Considering moving funds from American Funds to Vanguard

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caltaz723
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Joined: Tue Jan 12, 2021 5:41 pm

Considering moving funds from American Funds to Vanguard

Post by caltaz723 »

Good evening! I am so glad that I found this group. Recently started to learn all the things I didn't know that I didn't know and my head is spinning!
I am trying to encourage my husband to move our assets to Vanguard and am being met with his stubbornness and a lack of understanding.

Background: We are in our early 40's. He has a ROTH IRA and I have traditional IRA. Our 3 kiddos have 529s. (Investment total is in low six figures) Our financial management group Lucia was recently bought by LPL and in signing our new applications for rollover, we discovered the 1.85% annual AUM fee in addition to the higher fund ERs.

I am embarrassed to say neither of us really ever paid attention to the costs of our investments, but to me this is just too much to justify staying where we are (at American Funds). We love our advisor, she has been with my husband since he started investing, but as I'm trying to make the point- she won't be paying our kids' college expenses and losing this much to annual fees will hurt our overall portfolio. My husband is fearful of not having an advisor we trust, but in reality we only meet with her yearly and not too much changes for us at this time. I've read a lot and am very interested and think I'm capable of managing a three-fund portfolio myself. I've done the yahoo finance comparison for how our AF investments align with VTSAX and they all underperform. How can I convince my husband it will be worth it long term? Is it really as simple as the Vanguard website makes it look? I'd be willing to pay for a fee based advisor for major changes to our lives, if this will smooth the bumps. Is this something I should really push for now?
Thank you!
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retired@50
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Re: Considering moving funds from American Funds to Vanguard

Post by retired@50 »

caltaz723 wrote: Tue Jan 12, 2021 6:09 pm Good evening! I am so glad that I found this group.
Thank you!
Welcome to the forum. :happy

I'll try to take the questions in order...
How can I convince my husband it will be worth it long term?
I can suggest this wiki page that discusses expense ratios. A high expense ratio is just as corrosive to your portfolio as an assets under management fee. With American funds, and your adviser, you're paying up two ways. :shock:

See link: https://www.bogleheads.org/wiki/Expense_ratios
Is it really as simple as the Vanguard website makes it look?
It certainly can be. The three fund portfolio should be the anchoring idea you try not to let go of without an excellent reason that you fully understand. Many people think a dozen funds is better than three, but it isn't necessary to own that many funds, 12 funds just adds complexity, not diversification.

https://www.bogleheads.org/wiki/Three-fund_portfolio
Is this something I should really push for now?
This is a tough one... Many people fight about money, it's personal, it has deep roots in your brain, etc. Maybe if the Wiki page on expense ratios doesn't do the trick, head down to the library and borrow a copy of John Bogle's book "The little book of common sense investing". It's short, and gets directly to the point. He could probably read it in a single day if he was inclined.

Book recommendations: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews

Also, keep in mind that Vanguard offers Personal Advisory Services, which is similar to the financial adviser you have, but the meetings would either be video calls or telephone calls, but the fee is far lower. Current rate is .30% for assets under management. That's 1/6th of what you currently pay.


Regards,
Last edited by retired@50 on Thu Jan 14, 2021 3:50 pm, edited 1 time in total.
This is one person's opinion. Nothing more.
sycamore
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Re: Considering moving funds from American Funds to Vanguard

Post by sycamore »

caltaz723, welcome to the forum!

Absolutely you can move your assets to Vanguard and save yourselves lots of money in the process.
Absolutely it can be as simple as it looks.
Will the Vanguard Total Stock Market Fund always outperform the AF funds? No, not always. Sometimes it will, sometimes the AF funds' management will have picked better winners than the overall market. That's the way it goes.

So, yes, I encourage you to push for this now. You deserve to keep that 1.85% -- after all, you're the one taking the risk with the money, not the advisor!

(Note: if you or your husband is really attached to those particular AF funds, you may be able to still hold them at Vanguard - it depends on the particular share class and other things. Worst case, you would sell the funds at your current IRA institution, then transfer the cash to Vanguard, and purchase the relevant AF funds there. Here's a list of AF funds at Vanguard: https://personal.vanguard.com/us/funds/ ... ilyId=6338.)

Here are some things to help persuade someone to move assets out of the 1.85% AUM advisor relationship:
https://investor.vanguard.com/investing ... t-of-costs
https://www.fidelity.com/viewpoints/inv ... ses-matter
viewtopic.php?t=217026

Also, consider any of the major Vanguard competitors (Fidelity, Schwab, E*Trade) - they can all do what you'll need at a very low cost like Vanguard.

And if you or your husband don't feel comfortable with a full "DIY" approach, the brokerages all offer an advisory service for a relatively low fee (Vanguard's is 0.30%, much lower than 1.85%). I'd search for reviews on advisory services before picking.

Best of luck!
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TinyElvis
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Re: Considering moving funds from American Funds to Vanguard

Post by TinyElvis »

caltaz723 wrote: Tue Jan 12, 2021 6:09 pm Our financial management group Lucia was recently bought by LPL and in signing our new applications for rollover, we discovered the 1.85% annual AUM fee in addition to the higher fund ERs.
It's surprising (to me) that you are getting hit with high fund expenses if you are paying AUM. I would have assumed that you were getting institutional shares (with lower ERs and no loads).

Which American Funds do you have? I kept ours when I moved to Vanguard due to potential capital gains from selling. They are good funds and are less expensive than many other managed funds.
"Give a cat a fish and it will eat for a day. Teach a cat to fish and it will just sit there waiting for you to give it a fish."
Topic Author
caltaz723
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Joined: Tue Jan 12, 2021 5:41 pm

Re: Considering moving funds from American Funds to Vanguard

Post by caltaz723 »

Thanks for all the advice! I'm looking into all links from previous posts to help ease this transition.

In my husbands ROTH we have AMCFX, GWPEX, AEPEX, GFFFX, ANWFX and in my IRA I have PGWFX and GFFFX. No load funds but the ER's (0.30-0.48) are not where I've researched they could be, in addition to our exorbitant AUM fee. I've compared to Vanguard funds and some I would consider rolling over to Vanguard (GWPEX and GFFFX) as long as our ER went down and we lost the annual advisory fee.

I am doing more research and learning more everyday and with insights from like minded investors, hoping this will give me the ammo I need for my hubby and I to pull the trigger and move our investments!

Thank you.
usagi
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Re: Considering moving funds from American Funds to Vanguard

Post by usagi »

sycamore wrote: Tue Jan 12, 2021 7:58 pm
Also, consider any of the major Vanguard competitors (Fidelity, Schwab, E*Trade) - they can all do what you'll need at a very low cost like Vanguard.
This. I would suggest you search the forum for complaints regarding Vanguard's customer service before deciding where to land. You may still select Vanguard, but at least it will be a conscious choice rather than a reflexive action you come to regret.

Cheers.
pkcrafter
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Re: Considering moving funds from American Funds to Vanguard

Post by pkcrafter »

Our financial management group Lucia was recently bought by LPL and in signing our new applications for rollover, we discovered the 1.85% annual AUM fee in addition to the higher fund ERs.
The AUM fee is the highest I've ever seen--it's substantially higher than the dreaded Edward Jones.

Impact of costs

https://investor.vanguard.com/investing ... t-of-costs
We love our advisor, she has been with my husband since he started investing, but as I'm trying to make the point- she won't be paying our kids' college expenses
No, you will be paying for her kids college expenses. :confused


Paul
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TinyElvis
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Re: Considering moving funds from American Funds to Vanguard

Post by TinyElvis »

caltaz723 wrote: Tue Jan 12, 2021 8:46 pm Thanks for all the advice! I'm looking into all links from previous posts to help ease this transition.

In my husbands ROTH we have AMCFX, GWPEX, AEPEX, GFFFX, ANWFX and in my IRA I have PGWFX and GFFFX. No load funds but the ER's (0.30-0.48) are not where I've researched they could be, in addition to our exorbitant AUM fee. I've compared to Vanguard funds and some I would consider rolling over to Vanguard (GWPEX and GFFFX) as long as our ER went down and we lost the annual advisory fee.

I am doing more research and learning more everyday and with insights from like minded investors, hoping this will give me the ammo I need for my hubby and I to pull the trigger and move our investments!

Thank you.
That’s not a bad expense ratio really. If they are in tax deferred then CG is not a concern, so sell as you see fit and allocate into your Vanguard funds. :) Besides my 4 American funds in taxable, I am all Vanguard with the 4 fund portfolio.
"Give a cat a fish and it will eat for a day. Teach a cat to fish and it will just sit there waiting for you to give it a fish."
Topic Author
caltaz723
Posts: 5
Joined: Tue Jan 12, 2021 5:41 pm

Re: Considering moving funds from American Funds to Vanguard

Post by caltaz723 »

usagi wrote: Tue Jan 12, 2021 9:55 pm
sycamore wrote: Tue Jan 12, 2021 7:58 pm
Also, consider any of the major Vanguard competitors (Fidelity, Schwab, E*Trade) - they can all do what you'll need at a very low cost like Vanguard.
This. I would suggest you search the forum for complaints regarding Vanguard's customer service before deciding where to land. You may still select Vanguard, but at least it will be a conscious choice rather than a reflexive action you come to regret.

Cheers.
I will thanks! This is also an issue with our advisors office. She's great, but the staff doesn't send us documents requested on time, they misspelled my husbands name on the name correction form :oops: and missed 2 of our 529 plans when they rolled us over to LPL. So my expectations are pretty low at this point, especially considering how much we've paid them in fees over time!
jimkinny
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Re: Considering moving funds from American Funds to Vanguard

Post by jimkinny »

buy the Boglehead Guide to Investing book 2nd edition and maybe the Guide to Retirement. Use the Amazon link above to support this website.
afan
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Re: Considering moving funds from American Funds to Vanguard

Post by afan »

I am skeptical of predictions about future market returns but note:
Many predictions call for very low long term results due to the current high valuations of stocks and bonds. That management fee on top of the expense ratios could eat up ALL of your returns and even put you in the red long term. You need to get out.
Since they are in Roth, there are no tax consequences.

Some people on here complain about Vanguard service. Many others are perfectly happy. You have the option of opening an account at other firms, Schwab or Fidelity come to mind, moving the retirement accounts there and investing in Vanguard mutual funds or ETFs. No management fees and dirt cheap expense ratios.

You need to get out.
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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ruralavalon
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Re: Considering moving funds from American Funds to Vanguard

Post by ruralavalon »

Welcome to the forum :) .


caltaz723 wrote: Tue Jan 12, 2021 6:09 pm Good evening! I am so glad that I found this group. Recently started to learn all the things I didn't know that I didn't know and my head is spinning!
I am trying to encourage my husband to move our assets to Vanguard and am being met with his stubbornness and a lack of understanding.

Background: We are in our early 40's. He has a ROTH IRA and I have traditional IRA. Our 3 kiddos have 529s. (Investment total is in low six figures) Our financial management group Lucia was recently bought by LPL and in signing our new applications for rollover, we discovered the 1.85% annual AUM fee in addition to the higher fund ERs.

I am embarrassed to say neither of us really ever paid attention to the costs of our investments, but to me this is just too much to justify staying where we are (at American Funds). We love our advisor, she has been with my husband since he started investing, but as I'm trying to make the point- she won't be paying our kids' college expenses and losing this much to annual fees will hurt our overall portfolio. My husband is fearful of not having an advisor we trust, but in reality we only meet with her yearly and not too much changes for us at this time. I've read a lot and am very interested and think I'm capable of managing a three-fund portfolio myself. I've done the yahoo finance comparison for how our AF investments align with VTSAX and they all underperform. How can I convince my husband it will be worth it long term? Is it really as simple as the Vanguard website makes it look? I'd be willing to pay for a fee based advisor for major changes to our lives, if this will smooth the bumps. Is this something I should really push for now?
Thank you!
I think moving from American Funds to Vanguard is a good idea. I prefer good index funds with low expense ratios over even good actively managed funds with higher expense ratios.

The 1.85% Asset Under Management (AUM) fee is horrible in my opinion. That's reason enough by itself to make the move. Over the 20 years or so until retirement that costs you 37% in the end value of your portfolio.

You might ask your husband to consider the following resources and information.

Low expense ratios are critical to long-term investing performance. Seemingly small annual fees can have a large cumulative impactover time. Here is a "Mutual fund fees calculator" you could use to estimate the impact of investing expenses.

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

In general index funds have usually done better than actively managed funds. Please see:
(1) Morningstar (9/20/2019), "Active Funds vs. Passive Funds: Which Fund Types Had Increased Success Rates? ", link ; and
(2) Index Fund Advisors (11/25/2019), "SPIVA: Mid-Year 2019 Active vs. Passive Scorecard", link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
prairieman
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Re: Considering moving funds from American Funds to Vanguard

Post by prairieman »

You could try presenting your husband with a spreadsheet calculation. Take an average gain per year and project 20 years out with and without the fees.
Nobody showed this kind of calculation to me but I did one and convinced myself to take immediate action.
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