Poor financial advisor performance

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
dbr
Posts: 29798
Joined: Sun Mar 04, 2007 9:50 am

Re: Poor financial advisor performance

Post by dbr » Tue Jul 16, 2019 10:17 am

goingup wrote:
Tue Jul 16, 2019 10:09 am
I'd think very carefully about leaving your advisor. Being a DIY'er really isn't for everyone. I remember reading (with shock) in Investor's Manifesto by Bill Bernstein when he stated that most people need a financial advisor. I've come around to thinking he may have a point.

Talk with your advisor and tell him your concerns. Find out if he could we reduce that .9% fee. Do you really need to sit down with him every 6 months? Seems like a lot unless you're working through something specific.

Not everyone needs an advisor, but if you're still a somewhat unsettled investor at age 62 you may benefit a lot from having someone else steer.
It is still a point of confusion whether or not the OP had been changing asset allocation attempting to time the market while being under the advisor. If that is true, then Bernstein's point to hire an advisor to prevent that has failed. The advisor can also explain appropriate concepts of benchmark. Whether or not he can truly defend the AUM is a different question.

User avatar
Ben Mathew
Posts: 739
Joined: Tue Mar 13, 2018 11:41 am
Location: Seattle
Contact:

Re: Poor financial advisor performance

Post by Ben Mathew » Tue Jul 16, 2019 10:22 am

goingup wrote:
Tue Jul 16, 2019 10:09 am
I'd think very carefully about leaving your advisor. Being a DIY'er really isn't for everyone. I remember reading (with shock) in Investor's Manifesto by Bill Bernstein when he stated that most people need a financial advisor. I've come around to thinking he may have a point.

Talk with your advisor and tell him your concerns. Find out if he could we reduce that .9% fee. Do you really need to sit down with him every 6 months? Seems like a lot unless you're working through something specific.

Not everyone needs an advisor, but if you're still a somewhat unsettled investor at age 62 you may benefit a lot from having someone else steer.
But an unsettled investor will not let an competent advisor steer. When the competent advisor underperforms a benchmark, they will look for a new advisor, as OP is doing. They end up chasing advisors, not much different from chasing funds. I think there is no good substitute to learning how to invest. Finding a good advisor and sticking with them is not any easier than finding a good strategy and sticking with it. I would say it's harder to find a good advisor than to find a good strategy. And of course, it's more expensive.

User avatar
Ben Mathew
Posts: 739
Joined: Tue Mar 13, 2018 11:41 am
Location: Seattle
Contact:

Re: Poor financial advisor performance

Post by Ben Mathew » Tue Jul 16, 2019 10:32 am

jjodod wrote:
Tue Jul 16, 2019 8:45 am
I think I may have misstated my investment behavior in the original post which has led to some wrong perceptions.

In the 5 years we’ve been with the FA we have not once asked him to add or drop a fund. He has proposed a few changes over the period which we approved. Historically, I have been in only a handful of mutual funds, mostly Vanguard. I have been guilty of changing allocation in market swings, e.g., transferring or decreasing contributions to stock funds in market downturns rather than realizing stocks are on sale and I should be buying. I am just stating a fact that the IDX 500 alone would have performed better than this strategy (11% lifetime of fund).

The two biggest fund changes occurred when switching advisors: first, when I went from DIY to Vanguard FA, and second, when I went from DIY to the current advisor.

I actually had a fairly simple Vanguard portfolio originally which their FA made more complicated. I didn’t agree with some of his actions (selling my long held Health Care Fund) and I felt the subsequent performance bore my misgivings out.

The most important advice our new FA has given us is the importance of asset allocation and having a formal plan.

Finally, the value of our portfolio is a result of our dedication to savings and not a reflection of our investing acumen.
This is what I understood as well. The problem with your approach is that you are evaluating things--whether it's funds, strategies, or advisors--based on recent performance. That causes you to get anxious during periods of underperformance, decide this is not the right course, and try to change things. This approach is destined to fail. It's not an advisor vs DIY issue. You are market timing--both when you are DIY'ing, and when you have an advisor. You have to recognize it and figure out how to keep yourself from doing it.

Coburn
Posts: 56
Joined: Sat Jun 08, 2019 12:46 pm

Re: Poor financial advisor performance

Post by Coburn » Tue Jul 16, 2019 10:35 am

1. I think the OP suffers from "The grass is always greener..." syndrome. This to evident to me by reading his posts as is his mood and tone of his posts.

2. My advice is to talk for the FA is see if their fees can be lowered. The portfolio performance has been fine...it's definitely not poor as the title states.

3. If he does go back to a DIY-investor, he will probably find something else to be dissatisfied about later.

4. Leave well enough alone. Many would wiling to trade shoes with the OP at the drop of the hat.

dbr
Posts: 29798
Joined: Sun Mar 04, 2007 9:50 am

Re: Poor financial advisor performance

Post by dbr » Tue Jul 16, 2019 10:38 am

Coburn wrote:
Tue Jul 16, 2019 10:35 am
1. I think the OP suffers from "The grass is always greener..." syndrome. This to evident to me by reading his posts as is his mood and tone of his posts.

2. My advice is to talk for the FA is see if their fees can be lowered. The portfolio performance has been fine...it's definitely not poor as the title states.

Agree. When you engage in meaningless benchmarking grass is greener is what you are going to see. However, a headwind of 0.9% is real.

User avatar
goingup
Posts: 3594
Joined: Tue Jan 26, 2010 1:02 pm

Re: Poor financial advisor performance

Post by goingup » Tue Jul 16, 2019 10:50 am

Ben Mathew wrote:
Tue Jul 16, 2019 10:22 am
goingup wrote:
Tue Jul 16, 2019 10:09 am
I'd think very carefully about leaving your advisor. Being a DIY'er really isn't for everyone. I remember reading (with shock) in Investor's Manifesto by Bill Bernstein when he stated that most people need a financial advisor. I've come around to thinking he may have a point.

Talk with your advisor and tell him your concerns. Find out if he could we reduce that .9% fee. Do you really need to sit down with him every 6 months? Seems like a lot unless you're working through something specific.

Not everyone needs an advisor, but if you're still a somewhat unsettled investor at age 62 you may benefit a lot from having someone else steer.
But an unsettled investor will not let an competent advisor steer. When the competent advisor underperforms a benchmark, they will look for a new advisor, as OP is doing. They end up chasing advisors, not much different from chasing funds. I think there is no good substitute to learning how to invest. Finding a good advisor and sticking with them is not any easier than finding a good strategy and sticking with it. I would say it's harder to find a good advisor than to find a good strategy. And of course, it's more expensive.
Ben Mathew-
You make some great points. I don't want to disparage the OP, but he may not have quite the dispassionate mettle that helps make a DIY investor successful. Having an advisor might be a bulwark between bad behavior/impulsiveness and the portfolio. I doubt the OP needs to learn how to invest--no amount of learning can cure chronic... unsettledness. :wink: Besides, he has explained his long experience (since the '80s) as an investor.

While the AUM seems steep to me, the portfolio itself is good with reasonable funds. The performance seems normal when fees are taken into account.

I guess I doubt that ditching the advisor is a prudent move in this case. Often it's the right move to escape the advisor's clutches, but sometimes it's really not.

Rus In Urbe
Posts: 464
Joined: Sat Dec 09, 2017 2:12 pm

Re: Poor financial advisor performance

Post by Rus In Urbe » Tue Jul 16, 2019 10:55 am

OP wrote:
Over the past 5 years we have been satisfied with their service but less so with our portfolio performance.
OP, I would examine the statement above, which you made in your original post.

To my way of thinking "service" = "portfolio performance" and nothing more.

But clearly to you, "service" from an FA entails other things as well. What are those? Affirmation? Information? A feeling of being in control? Hand-holding? A way to schedule and re-visit your holdings every six months? None of these is bad, if you are honest with yourself that you need those "services." As others have said, DIY is not for everyone and your original post indicates that you can't trust yourself in downturns or other events not to make basic investing mistakes. So, figure out what you need from an advisor and know what you are paying for that service. Be brutally honest with yourself.

Personally, I think the idea of getting a target date lifestyle index fund going with Vanguard would be the way to go but this will work ONLY if you can "keep your mitts off," as another Boglehead said. Again, a lot of this comes down to being totally honest with your own behaviors around money. Nothing shameful about that---each of us has our own habits and tendencies and knowing them and working around them is wisdom.

Good luck to you in your next steps! :beer
Rus
I'd like to live as a poor man with lots of money. ~Pablo Picasso

delamer
Posts: 8402
Joined: Tue Feb 08, 2011 6:13 pm

Re: Poor financial advisor performance

Post by delamer » Tue Jul 16, 2019 11:00 am

dbr wrote:
Tue Jul 16, 2019 10:38 am
Coburn wrote:
Tue Jul 16, 2019 10:35 am
1. I think the OP suffers from "The grass is always greener..." syndrome. This to evident to me by reading his posts as is his mood and tone of his posts.

2. My advice is to talk for the FA is see if their fees can be lowered. The portfolio performance has been fine...it's definitely not poor as the title states.

Agree. When you engage in meaningless benchmarking grass is greener is what you are going to see. However, a headwind of 0.9% is real.
It is human nature to look at an alternative path that has worked out better — even if just in the short run — than the one you chose and be unhappy. But the OP’s advisor isn’t making changes without consulting him; the OP has signed off on the changes and so has some responsibility for the results.

Given the OP’s history, he needs to decide if the advisor’s ability to help him stay-the-course, despite occasional disagreements over investment choices, is worth the 0.9%.

That said, my in-laws got a reduction in fees from their advisor (from 1% to 0.75%, I believe) just by asking. A rational advisor knows it is better to make a little less than have to recruit a new client.

User avatar
nedsaid
Posts: 12132
Joined: Fri Nov 23, 2012 12:33 pm

Re: Poor financial advisor performance

Post by nedsaid » Tue Jul 16, 2019 11:07 am

jjodod wrote:
Mon Jul 15, 2019 5:35 pm
Wow. Thanks for all the replies. First, I’d like to say that the performance number (5.2%) is NET of all fees. Secondly, my portfolio DOES include foreign stock mutual funds (DFA) and they’ve been dogs. The 60/40 benchmark does not. It is 60% S&P 500 and 40% Barclays Aggregate Bond.

The funds that make up my portfolio with this advisor are:

Vngrd ST inv grade adm
Vngrd GNMA Adm
JP Morgan Core Bond
Vngrd Int-term bond index
DFA US Core Equity 1
DFA US Core Equity 2
Vngrd 500 Index
Vngrd Value Index Adm
Vngrd Mid Cap Index Adm
DFA US Targeted Value
DFA Tax-Advantaged World Ex. US Core Equity
IShares Core MSCI EAFE ETF
DFA International Small Cap Value
DFA Emerging Markets Core Equity
DFA Global Real Estate

Hope this answers your questions and thank you again for your valuable input.
This is actually a pretty good portfolio. It is very similar to what Paul Merriman would construct. I like that the advisor is using a combination of the lower cost Vanguard and DFA funds and one low cost ETF. Your advisor has served you well.

This is the classic Small/Value tilted portfolio we debate over in many threads. If you believe in factor tilting, this is a good portfolio. Keep in mind, it has very likely underperformed a Taylor Larimore 3 fund portfolio but that is because we have been in a Large Growth trend for 10 years now. The worst thing you could do is to switch back and forth between strategies. Value will again lead the market at some point, we don't know when. I counsel that you to be patient.

We can argue over the 0.90% AUM fee, in my view it is not unreasonable. I thought seriously of going with Merriman but they charged 1.00%. I decided to implement their recommendations myself. If you have bad investment behavior when you manage your own investments, that is why you hired your advisor, to protect you against you. I have mixed feelings, on the one hand, even 0.90% is a lot, compounded over many years. On the other hand, it is hard for an advisor to make a living on much less. A firm I worked for charged 0.75%. Unless you have enormous sums of money, hard to get portfolio management by an advisor for much less than that.

Vanguard has a Personal Advisory Service that charges 0.30% a year. If you really don't believe in Small/Value tilting, this might be the place to go.

I would go back to the question of why you hired this advisor in the first place. Sounds to me that you didn't do a good job managing your own investments and needed help. No shame in that.
A fool and his money are good for business.

dbr
Posts: 29798
Joined: Sun Mar 04, 2007 9:50 am

Re: Poor financial advisor performance

Post by dbr » Tue Jul 16, 2019 11:14 am

delamer wrote:
Tue Jul 16, 2019 11:00 am


It is human nature to look at an alternative path that has worked out better — even if just in the short run — than the one you chose and be unhappy. But the OP’s advisor isn’t making changes without consulting him; the OP has signed off on the changes and so has some responsibility for the results.

Given the OP’s history, he needs to decide if the advisor’s ability to help him stay-the-course, despite occasional disagreements over investment choices, is worth the 0.9%.
That is very true.

But I still can't figure out if changes are being made while under advisement or that refers to behavior at some previous time. I wish the OP would be more clear about that. And he hasn't yet answered what he is using for a benchmark, unless I missed it. Grass is greener is not what benchmarking is supposed to involve.

KyleAAA
Posts: 7303
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Poor financial advisor performance

Post by KyleAAA » Tue Jul 16, 2019 11:20 am

dbr wrote:
Tue Jul 16, 2019 11:14 am
delamer wrote:
Tue Jul 16, 2019 11:00 am


It is human nature to look at an alternative path that has worked out better — even if just in the short run — than the one you chose and be unhappy. But the OP’s advisor isn’t making changes without consulting him; the OP has signed off on the changes and so has some responsibility for the results.

Given the OP’s history, he needs to decide if the advisor’s ability to help him stay-the-course, despite occasional disagreements over investment choices, is worth the 0.9%.
That is very true.

But I still can't figure out if changes are being made while under advisement or that refers to behavior at some previous time. I wish the OP would be more clear about that. And he hasn't yet answered what he is using for a benchmark, unless I missed it. Grass is greener is not what benchmarking is supposed to involve.
OP posted above they are using 60% s&p 500 and 40% AGG

dbr
Posts: 29798
Joined: Sun Mar 04, 2007 9:50 am

Re: Poor financial advisor performance

Post by dbr » Tue Jul 16, 2019 11:54 am

KyleAAA wrote:
Tue Jul 16, 2019 11:20 am


OP posted above they are using 60% s&p 500 and 40% AGG
Thanks The conclusion is that it is not meaningful that a portfolio that is not that portfolio has a different performance in a specific period of time.

Fallible
Posts: 6931
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Poor financial advisor performance

Post by Fallible » Tue Jul 16, 2019 12:36 pm

jjodod wrote:
Tue Jul 16, 2019 8:45 am
...
The most important advice our new FA has given us is the importance of asset allocation and having a formal plan. ...
But these are investing basics you could've learned from the Bogleheads' wiki for free.
"John Bogle has changed a basic industry in the optimal direction. Of very few can this be said." ~Paul A. Samuelson

Topic Author
jjodod
Posts: 14
Joined: Sat Feb 15, 2014 9:39 am

Re: Poor financial advisor performance

Post by jjodod » Tue Jul 16, 2019 12:44 pm

nedsaid wrote:
Tue Jul 16, 2019 11:07 am
jjodod wrote:
Mon Jul 15, 2019 5:35 pm
Wow. Thanks for all the replies. First, I’d like to say that the performance number (5.2%) is NET of all fees. Secondly, my portfolio DOES include foreign stock mutual funds (DFA) and they’ve been dogs. The 60/40 benchmark does not. It is 60% S&P 500 and 40% Barclays Aggregate Bond.

The funds that make up my portfolio with this advisor are:

Vngrd ST inv grade adm
Vngrd GNMA Adm
JP Morgan Core Bond
Vngrd Int-term bond index
DFA US Core Equity 1
DFA US Core Equity 2
Vngrd 500 Index
Vngrd Value Index Adm
Vngrd Mid Cap Index Adm
DFA US Targeted Value
DFA Tax-Advantaged World Ex. US Core Equity
IShares Core MSCI EAFE ETF
DFA International Small Cap Value
DFA Emerging Markets Core Equity
DFA Global Real Estate

Hope this answers your questions and thank you again for your valuable input.
This is actually a pretty good portfolio. It is very similar to what Paul Merriman would construct. I like that the advisor is using a combination of the lower cost Vanguard and DFA funds and one low cost ETF. Your advisor has served you well.

This is the classic Small/Value tilted portfolio we debate over in many threads. If you believe in factor tilting, this is a good portfolio. Keep in mind, it has very likely underperformed a Taylor Larimore 3 fund portfolio but that is because we have been in a Large Growth trend for 10 years now. The worst thing you could do is to switch back and forth between strategies. Value will again lead the market at some point, we don't know when. I counsel that you to be patient.

We can argue over the 0.90% AUM fee, in my view it is not unreasonable. I thought seriously of going with Merriman but they charged 1.00%. I decided to implement their recommendations myself. If you have bad investment behavior when you manage your own investments, that is why you hired your advisor, to protect you against you. I have mixed feelings, on the one hand, even 0.90% is a lot, compounded over many years. On the other hand, it is hard for an advisor to make a living on much less. A firm I worked for charged 0.75%. Unless you have enormous sums of money, hard to get portfolio management by an advisor for much less than that.

Vanguard has a Personal Advisory Service that charges 0.30% a year. If you really don't believe in Small/Value tilting, this might be the place to go.

I would go back to the question of why you hired this advisor in the first place. Sounds to me that you didn't do a good job managing your own investments and needed help. No shame in that.
Dear nedsaid,

You are completely correct in your assessment of the portfolio. It is the firm’s philosophy to pursue a “small cap/value “ tilt. At our last meeting he warned us that it had underperformed. The other part of the philosophy is to reduce volatility. The portfolio may gain less but not lose as much either. My wife is concerned that we’ve had a 10 year bull and have only a 5% gain to show for it. She is uncomfortable with global funds and points out the low Morningstar ratings of the DFA funds. Contrary to what some of the other posts say I am reluctant to change course. I’m afraid of exactly the scenario you pointed out - we switch to large cap and that goes down. I think she needs the reassurance that the FA is giving us reasonable guidance and that the alternatives come with no guarantee.

Thank you.

tesuzuki2002
Posts: 711
Joined: Fri Dec 11, 2015 12:40 pm

Re: Poor financial advisor performance

Post by tesuzuki2002 » Tue Jul 16, 2019 12:44 pm

just1question wrote:
Mon Jul 15, 2019 4:34 pm
Given the nature of this forum, I think most people here will tell you to DIY (including me).
+1

ExitStageLeft
Posts: 1491
Joined: Sat Jan 20, 2018 4:02 pm

Re: Poor financial advisor performance

Post by ExitStageLeft » Tue Jul 16, 2019 1:09 pm

An approximation of your portfolio is here:
https://www.portfoliovisualizer.com/bac ... 0&total3=0

I took a few guesses as to which ticker to use and assumed equal weight for funds within an asset class. The resulting CAGR since 2014 is 5.9%, which after subtracting the FA's fee yields a 5% return. Seems pretty close to your reported 5.2% net of all fees.

It looks to me that the performance you should be comparing to is a total market four-fund portfolio using your asset allocation of 43.5% US equities, 14% international equities, 40% US bonds and 2.5% US real estate. If you were in a DIY four-fund portfolio using low-cost index funds from Vanguard your return would have been 6.7% net of fees.

User avatar
nedsaid
Posts: 12132
Joined: Fri Nov 23, 2012 12:33 pm

Re: Poor financial advisor performance

Post by nedsaid » Tue Jul 16, 2019 1:12 pm

jjodod wrote:
Tue Jul 16, 2019 12:44 pm
nedsaid wrote:
Tue Jul 16, 2019 11:07 am
jjodod wrote:
Mon Jul 15, 2019 5:35 pm
Wow. Thanks for all the replies. First, I’d like to say that the performance number (5.2%) is NET of all fees. Secondly, my portfolio DOES include foreign stock mutual funds (DFA) and they’ve been dogs. The 60/40 benchmark does not. It is 60% S&P 500 and 40% Barclays Aggregate Bond.

The funds that make up my portfolio with this advisor are:

Vngrd ST inv grade adm
Vngrd GNMA Adm
JP Morgan Core Bond
Vngrd Int-term bond index
DFA US Core Equity 1
DFA US Core Equity 2
Vngrd 500 Index
Vngrd Value Index Adm
Vngrd Mid Cap Index Adm
DFA US Targeted Value
DFA Tax-Advantaged World Ex. US Core Equity
IShares Core MSCI EAFE ETF
DFA International Small Cap Value
DFA Emerging Markets Core Equity
DFA Global Real Estate

Hope this answers your questions and thank you again for your valuable input.
This is actually a pretty good portfolio. It is very similar to what Paul Merriman would construct. I like that the advisor is using a combination of the lower cost Vanguard and DFA funds and one low cost ETF. Your advisor has served you well.

This is the classic Small/Value tilted portfolio we debate over in many threads. If you believe in factor tilting, this is a good portfolio. Keep in mind, it has very likely underperformed a Taylor Larimore 3 fund portfolio but that is because we have been in a Large Growth trend for 10 years now. The worst thing you could do is to switch back and forth between strategies. Value will again lead the market at some point, we don't know when. I counsel that you to be patient.

We can argue over the 0.90% AUM fee, in my view it is not unreasonable. I thought seriously of going with Merriman but they charged 1.00%. I decided to implement their recommendations myself. If you have bad investment behavior when you manage your own investments, that is why you hired your advisor, to protect you against you. I have mixed feelings, on the one hand, even 0.90% is a lot, compounded over many years. On the other hand, it is hard for an advisor to make a living on much less. A firm I worked for charged 0.75%. Unless you have enormous sums of money, hard to get portfolio management by an advisor for much less than that.

Vanguard has a Personal Advisory Service that charges 0.30% a year. If you really don't believe in Small/Value tilting, this might be the place to go.

I would go back to the question of why you hired this advisor in the first place. Sounds to me that you didn't do a good job managing your own investments and needed help. No shame in that.
Dear nedsaid,

You are completely correct in your assessment of the portfolio. It is the firm’s philosophy to pursue a “small cap/value “ tilt. At our last meeting he warned us that it had underperformed. The other part of the philosophy is to reduce volatility. The portfolio may gain less but not lose as much either. My wife is concerned that we’ve had a 10 year bull and have only a 5% gain to show for it. She is uncomfortable with global funds and points out the low Morningstar ratings of the DFA funds. Contrary to what some of the other posts say I am reluctant to change course. I’m afraid of exactly the scenario you pointed out - we switch to large cap and that goes down. I think she needs the reassurance that the FA is giving us reasonable guidance and that the alternatives come with no guarantee.

Thank you.
I would gently explain to your wife that successful investors do what feels uncomfortable. Your portfolio has experienced what seems like disappointing performance because International Stocks have underperformed US Stocks and Value has underperformed Growth. You also had 40% in bonds. You also have drag because of the advisor fee. But you hired the advisor because you wanted help.

Your benchmark is flawed because your stocks were not in the S&P 500, you had International Stocks in there as well.

Let me speak to the 3 Star ratings for the DFA funds. First of all, be wary of the Star ratings at Morningstar, they are like driving by looking at the rearview mirror. Similar Vanguard funds, have 4 star ratings, for example I own the Vanguard Small-Value Index ETF but it has larger market caps and inferior Value characteristics compared to the DFA product. In a Large Growth environment, not hard to figure out why Vanguard outperformed DFA in Small Value. Small Value as an asset class is up but has been left in the dust by the S&P 500 over the last 5 years.

Go put "My New 'Doo" in the searchbox, and it will pull up my "How Do You Like My New 'Doo" thread. Go to page 4 and scroll almost to the bottom and you will see a post where I recreate a discussion I had with Larry Swedroe where I told him that I benchmarked my portfolio against the 3 fund portfolio. Larry told me that I used the wrong benchmark and told me why I was wrong. He used the term resulting. I would recommend that you read that post carefully. Larry's comments are gold.

I looked at my spreadsheet, and my portfolio had an 8.02% Compound Annual Growth Rate for 10 years as of 12/31/2018. My portfolio was 64%-69% stocks and 24%-29% of my stocks were International. I also didn't pay an advisor fee. My all-in costs were probably 0.50% a year, yours would be probably 1.24% a year. Okay, I looked at my 5 year CAGR for my portfolio and I achieved 3.29% over 5 years. So what you did wasn't so bad in comparison. In fact, your advisor looks brilliant in comparison. My returns were 5.67% in 2014, 0.48% in 2015, 8.63% in 2016, 15.01% in 2017, and -6.34% in 2018.

I might do some more analysis for you but given what you were invested in, your portfolio performed as one would expect. You are in a lot of cheap index funds and passive factor funds. Presumably index or index like factor funds would have little tracking error from their benchmarks. These are not active products.
Last edited by nedsaid on Tue Jul 16, 2019 2:09 pm, edited 2 times in total.
A fool and his money are good for business.

delamer
Posts: 8402
Joined: Tue Feb 08, 2011 6:13 pm

Re: Poor financial advisor performance

Post by delamer » Tue Jul 16, 2019 1:18 pm

jjodod wrote:
Tue Jul 16, 2019 12:44 pm
nedsaid wrote:
Tue Jul 16, 2019 11:07 am
jjodod wrote:
Mon Jul 15, 2019 5:35 pm
Wow. Thanks for all the replies. First, I’d like to say that the performance number (5.2%) is NET of all fees. Secondly, my portfolio DOES include foreign stock mutual funds (DFA) and they’ve been dogs. The 60/40 benchmark does not. It is 60% S&P 500 and 40% Barclays Aggregate Bond.

The funds that make up my portfolio with this advisor are:

Vngrd ST inv grade adm
Vngrd GNMA Adm
JP Morgan Core Bond
Vngrd Int-term bond index
DFA US Core Equity 1
DFA US Core Equity 2
Vngrd 500 Index
Vngrd Value Index Adm
Vngrd Mid Cap Index Adm
DFA US Targeted Value
DFA Tax-Advantaged World Ex. US Core Equity
IShares Core MSCI EAFE ETF
DFA International Small Cap Value
DFA Emerging Markets Core Equity
DFA Global Real Estate

Hope this answers your questions and thank you again for your valuable input.
This is actually a pretty good portfolio. It is very similar to what Paul Merriman would construct. I like that the advisor is using a combination of the lower cost Vanguard and DFA funds and one low cost ETF. Your advisor has served you well.

This is the classic Small/Value tilted portfolio we debate over in many threads. If you believe in factor tilting, this is a good portfolio. Keep in mind, it has very likely underperformed a Taylor Larimore 3 fund portfolio but that is because we have been in a Large Growth trend for 10 years now. The worst thing you could do is to switch back and forth between strategies. Value will again lead the market at some point, we don't know when. I counsel that you to be patient.

We can argue over the 0.90% AUM fee, in my view it is not unreasonable. I thought seriously of going with Merriman but they charged 1.00%. I decided to implement their recommendations myself. If you have bad investment behavior when you manage your own investments, that is why you hired your advisor, to protect you against you. I have mixed feelings, on the one hand, even 0.90% is a lot, compounded over many years. On the other hand, it is hard for an advisor to make a living on much less. A firm I worked for charged 0.75%. Unless you have enormous sums of money, hard to get portfolio management by an advisor for much less than that.

Vanguard has a Personal Advisory Service that charges 0.30% a year. If you really don't believe in Small/Value tilting, this might be the place to go.

I would go back to the question of why you hired this advisor in the first place. Sounds to me that you didn't do a good job managing your own investments and needed help. No shame in that.
Dear nedsaid,

You are completely correct in your assessment of the portfolio. It is the firm’s philosophy to pursue a “small cap/value “ tilt. At our last meeting he warned us that it had underperformed. The other part of the philosophy is to reduce volatility. The portfolio may gain less but not lose as much either. My wife is concerned that we’ve had a 10 year bull and have only a 5% gain to show for it. She is uncomfortable with global funds and points out the low Morningstar ratings of the DFA funds. Contrary to what some of the other posts say I am reluctant to change course. I’m afraid of exactly the scenario you pointed out - we switch to large cap and that goes down. I think she needs the reassurance that the FA is giving us reasonable guidance and that the alternatives come with no guarantee.

Thank you.
One thing that you still haven’t addressed is how much money you need in order to retire.

It may be that you could implement a more conservative portfolio and still meet you goals.

But without knowing your needs, we can’t determine your best option.

Topic Author
jjodod
Posts: 14
Joined: Sat Feb 15, 2014 9:39 am

Re: Poor financial advisor performance

Post by jjodod » Tue Jul 16, 2019 1:30 pm

I do have my number. It’s 2 million. I have 100k in another 401k not under their management and 170k in taxable funds. I figure I’m within 150k of my goal. Plan on taking my wife’s SS at her age 66 and mine at 70. No plans to completely retire as long as heath holds

delamer
Posts: 8402
Joined: Tue Feb 08, 2011 6:13 pm

Re: Poor financial advisor performance

Post by delamer » Tue Jul 16, 2019 1:34 pm

jjodod wrote:
Tue Jul 16, 2019 1:30 pm
I do have my number. It’s 2 million. I have 100k in another 401k not under their management and 170k in taxable funds. I figure I’m within 150k of my goal. Plan on taking my wife’s SS at her age 66 and mine at 70. No plans to completely retire as long as heath holds
OK, so a $2 million portfolio at a safe withdrawal rate of 4% means about $80,000/year.

With your joint Social Security benefits, will that be adequate in retirement?

Topic Author
jjodod
Posts: 14
Joined: Sat Feb 15, 2014 9:39 am

Re: Poor financial advisor performance

Post by jjodod » Tue Jul 16, 2019 1:41 pm

That would be swell.

dbr
Posts: 29798
Joined: Sun Mar 04, 2007 9:50 am

Re: Poor financial advisor performance

Post by dbr » Tue Jul 16, 2019 1:46 pm

I think the only actual fault on the part of the advisor is not to have provided more clear and complete explanation regarding what to expect and how results might differ from other portfolios one could look at. A key piece of missing information might be appreciation of the variability of investment results in time and across asset classes.

Post Reply