Is the VPAS Service worth the 0.30%?

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aCautiousWind
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Is the VPAS Service worth the 0.30%?

Post by aCautiousWind » Thu Feb 07, 2019 2:33 pm

Moved IRA accounts from Ameriprise to Vanguard.

Current holdings:
MFECX - 1.69 exp ratio, $24,200
MUECX - 1.58 exp ratio, $20,582
PRWCX - 0.71 exp ratio, $50,616

Trying to decide if the 0.30% charged for being in the Vanguard Personal Advisory Services is worth it. Obviously will be saving money by moving to VG from MFS, and from Ameriprise generally to Vanguard - but not sure if the value is there for me to consider having the service.

I'm 32yo, make ~70k/year

My other investments are an ESPP program (I work for UnitedHealth and have approximately $10k in stock), a brokerage account with Robinhood of ~$7500 and a brokerage account with Fidelity of ~$13k (holds the UNH shares as well as a couple Amazon shares I bought at $800), and my work 401k (currently at 12.5% contribution - I contribute 8%, UNH contributes 4.5%).

May be more info than is needed but trying to give the full picture.
-ACW | | "The price of anything is the amount of life you exchange for it." -Thoreau

mcraepat9
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Re: Is the VPAS Service worth the 0.30%?

Post by mcraepat9 » Thu Feb 07, 2019 2:38 pm

aCautiousWind wrote:
Thu Feb 07, 2019 2:33 pm
Moved IRA accounts from Ameriprise to Vanguard.

Current holdings:
MFECX - 1.69 exp ratio, $24,200
MUECX - 1.58 exp ratio, $20,582
PRWCX - 0.71 exp ratio, $50,616

Trying to decide if the 0.30% charged for being in the Vanguard Personal Advisory Services is worth it. Obviously will be saving money by moving to VG from MFS, and from Ameriprise generally to Vanguard - but not sure if the value is there for me to consider having the service.

I'm 32yo, make ~70k/year

My other investments are an ESPP program (I work for UnitedHealth and have approximately $10k in stock), a brokerage account with Robinhood of ~$7500 and a brokerage account with Fidelity of ~$13k (holds the UNH shares as well as a couple Amazon shares I bought at $800), and my work 401k (currently at 12.5% contribution - I contribute 8%, UNH contributes 4.5%).

May be more info than is needed but trying to give the full picture.
In my mind, it depends on your approach to investing and whether you need some hand-holding or someone to prevent you from tinkering or making bad decisions at the worst time.

If I were you, given the size of amounts you are working with, you would probably get the same exposure and idiot-proofing by moving your IRA and 401k to low cost target date funds (assuming you have access in your 401k) and keeping your taxable brokerage with UNH/Amazon shares and other low cost tax efficient broad equity ETFs or mutual funds. Would be helpful if you list out your investment options in your 401k (including tickers and expense ratios) and we can tell you what course might work best for you.

Are you contributing the maximum amount you can to your 401k? If not, it would make more sense to do that than to do taxable investing. Leaving a big tax advantage on the table by doing taxable first before maxing your 401k.
Amateur investors are not cool-headed logicians.

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Re: Is the VPAS Service worth the 0.30%?

Post by bloom2708 » Thu Feb 07, 2019 2:40 pm

You do not need PAS if you are going to do a simple 2/3 fund style total market portfolio.

You should max your pre-tax 401k and Roth IRA before ESPP and taxable investing. Matching does not count toward the $19k 2019 limit.

401k: Your bond allocation (based on your entire portfolio), balance in stock funds.
Roth IRA: Stock index funds (Total US and/or Total International
Rollover/Traditional IRAs: Bonds if they don't all fit in your 401k. Balance in stock index funds
Taxable: Stock index funds. Total US and/or Total International

Think 1 or 2 funds per account. Your entire portfolio is one entity. You do not need all pieces everywhere. Tax efficient like above. Low cost. Broad market based index funds. Tilts like REIT and Small Cap Value (optional) could go in Roth.

Go slow and a plan will form. Some use PAS for 1 year and then drop. I do not think you need it if you adopt a simple plan like above.
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daheld
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Re: Is the VPAS Service worth the 0.30%?

Post by daheld » Thu Feb 07, 2019 2:44 pm

You'll find my comments on other threads dealing with PAS if you search for them. The answer, like anything, depends on your specific situation.

My wife and I use it for our Roths and taxable retirement savings. Prior to us getting married and combining financial accounts, she used a financial advisor who had her invested in front loaded, high expense funds. She was not comfortable with going it alone and me managing things for us. To us, PAS is a perfect middle ground. It's low-cost, and you can trust that you'll get good advice. I am personally a proponent, and as someone else said you can always use it for a year or two to get an idea of what they do and recommend, then manage it yourself.

John Laurens
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Re: Is the VPAS Service worth the 0.30%?

Post by John Laurens » Thu Feb 07, 2019 2:49 pm

I’m assuming that you thought Ameriprise fees and purchasing individual stocks were worth it as one point or another? If so, you will be tickled pink with PAS.

Once you develop an IPS and feel confident you won’t make behavioral mistakes you can cancel PAS.

Regards,
John

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aCautiousWind
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Re: Is the VPAS Service worth the 0.30%?

Post by aCautiousWind » Thu Feb 07, 2019 3:03 pm

[/quote]

In my mind, it depends on your approach to investing and whether you need some hand-holding or someone to prevent you from tinkering or making bad decisions at the worst time.

If I were you, given the size of amounts you are working with, you would probably get the same exposure and idiot-proofing by moving your IRA and 401k to low cost target date funds (assuming you have access in your 401k) and keeping your taxable brokerage with UNH/Amazon shares and other low cost tax efficient broad equity ETFs or mutual funds. Would be helpful if you list out your investment options in your 401k (including tickers and expense ratios) and we can tell you what course might work best for you.

Are you contributing the maximum amount you can to your 401k? If not, it would make more sense to do that than to do taxable investing. Leaving a big tax advantage on the table by doing taxable first before maxing your 401k.
[/quote]

I'm not maxing out my 401k, but could certainly do more - I dropped my ESPP Contributions for this cycle and put % towards my 401k, and don't plan to do any more individual stock investment. I've considered just liquidating my non-company stocks and putting them in our Roth (we'd be just about maxed out between the both of us (wife and I) if I did that, and the taxable gains would be relatively minimal at this point (aside from the cheap Amazon shares I have).

Investment options are as follows:
Myriad of Wells Fargo Target Date Funds - ~0.06%
VIIIX - 0.02% - I'm in (63%)
VMCPX - 0.03% - I'm in (14%)
VSCPX - 0.03% - I'm in (5%)
ABEMX - 1.10%
RERGX - 0.49% - I'm in (10%)
PAAIX - 1.005%
FIAM Small Company Commingled Pool Class B - 0.64%
Wellington Mid Cap Opportunities Portfolio - 0.49%
State Street Global Equity ex USA Index Non-Lending Series Fund Class C - 0.15%
UHG Stable Value (Bonds) - 0.38% (I'm in - no ongoing investment - $880)
State Street US Bond Index Non-Lending Series Fund Class C - 0.052% (I'm in - 8%)
Dodge & Cox Income Fund (Bonds) - 0.1496%
-ACW | | "The price of anything is the amount of life you exchange for it." -Thoreau

Topic Author
aCautiousWind
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Re: Is the VPAS Service worth the 0.30%?

Post by aCautiousWind » Thu Feb 07, 2019 3:07 pm

John Laurens wrote:
Thu Feb 07, 2019 2:49 pm
I’m assuming that you thought Ameriprise fees and purchasing individual stocks were worth it as one point or another? If so, you will be tickled pink with PAS.

Once you develop an IPS and feel confident you won’t make behavioral mistakes you can cancel PAS.

Regards,
John
We initially got an advisor because I wanted some help with how best to invest a bit of money that we'd gotten in an insurance settlement. It all happened pretty quickly, so I just resolved to educate myself over time. Well, now I have, so the advisory piece doesn't make sense to me any more - we recently moved and our advisor is not licensed in WA (our new state) so it made the transition fairly seamless.

I know regardless I will love not having the advisor fee from Ameriprise - yikes, and while the MFS funds have performed fairly well, the exp ratios certainly aren't ideal.
-ACW | | "The price of anything is the amount of life you exchange for it." -Thoreau

drzzzzz
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Re: Is the VPAS Service worth the 0.30%?

Post by drzzzzz » Thu Feb 07, 2019 3:57 pm

As others have mentioned it depends on what you are looking for and how involved you want to be. I would suggest that you talk with PAS if you don't want to go cold turkey and they will also likely provide a plan that you can review and then decide whether or not you want to use them. After seeing the plan proposed, you can still implement their suggestions and not use them. We used PAS for a portion of our portfolio a few years back and left because we had disagreements with what they wouldn't do for us (posted on other threads), but not related to their initial recommendations or how they handled the account. It will certainly be cheaper than what you are currently doing and costs you nothing to talk to them and get a plan.

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Earl Lemongrab
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Re: Is the VPAS Service worth the 0.30%?

Post by Earl Lemongrab » Thu Feb 07, 2019 5:25 pm

It's not worth it to me. Then again, I wouldn't use it if it were free, so keep that in mind.

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aCautiousWind
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Re: Is the VPAS Service worth the 0.30%?

Post by aCautiousWind » Thu Feb 07, 2019 5:28 pm

drzzzzz wrote:
Thu Feb 07, 2019 3:57 pm
As others have mentioned it depends on what you are looking for and how involved you want to be. I would suggest that you talk with PAS if you don't want to go cold turkey and they will also likely provide a plan that you can review and then decide whether or not you want to use them. After seeing the plan proposed, you can still implement their suggestions and not use them. We used PAS for a portion of our portfolio a few years back and left because we had disagreements with what they wouldn't do for us (posted on other threads), but not related to their initial recommendations or how they handled the account. It will certainly be cheaper than what you are currently doing and costs you nothing to talk to them and get a plan.
Makes sense. I'm thinking I will take the call with advice - and more than likely use that advice, but I probably won't use the service going forward. I think I'm comfortable enough now with investing that I can handle checking in on it and rebalancing every so often without paying for it.
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dbr
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Re: Is the VPAS Service worth the 0.30%?

Post by dbr » Thu Feb 07, 2019 6:08 pm

I would say that at 0.5% nobody should be paying that for advice and investment management. At 0.1% I would say, sure, go for it, the fee doesn't hurt. At 0.3% I would say I just don't know.

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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Thu Feb 07, 2019 9:36 pm

0.3% over a lifetime can add up. If bonds return 1.5% real and stocks return 5% real, then a 50/50 portfolio will return 3.3% real. If you save $15,000/yr from now (age 32) to age 65, a portfolio with these returns will net you (all $ inflation adjusted, in today's dollars):

No fees: $907,671
After .3% fees: $856,471

So fees will have consumed $907,671 - $856,471 = $51,200, or 5.6% of your nest egg. Not terrible, but not trivial either. And remember, this is just fees till age 65. The impact over your entire lifetime will be even greater.

I strongly recommend that people learn the basics of personal finance and manage it themselves. It's not that hard to do if you are motivated enough.

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Re: Is the VPAS Service worth the 0.30%?

Post by GmanJeff » Fri Feb 08, 2019 1:35 pm

Ben Mathew wrote:
Thu Feb 07, 2019 9:36 pm
0.3% over a lifetime can add up. If bonds return 1.5% real and stocks return 5% real, then a 50/50 portfolio will return 3.3% real. If you save $15,000/yr from now (age 32) to age 65, a portfolio with these returns will net you (all $ inflation adjusted, in today's dollars):

No fees: $907,671
After .3% fees: $856,471

So fees will have consumed $907,671 - $856,471 = $51,200, or 5.6% of your nest egg. Not terrible, but not trivial either. And remember, this is just fees till age 65. The impact over your entire lifetime will be even greater.

I strongly recommend that people learn the basics of personal finance and manage it themselves. It's not that hard to do if you are motivated enough.
This assumes identical performance and volatility from unmanaged and managed portfolios, with the only variable being the payment of PAS management fees. Whether the managed portfolio will do better or not will only be known in retrospect, but if an overconfident, uninformed, or inattentive individual investor makes one or more ill-considered or improvident decisions, or fails to act when s/he should have, and would have avoided those behavioral errors if supported by PAS, the fee may well more than pay for itself.

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Re: Is the VPAS Service worth the 0.30%?

Post by CABob » Fri Feb 08, 2019 2:07 pm

Earl Lemongrab wrote:
Thu Feb 07, 2019 5:25 pm
It's not worth it to me. Then again, I wouldn't use it if it were free, so keep that in mind.
Interesting response. I am inclined to think along similar lines, but I have a question, Don't you occasionally want a second (or third) opinion on something or a safety check on your portfolio or an aspect of investing?
Bob

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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Fri Feb 08, 2019 2:39 pm

GmanJeff wrote:
Fri Feb 08, 2019 1:35 pm
Ben Mathew wrote:
Thu Feb 07, 2019 9:36 pm
0.3% over a lifetime can add up. If bonds return 1.5% real and stocks return 5% real, then a 50/50 portfolio will return 3.3% real. If you save $15,000/yr from now (age 32) to age 65, a portfolio with these returns will net you (all $ inflation adjusted, in today's dollars):

No fees: $907,671
After .3% fees: $856,471

So fees will have consumed $907,671 - $856,471 = $51,200, or 5.6% of your nest egg. Not terrible, but not trivial either. And remember, this is just fees till age 65. The impact over your entire lifetime will be even greater.

I strongly recommend that people learn the basics of personal finance and manage it themselves. It's not that hard to do if you are motivated enough.
This assumes identical performance and volatility from unmanaged and managed portfolios, with the only variable being the payment of PAS management fees. Whether the managed portfolio will do better or not will only be known in retrospect, but if an overconfident, uninformed, or inattentive individual investor makes one or more ill-considered or improvident decisions, or fails to act when s/he should have, and would have avoided those behavioral errors if supported by PAS, the fee may well more than pay for itself.
But that is not a reason to pay fees. Vanguard PAS is not going to manage the portfolio any better than a well informed individual investor who invests it in a simple 3 fund portfolio. Ex-post, one or the other might come out ahead due to luck. But why pay more for the same odds? The .03% is a ex-ante known drag on VPAS.

If the investor is overconfident or impulsive or has other pyschological barriers that prevent them from making and following a simple Boglehead-type plan, then maybe Vanguard PAS might serve as a restraint from doing foolish things. But there are limits to what an advisor can do for an uninformed client. If the market drops 50%, panicked investors will sell, whether or not they are enrolled in VPAS. A more robust solution is to learn how Boglehead-type investing works, learn the common pitfalls, and prepare to avoid them.

Also note that an uninformed individual investor remains an easy prey for financial industry sharks, even if they are enrolled in VPAS. It's only a matter of time before some smooth talking sales shark persuades them to ditch their moderately priced advisory service and pay them high fees to be placed into expensive products. The only robust protection is to become informed. But once you are informed enough to avoid the sharks, you are also informed enough to manage the money yourself. And if you cannot become well-informed, then there's nothing that can save you. The financial industry will get you one way or the other. Between AUM fees, front-end, back-end and sideways commissions, complicated life insurance products, and complicated annuities, you will eventually be parted with a lot of your wealth.

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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Fri Feb 08, 2019 2:41 pm

CABob wrote:
Fri Feb 08, 2019 2:07 pm
Earl Lemongrab wrote:
Thu Feb 07, 2019 5:25 pm
It's not worth it to me. Then again, I wouldn't use it if it were free, so keep that in mind.
Interesting response. I am inclined to think along similar lines, but I have a question, Don't you occasionally want a second (or third) opinion on something or a safety check on your portfolio or an aspect of investing?
That's what Bogleheads.org is for. It's .3% cheaper and 83% better!
Last edited by Ben Mathew on Fri Feb 08, 2019 7:10 pm, edited 1 time in total.

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Re: Is the VPAS Service worth the 0.30%?

Post by hushpuppy » Fri Feb 08, 2019 2:49 pm

delete
Last edited by hushpuppy on Fri Feb 15, 2019 9:09 pm, edited 1 time in total.
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Re: Is the VPAS Service worth the 0.30%?

Post by drzzzzz » Fri Feb 08, 2019 2:55 pm

Hushpuppy

You can exclude anything that you want from being managed by PAS, such as PRWCX, especially since this wouldn't be part of their recommendations, although if the position is large enough they likely might take it into account as they balance the remainder of the portfolio assets between stocks and bonds.

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Re: Is the VPAS Service worth the 0.30%?

Post by GmanJeff » Fri Feb 08, 2019 6:45 pm

Ben Mathew wrote:
Fri Feb 08, 2019 2:39 pm
GmanJeff wrote:
Fri Feb 08, 2019 1:35 pm
Ben Mathew wrote:
Thu Feb 07, 2019 9:36 pm
0.3% over a lifetime can add up. If bonds return 1.5% real and stocks return 5% real, then a 50/50 portfolio will return 3.3% real. If you save $15,000/yr from now (age 32) to age 65, a portfolio with these returns will net you (all $ inflation adjusted, in today's dollars):

No fees: $907,671
After .3% fees: $856,471

So fees will have consumed $907,671 - $856,471 = $51,200, or 5.6% of your nest egg. Not terrible, but not trivial either. And remember, this is just fees till age 65. The impact over your entire lifetime will be even greater.

I strongly recommend that people learn the basics of personal finance and manage it themselves. It's not that hard to do if you are motivated enough.
This assumes identical performance and volatility from unmanaged and managed portfolios, with the only variable being the payment of PAS management fees. Whether the managed portfolio will do better or not will only be known in retrospect, but if an overconfident, uninformed, or inattentive individual investor makes one or more ill-considered or improvident decisions, or fails to act when s/he should have, and would have avoided those behavioral errors if supported by PAS, the fee may well more than pay for itself.
But that is not a reason to pay fees. Vanguard PAS is not going to manage the portfolio any better than a well informed individual investor who invests it in a simple 3 fund portfolio. Ex-post, one or the other might come out ahead due to luck. But why pay more for the same odds? The .03% is a ex-ante known drag on VPAS.

There is no way to know if if your statement about a "well informed investor" performing better is true. Since VPAS does not automatically promote a portfolio of three funds for every investor, there is an obvious divergence right there in approach, and therefore an almost certain divergence in results (for better or for worse). We'd need more data before concluding that any particular 3-fund portfolio, which can consist of an almost limitless variety of specific funds from any fund company, in any relative ratio, selected by an individual investor would necessarily outperform whatever VPAS would propose for that same investor. Bald assertions that a hypothetical "Well informed investor" can outperform VPAS seem more like an article of faith than an evidence-based conclusion.

Conversely, it would be foolish to assert that VPAS will outperform any particular investor - there's just no way to know. What we can say is that VPAS offers a suite of investment management and advisory services supported by Vanguard, at a known cost, which some well-informed investors may find offers value commensurate with the fee.

There is always present in these threads a Greek chorus resolutely insisting that VPAS is always a bad choice for any investor and that anyone can replicate the training, experience and resources behind VPAS advisors. There is, however, a valid alternative perspective.

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Re: Is the VPAS Service worth the 0.30%?

Post by hushpuppy » Fri Feb 08, 2019 6:57 pm

delete
Last edited by hushpuppy on Fri Feb 15, 2019 9:08 pm, edited 1 time in total.
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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Fri Feb 08, 2019 7:53 pm

GmanJeff wrote:
Fri Feb 08, 2019 6:45 pm
Ben Mathew wrote:
Fri Feb 08, 2019 2:39 pm
GmanJeff wrote:
Fri Feb 08, 2019 1:35 pm
Ben Mathew wrote:
Thu Feb 07, 2019 9:36 pm
0.3% over a lifetime can add up. If bonds return 1.5% real and stocks return 5% real, then a 50/50 portfolio will return 3.3% real. If you save $15,000/yr from now (age 32) to age 65, a portfolio with these returns will net you (all $ inflation adjusted, in today's dollars):

No fees: $907,671
After .3% fees: $856,471

So fees will have consumed $907,671 - $856,471 = $51,200, or 5.6% of your nest egg. Not terrible, but not trivial either. And remember, this is just fees till age 65. The impact over your entire lifetime will be even greater.

I strongly recommend that people learn the basics of personal finance and manage it themselves. It's not that hard to do if you are motivated enough.
This assumes identical performance and volatility from unmanaged and managed portfolios, with the only variable being the payment of PAS management fees. Whether the managed portfolio will do better or not will only be known in retrospect, but if an overconfident, uninformed, or inattentive individual investor makes one or more ill-considered or improvident decisions, or fails to act when s/he should have, and would have avoided those behavioral errors if supported by PAS, the fee may well more than pay for itself.
But that is not a reason to pay fees. Vanguard PAS is not going to manage the portfolio any better than a well informed individual investor who invests it in a simple 3 fund portfolio. Ex-post, one or the other might come out ahead due to luck. But why pay more for the same odds? The .03% is a ex-ante known drag on VPAS.

There is no way to know if if your statement about a "well informed investor" performing better is true. Since VPAS does not automatically promote a portfolio of three funds for every investor, there is an obvious divergence right there in approach, and therefore an almost certain divergence in results (for better or for worse). We'd need more data before concluding that any particular 3-fund portfolio, which can consist of an almost limitless variety of specific funds from any fund company, in any relative ratio, selected by an individual investor would necessarily outperform whatever VPAS would propose for that same investor. Bald assertions that a hypothetical "Well informed investor" can outperform VPAS seem more like an article of faith than an evidence-based conclusion.

Conversely, it would be foolish to assert that VPAS will outperform any particular investor - there's just no way to know. What we can say is that VPAS offers a suite of investment management and advisory services supported by Vanguard, at a known cost, which some well-informed investors may find offers value commensurate with the fee.

There is always present in these threads a Greek chorus resolutely insisting that VPAS is always a bad choice for any investor and that anyone can replicate the training, experience and resources behind VPAS advisors. There is, however, a valid alternative perspective.
I thinking waiting for data on whether VPAS has some special skills that will enable it to outperform the simple 3-fund portfolio is skirting the issue. The evidence is just overwhelming that advisors/investment managers will generally trail the market portfolio net of fees. VPAS is not likely to be the exception to the rule. And you don't have to hold the 3 fund portfolio. If you believe in a tilt, you can easily tilt yourself. VPAS is not going to have any special insight into whether tilting towards specific factors is a good idea. They're just making a bet too, like everyone else.

VPAS is moderately priced. At .3%, it doesn't do as much harm as 1% AUM, which is downright deadly. But I dislike the AUM model of charging for investment advice. It's fraught with potential for abuse because it makes fees look smaller than they are. The financial industry has long exploited it to siphon off exorbitant fees without their consumers knowing how much it has cost them. If fees are down to the .15% and below, then fine--it doesn't make too much of a difference. But .3% is still a level where people can lose a good bit of their money without knowing it.

I actually think people have gone too easy on VPAS on this forum.

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Re: Is the VPAS Service worth the 0.30%?

Post by Earl Lemongrab » Fri Feb 08, 2019 8:04 pm

CABob wrote:
Fri Feb 08, 2019 2:07 pm
Earl Lemongrab wrote:
Thu Feb 07, 2019 5:25 pm
It's not worth it to me. Then again, I wouldn't use it if it were free, so keep that in mind.
Interesting response. I am inclined to think along similar lines, but I have a question, Don't you occasionally want a second (or third) opinion on something or a safety check on your portfolio or an aspect of investing?
I have no interest in fiddling with my portfolio. I have had the basic structure since 2007, with alterations only for changes to my 401(k) and progress towards goals. If I did want anything, that would be better served by questions posted to Bogleheads. From what I have heard, the VPAS advisers tend to go for the four-fund portfolio.

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Re: Is the VPAS Service worth the 0.30%?

Post by lostdog » Sat Feb 09, 2019 9:50 am

If you have issues with staying the course, panic selling, constant fear and second guessing your strategy then VPAS is worth it for you.
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Re: Is the VPAS Service worth the 0.30%?

Post by dbr » Sat Feb 09, 2019 10:04 am

lostdog wrote:
Sat Feb 09, 2019 9:50 am
If you have issues with staying the course, panic selling, constant fear and second guessing your strategy then VPAS is worth it for you.
I agree. That person should also acknowledge the cost of needing the support.

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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Sat Feb 09, 2019 11:33 am

dbr wrote:
Sat Feb 09, 2019 10:04 am
lostdog wrote:
Sat Feb 09, 2019 9:50 am
If you have issues with staying the course, panic selling, constant fear and second guessing your strategy then VPAS is worth it for you.
I agree. That person should also acknowledge the cost of needing the support.
Yes. And to those considering hiring VPAS: acknowledging the cost of the support would involve assuming that VPAS will not earn back any of the .3% fees in the form of outperformance of a 3 fund portfolio or a tilted portfolio that you could have built themselves. Under that assumption, calculate how much you would pay VPAS over the course of a lifetime. For many people, it will be in the hundreds of thousands of dollars. If you would have been willing to write a check to VPAS for that amount to keep you on track, then congratulations, you are making the right decision to employ VPAS. If, however, you wouldn't write that check to VPAS, then don't let them write the checks themselves. The fact that the money is being taken directly out of your assets should not affect your decision.

heyyou
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Re: Is the VPAS Service worth the 0.30%?

Post by heyyou » Sat Feb 09, 2019 3:58 pm

Prior to VG's PAS, prospective Bogleheads bought several books from different esteemed authors to get general investing advice. The messages were helpfully repetitive but each reader might find an author whose writing style better suited him/her.

Yes, use PAS for a few years, while you learn more. That too is a good investment. It has been written here that by the time that you know enough to evaluate the advice that you have purchased, you know enough to do it yourself.

PatrickA5
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Re: Is the VPAS Service worth the 0.30%?

Post by PatrickA5 » Sat Feb 09, 2019 4:00 pm

I wrote up a couple of paragraphs in my "When I'm Dead" book about VPAS for DW to read when I'm gone. She knows nothing about investing and probably will never have any desire to know much. She's more than capable. Just don't think she will take the time. Who knows, maybe the fees will come down by then. If nothing else, it will provide someone to talk to that won't be out to make a big fat commission check off of her.

On another topic. I got me a brand spankin' new Flagship Rep. Looks like she's straight out of college. Fortunately, she has experience as she was the treasurer of her investment club at school. :D I'm sure she'll be fine. I probably only talked to my other previous reps maybe once each. This is my 5th one in 5 years.

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Re: Is the VPAS Service worth the 0.30%?

Post by KESP » Sun Feb 10, 2019 10:41 am

I’ve said this before another post, I have the VPAS service, not because I cannot handle a three or four fund portfolio, but rather if I die, my husband would most definitely fall prey to a high cost financial advisor. He does not use a computer, has no interest in learning about financing, and would do in his mind the easiest thing, which would be to hire someone he thinks would do everything for him. Either that or remarry in like a week. :happy

MidFlorida1214
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Re: Is the VPAS Service worth the 0.30%?

Post by MidFlorida1214 » Sun Feb 10, 2019 1:00 pm

Given the low AUM fee and the basic portfolio that is allocated so broadly, the VPAS is a good way to go for someone who would rather not work their portfolio on their own. Also, if only one of a couple is interested in managing investments, I would think seriously about setting it up rather than leaving a letter of directions for a spouse. When one spouse passes on, there is plenty to do, and it is often done while one’s thinking is clouded by recent events. Why not take one important issue off the table?

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Ben Mathew
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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Sun Feb 10, 2019 1:15 pm

MidFlorida1214 wrote:
Sun Feb 10, 2019 1:00 pm
Given the low AUM fee
The AUM fee can easily cost over $100K over a lifetime for a middle income earner and saver. VPAS is not low cost. It's lower than other most other AUM advisors, but it's still quite expensive. It would be a lot cheaper for most people to hire a fee-only advisor as needed. Even if the advisor charges $400/hour.

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Re: Is the VPAS Service worth the 0.30%?

Post by Iorek » Sun Feb 10, 2019 5:21 pm

Ben Mathew wrote:
Sat Feb 09, 2019 11:33 am
Under that assumption, calculate how much you would pay VPAS over the course of a lifetime. For many people, it will be in the hundreds of thousands of dollars.
Maybe my math is off, but my calculation shows that to incur hundreds of thousands of dollars in fees, one would need to have a balance of over $1.1 million each year for 60 years. I don't think "many" people fall under that category.

And of course, one is free to start using VPAS without making a "lifetime" commitment to it. Most people I see who use it either use it for a few years when they are starting to get serious about retirement investing, to get oriented, or use it when they are well into retirement and would like assistance in case of death or decline.

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Re: Is the VPAS Service worth the 0.30%?

Post by rob » Sun Feb 10, 2019 5:32 pm

If your driving then it's not worth it. In my case, I have suggested that my spouse does us it after I'm gone as she has no interest in finance, so it's not a yes/no option.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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Ben Mathew
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Re: Is the VPAS Service worth the 0.30%?

Post by Ben Mathew » Sun Feb 10, 2019 8:40 pm

Iorek wrote:
Sun Feb 10, 2019 5:21 pm
Ben Mathew wrote:
Sat Feb 09, 2019 11:33 am
Under that assumption, calculate how much you would pay VPAS over the course of a lifetime. For many people, it will be in the hundreds of thousands of dollars.
Maybe my math is off, but my calculation shows that to incur hundreds of thousands of dollars in fees, one would need to have a balance of over $1.1 million each year for 60 years. I don't think "many" people fall under that category.

And of course, one is free to start using VPAS without making a "lifetime" commitment to it. Most people I see who use it either use it for a few years when they are starting to get serious about retirement investing, to get oriented, or use it when they are well into retirement and would like assistance in case of death or decline.
Here's an example of a person who saves $20,000 per year from age 25 to age 65, and withdraws $80,000 per year in retirement from age 66 onwards. All figures inflation adjusted (today's $). Return assumptions are 50/50 portfolio with stocks @ 5% real and bonds at 1.5% real. Inflation is 2%.

The spreadsheet below shows that by age 90, this person would have $696,937 left in the retirement account without the VPAS fee drag, and $325,717 with the drag. The difference of $371,219 is what VPAS cost this person over a lifetime. I bet that number is much higher than what most people think when they see the .3% AUM fee. It's enough to pay for a few years of long term care. VPAS is expensive, just not as expensive as many other advisors out there.

Image

Using VPAS for a year or two to get the hang of things is fine. But I'm sure that's not how VPAS is hoping customers will use their services.

The hourly fee model is vastly superior to AUM when it comes to paying for advice. According to this thread, Rick Ferri will be providing advice for an hourly fee. I hope he does well with it. Fee-only pricing remains rare, and I think it's because consumers vastly underestimate how much they are paying with AUM. I'd love to see the fee-only model become more common.

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