote:Good advise.

Yes, you are so right on - I'm bit aggressive, given i am 40, my bonds = age - 20 = my AA is 80:20, she is conservative. We went to an advisdor so she better understands investments .... she is mom of twins with a job and no interest in investing yet she ask to invest vs putting $ in checking...

Is there a tax-managed 60:40 Vanguard fund ?

Tax managed Balanced is 50:50

BL wrote:This sounds like her money, not yours, for whatever reason. I would wait and do the slice and dice when you put money in your Roth or wherever. Until then, perhaps you two can work together to come up with a simple, diversified, low-ER portfolio like the 3-fund or an easy-to-do balanced fund. I believe couples need to compromise and also their investing styles often conflict but complement each other: one may be too conservative and one may be too aggressive while a compromise might actually work out better in the long run.

The 50/50 is the one I am aware of. The usual advice is no stocks if less than 5 years, conservative in 5-10 years, and gradually more aggressive for longer term investments. The age-in-bonds to age-20 aggressive is recommended for retirement funds, but this doesn't sound like that.

50-60% Total stock market and 50-40% muni bond(s) might be simple enough.
The balanced might be close enough or you could add some Total Stock market along with it. Balanced would be less painful when the market falls as the numbers are cushioned by the bonds. The "sleep well at night" balanced fund might be worthwhile for that reason. Also leaving it alone as it doesn't have to be rebalanced is worth something and not "tinkering" may be worth a lot!

I still haven't figured out what "50K Moderate" means, but I guess it was a taxable account.

sweeden22
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by sweeden22 » Tue Apr 18, 2017 3:28 am

I would also recommend a book like others suggested in the thread before you go back to the advisor. I am sure he/she makes you feel great now, but they might not later.

They likely need to sell those insurance contracts for their own job/financial benefit. Why not work together with your spouse on a sensible portfolio even if conservative as she prefers, do it yourselves, and save massive amounts of fees both up front and over the years?

Do other funds go into retirement accounts, IRAs, etc? Just checking if those are already being maxed out.

Good luck.

zuma
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by zuma » Tue Apr 18, 2017 4:36 am

confusedinvestor wrote:- For some reason, i feel like tilting (Small Cap Blend + Emerging) vs 3 Fund Portfolio = I have no idea what will really happen in future, may be i will lag vs 3 Fund

- Maybe i will realize in next 5 yrs, just to go with 3 Fund when i will see my slice-dice lags vs 3 Fund

You're tilting "for some reason". Why don't you know the reason?

Knowing why you've chosen your strategy is important because it will help you stick with your plan. Based on your second comment, it sounds like you aren't prepared to do that.

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JPH
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by JPH » Tue Apr 18, 2017 7:07 am

The portfolio you are suggesting seems crazy complicated to me. How does this mix fit into your overall plan? Does your wife understand it and the reasons for this mix? Is she comfortable in managing this portfolio?
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

ddurrett896
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by ddurrett896 » Tue Apr 18, 2017 7:08 am

confusedinvestor wrote:We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?


I wouldn't go back to the advisor. Any "advisor" that pushes UL Insurance doesn't care about your well being.

confusedinvestor wrote:Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits. Please help on my DIY suggestion to my wife and her advisor...


$500 is a drop in the bucket compared to what it will cost if you move forward. Consider it a learning lesson - a cheap one!! Stick the money in Vanguard Target Retirement 2040 Fund (VFORX) and forget about it.

harvestbook
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by harvestbook » Tue Apr 18, 2017 7:38 am

Yep, $500 is a cheap lesson if you move to do it on your own. I'd recommend starting out very simple, either Target Retirement fund or a three-fund with the munis. Let it sit there while you continue learning. If you feel confident in slicing it up later, and have solid reasoning, then you can gradually shift to your desired AA later. Plus it seems it would be easier to convince your wife if you were using a strategy that "everybody on Bogleheads said was smart, and they're all smarter than this adviser."
I'm not smart enough to know, and I can't afford to guess.

NotWhoYouThink
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by NotWhoYouThink » Tue Apr 18, 2017 7:43 am

We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?


I'll join the chorus about not going back to the advisor. He is a salesman, he is not a marriage counselor or an objective analyst. Would you go to the Chevy dealer and expect to convince the salesman you should buy an F-150?

Also, we don't know what your wife told the advisor she wanted. Depending on what she said, maybe she led him down the path of permanent life insurance. If you ask for something you can't get in ETFs and mutual funds (like safety and guaranteed preservation of capital) then the salesman might suggest something with high costs but also some built in protection.

A target date fund is probably an option to consider. Your wife does not yet trust you to make investing decisions, and you are still figuring it all out, which is fine. But maybe a target date fund from a major provider like Fidelity or Vanguard would be a good compromise for now.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Jack FFR1846 » Tue Apr 18, 2017 7:53 am

If your wife wants to get an even better first hand experience as to how her money would work with this insurance product, instead of going to the adviser's office, ask that he meet you at the local BMW dealer. Take the $50k and just give it to the dealer as a payment for whatever car the adviser had planned for your wife's money. Instead of getting the 8% sliver at the beginning and a couple percent a year, just give it to the dealer in one lump sum. No angst about surrender charges, hocus pocus calculations saying she has $300k but can only access 75 cents in 10 years, no wonder why when she takes out the 75 cents in 10 years there's a tax bill for $1000 that mysteriously appears. It's easier, simpler and less stressful. I'd advise that the adviser get a blue 5 series and kick in the proceeds from one other mark....uh, I mean client.
Bogle: Smart Beta is stupid

aristotelian
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by aristotelian » Tue Apr 18, 2017 8:04 am

Please sit down with your wife and have a conversation to slow things down. That goes for you too, not just her. What is your understanding about "decision rules" when it comes to your portfolio? How much is "his" and how much is "hers", or do you want to make all decisions jointly? What general guidelines can you agree to? Then write these down in an Investment Policy Statement that can help the two of you make decisions. (Do a search on Bogleheads for IPS).

If you are comfortable with your wife having $50K of "hers" money, then so be it. Step out of it and let her make her own mistakes.

She may feel strongly about having expert consultation. A compromise there might be that you would consider fee-only advisor for advice only (no assets-under-management).

If it is joint money, then you take the next step to decide how to make joint decisions. For example, my IPS states that we are not allowed to invest in instruments that we have not researched ourselves and do not fully understand. That would rule out an annuity, especially without doing some comparison shopping first. That might also rule out your complex slice-and-dice mini-portfolio too. Perhaps if she understood what you were proposing she would be more open to it.

Once you have an IPS, then you can both decide whether or not this particular investment makes sense. I suspect an IPS might help with the rest of your portfolio too. Decisions like these are especially important with taxable investments, which can be very costly as well as inconvenient to undo (if you slice and dice, do you want to have 10 taxable transactions every time you want to make a withdrawal from this account?).

Dottie57
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Dottie57 » Tue Apr 18, 2017 8:13 am

Way to complicated. How about one of the Vanguard life strategy funds. 60/40. Or 80/20?

All in one fund. Easy, peasy.

ponyboy
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by ponyboy » Tue Apr 18, 2017 8:15 am

The most troubling thing OP said was that it was his wifes money. Not their money. When you're married its all of your money. I think OP and his wife need to sit down and have a discussion about how both of your money belongs to both people...since you're married and all.

goingup
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by goingup » Tue Apr 18, 2017 9:30 am

confusedinvestor-
It would be advisable to slow down. The advisor's advice is poor. Your proposed portfolio is excessively complex.

Suggest you regroup and rethink your decisions.

John Laurens
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by John Laurens » Tue Apr 18, 2017 9:46 am

Confused investor

I would suggest you stay in cash for now. You need a more firm foundation in what you believe and why you believe it.

Regards,

John

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by sport » Tue Apr 18, 2017 9:55 am

Do not take advice from anyone who has something to sell to you. There is automatically a conflict of interest. When the advisor's interest is different from yours, whose interests will the advisor suggest? The old-fashioned way of saying this is "don't ask a barber whether or not you need a haircut".

Danzangdc
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Danzangdc » Tue Apr 18, 2017 9:58 am

ponyboy wrote:The most troubling thing OP said was that it was his wifes money. Not their money. When you're married its all of your money. I think OP and his wife need to sit down and have a discussion about how both of your money belongs to both people...since you're married and all.


Couples handle finances in lots of different ways. Don't judge. It could literally be her money from outside the marriage. It could be that each of them gets to keep some of their 'own' money from the marital pot -- lots of couples do that so that they have some independence in spending and saving. It could be her retirement funds that have been saved under her name, etc., etc., etc.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by pkcrafter » Tue Apr 18, 2017 10:16 am

confused investor:
Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits. Please help on my DIY suggestion to my wife and her advisor...

What did you get for your $500? Did he lay out a strategy? An asset allocation? Did he make recommendations besides the insurance.
What happened to "get a free risk analysis?"

My advice is Don't Go Back! If your wife wants an advisor, find a fee-only CFP who is required to provide fiduciary duty.

Read up on Indexed Universal Life. Article by Boglehead Dr. Dahle.

http://www.mdmag.com/physicians-money-d ... -insurance

Paul
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by ruralavalon » Tue Apr 18, 2017 10:25 am

confusedinvestor wrote:Folks, My wife and I went to an local adviser to get a portfolio recommendation on investing her 50K Moderate and guess what ? Advisor suggested Indexed-Universal-Life Insurance (IUL) and convinced my wife that it is a better product as it will not go down if market goes down yet it will go up if market goes up , will act as LTC, death benefit etc...oh well...this 50K is not part of our EFund or Retirement,..

We are going back to this Advisor next week and I'm going to propose this AA(60:40 with the following Funds) and let's see what the Advisor says ?

Truly appreciate your feedback before we see this advisor next week as we already paid him $500 for 2 hrs/2 visits. . . . .


Why waste any more of your time with this advisor?

Equity indexed life insurance is a horrible investing idea.
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Nearly A Moose
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Nearly A Moose » Tue Apr 18, 2017 10:34 am

I don't usually chime in on the investing threads (still learning myself), but I'm going to echo the "slow down" chorus. Make that, "stop right now."

This strategy seems to make little sense - lots of slicing and dicing (presumably to tweak yield and risk) within an insurance product, which just sucks out fees. And using an insurance product as a source of future spending and vacations? I'm not getting into your decision to have "his" and "hers" money (my wife and i just have one pot), but are these "her" vacations or your vacations? None of this really seems to add up.

A couple reactions to things you've said: if the goal is to have this money in 5-10 years, run some very simple portfolios through a Monte Carlo simulation to see what they will likely look like in 10 years. I'm going to guess that the overwhelming majority of the scenarios will be a significant net gain 10 years from now, which means more shopping and more vacation. Remember, if this money isn't going to be spent until 10 years from now, you absolutely Donny care how much it's worth at year 5, ,7, or 9. If you want to be rather conservative about this, try something like 40:60, or read up on how Betterment approaches emergency funds (in short, overfund it a bit so it can withstand a loss, then invest it at ~30/70 to get some yield); that might be a good conservative model that your wife is likely to not see drop. Or even just do a basic muni bond fund. You're holding this long enough that you'll see a net gain from the anticipated rising interest rates.
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by mickens16 » Tue Apr 18, 2017 10:36 am

You mention that this money is not for retirement or an EF, however, I didn't see what it is for and how soon you will need it. If you won't need to money for at least 5 years I think the Tax Managed Balanced Fund is a great idea. If you wanted to add some diversification you could add 10-15% of the stock portion for international such as VXUS or the fund equivalent.

Other ideas as it appears you live in California: 45% Total Stock, 15% Total International, and 40% Vanguard California Tax Exempt. Lastly, to make it even easier just use the Vanguard Total World Stock Fund/ETF for the stock portion.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Tyler Aspect » Tue Apr 18, 2017 10:48 am

My wife once paid $100 to learn how to sell insurance products, and I tagged along to attend their training seminar. One of the big producers taught the introduction sales course about some basic elements of financial planning, but the end goal is still to get the customers' trust in order to sell insurance products.

My advice is to run away from insurance salesperson. My wife did not end up selling any insurance products so we are still together.
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by CFM300 » Tue Apr 18, 2017 11:09 am

confusedinvestor wrote:Is there a tax-managed 60:40 Vanguard fund ?

Tax managed Balanced is 50:50

I agree with others: do not go back for a second meeting.

To answer your question above... No, there is no tax-managed 60/40. But Vanguard's Total Stock Market (TSM) fund is very tax-efficient. So just do an 80/20 split between Tax-Managed Balanced and TSM. That will give you 60% stocks and 40% bonds.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by stevew7 » Tue Apr 18, 2017 11:54 am

confusedinvestor wrote:Advisor suggested Indexed-Universal-Life Insurance (IUL) and convinced my wife that it is a better product as it will not go down if market goes down yet it will go up if market goes up , will act as LTC, death benefit etc


I can't believe this "financial advisor" is charging you $250/hour and then has the gall to try to sell you a life insurance product that will earn them a big commission on top of the hourly they are charging! I concur with others - run away from this "advisor" as it certainly seems that they only have their and NOT YOUR interests at heart.

If your spouse insists on attending the second meeting, please be certain to ask these specific questions about the IUL they recommended:

1) If I put 50k in the IUL and the market goes down 10% over the next 12 months, what will the surrender value of my IUL policy be? It is important that you use the phrase "surrender value." If he plays dumb or starts trying to confuse you with insurance jargon, you can follow-up with - we have an emergency in 12 months and need our 50k back. We want to cancel the policy. How much will our check from the insurance company be?

1a) If he says, 50k, he is lying. Ask him to show you where on the illustration it says 50k.
1b) If he says less than 50k, ask why he lied to you earlier and said "it will not go down if the market goes down."

2) Ask the insurance salesman what his commission will be on selling you this IUL policy? And then ask him why that commission isn't sufficient to pay him for his services and why he is charging you an hourly fee?

3) I would also be curious to hear their response to your suggested boglehead portfolio. Don't let him off the hook; if he agrees your allocation is reasonable and he makes only minor changes to it, make sure you ask why he didn't suggest such a portfolio in the first place instead of the IUL.

Here's a blog from an insurance salesman that outlines some of the reasons why an IUL performs poorly for just about everyone except the insurance company and insurance salesman:
http://truthconcepts.com/the-top-10-rea ... rsal-life/

Your research & questions & suggested portfolio indicate you are well on your way toward not needing paid advice, but I understand your wife may not be in the same place or may want to look a human in the eye for financial advice. If she insists on an local advisor, I'd recommend you keep looking. A few boglehead users have had some luck with the some advisors in the garrett network (http://www.garrettplanningnetwork.com/) and some have had reasonable success using Vanguard's advisory services (https://investor.vanguard.com/financial ... visor-fees).

Good luck!

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by barnaclebob » Tue Apr 18, 2017 12:41 pm

You will have lost as soon as you walk into the advisors office and want his opinions. The battle right now is investment advisor vs DIY. Your specific portfolio doesn't matter and if you let the advisor know what it is then he will just be able to poke holes in it with a bunch of fear mongering.

The bottom line is that 50k isn't that much money relative to a comfortable retirement nest egg. Splitting it up a dozen ways just introduces unneeded complexity.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Easy Rhino » Tue Apr 18, 2017 1:45 pm

Determine how this adviser is paid. Commissions on insurance products, commissions on trades, or a fee based on assets he might manage. This would be possibly in addition to the hourly rate you're sending him.

It sounds like he'd get a commission, but that seems weird since you're already paying him hourly.

Realize that both your investment decisions affect each other. Money can be "his" and "hers" but expenses now and in retirement are ultimately "ours". So you need to at least coordinate.

Also, have an answer to this question: If it's "her" money, then would she be okay with "you" managing it?

What's your wife's risk tolerance? if she's very very risk averse, then that may be why an insurance product was recommended. (in which case consider the annuity against something virtually risk free like CD's, cash, TIPS, or Ibonds).

Your plan seems needlessly complicated. $50k isn't a ton of money by investment standard. Funds have minimums or trading commissions are paid, slicing and dicing that much gets more expensive and imposes a greater management burden.

Going into the adviser's office with the intention to compete with him on portfolio management isn't going to work on a social level. Either he's a superior salesman than you (likely), and convinces your wife that you're a dummy, or you grind him into dust, in which case there's a lot of hurt feelings and wasted cash for the consult. (unless he truly is working in your best interests, in which case he may be able to layout out the pros and cons of both)

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by BL » Tue Apr 18, 2017 2:50 pm

As for insurance that is no way to save for money needed in the not too distant future. About all you could do is borrow from it and pay interest: well, you could just as well borrow at the bank or credit card because you have to pay it back or else the policy might crash and you might even have to pay tax on it then! In the meantime they have made a lot of money.

If you change your mind, in order to get it out in a few years you will pay thousands in surrender fees and have less than you started from. Before you purchase is the time to change your mind.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by sport » Tue Apr 18, 2017 2:59 pm

One thing I always objected to is paying interest to borrow my own money. :annoyed

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Tue Apr 18, 2017 9:12 pm

Thanks to everyone for good advises ! I've forwarded this forum thread (advises for everyone) to my wife so she can review this .

After everyone's feedback and additional reading, we are not comfortable buy IUL or act open on any advises he offers.

This advisor has a CFP and we haven't singed anything yet, except, paid 2 hour, $250/hr fees for a high level review of our finances which the advisor will present his recommendations, options for sign up with his services in our next meeting.

Wife doesnt trust me nor do I trust myself (b/c of lack of knowledge, afraid of DIY) on our finances . So I need to continue searching for advisor.

We are lucky to get good feedback on our overall finances anyway in this thread - viewtopic.php?p=2248829#p2248829

This 50K is just for mid-term-$ for vaccation/etc for Years to Withdrawal 5-10 yrs with Years Withdrawl to Continue for 5-10 yrs. We came up with AA 60:40 per this Guide, Table 1

https://www3.troweprice.com/usis/conten ... dology.pdf

Wife still wants to attend the 2nd meeting with Advisor to see what he has to say but we will not act on it.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by aristotelian » Tue Apr 18, 2017 9:38 pm

That's great. Sounds like the two of you are getting on the same page. Ask the advisor what he would recommend based on a parameter of index funds only with no bigger expense ratio than .25%. Also ask if he would reduce his fee for helping you manage a simple portfolio and meeting once or twice a year for checkups.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by pkcrafter » Tue Apr 18, 2017 10:19 pm

This 50K is just for mid-term-$ for vaccation/etc for Years to Withdrawal 5-10 yrs with Years Withdrawl to Continue for 5-10 yrs. We came up with AA 60:40 per this Guide,

You mean this guy recommended an IUL policy for money needed in 5-10 years. :shock:

You don't need an advisor for this. Money needed in 5 to 10 years for things like vacations should not be in the market at all, unless you don't mind not having what you expected when it's needed.

Paul
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by confusedinvestor » Wed Apr 19, 2017 1:25 am

Unrelated question:

What do you guys think of this Financial Guard? A good AA tool for $150/yr ?

https://www.financialguard.com/SignUp.aspx

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by aristotelian » Wed Apr 19, 2017 5:45 am

confusedinvestor wrote:Unrelated question:

What do you guys think of this Financial Guard? A good AA tool for $150/yr ?

https://www.financialguard.com/SignUp.aspx

Personal capital has AA tools for free
Last edited by aristotelian on Wed Apr 19, 2017 7:54 am, edited 1 time in total.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Mr.BB » Wed Apr 19, 2017 5:58 am

Here is a simple that I always use.
1) I do not buy insurance products from a financial person
2) I do not buy financial products from a insurance person
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Jack FFR1846 » Wed Apr 19, 2017 6:36 am

Does the adviser know you want to take the money out for vacation in 5 years? That's well within the "huge loss" period for insurance. This is considered short term money as would be an emergency fund. This is easy to advise. CD, iBond, high yield savings. That's it. Any other "investment" in the market has the risk of losing money. 5 years is too short to expect gains in the market. Putting $50k into a vacation fund, planning a great month in Europe, reaching that 5 year point and finding you've got $30k isn't what you're signing up for. You don't need investment advice for 5 years. You need to decide who has the best 5 year CD rate and what the withdrawal penalty is (Ally is 2% with 150 days of interest penalty). You're looking for ROI (return ON investment) while your time frame should be focusing on ROI (return OF investment). An insurance policy absolutely does NOT do this.
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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by ddurrett896 » Wed Apr 19, 2017 6:52 am

confusedinvestor wrote: So I need to continue searching for advisor.


Target Date Funds are the solution to this problem.

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Frisco Kid » Wed Apr 19, 2017 7:03 am

Quickly visited Op's wifes advisors website for an Insurance and Financial Services firm. Yes, they are salesman and will cost you $ in fees regardless of what investments they make for you. I would explain that to your wife, if she is more comfortable with this $ being professionally managed than the $ saved and I suspect she is, you have an uphill battle. Differences in money issues within a marriage can be a major area of stress. You already have $500 invested just for a consult.....................

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Re: Wife's Money - 50K - Her Advisor vs My DIY - Help

Post by Mr.BB » Wed Apr 19, 2017 7:47 am

Frisco Kid wrote:Quickly visited Op's wifes advisors website for an Insurance and Financial Services firm. Yes, they are salesman and will cost you $ in fees regardless of what investments they make for you. I would explain that to your wife, if she is more comfortable with this $ being professionally managed than the $ saved and I suspect she is, you have an uphill battle. Differences in money issues within a marriage can be a major area of stress. You already have $500 invested just for a consult.....................


Make and show your wife a spreadsheet of what it will cost you to have this advisor take care of your money over 10-20 years. It's a real eye opener!
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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