Currently with Schwab private client--and decided to get out--but what to do

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 3:00 pm

Been with Schwab private Client for 16+ years. They did OK, but now I have to to learn and make my own changes. I'm learning a lot here. Thank you.

Of course Schwab does not want to loose custody of my account and that's fine. I like their website and it seems to give me more than enough info that I need.

I've been through 4-5 assigned advsisors over the past 16+ years. The last one just left the company and I've had it.

My local office contact (who has always been great) suggested looking at one of Schwabs outside adviser firms. I met with 2 this week. The 1st I met with has not met the S&P index for the past 20 years ( usually between .5 and 1% below index net fees) but claim they got those results by reducing their clients risk. Met with 2nd and they in their 23 year history show on their nice chart that they did better than the index ( net fees) in each of their 23 years using individual stocks and covered call options and other option means.

I'm torn as to give the 2nd firm a try with 10% of my equity portfolio on a trial basis and see what they can do. I would be more engaged now than I have been the past 16 years and would at least learn some things. Or to just work on maintaining the hand full of good individual stocks and as things are sold move to a simple 3-4 fund portfolio.

Any thoughts would help my learning curve. Any good questions to ask them if I decide to give them a chance for 1-2 years?

Joe

yougotitdude
Posts: 72
Joined: Fri Sep 15, 2017 12:40 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by yougotitdude » Thu Apr 18, 2019 3:08 pm

For each firm, what were their respective results in 2008 and 2011?

What were their maximum drawn downs during the 2007-2009 period?

Not beating the S&P 500 over a 20 year period is not a big deal (especially if they averaged only about 1% or smaller annualized return difference). If they had a 5% drop in 2008. yes, yes, 1% at 20 years end up being a lot of money for a difference, but for some folks that well worth it to not have huge drawdowns.

For the 2nd firm, I find them highly, highly suspect. I've never seen any firm beat the market every single year for 23 straight years. I don't even think the Medallion fund has beaten it ever year for 23 years (but could be wrong about that).

William55
Posts: 11
Joined: Wed Dec 13, 2017 2:11 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by William55 » Thu Apr 18, 2019 3:27 pm

I have been using M1 Finance now for a while I really enjoy the service, it is super easy to use and there support team is very responsive. They have a promo right now where they are paying you if you are looking to transfer in.

123
Posts: 5401
Joined: Fri Oct 12, 2012 3:55 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by 123 » Thu Apr 18, 2019 3:31 pm

If you're used to Schwab you may want to stay there but just do things on your own. This website has a lot of info to give you some perspectives. The biggest issue you face is in taxable accounts to avoid taxes where possible, or offset gains with losses. Now it's possible that your advisers just had you pay the taxes, if you didn't care maybe they didn't either.

One option is to test the waters elsewhere. You can try Vanguard Personal Advisory Services for .3% (with a $50,000 account minimum annual fee). You don't have to move all your assets, just have Vanguard pull $50,000 from an existing retirement account (preferred) and let them handle that $50K. After you see how simple it is for a year or so you may want to just do it yourself. Maybe you'll move the money back to Schwab and do everything there or maybe you'll move it all to Vanguard, it'll be up to you.

How much of an AUM are you paying with Schwab? Beyond the AUM fee it is typical for AUM accounts to be put in investments that have higher costs (expense ratios) as well.

Some people like the "excitement" of individual stocks and the chance to "beat the market". Yeah, we get that. Many of us have been there too. Most of us are now content to just take average market returns - we got tired of being losers some (or most) years. As your portfolio increases in size it becomes difficult to "win" against the market because failures of large bets cost you dearly.
The closest helping hand is at the end of your own arm.

mptfan
Posts: 5714
Joined: Mon Mar 05, 2007 9:58 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by mptfan » Thu Apr 18, 2019 3:37 pm

GNXGuy wrote:
Thu Apr 18, 2019 3:00 pm
The 1st I met with has not met the S&P index for the past 20 years ( usually between .5 and 1% below index net fees) but claim they got those results by reducing their clients risk. Met with 2nd and they in their 23 year history show on their nice chart that they did better than the index ( net fees) in each of their 23 years using individual stocks and covered call options and other option means.
I am very skeptical when I hear financial advisors reference "the S&P index" as a benchmark because major brokerages are intentionally misleading when it comes to referencing indices. Let me show you exactly what I mean.

I have a Schwab brokerage account, and I looked at my March brokerage statement and under the heading "Market Monitor" it shows what it claims to be the "year to date change" of several indicies, including the Standard and Poor's 500 Index with a "year to date change" of 13.07% as of March 31, 2019. However, if you refer to the Vanguard S&P 500 index fund Admiral shares (VFIAX) it shows a year to date performance of 13.65% through March 31, 2019. Why is it that the Vanguard S&P 500 fund performed .58% better than the index itself over just 3 months? That is a difference of more than 2% over a year! How is that possible? I'll tell you....the "year to date change" in the index value reported by Schwab only shows the change in the value of the price index, while the total return number reported by Vanguard includes...you guessed it...dividends paid by the stocks in the index which are included in the total return. It's certainly easier to "beat the index" if you compare yourself to the price changes in the index and ignore the dividends paid by the stocks in the index. As far as I'm concerned, that's deceptive and cheating. Over time, the stocks in the S&P 500 index pay dividends, usually about 2% per year, so in any given year the index may be up 8% while the total return of the stocks in the index may be 10%. So an advisor may have a portfolio that returns 9% in that year and claim to beat the index, when in reality the portfolio trailed the total return of the index. Likewise, if an advisor tells you that he was "only 1% below index," what he is really telling you is that you lost 3% of total return compared to what you could have gotten by simply investing in an S&P 500 index fund.

So color me skeptical when advisors from major brokerage firms refer to "the index" as a benchmark for performance.

afan
Posts: 4469
Joined: Sun Jul 25, 2010 4:01 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by afan » Thu Apr 18, 2019 5:33 pm

If you refuse to manage the money yourself, then you could stay at Schwab and use their intelligent portfolio premium service. It would be way cheaper than hiring a conventional advisor.

You could try Vanguard PAS. It would be more expensive than the Intelligent Portfolio Premium, but cheaper than almost any other legitimate advisor you could hire. Probably better investment plan.

Looking at the overall performance of a manager is essentially meaningless. If the manager is customizing portfolios for individual clients (as they will claim to do) then some will have conservative portfolios that will underperform the pure stock indexes whenever stocks are up.

If someone claims they are beating stocks many years in a row, they are probably lying. Bill Miller did this for a long time, in a mutual fund with real annual audited financial reports. So that was not a lie. But he ended up losing so much that his record was trailing the S&P 500 for his career. And got very rich trailing the index. Nice work if you can get it.

Of course, Madoff beat the heck out of stocks for years and years, using options. Until he got caught.

Not saying the Schwab advisors are criminals, but that a long stretch of actually beating the market (and it would be almost impossible to know) is due to luck. Or lying by twisting the facts until they look good. Or just lying.

The simplest maneuver may be to put the money in a balanced, life strategy or target retirement fund. The fund will manage the investments for you and charge a tiny fraction of what you would pay to have your own personal manager. And all the returns would be public and audited.
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

VACat07
Posts: 10
Joined: Mon Feb 11, 2019 4:56 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by VACat07 » Thu Apr 18, 2019 6:04 pm

We used the outside advisors from Schwab for 3 years (had several accounts with Schwab for over 30 years), but decided about a year ago to take everything back and manage ourselves. They did a decent job, but a little more churn than I wanted and the quarterly fees kept adding up without necessarily beating the market. We are about 60/40 retirement to taxable accounts. I switched all retirement accounts to the Schwab equivalent of the 3 fund portfolio discussed here. The hard one is the taxable accounts because of capital gains. I’ve sold all the losers and switched those funds into the 3 fund portfolio, but I have to slowly switch the rest of the account so I don’t get hit with huge capital gains taxes. It’s very easy to do yourself. You don’t need anyone else to manage it to be honest.

Veritas Simplex
Posts: 51
Joined: Sat Aug 26, 2017 1:50 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by Veritas Simplex » Thu Apr 18, 2019 6:47 pm

Schwab Private Client is a high cost service and the fees really eat into your returns. Also have found them not to be especially tax sensitive. Moving to a 3 or 4 fund portfolio at Schwab makes sense, as they have several low cost funds and ETFs. Just be mindful of embedded gains in taxable accounts as you unwind your positions. You can post specifics here for feedback. Ongoing management of your 3 or 4 fund portfolio takes minimal time and saves you lots in fees.

If you decide you'd rather hire a portfolio manager, my preference is Vanguard PAS due its simplified portfolio structure. You could hire them and then take over when you feel comfortable managing yourself. Schwab's Intelligent Portfolios don't appeal to me due to their complexity and "slice and dice" approach, adding small percentages to variety of asset classes.

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:37 pm

Thank you

Here are the charts from the 2 respective firms.

https://photos.app.goo.gl/JgNEsybBMJ2tC2hLA

yougotitdude wrote:
Thu Apr 18, 2019 3:08 pm
For each firm, what were their respective results in 2008 and 2011?

What were their maximum drawn downs during the 2007-2009 period?

Not beating the S&P 500 over a 20 year period is not a big deal (especially if they averaged only about 1% or smaller annualized return difference). If they had a 5% drop in 2008. yes, yes, 1% at 20 years end up being a lot of money for a difference, but for some folks that well worth it to not have huge drawdowns.

For the 2nd firm, I find them highly, highly suspect. I've never seen any firm beat the market every single year for 23 straight years. I don't even think the Medallion fund has beaten it ever year for 23 years (but could be wrong about that).

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:43 pm

Thank you,

I'm grandfathered at Schwab with their old fees @ .75 they have only managed 20% of my equity portfolio. (50% is in 401K's and the other 30% is my personal trading account that I hold 3-4 stocks that have done well long)

I am knowledgeable about tax loss harvesting and hopefully most tax implications involved with taxable accounts.
123 wrote:
Thu Apr 18, 2019 3:31 pm
If you're used to Schwab you may want to stay there but just do things on your own. This website has a lot of info to give you some perspectives. The biggest issue you face is in taxable accounts to avoid taxes where possible, or offset gains with losses. Now it's possible that your advisers just had you pay the taxes, if you didn't care maybe they didn't either.

One option is to test the waters elsewhere. You can try Vanguard Personal Advisory Services for .3% (with a $50,000 account minimum annual fee). You don't have to move all your assets, just have Vanguard pull $50,000 from an existing retirement account (preferred) and let them handle that $50K. After you see how simple it is for a year or so you may want to just do it yourself. Maybe you'll move the money back to Schwab and do everything there or maybe you'll move it all to Vanguard, it'll be up to you.

How much of an AUM are you paying with Schwab? Beyond the AUM fee it is typical for AUM accounts to be put in investments that have higher costs (expense ratios) as well.

Some people like the "excitement" of individual stocks and the chance to "beat the market". Yeah, we get that. Many of us have been there too. Most of us are now content to just take average market returns - we got tired of being losers some (or most) years. As your portfolio increases in size it becomes difficult to "win" against the market because failures of large bets cost you dearly.

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:47 pm

Thank you,

here is a link to the charts I was referring too from the 2 different adviser firms
https://photos.app.goo.gl/JgNEsybBMJ2tC2hLA

Good information---very misleading how they show the benchmark

Thanks

Joe
mptfan wrote:
Thu Apr 18, 2019 3:37 pm
GNXGuy wrote:
Thu Apr 18, 2019 3:00 pm
The 1st I met with has not met the S&P index for the past 20 years ( usually between .5 and 1% below index net fees) but claim they got those results by reducing their clients risk. Met with 2nd and they in their 23 year history show on their nice chart that they did better than the index ( net fees) in each of their 23 years using individual stocks and covered call options and other option means.
I am very skeptical when I hear financial advisors reference "the S&P index" as a benchmark because major brokerages are intentionally misleading when it comes to referencing indices. Let me show you exactly what I mean.

I have a Schwab brokerage account, and I looked at my March brokerage statement and under the heading "Market Monitor" it shows what it claims to be the "year to date change" of several indicies, including the Standard and Poor's 500 Index with a "year to date change" of 13.07% as of March 31, 2019. However, if you refer to the Vanguard S&P 500 index fund Admiral shares (VFIAX) it shows a year to date performance of 13.65% through March 31, 2019. Why is it that the Vanguard S&P 500 fund performed .58% better than the index itself over just 3 months? That is a difference of more than 2% over a year! How is that possible? I'll tell you....the "year to date change" in the index value reported by Schwab only shows the change in the value of the price index, while the total return number reported by Vanguard includes...you guessed it...dividends paid by the stocks in the index which are included in the total return. It's certainly easier to "beat the index" if you compare yourself to the price changes in the index and ignore the dividends paid by the stocks in the index. As far as I'm concerned, that's deceptive and cheating. Over time, the stocks in the S&P 500 index pay dividends, usually about 2% per year, so in any given year the index may be up 8% while the total return of the stocks in the index may be 10%. So an advisor may have a portfolio that returns 9% in that year and claim to beat the index, when in reality the portfolio trailed the total return of the index. Likewise, if an advisor tells you that he was "only 1% below index," what he is really telling you is that you lost 3% of total return compared to what you could have gotten by simply investing in an S&P 500 index fund.

So color me skeptical when advisors from major brokerage firms refer to "the index" as a benchmark for performance.

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:52 pm

Thank you,

Schwab has only managed 20% of my equity portfolio. The balance is in 2 401K's of which I plan to sell the crappy funds within and buy a fidelity index fund not that my wife's company just switched to Fidelity around the 1st of the year.

I'm certainly leaning toward self management with a 3-4 index funds as prescribed as I slowly sell off many of the individual stocks schwab has prescribed (many I plan to keep for a while as the gains are huge)

Joe

afan wrote:
Thu Apr 18, 2019 5:33 pm
If you refuse to manage the money yourself, then you could stay at Schwab and use their intelligent portfolio premium service. It would be way cheaper than hiring a conventional advisor.

You could try Vanguard PAS. It would be more expensive than the Intelligent Portfolio Premium, but cheaper than almost any other legitimate advisor you could hire. Probably better investment plan.

Looking at the overall performance of a manager is essentially meaningless. If the manager is customizing portfolios for individual clients (as they will claim to do) then some will have conservative portfolios that will underperform the pure stock indexes whenever stocks are up.

If someone claims they are beating stocks many years in a row, they are probably lying. Bill Miller did this for a long time, in a mutual fund with real annual audited financial reports. So that was not a lie. But he ended up losing so much that his record was trailing the S&P 500 for his career. And got very rich trailing the index. Nice work if you can get it.

Of course, Madoff beat the heck out of stocks for years and years, using options. Until he got caught.

Not saying the Schwab advisors are criminals, but that a long stretch of actually beating the market (and it would be almost impossible to know) is due to luck. Or lying by twisting the facts until they look good. Or just lying.

The simplest maneuver may be to put the money in a balanced, life strategy or target retirement fund. The fund will manage the investments for you and charge a tiny fraction of what you would pay to have your own personal manager. And all the returns would be public and audited.

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:53 pm

I'm in the same boat know and will most likely do exactly as you did with the Schwab equivalent of the 3 fund portfolio

Joe

VACat07 wrote:
Thu Apr 18, 2019 6:04 pm
We used the outside advisors from Schwab for 3 years (had several accounts with Schwab for over 30 years), but decided about a year ago to take everything back and manage ourselves. They did a decent job, but a little more churn than I wanted and the quarterly fees kept adding up without necessarily beating the market. We are about 60/40 retirement to taxable accounts. I switched all retirement accounts to the Schwab equivalent of the 3 fund portfolio discussed here. The hard one is the taxable accounts because of capital gains. I’ve sold all the losers and switched those funds into the 3 fund portfolio, but I have to slowly switch the rest of the account so I don’t get hit with huge capital gains taxes. It’s very easy to do yourself. You don’t need anyone else to manage it to be honest.

Topic Author
GNXGuy
Posts: 17
Joined: Mon Apr 01, 2019 10:59 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by GNXGuy » Thu Apr 18, 2019 10:54 pm

I agree 100%

Thank you

Joe

Veritas Simplex wrote:
Thu Apr 18, 2019 6:47 pm
Schwab Private Client is a high cost service and the fees really eat into your returns. Also have found them not to be especially tax sensitive. Moving to a 3 or 4 fund portfolio at Schwab makes sense, as they have several low cost funds and ETFs. Just be mindful of embedded gains in taxable accounts as you unwind your positions. You can post specifics here for feedback. Ongoing management of your 3 or 4 fund portfolio takes minimal time and saves you lots in fees.

If you decide you'd rather hire a portfolio manager, my preference is Vanguard PAS due its simplified portfolio structure. You could hire them and then take over when you feel comfortable managing yourself. Schwab's Intelligent Portfolios don't appeal to me due to their complexity and "slice and dice" approach, adding small percentages to variety of asset classes.

targetconfusion
Posts: 47
Joined: Sun Aug 12, 2018 1:02 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by targetconfusion » Thu Apr 18, 2019 11:28 pm

mptfan wrote:
Thu Apr 18, 2019 3:37 pm
the "year to date change" in the index value reported by Schwab only shows the change in the value of the price index, while the total return number reported by Vanguard includes...you guessed it...dividends paid by the stocks in the index which are included in the total return.
This seems so obviously misleading that I'm, naively, continually shocked the first expression of the number is ever even acknowledged. Return should, by default, include price appreciation and dividends otherwise we're discussing something incomplete and, thus, incomparable to anything else.
Last edited by targetconfusion on Fri Apr 19, 2019 12:05 pm, edited 1 time in total.

mptfan
Posts: 5714
Joined: Mon Mar 05, 2007 9:58 am

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by mptfan » Fri Apr 19, 2019 7:35 am

targetconfusion wrote:
Thu Apr 18, 2019 11:28 pm
mptfan wrote:
Thu Apr 18, 2019 3:37 pm
the "year to date change" in the index value reported by Schwab only shows the change in the value of the price index, while the total return number reported by Vanguard includes...you guessed it...dividends paid by the stocks in the index which are included in the total return.
This seems so obviously misleading that I'm, naively, continually shocked the first expression of the number is ever even acknowledged. Return should, by default, include price appreciation and dividends otherwise we're discussing something incomplete, thus, and incomparable to anything else.
I agree, but unfortunately the investment industry preys upon people's ignorance and naivete in these matters and routinely uses only the change in the value of the index as their benchmark for total return. They know it's misleading but they do it anyway because it benefits them and 99% of people probably don't understand that it is misleading.

It's easy to "beat the index" if you simply ignore, on average, 20% of the total return of the stocks in the index and benchmark yourself against 80% of the total return. Worse yet, in a year where the stock market returns less than 10%, let's say 6%, then the dividends paid are likely to be 1/3 of the total return for that year. Pretty nice to benchmark yourself against only 2/3 of the stock market return wouldn't you say?

yougotitdude
Posts: 72
Joined: Fri Sep 15, 2017 12:40 pm

Re: Currently with Schwab private client--and decided to get out--but what to do

Post by yougotitdude » Sun May 19, 2019 6:35 am

Sorry for the super late reply on this but for the second advisor, they are using total return against the S&P 500 per the disclosures at the bottom.

The second advisor has earned their fee. They almost met the market with quite a bit less downside. For those looking at total return, that might not be worth it but for folks that are not okay with deep declines they did a fair job.

It's really hard to see how the first advisor has done since they just show a chart.


Also, I don't think either show if the same person was running the strategies or not.

Post Reply