First experience with Financial Advisor

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Njm8845
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First experience with Financial Advisor

Post by Njm8845 » Tue Jan 23, 2018 3:32 pm

Today I spoke with a financial advisor concerning money in an account that was gifted to us from my wife's parents. It's a small amount by any measure, but I guess that's irrelevant. I had never spoken to a financial advisor before, but here is what he recommended:

1) Sell the fund that tracks SP500 (ER = .04) for an "in house developed rotating sector strategy" (ER=.91) that returned 21% last year. I said that this didn't really match what I wanted to do philosophically, and he went on a long sales pitch that ended with "if I was fine losing 40% next year, so be it."

2) I mentioned how I'd like to set up dividends/capital gains to be directed towards a cash account, so that I can contribute to a 529 plan. He said that this wasn't a big deal, as when the time came, we'd just have to raise capital. It took me a second, but I said, "you mean sell shares?" "Yes." Doesn't this inattention to tax consequences bother anyone else?

I stuck with my intuition and did not follow his advice. I know I'm preaching to the choir, but I couldn't believe how much this guy rubbed me the wrong way.

This site has been invaluable to me. Thanks for all the great posts and answers.

harryw
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Re: First experience with Financial Advisor

Post by harryw » Tue Jan 23, 2018 3:43 pm

"if I was fine losing 40% next year, so be it."
wow. did he really say that verbatim?
shouldn't he have suggested 100% cash in that case? I am glad for you that you walked away.

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Meg77
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Re: First experience with Financial Advisor

Post by Meg77 » Tue Jan 23, 2018 3:47 pm

Haha what's funny is that your S&P 500 index outperformed his strategy last year - at a fraction of the cost. What a sales pitch. :oops:
"An investment in knowledge pays the best interest." - Benjamin Franklin

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Pajamas
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Re: First experience with Financial Advisor

Post by Pajamas » Tue Jan 23, 2018 3:52 pm

Exactly how is he paid? From the 0.91%?

Jack FFR1846
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Re: First experience with Financial Advisor

Post by Jack FFR1846 » Tue Jan 23, 2018 3:53 pm

Transfer the whole thing out and be done with this graduate of Knowledge Kollege Clown Skool.
Bogle: Smart Beta is stupid

bloom2708
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Re: First experience with Financial Advisor

Post by bloom2708 » Tue Jan 23, 2018 3:58 pm

Selling shares and sending the dividends to the cash account are the same. So he is not so far off base there.

You are here learning. 38 posts. No reason to have an advisor. You have all of Bogleheads to advise.

Move it to Vanguard or Fidelity or Schwab and DIY!
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend very little time here! | 3. You have no control <--spend no time here

Njm8845
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Re: First experience with Financial Advisor

Post by Njm8845 » Tue Jan 23, 2018 4:36 pm

Not reinvesting dividends / capital gains was my way of slowly removing money from this account altogether.

I do have another fund in that account besides the SP500 index. It's a momentum play, with ER = .6. The return for 2017 was 24%. ER is super high after only looking at vangd funds for so long. But I figured since the return was good, let it ride.

Ideally I would move everything into the SP index, but then would have a large tax bill. The hard part is determining that breakeven point of "After 10 years, not having the money in this fund should outweigh paying the tax guy now."

bloom2708
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Re: First experience with Financial Advisor

Post by bloom2708 » Tue Jan 23, 2018 4:39 pm

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

Tinker with this calculator.

See how much a 1 or 2% fee erodes a portfolio over time. You can use 3 fee rates. .1% 1% and 2%. That doesn't include the higher expense ratios.

You can transfer "in kind" and get it out of the advisor and then look into selling across multiple tax years.
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend very little time here! | 3. You have no control <--spend no time here

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Toons
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Re: First experience with Financial Advisor

Post by Toons » Tue Jan 23, 2018 4:46 pm

"in house developed rotating sector strategy"

The complete opposite of the
"Hurry Up And Do Nothing" strategy of
3 fund portfolio.
Rotation Creates Friction.
Avoid Friction.


:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

Fallible
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Re: First experience with Financial Advisor

Post by Fallible » Tue Jan 23, 2018 5:20 pm

Njm8845 wrote:
Tue Jan 23, 2018 3:32 pm
Today I spoke with a financial advisor concerning money in an account that was gifted to us from my wife's parents. It's a small amount by any measure, but I guess that's irrelevant. I had never spoken to a financial advisor before, but here is what he recommended: ...
Have you read the wki page on "Investment Adviser"?
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

Njm8845
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Re: First experience with Financial Advisor

Post by Njm8845 » Wed Jan 24, 2018 2:07 pm

I spoke with him again, and he let me know that he charges 2% transaction fees. I've never heard of transactions being anything other than a flat fee.

This indeed makes me want to pull it all out now and stick it in Vangd.

At this point I'm expecting him to charge me for the conversations.

I did read the wiki on Financial Advisors. Turns out that he's not a financial advisor, but a broker.

Dottie57
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Re: First experience with Financial Advisor

Post by Dottie57 » Wed Jan 24, 2018 2:12 pm

What type of magic eight ball does the FA have? He cannot see the future.

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Pajamas
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Re: First experience with Financial Advisor

Post by Pajamas » Wed Jan 24, 2018 2:16 pm

Njm8845 wrote:
Wed Jan 24, 2018 2:07 pm
I spoke with him again, and he let me know that he charges 2% transaction fees. I've never heard of transactions being anything other than a flat fee.

This indeed makes me want to pull it all out now and stick it in Vangd.

At this point I'm expecting him to charge me for the conversations.

I did read the wiki on Financial Advisors. Turns out that he's not a financial advisor, but a broker.
That was a close call! You are lucky to have eluded a trap that has no doubt ensnared many others.

Nutmeg
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Re: First experience with Financial Advisor

Post by Nutmeg » Wed Jan 24, 2018 5:10 pm

bloom2708 wrote:
Tue Jan 23, 2018 3:58 pm
Selling shares and sending the dividends to the cash account are the same. So he is not so far off base there.
If you are referring to tax effects, this is not true in all cases.

Selling shares and choosing to have dividends distributed as cash rather than reinvested would not be the same for tax purposes if you use the specific identificstion method of determining basis and choose the acquisition dates of the shares to sell based on the effect on basis and therefore on your tax consequences.

Jamesla30
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Re: First experience with Financial Advisor

Post by Jamesla30 » Wed Jan 24, 2018 5:47 pm

As others have stated. Run as fast as you can the other way. How much money are we talking here? If its a small amount like you say, then you're probably overthinking things as far as tax consequence, etc. Unless you have really high income.

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BolderBoy
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Re: First experience with Financial Advisor

Post by BolderBoy » Wed Jan 24, 2018 5:51 pm

Jack FFR1846 wrote:
Tue Jan 23, 2018 3:53 pm
Transfer the whole thing out and be done with this graduate of Knowledge Kollege Clown Skool.
Bruhahahahahaha. +1000!
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

FRANK2009
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Re: First experience with Financial Advisor

Post by FRANK2009 » Thu Jan 25, 2018 11:49 am

Totally agree with the other posters. In house rotational strategy for a .91 ER? You spoke to a salesman.

rocketdog
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Re: First experience with Financial Advisor

Post by rocketdog » Thu Jan 25, 2018 12:00 pm

You need to talk to an advisor who is a fee-only fiduciary. You would never get such talk from one of those.

slimshady
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Re: First experience with Financial Advisor

Post by slimshady » Thu Jan 25, 2018 12:21 pm

Hi OP. A family member is in the process of moving his portfolio from Edward Jones to Vanguard.
He spoke with his "full service adviser" some time ago and inquired as to fees, commissions, charges, etc. The adviser never gave him straight answers and skirted the questions. I can only imagine the amount of money EJ and the adviser made off his portfolio over the course of several years.

Move the money to Vanguard and don't look back. As time goes on, reach out to the members of this forum and they will assist you with any questions that may arise. They helped me back in 2012 and still do to this day.

All the best to you.

Rich

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