Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

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josh8906
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Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Tue Jun 12, 2018 11:43 am

Hi, I am trying to help my 75 years old mother in law. She is invested with Raymond James and has been for many years. She is wondering if she should swap to Vanguard to try to avoid Raymond James fees and if possible Vanguard could maybe help her investments grow more. Her Financial Advisor said her account doesn't have any management fees. Raymond James does collect commissions when buying and selling. I'm not sure of the expense ratios on all of the investments except the one I found off Morningstar for the open end mutual fund at 1.85%. Here is some details off the statement.

Total Ending Balance is $647,200.
Value is $117,865 in nine REITS/Tangibles
Value is $71,745 in one open end and five closed end mutual funds.
Value is $576,194 of fixed income in twelve municipal bonds.

She withdraws $3750 (Approx. 6%) from the account each month to help with expenses. There is approximately $190,000 of municipal bonds that is going to mature this year. The Financial Advisor wants to invest this money in individual stocks because he said municipal bonds wasn't paying much right now. When mentioning to Financial Advisor about maybe swapping to Vanguard he said Vanguard didn't have anything to generate her income. Any ideas on what she may need to do? Thanks for any help!

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Oak&Elm
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Oak&Elm » Tue Jun 12, 2018 11:51 am

With 9 REITS and 190k in muni bonds I assume this is a non-tax advantaged account. Raymond James is a full service brokerage, of course they charge fees,...for everything. Swap to Vanguard asap. Note Vanguard can hold your remaining muni-bonds if you choose to keep them

josh8906
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Tue Jun 12, 2018 12:05 pm

It's supposed to be a tax advantage account. There is actually $576,194.85 in municipal bonds. The $190,000 is from municipal bonds that is going to mature this year.

Nate79
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Nate79 » Tue Jun 12, 2018 12:29 pm

Yes, I would transfer to another low cost brokerage. Personally I would look into Schwab (maybe Fidelity) vs Vanguard. I would get an actual list of all the holdings and then check with Schwab and Vanguard if they can accept these funds and how much it would cost to sell and then invest the proceeds into low cost index funds. It may be wise to hold the bond funds until they mature depending on the specific details. It may be wise to hire a financial advisor on an hourly basis to look over the funds and advise what to do.

If you want to use Vanguard she could use for example Vanguard PAS service for automated investing (0.3%) or she could use some simple funds like Vanguard's Wellesley which is an active fund that is 1/3 stock and 2/3 bonds and some other index funds (Lifestrategy funds may also be an option).

ResearchMed
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by ResearchMed » Tue Jun 12, 2018 12:43 pm

josh8906 wrote:
Tue Jun 12, 2018 11:43 am
Hi, I am trying to help my 75 years old mother in law. She is invested with Raymond James and has been for many years. She is wondering if she should swap to Vanguard to try to avoid Raymond James fees and if possible Vanguard could maybe help her investments grow more. Her Financial Advisor said her account doesn't have any management fees. Raymond James does collect commissions when buying and selling. I'm not sure of the expense ratios on all of the investments except the one I found off Morningstar for the open end mutual fund at 1.85%. Here is some details off the statement.

Total Ending Balance is $647,200.
Value is $117,865 in nine REITS/Tangibles
Value is $71,745 in one open end and five closed end mutual funds.
Value is $576,194 of fixed income in twelve municipal bonds.

She withdraws $3750 (Approx. 6%) from the account each month to help with expenses. There is approximately $190,000 of municipal bonds that is going to mature this year. The Financial Advisor wants to invest this money in individual stocks because he said municipal bonds wasn't paying much right now. When mentioning to Financial Advisor about maybe swapping to Vanguard he said Vanguard didn't have anything to generate her income. Any ideas on what she may need to do? Thanks for any help!
[emphasis added]

She is taking 6% of what each month?

6% per month is 72% per year... the total would be depleted in less than two years.
(Even 6% per *year* is more than some people would recommend.)

RM
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josh8906
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Tue Jun 12, 2018 12:58 pm

Sorry that should be approximately 6% per year.

magicrat
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by magicrat » Tue Jun 12, 2018 1:02 pm

josh8906 wrote:
Tue Jun 12, 2018 12:05 pm
It's supposed to be a tax advantage account. There is actually $576,194.85 in municipal bonds. The $190,000 is from municipal bonds that is going to mature this year.
Why are their municipal bonds in a tax-advantaged account?

dbr
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by dbr » Tue Jun 12, 2018 1:14 pm

josh8906 wrote:
Tue Jun 12, 2018 12:05 pm
It's supposed to be a tax advantage account. There is actually $576,194.85 in municipal bonds. The $190,000 is from municipal bonds that is going to mature this year.
"Supposed to be" ? A tax advantaged account would be an IRA, either her own or one she inherited from someone. It would make no sense whatsoever for munis to be in such an account. On the other hand munis are tax exempt and hence a "tax advantaged" investment, but not a tax advantaged account. If her tax rates are low it probably doesn't make sense to be in munis, but more would have to be known.

By conventional analysis trying to withdraw at a rate of 6% a year or more from a portfolio that high in fixed income (or any portfolio, really) is likely to run out of money in less than 20 years or age 95. For a fifteen year time-line things would be more optimistic. Has her advisor given her any projections regarding the fate of this portfolio? With fees and expenses the time line to failure would be faster as the actual drain on the assets is probably closer to 7% or 8%.

Veritas Simplex
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Veritas Simplex » Tue Jun 12, 2018 1:14 pm

Munis in a client's IRA? As they say, good for the firm, good for the broker - 2 out of 3 ain't bad! This account sounds like a traditional full service brokerage model which does not charge AUM fees, but makes money on the spread trading the bonds from their inventory, and commissions on the REITs, tangibles and mutual funds. Agree with the advice to try Schwab for the transfer; she may may get a bonus and their brokerage service is superior to Vanguard IMHO.

josh8906
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Tue Jun 12, 2018 2:52 pm

Sorry for the confusion. I was thinking of it being a tax advantage account because of the munis being tax exempt. It is a regular tax account.

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BL
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by BL » Tue Jun 12, 2018 4:11 pm

I really think Vanguard PAS would be ideal for her. She is used to having someone to consult with, and I fear some other brokerage might take advantage of that to sell her expensive products (maybe not as bad as current one sounds). At least she could call PAS, with current holdings list in hand, and see what they recommend. If she doesn't like them, no harm done. (Come back here with recommendation and get opinions.) I understand they are easy to drop, if that is later decided, and she would be left with a reasonable, low-ER, well-balanced portfolio with suitable AA.

I don't know if PAS manages individual muni bonds, but you could ask about that and CDs as well. They do have a Prime Money Market which is paying a decent 1.95% SEC yield now and going up regularly, while bonds are falling in value but paying out more dividends.

Income can come from selling stock funds as well as dividends, but a lot of folks seem to think it has to come from dividends. It is a wash as far as portfolio is concerned.

dbr
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by dbr » Tue Jun 12, 2018 5:16 pm

I suspect her income is not enough to justify holding individual munis, but we need the data to know. I bet this is a combination of her having expressed some tax aversion and RJ finding an opportunity to earn a spread on the trade.

goblue100
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by goblue100 » Tue Jun 12, 2018 5:38 pm

I would convince her to take the plunge and move. While she can certainly stand a conservative portfolio, it sounds she is 90% bonds. She is withdrawing 7% a year, $3750 X 12 is $45,000. $45,000 of a %647,200 portfolio is 6.9%. Even for a 75 year old, that is a little high for the portfolio to survive 20 years. I would look to guide her to a 30 / 70 portfolio and take 3100 a month.
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PFInterest
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by PFInterest » Tue Jun 12, 2018 5:44 pm

josh8906 wrote:
Tue Jun 12, 2018 11:43 am
Hi, I am trying to help my 75 years old mother in law. She is invested with Raymond James and has been for many years. She is wondering if she should swap to Vanguard to try to avoid Raymond James fees and if possible Vanguard could maybe help her investments grow more. Her Financial Advisor said her account doesn't have any management fees. Raymond James does collect commissions when buying and selling. I'm not sure of the expense ratios on all of the investments except the one I found off Morningstar for the open end mutual fund at 1.85%. Here is some details off the statement.

Total Ending Balance is $647,200.
Value is $117,865 in nine REITS/Tangibles
Value is $71,745 in one open end and five closed end mutual funds.
Value is $576,194 of fixed income in twelve municipal bonds.

She withdraws $3750 (Approx. 6%) from the account each month to help with expenses. There is approximately $190,000 of municipal bonds that is going to mature this year. The Financial Advisor wants to invest this money in individual stocks because he said municipal bonds wasn't paying much right now. When mentioning to Financial Advisor about maybe swapping to Vanguard he said Vanguard didn't have anything to generate her income. Any ideas on what she may need to do? Thanks for any help!
actually thats about 7%.
yes you need to move. literally anywhere else should be better (schwab, fidelity, TDA, Vanguard).
call Vanguard or wherever and find out what you can transfer.
Tell RJ to stop buying/selling on the accounts and send all dividends to a sweep fund or bank account (do not reinvest).

Veritas Simplex
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Veritas Simplex » Tue Jun 12, 2018 8:25 pm

Be aware that Vanguard PAS will want her to diversify the portfolio by selling most or all her munis and reinvest in Vanguard funds. Make sure she is prepared to accept a complete restructure of the portfolio. Agree that portfolio could benefit from a higher stock allocation. Again, make sure she is prepared to accept greater fluctuations in portfolio value than she's been accustomed to.

pkcrafter
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by pkcrafter » Tue Jun 12, 2018 8:48 pm

josh8906 wrote:
Tue Jun 12, 2018 2:52 pm
Sorry for the confusion. I was thinking of it being a tax advantage account because of the munis being tax exempt. It is a regular tax account.
OK, if it's a taxable account we can harp on REITS being in it. They are very tax-inefficient. Are these non-traded REITS??

I'd bet the advisor made 5% off the bond sales as well. No question, get her out of there!

Take a look at Schwab or Fidelity.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

josh8906
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Wed Jun 13, 2018 8:31 am

The REITS are Blackstone Mortgage, Crossamerica Partners, Energy Transfer Partners, Enterprise Products, Fortress, Genesis Energy, Landmark Infrastructure, Two Harbors and Uniti Group. I'm not sure if they are non traded are maybe some of both traded and non traded.

Jack FFR1846
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Jack FFR1846 » Wed Jun 13, 2018 8:36 am

josh8906 wrote:
Wed Jun 13, 2018 8:31 am
The REITS are Blackstone Mortgage, Crossamerica Partners, Energy Transfer Partners, Enterprise Products, Fortress, Genesis Energy, Landmark Infrastructure, Two Harbors and Uniti Group. I'm not sure if they are non traded are maybe some of both traded and non traded.
What a bunch of junk!

Move her out. Have her do a target date fund and be done with it. No need for PAS, who pretty much listen to her, see her age and create a portfolio which is exactly the same as one of their target date funds. Skip the PAS fees.
Bogle: Smart Beta is stupid

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Oak&Elm
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by Oak&Elm » Wed Jun 13, 2018 1:58 pm

Josh, I had/have a similar portfolio that I inherited when my parents passed. It was set up by their friendly EJ advisor. Typical stuff, multiple overlapping class A American funds with high er’s. But they also had about 20+ individual muni bonds all providing at least 4% tax free returns. As you already know the high interest muni bonds are being called at first callable date, my group of 20+ is now down to 12 with 8 more likely to be called by 2019. I mention this because the bonds will eventually take care of themselves when called. When I moved my parents investments from EJ to Vanguard I simply sold the mutual funds and transfered the muni bonds in-kind. I’m sure Vanguard would be happy to hold them for your mom as well. I would suggest you don’t sell the muni bonds, just let them mature, unless you’re an expert at selling bonds on the secondary market. Since this is a taxable account selling anything will trigger cap gains, but I would thoughtfully begin selling what other funds you have and buying into the standard 3 fund BH portfolio. Since you already are heavy on bonds maybe just consider replacing with TSM both US and international. Vanguard also has a managed payout fund which may work for your mom. I you need help Vanguard does have the PAS, I have no opinion on that since I have never used it. One more very important thing is if you move away from RJ make sure you know what the original purchase price was of each individual muni bond, can be a tax nightmare, found this out the hard way.

josh8906
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by josh8906 » Tue Jun 19, 2018 10:58 am

Thanks to everyone for their help. I talked with Vanguard and they said everything would transfer over "in kind". My next step involves trying to figure out what to sell first and when for tax purposes. All the munis are from 5 to 5.250 percent so we are going to hold on them till they mature or called.

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David Jay
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Re: Need Investment Advice! Continue with Raymond James or Swap to Vanguard!

Post by David Jay » Tue Jun 19, 2018 11:34 am

josh8906 wrote:
Tue Jun 19, 2018 10:58 am
All the munis are from 5 to 5.250 percent so we are going to hold on them till they mature or called.
Agree!
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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