My advisor VS Vanguard's PAS

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MOH
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My advisor VS Vanguard's PAS

Post by MOH » Fri Apr 12, 2019 1:59 pm

Hello Bogleheads,

Thank you in advance for reading this and offering some advice and perspective.

My wife and I are each 50 years old and have had a financial advisor for the past 14 years and we’ve been happy with their service. I think they are very smart, honest and attentive to whatever we need whenever we need it. They also offer accounting services which makes everything very turn-key and easy.

A few months ago, a friend of mine suggested I read, “The Boglehead’s Three Fund Portfolio.” I did, and that is when I started down the rabbit hole. :) I then purchased “The Boglehead’s Guide to investing” and have been reading this forum.

This led me to reaching out to Vanguard and speaking with representatives from their Flagship Services. After multiple conversations, a representative has given us a thorough plan of what they would do if we moved our assets to Vanguard and used their Personal Advisor Service.

I am not interested in doing our investing myself, so I am deciding between keeping my current advisor vs. switching to Vanguard’s advisor service.

My current advisor charges us a fee of 0.50%. And the average, weighed expense cost across all of our stock and bond investments (a 70/30 ratio) is 0.35%. Over the past ten years, 3/31/2009-3/31/2019, our average net return is 8.5%. (So, a 9.35% gross return minus 0.85% fees/cost)

The representative from Vanguard put together a plan for us that would sell some of our actively managed funds while paying some smaller capital gains, and keeping other actively managed funds to avoid paying large capital gains. So we would be keeping some of active funds and adding in more Vanguard index funds than we currently have.

Vanguard would charge us 0.30% for our fee. And after selling off some of our active funds and keeping others while adding in more Vanguard index funds, our average weighted expense cost (again across a 70/30 ratio) would be 0.12%.

So, all in, Vanguard would cost 0.42% VS my current advisor which is 0.85%.

This gives Vanguard a savings advantage of 0.43%.

I’ll be honest, it’s not as big of a gap as I thought it would be. That being said, it’s not insignificant.

I’m a little stuck with analysis-paralysis. While I know Vanguard has a 0.43% edge, I'm balancing that against the good relationship that I have with my current advisor which has been working and the possible disruption of moving all of our assets.

Basically, is it worth it? Thank you for taking the time to read this. I appreciate any feedback.

bloom2708
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Re: My advisor VS Vanguard's PAS

Post by bloom2708 » Fri Apr 12, 2019 2:29 pm

Run your exact numbers through this calculator:

https://www.dinkytown.net/java/compare- ... -fees.html

See the difference the .4 to .5 makes over 30 years.

I think it would be worth it to switch. Once set up with PAS, you can use it for 1-2 years and then go it on your own.

Saving an additional .3%. Our all up cost at Vanguard is .06%. 3 unique funds placed tax efficiently.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead | “It’s not things that upset us but rather our opinions about things.” Epictetus

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Elric
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Re: My advisor VS Vanguard's PAS

Post by Elric » Fri Apr 12, 2019 2:42 pm

Schwab offers two other options to consider. Their robo-advisor is free (albeit with a required cash component) a d their new service adds human financial planning at a lower annual fee than Vanguard. See https://www.schwab.com/public/schwab/in ... t_advisory

Disclosure: I use Schwab as my broker, and I have significant parts of my portfolio invested in Vanguard funds, but don't use either robo-advisor. I don't have first hand experience with either Vanguard or Schwab's advisor services.
"No man is free who works for a living." | Illya Kuryakin

livesoft
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Re: My advisor VS Vanguard's PAS

Post by livesoft » Fri Apr 12, 2019 2:59 pm

If you have a taxable account and it is not invested tax-efficiently, then you are paying additional costs in a stealthy, unseen way.

I suggest you have a friendly conversation with your advisor. If they are smart, then they will lower their fees for you.

And to go back to tax efficiency: How much extra in taxes did you pay because of your advisor? You can ask them directly since you are paying them to tell you that. I don't use an advisor, but I make sure of 4 things that affect taxes on my investments:

1. On my Form 1040 Schedule B, part I, I make sure I have less than $10 of taxable income.

2. On my Form 1040 Schedule B, part II, I make sure I have almost all qualified ordinary dividends and no non-qualified ordinary dividends.

3. On my Form 1040 Schedule D, I make sure that Line 13 is always $0.00.

4. On my Form 1040 Schedule D, I make sure that Line 16 is always negative.

Those 4 things are easy for all taxpayers to check even if they have someone else prepare their tax returns.
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ExitStageLeft
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Re: My advisor VS Vanguard's PAS

Post by ExitStageLeft » Fri Apr 12, 2019 3:05 pm

Welcome to the forum!

Your 10-year return of 9.35% could be above or below the overall market, depending upon how much of your equities are in international markets.

https://www.portfoliovisualizer.com/bac ... alBond2=30

Returns come and go, but fees are forever. You can use PortfolioVisualizer to backtest how your portfolio did from 1999 to 2009. Returns in a bull market may hide the risks inherent in a portfolio, but the 1999-2009 tme period would show how those risks would have manifested.

deltaneutral83
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Re: My advisor VS Vanguard's PAS

Post by deltaneutral83 » Fri Apr 12, 2019 3:12 pm

MOH wrote:
Fri Apr 12, 2019 1:59 pm


My current advisor charges us a fee of 0.50%. And the average, weighed expense cost across all of our stock and bond investments (a 70/30 ratio) is 0.35%. Over the past ten years, 3/31/2009-3/31/2019, our average net return is 8.5%. (So, a 9.35% gross return minus 0.85% fees/cost)
You didn't mention the portion of your equities that is international unless I missed it. A quick look at a 70/30 portfolio from Vanguard (where they will recommend 40% of your equities be in international) shows above 10% from 3/31/2009-3/31/2019. Funny enough, it looks like the drag on your portfolio is more than just the 85 bps. I used Tot US, Tot Intl, and Tot Bond from VG as the benchmarks against your actively managed portfolio.

I'd suggest moving to the PAS system with VG and then after 12 months you may elect to drive your own 3F. As far as you've come in the last 12 months, the 3F will not be complex for you to implement on your own, but you can always pay VG 30 bps and that's fine too.

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Fri Apr 12, 2019 3:32 pm

bloom2708 wrote:
Fri Apr 12, 2019 2:29 pm
Run your exact numbers through this calculator:

https://www.dinkytown.net/java/compare- ... -fees.html

See the difference the .4 to .5 makes over 30 years.

I think it would be worth it to switch. Once set up with PAS, you can use it for 1-2 years and then go it on your own.

Saving an additional .3%. Our all up cost at Vanguard is .06%. 3 unique funds placed tax efficiently.
This is great. I'm going to run some numbers through it. Thanks!

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Fri Apr 12, 2019 3:33 pm

Elric wrote:
Fri Apr 12, 2019 2:42 pm
Schwab offers two other options to consider. Their robo-advisor is free (albeit with a required cash component) a d their new service adds human financial planning at a lower annual fee than Vanguard. See https://www.schwab.com/public/schwab/in ... t_advisory

Disclosure: I use Schwab as my broker, and I have significant parts of my portfolio invested in Vanguard funds, but don't use either robo-advisor. I don't have first hand experience with either Vanguard or Schwab's advisor services.
I'll check it out. But if I were to switch, I feel like Vanguard would be worth the slight extra for their philosophy and Flagship services. Thanks!

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Fri Apr 12, 2019 3:36 pm

livesoft wrote:
Fri Apr 12, 2019 2:59 pm
If you have a taxable account and it is not invested tax-efficiently, then you are paying additional costs in a stealthy, unseen way.

I suggest you have a friendly conversation with your advisor. If they are smart, then they will lower their fees for you.

And to go back to tax efficiency: How much extra in taxes did you pay because of your advisor? You can ask them directly since you are paying them to tell you that. I don't use an advisor, but I make sure of 4 things that affect taxes on my investments:

1. On my Form 1040 Schedule B, part I, I make sure I have less than $10 of taxable income.

2. On my Form 1040 Schedule B, part II, I make sure I have almost all qualified ordinary dividends and no non-qualified ordinary dividends.

3. On my Form 1040 Schedule D, I make sure that Line 13 is always $0.00.

4. On my Form 1040 Schedule D, I make sure that Line 16 is always negative.

Those 4 things are easy for all taxpayers to check even if they have someone else prepare their tax returns.
This is great. I'll check out the numbers on my current tax return. I know Vanguard was promoting tax efficiency in our conversations. Regarding, asking my advisor to lower their fees, I had thought about that. But I'm not sure how it would be taken. My guy is to just decide which way to go rather than give them an ultimatum--lower your fees or I will leave. But again, I'll consider it. Thanks!

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Fri Apr 12, 2019 3:37 pm

ExitStageLeft wrote:
Fri Apr 12, 2019 3:05 pm
Welcome to the forum!

Your 10-year return of 9.35% could be above or below the overall market, depending upon how much of your equities are in international markets.

https://www.portfoliovisualizer.com/bac ... alBond2=30

Returns come and go, but fees are forever. You can use PortfolioVisualizer to backtest how your portfolio did from 1999 to 2009. Returns in a bull market may hide the risks inherent in a portfolio, but the 1999-2009 tme period would show how those risks would have manifested.
Thank you!

dbr
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Re: My advisor VS Vanguard's PAS

Post by dbr » Fri Apr 12, 2019 3:59 pm

0.85 to 0.42 is meaningful but not as meaningful as 0.85 to 0.12. The suggestion might be to let VPAS get things set up and then move away and eliminate the 0.30. But there are some other issues.

1. Actively managed funds may have significant turnover which also includes trading costs not in the ER. For stock funds you could estimate 1% cost for every 100% in turnover. If some of your holdings are in taxable accounts you need to include tax costs for distributions and capital gains from trading in your funds and trading of your funds. Vanguard portfolios would be low turnover tax efficient index portfolios.

2. Do they provide services VPAS does not, or when you mention accounting services is that an extra cost to you.

anil686
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Re: My advisor VS Vanguard's PAS

Post by anil686 » Fri Apr 12, 2019 4:15 pm

dbr wrote:
Fri Apr 12, 2019 3:59 pm
0.85 to 0.42 is meaningful but not as meaningful as 0.85 to 0.12. The suggestion might be to let VPAS get things set up and then move away and eliminate the 0.30. But there are some other issues.

1. Actively managed funds may have significant turnover which also includes trading costs not in the ER. For stock funds you could estimate 1% cost for every 100% in turnover. If some of your holdings are in taxable accounts you need to include tax costs for distributions and capital gains from trading in your funds and trading of your funds. Vanguard portfolios would be low turnover tax efficient index portfolios.

2. Do they provide services VPAS does not, or when you mention accounting services is that an extra cost to you.
this! Once you feel comfortable - that drop from 0.83% to 0.10% would be possible and probably likely if you have an interest in managing your own portfolio...

livesoft
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Re: My advisor VS Vanguard's PAS

Post by livesoft » Fri Apr 12, 2019 5:40 pm

MOH wrote:
Fri Apr 12, 2019 3:36 pm
This is great. I'll check out the numbers on my current tax return. I know Vanguard was promoting tax efficiency in our conversations. Regarding, asking my advisor to lower their fees, I had thought about that. But I'm not sure how it would be taken. My guy [goal] is to just decide which way to go rather than give them an ultimatum--lower your fees or I will leave. But again, I'll consider it. Thanks!
I did not suggest giving them an ultimatum, but I did suggest having a "friendly conversation." You can take them to lunch and pay for it yourself. You can ask them to lower their fees and you shouldn't care how it would be taken, but you should find out.
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Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sat Apr 13, 2019 7:56 am

dbr wrote:
Fri Apr 12, 2019 3:59 pm
0.85 to 0.42 is meaningful but not as meaningful as 0.85 to 0.12. The suggestion might be to let VPAS get things set up and then move away and eliminate the 0.30. But there are some other issues.

1. Actively managed funds may have significant turnover which also includes trading costs not in the ER. For stock funds you could estimate 1% cost for every 100% in turnover. If some of your holdings are in taxable accounts you need to include tax costs for distributions and capital gains from trading in your funds and trading of your funds. Vanguard portfolios would be low turnover tax efficient index portfolios.

2. Do they provide services VPAS does not, or when you mention accounting services is that an extra cost to you.
Yes, accounting is an extra cost. It's just easier having it all in one place. Aside from that, my current advisor's services are similar. They have provided value over the years in offering us advice on mortgages, renting vs buying, college savings, etc etc.

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sat Apr 13, 2019 7:59 am

livesoft wrote:
Fri Apr 12, 2019 5:40 pm
MOH wrote:
Fri Apr 12, 2019 3:36 pm
This is great. I'll check out the numbers on my current tax return. I know Vanguard was promoting tax efficiency in our conversations. Regarding, asking my advisor to lower their fees, I had thought about that. But I'm not sure how it would be taken. My guy [goal] is to just decide which way to go rather than give them an ultimatum--lower your fees or I will leave. But again, I'll consider it. Thanks!
I did not suggest giving them an ultimatum, but I did suggest having a "friendly conversation." You can take them to lunch and pay for it yourself. You can ask them to lower their fees and you shouldn't care how it would be taken, but you should find out.
Ultimatum was the wrong word. I'll think about it. If we decide to switch, it's not a conversation I'm looking forward to. I highly doubt they would drop their fee but who knows. There would still be the difference in expense costs across the funds, but if they dropped their fee to say 30 basis points like Vanguard, then we're only talking about a 0.2% difference or so in costs. Then it's a question of tax efficiency, etc and how impactful that would be. Thanks.

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sat Apr 13, 2019 8:12 am

bloom2708 wrote:
Fri Apr 12, 2019 2:29 pm
Run your exact numbers through this calculator:

https://www.dinkytown.net/java/compare- ... -fees.html

See the difference the .4 to .5 makes over 30 years.

I think it would be worth it to switch. Once set up with PAS, you can use it for 1-2 years and then go it on your own.

Saving an additional .3%. Our all up cost at Vanguard is .06%. 3 unique funds placed tax efficiently.
I just used the calculator and WOW, was that eye opening. Thank you!

dbr
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Re: My advisor VS Vanguard's PAS

Post by dbr » Sat Apr 13, 2019 8:42 am

MOH wrote:
Sat Apr 13, 2019 7:56 am
dbr wrote:
Fri Apr 12, 2019 3:59 pm
0.85 to 0.42 is meaningful but not as meaningful as 0.85 to 0.12. The suggestion might be to let VPAS get things set up and then move away and eliminate the 0.30. But there are some other issues.

1. Actively managed funds may have significant turnover which also includes trading costs not in the ER. For stock funds you could estimate 1% cost for every 100% in turnover. If some of your holdings are in taxable accounts you need to include tax costs for distributions and capital gains from trading in your funds and trading of your funds. Vanguard portfolios would be low turnover tax efficient index portfolios.

2. Do they provide services VPAS does not, or when you mention accounting services is that an extra cost to you.
Yes, accounting is an extra cost. It's just easier having it all in one place. Aside from that, my current advisor's services are similar. They have provided value over the years in offering us advice on mortgages, renting vs buying, college savings, etc etc.
The question then would be to tally what you spent on them and decide if the value was worth it. The next question is whether or not those sorts of services would continue to be worth it considering what has to be paid for it. I think people are helping demonstrate what those costs are. VPAS is not going to offer advice on items such as the above.

Sandi_k
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Re: My advisor VS Vanguard's PAS

Post by Sandi_k » Sat Apr 13, 2019 11:47 am

MOH wrote:
Sat Apr 13, 2019 8:12 am

I just used the calculator and WOW, was that eye opening. Thank you!
Can you give us a general idea of the difference? It wold be useful to others agonizing over leaving their advisor relationship...

NotWhoYouThink
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Re: My advisor VS Vanguard's PAS

Post by NotWhoYouThink » Sat Apr 13, 2019 12:28 pm

What is the asset allocation your current advisor has you in? Has it been pretty steady the last 10 years? Because your AA will have a bigger effect on your returns than the difference between your current fees and Vanguard fees.

Do you care what your AA is? Do you want to have input on that topic, or do you want to turn it over to an expert and let them decide? It's ok if you want to do that, but then you need to understand that you can't compare a Vanguard 50/50 allocation at .3% plus fund ERs against someone else's 80/20 allocation at .5% plus fund expenses. It's apples and oranges. You might have much better results with a riskier (more equities) allocation and higher fees than with a more conservative allocation with lower fees.

The fees matter a lot when you are comparing the same underlying investments. It's more complicated when the underlying investments are significantly different.

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sat Apr 13, 2019 4:21 pm

NotWhoYouThink wrote:
Sat Apr 13, 2019 12:28 pm
What is the asset allocation your current advisor has you in? Has it been pretty steady the last 10 years? Because your AA will have a bigger effect on your returns than the difference between your current fees and Vanguard fees.

Do you care what your AA is? Do you want to have input on that topic, or do you want to turn it over to an expert and let them decide? It's ok if you want to do that, but then you need to understand that you can't compare a Vanguard 50/50 allocation at .3% plus fund ERs against someone else's 80/20 allocation at .5% plus fund expenses. It's apples and oranges. You might have much better results with a riskier (more equities) allocation and higher fees than with a more conservative allocation with lower fees.

The fees matter a lot when you are comparing the same underlying investments. It's more complicated when the underlying investments are significantly different.
Our AA is currently 70/30 and has been (as far as I know) for the past ten years. My current advisor recommends we are at 70/30 and Vanguard also recommends we be at 70/30.

Whether I stay with my advisor or go with Vanguard, 70/30 appears to be the right AA for us and we feel comfortable with it. Therefore, the fees/expenses appear to be the defining factor. (Or at least a major one.)

tibbitts
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Re: My advisor VS Vanguard's PAS

Post by tibbitts » Sat Apr 13, 2019 6:25 pm

From the limited information we have it sounds like you have a decent adviser now. It's difficult to judge how much "extra" you're getting from them vs. what VG would provide but it seems like they're venturing into some categories of advice that VG would not. So maybe that's worth it to you. There are all kinds of people paying 1%+ to purchase funds with 1%+ expenses. In any case you shouldn't feel that you're in a bad situation.

I'm not sure an adviser would negotiate fees, I just don't know. I can think of some arguments you could use, but I think it comes down to the adviser's outlook. If he thinks his business will shrink 20% annually and market returns are going to be maybe 1% real for the remainder of his career, he might agree to be your adviser for life for next to nothing.

GmanJeff
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Re: My advisor VS Vanguard's PAS

Post by GmanJeff » Sat Apr 13, 2019 7:08 pm

You may want to ask PAS whether they can assist with the types of issues and questions you expect to have. Several of the responses you have received here appear to indicate PAS would not be helpful with those, but I would expect otherwise. PAS advisors manage portfolios, but also provide financial planning and related advice, so it may be worthwhile to determine for yourself whether your needs in that regard could be met at Vanguard as well as at your current firm.

dave1054
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Re: My advisor VS Vanguard's PAS

Post by dave1054 » Sat Apr 13, 2019 7:20 pm

Just a few thoughts:

Nobody seems to be too concerned about expenses until the market turns down.

I have never met a financial advisor who does not try to steer clients to investments that benefit them in hidden fees. It may be subconscious but it happens all the time. Vanguard PAS advisors are on salary and only recommend very low expense funds.

If you need assistance for mortgage advise, college savings, rent vs own etc there are tons of resources on the internet. Otherwise, pay a financial advisor per hour.

Finally,you mentioned they provide tax services. Not a good idea. You should always separate your advisor from your accountant. Sounds like conflict of interest of me.

afan
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Re: My advisor VS Vanguard's PAS

Post by afan » Sat Apr 13, 2019 7:27 pm

MOH wrote:
Sat Apr 13, 2019 7:56 am
Aside from that, my current advisor's services are similar. They have provided value over the years in offering us advice on mortgages, renting vs buying, college savings, etc etc.
If you value the non-investing financial advice, you may want to be careful about PAS. I do not use that service, but I have used the "ask a CFP" service that comes free for Flagship investors. The CFPs have been useless. I know more about the issues than they do and they make no attempt to learn enough to add any value. Vanguard is wonderful in providing index funds at rock bottom prices and with no gimmicks. But They do not provide financial advice.

If you can, try them out for advice on something and see how they compare to your current advisor.

Recognize that you can get your investments "managed" by putting the proceeds of your sales and any new money into any of a number of balanced, life strategy or target date funds. There will be an expense ratio that his higher than if you simply bought the index funds on your own. The expense ratio will be lower than the PAS fee and there will be no additional costs on top.

If you move enough funds to Vanguard to qualify for Flagship, then you can get the same advice you would from PAS. No fee required.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 8:52 am

tibbitts wrote:
Sat Apr 13, 2019 6:25 pm
From the limited information we have it sounds like you have a decent adviser now. It's difficult to judge how much "extra" you're getting from them vs. what VG would provide but it seems like they're venturing into some categories of advice that VG would not. So maybe that's worth it to you. There are all kinds of people paying 1%+ to purchase funds with 1%+ expenses. In any case you shouldn't feel that you're in a bad situation.

I'm not sure an adviser would negotiate fees, I just don't know. I can think of some arguments you could use, but I think it comes down to the adviser's outlook. If he thinks his business will shrink 20% annually and market returns are going to be maybe 1% real for the remainder of his career, he might agree to be your adviser for life for next to nothing.
Thanks. After all the research and reading I've done over the past six months, I don't feel like I'm in a bad situation at all. If I could turn back the clock 14 years though and start over with a three fund portfolio, I would do it in a second. That being said, I'm looking forward, evaluating and accepting where we're at and whether or not a change is beneficial.

One more piece of information, we would qualify for Flagship Select services, which include advice on wealth and estate planning for instance and other areas that would probably interest me in the future. Not sure if it would be as timely and personal as what I'm getting now, where when I pick up the phone it's always answered by my person, but it's there.

That being said, we're at the stage of our lives where many of the big decisions we've needed to make have been made and taken care of--like saving for college, buying a home, renting vs buying, etc.

When I look at the next ten or twelve years that we'll be working until we try to retire, I don't anticipate a lot of big life decisions. The biggest ones will be what age we decide to retire and how much we have to do it with and how we do it when the time comes, and our estate planning. But who knows what life will throw at us in the meantime. :)

dbr
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Re: My advisor VS Vanguard's PAS

Post by dbr » Sun Apr 14, 2019 8:59 am

MOH wrote:
Sun Apr 14, 2019 8:52 am


Thanks. After all the research and reading I've done over the past six months, I don't feel like I'm in a bad situation at all. If I could turn back the clock 14 years though and start over with a three fund portfolio, I would do it in a second. That being said, I'm looking forward, evaluating and accepting where we're at and whether or not a change is beneficial.

One more piece of information, we would qualify for Flagship Select services, which include advice on wealth and estate planning for instance and other areas that would probably interest me in the future. Not sure if it would be as timely and personal as what I'm getting now, where when I pick up the phone it's always answered by my person, but it's there.

That being said, we're at the stage of our lives where many of the big decisions we've needed to make have been made and taken care of--like saving for college, buying a home, renting vs buying, etc.

When I look at the next ten or twelve years that we'll be working until we try to retire, I don't anticipate a lot of big life decisions. The biggest ones will be what age we decide to retire and how much we have to do it with and how we do it when the time comes, and our estate planning. But who knows what life will throw at us in the meantime. :)
The more money you have and the longer time you let it go on the more dollars you lose to fees, even that 0.30%. At the same time there are more cost effective ways to answer questions and find information than paying an annual "tax" on your assets.

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 9:02 am

GmanJeff wrote:
Sat Apr 13, 2019 7:08 pm
You may want to ask PAS whether they can assist with the types of issues and questions you expect to have. Several of the responses you have received here appear to indicate PAS would not be helpful with those, but I would expect otherwise. PAS advisors manage portfolios, but also provide financial planning and related advice, so it may be worthwhile to determine for yourself whether your needs in that regard could be met at Vanguard as well as at your current firm.
Yes, I've been looking into it and have been asking about it. It sounds like Flagship select services would be helpful with the various types of advice. They may not always be as accessible as my current person. But considering how often I may need them, I'm not sure that would be an issue.

Topic Author
MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 9:08 am

dave1054 wrote:
Sat Apr 13, 2019 7:20 pm
Just a few thoughts:

Nobody seems to be too concerned about expenses until the market turns down.

I have never met a financial advisor who does not try to steer clients to investments that benefit them in hidden fees. It may be subconscious but it happens all the time. Vanguard PAS advisors are on salary and only recommend very low expense funds.

If you need assistance for mortgage advise, college savings, rent vs own etc there are tons of resources on the internet. Otherwise, pay a financial advisor per hour.

Finally,you mentioned they provide tax services. Not a good idea. You should always separate your advisor from your accountant. Sounds like conflict of interest of me.
I have never thought of having our accountant within the same company as our advisor as a conflict. I will think about that. If I were to switch to Vanguard, I would need to find a new CPA. I have been trying to research it a bit and have been trying to get some referrals. I wish there was an "Angie's List" kind of search I could use for a CPA.

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goingup
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Re: My advisor VS Vanguard's PAS

Post by goingup » Sun Apr 14, 2019 9:16 am

The logical starting point, it seems to me, is to find out if your financial advisor would reduce his fee. Having been there 14 years, you probably don't require a lot of attention. If you need lots of hand-holding, he may not be inclined to reduce. If you are low-maintenance, he might be amenable to a lower AUM fee.

It's good to start thinking about costs associated with your portfolio. Your investable assets at this age/stage of your life have a way of doubling quickly. I'd find that AUM and ERs to be really onerous.

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 9:18 am

afan wrote:
Sat Apr 13, 2019 7:27 pm
MOH wrote:
Sat Apr 13, 2019 7:56 am
Aside from that, my current advisor's services are similar. They have provided value over the years in offering us advice on mortgages, renting vs buying, college savings, etc etc.

Recognize that you can get your investments "managed" by putting the proceeds of your sales and any new money into any of a number of balanced, life strategy or target date funds. There will be an expense ratio that his higher than if you simply bought the index funds on your own. The expense ratio will be lower than the PAS fee and there will be no additional costs on top.
I did read about the balanced, life funds. My issue is that I hold so many actively managed funds. The PAS at Vanguard would recommend selling some but keeping others (for now) to avoid large capital gains. I would defer to their expertise about what actively managed funds to sell now and hold and for how long. That would complicate just moving into a life strategy fund. But I appreciate the information.

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Re: My advisor VS Vanguard's PAS

Post by tibbitts » Sun Apr 14, 2019 9:33 am

MOH wrote:
Sun Apr 14, 2019 9:08 am
dave1054 wrote:
Sat Apr 13, 2019 7:20 pm
Just a few thoughts:

Nobody seems to be too concerned about expenses until the market turns down.

I have never met a financial advisor who does not try to steer clients to investments that benefit them in hidden fees. It may be subconscious but it happens all the time. Vanguard PAS advisors are on salary and only recommend very low expense funds.

If you need assistance for mortgage advise, college savings, rent vs own etc there are tons of resources on the internet. Otherwise, pay a financial advisor per hour.

Finally,you mentioned they provide tax services. Not a good idea. You should always separate your advisor from your accountant. Sounds like conflict of interest of me.
I have never thought of having our accountant within the same company as our advisor as a conflict. I will think about that. If I were to switch to Vanguard, I would need to find a new CPA. I have been trying to research it a bit and have been trying to get some referrals. I wish there was an "Angie's List" kind of search I could use for a CPA.
I actually think the opposite is more of a problem - you have a lawyer, tax person / CPA, and investment adviser none of whom know what the other one is doing or understand the issues the other one does. I don't like hearing "well I'm not a ..." whatever. Give me that JD+CPA+CFP.

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Re: My advisor VS Vanguard's PAS

Post by dave1054 » Sun Apr 14, 2019 10:32 am

Tidbits may be correct. However ask Bernie Madoff’s clients about one stop shopping and conflict of interests🤔

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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 10:45 am

goingup wrote:
Sun Apr 14, 2019 9:16 am
The logical starting point, it seems to me, is to find out if your financial advisor would reduce his fee. Having been there 14 years, you probably don't require a lot of attention. If you need lots of hand-holding, he may not be inclined to reduce. If you are low-maintenance, he might be amenable to a lower AUM fee.

It's good to start thinking about costs associated with your portfolio. Your investable assets at this age/stage of your life have a way of doubling quickly. I'd find that AUM and ERs to be really onerous.
I think we have become more and more low maintenance and will continue to do so. Let's say my current advisor did agree to reduce their fee to 30 basis points to match what Vanguard PAS offers. Then the difference would be in their respective investing approaches. My current expenses across funds with my advisor is 0.35%. If I move my assets to Vanguard, they would sell some actively managed funds and replace them with low cost index funds, while keeping some actively managed funds to avoid large capital gains. That combination would result in expenses for the portfolio being 0.12.

So in this scenario where my advisor potentially reduces their fee, it is 0.35% vs 0.12%. Also, I would consider their two different investing approaches. As time marches on, I'm guessing the goal for Vanguard would be to eventually get rid of all my actively managed funds if and when it ever makes sense.

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Re: My advisor VS Vanguard's PAS

Post by dbr » Sun Apr 14, 2019 10:53 am

So you would continue to do business with a man who is now admitting that he has been overcharging you for 14 years :x

GmanJeff
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Re: My advisor VS Vanguard's PAS

Post by GmanJeff » Sun Apr 14, 2019 12:56 pm

MOH wrote:
Sun Apr 14, 2019 9:02 am
GmanJeff wrote:
Sat Apr 13, 2019 7:08 pm
You may want to ask PAS whether they can assist with the types of issues and questions you expect to have. Several of the responses you have received here appear to indicate PAS would not be helpful with those, but I would expect otherwise. PAS advisors manage portfolios, but also provide financial planning and related advice, so it may be worthwhile to determine for yourself whether your needs in that regard could be met at Vanguard as well as at your current firm.
Yes, I've been looking into it and have been asking about it. It sounds like Flagship select services would be helpful with the various types of advice. They may not always be as accessible as my current person. But considering how often I may need them, I'm not sure that would be an issue.
When I reach out to my assigned VG rep to ask questions, usually by sending a message through the website, I typically receive a return call within a few hours even when the matter isn't time-sensitive. If my rep is out, a colleague covering for him will respond within the same timeframe.

123
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Re: My advisor VS Vanguard's PAS

Post by 123 » Sun Apr 14, 2019 1:12 pm

MOH wrote:
Sun Apr 14, 2019 9:02 am
...It sounds like Flagship select services would be helpful with the various types of advice. They may not always be as accessible as my current person. But considering how often I may need them, I'm not sure that would be an issue.
The OP's mention of Flagship select services indicates invested assets of $5M or more. While his current AUM fee of .5% doesn't seem onerous when we typically hear AUM fees of 1.00%+ when you consider the size of the assets involved that .5% AUM is actually $25,000+ annually.
The closest helping hand is at the end of your own arm.

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Re: My advisor VS Vanguard's PAS

Post by Independent George » Sun Apr 14, 2019 1:16 pm

Honestly, I don't think your current advisor is all that bad, especially with the additional tax accounting services provided. It's more than most of us DIY folks pay, but you could do much worse. And I'm sure that if you asked, I'm sure they would switch you over to lower cost index funds, dropping the total cost down to almost Vanguard PAS levels. Having the advisor has kept you saving and investing (which you may well not have done had you gone without); all things considered, I think you've done alright.

If it were me, I probably wouldn't change over; I'd just ask them to simplify my portfolio with lower cost options.

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Re: My advisor VS Vanguard's PAS

Post by afan » Sun Apr 14, 2019 1:50 pm

If your current advisor will cut fees to match PAS, the next question is whether the advisor will switch to low cost index funds. OP may be able to get to the same costs as with PAS while maintaining the relationship with the current advisor.

I repeat my caution against the value of financial advice from Vanguard. Those promised services and estate planning help are vaporware as best I can tell.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Wiggums
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Re: My advisor VS Vanguard's PAS

Post by Wiggums » Sun Apr 14, 2019 1:57 pm

I’m more concerned about the complexity (number of the funds). Are you sure the funds don’t have a front or back end load fee?

If it’s just .5% and you’re happy there, I would not rush into the decision one way or another. Of course, lower fees make a difference but there is also value in the service too.

Good luck to you...

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Re: My advisor VS Vanguard's PAS

Post by Mr.BB » Sun Apr 14, 2019 2:15 pm

The question for the OP's advisor (if he says he will put him in lower ER index funds) is why didn't you do this for me before?
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 2:19 pm

dbr wrote:
Sun Apr 14, 2019 10:53 am
So you would continue to do business with a man who is now admitting that he has been overcharging you for 14 years :x
Who said it was a man? :happy

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 2:24 pm

123 wrote:
Sun Apr 14, 2019 1:12 pm
MOH wrote:
Sun Apr 14, 2019 9:02 am
...It sounds like Flagship select services would be helpful with the various types of advice. They may not always be as accessible as my current person. But considering how often I may need them, I'm not sure that would be an issue.
The OP's mention of Flagship select services indicates invested assets of $5M or more. While his current AUM fee of .5% doesn't seem onerous when we typically hear AUM fees of 1.00%+ when you consider the size of the assets involved that .5% AUM is actually $25,000+ annually.
We would just qualify for Flagship Select. When I mentioned in my first post that the difference between my current advisor's fee and fund expenses and Vangauard's approach would be 0.42% in favor of Vanguard, that difference would be a savings of over 20K a year. Then when I run the scenarios for the next ten years through the calculator that another Boglehead mentioned above, it's a lot of potential money saved/earned. That is of course, assuming Vanguard and my current advisor generate the same returns over the next decade.

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 2:26 pm

afan wrote:
Sun Apr 14, 2019 1:50 pm
If your current advisor will cut fees to match PAS, the next question is whether the advisor will switch to low cost index funds. OP may be able to get to the same costs as with PAS while maintaining the relationship with the current advisor.

I repeat my caution against the value of financial advice from Vanguard. Those promised services and estate planning help are vaporware as best I can tell.
Has that been your direct experience with Vanguard Flagship services, that they are vaporware? Or is that what you've heard from others?

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 2:32 pm

Wiggums wrote:
Sun Apr 14, 2019 1:57 pm
I’m more concerned about the complexity (number of the funds). Are you sure the funds don’t have a front or back end load fee?

If it’s just .5% and you’re happy there, I would not rush into the decision one way or another. Of course, lower fees make a difference but there is also value in the service too.

Good luck to you...
I know that the funds I'm currently in do not have a front or back end load fee. What I am determining now, is how much help/service (other than asset allocation and management) I will need help with in say, the next ten years. We own a home with a low mortgage, our kids are still several years away from college but we have saved enough in our 529 plans, and things are going well with many big life decisions behind us. The next big item for us will probably be when we potentially retire in a decade and what types of changes take place then, how much we live on, etc. I guess what I'm saying is, my advisor has given us great advice and service. I'm not sure how dependent I will be on it for a while now since we're more on autopilot of working and saving as much as can for a while.

Thanks!

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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 2:38 pm

Mr.BB wrote:
Sun Apr 14, 2019 2:15 pm
The question for the OP's advisor (if he says he will put him in lower ER index funds) is why didn't you do this for me before?
I know the answer because I actually asked why we weren't just in index funds a few years back. The answer was that they believed a mix of index and carefully researched actively managed funds would give more performance.

Yes, I can hear the collective groans from all the Bogleheads reading this thread. :happy And I get it, especially after reading "The Three Fund Portfolio" and learning from this forum for a bit.

Again, if I was starting from the beginning, there is no doubt I would use a three fund portfolio. But, that hasn't been the route I've gone down for the past 14 years. So in either case--whether I stay with my advisor or switch to Vanguard PAS--there are some actively managed funds that I will be keeping to avoid big cap gains. So given that, I'm just trying to determine the best route forward.

Thanks!

drzzzzz
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Re: My advisor VS Vanguard's PAS

Post by drzzzzz » Sun Apr 14, 2019 3:06 pm

We have used Vanguard PAS and left them so I would really suggest that you talk with a Vanguard PAS advisor before leaving your current advisor whom you seem to be happy with. Also while we are not Flagship select we have reasonable assets with Vanguard and I find the advice I get from boglehead's is often much better and more accurate than what I get from a Vanguard flagship rep whom we have had for a long time. Our experience with Vanguard PAS is that they are not interested in offering tax advice if that is something that you are interested in and if you have a "complicated question" such as when to retire or do you have enough to retire, or how much to take out to live on, or should I do Roth conversions, etc, I am not sure they would be willing to make those recommendations either even if you are a Flagship select client or they might only offer to do so if you pay extra for it. As I recall they clearly say they do not provide tax related services or recommendations. I found their portfolio tax efficient (and similar to what you will find on here), but they had some foolish rules that they refused to budge on and we decided they were not in our best interest which led us to leave their services and just continuing to manage our finances in a boglehead manner (and save on their fees as well).

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Re: My advisor VS Vanguard's PAS

Post by tibbitts » Sun Apr 14, 2019 5:07 pm

MOH wrote:
Sun Apr 14, 2019 2:38 pm
Mr.BB wrote:
Sun Apr 14, 2019 2:15 pm
The question for the OP's advisor (if he says he will put him in lower ER index funds) is why didn't you do this for me before?
I know the answer because I actually asked why we weren't just in index funds a few years back. The answer was that they believed a mix of index and carefully researched actively managed funds would give more performance.

Yes, I can hear the collective groans from all the Bogleheads reading this thread. :happy And I get it, especially after reading "The Three Fund Portfolio" and learning from this forum for a bit.

Again, if I was starting from the beginning, there is no doubt I would use a three fund portfolio. But, that hasn't been the route I've gone down for the past 14 years. So in either case--whether I stay with my advisor or switch to Vanguard PAS--there are some actively managed funds that I will be keeping to avoid big cap gains. So given that, I'm just trying to determine the best route forward.

Thanks!
At least until something like thirteen seconds ago, Vanguard's advisors also recommended a mix of index and active funds. So if you were at VG you'd likely be in a similar situation to where you are now. Your adviser wasn't exactly taking an anti-VG approach by using a mix of index and active, and just like with VG there may be some tax considerations to changing that for you at this point.

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 5:45 pm

drzzzzz wrote:
Sun Apr 14, 2019 3:06 pm
We have used Vanguard PAS and left them so I would really suggest that you talk with a Vanguard PAS advisor before leaving your current advisor whom you seem to be happy with. Also while we are not Flagship select we have reasonable assets with Vanguard and I find the advice I get from boglehead's is often much better and more accurate than what I get from a Vanguard flagship rep whom we have had for a long time. Our experience with Vanguard PAS is that they are not interested in offering tax advice if that is something that you are interested in and if you have a "complicated question" such as when to retire or do you have enough to retire, or how much to take out to live on, or should I do Roth conversions, etc, I am not sure they would be willing to make those recommendations either even if you are a Flagship select client or they might only offer to do so if you pay extra for it. As I recall they clearly say they do not provide tax related services or recommendations. I found their portfolio tax efficient (and similar to what you will find on here), but they had some foolish rules that they refused to budge on and we decided they were not in our best interest which led us to leave their services and just continuing to manage our finances in a boglehead manner (and save on their fees as well).
What were the foolish rules that they refused to budge on? Thanks.

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MOH
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Re: My advisor VS Vanguard's PAS

Post by MOH » Sun Apr 14, 2019 5:53 pm

tibbitts wrote:
Sun Apr 14, 2019 5:07 pm
MOH wrote:
Sun Apr 14, 2019 2:38 pm
Mr.BB wrote:
Sun Apr 14, 2019 2:15 pm
The question for the OP's advisor (if he says he will put him in lower ER index funds) is why didn't you do this for me before?
I know the answer because I actually asked why we weren't just in index funds a few years back. The answer was that they believed a mix of index and carefully researched actively managed funds would give more performance.

Yes, I can hear the collective groans from all the Bogleheads reading this thread. :happy And I get it, especially after reading "The Three Fund Portfolio" and learning from this forum for a bit.

Again, if I was starting from the beginning, there is no doubt I would use a three fund portfolio. But, that hasn't been the route I've gone down for the past 14 years. So in either case--whether I stay with my advisor or switch to Vanguard PAS--there are some actively managed funds that I will be keeping to avoid big cap gains. So given that, I'm just trying to determine the best route forward.

Thanks!
At least until something like thirteen seconds ago, Vanguard's advisors also recommended a mix of index and active funds. So if you were at VG you'd likely be in a similar situation to where you are now. Your adviser wasn't exactly taking an anti-VG approach by using a mix of index and active, and just like with VG there may be some tax considerations to changing that for you at this point.
The recommended portfolio/asset allocation from Vanguard, if I were to move my assets, does not recommend purchasing any active funds. Only holding a portion of my current active funds and adding in more index fund investments. When I started the conversation with Vanguard, I expressed an interest in low cost, index funds.

I'm surprised to hear that Vanguard PAS would recommend active funds to potential investors. Was that your experience?

tibbitts
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Re: My advisor VS Vanguard's PAS

Post by tibbitts » Sun Apr 14, 2019 6:01 pm

MOH wrote:
Sun Apr 14, 2019 5:53 pm
tibbitts wrote:
Sun Apr 14, 2019 5:07 pm
MOH wrote:
Sun Apr 14, 2019 2:38 pm
Mr.BB wrote:
Sun Apr 14, 2019 2:15 pm
The question for the OP's advisor (if he says he will put him in lower ER index funds) is why didn't you do this for me before?
I know the answer because I actually asked why we weren't just in index funds a few years back. The answer was that they believed a mix of index and carefully researched actively managed funds would give more performance.

Yes, I can hear the collective groans from all the Bogleheads reading this thread. :happy And I get it, especially after reading "The Three Fund Portfolio" and learning from this forum for a bit.

Again, if I was starting from the beginning, there is no doubt I would use a three fund portfolio. But, that hasn't been the route I've gone down for the past 14 years. So in either case--whether I stay with my advisor or switch to Vanguard PAS--there are some actively managed funds that I will be keeping to avoid big cap gains. So given that, I'm just trying to determine the best route forward.

Thanks!
At least until something like thirteen seconds ago, Vanguard's advisors also recommended a mix of index and active funds. So if you were at VG you'd likely be in a similar situation to where you are now. Your adviser wasn't exactly taking an anti-VG approach by using a mix of index and active, and just like with VG there may be some tax considerations to changing that for you at this point.
The recommended portfolio/asset allocation from Vanguard, if I were to move my assets, does not recommend purchasing any active funds. Only holding a portion of my current active funds and adding in more index fund investments. When I started the conversation with Vanguard, I expressed an interest in low cost, index funds.

I'm surprised to hear that Vanguard PAS would recommend active funds to potential investors. Was that your experience?
I don't use PAS but it's well established on the forum that Vanguard has, in the very recent past, advocated various mixes of index and active funds. The index-only recommendations are extremely recent, so unless you're a new customer, you would have been in those active funds for years and be in the same capital gains situation as with many other advisers. Vanguard's recommendations have really varied all over the map over the years, but sometimes we have short memories around here.

Just one example:

https://advisors.vanguard.com/VGApp/iip ... ivePassive

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