Asked my advisor about fees and here's their reply

[Northern Flicker]

Last question would be if the assets are in a taxable account or tax-qualified retirement account? If the latter you may be able to use LifeStrategy or Target Retirement fund products and not even need an advisor.

Just to be clear. I have never heard that Lifestrategy or Target date funds are only available in retirement accounts.
If for some reason that is true, you can invest in balanced funds without an advisor.

You can invest in balanced funds in a taxable account, but it is often not advisable. It makes it difficult to manage taxes for each asset class separately and it may not be the most tax-efficient portfolio in a taxable account. It still might be worth it to save a 1% advisor fee, but maybe not to save a 0.3% advisory fee.

There is the Vanguard Tax-Managed Balanced Fund that might fit the needs of some investors as an all-in-one fund in taxable space.

[Northern Flicker]

DFTCX $47,500 US Core Equity Portfolio
DFTWX $21,500 World except US core equity
QTMRX $18,000 Large-cap momentum
DFSMX $13,700 short-term muni
DFTIX $13,000 intermediate muni bonds
BTIIX $18,000 Equity 500 Index
DGEIX $11,500 Global equity
DFUVX $10,600 US Large-cap value
DURPX $10,600 US High Profitability
AMOMX $1,500 Large-cap momentum
DFSVX $7800 US Small-cap value
DFSTX $6000 US Small-cap blend
DFVIX $9500 Int’l Value Developed Markets
ATSMX $9900 Small-cap momentum
ATIMX $9000 international momentum
DIHRX $4600 International profitability

I added fund descriptions. The portfolio is intended to be core diversified equity with tilts to value, momentum, and quality factors added.

I think it is fairly complex, but DFA funds are not sold other than through advisors because advisors are supposed to know what they are doing.

You may want to find out what the embedded capital gains are to understand the tax ramifications of moving the assets. You also may try to negotiate a lower AUM fee.

[Punta Cana DR]

OK funds are DFA....but they have to outperform indexes by 1.1 to 1 3% with AUM. That is a lot of headwind, but if not a DIY investor...that is the price you pay.

Not all will mow own lawn or manage investments, which is why we have services.

[triyoda]

They discuss the .35 expense ratio and trade price at length but never even mention why the AUM fee is so high.

Indeed. If, as he claims, there is "not much trading going on", and you haven't received advice from him in a decade, I can't help but wonder what he's actually doing to earn his fee.

Good question, but before everyone jumps to conclusions, the OP ought to benchmark the performance of their account over the management period. We can debate the idea that it is possible anyone can beat the market or if it is worth paying an advisor, but it is entirely within the realm of possibility these fees were well spent and the account was well managed and beat the market. It is also possible that little value was added for these fees, we don't have enough information to know. At first glance the number of funds looks a little excessive, so maybe not the most efficient asset deployment.

Likewise, if the OP ignored the account altogether for many years, it is entirely possible the 1.1% fee was well worth it to protect them from themselves either neglecting the account or making even worse investments.

To the OP, good for you for looking into your accounts and asking questions. You will get excellent advice here to guide your journey.

[tfb]

You can invest in balanced funds in a taxable account, but it is often not advisable. It makes it difficult to manage taxes for each asset class separately and it may not be the most tax-efficient portfolio in a taxable account. It still might be worth it to save a 1% advisor fee, but maybe not to save a 0.3% advisory fee.

The portfolio posted is about 90% stocks 10% muni. If we replace it with a balanced fund with 90% stocks 10% bonds, for example Vanguard Target Retirement 2045 Fund, the difference in after-tax return on the 10% taxable bonds in the target date fund versus munis is well below paying 0.3% on 100% of the portfolio (or 0.2% if we consider the higher ER in the target date fund).

[Northern Flicker]

The portfolio posted is about 90% stocks 10% muni. If we replace it with a balanced fund with 90% stocks 10% bonds, for example Vanguard Target Retirement 2045 Fund, the difference in after-tax return on the 10% taxable bonds in the target date fund versus munis is well below paying 0.3% on 100% of the portfolio (or 0.2% if we consider the higher ER in the target date fund).

Target Retirement funds have glide paths so TR2045 will not always be 10% bonds. And when it is less tax-efficient in the future with a larger bond allocation, there may be embedded capital gains in the stock portion that would prevent re-allocating without realizing the potentially taxable gains.

[Northern Flicker]

Good question, but before everyone jumps to conclusions, the OP ought to benchmark the performance of their account over the management period. We can debate the idea that it is possible anyone can beat the market or if it is worth paying an advisor, but it is entirely within the realm of possibility these fees were well spent and the account was well managed and beat the market.

One observation is that the momentum funds have negative loading on value, cancelling out some or all of the value tilts, and there is substantial large cap exposure. Whether or not you believe in the wisdom of size and value tilts, it is unclear to me that they are actually being achieved at the portfolio level as the advisor seems to have intended.

It is entirely possible that the portfolio behaves like an expensive 3-fund portfolio.

[passiveTiger]

John, how many funds do you have. Would you mind posting some of them along with ticker symbols?

Paul

Sure, heres what I see:

DFTCX $47,500
DFTWX $21,500
QTMRX $18,000
DFSMX $13,700
DFTIX $13,000
BTIIX $18,000
DGEIX $11,500
DFUVX $10,600
DURPX $10,600
AMOMX $1,500
DFSVX $7800
DFSTX $6000
DFVIX $9500
ATSMX $9900
ATIMX $9000
DIHRX $4600

There are a LOT of others but they're in small increments of a 2k-4k elsewhere. My head is sort of spinning with all the different funds I'm in!

That is crazy. You are in at least 16 different funds. I am guessing this is not a tax advantaged account, because I think one of those is a municipal bond fund.

Wow. Your "advisor" cannot possibly be a fiduciary, is he? If so, that word really has no meaning at all in investment advisory services.

I am sorry this has happened to you.

[Northern Flicker]

It is also odd that a DFA advisor is not using DFA tax-managed funds in a taxable account. Having access to a properly constructed portfolio using the best funds DFA has to offer for the particular situation is what you should expect from an advisor.

Playing around with factor regressions on portfoliovisualizer, the portfolio has weak size and value loadings for the samples available, and virtually no loading on momentum (slightly negative in fact). I think a very similarly performing portfolio could be constructed with 4 Vanguard funds:

54% VTSAX Total US Stock index
22% VTRIX Int’l Value Stock Fund
14% VIOV US Small-Cap Value
10% VWITX Intermediate Muni Bond Fund

I’m not suggesting this is (or isn’t) what should be held, but it would have an aggregate expense ratio of roughly .15%, would be more tax-efficient, and no advisor would be needed.

For tax efficiency, I likely would substitute either VTIAX or IXUS (total int’l stock index funds) for VTRIX above and call it good.

[johnsac]

Everyone, my sincerest thanks. I'm so appreciative of your feedback, instructions and insights. Some of you took an extraordinary amount of time to write out long posts and I'm stunned at your willingness to help. Simply awesome.b

[Blister]

Can only echo what others have said. Take time now to educate yourself about asset allocation and simplifying your portfolio. I feel your portfolio is way to complicated. With a fairly simple portfolio you can do as good as if not better than the majority of folks out there. You basically need only 3 funds or ETFs. Total stock market US, Total bond Market US and total international. You can do this yourself and save the AUM fee and even cut down on the trading and expense ratios.

Good luck and welcome to the forum