Sharing how I chose a low-cost DFA advisor 3 1/2 years ago

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DiehardDisciple
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Joined: Mon Jul 23, 2007 11:15 pm

Sharing how I chose a low-cost DFA advisor 3 1/2 years ago

Post by DiehardDisciple »

Hi everyone. I wasn't sure which category to post this, so I am doing it in "Help with Personal Investments." I got a lot of help from this website back in 2008 (and maybe before that), and I've been trying to pay it back since. In 2008 I was looking for an advisor whose options included DFA funds, and I narrowed down my search to Rick Ferri (Portfolio Solutions), Steve Evanson (Evanson Asset Management), and John Gorlow (Cardiff Park). (I had first cast a much wider net, but these three had the lowest fees.)

I then spoke to these advisors and posted questions on Bogleheads and elsewhere to get feedback. Many kind people sent me opinions through private messages.

I did make a decision on which advisor to choose, and on another blog, http://www.mymoneyblog.com/dfa_funds_the_p_1.html, I offered to help anyone who narrowed their own advisor search down to these same three individuals. I publicly posted my e-mail address there. Perhaps it was wrong to do this: I've since been contacted at least two dozen, if not three dozen times. Empathizing with each person contacting me, I spoke to them by phone so I could explain in detail my decision. I did this for free. Each phone call went for about 90 minutes, sometimes 2 hours. All smart strangers who contacted me for my opinion and whom I've never crossed paths with since. While I enjoy helping them, I realize I should put my thoughts in writing for everyone to see.

Hopefully my words won't slander any of these advisors. All three were very nice on the phone and gave me their time for free. So, I'm going to be vague enough in explaining the negatives with each advisor so that you won't know who I am referring to unless you do a tiny bit of research on your own (like visiting their websites).

Advisor 1:

* He charges a flat fee. A flat fee encourages as many clients as possible and discourages quality time with each client. The advisor has less reason to be interested in the growth of your portfolio as someone charging a percentage. The flat-fee model discourages emotional handholding. You may be okay with that, but if you predecease your spouse, will he/she be okay with that?

* This advisor does not have any associates (other than possible back-office support), so at some point he will hit a ceiling with the number of clients he can take on before sacrificing the amount of hand-holding offered and/or mistake-free account management (the logistical stuff). He did not mention what his cap of the number of clients is.

* Speaking of mistake-free management, I heard from one Bogleheads member anonymously who said that a mistake was made when his account was being set up. If he had known ahead of time that the mistake was going to be made, he would not have gone with this advisor, but now that it was too late, he was sticking with him.

* I heard that the advisor bought a GE bond for another client as part of a bond ladder that included bonds of up to a 10-year duration. If you believe that bonds should be a haven for safety and stability for the rest of the portfolio and that one should just invest in high-quality, short-term bonds (so that more exposure could be taken on the equity side where the return-risk relationship is more favorable), than you do not want bonds longer than a 5-year duration nor any corporate bonds such as GE. And, from what I understand, if you do not want to go out more than five years in duration (or even three years), you really do not need a ladder. Just a couple different bond funds that vary between six months and three years.

* The advisor was reluctant to meet for longer than 75 minutes even if I compensated him for his time if I ended up going with a different advisor. (I didn't want him to think that I was just going to be using an introductory meeting to get free advice). This was despite the fact that I told him I would be flying 3000 miles across the country on my own dime to meet him.



Advisor 2:

* He charges a flat fee. A flat fee encourages as many clients as possible and discourages quality, open-ended time with each client. The advisor has less reason to be interested in the growth of your portfolio as someone charging a percentage. The flat-fee model discourages emotional handholding. You may be okay with that, but if you predecease your spouse, will he/she be okay with that?

* The advisor is older than 60, perhaps 65 now. He explains that he is very healthy and works out regularly, but you can't stop the clock.

* The advisor uses associates. Your time in talking to him will be limited and you will usually be referred to an associate.

* I met the associate that I was assigned to. It was the associate who - I have since learned - has been tapped to be the advisor's successor. I drove three hours to have lunch with this associate. I treated. I told him in advance that I would compensate him for his time if I ended up choosing another advisor. The associate was cordial and bright, but he seemed distracted and also somewhat indifferent to my stress in making the decision of choosing an advisor. In other words, he wasn't that empathetic. Maybe he was just used to dealing with clients from afar. My late father and paternal grandfather were investment advisors for over 75 years combined at prestigious firms in Philadelphia and Manhattan respectively, and their favorite part of the job was reassuring the clients when they were nervous and stressed. I did not see this ability in this associate. 60 minutes into our lunch, I anxiously asked if he could give me another 10-15 minutes because I had several more questions, and he said fine but that then he had to go. This response in words alone was fine, but the indifferent and distracted tone kind of irked me. I had just driven three hours to meet him, our meeting had been planned well in advance, I was going to be compensating him for his time if I did not pick him as my advisor, and I was paying for his lunch. The food at the restaurant was good, but I left with a bad taste in my mouth.

* Also about this associate: He made a lot of money in another field and could have retired. In fact, he did briefly. But he had kids and didn't want his kids to see him loafing around the house. So, he decided to work with the person managing his money, who is... you guessed it... the primary advisor of this firm. When I asked the associate what his motive is in doing this work, he mentioned that he wanted his kids to seem him working hard. That answer is very respectable, but as a prospective client, I really wanted to hear him say how excited he was to be an investment advisor and how passionate he was about helping others achieve their financial goals. I did not hear this from him.

* I don't know how much financial training this associate has had. He went to an Ivy League school for undgergrad, but his background is more in marketing. There is no public info about him on the primary advisor's site, which is odd since - as stated above - the advisor will be turning over the practice to him when the primary advisor retires. I googled this associate, and the only info I can find is his LinkedIn profile. It mentions his undergrad degree, and his previous experience to working with this advisor, but it says nothing about financial certifications like a CFP, or even an MBA.

* The advisor supports gold and commodities in the portfolio. I learned that commodities usually are positively correlated enough with emerging market stocks (stocks in countries whose economies are primarily raw-materials based), so you could just allocate the commodity portion to EM stocks instead. To this advisor's credit, commodities and gold have done well since 2008 and this advisor did say to me that I could have a portfolio without them, but I didn't want to be the outlier client whose portfolio would have been different from everyone else's among the firm's clients.


Advisor 3:

* The advisor uses associates. Your time in talking to him will be limited and you will usually be referred to an associate.

* This advisor's firm charges an AUM% fee. The bad news with this is that if you have a very large account, say $10 million, the firm will likely put in the same amount of work for you as they will for someone with a $1 million account, and charge you 10x as much, (the same percentage being applied to both accounts.)

* I was not impressed with the associate with whom I spoke over the telephone. He had a fair amount of experience in the field, but he spoke in a slightly pompous/condescending way to me on certain issues, even though I was very polite. I was also not impressed with this person's education, and I wondered silently about his critical thinking skills. He had an undergraduate degree in business from a college I had never heard of. Most importantly, it was the tone in which he spoke to me. It was sort of like "I'm holding all the cards, and you're going to do it our way if you want to do business with us." Hearing this from someone with this educational background turned me off. He might have the logistical know-how, but he was lacking in the realm of building rapport with an anxious prospect. At least this was the impression I got on the phone in my one chat with him. Sadly, you never get a 2nd chance to make a 1st impression.

* They are quite rigid on the portfolio they give you. There's not much of a dialogue between the advisor and client on asset allocation. A sample portfolio was made for me, and I wasn't happy with at least 40% of it (around 4 funds more or less). They were open to budging on the choice of one fund, but not the others. It felt too cookie-cutter.

* The bond fund recommendations included a corporate-bond fund and an emerging-markets bond fund. They would not budge on this. If you believe that bonds are solely for security and portfolio stability (high-quality and short-term), this is not for you.

* The equity recommendations included at least one Vanguard fund - if not more - and possibly a Rydex or ishares fund. They did not want to budge on this. If you like the DFA philosophy, at least on equities, and only want to invest your equity portion in DFA funds, this advisor is not for you.

* Too many trademark symbols on their website for concepts that are commonsense. I'm always skeptical of that, as if someone is trying to tell me that the shiny red apple they can offer me is unusually different from any other shiny red apple I can find.



My decision:

I ruled out all three. I also considered Russell Wild, who wrote several books on investing. He is an advisor in PA. I met him and liked him a lot. Very nice person. http://www.russellwild.com/investment.html . Very reasonable fees. A flat fee I believe it was. Unfortunately, unlike with the advisors described above, I could not independently find a client of Russell's. He offered to direct me to a client of his, but I wanted to find one on my own for due-diligence purposes, such as through Bogleheads or http://www.mymoneyblog.com (this thread: http://www.mymoneyblog.com/dfa_funds_the_p_1.html ) . I could not find a client of his on my own. So I had to rule him out.

Meanwhile, I saw some of Derek Tinnin's Bogleheads posts, and I liked what he had to say. He's at Purpose Wealth Management. At this time, I was having some exchanges with a respected Bogleheads contributor who has apparently departed, someone named Smallhi, and I really agreed with a lot of what he - SmallHi - said in his posts. I never found out his name. I asked him whom he would use if he had to pick an advisor, and he said Derek Tinnin. I spoke with Derek on the phone and liked him. I liked his fee structure. A % structure, which now has a cap to it. Once a portfolio goes above that amount, the fee is flat, which acknowledges that not a lot of extra work is being done for a larger portfolio to justify a continued percentage fee. But up to that point, unlike with the regular flat-fee advisors, Derek has a financial self-interest in seeing your portfolio grow.

I drove out to Derek (9 hours through a snowstorm) and met with him in person. About 75-90 minutes into our lunch, I anxiously said that I had several more questions and would be okay if we talked for about 15-20 minutes. Derek reassuringly replied that I had driven a long way to see him and that this was an important situation and that he would give me all the time I needed that afternoon. This was exactly what I needed to hear. It was very calming. We talked for close to 2 and 1/2 hours, if not closer to 3 hours. Basically he stayed until I was happy with his answers to each of my questions, and I had dozens, if not scores. Not once did I see him looking at his cell phone checking his messages. Maybe he did that in the bathroom on his own, but not in front of me.

When I walked out of that restaurant, I felt a lightness, like a big burden was off my shoulders. Basically I felt a lot of relief. That's how I knew I had found the right guy. I had searched nationwide very diligently, and now I felt comfortable with one individual in particular.

I chose Derek. I've had some phone calls with him since - after I set up my account with him - in which I was quite anxious (I’m that way by nature and take a medicine for it), and in each call Derek sounds the same, relaxed and not rushed for time. A very good listener who wants each decision in the relationship to be jointly made. He's done some great handholding in that sense. Since the end of 2008, when I switched to passive funds, I might have had a little more money in my name had I gone with a flat-fee advisor, particular the one who espoused including commodities and gold, but the bottom line is that I sleep well, at least when thinking about this aspect of my life. Trust and mutual respect are invaluable.

Good luck!
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sperry8
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by sperry8 »

Thank you. This was quite helpful. I got similar feelings when chatting with some of the advisors you mentioned. I wanted to choose them to invest a portion of my money in DFA (through them). But that's not allowed. I have to go with their portfolio. Their way or the highway. And they don't exactly instill confidence when discussing their way. They just say, we're probably not for you. Who are you for then? People who just 'trust' you to lose their money? So I too never went with any of them. Perhaps I'll take a look at this fellow you finally chose. But my experience with advisors has not been good. I doubt I'll hire someone - but if they can actually empathize and do what I want with my money (e.g., assist me with setting up monies into DFA funds), I'd consider them.
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Muchtolearn
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Muchtolearn »

Excellent post. Thank you. I was getting nervous that you chose one of the first 3 you discussed and was happy when you discarded all (not based on my opinions of them, which are non-existent, but your concerns). What really confuses me is why you need an advisor at all? It sounds like you know everything you need. Is it just for handholding?
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DiehardDisciple
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by DiehardDisciple »

Thanks for the compliment - and for being empathetic yourself. It takes a giver to know a giver. :beer

I need an advisor because a) I could use the handholding, b) I need another human between me and my emotional impulses, and c) I'm focusing my energies on something else in an unrelated field and don't want to be a full-time advisor for myself. I have fairly poor self-discipline and I'm borderline ADD, and I need all my attention for this other pursuit. I thought long and hard about the three-fund Vanguard portfolio espoused by the well-respected gurus here, and I continue to think long and hard about it. But wrongly or rightly, I bought into the Fama-French 3-factor model (a gradual small-value tilt after beginning with a total stock market fund). I also knew I needed an advisor for reasons stated above and wanted someone who was very smart, and fairly cheap. I didn't think too much of the private-wealth-management advisors at Vanguard. I forget what they call them now. The really sharp minds - in terms of professional passive advisors - seemed to be investing their equity allocations with DFA. At least in my opinion.
yobria
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by yobria »

DiehardDisciple wrote:I need an advisor because a) I could use the handholding, b) I need another human between me and my emotional impulses, and c) I'm focusing my energies on something else and don't want to be a full-time advisor for myself.
I dunno, sounds like you spent more energy looking for an advisor than I ever did buying a few index funds. Accessing my ETrade account doesn't require a 9 hour drive through a snowstorm. :)

Once the poster smallhi asked other advisors here about embedding fine print in his customer contracts forcing them to liquidate their portfolio if they ever dared stop using his services. It was a wake up call for me regarding broker or intermediary risk.
xerty24
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by xerty24 »

Sounds like you found a good fit.
No excuses, no regrets.
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ofcmetz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by ofcmetz »

Thanks for sharing your experiences. Sounds like you went to extraordinary lengths to find a financial advisor who is an exact fit for you. While I'm very happy being a do it yourself investor, I totally understand your reasons for not going it alone. I have to think that if others were to go though the same process you did that they would just as likely settle on one of the other three you didn't choose for their own reasons.
Never underestimate the power of the force of low cost index funds.
integrity
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by integrity »

Could you explain why you wanted an advisor in the first place? What were the reasons you chose not to manage your portfolio yourself?
reggiesimpson
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by reggiesimpson »

Glad to see you found an adviser to suit your needs. I went through much the same process you did in recent months for the same reasons you brought up. I lifted 6 advisers from the pages of this forum and went through the work of scrutinizing them. It actually came down to the three that you have discussed. I eliminated %AUM even though Ferri is very good (IMHO). The fee would have been too high for me. I came close to EAM (like you) but after long discussions with John Gorlow the choice became evident. Obviously my impression of John was quite different from yours and my experience with him has borne this out. I posted the "search" process and why i chose Cardiff Park over others (much like yourself with Tinnin) and was roundly excoriated for doing so. Time of day? Posters online at the time? Who knows? All the FAs i looked at came off the pages of this forum! But much like yourself i found it important to mention the process that i went through and why i chose Gorlow. It really is a personal choice after all and i found that the "fit" really is the crucial decision.
pkcrafter
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by pkcrafter »

The important thing is you found someone you can be comfortable with.

Diehard Disciple wrote:
He charges a flat fee. A flat fee encourages as many clients as possible and discourages quality time with each client. The advisor has less reason to be interested in the growth of your portfolio as someone charging a percentage.
An alternate argument can be made that an advisor charging a percentage has an incentive to take higher risk with your portfolio because the more you make, the more he makes. Fee only removes any incentive, but in the end it's competence and compatibility.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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1210sda
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by 1210sda »

Thanks Diehard Disciple.

I believe your experience will be a great guide many BH's who are searching for an advisor. Especially newer BH's.

Your dedication to the task is admirable. Honestly, I can't think of too many things that I would fly 3,000 miles on my own dime for.

If you change your mind in the future, the Three Fund Portfolio, Target Retirement Funds and LifeStrategy Funds are quite decent.

1210
Bitzer
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Bitzer »

I am comfortable managing my own portfolio and have it divided into 50% a mix of 3 target date funds (Vanguard, TRowe and Schwab) and 50% in managed ETF portfolio (which I constructed using advice found in this forum). The question I have is should I transfer some assets to one of the advisors mentioned in this thread simply to gain access to DFA funds? The consensus in this forum seems to be no.
letsgobobby
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by letsgobobby »

reggiesimpson wrote:Glad to see you found an adviser to suit your needs. I went through much the same process you did in recent months for the same reasons you brought up. I lifted 6 advisers from the pages of this forum and went through the work of scrutinizing them. It actually came down to the three that you have discussed. I eliminated %AUM even though Ferri is very good (IMHO). The fee would have been too high for me. I came close to EAM (like you) but after long discussions with John Gorlow the choice became evident. Obviously my impression of John was quite different from yours and my experience with him has borne this out. I posted the "search" process and why i chose Cardiff Park over others (much like yourself with Tinnin) and was roundly excoriated for doing so. Time of day? Posters online at the time? Who knows? All the FAs i looked at came off the pages of this forum! But much like yourself i found it important to mention the process that i went through and why i chose Gorlow. It really is a personal choice after all and i found that the "fit" really is the crucial decision.
I remember your posts and I think you were treated shamefully. Glad you have stuck around despite.
Muchtolearn
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Muchtolearn »

DiehardDisciple wrote:Thanks for the compliment - and for being empathetic yourself. It takes a giver to know a giver. :beer

I need an advisor because a) I could use the handholding, b) I need another human between me and my emotional impulses, and c) I'm focusing my energies on something else in an unrelated field and don't want to be a full-time advisor for myself. I have fairly poor self-discipline and I'm borderline ADD, and I need all my attention for this other pursuit. I thought long and hard about the three-fund Vanguard portfolio espoused by the well-respected gurus here, and I continue to think long and hard about it. But wrongly or rightly, I bought into the Fama-French 3-factor model (a gradual small-value tilt after beginning with a total stock market fund). I also knew I needed an advisor for reasons stated above and wanted someone who was very smart, and fairly cheap. I didn't think too much of the private-wealth-management advisors at Vanguard. I forget what they call them now. The really sharp minds - in terms of professional passive advisors - seemed to be investing their equity allocations with DFA. At least in my opinion.
I do hear that DFA may provide an enhancement. I have my being form Missouri on this. I also have begged people to do a prospective study of whatever tilt they want but nobody seems interested (if the study fails, there is all goes). You do not appear to have borderline ADD to me. As to being a giver, that has been my whole problem in life. Now as I approach 60 I realize I do not have any interaction with anybody where I ever ask for anything but worse, I believe everybody expects something from me (I hope I'm wrong).

I have an idea for you. Why don't you see what how your portfolio is laid out. I bet you could simply reproduce that at Vanguard (they even have small value funds if you want a tilt). Figure out how much you'd save. There is no time limit on this. then see on paper if you could DIY and if so think about it.
Muchtolearn
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Muchtolearn »

letsgobobby wrote:
reggiesimpson wrote:Glad to see you found an adviser to suit your needs. I went through much the same process you did in recent months for the same reasons you brought up. I lifted 6 advisers from the pages of this forum and went through the work of scrutinizing them. It actually came down to the three that you have discussed. I eliminated %AUM even though Ferri is very good (IMHO). The fee would have been too high for me. I came close to EAM (like you) but after long discussions with John Gorlow the choice became evident. Obviously my impression of John was quite different from yours and my experience with him has borne this out. I posted the "search" process and why i chose Cardiff Park over others (much like yourself with Tinnin) and was roundly excoriated for doing so. Time of day? Posters online at the time? Who knows? All the FAs i looked at came off the pages of this forum! But much like yourself i found it important to mention the process that i went through and why i chose Gorlow. It really is a personal choice after all and i found that the "fit" really is the crucial decision.
I remember your posts and I think you were treated shamefully. Glad you have stuck around despite.
I am too bobby. I can say I learned as much from him as anybody. Posts like reggie's and the poster in this thread provide a topic different form the usual. And each time it does get me thinking whether I can use a low cost adviser as opposed to my 6 year DCA quarterly plan.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Jerry_lee »

Congrats on your decision. Don't worry, fees included, I image any of the portfolios from any of those advisors would have performed considerably better than the average. You cannot imagine how bad it is out there--I read one member here was infamously betting heavily on SV and the S&P 600 Pure Value ETF in particular during the downturn, only to bail on it in 2009 when they became a prominent TSMer. In the last 3 years, RZV has bested VTI by almost 20% per year (but lost about 20% more during the downturn when they were holding it). I cannot even begin to imagine what that does to a portfolio's IRR?
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gerntz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by gerntz »

DD, thank you very much for your post. It hits very close to my heart both literally & figuratively.

I agree with your, "I need an advisor because a) I could use the handholding, b) I need another human between me and my emotional impulses, and c) I'm focusing my energies on something else in an unrelated field and don't want to be a full-time advisor for myself.", more so b) & c). I'd add for us d) that we want the backup for when I'm not capable of overseeing our investments/advisor. My DW, while plenty mathmatically & financially competent, wouldn't want to spend energy on the subject.

First, we have been with one of your first three advisors for close to 10 years. We have dealt primarily with the principle and haven't had the issues/concerns you describe. Also, his investment recommendations fit better with our thoughts than they apparently do for you. I admit I haven't thought about, much less done, the detailed fixed income analysis you have to come to firm viewpoints. Regardless and net, we believe we get good value and are satisfied.

Second, Derek Tinnin's firm is located about 4 miles from where I work for a short time yet and is about 20 miles from where we live. Shocking to say the least that I've never heard of PW as I periodically scour around the internet for low cost DFA-access advisors. I read much of what's on PW's site and it sounds good to me also. Somewhat higher fees than we pay today, but not outrageous at all. I will certainly keep PW in mind if we feel the need to switch advisors, probably will be the first call.

Thanks again for your information and process.
gerntz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by gerntz »

reggiesimpson wrote:Glad to see you found an adviser to suit your needs. I went through much the same process you did in recent months for the same reasons you brought up. I lifted 6 advisers from the pages of this forum and went through the work of scrutinizing them. It actually came down to the three that you have discussed. I eliminated %AUM even though Ferri is very good (IMHO). The fee would have been too high for me. I came close to EAM (like you) but after long discussions with John Gorlow the choice became evident. Obviously my impression of John was quite different from yours and my experience with him has borne this out. I posted the "search" process and why i chose Cardiff Park over others (much like yourself with Tinnin) and was roundly excoriated for doing so. Time of day? Posters online at the time? Who knows? All the FAs i looked at came off the pages of this forum! But much like yourself i found it important to mention the process that i went through and why i chose Gorlow. It really is a personal choice after all and i found that the "fit" really is the crucial decision.
I've been wondering what your decision was, rs. Good to know. Thanks.
gerntz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by gerntz »

Bitzer wrote:I am comfortable managing my own portfolio and have it divided into 50% a mix of 3 target date funds (Vanguard, TRowe and Schwab) and 50% in managed ETF portfolio (which I constructed using advice found in this forum). The question I have is should I transfer some assets to one of the advisors mentioned in this thread simply to gain access to DFA funds? The consensus in this forum seems to be no.
Of course that's the consensus HERE. This forum is composed of, visited by, primarily DIYers. As such, they don't have access to DFA funds (Who knows, there may be a hidden way.) and thus must not think the advisor fees are worth it. It's just a fact. I visit because I find some of info provided valuable and thus appreciate the inputs.
yobria
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by yobria »

gerntz wrote:This forum is composed of, visited by, primarily DIYers. As such, they don't have access to DFA funds (Who knows, there may be a hidden way.) and thus must not think the advisor fees are worth it. It's just a fact.
That sounds right to me.
Mortgasm
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Mortgasm »

Bitzer wrote:I am comfortable managing my own portfolio and have it divided into 50% a mix of 3 target date funds (Vanguard, TRowe and Schwab) and 50% in managed ETF portfolio (which I constructed using advice found in this forum). The question I have is should I transfer some assets to one of the advisors mentioned in this thread simply to gain access to DFA funds? The consensus in this forum seems to be no.

I chose to do that, and am very happy with my extremely low-cost choice. But I also think that if you have to ask, you probably shouldn't. I spent a lot of hours researching. There is no simple answer to that question.

And the other poster is right - this is a VANGUARD oriented board. Most people here prefer the simplicity of fewer, market-weighted funds because those are the type of people that are attracted to, and stay with, a Jack Bogle inspired discussion board. It doesn't mean they are always right, and there is definitely some group think that occurs. But you'll find that anywhere.
reggiesimpson
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by reggiesimpson »

I hope the OP doesnt mind if i take a moment to thank letsgobobby,muchtolearn and gerntz for their comments. As the OP and others here have already found out its this Forum that has been our own objective sounding board for some time. The various opinions and suggestions have added not only to our wealth of knowledge but given many of us the confidence to make much wiser decisions than had we gone off on our own. Thank you everyone.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Bongleur »

The example retirement portfolio on the Purpose Wealth site only has a 55% monte carlo chance of lasting the required 25 year period. And it could fail after only 8 years. Only using 28% bonds, too. None of them are TIPS either. Hope they do a lot better for you.
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imagardener
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by imagardener »

Diehard

Thanks for a very interesting post. We are not looking for an advisor (on the order of "We don't want to join a country club that would have us as a member) but here's a funny story (told on myself).

Having done some research to determine what bond fund we wanted to sink some new money into I came up with DIPSX (a DFA fund), highly rated by Morningstar and bested the Vanguard like-minded fund in both returns and rating. When I did a quote search on Vanguard they quite plainly spelled it out that it was not available to purchase at Vanguard, so I went to DFA's site and saw that it was available at "Fidelity Advisor". Fidelity is our other brokerage and we are (I thought) in Advisor status there so wired a large sum (for us) from Vanguard to Fidelity and put the "Buy" order in. It was refused but gave me a phone # to call at Fidelity.

The nice Fidelity person on the phone regretfully told me that it was not available directly from Fidelity, that we needed an "advisor". I said I thought we had "an advisor" at Fidelity. He said "No we need an outside advisor who uses Fidelity's platform to maintain our account." Ooooh. Now I see, we need an ADVISOR. Duh.He was not able to give us any names on the phone but that didn't matter since we (see above) don't want an advisor that would be interested in our account, or don't want the pain of looking for and interviewing one. Been there done that, no joy.

So day before yesterday money got wired back to Vanguard and the Vanguard bond fund was purchased yesterday. I've been managaing our money for 20+ years now and still learning new stuff.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by DWolf »

I have an idea for you. Why don't you see what how your portfolio is laid out. I bet you could simply reproduce that at Vanguard (they even have small value funds if you want a tilt). Figure out how much you'd save. There is no time limit on this. then see on paper if you could DIY and if so think about it.
You could definitely mimic the small cap and value tilts but you would have a more difficult time reproducing their opportunistic/patient trading strategies (goal is to lower trading costs), reducing reconstitution risk by not following traditional indexes, and momentum screens (not sure I'm sold on this fourth factor yet - or actually being able to capture it...).

For those of you who use low cost DFA Advisors I've always wondered if they really are financial advisors, or if they are professional asset managers? I guess I differentiate in that an asset manager will manage a portfolio for you (probably not that much of a value for the typical BH) whereas an advisor will provide advice specific to you unique situation. Do they understand your individual goals, get a copy of your tax return, perform tax planning, estate planning, and a written comprehensive plan? If they do it could definitely be worth 25 bips, or $2,500, or whatever is considered a low cost provider these days...
Woodshark
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Woodshark »

Before your post I had never even heard of DFA. Thank you for posting this as I now know a little more than I did yesterday.

Always learning.
Chaol
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Chaol »

DWolf wrote: For those of you who use low cost DFA Advisors I've always wondered if they really are financial advisors, or if they are professional asset managers? I guess I differentiate in that an asset manager will manage a portfolio for you (probably not that much of a value for the typical BH) whereas an advisor will provide advice specific to you unique situation. Do they understand your individual goals, get a copy of your tax return, perform tax planning, estate planning, and a written comprehensive plan? If they do it could definitely be worth 25 bips, or $2,500, or whatever is considered a low cost provider these days...
The "advisor" you describe sounds to me like a "financial planner". It gets confusing when some financial advisors and portfolio managers offer financial planning services.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by DWolf »

The "advisor" you describe sounds to me like a "financial planner". It gets confusing when some financial advisors and portfolio managers offer financial planning services.[/quote]

I agree - the definitions are pretty loose. When I search for local financial planners I know ML and EJ reps show up, but regardless of what they call themselves there wouldn't be any real planning advice there.
Here is investopedia's definition of financial advisor:
Definition of 'Financial Advisor'
One who provides financial advice or guidance to customers for compensation. Financial advisors can provide many different services, such as investment management, income tax preparation and estate planning. They must carry the Series 65 license in order to conduct business with the public. A wide variety of licenses are available for the services that a financial advisor can provide.

I guess that get's back to my original question what do you get for your money with a low cost DFA advisor/planner? Is it access to DFA funds and portfolio management or do you get financial planning advice as well? Interested in hearing from those with experience.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by livesoft »

This is a great thread, thanks for starting it.

I came away though with the feeling that the Advisors were also interviewing the OP and one or two may have decided they didn't want the OP's business. :| As an example, sometimes I am given 30 minutes to interview someone who has applied for a job. I might know in 5 minutes that I would never give them a job, so what do I do for the next 25 minutes?

ML: Merrill Lynch
EJ: Edward Jones.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Bongleur »

>ML and EJ

???
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DiehardDisciple
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by DiehardDisciple »

Hi everyone. Thanks for appreciating my efforts to help others. And throughout this post I'll give my reasoning why I needed an advisor. I'll address each commenter one by one.

sperry8, I'm sorry, I didn't see your post when I made my first reply to muchtolearn, who posted after you. I think DFA-registered advisors other than PS are amenable to tailoring a portfolio to the way you want it. Getting someone to empathize with your situation, to understand your situation, is the first criterion, in my opinion. Good luck.

yobria, you're right: A 9-hr drive through a snowstorm is much longer than buying a few index funds and accessing one's E-trade account. However, that 9-hr drive is much quicker than writing five thousand, two hundred, and eighteen posts on the Bogleheads forum.

Time is money and vice versa.

Thanks for the interesting comment about smallhi. That may indeed have happened. I just need another person between me and my portfolio because I have a diagnosed anxiety disorder that clouds my thinking when it comes to implementing a strategy. I'm great with developing the strategy, but then I start doubting myself when actually implementing it, in all areas of life. Too much time spent biting the fingernails.

xerty24, thanks for the comment. Hopefully it will continue to be a good fit. However, I accept that there is no perfect fit.

ofcmetz, thanks for your words. I wish I had the stomach to be a do-it-yourself investor, but I can simply see myself making very rash decisions. I can be very impulsive and tend to start contradicting myself if I'm not careful. When I was in graduate school, my professor gave out joke awards at the end of the year, and the award I got was "Best Debater... with himself."

And you're right; ultimately the adviser decision is very subjective. The one I had lunch with whom I didn't choose might have had a bad morning and was simply too distracted in that moment. It becomes an issue of splitting hairs. I like to say that these advisors are not just all in the same ballpark, but also in the same seating section, if not the same row.

(Note to people who want to talk in depth to prospective advisors: Offer to compensate them for their time if you decide afterwards not to use them. I did this so they would be less tempted to use the reason of a "busy schedule... gotta go" in keeping the appointment short. After all, there may be some DIY-ers who think, "Free hour with an advisor!" and take advantage of that. I wanted to treat them as best as I could so I could better see how much of an effort they made over me. Later on, I did write a check to the advisor I had lunch with whom I did not end up choosing.)

Integrity, I like your user name. I wanted an advisor for not only the reasons listed above, but also because I wanted someone with whom I felt comfortable so that in case I died, my mother and sister (both single) would have a good option if they decide to switch out of individual stocks and away from their active advisor. It's simply hard to find a financial professional whom you can trust and who is reasonable. But more than that, I'm working on something for my work that is very time-intensive and brainpower-intensive. I believe that the more I detach from thinking about one topic, such as investing, the more depth I can go into on this other topic (if brain capacity is a fixed volume).

This other topic: I'm designing a unique type of school to resolve 12 conflicts overseas, a day school that would be for the children of opposing political leaders (with 40% of the student body coming from the public through a lottery). It's very complicated, but I have a sense that I am ahead of the international community and all academic scholars with this idea as the most possibly farsighted way to resolve these conflicts. Friends, upon listening to the details, say that it could lead to a peace prize someday, and at least 20 times I've heard people say that my work reminds them of Greg Mortenson's 3 Cups of Tea, before his recent accounting scandal. Or Seeds of Peace. But Seeds of Peace takes the kids out of their home conflicts, and only for the summer.

The work-in-progress website is http://www.1for2.org . This includes a day school for the Shia and Sunni leaders' children in Baghdad, one for the Palestinian and Israeli leaders' kids between Ramallah and Jerusalem, and ten other conflicts too, including a school in the Korean DMZ between Seoul and nearby Kaesong, NK. Currently sitting on a 90-age bibliography of two-line scholarly citations from academic periodicals to back up my argument. Would like to avoid having to get a PhD. (I haven't applied for grants yet. Was a history teacher for awhile.)

The first location that I am working on for such a school is Cyprus, and so I have to follow the ongoing events of that conflict too. There is an online Cyprus forum that is similar in appearance to Bogleheads, and in the category for Cyprus Problem Solution Proposals, my thread has more than 50% views than any other one. (I realize that "Views" is not a useful statistic, but it is what it is.) My thread on the following site begins with "A Novel Catalyst..." http://www.cyprus-forum.com/cyprus-solution.html

I feel a lot stress on this because I’m the one carrying the bulk of the concept right now. If I bite the dust tomorrow, the concept might too (thus a lot of my anxiety). I hate the term, "visionary," but that is an adept description. I need a fair amount of brainpower just to keep up my confidence that I’m on to something important, and then I need more brainpower to analyze the specifics. So, to increase my brainpower depth on this topic, I also took the time - in addition to finding a good advisor - to research in depth every other topic that gave me anxiety, some tangentially connected to this conflict-resolution project and others strictly for my private life. Like I did with investing, I read a lot of books for each topic and synthesized my findings into documents to share with friends and strangers alike. Every time I finished a topic, I felt that I incrementally think more deeply about my project.

I put these documents on a free website, which I'll share with you all now: http://www.mighthelp.net . I’m in the process of editing the format of some of the documents, but the “Tips for your money” document is completed and free: http://www.mighthelp.net/images/Tips_for_your_money.doc . It “might help.” Maybe not.

Reggie Simpson, I saw your thread when you came back and announced your decision. Thanks for your words here. Know that your thread, in which you got flamed by others, inspired me to share my views too. Kudos to you for going through the same search process. I might have had a different reaction had I taken the time to meet John in person. A lot of this is just geography differences - I can drive to Ohio but not Southern California. Gorlow and Tinnin are sitting in the same row in the "ballpark." Other Boglehead readers have really benefited from both our threads. Also good words there about the Bogleheads forum being a surrogate forum for people needing an advisor, either a Vanguard or DFA-affiliated one, or someone else, such as from the Garrett Planning Network - http://www.garrettplanningnetwork.com.

Pkcrafter (Paul), thanks for your post. That’s an interesting point about possible negative behavior consequences on the advisor’s part with an AUM account. I do keep an eye on what is done in each transaction that Derek does for me, and I look forward to my portfolio hitting the milestone where his fee will shift from a % to a flat fee (the milestone is $2.4 million, but I am far from it).

1210sda, thanks for the cordial post. Being an excellent debater with myself - :) , I think about the three-fund portfolio quite often. The last couple of days I’ve been looking at those returns of the Vanguard total-bond fund. But then, if I shifted to the three-fund portfolio, or one of the other two options you mentioned, I would be thinking about the DFA funds. I need to better appreciate the greenness of my own grass. (About bonds, Derek does have a big chunk of my bond allocation in Vanguard’s VMLUX, for anyone interested. The argument for DFA bond funds is not as strong as the argument for their equity funds.)

Bitzer, you may want to start your own message thread so that your question will stand out in the title. The answer to your question is difficult. If you feel competent managing your own portfolio but believe in the DFA tilting to small-value, you may just want to use the funds and ETFs you have access to do that. I personally get too stressed at the thought of being solely responsible for my portfolio. It would make it difficult for me to sleep at night – a very subjective reason but an important one. And I agree with what mortgasm said. “There is no simple answer to that question.”

Letsgobobby, I too thought other posters came out a little too harshly on Reggie.

Muchtolearn, thanks again for your nice words. For reasons described above, I don’t want to be advisor-free (ie, DIY) right now. My post on Thursday was my first Bogleheads post in over two years, and I only came back to make a written thread to which I can direct the readers of MyMoneyBlog (http://www.mymoneyblog.com/dfa_funds_the_p_1.html), several dozen of which have politely contacted me and asked for help. Hopefully when I finish following up to this thread, I can take a multi-year vacation before my next Bogleheads appearance.

:happy

About reproducing the DFA portfolio at Vanguard, see what DWolf wrote below about not being able to reproduce "their opportunistic/patient trading strategies (goal is to lower trading costs), reducing reconstitution risk by not following traditional indexes, and momentum screens (not sure I'm sold on this fourth factor yet - or actually being able to capture it...)."

And for anyone who suspects they might be ADD or ADHD, here is a fabulous site that spins ADD as a gift: http://www.borntoexplore.org, http://www.borntoexplore.org/addlinks.htm .

Jerry lee, thanks for your post. DIY-ers are often very successful with their portfolios, but it takes...

a lot of strength to stick with the plan
when the you-know-what is hitting the fan.

(Nice rhyme, eh!) I just don't have enough inner fortitude to allocate to my investments. I need fortitude for the other stuff described above.

gerntz, thanks for seconding my reasons. Wise is he who knows his limitations. I would struggle with sticking to one plan if I were on my own. Good luck with your pursuits in the other field. Life is short. I thought Bogle wrote somewhere - but maybe it was someone else - about index funds being the "seven-seas portfolio." Just invest in the funds and then go out and sail the seven seas while tuning out the markets. While I greatly respect the DIY approach (and envy the self-discipline needed), I see some posting on here so often that it seems as if they are missing out on a key benefit of index funds:

leading a well-rounded life.

Regarding the fixed-income views, there is a tremendous amount of conflicting data out there I'm sure. Ultimately it's a leap of faith, just like it is with picking an advisor. In fact, I share the following movie clip with people when they are trying to muster up enough trust and faith when changing to a new advisor (data alone doesn't get you across the bridge): http://www.youtube.com/watch?v=xFntFdEGgws (it begins at the 00:16 mark).

Gerntz, I’m glad you believe that you are getting good value and are satisfied. That’s all there is to it.

And congrats for living in a beautiful part of the country. You’re also lucky to have a good second adviser option so close to you. There’s a psychological positive to that: If there’s a doomsday Armageddon, you can run to your advisor’s house and camp out on his lawn until he comes out in his pajamas, and then do what he does (assuming there is no phone service). That’s one reason why I thought so much about Russell Wild in Allentown, PA. I’ll settle for living about 15 miles from Vanguard’s main campus. I stumbled onto Derek because back in ’08 I read the Bogleheads boards extensively (and I think I also saw his posts on a forum that no longer exists on http://www.indexuniverse.com).

Bongleur, thanks for pointing that about PW's example portfolio and its monte carlo chances. I will ask Derek about it, at least for myself (I probably won’t post later about it). From what I understand, and from what I think Derek told me at one point, TIPS are a great option for a tax-sheltered account but not so much for a taxable account. The bulk of my portfolio is taxable. Bongleur, livesoft wrote “ML: Merrill Lynch, EJ: Edward Jones” to let people know who DWolf was referring to in the previous post. DWolf had used the initials without explaining what they were.

Imagardener, funny story. I can relate. Fidelity’s labels for their advisor services and “advisor-directed” services are confusing. However, as you mentioned, they are very nice on the phone, and smart. I don’t feel like I’m talking to the average call-center representative. They must pay those folks well. I hope you have the MySmart ATM card; its full rebates for transactions at any bank’s ATM machine nationwide are great. It’s nice to hit yes when the machine says, “This ATM will charge you a $5 fee for the transaction. Do you accept?”

DWolf, about the DFA advisors being asset managers or financial advisors, I think it depends on the individual financial professional. Some fall into one category and some into the other. But from looking around, I found that the ones who offer full services - estate planning, insurance planning, tax preparation - under one fee umbrella are overcharging the customer. It's cheaper to disentangle the services and pay for them a la carte, mainly because you can get estate planning and tax returns done for an hourly fee, which comes out to be a lot less than a higher percentage fee of assets. For me at least, Derek takes into account my future taxes (based on my predicted earnings information that I give him) when deciding what to buy and sell for me, and then he works with my third-party tax accountant here in my town whom I pay to do the actual tax prep and filing.

About his financial-planning services, he charges an additional fee if you want that, which he calls his financial-planning fee: http://www.purposewealth.com/pages/Services/default/3/ (I’m beginning to feel like Reggie in going into depth about one advisor, but I just don’t know offhand about the others.) I used this extra service my first year, but I really didn’t need it, and the conversations are mostly client-driven; I barely bothered to ask Derek questions; I just wanted the extra handholding option (the option to ask for a lot more detailed advice about my budgeting needs). I dropped that additional service after my 1st year and have been fine since; it depends on what the client needs.

Woodshark, you’re welcome. You’ll find that at least with the equity allocation of your portfolio, the debate here on Bogleheads between believers in Vanguard equity funds and believers in DFA equity funds is fiercer than the North and the South in the Civil War. I’m only half-joking. Stay safe!!! :)

And it’s also a sensitive issue because DIY-ers can’t get access to DFA funds without going through an independent advisor who will then charge you a flat or percentage fee on top of the DFA mutual fund costs. And a lot of these advisors have portfolio-minimum requirements, which then means that the people using DFA already on here have portfolios of a certain size.

Livesoft, you’re welcome. That was an interesting comment about the prospective client being interviewed by the advisor, as well as the other way around. I really didn’t feel that way. Most of the questions asked of me were about my goals and less about how much I agreed with their philosophy; it was up to me to figure out whether I agreed with their philosophy. The one time when a DFA-registered advisor might pass on a client is if the client comes across as someone insisting on a high level of trading to catch the hot fund du jour.


:beer
FiveThirteen
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by FiveThirteen »

Thanks so much for all of your thoughts DieHard.

Anyone else on the board using Derek Tinnin besides DieHard?
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by livesoft »

DiehardDisciple wrote:.... The one time when a DFA-registered advisor might pass on a client is if the client comes across as someone insisting on a high level of trading to catch the hot fund du jour.
Another time might be if the potential client is a master debater with himself.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

As one of the advisors mentioned, I have to say that I don't quite recognize my firm on any of the 3 options on the first post. I think Portfolio Solutions is #3, however I am thrown off by the incorrect mention of Rydex funds as well as the incorrect comments about limited asset allocation help. Also, to infer that I am not accessible is terribly wrong. Many Bogleheads who have contacted me over the years know this. Anyone can call or email me anytime they want. I answer all emails, I take all calls, and I promptly return calls if I am not available.

In any case, the difference between my company and other is that I started the company as an experienced financial analyst. I actual do research into indexes, index funds, fund providers, asset allocation, etc, and select the best asset allocation and individual investments based on this research.

I would like to be very clear in this statement, Portfolio Solutions is not a "DFA advisor". We're not "one dimensional", pardon the pun. Portfolio Solutions is not a mutual fund wholesaler as some advisor are. IMO, it is simply wrong for an advisor to sell DFA is the best choice in all asset classes, in all styles, all for the time, for all investors. I have too much experience, knowledge and ethics to rely on access to DFA funds as a sales gimmick.

We are often contacted by investors who absolutely must have DFA funds, and because this is what they want, they expect their advisor to give them all DFA funds. We will not do that. We are not an order taker. That's not to say we don't use a few DFA funds. To the contrary, we do hold a few that we believe will add value above their higher cost. But that is our decision, not a client's decision, and these are the decisions we get paid to make.

I am very proud of work we have done on behalf of hundreds of households, non-profits, and pension beneficiaries over the years. Our company has grown every year because of this good service despite two severe market downturns since we begain in 1999. Thanks for allowing me to make these clarifying statements.

Rick Ferri
Last edited by Rick Ferri on Sun Apr 29, 2012 9:07 am, edited 8 times in total.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Jerry_lee »

Diehard Disciple,

With a few exceptions, I don't really believe the average "boglehead" is that successful with their investments. I see numerous examples of complete asset allocation regime changes (see my example above), I see a lot of obsession over portfolio tweaking and allocation minutia (never a good sign), I notice a preponderance of posts at any point in time extolling the virtues of the current strategy du jour (real estate and commodities a few years ago, gold and permanent portfolios more recently, and a general trend towards severe overweighting of fixed income -- and intermediate/longer term bonds at that), and a whole lot of recency bias (have you noticed the threads popping up questioning the existence of any value premium whatsoever?).

And then you'll see a pretty universal belief here that all index funds are basically the same except for expense ratio differences, despite, for example, the 200bps of return difference over the last decade between DFAs US Targeted Value fund and Vanguards Small Value fund or the 160bps of return difference or between DFAs US Small Value fund and the iShares Russell 2000 Value (both comparisons chosen for the fact that they have very similar factor exposures).

Lastly, you don't really see any fundamental understanding of the business of investment advisory services. It is commonplace to see RIAs with DFA access referred to as "selling DFA", there is almost never any distinction between an advisor and an adviser, and even when a credible advisor search is conducted, I have never once seen a comparison of one of the most important aspects of outcome (assuming the same level of discipline): what is the overall allocation/factor tilt of the proposed portfolios? It is presumed that all portfolios are roughly equivalent. Your discussion of fixed income philosophies is about as close as it comes. The reality is, the difference between 0.25% and 0.5% or 0.75% fees pales in comparison to the expected outcomes of a 0.1/0.1 tilt vs. a 0.3/0.5 tilt or 0.4/0.6 on the non-US side (ignoring all the additional services you get for the higher fee).
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Jerry_lee »

By the way, there are some really exciting things going on in the industry at the low fee/low service end for those who want minimal assistance. Online companies like Betterment are offering the same ETF model portfolio/rebalance/once a year review model for as little as 0.1%, rendering obsolete the higher fee firms at the same service level.

This is a great example of the market in action. In all industries, there has always been tremendous fee compression at that end of the spectrum as it grows and matures. Its a good thing, as it becomes easier for consumers to identify fees paid for services rendered. Today, we take for granted that the Family Dollar Store experience/price is far different than a Super Target/Walmart, which wasn't always the case.
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

Jerry_lee wrote:By the way, there are some really exciting things going on in the industry at the low fee/low service end for those who want minimal assistance. Online companies like Betterment are offering the same ETF model portfolio/rebalance/once a year review model for as little as 0.1%, rendering obsolete the higher fee firms at the same service level.
I think they're interesting, but the people running these companies have extremely limited experience in the low-fee advisor market, and they are running on venture capital that will run out eventually. The people who started these companies have an idea, which I give them credit for, but the economics are tough. One or two of these companies may eventually survive, but which? Their money won't last forever. They must get several billion dollars under management very soon to survive. I say this an experienced low-fee advisor whose business has been growing and profitable every year.

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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by yobria »

DiehardDisciple wrote:yobria, you're right: A 9-hr drive through a snowstorm is much longer than buying a few index funds and accessing one's E-trade account. However, that 9-hr drive is much quicker than writing five thousand, two hundred, and eighteen posts on the Bogleheads forum.
Ok, each to his own. I hope whoever you chose didn't go too heavy on the DFA funds though - whatever special sauce they may once have had seemed to have stopped working about five years ago, looking at M* performance numbers.
Mazz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Mazz »

DiehardDisciple,

Just out of curiosity, when you conducted your search did FPL Capital Management (based in New Orleans), make your short list? I found them in 2010 on their public website FinancialPlanning.com

Like you, I was looking for a flat fee DFA advisor. I found their fee to be the lowest of the various flat fee advisors. I researched and interviewed them extensively.

FPL Capital is a boutique size investment firm with a very unique business model that lets them charge a low flat fee for the portfolios that they manage.
They then charge an hourly consulting fee for additional wealth management services outside of investing in their model portfolio. They have specific CPAs and attorneys on annual retainer which they make available to their clients. Thus, they operate like a shared Family Office.

I signed up with them a little over a year ago, and have been extremely impressed with the services they are able to provide at any price.
I think this type of model is the future for wealth managers. If not, it should be.

Here are some of the services they offer that I like:
They offer their own model portfolios, but they will also work with the client to create a customized model that is specific to the client.

In addition to utilizing DFA funds, they will also recommend other low cost passive funds like Vanguard and WisdomTree. I have become a huge fan of Wisdom Tree.

They have custodial relationships with the three big discount brokers (Schwab, Fidelity. & TD Ameritrade).

Outside Managers - I had money with two separate account money managers on the Merrill Lynch platform and was able to keep the same managers and switch to a much cheaper Schwab platform. (about 60% lower price than Merrill).

They also provide quarterly performance reports on all of my portfolios, not just the ones they manage.
Bongleur
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Bongleur »

> a unique type of school to resolve 12 conflicts overseas, a day school that would be for the children of opposing political leaders

Hmmm... better to take them HERE. Rome understood the strategic value of indoctrinating hostages...
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.
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Rick Ferri
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

I don't know who FPL Capital Management is, but here are two comments on the FPL Capital Management website:

"Our Equity Model Folios Have Outperformed Its Benchmark Index by an Average of 52% Over the Last 10 Years"
"Our Fixed Income Model Folios Have Outperformed Its Benchmark Index by an Average of 12% Over the Last 10 Years"

Listen folks, lets be ethical for a moment. The ONLY way this can happen with a passive index fund advisor is if the advisor uses the wrong benchmarks! By default, a properly selected benchmark will outperform a passive index portfolio due to fees. It HAS to. Anything less is the wrong yardstick to measure the portfolio's risk and return. BTW, they don't mention if these returns are before their fee. Advisors routinely forget to include their cost in their claim to performance fame.

I am sorry if I offend anyone. But I have been in this business for almost 25 years and am so sick and tire of misrepresentation by advisors that it makes me scream. I think the worst is one advisor who claims to have performance on DFA portfolios back to 1927. That is just absurd. You should forget an advisor as soon as you see this type of fabrication and misrepresentation.

There is no free lunch on Wall Street. There is risk, there is return, and there are fees. ALL else is marketing!

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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DiehardDisciple
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by DiehardDisciple »

If people need to reach me, you can send me a pm. But I've tried to explain as much as I can in writing here and will probably just be directing you back to some part of what I wrote here. Good luck.
yobria
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by yobria »

Rick Ferri wrote:There is no free lunch on Wall Street. There is risk, there is return, and there are fees. ALL else is marketing!

Rick Ferri
Yes, I hope everyone masters this key concept.

You know that silly saying - "Whether you eat at McDonalds or a five star restaurant, it all comes out the same way". Exactly the same with financial products. Whatever anyone's promising, everything ultimately gets invested in the same pool of securities in very liquid, ruthlessly efficient markets. And these markets move randomly in response to new public information - they could care less about mimicking the past.
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tetractys
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by tetractys »

yobria wrote:You know that silly saying - "Whether you eat at McDonalds or a five star restaurant, it all comes out the same way". Exactly the same with financial products. Whatever anyone's promising, everything ultimately gets invested in the same pool of securities in very liquid, ruthlessly efficient markets. And these markets move randomly in response to new public information - they could care less about mimicking the past.
Well the thing about eating at McD, not all of it comes out the same way. You might notice that soon after the first bite there's a glucky feeling in your neck and around your ears, your sinuses react, your heart feels a little heavier, and grease immediately flows from the pores of your face and head. And yet it can be addicting. Likewise there may be a difference between advisors, some are mainly vegetables or fruit, others meat or fish, oatmeal, quaaludes, ... whatever.

So who knows, maybe DiehardDisciple has been getting something that makes him feel a little too good. -- Tet
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Rick Ferri
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

yobria wrote:
Rick Ferri wrote: There is no free lunch on Wall Street. There is risk, there is return, and there are fees. ALL else is marketing!
Yes, I hope everyone masters this key concept.
That is the point of this forum, is it not? We are all here to help other investors master this one simple fact. But it can be very frustrating at times. There is so much smoke and mirrors from Wall Street and the advisor community. There is so much deception, so much bending of words, so much false representation that it makes the job very difficult. That said, when a person finally gets it, and I mean TRULY get's it, when they have their "Aha!" moment, when the brain light goes on bright, it makes it worth the effort.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
gerntz
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by gerntz »

DWolf wrote:
I guess that get's back to my original question what do you get for your money with a low cost DFA advisor/planner? Is it access to DFA funds and portfolio management or do you get financial planning advice as well? Interested in hearing from those with experience.
What we get from our advisor is understanding of where we are in our life, our financial goals, and our risk/reward tolerance level - limit downside risk. From that he selects the mix of funds, stocks, bonds, and commodities - with our concurrence. We use a CPA for tax implications of our withdrawal and gifting choices and relay those to the advisor to help make future allocation choices/changes. We used an attorney for estate planning. The last was a one-time fee though may pop up again in the future. The taxe issues are periodic pay by the hour events. Don't see the need for ongoing oversight for the last two items.
true_north
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by true_north »

I’ve been using DFA funds for 6 years now, part of a fee-only portfolio of DFA and all other items including fixed income product at fee structure of 1%.

My DFA positions are Canadian Core equity and US Vector Equity.

in 2008 the 5 year results were below the Russell bechmarks

Just looking now at the 5 year results DFA performs worse to the Russell Indices.

I’m really thinking of pulling out of this advisor and DFA and to my own index portfolio, despite good chunk of my fee is tax-deductible.
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Rick Ferri
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

Hire an advisor because you want one or need one, not because you're seeking access to products that you don't have access to otherwise. Compare advisors based on their philosophy, experience, reputation, service and cost.If you hire an advisor for the right reasons, then you are happy and the advisor is happy.

Rick Ferri
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bertilak
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by bertilak »

Rick Ferri wrote:... when a person finally gets it, and I mean TRULY get's it, when they have their "Aha!" moment, when the brain light goes on bright, it makes it worth the effort.
Rick, your Power of Passive Investing and Asset Allocation books were part of my AHA moment. It helped me realize I didn't need an advisor. I feel bad that you lost some potential business -- me! At least I paid for your books!
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Rick Ferri
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Re: Sharing how I chose a low-cost DFA advisor 3 1/2 years a

Post by Rick Ferri »

Everyone can do-it-yourself (DIY). That's why I wrote the books!

That being said, many people don't want to DIY because investing it isn't their thing, or shouldn't DIY because they won't stay disciplined, or can't DIY because of time constraints, health issues or legal reasons. For those people there are investment managers.

Personally, I don't do my own taxes although I could. It's too time consuming, and it doesn't interest me that much. I would rather have someone else do them for me because it saves me time and I believe they do better job anyway. This is luxury that I can afford, so I take advantage of it. I believe people who understand low-cost investing but hire a manager anyway have the same thoughts.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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