Advice on using a wealth manager or financial advisor?

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schrute
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Advice on using a wealth manager or financial advisor?

Post by schrute »

I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me. Anyone have any experiences? Using Fidelity would be nice. Account is worth about $500,000 right now in a taxable brokerage account.

Basically it would be nice to direct the person to buy individual stocks or perhaps some index funds for me. My understanding is that the fees vary between 0.50%-1.0%. Have people had successes with WMs or FAs or have you just lost money?
Last edited by schrute on Fri Apr 27, 2018 11:02 pm, edited 1 time in total.
LarryAllen
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Re: Advice on using a wealth manager or financial advisor?

Post by LarryAllen »

I don't think there is an actual difference between a "wealth manager" or a "financial advisor." Both sell you stuff.
MrPotatoHead
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Re: Advice on using a wealth manager or financial advisor?

Post by MrPotatoHead »

schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me.
You made a declaration. What is the prohibition that is being imposed that stops you managing the account directly? What are the repercussions?
MrPotatoHead
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Re: Advice on using a wealth manager or financial advisor?

Post by MrPotatoHead »

MrPotatoHead wrote: Fri Apr 27, 2018 11:41 pm
schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me.
You made a declaration. What is the prohibition that is being imposed that stops you managing the account directly? What are the repercussions?
if this is merely a self imposed restriction the obvious course of action would be to hire a fee only financial planner or better yet a CFA who is directed not to create a financial plan for you, but rather write up an investment plan and an IPS for you that, as part of the caveats, uses only low cost index funds.

If you want to implement at Fidelity I would further stipulate they had to be commission free ishares or a similar restriction (you could ask the forum to write the restrictions for you). Tell them they will be doing this for a flat rate of 2K (up to 3k). Once again this is not a comprehensive financial plan, this is just an investment plan, so 2-3k is adequate compensation. This is to be a one time event only. Set a portfolio review for 10 years in the future. Then before you implement said plan, run the recommendations by this forum as a final check.

I obviously am shooting in the dark in regard to what your motivations are. Because with this approach you are effectively throwing away 2-3K to get around the methanol baggage of managing it yourself. But he methodology has proven to be effective both in terms of cost and efficiency.
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

Vanguard Personal Advisory Services will set up and manage a portfolio for you for 0.3% pa. An advantage is that what you will get is pretty much a cookie cutter of diversified low cost total market and total bond funds without any selling of products that profit the broker.

Since you seem to want an investment manager rather than an advisor you could look around for that. Fees should be no more than order of .3-.5% I don't know if the old Rick Ferri Portfolio Solution is really still in that business. It is always a worry that rather than .25% for investment management you get tagged for upwards of 1% to be sold things you don't need.

I suspect that your portfolio value isn't large enough to get low fee deals for this kind of service, leaving perhaps VPAS as a better option.
PFInterest
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Re: Advice on using a wealth manager or financial advisor?

Post by PFInterest »

schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me. Anyone have any experiences? Using Fidelity would be nice. Account is worth about $500,000 right now in a taxable brokerage account.

Basically it would be nice to direct the person to buy individual stocks or perhaps some index funds for me. My understanding is that the fees vary between 0.50%-1.0%. Have people had successes with WMs or FAs or have you just lost money?
Whose account is it if you can't manage it?
I wouldn't pay anyone but that's me.
livesoft
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Re: Advice on using a wealth manager or financial advisor?

Post by livesoft »

I was asked by a friend to look over their portfolio and what their financial advisor had done for them. Their financial advisor was perfectly fine and had made basically the market return for them less their fees because the advisor kept them invested in passively-managed, low-expense ratio index funds in a tax-efficient way and did not buy individual stocks nor do any active trading of those funds.

So while I haven't ever used a financial advisor nor a wealth manager myself, I can write that people have made money and lost money (just like stock markets do) with WMs and/or FAs. So I think that directly answers your question. Did it help?
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mrpotatoheadsays
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Re: Advice on using a wealth manager or financial advisor?

Post by mrpotatoheadsays »

" I can't manage directly"...

Put it all in a S&P 500 index fund and leave it alone. There is nothing to manage!

A typical wealth manager would require $2,000,000 in assets, 2% in fees and would underperform the S&P 500 index fund.
A typical financial advisor would want 5% in fees and would underperform the S&P 500 index fund.
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

It would probably help to know more exactly what level of management you can do. The poster suggesting just placing the money in one or two simple funds and checking on the account from time to time might have the best suggestion. In any case there is still tax filing.
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nedsaid
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Re: Advice on using a wealth manager or financial advisor?

Post by nedsaid »

schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me. Anyone have any experiences? Using Fidelity would be nice. Account is worth about $500,000 right now in a taxable brokerage account.

Basically it would be nice to direct the person to buy individual stocks or perhaps some index funds for me. My understanding is that the fees vary between 0.50%-1.0%. Have people had successes with WMs or FAs or have you just lost money?
Look into the Fidelity Go service. Mostly run by robots and a fairly cheap service that uses Fidelity Index funds.
A fool and his money are good for business.
Topic Author
schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

mrpotatoheadsays wrote: Sat Apr 28, 2018 8:49 am " I can't manage directly"...

Put it all in a S&P 500 index fund and leave it alone. There is nothing to manage!

A typical wealth manager would require $2,000,000 in assets, 2% in fees and would underperform the S&P 500 index fund.
A typical financial advisor would want 5% in fees and would underperform the S&P 500 index fund.
PFInterest wrote: Sat Apr 28, 2018 8:38 am
schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me. Anyone have any experiences? Using Fidelity would be nice. Account is worth about $500,000 right now in a taxable brokerage account.

Basically it would be nice to direct the person to buy individual stocks or perhaps some index funds for me. My understanding is that the fees vary between 0.50%-1.0%. Have people had successes with WMs or FAs or have you just lost money?
Whose account is it if you can't manage it?
I wouldn't pay anyone but that's me.
MrPotatoHead wrote: Fri Apr 27, 2018 11:41 pm
schrute wrote: Fri Apr 27, 2018 10:42 pm I have an account that I can't manage directly so looking to have a wealth manager or financial advisor manage the portfolio for me.
You made a declaration. What is the prohibition that is being imposed that stops you managing the account directly? What are the repercussions?
I live in a community property state (Cali) and this property is currently separate property (haven't touch it since being married). I'm married, but things are starting to go sour (we're working on it). Regardless, I wanted to think about keeping this separate if it comes to it. To those that don't know, community property states equally divide community property. Property acquired prior to marriage is considered separate property. All passive gains continue to remain as separate property. I reviewed with 2 attorneys and both advised me to keep the funds where they are or have someone else "actively managing it". It's currently in a single stock, but I don't believe that stock will go up forever. If I sell now and buy an index fund myself, they believe that would open me to "active asset appreciation" argument whereas someone else (a non-family member) would be "passive asset appreciation". To your question on what would happen - all gains would be dividable to the community.

I have other accounts I manage and fine with us dividing if it comes to it, which is worth almost as much.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

livesoft wrote: Sat Apr 28, 2018 8:41 am I was asked by a friend to look over their portfolio and what their financial advisor had done for them. Their financial advisor was perfectly fine and had made basically the market return for them less their fees because the advisor kept them invested in passively-managed, low-expense ratio index funds in a tax-efficient way and did not buy individual stocks nor do any active trading of those funds.

So while I haven't ever used a financial advisor nor a wealth manager myself, I can write that people have made money and lost money (just like stock markets do) with WMs and/or FAs. So I think that directly answers your question. Did it help?
Yes, thank you.
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BL
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Re: Advice on using a wealth manager or financial advisor?

Post by BL »

Another choice is to buy either a 3-fund portfolio (possibly with muni bonds) or a single balanced fund:
Tax-managed balanced fund
Fidelity's INDEX target fund or four-in-one fund (bonds are not really tax-efficient).

I like the idea of Vanguard PAS. You can talk with them now and see what they would use with their low-cost management at Vanguard.

3-fund suggestions for various brokerages including Fidelity:
https://www.bogleheads.org/wiki/Three-fund_portfolio
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

schrute wrote: Sat Apr 28, 2018 11:30 am

I live in a community property state (Cali) and this property is currently separate property (haven't touch it since being married). I'm married, but things are starting to go sour (we're working on it). Regardless, I wanted to think about keeping this separate if it comes to it. To those that don't know, community property states equally divide community property. Property acquired prior to marriage is considered separate property. All passive gains continue to remain as separate property. I reviewed with 2 attorneys and both advised me to keep the funds where they are or have someone else "actively managing it". It's currently in a single stock, but I don't believe that stock will go up forever. If I sell now and buy an index fund myself, they believe that would open me to "active asset appreciation" argument whereas someone else (a non-family member) would be "passive asset appreciation". To your question on what would happen - all gains would be dividable to the community.

I have other accounts I manage and fine with us dividing if it comes to it, which is worth almost as much.
In light of this somewhat esoteric consideration I think you need to be under legal advice regarding any change you make. Just speculating ignorantly one might ask if a requirement like this needs a trust of some kind or is similar to what happens to the assets of people elected to public office who have to distance themselves from conflicts interest. By active management presumably they mean giving a manager discretionary authority over trading, but I am no lawyer to advise you on this. I think both you and we are way out of our depth here while at the same time there is considerable consequence at stake.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

dbr wrote: Sat Apr 28, 2018 12:16 pm
schrute wrote: Sat Apr 28, 2018 11:30 am

I live in a community property state (Cali) and this property is currently separate property (haven't touch it since being married). I'm married, but things are starting to go sour (we're working on it). Regardless, I wanted to think about keeping this separate if it comes to it. To those that don't know, community property states equally divide community property. Property acquired prior to marriage is considered separate property. All passive gains continue to remain as separate property. I reviewed with 2 attorneys and both advised me to keep the funds where they are or have someone else "actively managing it". It's currently in a single stock, but I don't believe that stock will go up forever. If I sell now and buy an index fund myself, they believe that would open me to "active asset appreciation" argument whereas someone else (a non-family member) would be "passive asset appreciation". To your question on what would happen - all gains would be dividable to the community.

I have other accounts I manage and fine with us dividing if it comes to it, which is worth almost as much.
In light of this somewhat esoteric consideration I think you need to be under legal advice regarding any change you make. Just speculating ignorantly one might ask if a requirement like this needs a trust of some kind or is similar to what happens to the assets of people elected to public office who have to distance themselves from conflicts interest. By active management presumably they mean giving a manager discretionary authority over trading, but I am no lawyer to advise you on this. I think both you and we are way out of our depth here while at the same time there is considerable consequence at stake.
I've consulted 2 attorneys and they're not going to provide me investment advice. Their advice is that if I want to gains separate property, I can either keep it where it is right now or sell the proceeds and collect whatever interest the account provides or have someone else actively managing it for me. The first is not an option, the second (I think is the worst), and the last provides me some kind of gain on the account. Yes, regarding active management. No a trust is not necessary, it isn't like political office where political decisions could be a conflict of interest at the person's deciding own benefit. I'll take it up with my attorney.

I think it's worthwhile to ignore the legal part of this (I will figure that separately from investing) - I figure it would just be complicated, but people wanted the background. I'm more concerned with options available for actively managing my money, what it would cost, how it would perform, etc. if I do choose to go this route.
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

I have to beg out because I have no idea what "actively managing your money" means and under what circumstances an account you might open would fail to meet that requirement.

Maybe someone who understands this better can help.
inbox788
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Re: Advice on using a wealth manager or financial advisor?

Post by inbox788 »

Would DFA Dimensional Fund Advisors qualify as active?

https://www.bogleheads.org/wiki/Dimensi ... d_Advisors

I haven't used them, but have seen some discussions here and here are a couple of random threads; search for more.
viewtopic.php?t=211879
viewtopic.php?t=113380
Topic Author
schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

inbox788 wrote: Sat Apr 28, 2018 2:01 pm Would DFA Dimensional Fund Advisors qualify as active?

https://www.bogleheads.org/wiki/Dimensi ... d_Advisors

I haven't used them, but have seen some discussions here and here are a couple of random threads; search for more.
viewtopic.php?t=211879
viewtopic.php?t=113380
I'm reading the threads, they just have to buy/sell the securities or funds for me and act as a portfolio manager. It won't work if they advise me and I do it myself.
inbox788
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Re: Advice on using a wealth manager or financial advisor?

Post by inbox788 »

schrute wrote: Sat Apr 28, 2018 2:41 pmI'm reading the threads, they just have to buy/sell the securities or funds for me and act as a portfolio manager. It won't work if they advise me and I do it myself.
While the funds themselves have low fees, the advisors that you're required to use have add on fees that can be quite high. I was under the impression they made the changes to your account (i.e. TLH), but I guess it varies, so you need to find a lower fee advisor that would do that for you.

http://www.retireearlyhomepage.com/low_fee_dfa.html
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

Keeping in mind the previous discussion, one might imagine that if a DFA advisor or an advisory account at a random broker is suitable for this purpose, then Vanguard Personal Advisory Service at 0.3% AUM and using only Vanguard funds might be suitable. From what some people have written they might be better because they mostly tell you what they are investing in rather than let you tell them.
4nwestsaylng
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Re: Advice on using a wealth manager or financial advisor?

Post by 4nwestsaylng »

This is a question I continue to grapple with.I currently have a 50/50 overall AA (taxable and deferred total), and the equity portion is 50% in Schwab Intelligent Portfolio (this has an individually adjustable fixed/equity ratio, so I have it dialed to 100% equity ETFs), 50% in Vanguard Total Stock Market Index. This is all in my Schwab taxable account. Fixed portion is all in the TSP.

My 50% fixed consists of 100% TSP G fund, the short term, stable value fund, which is unique in that it captures rises in short term rates with no downside risk of price drop, as the securities are sold by the Federal Government directly into the TSP fund). Other options witihin TSP are a bond index fund that follows the Barrons Aggregate Bond Index, but with that fund, there is of course price risk due to longer duration in a trend of rising interest rates.

My Schwab advisor has told me that it is better to have the equities primarily in the tax deferred account, and the bonds primarily in the taxable account,
yet in my 25% marginal tax rate I am not sure it makes much difference. I turn 70 in one year so will then have to take withdrawals from the deferred account anyway and pay income tax.

I would like my fixed assets to earn higher rates, but clearly with bond funds of longer average duration, there is a continued drop in NAV of the fund as rates creep up. My Schwab adviser correctly points out that if I instead purchased individual bonds through their bond department, I could get longer duration, higher yield, and yes, dropping NAV, but unlike a bond fund, the bonds can be held to maturity. So I wonder, with higher rates continuing, whether it is best to stay in the G fund with a low interest rate, or go to individual bonds of longer duration and hold them, and if so, how transparent are the fees at Schwab for these individual purchases.

With all these considerations, I do indeed still ponder whether it is worth considering paying a asset manager, say no more than one percent of AUM and just leave this to a large firm to manage assets. Some firms have managed to at least match the index averages but also include downside protection and dampen the downside risk.

I know this is heresy to bring this up, and often the ridicule and smart a** comments follow, but still I throw this out there for comment and suggestions.
Yes, I am out of individual equities, I am taking a partial venture in robo funds, but the rest is in the TSM index, yet I still know there are gaps in my knowledge. Many of you say this is just hand holding, maybe you are right, but I don't think it is that simple.
inbox788
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Re: Advice on using a wealth manager or financial advisor?

Post by inbox788 »

4nwestsaylng wrote: Sat Apr 28, 2018 3:23 pmMy Schwab advisor has told me that it is better to have the equities primarily in the tax deferred account, and the bonds primarily in the taxable account,
yet in my 25% marginal tax rate I am not sure it makes much difference. I turn 70 in one year so will then have to take withdrawals from the deferred account anyway and pay income tax.
What are the tax consequences of these changes in the taxable account? Is the Schwab advisor an investment advisor or a financial advisor or a wealth manager?
In any case, this seems to run counter to the tax efficient fund placement, but being in withdrawal phase may require revisiting the subject.
https://www.bogleheads.org/wiki/Tax-eff ... _placement
I would like my fixed assets to earn higher rates, but clearly with bond funds of longer average duration, there is a continued drop in NAV of the fund as rates creep up. My Schwab adviser correctly points out that if I instead purchased individual bonds through their bond department, I could get longer duration, higher yield, and yes, dropping NAV, but unlike a bond fund, the bonds can be held to maturity. So I wonder, with higher rates continuing, whether it is best to stay in the G fund with a low interest rate, or go to individual bonds of longer duration and hold them, and if so, how transparent are the fees at Schwab for these individual purchases.
This is often discussed here, and the advisor is only providing a narrow view of a far more complex situation. Don't go into individual bonds without understanding what you're signing up for, and often, you won't be getting the benefits you're seeking.
https://www.bogleheads.org/wiki/Individ ... _bond_fund
With all these considerations, I do indeed still ponder whether it is worth considering paying a asset manager, say no more than one percent of AUM and just leave this to a large firm to manage assets. Some firms have managed to at least match the index averages but also include downside protection and dampen the downside risk.
No, you shouldn't pay one percent extra without a guarantee they will not only match the index averages, but beat it by that one percent they're charging. Good luck finding a firm willing to do so. You said "some firms", but other firms won't match the index averages AND they'll take one percent additional in fees. How will you find the "some firms" and avoid the "other firms" until after the fact? Also, how do you evaluate "downside protection" and "dampen downside risk"? How do you see after the fact and how do you choose going forward? Usually, these terms apply to past performance, and often not repeated.
4nwestsaylng
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Re: Advice on using a wealth manager or financial advisor?

Post by 4nwestsaylng »

Thanks for the above comments. The Schwab advisor is a CFP; will go to the suggested link to learn more before discussing it with him again. There was no pressure, I just outlined for him my AA and that was his comment, but clearly it is more complex, and I wonder if selection of individual bonds by Schwab Bond dept involves more indirect fees that are not transparent, which might offset the advantage of being able to hold longer term bonds to maturity vs the immediate NAV loss in a bond fund with rising rates.

Also, while it is true that bond funds take a hit in NAV, I would think that those funds are acquiring new bonds as rates rise, which might dampen the overall NAV drop. Yet if average duration of a bond fund is, say, six years, would not the NAV drop based on that average, every time rates rise?

Agree that past performance is no guarantee, that is what makes it difficult. I guess if an advisor could show past performance beating the SP500 or the TSM by several percentage points, such that it beats the index NET of fees consistently, not just one year,it might be worth considering. Also if that advisor could show that the performance of his/her portfolio in past slumps dropped less than the indexes,at least enough to cover fees,that does represent track record,even if the future is not predictable.

And as you say, "which firms"? Short of asking for data firm by firm, how do you compare past performance net of fees, are there any publications which track and verify the claims made? There are many major wealth management firms and advisors; the WSJ two days ago had a Barrons insert with the top 100 advisors by AUM, but no mention of track records. I may call a few and ask for their data on past performance net of fees for the past ten years.

We read that over 80 or 90 percent of active wealth management accounts fail to beat the indexes, and those that do are a different group year to year.
So is it truly the case that we don't know of advisory firms with a long consistent record of at least matching the SP500 or TSM net of fees?

I just find it hard to believe that these firms stocked with bright financial minds can't earn their keep and outperform the index, but John Bogle is a wise man, and he says they can't consistently. Yet many very wealthy smart people have their assets under fee management.
4nwestsaylng
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Re: Advice on using a wealth manager or financial advisor?

Post by 4nwestsaylng »

I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
Right now I'm comparing Fidelity, Vanguard, and potentially Merill Lynch/Morgan Stanley. I really want an advisor where I could potentially buying stocks, ETFs, or CEFs.
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

schrute wrote: Sun Apr 29, 2018 1:04 pm
4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
Right now I'm comparing Fidelity, Vanguard, and potentially Merill Lynch/Morgan Stanley. I really want an advisor where I could potentially buying stocks, ETFs, or CEFs.
You don't need an advisor to buy things, with a few exceptions perhaps.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

dbr wrote: Sun Apr 29, 2018 1:05 pm
schrute wrote: Sun Apr 29, 2018 1:04 pm
4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
Right now I'm comparing Fidelity, Vanguard, and potentially Merill Lynch/Morgan Stanley. I really want an advisor where I could potentially buying stocks, ETFs, or CEFs.
You don't need an advisor to buy things, with a few exceptions perhaps.
I do for my particular case and objective. If this situation wasn't a concern, I'd have no hesitation managing it myself, picking my own funds or stocks or ETFs, etc. It's purely to remove myself from the equation.
dbr
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Re: Advice on using a wealth manager or financial advisor?

Post by dbr »

schrute wrote: Sun Apr 29, 2018 1:22 pm
dbr wrote: Sun Apr 29, 2018 1:05 pm
schrute wrote: Sun Apr 29, 2018 1:04 pm
4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
Right now I'm comparing Fidelity, Vanguard, and potentially Merill Lynch/Morgan Stanley. I really want an advisor where I could potentially buying stocks, ETFs, or CEFs.
You don't need an advisor to buy things, with a few exceptions perhaps.
I do for my particular case and objective. If this situation wasn't a concern, I'd have no hesitation managing it myself, picking my own funds or stocks or ETFs, etc. It's purely to remove myself from the equation.
Yes, of course, sorry -- I was the one who asked that the first time around. But have you resolved if you actually end run the legal requirements if someone buys what you want for you -- distinct from someone buying what they want without direction from you? Maybe that doesn't matter.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

dbr wrote: Sun Apr 29, 2018 1:27 pm
schrute wrote: Sun Apr 29, 2018 1:22 pm
dbr wrote: Sun Apr 29, 2018 1:05 pm
schrute wrote: Sun Apr 29, 2018 1:04 pm
4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
Right now I'm comparing Fidelity, Vanguard, and potentially Merill Lynch/Morgan Stanley. I really want an advisor where I could potentially buying stocks, ETFs, or CEFs.
You don't need an advisor to buy things, with a few exceptions perhaps.
I do for my particular case and objective. If this situation wasn't a concern, I'd have no hesitation managing it myself, picking my own funds or stocks or ETFs, etc. It's purely to remove myself from the equation.
Yes, of course, sorry -- I was the one who asked that the first time around. But have you resolved if you actually end run the legal requirements if someone buys what you want for you -- distinct from someone buying what they want without direction from you? Maybe that doesn't matter.
Good point. I didn't clarify all the legal points I learned from discussing with my lawyer. Basically, if I got a divorce I would need to prove that it was passive appreciation (it's burden of proof is on me). I'll have no problem proving the property is separate - it always has been. The passive appreciation is what I'm trying to plan, basically I can't make investment decisions or directly contribute to the appreciation of the property. My lawyer advised me that someone managing the money for me adds a buffer. But to be sure that they're not acting as my shill, it shouldn't be a family member. Someone presenting investment advice for my approval would likely fall into the passive category. It becomes harder to show there's active appreciation if I am not the sole person making investment decisions. My preference is to control the assets myself, but doing so will expose me legally.
WildCat48
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Re: Advice on using a wealth manager or financial advisor?

Post by WildCat48 »

Divorce in California? You are screwed. Stay woke.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

WildCat48 wrote: Sun Apr 29, 2018 3:01 pm Divorce in California? You are screwed. Stay woke.
Why screwed?
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
What did you decide on doing?
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Quantum
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Re: Advice on using a wealth manager or financial advisor?

Post by Quantum »

schrute wrote: Sun Apr 29, 2018 8:03 pm
WildCat48 wrote: Sun Apr 29, 2018 3:01 pm Divorce in California? You are screwed. Stay woke.
Why screwed?
It's California.

Community property state by default unless uncontested with a notarized agreement to walk with a different split.
Even then, some judge can go all SJW white knight and force a 50/50 split (or worse).
A large majority of cases are biased in favor of the wife.
The husband usually gets deeply screwed.
Divorce proceeding takes at least 6 months (mandatory for most cases is a 6 month "cool down") can be reset by either party.
Costs a lot of money even before lawyers becoming involved, and in some cases even years after a divorce is granted, one party can sue over how the assets were split.

Prenups are often overturned by activist judges, and of course the state does all it can to grab taxes in the settlement.
“The advantage always favors the one who is trying to create fear, over the one who is trying to erase it.” | Howard R. Hughes JR.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

Quantum wrote: Wed May 02, 2018 8:19 pm
schrute wrote: Sun Apr 29, 2018 8:03 pm
WildCat48 wrote: Sun Apr 29, 2018 3:01 pm Divorce in California? You are screwed. Stay woke.
Why screwed?
It's California.

Community property state by default unless uncontested with a notarized agreement to walk with a different split.
Even then, some judge can go all SJW white knight and force a 50/50 split (or worse).
A large majority of cases are biased in favor of the wife.
The husband usually gets deeply screwed.
Divorce proceeding takes at least 6 months (mandatory for most cases is a 6 month "cool down") can be reset by either party.
Costs a lot of money even before lawyers becoming involved, and in some cases even years after a divorce is granted, one party can sue over how the assets were split.

Prenups are often overturned by activist judges, and of course the state does all it can to grab taxes in the settlement.
Are you an attorney? Maybe we'll go live to a more favorable state :D
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Quantum
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Re: Advice on using a wealth manager or financial advisor?

Post by Quantum »

schrute wrote: Wed May 02, 2018 8:22 pm
Quantum wrote: Wed May 02, 2018 8:19 pm
schrute wrote: Sun Apr 29, 2018 8:03 pm
WildCat48 wrote: Sun Apr 29, 2018 3:01 pm Divorce in California? You are screwed. Stay woke.
Why screwed?
It's California.

Community property state by default unless uncontested with a notarized agreement to walk with a different split.
Even then, some judge can go all SJW white knight and force a 50/50 split (or worse).
A large majority of cases are biased in favor of the wife.
The husband usually gets deeply screwed.
Divorce proceeding takes at least 6 months (mandatory for most cases is a 6 month "cool down") can be reset by either party.
Costs a lot of money even before lawyers becoming involved, and in some cases even years after a divorce is granted, one party can sue over how the assets were split.

Prenups are often overturned by activist judges, and of course the state does all it can to grab taxes in the settlement.
Are you an attorney? Maybe we'll go live to a more favorable state :D
Physicist. But, you know...
https://xkcd.com/793/
“The advantage always favors the one who is trying to create fear, over the one who is trying to erase it.” | Howard R. Hughes JR.
4nwestsaylng
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Re: Advice on using a wealth manager or financial advisor?

Post by 4nwestsaylng »

schrute wrote: Wed May 02, 2018 7:43 pm
4nwestsaylng wrote: Sun Apr 29, 2018 2:05 am I have been reading the above suggested link on bonds. Much more complex that I realized,but is going to help me in discussing with the Schwab advisor.
I will have to spend a couple of hours on this link, there are lots of concepts to grasp. It is certainly answering the questions I have posed here on bonds,and hopefully will help me decide whether to stay with a bond index fund or go to individual bonds in this era of rising rates. It appears that there is little advantage to a rolling laddered portfolio of bonds vs a fund.

Thanks again for the suggestions.
What did you decide on doing?
I decided not to use bond funds. There will be continued raises in interest rates, and so I am going to go with laddered short term bonds, primarily treasuries, which have no commission at Schwab, and also some short term corporates. I know this contradicts my conclusion above, but after all the analysis, this is where I am. If anyone thinks I am way off and should reconsider I am open to it.
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Re: Advice on using a wealth manager or financial advisor?

Post by mancich »

Buy a Vanguard Target date fund and be done with it. It doesn't get any simpler. Yes, the bond portion is tax-inefficient in a taxable account, but it's better than paying a wolf in sheep's clothing an annual fee, along with the dogs with fleas they will sell you in the form of high expense ratio mutual funds.
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

mancich wrote: Tue Jun 19, 2018 10:22 am Buy a Vanguard Target date fund and be done with it. It doesn't get any simpler. Yes, the bond portion is tax-inefficient in a taxable account, but it's better than paying a wolf in sheep's clothing an annual fee, along with the dogs with fleas they will sell you in the form of high expense ratio mutual funds.
It's not that I lack investment acumen or the confidence to do it myself. It's complicated, but I can't make the investment myself otherwise it poses a conflict to my own interests. Either I let the money sit or make an investment decision and potentially give up half of the gains on it. Or if I let someone else make legal investment decisions of the money, it continues to remain mine.
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Re: Advice on using a wealth manager or financial advisor?

Post by Bongleur »

>My lawyer advised me that someone managing the money for me adds a buffer....Someone presenting investment advice for my approval would likely fall into the passive category.
>

but but but -- isn't this exactly what you are paying the lawyer to figure out? Whether a specific advisor contract will or will not pass the legal test? Seems to me he should be able to draft a contract that meets the criteria. Then you offer that contract to potential entities who charge for the work.

And any advisor would require you to write down your objectives, in as much detail as possible, so he can prove that he has fulfilled them. Again, you are paying the lawyer to include that language in the contract.

Sounds like you want to achieve market returns at market risk at minimal investment overhead cost, such costs subject to variation based on the quality of the firm providing the investment vehicle. You could specify Vanguard or Schwab or whomever as an example of a company which is acceptable to you -- or he can write extensive paperwork covering his butt if he chooses another. Which he won't want to do. So the guy might get to pick between the S&P 500 fund and the Large Cap fund, but that's about all the latitude he has.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.
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Re: Advice on using a wealth manager or financial advisor?

Post by MotoTrojan »

Vanguard PAS. Prevents you from getting locked into tax inefficient high fee junk for the next chapter of this story.
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Re: Advice on using a wealth manager or financial advisor?

Post by JoinToday »

schrute wrote: Sat Apr 28, 2018 11:30 am ....

I live in a community property state (Cali) and this property is currently separate property (haven't touch it since being married). I'm married, but things are starting to go sour (we're working on it). Regardless, I wanted to think about keeping this separate if it comes to it. To those that don't know, community property states equally divide community property. Property acquired prior to marriage is considered separate property. All passive gains continue to remain as separate property. I reviewed with 2 attorneys and both advised me to keep the funds where they are or have someone else "actively managing it". It's currently in a single stock, but I don't believe that stock will go up forever. If I sell now and buy an index fund myself, they believe that would open me to "active asset appreciation" argument whereas someone else (a non-family member) would be "passive asset appreciation". To your question on what would happen - all gains would be dividable to the community.

I have other accounts I manage and fine with us dividing if it comes to it, which is worth almost as much.
Are you certain you understand (or understood) the attorneys correctly? (or maybe your lawyers are ultra conservative or wrong, or my lawyer was incorrect) I live in California, am married, and have separate property.

My understanding is that gains or income due to your work (I guess that is "active" in your description) during marriage is split 50/50. It is community property. I suppose if you were doing day trading with separate property & had some big gains, your spouse or lawyer may argue that it was active income. Or if you managed and fixed rentals that were owned prior to marriage, they may be considered active, since you are spending time fixing things, etc. But an occasional trade with your separate property is hardly "active" work. I spent a little time initially putting my separate assets in the desired index funds, but don't do anything else except at tax time.

I have separate property, held within our (joint) trust, and in order to keep it separate, my lawyer told me to have it titled as:
"Join Today, trustee of the Today Family Trust, sole and separate property."

The one thing to note: Taxes associated with dividends, interest, and LTCG from the separate property must come from the sole and separate property account. So I do my taxes twice: one set of taxes with all income (Joint plus separate), and one set of taxes with just the joint income. The tax difference is what I take out of my separate property account and deposit in our joint account. So my separate property income is effectively taxed at our marginal tax rate. I also never move money from the joint account to the separate property account -- it is always a one way transaction, from my separate property to the joint account

Note: I am on my first marriage, and am not a lawyer. So I may not have things correct, but this is what I understand from my trust attorney.
I wish I had learned about index funds 25 years ago
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

JoinToday wrote: Wed Jun 20, 2018 1:25 am
schrute wrote: Sat Apr 28, 2018 11:30 am ....

I live in a community property state (Cali) and this property is currently separate property (haven't touch it since being married). I'm married, but things are starting to go sour (we're working on it). Regardless, I wanted to think about keeping this separate if it comes to it. To those that don't know, community property states equally divide community property. Property acquired prior to marriage is considered separate property. All passive gains continue to remain as separate property. I reviewed with 2 attorneys and both advised me to keep the funds where they are or have someone else "actively managing it". It's currently in a single stock, but I don't believe that stock will go up forever. If I sell now and buy an index fund myself, they believe that would open me to "active asset appreciation" argument whereas someone else (a non-family member) would be "passive asset appreciation". To your question on what would happen - all gains would be dividable to the community.

I have other accounts I manage and fine with us dividing if it comes to it, which is worth almost as much.
Are you certain you understand (or understood) the attorneys correctly? (or maybe your lawyers are ultra conservative or wrong, or my lawyer was incorrect) I live in California, am married, and have separate property.

My understanding is that gains or income due to your work (I guess that is "active" in your description) during marriage is split 50/50. It is community property. I suppose if you were doing day trading with separate property & had some big gains, your spouse or lawyer may argue that it was active income. Or if you managed and fixed rentals that were owned prior to marriage, they may be considered active, since you are spending time fixing things, etc. But an occasional trade with your separate property is hardly "active" work. I spent a little time initially putting my separate assets in the desired index funds, but don't do anything else except at tax time.

I have separate property, held within our (joint) trust, and in order to keep it separate, my lawyer told me to have it titled as:
"Join Today, trustee of the Today Family Trust, sole and separate property."

The one thing to note: Taxes associated with dividends, interest, and LTCG from the separate property must come from the sole and separate property account. So I do my taxes twice: one set of taxes with all income (Joint plus separate), and one set of taxes with just the joint income. The tax difference is what I take out of my separate property account and deposit in our joint account. So my separate property income is effectively taxed at our marginal tax rate. I also never move money from the joint account to the separate property account -- it is always a one way transaction, from my separate property to the joint account

Note: I am on my first marriage, and am not a lawyer. So I may not have things correct, but this is what I understand from my trust attorney.
Thanks for the answer! I spoke to a few attorneys and got some conflicting information. I know that this is not often litigated and where it has active/passive appreciation is taken into account. It would need to be argued, but in the event of a contested divorce the burden is on me to show passive when someone stubborn can say it's active. The first attorney advised me to use a financial advisor to remove all possible conflicts and arguments. It was separate property, when it appreciated it was not at all due to my efforts (as I did not control the account), etc. Other attorneys were a bit liberal, buying into an index fund would be okay. But I guess I wanted to know at what point does it become community? What if I bought/sold the same stock 5x for 5 years? No attorney will give me an answer there. So I haven't done anything yet, but a bit reluctant to do anything until I have a somewhat clear picture. My eventually goal is to get it into a high-dividend paying fund.

As it relates to taxes, you're taken it out the tax owed from your separate property and combine it with your joint accounts for the tax due? Mine is just a separate account which I designate as 'Separate'.
JoinToday
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Re: Advice on using a wealth manager or financial advisor?

Post by JoinToday »

schrute wrote: Wed Jun 20, 2018 5:27 pm ....

Thanks for the answer! I spoke to a few attorneys and got some conflicting information. I know that this is not often litigated and where it has active/passive appreciation is taken into account. It would need to be argued, but in the event of a contested divorce the burden is on me to show passive when someone stubborn can say it's active. The first attorney advised me to use a financial advisor to remove all possible conflicts and arguments. It was separate property, when it appreciated it was not at all due to my efforts (as I did not control the account), etc. Other attorneys were a bit liberal, buying into an index fund would be okay. But I guess I wanted to know at what point does it become community? What if I bought/sold the same stock 5x for 5 years? No attorney will give me an answer there. So I haven't done anything yet, but a bit reluctant to do anything until I have a somewhat clear picture. My eventually goal is to get it into a high-dividend paying fund.

As it relates to taxes, you're taken it out the tax owed from your separate property and combine it with your joint accounts for the tax due? Mine is just a separate account which I designate as 'Separate'.
Regarding taxes: Do you file as "Married filing jointly" or "Married filing separately"? We file a joint return, and I have adjusted withholding from my pension check (community property) to get as close as I can to the correct amount for our entire tax due for (joint + separate) income. When I do my taxes, I do the taxes twice, one with and one without income due to my separate asset. I then transfer the difference from my separate to our joint account at vanguard.

Example (just made up, don't verify the actual tax number):
community property income is $100K, income from my separate account is $50K. I do the taxes with $150K income, and it turns out to be $30K.
I redo the taxes with only community property income ($100K), and the taxes are $13K. To cover the additional tax for my separate property, I transfer $17K from my separate property account to our joint account.

I don't do a prorated tax allotment: My separate account made 1/3 of our total income, so the separate account pays 1/3 of the tax due.

Regarding active vs passive: How much capital gains are we talking about? The amount of time dealing with a (passive) financial advisor is probably at least 10x the time it takes to sell & reallocate the money, especially if you only have to do it once. Can you swallow the pill, take the medicine, rip the bandage off, all at once? or maybe do an automatic sell in december & january to make the tax bill more tolerable? For what it is worth, I would just sell, put it all in VG Total US stock market for tax efficiency (if an after tax account), and don't touch after that.
I wish I had learned about index funds 25 years ago
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schrute
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Re: Advice on using a wealth manager or financial advisor?

Post by schrute »

JoinToday wrote: Wed Jun 20, 2018 9:09 pm
schrute wrote: Wed Jun 20, 2018 5:27 pm ....

Thanks for the answer! I spoke to a few attorneys and got some conflicting information. I know that this is not often litigated and where it has active/passive appreciation is taken into account. It would need to be argued, but in the event of a contested divorce the burden is on me to show passive when someone stubborn can say it's active. The first attorney advised me to use a financial advisor to remove all possible conflicts and arguments. It was separate property, when it appreciated it was not at all due to my efforts (as I did not control the account), etc. Other attorneys were a bit liberal, buying into an index fund would be okay. But I guess I wanted to know at what point does it become community? What if I bought/sold the same stock 5x for 5 years? No attorney will give me an answer there. So I haven't done anything yet, but a bit reluctant to do anything until I have a somewhat clear picture. My eventually goal is to get it into a high-dividend paying fund.

As it relates to taxes, you're taken it out the tax owed from your separate property and combine it with your joint accounts for the tax due? Mine is just a separate account which I designate as 'Separate'.
Regarding taxes: Do you file as "Married filing jointly" or "Married filing separately"? We file a joint return, and I have adjusted withholding from my pension check (community property) to get as close as I can to the correct amount for our entire tax due for (joint + separate) income. When I do my taxes, I do the taxes twice, one with and one without income due to my separate asset. I then transfer the difference from my separate to our joint account at vanguard.

Example (just made up, don't verify the actual tax number):
community property income is $100K, income from my separate account is $50K. I do the taxes with $150K income, and it turns out to be $30K.
I redo the taxes with only community property income ($100K), and the taxes are $13K. To cover the additional tax for my separate property, I transfer $17K from my separate property account to our joint account.

I don't do a prorated tax allotment: My separate account made 1/3 of our total income, so the separate account pays 1/3 of the tax due.

Regarding active vs passive: How much capital gains are we talking about? The amount of time dealing with a (passive) financial advisor is probably at least 10x the time it takes to sell & reallocate the money, especially if you only have to do it once. Can you swallow the pill, take the medicine, rip the bandage off, all at once? or maybe do an automatic sell in december & january to make the tax bill more tolerable? For what it is worth, I would just sell, put it all in VG Total US stock market for tax efficiency (if an after tax account), and don't touch after that.
We file MFJ. Regarding the separate, got it, and thanks for explaining.

Capital Gains of about $400K right now. I think I'm getting talked off the ledge... but basically I want to ensure this property remains separate. I'm not super worried about the taxes (I'd be in the highest bracket if I sell), but want to make sure I have a plan once I do sell.
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