Advice Request: Considering removing advisor from IRA

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Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Advice Request: Considering removing advisor from IRA

Post by Peppermint » Thu Aug 16, 2018 9:25 am

Hi everyone!

This is my very first (very long) post here. I just signed up for an account but have been reading the site for a couple years now (I stumbled in from the MMM site way back when.) I am seeking advice for how to move forward with my portfolio, specifically the IRA and taxable Schwab accounts I have.

I am currently 53 years old (just turned so in June this year), female and really want to early retire in 2 years at 55. Plan is to travel and live out of the US the bulk of my retirement, starting in lower cost (better, more reliable) healthcare areas (Mexico, South America, and branching out from there etc.). Not looking to necessarily buy a home once retired, more likely rent so I can move (or remain in one spot) as often as I like and remain flexible.

I am recently divorced (although, long story, am back with ex-husband); when we divorced we each (by agreement) kept our retirement accounts separate so I walked away with everything I had earned in my IRA/401K, and he with his. We divided up equity from the house sold, and proportionally shared the after-tax Schwab account that was 90% built via after tax 401K and individual contributions I made; only a small amount in that account was his and he was dispersed that amount.

I currently have the following accounts in my name only:

Emergency Fund: 15 months living expenses on hand (in an Ally Savings and No Penalty CD – this is a new account I just opened in July to start earning some real interest on this cash that’s just been sitting in a credit union savings account.)

Regular Fund for recurring monthly bills: Credit Union account – where my direct deposit goes. Also contains ~4 months of expenses; has a local branch so I can go into see a teller which is the main reason why I am keeping it

401K at Fidelity – Fully vested. I contribute the max pre-tax including the additional amount I can since I’m over 50. Plan is to use this account when I turn 50 in 2020 and retire since I can begin withdrawing from it (as long as I’m still employed by current employer at the time of retirement in 2020). Employer matches up to 6%.

IRA Account (at Schwab) has an Advisor attached from a separate firm (not a Schwab advisor) – the advisor fee is .7% This account is the bulk of my retirement; contains rollover 401K from prior firm I worked at plus a payout of my Pension I received when I left that firm (did not want to risk leaving it at the old firm so took the cash rollover into an IRA). This account was rolled into Schwab in March 2014 (from another advisor).

After Tax investment account (at Schwab) – no advisor – but contains some individual stocks, funds and one ETF. Also rolled into a new Schwab account in March 2014 (from another advisor).

Annuity – Very small annuity at Prudential (“Prudential Defined Income Variable” with a 6% guaranteed income growth rate) that was funded a few years ago (8/13/2013) out of my IRA account (a former investment advisor’s recommendation; he’s not my current advisor.)

Debt: Mortgage: Townhome purchased last year in my name only – rate: 4.250% 30 year fixed – no other recurring debt other than utilities, food, misc, gym membership, Visa (paid in full each month).

Tax Filing Status: 2017 return: Single
Tax Rate: Federal 2017 return: 25%; State 2017 return: 5.75%
State of Residence: Virginia
Age 53

Portfolio size (Schwab IRA/Fidelity 401K/Schwab Taxable/Annuity) ~$1.69M
Desired Asset Allocation – Unsure
Desired International allocation – Not really looking for international investments so I would say, as low as makes sense?

IRA account breakdown (Schwab): (Note if someone can advise how to paste in the below in a way that makes it more legible I am happy to revise)

Symbol Description % Of Account Price Change % Gain/Loss %
T A T & T INC 1.49% 1.39% -6.69%
ABB ABB LTD F SPONSORED ADR 1 ADR REPS 1 ORD SHS 1.52% 0.80% -12.36%
ACN ACCENTURE PLC F CLASS A 2.45% 0.92% 104.03%
AMGN AMGEN INC. 2.20% -0.46% 61.01%
ANTM ANTHEM INC 3% 0.27% 171%
APA APACHE CORP 0.79% 0.14% -49.70%
AAPL APPLE INC 6.41% 0.89% 174.03%
ADP AUTO DATA PROCESSING 2.40% -0.08% 112.44%
BHGE BAKER HUGHES A G E COMPA CLASS A 0.78% 0% -50.92%
BWA BORG WARNER INC 0.85% 1.75% -13.48%
CACI C A C I INC CLASS A 3.51% 3.09% 151.28%
CDK CDK GLOBAL INC 0.38% 0.35% 111.80%
CE CELANESE CORP 1.09% 0.59% 123.77%
CHKP CHECK PT SOFTWARE F 1.73% 0.44% 67.79%
CNK CINEMARK HOLDINGS 1.48% 1.28% -4.21%
DE DEERE & CO 2.60% 1.23% 61.85%
DKS DICKS SPORTING GOODS 0.28% 0.69% -20.25%
D DOMINION ENERGY INC 1.59% -0.05% -10.05%
DWDP DOWDUPONT INC 2.14% 0.29% 39.67%
XOM EXXON MOBIL CORP 1.76% 0.62% -12.44%
GIS GENERAL MILLS INC 1.41% 0.87% -10.18%
IBM IBM CORP 1.37% 0.78% -23.56%
JPM J P MORGAN CHASE & CO 2.17% 1.03% 104.93%
JNJ JOHNSON & JOHNSON 1.73% 0.48% 35.53%
KMI KINDER MORGAN INC 0.88% 0.48% -57.11%
MSFT MICROSOFT CORP 3.27% 0.43% 172.91%
OMC OMNICOM GROUP INC 1.82% 1.19% -3.18%
PKI PERKINELMER INC 2.55% 0.25% 86.51%
SYK STRYKER CORP 2.54% 0.94% 105.16%
SYY SYSCO CORP 2.52% -0.87% 105.09%
TROW T ROWE PRICE GROUP 2.62% 0.07% 55.64%
KO THE COCA-COLA CO 2.09% 0.12% 18.60%
TRV TRAVELERS COMPANIES 2.21% 0.96% 52.85%
UPS UNITED PARCEL SRVC CLASS B 1.59% 0.18% 6.79%
VZ VERIZON COMMUNICATN 1.62% 0.91% 13.94%
V VISA INC CLASS A 1.60% 0.62% 7.73%
WBA WALGREENS BOOTS ALLI 1.57% 0.77% 6.92%
XPER XPERI CORP 00500 0.37% -0.91% -20.59%
031162CJ7 AMGEN INC. 2.6%26 DUE 08/19/26 1.04% N/A -1.77%
031162BM1 AMGEN INC. 3.875%21 DUE 11/15/21 2.31% N/A -2.54%
94973VAS6 ANTHEM INC 4.35%20 DUE 08/15/20 1.55% N/A -5.31%
037411AX3 APACHE CORP 3.625%21 TENDER OFFER EXP: 08/22.09/06/2018 1.14% N/A -4.93%
037833AK6 APPLE INC 2.4%23 DUE 05/03/23 1.46% N/A 3.05%
25468PCW4 DISNEY WALT CO N 2.35%22 DUE 12/01/22 1.46% N/A -0.60%
26054LPP2 DOW CHEMICAL CO 3.65%22 DUE 03/15/22 1.51% N/A 0.16%
370334BM5 GENERAL MILLS IN 3.15%21 DUE 12/15/21 1.50% N/A -3%
459200HE4 IBM CORP 1.875%19 DUE 05/15/19 1.50% N/A 0.07%
46625HRX0 J P MORGAN CHAS 3.625%27 DUE 12/01/27 1.80% N/A -4.57%
46625HRL6 J P MORGAN CHASE 2.7%23 DUE 05/18/23 1.83% N/A -4.43%
539830BF5 LOCKHEED MARTIN C 2.5%20 DUE 11/23/20 1.49% N/A -0.04%
594918BQ6 MICROSOFT CORP 2%23 DUE 08/08/23 0.72% N/A -5.57%
681919AZ9 OMNICOM GROUP I 3.625%22 DUE 05/01/22 2.26% N/A -0.83%
863667AF8 STRYKER CORP 3.375%24 DUE 05/15/24 1.87% N/A 0.03%
89417EAG4 TRAVELERS COMPANI 3.9%20 DUE 11/01/20 1.54% N/A -4.74%
931142CU5 WAL-MART STORES 3.625%20 DUE 07/08/20 2.30% N/A -4.13%
Cash & Money Market -- 0.33% -- --

After tax account (Schwab): (Note if someone can advise how to paste in the below in a way that makes it more legible I am happy to revise)

Symbol Description % Of Account Gain/Loss % Reinvest Dividends?
AMZN AMAZON.COM INC 31.09% 401.10% No
AAPL APPLE INC 9.28% 469.76% No
BWA BORG WARNER INC 2.93% 5.76% No
CBS CBS CORP CLASS B 13.86% 6.57% No
CE CELANESE CORP 7.59% 88.60% No
TSLA TESLA INC 3.30% 10.89% No
SPY SPDR S&P 500 ETF 4.65% 16.39% No
JACTX JANUS HENDERSON FORTY FD CL T 6.11% 17.05% No
JATTX JANUS HENDERSON TRITON FD CL T 6.11% 69.94% No
OAKBX OAKMARK EQUITY & INCOME FD INV 11.16% -0.54% Yes
SWRXX SCHWAB INVESTOR MONEY FD 3.33% 0% --
SWVXX SCHWAB VALUE ADVANTAGE MONEY FUND 0.60% 0% --
Cash & Money Market -- 0% -- --

401K (Fidelity): (our company was recently acquired and the funds in the 401K are “special” for this employer so there’s less publically available info for these funds. I did try to get advice on how to invest when we moved to the new 401K plan from my current advisor. Net net I am not super worried about the investment directions in the Fidelity 401k fund, but below is what I have so far)

Name/Initial Purchase Date Asset Class Category % Invested YTD
SM MIDCAP CORE INDEX 12/29/2017 Stock Investments Mid-Cap Blend 24.68% 8.22%
EQUITY INDEX FUND 12/29/2017 Stock Investments Large Cap Blend 21.12% 6.66%
US LARGE CAP EQUITY 12/29/2017 Stock Investments Large Cap Blend 15.98% 8.63%
PMP 2035 FUND 12/29/2017 Blended Fund Investments Other 14.18% 0.48%
BOND FUND 12/29/2017 Bond Investments Intermediate-Term 9.10% -0.78%
INTERNATIONAL INDEX 12/29/2017 Stock Investments International 8.11% -6.07%
INTERNATIONAL EQUITY 12/29/2017 Stock Investments Foreign 3.78% -4.60%
BOND INDEX FUND 12/29/2017 Bond Investments Intermediate-Term 3.04% -1.09%

~~~~~~~~~~~

My big questions are the following:

1) Schwab IRA: I’m considering removing my advisor from my IRA account at Schwab, but am soooo scared to do so because there are so many stocks and fixed income items in there that I am afraid to make a move. I have rationalized remaining by telling myself that .7% isn’t toooo much to spend for peace of mind so I don’t have to worry/think about this. I also want to begin Roth Conversions when I retire (target 2020) and am somewhat afraid of doing conversions without their (or someone’s) advice esp. given how complex the account currently is with all the stocks and fixed income items. (If it were just stocks it might be different, but the fixed income items with all those end dates … I’m totally lost in how I would deal with those.)

Note: I’d prefer not to move this account from Schwab for a variety of reasons, one being that I have called them frequently for help on my Taxable account and feel that their responsiveness and ability to break things down for me is an important factor. I also really like their website layout a lot.

I also know that I can leave the current non-Schwab advisor for a Schwab advisor – they (advisors at Schwab) are hesitant to talk to me since I already have an advisor tied to my account. But looking online they charge .9% for “private client” (which obviously wouldn’t work because its higher than I pay now.)

Their “Schwab Intelligent Portfolio” of ETFs costs less (.25%), but SIP/SIA requires a good portion to remain in cash at low rates (per what I’ve read on Bogleheads), so it’s not ideal either. Honestly if I could get this IRA down to a few funds to manage I might be willing to try to DIY entirely with a few Schwab Mutual/ETF funds …

One major point to add: this overall IRA account is up 24%. So am I worrying about something that I shouldn’t (i.e., is it worth .7% to stay with this advisor given the performance I am seeing?)

2) Schwab Taxable: I am nervous about my after tax Schwab account because it’s filled with stocks/funds that have been performing fairly well but I’m afraid I may lose out if I don’t do something to reduce exposure risk. So far the account is up +70%. I recently (last year) sold a few Amazon shares just to start “taking money off the table” for that stock given the gains, and plan to sell a few more this year. I view this as a taxable account that will help me in early retirement and don’t want to risk losing it, but since its after tax I can’t really sell it off without the capital gains hit (there are no real losses to harvest currently). And I don’t want to absorb too much of cap gains in any given tax year.

Appreciate any advice for these two accounts as I consider my next move. Thanks!

b42
Posts: 280
Joined: Thu Apr 11, 2013 7:00 pm

Re: Advice Request: Considering removing advisor from IRA

Post by b42 » Thu Aug 16, 2018 11:50 am

Welcome to the forums!

You mention that the bulk of your retirement funds is in your IRA. Assuming $1 million of the $1.69 million is located there, that means you are paying $7,000 a year in advisor fees. Per year. If you want to keep an advisor due your unique retirement plans, you could always switch over to a fee for service advisor that you would pay hourly. That would get you similar, if not better service, for a much lower cost.

As for asset allocation, I would spreadsheet out all your holdings and figure out the estimated US Stock/International Stock/Bond holdings to see where you are at now. As a start, something like a 60% Stock/40% bond would be appropriate, if not a bit conservative.

I count 56 holdings in your IRA. That's an incredible number of stocks and funds, and sounds like a nightmare to manage. One option is to roll over these funds to another company (Like Fidelity or Vanguard, or you could even stay at your current provider), sell everything (as long as it's in the IRA there would be no tax consequences), and do a three fund portfolio:

viewtopic.php?f=10&t=88005

So for example, you could do the following with $1 million:

50% Vanguard US Stock Market ($500,000)
40% Vanguard US Bond Market ($400,000)
10% International Stock Market ($100,000)

Something this simple would be more diversified than your current portfolio with no overlap, have a low fund expense ratio, and makes it much easier to rebalance and adjust for how much risk you want to take (want more risk? Sell some of the bond fund and buy either of the stock funds).

You are right to be concerned about the .7% fee even though the account is up 24%. Over time, costs that seem relatively small add up:

https://www.bogleheads.org/wiki/Expense_ratios

Remember that when the market eventually performs poorly, your advisor is still taking his 0.7% fee. Or to put it another way, what is your advisor doing to justify his fee? Does his handling of your accounts give you confidence that he has the skills and knowledge to beat a passive market index portfolio? For the 24% return, is there a benchmark that you can use to compare?

It may help to think of your entire portfolio as one big account. It's more important to have your desired asset allocation rather than being in the "right" investments.

You mention that you have a decent amount of capital gains in your taxable account. Depending on your retirement situation, there may be some options:

1. If you give money to charity regularly, you may be able to gift them appreciated stock to avoid the capital gains taxes
2. If you are retiring young and living out of the country where the cost of living is cheaper, your income may be low enough where you can start to sell of a portion of your holdings every year and stay under the income limit to avoid capital gains taxes.

viz
Posts: 91
Joined: Fri May 04, 2018 11:22 pm

Re: Advice Request: Considering removing advisor from IRA

Post by viz » Thu Aug 16, 2018 12:12 pm

Peppermint wrote:
Thu Aug 16, 2018 9:25 am
Hi everyone!

This is my very first (very long) post here. I just signed up for an account but have been reading the site for a couple years now (I stumbled in from the MMM site way back when.) I am seeking advice for how to move forward with my portfolio, specifically the IRA and taxable Schwab accounts I have.
welcome to the forum. I am sure you will get some great responses here. I have mine below (not so great response)
Peppermint wrote:
Thu Aug 16, 2018 9:25 am
Portfolio size (Schwab IRA/Fidelity 401K/Schwab Taxable/Annuity) ~$1.69M
Desired Asset Allocation – Unsure
Desired International allocation – Not really looking for international investments so I would say, as low as makes sense?
Asset Allocation: https://www.bogleheads.org/wiki/Investi ... allocation
what is your annual expenses? you mentioned early retirement and savings is just one part of the equation
Peppermint wrote:
Thu Aug 16, 2018 9:25 am
IRA account breakdown (Schwab): (Note if someone can advise how to paste in the below in a way that makes it more legible I am happy to revise)

Symbol Description % Of Account Price Change % Gain/Loss %
T A T & T INC 1.49% 1.39% -6.69%
...
Cash & Money Market -- 0.33% -- --
this is way too many. For IRA, I would suggest sell everything and move to simpler portfolio. there are no tax consequences here
https://www.bogleheads.org/wiki/How_to_ ... _portfolio
Peppermint wrote:
Thu Aug 16, 2018 9:25 am
One major point to add: this overall IRA account is up 24%. So am I worrying about something that I shouldn’t (i.e., is it worth .7% to stay with this advisor given the performance I am seeing?)
what time period is this 24% gain over? Is it annual rate?
Peppermint wrote:
Thu Aug 16, 2018 9:25 am

2) Schwab Taxable: I am nervous about my after tax Schwab account because it’s filled with stocks/funds that have been performing fairly well but I’m afraid I may lose out if I don’t do something to reduce exposure risk. So far the account is up +70%. I recently (last year) sold a few Amazon shares just to start “taking money off the table” for that stock given the gains, and plan to sell a few more this year. I view this as a taxable account that will help me in early retirement and don’t want to risk losing it, but since its after tax I can’t really sell it off without the capital gains hit (there are no real losses to harvest currently). And I don’t want to absorb too much of cap gains in any given tax year.
Are these long term or short term gains? I would offload losers and long term gains first & move the money to portfolio with higher bonds.
I think the key overall is to figure out if your portfolio can sustain you for next 30 years. You should be looking at <4% withdrawal rate for good chance of success. checkout https://www.portfoliovisualizer.com/

Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Re: Advice Request: Considering removing advisor from IRA

Post by Peppermint » Thu Aug 16, 2018 2:06 pm

Thanks for replying!
~~~~~~~~~~
to viz:

Re your an annual expense question I probably spend more than I need to be right now (I know I do :shock: ), but once in retirement I'm planning $50,000 annual at most. Plan is to move out of US for lowered expenses. The $50,000 is top end and would include any healthcare, taxes, etc.

24% gain is since the IRA account moved to Schwab March 2014

Re after tax account they are all long term (except Tesla). No losers in there to offset any gains. (Good problem to have I know)

Thanks!
~~~~~~~~
to b42:

Re IRA account: Yep absolutely, the .7% seems small-ish (it translates to about $8400 a year) but the market is up. So yes I am also wondering what they are really doing to help me as it seems its been "most boats are rising" so I can't help but be benefiting from that. I will ask them what their for fee hourly rate is and see what they say ...

Thanks!

viz
Posts: 91
Joined: Fri May 04, 2018 11:22 pm

Re: Advice Request: Considering removing advisor from IRA

Post by viz » Thu Aug 16, 2018 2:45 pm

Peppermint wrote:
Thu Aug 16, 2018 2:06 pm
Thanks for replying!
~~~~~~~~~~
to viz:

Re your an annual expense question I probably spend more than I need to be right now (I know I do :shock: ), but once in retirement I'm planning $50,000 annual at most. Plan is to move out of US for lowered expenses. The $50,000 is top end and would include any healthcare, taxes, etc.
At $50k, you need about 1.25M for safe withdrawal. Personally, I would be more comfortable with 1.5M at least so you look to be doing good in this respect.
Peppermint wrote:
Thu Aug 16, 2018 2:06 pm
Thanks f
24% gain is since the IRA account moved to Schwab March 2014
the 24% over that period is poor performance IMHO. If you have a 60/40 portfolio, you would have seen 40% gain
https://goo.gl/1j8LKW
A more conservative 40/60 portfolio would have been 30% up
https://goo.gl/9ckHWB

This is of course assuming that you had all the money invested day 1 which I don't know if it is true. Also, is 24% after expenses as you would have paid ~ 40K in fees in last 4+ years

Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Re: Advice Request: Considering removing advisor from IRA

Post by Peppermint » Thu Aug 16, 2018 3:11 pm

viz,

Yes the funds were all moved into Schwab at once in March 2014.

And yikes. :shock: Thanks for those links. Ugh. I am paid up through end of September for the AUM (but they would pro-rate and return a portion if I fire them sooner).

So if I do sell out of those stocks what are the recommendations for a simplified 2-3 fund Schwab portfolio? I know everyone recommends Vanguard but I would like to stay at Schwab - can someone recommend the 2-3 funds that I should investigate at Schwab for a semi-hands off portfolio?

Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Re: Advice Request: Considering removing advisor from IRA

Post by Peppermint » Thu Aug 16, 2018 3:45 pm

So I just found this page:

https://www.bogleheads.org/wiki/Three-f ... head-style

And am reviewing the below 3 funds:

SCHB - Schwab U.S. Broad Market ETF
SCHF - Schwab International Equity ETF
SCHZ - Schwab U.S. Aggregate Bond ETF

Thoughts anyone?

viz - using that Portfolio Analyzer link you provided, the difference between these 3 and my current basket of stocks, fixed incomes, also shows that I have missed out on a similar amount of portfolio increase had I just used a 3 fund portfolio.

b42
Posts: 280
Joined: Thu Apr 11, 2013 7:00 pm

Re: Advice Request: Considering removing advisor from IRA

Post by b42 » Sat Aug 18, 2018 7:59 am

The 3 fund portfolio you have listed above is excellent. The only "issue" I see is that emerging markets is not included in the international ETF (I don't see an international equity ETF at Schwab that covers all non-us companies), but their mutual fund Schwab International Index (SWISX) appears to. But overall looking at the big picture emerging markets isn't that huge of a concern (the actual percentage of your portfolio would be small).

That portfolio would have rock-bottom costs. Taking even the highest expense ratio, 0.06%, for a million dollar portfolio would cost you $600 a year. So you are already thousands ahead of the advisor who would have to make up that difference in returns just to break even.

Also, think of how easy that portfolio is to manage. You could explain it to anyone in 2 minutes, rather than diving into the myriad holdings you have now.

dogagility
Posts: 160
Joined: Fri Feb 24, 2017 6:41 am

Re: Advice Request: Considering removing advisor from IRA

Post by dogagility » Sat Aug 18, 2018 8:26 am

Peppermint wrote:
Thu Aug 16, 2018 3:45 pm
SCHB - Schwab U.S. Broad Market ETF
SCHF - Schwab International Equity ETF
SCHZ - Schwab U.S. Aggregate Bond ETF

Thoughts anyone?
Agree this a great choice of funds.
At the least, get your IRA money out of you "advisor's" account and into such a three-fund portfolio. I would also suggest a 60%/40% stock/bond allocation with 30% of your total stock allocation in international.

Simplifying your investment portfolio and learning some more about investing (it's not that difficult using the Boglehead approach) will make your retirement much less stressful. And save you large money each year by not paying your "advisor".

dogagility
Posts: 160
Joined: Fri Feb 24, 2017 6:41 am

Re: Advice Request: Considering removing advisor from IRA

Post by dogagility » Sat Aug 18, 2018 8:27 am

dogagility wrote:
Sat Aug 18, 2018 8:26 am
Peppermint wrote:
Thu Aug 16, 2018 3:45 pm
SCHB - Schwab U.S. Broad Market ETF
SCHF - Schwab International Equity ETF
SCHZ - Schwab U.S. Aggregate Bond ETF

Thoughts anyone?
Agree this a great choice of funds.
At the least, get your IRA money out of you "advisor's" account and into such a three-fund portfolio. Consider your entire retirement portfolio as one entity. I would also suggest a 60%/40% stock/bond allocation across your entire portfolio with 30% of your total stock allocation in international.

Simplifying your investment portfolio and learning some more about investing (it's not that difficult using the Boglehead approach) will make your retirement much less stressful. And save you large money each year by not paying your "advisor".

JW-Retired
Posts: 6875
Joined: Sun Dec 16, 2007 12:25 pm

Re: Advice Request: Considering removing advisor from IRA

Post by JW-Retired » Sat Aug 18, 2018 9:13 am

Peppermint wrote:
Thu Aug 16, 2018 3:45 pm
So I just found this page:

https://www.bogleheads.org/wiki/Three-f ... head-style

And am reviewing the below 3 funds:

SCHB - Schwab U.S. Broad Market ETF
SCHF - Schwab International Equity ETF
SCHZ - Schwab U.S. Aggregate Bond ETF

Thoughts anyone?
Along with the 0.7% AUM fee being too expensive, your ghastly 50-something number of different funds & individual equities is obviously impossible for most people to manage. Wily advisors often do this just to make investing seem so very complicated you stay on their hook... and it works! Does this advisor also do a lot of churning the mix to get more sales commissions?

I would definitely quit the advisor and sell everything in your pre-tax accounts immediately. Replace them with a low single digit number of index mutual funds and/or ETFs you can manage yourself. (IMO, mutual funds are a little easier than ETFs to manage.) Anyway, you will find folks here will be happy to help with specifics.

Once you have a 3-fund or 4-fund portfolio similar to the above, there is almost nothing you need to do to manage it. Maybe once every year or two, you might take make a small change to re-balance your amounts of US vs International equities and the percentage of bonds.

The taxable account has tax implications in fixing it, so you should figure out what those are before you do very much with it.
JW
Again, welcome to the forum!
Retired at Last

Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Re: Advice Request: Considering removing advisor from IRA

Post by Peppermint » Sat Aug 18, 2018 11:35 am

Thank you all for the input on the 3 fund ETF options at Schwab. I agree there's a bagillion stocks in my account that just make it confusing. I would *maybe* accept that if I were getting comparable (or better) returns, but analyzing various simple 3 fund options using that Backtest Portfolio site makes it clear that I am getting nothing much for the $ I am paying.

I do have an additional couple of questions on the Fixed Income options though.

These are (pardon my ignorance) Bonds right? And I do see where they periodically pay $$ out into my IRA.

Here are the fixed income items arranged in order (I think) based on the call/due (?) dates. Right now this represents ~27% of my IRA.

Symbol Description
037411AX3 APACHE CORP 3.625%21 TENDER OFFER EXP: 08/22.09/06/2018
459200HE4 IBM CORP 1.875%19 DUE 05/15/19
931142CU5 WAL-MART STORES 3.625%20 DUE 07/08/20
94973VAS6 ANTHEM INC 4.35%20 DUE 08/15/20
89417EAG4 TRAVELERS COMPANI 3.9%20 DUE 11/01/20
539830BF5 LOCKHEED MARTIN C 2.5%20 DUE 11/23/20
031162BM1 AMGEN INC. 3.875%21 DUE 11/15/21
370334BM5 GENERAL MILLS IN 3.15%21 DUE 12/15/21
26054LPP2 DOW CHEMICAL CO 3.65%22 DUE 03/15/22
681919AZ9 OMNICOM GROUP I 3.625%22 DUE 05/01/22
25468PCW4 DISNEY WALT CO N 2.35%22 DUE 12/01/22
46625HRL6 J P MORGAN CHASE 2.7%23 DUE 05/18/23
594918BQ6 MICROSOFT CORP 2%23 DUE 08/08/23
037833AK6 APPLE INC 2.4%23 DUE 05/03/23
863667AF8 STRYKER CORP 3.375%24 DUE 05/15/24
031162CJ7 AMGEN INC. 2.6%26 DUE 08/19/26
46625HRX0 J P MORGAN CHAS 3.625%27 DUE 12/01/27

So my next questions are as follows:

1) Should I leave these as is for now (instead of selling them all immediately and putting the $ into SCHZ (Schwab U.S. Aggregate Bond ETF), and instead sell them at those "DUE" dates above? I honestly don't know how these things work (which I'm sure my advisor relies on :| ).

2) If I should sell some now, how do I know which ones to sell?

3) Does SCHZ pay fixed income back into my account? It doesn't appear to based on the description below ... Or is this return represented in the price of the fund moving (ideally) up?

The Schwab site describes the SCHZ Fund Strategy as follows:
The investment seeks to track as closely as possible- before fees and expenses- the total return of the Bloomberg Barclays US Aggregate Bond Index. The fund will invest at least 90% of its net assets in securities included in the index. The index is a broad-based benchmark measuring the performance of the U.S. investment grade- taxable bond market- including U.S. Treasuries- government-related and corporate bonds- mortgage pass-through securities- commercial mortgage-backed securities- and asset-backed securities that are publicly available for sale in the United States.

Thank so much for helping me with this!

JW-Retired
Posts: 6875
Joined: Sun Dec 16, 2007 12:25 pm

Re: Advice Request: Considering removing advisor from IRA

Post by JW-Retired » Sat Aug 18, 2018 5:25 pm

Peppermint wrote:
Sat Aug 18, 2018 11:35 am
Here are the fixed income items arranged in order (I think) based on the call/due (?) dates. Right now this represents ~27% of my IRA.
Symbol Description
037411AX3 APACHE CORP 3.625%21 TENDER OFFER EXP: 08/22.09/06/2018
459200HE4 IBM CORP 1.875%19 DUE 05/15/19
931142CU5 WAL-MART STORES 3.625%20 DUE 07/08/20
94973VAS6 ANTHEM INC 4.35%20 DUE 08/15/20
89417EAG4 TRAVELERS COMPANI 3.9%20 DUE 11/01/20
539830BF5 LOCKHEED MARTIN C 2.5%20 DUE 11/23/20
031162BM1 AMGEN INC. 3.875%21 DUE 11/15/21
370334BM5 GENERAL MILLS IN 3.15%21 DUE 12/15/21
26054LPP2 DOW CHEMICAL CO 3.65%22 DUE 03/15/22
681919AZ9 OMNICOM GROUP I 3.625%22 DUE 05/01/22
25468PCW4 DISNEY WALT CO N 2.35%22 DUE 12/01/22
46625HRL6 J P MORGAN CHASE 2.7%23 DUE 05/18/23
594918BQ6 MICROSOFT CORP 2%23 DUE 08/08/23
037833AK6 APPLE INC 2.4%23 DUE 05/03/23
863667AF8 STRYKER CORP 3.375%24 DUE 05/15/24
031162CJ7 AMGEN INC. 2.6%26 DUE 08/19/26
46625HRX0 J P MORGAN CHAS 3.625%27 DUE 12/01/27

1) Should I leave these as is for now (instead of selling them all immediately and putting the $ into SCHZ (Schwab U.S. Aggregate Bond ETF), and instead sell them at those "DUE" dates above? I honestly don't know how these things work (which I'm sure my advisor relies on :| ).

2) If I should sell some now, how do I know which ones to sell?

3) Does SCHZ pay fixed income back into my account? It doesn't appear to based on the description below ... Or is this return represented in the price of the fund moving (ideally) up?

The Schwab site describes the SCHZ Fund Strategy as follows:
The investment seeks to track as closely as possible- before fees and expenses- the total return of the Bloomberg Barclays US Aggregate Bond Index. The fund will invest at least 90% of its net assets in securities included in the index. The index is a broad-based benchmark measuring the performance of the U.S. investment grade- taxable bond market- including U.S. Treasuries- government-related and corporate bonds- mortgage pass-through securities- commercial mortgage-backed securities- and asset-backed securities that are publicly available for sale in the United States.
Sorry, can't help you on selling/buying individual bonds. I've always owned only bond funds such as Vanguard Intermediate-Term Bond Index Fund Admiral, VBILX. This fund holds thousands of bonds and does all the selling and buying themselves when some bonds come due. I do nothing between buying some dollar amount of the fund, and selling some dollar amount if and when I might need the money.

I'm hopeful a much more bond knowledgeable Boglehead will be able to answer your questions soon!
JW
Retired at Last

User avatar
PalmQueen
Posts: 41
Joined: Sun Jul 08, 2018 6:09 pm

Re: Advice Request: Considering removing advisor from IRA

Post by PalmQueen » Sat Aug 18, 2018 10:19 pm

JW-Retired wrote:
Sat Aug 18, 2018 5:25 pm

Sorry, can't help you on selling/buying individual bonds. I've always owned only bond funds such as Vanguard Intermediate-Term Bond Index Fund Admiral, VBILX. This fund holds thousands of bonds and does all the selling and buying themselves when some bonds come due. I do nothing between buying some dollar amount of the fund, and selling some dollar amount if and when I might need the money.
JW-Retired - Your comment is helpful to me as I'm looking into bond funds. Here's my question - when you hold a bond fund can you sell at any time or do you need to sell after a predetermined period of time? Thanks!

Peppermint
Posts: 6
Joined: Thu Aug 16, 2018 8:18 am

Re: Advice Request: Considering removing advisor from IRA

Post by Peppermint » Sun Aug 19, 2018 10:35 am

Bumping for any more input on selling bonds:

1) Should I leave my individual bonds as is for now (instead of selling them all immediately and putting the $ into SCHZ (Schwab U.S. Aggregate Bond ETF), and instead sell them at those "DUE" dates above? I honestly don't know how these things work (which I'm sure my advisor relies on :| ).

2) If I should sell some now, how do I know which ones to sell?

3) Does SCHZ pay fixed income back into my account? It doesn't appear to based on the description below ... Or is this return represented in the price of the fund moving (ideally) up?

Thanks!

b42
Posts: 280
Joined: Thu Apr 11, 2013 7:00 pm

Re: Advice Request: Considering removing advisor from IRA

Post by b42 » Sun Aug 19, 2018 2:15 pm

1. I would try to see how you can go about selling the bonds from your account. If you end up buying a total bond market fund, you won't need the individual holdings. The DUE date I assume is the maturity date when the bond holder is required to pay back the principal to you. If you choose to ride them out they will "go away" on their own once they mature.

2. You could follow the path of the IRA stocks and sell them all when you convert to an index fund. Or to put it another way, if you end up keeping a few, do you have a good reason for doing so?

3. SCHZ pays dividends monthly:

https://www.schwabfunds.com/public/csim ... ymbol=SCHZ

The average yield to maturity is currently 3.26%.

AllMostThere
Posts: 56
Joined: Sat Dec 31, 2016 2:04 pm

Re: Advice Request: Considering removing advisor from IRA

Post by AllMostThere » Sun Aug 19, 2018 5:56 pm

Peppermint wrote:
Thu Aug 16, 2018 2:06 pm
Yep absolutely, the .7% seems small-ish (it translates to about $8400 a year) but the market is up. So yes I am also wondering what they are really doing to help me as it seems its been "most boats are rising" so I can't help but be benefiting from that. I will ask them what their for fee hourly rate is and see what they say ...

Thanks!
As others have pointed out, the "huge" number of funds in your IRA is basically manufactured complexity. Advisors do this to give the illusion of diversity thru unique expertise that does not exist. You can do better with a low cost 3-4 fund portfolio in your IRA. Add an additional 2-4 funds if you want to do some slice & dice with Emerging Mkts, Small Cap, etc. Your comment about the 0.7% as being "small-ish" is incorrect. It is huge and outrageous. Just think about your desire to use $50K per year in retirement, so the $8.4K being paid to your Adviser is over 16% of your annual desired income! For what?? Kick this person to the curb, and self direct your investments. This forum can guide you better than anyone can for the best price - FREE. You can do this. :happy

wanderer
Posts: 93
Joined: Sat Aug 16, 2014 4:09 pm
Location: Houston, Texas, USA

Re: Advice Request: Considering removing advisor from IRA

Post by wanderer » Sun Aug 19, 2018 9:14 pm

I'll add my 2 cents regarding the bonds in your IRA. I am not a bond specialist. I inherited some bonds from my parents (Edward Jones customers) so had to learn some of the details. In my case, sold the corporate bonds and kept a few muni's because they fit my cash flow needs w/o taxes.

First, take a look at the BH page on bond basics: https://www.bogleheads.org/wiki/Bond_basics. Then look at the composition of SXHZ, the bond ETF recommended: (hint 23.95% corporate bonds).
Then look at the bonds in your account: Note - ALL corporate bonds! Probably not what you want.

I'm not on Schwab, so looked up a few of your bonds through the Fidelity fixed income/Bond/CD page:
https://fixedincome.fidelity.com/ftgw/fi/FILanding. You need to login to view specific bonds (by CUSIP).
I'm sure Schwab has something similar, but since you are also a FIdo customer, you can use this link too!

From the Fido page:
CUSIP / Company/Coupon rate / Maturity /Current Yield (bid) / Current Bid / Moody Rating
031162CJ7 / Amgen / 2.60% / 05-2026 / 3.814% / 91.70 / BAA1
037833AK6 / Apple / 2.40% / 05-2023 / 3.102% / 96.95 / AA1
I did not look them all up but it appears the "average" yield is in the 3-4% range, based on rating and duration. So similar to the SCHZ bond fund.

The bonds can be sold, but they are subject to bid/ask spread and probably a Schwab transaction cost. You will need to discuss with a Schwab rep (they can do this easily, as my sister, a Schwab customer, did this with her inherited bonds).

My recommendation is to sell all of the bonds, recognizing there will be a loss, and buy a bond fund/ETF that fits your BH-style needs. (As well as the previous recommendation to fire the advisor ASAP and switch the stocks to index funds/ETF.) This is so much easier to manage and track performance!!!!

Hope this helps with your questions...

User avatar
Nestegg_User
Posts: 994
Joined: Wed Aug 05, 2009 1:26 pm

Re: Advice Request: Considering removing advisor from IRA

Post by Nestegg_User » Sun Aug 19, 2018 9:49 pm

as others have said: FIRE the “Adviser” NOW!!!

I’d then, at least, take the Apache bid (expires 8/22), so you have 1 less fee and get rid of the horrible 1.85% IBM and 2% micro”hard” ; and it’s crazy (and irresponsible) for your “advisor” to put you into bonds with durations like that with those lower yields. I suspect that he/she had that crap in inventory to unload to unsuspecting clients

get rid of them... including the “advisor”

as for Schwab itself, many of us use them but are DIY

JW-Retired
Posts: 6875
Joined: Sun Dec 16, 2007 12:25 pm

Re: Advice Request: Considering removing advisor from IRA

Post by JW-Retired » Mon Aug 20, 2018 6:48 pm

PalmQueen wrote:
Sat Aug 18, 2018 10:19 pm
JW-Retired wrote:
Sat Aug 18, 2018 5:25 pm

Sorry, can't help you on selling/buying individual bonds. I've always owned only bond funds such as Vanguard Intermediate-Term Bond Index Fund Admiral, VBILX. This fund holds thousands of bonds and does all the selling and buying themselves when some bonds come due. I do nothing between buying some dollar amount of the fund, and selling some dollar amount if and when I might need the money.
JW-Retired - Your comment is helpful to me as I'm looking into bond funds. Here's my question - when you hold a bond fund can you sell at any time or do you need to sell after a predetermined period of time? Thanks!
You can sell a $ amount of the fund at any time you want to, or you may choose not sell any of the fund for years. The fund will be buying and selling bond assets as some bonds become due more or less all the time.

One constraint on buying/selling any time you want is funds in general try to discourage "frequent trading". Many will not let you buy back shares of a fund you sold until some period of time like 30 or 60 days has passed.
See:
https://www.bogleheads.org/wiki/Frequent_trading_policy
JW
Retired at Last

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