Please help with this portfolio

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Mofritty
Posts: 24
Joined: Thu Nov 06, 2014 1:58 pm

Please help with this portfolio

Post by Mofritty » Mon Jun 19, 2017 11:57 am

Bogleheads,
Like many others their age, my parents have invested for many years and have completely trusted that their Edward Jones financial advisor is looking out for them. They are mid-seventies, married and retired with no debt. Please constructively critique their portfolio and provide any suggestions you may have that would help them get the most out of their money moving forward. Thank you.

Here is a snapshot of their portfolio per last month’s statement:
Total: $753994.08
HIS TRADITIONAL IRA (Outside Assets) $421,613.44
Individual Stock 3654.32
Mutual Fund: Franklin Rising Dividend CL A (FRDPX) 4443.81
Lincoln Natl. Life Annuity Purchased through Edward Jones Financial Advisor:
American Funds International Growth and Income 62,393.96
American Funds Bluechip 164,731.26
American Funds Growth and Income 124,109.57
American Funds Growth Fund 62,280.52

HIS TRADITIONAL IRA Advisory Solutions Fund Model $201,193.09
MDDVX Blackrock Equity Dividend 7969.50
BBIEX Bridge Builder International Equity 6536.92
BBGLX Bridge Builder Large Growth 8742.74
BBVLX Bridge Builder Large Value 17892.17
BBGSX Bridge Builder Small/Mid Growth 6641.33
BBVSX Bridge Builder Small/Mid Value 7877.83
DFISX DFA International Small Co 1 4508.37
DODFX Dodge and Cox International Stock 11949.05
DISYX Dreyfus International Stock Cl Y 8728.56
HAINX Harbor International 4258.62
NBGNX Neuberger Berman Genesis 6480.33
NHINX Neuberger Berman High Income 4074.57
PRFDX T Rowe Price Equity Income Cl 1 6523.23
TRLGX T Rowe Price Institutional Large Cap Growth 8573.42


ACBPX American Century Diversified Bond Cl 1 9194.13
BBTBX Bridge Builder Core Bond 46605.79
BBCPX Bridge Builder Core Plus Bond 11,117.67
BFWFX Capital World Bond Fund Cl F2 3707.43
JDFAX Janus Flexible Bond 9253.88
PTRQX Prudential Total Return Bond Cl 1 9434.69


OGVXX JP Morgan US Govt Mmf Capital 1122.86

Joint Tenants Right of Survivorship Advisory Solutions Fund Model $101,167.55
MDDVX Blackrock Equity Dividend 4041.13
BBIEX Bridge Builder International Equity 3158.82
BBGLX Bridge Builder Large Growth 4195.17
BBVLX Bridge Builder Large Value 9048.49
BBGSX Bridge Builder Small/Mid Growth 3107.58
BBVSX Bridge Builder Small/Mid Value 3996.93
DFISX DFA International Small Co 1 2107.17
DODFX Dodge and Cox International Stock 5250.41
DISYX Dreyfus International Stock Cl Y 4233.14
HAINX Harbor International 2091.13
NBGNX Neuberger Berman Genesis 3058.54
NHINX Neuberger Berman High Income 2034.54
PRFDX T Rowe Price Equity Income Cl 1 3021.29
TRLGX T Rowe Price Institutional Large Cap Growth 4304.94


ACBPX American Century Diversified Bond Cl 1 4960.34
BBTBX Bridge Builder Core Bond 22925.10
BBCPX Bridge Builder Core Plus Bond 5957.58
BFWFX Capital World Bond Fund Cl F2 2053.18
JDFAX Janus Flexible Bond 4967.55
PTRQX Prudential Total Return Bond Cl 1 4989.20

OGVXX JP Morgan US Govt Mmf Capital 945.42

Her Traditional IRA $30,020
CWGIX Capital World Growth and Income Fund A 10,905
ANCFX Fundamental Investors Fund A 18,146
AMECX Income Fund of America Cl A 969

Avo
Posts: 1097
Joined: Wed Jun 11, 2008 2:21 am
Location: California

Re: Please help with this portfolio

Post by Avo » Mon Jun 19, 2017 12:06 pm

It's the usual EJ mess.

Do your parents still trust their EJ advisor? If so, nothing any of us can say here will be relevant.

RadAudit
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Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Please help with this portfolio

Post by RadAudit » Mon Jun 19, 2017 12:14 pm

This won't be much help; but, here goes.

I'd first find out what the expense ratios are on each fund listed. Funds with higher expense ratios may be candidates for selling and reinvesting somewhere else. Funds with high expense ratios are not likely to outperform over time.

Second, I'd look at funds that are less than 5% of the total portfolio. These are also candidates for selling and reinvesting. Small positions are not likely to contribute too much to overall portfolio performance.

Third, I'd stop reinvesting dividends, interest and capital gains from the current set of funds and consider investing them somewhere else.

Fourth, I'd look at a three fund portfolio as a possible way to go for investing proceeds from fund sales and fund dividends, interest and capital gains.

After that, it gets down to tax questions on the sales, etc.
"Everything will be all right in the end. If everything is not all right, then it is not the end." - The Best Exotic Marigold Hotel

mortfree
Posts: 548
Joined: Mon Sep 12, 2016 7:06 pm

Re: Please help with this portfolio

Post by mortfree » Mon Jun 19, 2017 12:17 pm

That EJ advisor must be rich thanks to your parents. Hopefully you can convince them to leave, so they can keep a few more dollars for themselves.


.

crit
Posts: 348
Joined: Mon Jan 05, 2015 12:54 pm

Re: Please help with this portfolio

Post by crit » Mon Jun 19, 2017 12:32 pm

Fifth, find out what the capital gains are for each of the funds in the taxable account (I assume the "Joint Tenants" account is a taxable account).

The good news is that the majority is in IRAs, and can be liquidated or exchanged for reasonable things like a target-date fund or a Wellesley or balanced fund, with no tax implication or penalty. You can simplify this relatively easily.

Mofritty
Posts: 24
Joined: Thu Nov 06, 2014 1:58 pm

Re: Please help with this portfolio

Post by Mofritty » Mon Jun 19, 2017 12:39 pm

I appreciate the comments and believe me those are my sentiments as well.
I have researched the expense ratios which seem to range between .31 and .91depending on the fund. To make matters worse, some of carry a 5.75% load. Not sure yet if it is front end or back end but neither is settling.
The annuity is troubling to me because I am not sure if those assets can be transferred. Comments?
I agree with a simple three fund portfolio.
It is a mess and I the more constructive feedback I can receive here, the better the chance is that I will be able to convince them to move.
Thank you and keep it coming!!

Mofritty
Posts: 24
Joined: Thu Nov 06, 2014 1:58 pm

Re: Please help with this portfolio

Post by Mofritty » Mon Jun 19, 2017 12:51 pm

I am not sure what the joint tenants account is as far as taxable or non-taxable. Need to research that and its tax implications including capital gains as well as every hidden fee that EJ could possibly charge on the way out. I am just digging into this and the monthly statement alone is a nightmare to decipher. I am sure that is by design.

pobox2001
Posts: 68
Joined: Sun Apr 17, 2011 4:27 pm

Re: Please help with this portfolio

Post by pobox2001 » Mon Jun 19, 2017 12:53 pm

I would think the best argument to make would be to show the impact of investing costs over time. Of course, they are older so the impact of costs will be limited by the (probably) relatively shorter time frame. But savings are savings and statistically speaking one (or both) could live another 20 years! Also, the broad diversification of index funds may help convince them. Showing how the profitable asset classes change year-to-year may show them the futility of trying to pick next years winners and instead just own them all and re-balance annually.

Regarding the annuity, since it's in an IRA, it should be able to be moved with no tax costs. The issue is the surrender charge, which may be moot if they've had the annuity for enough years.

I would think the 5.75% loads were paid when they purchased the shares. This cost is lost and therefore irrelevant now. A good, low-cost index fund is still cheaper.

Good luck.

pobox2001

Avo
Posts: 1097
Joined: Wed Jun 11, 2008 2:21 am
Location: California

Re: Please help with this portfolio

Post by Avo » Mon Jun 19, 2017 4:13 pm

In addition to the fund expense rations, the "Advisory Solutions Model" also imposes a very hefty 1.44% AUM fee:

https://www.edwardjones.com/investments ... odels.html

https://www.edwardjones.com/images/advi ... f-fees.pdf

bloom2708
Posts: 2643
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Please help with this portfolio

Post by bloom2708 » Mon Jun 19, 2017 4:20 pm

Put their total portfolio value in this tool:

http://www.dinkytown.net/java/CompareFees.html

It will take work to figure out the expense ratios, sales loads and advisory solution fees being paid. You might have to estimate. Use 4 or 5% for the return.

Use .1 (Vanguard), .5 and 1.3 (or something for Edward Jones).

The look at the differences over 5, 10, 20 years in portfolio size.

I did this with my parents and they decided to stay with Edward Jones. They just can't confront the break up.

Over 30 or 40 years, the extra 1.2% expense ratio makes a huge difference.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

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Meg77
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Re: Please help with this portfolio

Post by Meg77 » Mon Jun 19, 2017 4:49 pm

I don't think you should do anything unless your parents are unhappy and eager to get away from their advisor. EJ funds typically charge a front end load, so that is a sunk cost. Reinvested dollars are not charged a load, only the initial investment. So the expense ratio and any AUM fees are the only ongoing costs.

Sure, they could save some money each year by switching to Vanguard and going 100% to index funds. But are they capable of managing that portfolio themselves, remembering to take the RMD, managing taxes, implementing an income strategy? If so, what will you do when they are no longer capable of that? Will they trust you to manage everything - and give you access to do so? If so, do you want to take on that responsibility?

My mom has most of her assets at Edward Jones, and after reviewing it all with her I concluded that she actually was in a pretty good spot. She decided to stay there. All her funds, while more expensive than index funds, were solidly rated - American Funds mostly. And the advisor had never churned her assets or moved her to other funds just to get the commissions. Most of her stuff is in taxable accounts with 2 decades of gains so would be pricey to sell anyway.

Point being, people here think that any financial advisor getting paid anything is akin to highway robbery. That is not typically the case in my experience, especially when it comes to retirees who may appreciate the help and not be capable of DIYing their entire financial lives.
"An investment in knowledge pays the best interest." - Benjamin Franklin

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