Advice on Canceling Fidelity Portfolio Advisory Service

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randomboglehead
Posts: 8
Joined: Tue Oct 10, 2017 6:55 pm

Advice on Canceling Fidelity Portfolio Advisory Service

Post by randomboglehead » Tue Oct 10, 2017 7:20 pm

Hi All,

First, thank you to the many active, helpful and knowledgeable participants here. I have learned a great deal in a short time due to the work and time that you dedicate to supporting others. It is greatly appreciated.

Second, here is the challenge:

Before I became educated in the way of the Bogleheads, my wife and I opened an account with Fidelity and were offered the Portfolio Advisory Services which we accepted. Our yearly review is coming up and today I reviewed the account information with my new Bogle lenses.

Currently, the account has around $80,000. The YTD return on the account is 12.15% whereas the S & P return appears to be around 15%. In addition, as many of you know, there is a management fee associated with this account. Ours is 1.7%, not including fees within the funds being managed. We hold the positions listed at the end of this post.

I am confident that I would like to move away from the PAS, it's fees and assumptions about beating the market but have a few questions:

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?

*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.

Thanks in advance, :)

RBH

FCTNX - ContraFund
FCPVX - Small Cap Value
FDGRX - Growth Company
FDRXX - Gov Cash Reserves Money Market
FDSCX - Stock Selector Small Cap Fund
FDSSX - Stock Selector All Cap Fund
FEMKX - Emerging Markets Fund
FERGX - SAI Emerging Markets Index Fund
FHIGX - Municipal Income Fund
FIONX - SAI International Index Fund
FLCSX - Large Cap Stock Fund
FLPSX - Low-Priced Stock Fund
FLTMX - Intermediate Municipal Income Fund
FLVEX - Large Cap Value Enhanced Index Fund
FMCCX - Stock Selector Mid Cap Fund I Class
FMNDX - Conservative Income Municipal Bond Fund Institutional Class
FNARX - Select Natural Resources Portfolio
FRGXX - Money Market Government Portfolio - Institutional Class
FSTFX - Limited Term Municipal Income Fund
FUQIX - SAI U.S. Quality Index Fund
FUSIX - Strategic Advisers® International II Fund
FVDFX - Fidelity® Value Discovery Fund

RadAudit
Posts: 2679
Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by RadAudit » Tue Oct 10, 2017 8:18 pm

Welcome to the forum.

You might want to edit your post / information in to the format discussed here for more complete answers to your questions. viewtopic.php?f=1&t=6212
FI is the best revenge. LBYM. Invest the rest. Stay the course.

livesoft
Posts: 57315
Joined: Thu Mar 01, 2007 8:00 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by livesoft » Tue Oct 10, 2017 8:20 pm

12% YTD return is quite respectable for a portfolio with 40% bonds in it. What percentage of your portfolio is in bond funds?

Nevertheless, you should ditch this service and simplify the portfolio now before it gets any larger.
This signature message sponsored by sscritic: Learn to fish.

sambb
Posts: 1809
Joined: Sun Mar 10, 2013 3:31 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by sambb » Tue Oct 10, 2017 8:24 pm

your return is pretty good. fees high, but return is pretty decent.

User avatar
CyclingDuo
Posts: 931
Joined: Fri Jan 06, 2017 9:07 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by CyclingDuo » Tue Oct 10, 2017 8:47 pm

randomboglehead wrote:
Tue Oct 10, 2017 7:20 pm
Hi All,

First, thank you to the many active, helpful and knowledgeable participants here. I have learned a great deal in a short time due to the work and time that you dedicate to supporting others. It is greatly appreciated.

Second, here is the challenge:

Before I became educated in the way of the Bogleheads, my wife and I opened an account with Fidelity and were offered the Portfolio Advisory Services which we accepted. Our yearly review is coming up and today I reviewed the account information with my new Bogle lenses.

Currently, the account has around $80,000. The YTD return on the account is 12.15% whereas the S & P return appears to be around 15%. In addition, as many of you know, there is a management fee associated with this account. Ours is 1.7%, not including fees within the funds being managed. We hold the positions listed at the end of this post.

I am confident that I would like to move away from the PAS, it's fees and assumptions about beating the market but have a few questions:

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?

*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.

Thanks in advance, :)

RBH

FCTNX - ContraFund
FCPVX - Small Cap Value
FDGRX - Growth Company
FDRXX - Gov Cash Reserves Money Market
FDSCX - Stock Selector Small Cap Fund
FDSSX - Stock Selector All Cap Fund
FEMKX - Emerging Markets Fund
FERGX - SAI Emerging Markets Index Fund
FHIGX - Municipal Income Fund
FIONX - SAI International Index Fund
FLCSX - Large Cap Stock Fund
FLPSX - Low-Priced Stock Fund
FLTMX - Intermediate Municipal Income Fund
FLVEX - Large Cap Value Enhanced Index Fund
FMCCX - Stock Selector Mid Cap Fund I Class
FMNDX - Conservative Income Municipal Bond Fund Institutional Class
FNARX - Select Natural Resources Portfolio
FRGXX - Money Market Government Portfolio - Institutional Class
FSTFX - Limited Term Municipal Income Fund
FUQIX - SAI U.S. Quality Index Fund
FUSIX - Strategic Advisers® International II Fund
FVDFX - Fidelity® Value Discovery Fund
It's very east to get the Three Fund Portfolio at Fidelity. You can use iShares (ETF's) commission free, or the Fidelity Mutual Funds. All explained here:

https://www.bogleheads.org/wiki/Three-fund_portfolio

Fidelity Total Market Index Fund Investor Class (FSTMX) or Premium Class (FSTVX)
Fidelity Total International Index Fund Investor Class (FTIGX) or Premium Class (FTIPX)
Fidelity U. S. Bond Index Fund Investor Class (FBIDX) or Premium Class (FSITX)

iShares Core S&P Total Market ETF (ITOT)
iShares Core MSCI Total International Stock ETF (IXUS)
iShares Core Total U.S. Bond Market ETF (AGG)

You could also do it at Fidelity with the Vanguard ETF's, however each purchase would be a $4.95 trading commission.

Vanguard Total Stock ETF (VTI)
Vanguard Total International Stock ETF (VXUS)
Vanguard Total Bond Market ETF (BND)

In terms of parting ways with the Portfolio Advisory Service, just tell them you no longer wish to have your assets under their PAS.

Assets be transferred in-kind into another account. (Please note: Certain funds, including the Strategic Advisers® Funds, cannot be transferred and must be liquidated before leaving your Account.)


https://www.fidelity.com/bin-public/060 ... mental.pdf

ACCOUNT CLOSURES

At any time, you can request to terminate the Service and close your Account. If you terminate the advisory agreement with Strategic Advisers you must also instruct Strategic Advisers to either (i) liquidate your Account assets and send the proceeds to you or to a different account specified by you, or (ii) transfer your Account assets to another account. In order to meet the trading deadlines below, all trading and monetary transactions associated with your Account closure must be processed
through your Fidelity representative. Under normal circumstances, Strategic Advisers will use its best efforts to process and execute requests for full Account liquidations or full Account closeouts via transfer in kind (collectively, “full closeouts”) as follows:

• For Blended Preference Accounts, requests for full closeouts must be received in good order by 12 p.m. ET on a business day in order for the full closeout request to be processed on the same business day. Requests received after 12 p.m. are processed on the next business day.

• For All Fidelity Preference Accounts, requests for full closeouts must be received in good order by 4 p.m. ET on a business day in order for the full closeout request to be processed on the same business day. Requests received after 4 p.m. ET are processed on the next business day.

• For Index-Focused Preference and Defensive Strategy Preference Accounts, requests for full closeouts must be received in good order by 4 p.m. ET on a business day in order for the full closeout request to be processed on the next business day. Requests received after 4 p.m. ET will generally be processed two or more business days after the request is made.

If the NYSE closes before 4 p.m. ET, the cutoff time for full closeout requests will be adjusted earlier in the day to allow sufficient time to process the transactions. For written requests received not in good order or if other trading activity is taking place within the Account on the day of a full closeout request, it may take an additional day or days to process the Account closure.

When closing your Account, Strategic Advisers will assess any unpaid advisory fees from prior quarters and as needed will prorate and assess the advisory fees from the beginning of the final quarter the Account is open to the termination date, which is defined as the date when Strategic Advisers is no longer actively managing the assets in the Account. Additionally, note that once the Account is closed, additional deposits to the Account will be rejected and any account features such as automated withdrawal plans will be terminated.

There may be mutual funds held in your Account that otherwise may not be available to you as a retail investor. In general, if you cease to be a client of Fidelity’s Portfolio Advisory Services, Strategic Advisers will redeem any and all shares of such funds and/or turn off dividend reinvestment, and you may incur a gain or loss as a result. If these shares are transferred to an account other than a Strategic Advisers’ managed account, you will be subject to the terms and conditions specified in that fund’s prospectus.

Strategic Advisers may terminate your participation in the Service for withdrawing cash from your Account that brings your account balance below the minimum, for failure to maintain a valid mailing address, or for any other reason, in Strategic Advisers’ sole discretion. Before terminating you from the Service, Strategic Advisers will provide at least 30 days’ notice; provided, however, that in order to comply with applicable law, rule, or regulation, there may be situations when Strategic Advisers does not provide such notice. Depending on the reason for the termination, you may have the opportunity to resolve the issue, but if you are unable to do so, the Service will cease and the Account will be restricted from trading pending your liquidation or transfer instructions. Liquidation of assets in taxable accounts may have adverse tax consequences.

Jack FFR1846
Posts: 5886
Joined: Tue Dec 31, 2013 7:05 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by Jack FFR1846 » Tue Oct 10, 2017 9:02 pm

"Hello, Fidelity. I'm (state your name) and I want to terminate my portfolio advisory services account. I want to liquidate everything and buy $XXX in (us total market index premium) and $XXX in (us total bond index premium) and the remainder in (total international index premium). Thanks".

There ya go. I have half my portfolio with Fidelity and all is in self directed passive index funds at lower cost than similar Vanguard funds.
Bogle: Smart Beta is stupid

cashmoney
Posts: 75
Joined: Thu Jun 29, 2017 11:15 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by cashmoney » Tue Oct 10, 2017 10:58 pm

randomboglehead wrote:
Tue Oct 10, 2017 7:20 pm
Hi All,

First, thank you to the many active, helpful and knowledgeable participants here. I have learned a great deal in a short time due to the work and time that you dedicate to supporting others. It is greatly appreciated.

Second, here is the challenge:

Before I became educated in the way of the Bogleheads, my wife and I opened an account with Fidelity and were offered the Portfolio Advisory Services which we accepted. Our yearly review is coming up and today I reviewed the account information with my new Bogle lenses.

Currently, the account has around $80,000. The YTD return on the account is 12.15% whereas the S & P return appears to be around 15%. In addition, as many of you know, there is a management fee associated with this account. Ours is 1.7%, not including fees within the funds being managed. We hold the positions listed at the end of this post.

I am confident that I would like to move away from the PAS, it's fees and assumptions about beating the market but have a few questions:

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?

*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.

Thanks in advance, :)

RBH

FCTNX - ContraFund
FCPVX - Small Cap Value
FDGRX - Growth Company
FDRXX - Gov Cash Reserves Money Market
FDSCX - Stock Selector Small Cap Fund
FDSSX - Stock Selector All Cap Fund
FEMKX - Emerging Markets Fund
FERGX - SAI Emerging Markets Index Fund
FHIGX - Municipal Income Fund
FIONX - SAI International Index Fund
FLCSX - Large Cap Stock Fund
FLPSX - Low-Priced Stock Fund
FLTMX - Intermediate Municipal Income Fund
FLVEX - Large Cap Value Enhanced Index Fund
FMCCX - Stock Selector Mid Cap Fund I Class
FMNDX - Conservative Income Municipal Bond Fund Institutional Class
FNARX - Select Natural Resources Portfolio
FRGXX - Money Market Government Portfolio - Institutional Class
FSTFX - Limited Term Municipal Income Fund
FUQIX - SAI U.S. Quality Index Fund
FUSIX - Strategic Advisers® International II Fund
FVDFX - Fidelity® Value Discovery Fund




I recently went from Fidelity Advisory to 3 fund Ishare portfolio at Fidelity.I couldn't transfer anything in kind so I had to be out of the market for 3 or 4 days while account settled.I was able to pay my last AUM fee of about $1400.00 out of checking account instead of it being deducted from portfolio.Having to write a check for the fee instead of having it deducted from the portfolio made me realize in a new way that I was paying way too much!

protagonist
Posts: 4953
Joined: Sun Dec 26, 2010 12:47 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by protagonist » Tue Oct 10, 2017 11:20 pm

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).
You can, but your life will be a lot simpler if you move into index funds. You will be in control of your own destiny and it will be easier to understand what you are doing and why. You already own so many diverse and large funds that you come close to indexing anyway...you are just paying too much to do so. Fidelity has great low-cost choices.
*What might I expect during such a conversation?
Who knows? And does it matter? You are the customer...you owe no explanations unless you want to explain.
*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.
Six of one, half a dozen of the other. You can read many threads on this forum where people compare the two. Since you are already with Fidelity the simplest solution would be to stay with them unless you are dissatisfied or if Vanguard offers you something special that resonates with you.

Minimizing tax issues would be complicated if you have had large gains. Others here might be able to help you better with specifics.
Thanks in advance, :)
You're welcome. Good luck.

User avatar
BL
Posts: 7368
Joined: Sun Mar 01, 2009 2:28 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by BL » Wed Oct 11, 2017 5:36 am

It sounds like a taxable account, so there will be taxes on capital gains when you sell. Are you aware of the amount of gains? You may have short-term gains if you have held some under 1 year, plus long-term CG on whatever is held longer. I suggest you figure it out first so you know how much tax you will owe. Of course, if you stay longer, and the funds increase, you will pay even more if you delay. Not sure if it would help to sell 1/2 this year and 1/2 in January.

J295
Posts: 1231
Joined: Sun Jan 01, 2012 11:40 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by J295 » Wed Oct 11, 2017 6:52 am

As indicated in prior reply, easy to create 3 fund or slightly modified portfolio at Fido. We've been there 35+ years and find the customer service top rate.

If I read your post correctly, you have $80k invested, so while there may be tax implications I wouldn't let the tail wag the dog here .... I'd liquidate and simplify.

Best of luck.

BlueRidgePro
Posts: 14
Joined: Fri Mar 09, 2012 1:49 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by BlueRidgePro » Wed Oct 11, 2017 7:28 am

22 positions for $80K???

What kind of "advice" are you getting?

Drop the advisory service and set up a simple portfolio of 2 or 3 funds. Many examples on this board.

scrabbler1
Posts: 2004
Joined: Fri Nov 20, 2009 2:39 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by scrabbler1 » Wed Oct 11, 2017 7:46 am

I have been with Fido for 27 years. I rejected an invitation to have them manage my large portfolio with them. It was made by a rather pushy Account Executive (an unpaid advisor) I briefly had with someone from the local office a few years ago. I asked the office manager to switch me to someone else and he did. I now have an AE who does not behave that way.

OP, I don't think your portfolio is large enough to have your own unpaid AE, but I am not really sure of that. As for how many funds you should have, I don't think it needs to be that many. I have 5 funds with Fido and that includes an IRA as well as a taxable account. One is an index fund but the other 4 are not, even though they have fairly low expense ratios, around 0.5%.

You can surely find ample advice from this forum as to which funds you can consolidate your holdings into, and dump the added layer of expenses from the PAS so you can add that to your own returns.

dbr
Posts: 24193
Joined: Sun Mar 04, 2007 9:50 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by dbr » Wed Oct 11, 2017 8:57 am

1. The performance of the S&P 500 is totally irrelevant to a portfolio that is not the S&P 500. Even if you were considering a change to an S&P 500 index fund the results for one or a few years are absolutely meaningless for comparison.

2. It is insane to pay 1.7% plus fund fees. They are stealing your money and you should get out of this arrangement as soon as possible.

Advice in the other replies is good. If this is a taxable account the tax issue starts with tabulating all your tax lots and determining how much tax cost comes from selling what. Make sure reinvested dividends, which are separate tax lots, are tabulated. You then proceed to look at your tax return and see where you can most easily eliminate things at least cost. Some may be at a loss anyway. Funds with highest costs can go first.

Fidelity should be willing to let you out of advisory, but if the worst comes to the worst, you can just contact another broker such as Vanguard or Schwab, etc. and have them pull the funds, just selling anything that doesn't transfer.

vested1
Posts: 1055
Joined: Wed Jan 04, 2012 4:20 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by vested1 » Wed Oct 11, 2017 9:30 am

As a former victim of Fidelity PAS I can sympathize. I can tell you from experience that you are likely not aware of all the fees you are paying. Have you received frequent emails confirming trades that you knew nothing about? Did you know that if you continued along this path for 30 years that your portfolio would likely be worth over 40% less? http://buyupside.com/calculators/feesdec07.htm

Be prepared for some well organized fuzzy reasoning from your Fidelity advisor about terminating PAS, which would increase in intensity if you decide to transfer to Vanguard, as your advisor gets paid (bonuses) to retain you. On a personal note, I tend to hold a grudge when someone takes advantage, so I transferred to Vanguard partially out of spite. Luckily it worked out well, but I would suggest a more logical, levelheaded approach. Fidelity is a fine place to hold investments as long as you avoid those onerous advisory fees.
Last edited by vested1 on Wed Oct 11, 2017 9:31 am, edited 1 time in total.

Mr.BB
Posts: 339
Joined: Sun May 08, 2016 10:10 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by Mr.BB » Wed Oct 11, 2017 9:31 am

A simple reminder for you when you go to your meeting.
He works for YOU! He is an employee of yours (technically, since you pay him for his services).
I am sure he will try to value his services for you; but look at the TOTAL cost of his services. The cost of the funds he put you in and of course what you paid him. For that money, how many times in the year did he meet with you, contact you, advise you? Was it worth it?

You owe him no explanation if you don't want to, and again....he works for you! Not the other way around.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

vested1
Posts: 1055
Joined: Wed Jan 04, 2012 4:20 pm

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by vested1 » Wed Oct 11, 2017 10:14 am

randomboglehead wrote:
Tue Oct 10, 2017 7:20 pm
Hi All,

First, thank you to the many active, helpful and knowledgeable participants here. I have learned a great deal in a short time due to the work and time that you dedicate to supporting others. It is greatly appreciated.

Second, here is the challenge:

Before I became educated in the way of the Bogleheads, my wife and I opened an account with Fidelity and were offered the Portfolio Advisory Services which we accepted. Our yearly review is coming up and today I reviewed the account information with my new Bogle lenses.

Currently, the account has around $80,000. The YTD return on the account is 12.15% whereas the S & P return appears to be around 15%. In addition, as many of you know, there is a management fee associated with this account. Ours is 1.7%, not including fees within the funds being managed. We hold the positions listed at the end of this post.

I am confident that I would like to move away from the PAS, it's fees and assumptions about beating the market but have a few questions:

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?

*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.

Thanks in advance, :)

RBH

FCTNX - ContraFund .68
FCPVX - Small Cap Value .99
FDGRX - Growth Company .77
FDRXX - Gov Cash Reserves Money Market .37
FDSCX - Stock Selector Small Cap Fund .89
FDSSX - Stock Selector All Cap Fund .64
FEMKX - Emerging Markets Fund 1.10 with 1.50% redemption fee
FERGX - SAI Emerging Markets Index Fund .082
FHIGX - Municipal Income Fund .46
FIONX - SAI International Index Fund .045
FLCSX - Large Cap Stock Fund .62
FLPSX - Low-Priced Stock Fund .68
FLTMX - Intermediate Municipal Income Fund .35
FLVEX - Large Cap Value Enhanced Index Fund .39
FMCCX - Stock Selector Mid Cap Fund I Class .88 with 5.75% front load
FMNDX - Conservative Income Municipal Bond Fund Institutional Class .25
FNARX - Select Natural Resources Portfolio .84 with .75% redemption fee
FRGXX - Money Market Government Portfolio - Institutional Class .14
FSTFX - Limited Term Municipal Income Fund .48
FUQIX - SAI U.S. Quality Index Fund .15
FUSIX - Strategic Advisers® International II Fund .9
FVDFX - Fidelity® Value Discovery Fund .75
I've added the ER's of each fund in red, not particularly to inform you, as you seem to be convinced that you need to get rid of PAS, but for others who may be considering signing up for Fidelity PAS. While it is impossible to determine what your actual fees are without knowing the percentage of assets in each position, it can be conservatively estimated that you are paying an additional .6% in ER's alone, not including redemption fees and loads. That's better than mine were, averaging over 1% in ER's when I had their service.

So, using the previous link I provided, plug in (1.7 + .6) 2.3% with 80,000 invested over 30 years. This would result in over 50% of your investment handed over in fees. That doesn't include trading costs, possible loads (which may be waived), and redemption fees. For comparison purposes, my investments at Vanguard, entirely in index funds, are more than 10 times what you have invested, while I pay less than half of the fees that you do. The gain in our portfolio has been 20% since retirement 20 months ago.

Congratulations on finding this forum and in your efforts to stop the bleeding.

User avatar
CyclingDuo
Posts: 931
Joined: Fri Jan 06, 2017 9:07 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by CyclingDuo » Wed Oct 11, 2017 10:25 am

vested1 wrote:
Wed Oct 11, 2017 10:14 am
randomboglehead wrote:
Tue Oct 10, 2017 7:20 pm
Hi All,

First, thank you to the many active, helpful and knowledgeable participants here. I have learned a great deal in a short time due to the work and time that you dedicate to supporting others. It is greatly appreciated.

Second, here is the challenge:

Before I became educated in the way of the Bogleheads, my wife and I opened an account with Fidelity and were offered the Portfolio Advisory Services which we accepted. Our yearly review is coming up and today I reviewed the account information with my new Bogle lenses.

Currently, the account has around $80,000. The YTD return on the account is 12.15% whereas the S & P return appears to be around 15%. In addition, as many of you know, there is a management fee associated with this account. Ours is 1.7%, not including fees within the funds being managed. We hold the positions listed at the end of this post.

I am confident that I would like to move away from the PAS, it's fees and assumptions about beating the market but have a few questions:

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?

*After canceling, what is the best way to move towards a more simplified portfolio (3 or 4 fund) while minimizing tax issues?
I am mainly interested in index funds and feel content to stay with Fidelity but would consider a move to Vanguard if that would make sense or make the process easier.

Thanks in advance, :)

RBH

FCTNX - ContraFund .68
FCPVX - Small Cap Value .99
FDGRX - Growth Company .77
FDRXX - Gov Cash Reserves Money Market .37
FDSCX - Stock Selector Small Cap Fund .89
FDSSX - Stock Selector All Cap Fund .64
FEMKX - Emerging Markets Fund 1.10 with 1.50% redemption fee
FERGX - SAI Emerging Markets Index Fund .082
FHIGX - Municipal Income Fund .46
FIONX - SAI International Index Fund .045
FLCSX - Large Cap Stock Fund .62
FLPSX - Low-Priced Stock Fund .68
FLTMX - Intermediate Municipal Income Fund .35
FLVEX - Large Cap Value Enhanced Index Fund .39
FMCCX - Stock Selector Mid Cap Fund I Class .88 with 5.75% front load
FMNDX - Conservative Income Municipal Bond Fund Institutional Class .25
FNARX - Select Natural Resources Portfolio .84 with .75% redemption fee
FRGXX - Money Market Government Portfolio - Institutional Class .14
FSTFX - Limited Term Municipal Income Fund .48
FUQIX - SAI U.S. Quality Index Fund .15
FUSIX - Strategic Advisers® International II Fund .9
FVDFX - Fidelity® Value Discovery Fund .75
I've added the ER's of each fund in red, not particularly to inform you, as you seem to be convinced that you need to get rid of PAS, but for others who may be considering signing up for Fidelity PAS. While it is impossible to determine what your actual fees are without knowing the percentage of assets in each position, it can be conservatively estimated that you are paying an additional .6% in ER's alone, not including redemption fees and loads. That's better than mine were, averaging over 1% in ER's when I had their service.

So, using the previous link I provided, plug in (1.7 + .6) 2.3% with 80,000 invested over 30 years. This would result in over 50% of your investment handed over in fees. That doesn't include trading costs, possible loads (which may be waived), and redemption fees. For comparison purposes, my investments at Vanguard, entirely in index funds, are more than 10 times what you have invested, while I pay less than half of the fees that you do. The gain in our portfolio has been 20% since retirement 20 months ago.

Congratulations on finding this forum and in your efforts to stop the bleeding.
Excellent response, vested1.

In other words, if the OP remains with the PAS with the current fees and funds, they will have to save twice as much over thirty to forty years compared to having the money in low cost index funds and using the DIY method.

My favorite visual of that scenario...

Image

OP - you want to be sitting in row one of that table, not in row 2 or row 3. No matter how handsome, beautiful, nice, friendly, your PAS Advisor appears to be. Sell your ticket in row 2 or row 3, and grab a ticket to sit in row 1 ASAP.

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by David Scubadiver » Wed Oct 11, 2017 10:51 am

What you can expect is that they will try to have you use a less expensive portfolio management tool, such as their robadvisor. If you don't wish to do that they will just give you the paperwork needed to open an brokerage account. Some of your funds may have back end loads/fees for selling. You should ask them if they do, and whether they drop off after a certain holding period (and find out what that holding period is for each fund).

Rather than liquidate everything, waiting for it to settle and then reinvesting, you transfer the funds to your fidelity brokerage account and sell them once they have been transferred. That way you can repurchase with the unsettled funds.

(As a last bit of service, they should be willing to make those trades for you and then transfer the funds to a self-directed account.

rotorhead
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by rotorhead » Wed Oct 11, 2017 11:10 am

OP,
Re: Advice on Canceling Fidelity Portfolio Advisory Service
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Unread post by David Scubadiver » Wed Oct 11, 2017 11:51 am

What you can expect is that they will try to have you use a less expensive portfolio management tool, such as their robadvisor. If you don't wish to do that they will just give you the paperwork needed to open an brokerage account. Some of your funds may have back end loads/fees for selling. You should ask them if they do, and whether they drop off after a certain holding period (and find out what that holding period is for each fund).

Rather than liquidate everything, waiting for it to settle and then reinvesting, you transfer the funds to your fidelity brokerage account and sell them once they have been transferred. That way you can repurchase with the unsettled funds.

(As a last bit of service, they should be willing to make those trades for you and then transfer the funds to a self-directed account.
You have been given some very good advice here; and I especially echo what David Scubadiver has said. If your account is taxable, you must take that into consideration before selling; as well as any back end loads. I think you need to do some serious homework, to see just how disposing of each of these funds will affect your tax liability; before taking action.

I have been Fidelity customer for more than 30 years, first with my company's 401k plan; and then after I rolled it over to Fidelity after retirement. And they have served my needs well. Their index funds are competitive with Vanguard. I have gone through several iterations over the years, and finally arrived at my two fund solution - one stock and one bond. I get notes & tips from my "assigned" advisor occasionally; but I just ignore them. Low cost indexing is absolutely the best way. It's your money and your future. Don't let them manage you to their advantage.

retiredjg
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by retiredjg » Wed Oct 11, 2017 1:13 pm

I do not believe you will be able to move the SAI and Strategic Advisors funds out - I think you'll have to liquidate them. This is one of the problems people have reported in the past - paying capital gains taxes just to get out from under the advisory service.

I didn't have any idea they were charging 1.7%. That is past outrageous and ridiculous.

randomboglehead
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by randomboglehead » Wed Oct 11, 2017 6:43 pm

livesoft wrote:
Tue Oct 10, 2017 8:20 pm
12% YTD return is quite respectable for a portfolio with 40% bonds in it. What percentage of your portfolio is in bond funds?

Nevertheless, you should ditch this service and simplify the portfolio now before it gets any larger.
Here are the allocations for the account mentioned:

Domestic Stock - 40%
Foreign Stock - 23%
Bonds - 33%
Short Term - 5%

livesoft
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by livesoft » Wed Oct 11, 2017 6:50 pm

An example of a benchmark fund of index funds would be the Vanguard Target Retirement 2025 fund VTTVX which is about 64% equities and 36% bonds. It has a performance of 12.5% through yesterday. One could use the separate funds and be quite tax-efficient with this. That is, one could avoid some of the annual distributions of your actively-managed Fidelity funds by using index funds.
This signature message sponsored by sscritic: Learn to fish.

randomboglehead
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by randomboglehead » Wed Oct 11, 2017 7:10 pm

David Scubadiver wrote:
Wed Oct 11, 2017 10:51 am
What you can expect is that they will try to have you use a less expensive portfolio management tool, such as their robadvisor. If you don't wish to do that they will just give you the paperwork needed to open an brokerage account. Some of your funds may have back end loads/fees for selling. You should ask them if they do, and whether they drop off after a certain holding period (and find out what that holding period is for each fund).

Rather than liquidate everything, waiting for it to settle and then reinvesting, you transfer the funds to your fidelity brokerage account and sell them once they have been transferred. That way you can repurchase with the unsettled funds.

(As a last bit of service, they should be willing to make those trades for you and then transfer the funds to a self-directed account.
Thanks for the advice! Inspired and supported by you all, I feel confident to shift strategy in the direction toward Bogletown.

To further the discussion:
As many of our fellow Bogleheads have noted, this account is taxable.

I have looked up the 2017 Year-to-Date Tax Activity as of today. Here is what it says:

Total Taxable Income $602.57
Ordinary Dividends and Distributions Details
- Ordinary Dividends $192.70
- Capital Gain Distributions $409.87
Interest Income Details $0.00
Miscellaneous Income Details $0.00
Original Issue Discount Details $0.00
Total Nondividend and Tax-Exempt Income $598.55
Nondividend Distributions Details $0.00
Tax-Exempt Income Details $598.55
Total Income $1,201.12

This might be an over-simplification but I see the total taxable income as $602.57 and if capital gains are 15%, then I would end up paying at most, about $90. (Some of the funds will not have to be immediately sold, so the total would be less.) Is this correct?

Right now, my plan of action is:
*Do research on which funds will not be available in a brokerage account and how the sale of those funds could affect taxes. If the tax burden is large, I will consider exploring the option of selling some now and some in 2018.
*Request discontinuation of PAS.
*Transfer remaining the funds into a brokerage account.
*Once funds have been moved, trade/sell to move towards a three fund portfolio. (I am considering 55% US stocks, 15% International Stocks and 30% bonds. (I am 40 years old.)

Does this sound like a solid plan?

Cheers to all for the help.

:sharebeer

RBH

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Duckie
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by Duckie » Wed Oct 11, 2017 7:35 pm

randomboglehead wrote:I have looked up the 2017 Year-to-Date Tax Activity as of today. Here is what it says:

Total Taxable Income $602.57
Ordinary Dividends and Distributions Details
- Ordinary Dividends $192.70
- Capital Gain Distributions $409.87
Interest Income Details $0.00
Miscellaneous Income Details $0.00
Original Issue Discount Details $0.00
Total Nondividend and Tax-Exempt Income $598.55
Nondividend Distributions Details $0.00
Tax-Exempt Income Details $598.55
Total Income $1,201.12

This might be an over-simplification but I see the total taxable income as $602.57 and if my federal tax bracket is 28%, then I would end up paying at most, $188.16. (Some of the funds will not have to be immediately sold, so the total would be less.) Is this correct?
The above list does not include any capital gains (not capital gains distributions) you incur when selling your funds. You need to find what the unrealized capital gains are for each fund. That will give you an idea of what amount of taxes you'll be subject to when selling.
Right now, my plan of action is:
*Do research on which funds will not be available in a brokerage account and how the sale of those funds could affect taxes. If the tax burden is large, I will consider exploring the option of selling some now and some in 2018.
*Request discontinuation of PAS.
*Transfer remaining the funds into a brokerage account.
*Once funds have been moved, trade/sell to move towards a three fund portfolio. (I am considering 55% US stocks, 15% International Stocks and 30% bonds. I am 40 years old.)

Does this sound like a solid plan?
Yes.

randomboglehead
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by randomboglehead » Wed Oct 11, 2017 7:47 pm

Duckie wrote:
Wed Oct 11, 2017 7:35 pm
randomboglehead wrote:I have looked up the 2017 Year-to-Date Tax Activity as of today. Here is what it says:

Total Taxable Income $602.57
Ordinary Dividends and Distributions Details
- Ordinary Dividends $192.70
- Capital Gain Distributions $409.87
Interest Income Details $0.00
Miscellaneous Income Details $0.00
Original Issue Discount Details $0.00
Total Nondividend and Tax-Exempt Income $598.55
Nondividend Distributions Details $0.00
Tax-Exempt Income Details $598.55
Total Income $1,201.12

This might be an over-simplification but I see the total taxable income as $602.57 and if my federal tax bracket is 28%, then I would end up paying at most, $188.16. (Some of the funds will not have to be immediately sold, so the total would be less.) Is this correct?
The above list does not include any capital gains (not capital gains distributions) you incur when selling your funds. You need to find what the unrealized capital gains are for each fund. That will give you an idea of what amount of taxes you'll be subject to when selling.
Got it. They are unrealized because I have yet to sell them. So, let me add this action step.

Research the funds that cannot be transferred to a brokerage account. Figure out their sale value, total those funds and potentially any others I would like to liquidate then see what the 15% capital gains tax is for that total amount.

Now we are moving!

workerbeeengineer
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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by workerbeeengineer » Wed Oct 11, 2017 11:17 pm

BlueRidgePro wrote:
Wed Oct 11, 2017 7:28 am
22 positions for $80K???

What kind of "advice" are you getting?

Drop the advisory service and set up a simple portfolio of 2 or 3 funds. Many examples on this board.
Lots of excellent replies here, but will echo BlueRidgePro...22 funds seems excessive and only serves to generate fees and re-enforce the view that investing is hard & complicated and requires an adviser. Will also add that a family member started his rollover IRA with PAS, but straightened himself out a few years later. Received nonsense replies from his PAS adviser as to why he was so lagging the S&P 500 and every other reasonable benchmark. He insisted on becoming self-directing and implemented Fido 4 in 1 Index as his main solution. Not exactly the BH 3 fund solution, but hugely better than where he was previously positioned.

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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by BL » Thu Oct 12, 2017 12:39 am

Here is a link to definition of Capital Gains (CG):
http://www.investopedia.com/terms/c/capitalgain.asp

Capital gains would be the difference between the cost of buying and the selling price of the fund.
Each purchase, including reinvesting dividends and distributed CGs, is in the cost of buying.
There should be a listing of either cost basis or unrealized CG somewhere on your website or paperwork, which you can use to calculate the tax cost of selling.

If you purchased some within a year, you would pay your regular tax on it unless you have some losses which wipe it out. The rest would be taxed at the CG rate.

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Re: Advice on Canceling Fidelity Portfolio Advisory Service

Post by gpburdell » Thu Oct 12, 2017 2:21 am

randomboglehead wrote:
Tue Oct 10, 2017 7:20 pm

*Can I cancel the advisory service and maintain the funds in a self-managed account? (I know it is possible that some of the funds are not available to an investor without the PAS).

*What might I expect during such a conversation?
My parents moved their retirement accounts to Fidelity a few years ago and are managed by PAS. A couple of months ago I convinced my mom to move her account out of PAS so I could manage it (using index etfs). When my mom called Fidelity to do this, it was easy and there was no resistance or trying to convince her to stay with PAS. They just told her to open a new rollover ira account which we already did; fido sold the current assets and transferred the proceeds to the new account in a couple business days.

My main problem with PAS was it wasn't using low cost index funds or etfs. They weren't even using their own Spartan funds or whatever they are called now.

Now I just got to convince them to do it with my dad's account which is alot bigger.

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