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IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 3:04 pm
by rentonhighlands
I have a traditional IRA with balance of $31,000. I am paying 1.75% or $125.00 a qtr in fees. To me this is simply to much to pay to manage this money. What options does the forum suggest to do with this money. Where would it be suggested to be moved to?

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 3:10 pm
by BL
I simply set up an account at Vanguard and had them pull the funds from the other account. You may have to pay a closing cost but you will make that up quickly with no fees (at least if you agree to online rather than paper statements) and low-cost funds.

There are other no/low cost options as well. Good luck.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 3:18 pm
by chaz
BL wrote:I simply set up an account at Vanguard and had them pull the funds from the other account. You may have to pay a closing cost but you will make that up quickly with no fees (at least if you agree to online rather than paper statements) and low-cost funds.

There are other no/low cost options as well. Good luck.
I agree, move to Vanguard!

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 3:22 pm
by kenyan
This forum is somewhat slanted toward Vanguard due to their history, unique structure, and continued dedication to lowering costs. However, there are other good options such as Schwab and Fidelity. When using those other brokers, the low-cost options are there (though there may not be as many options as at Vanguard); you just may need to be a bit more vigilant about selecting the right investments. For example, if you opt for Fidelity, use their Spartan line of funds.

The most foolproof option would be to move to Vanguard.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 3:36 pm
by Jay69
WellsTrade if you are a customer of Wells Fargo already is another option.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:11 pm
by rentonhighlands
When I am looking thought the options of funds what do I look for to tell me what is the low-cost options?
My investment adviser who is currently managing this money and charging me the fee's disagrees with using Fidelity or others like because he states 1.75% fee to manage the money is much cheaper. Naturally he would say this. His reasons being is mutual funds have hidden costs and often cost much more. Wheres at RBC where I am at now I have a choice to be in mutual funds, ETF's and can control the money better in a down turn of the market.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:16 pm
by White Coat Investor
How long has this advisor been fleecing you like this? Luckily, you made this mistake on only $31K. That's only a $543/year mistake. Many of us have made far larger ones. WTH do you care what he thinks now that you've realized he's stealing from you? Do you care what an employee embezzling from you thinks? Do you care what the guy you found in your house rifling through your medicine cabinet for oxycontin thinks? Of course not. I wouldn't even talk to this guy again. Just open an IRA at Vanguard and have them move the money over for you.

Reasonable fees for investment management IMHO are:

Hourly fee of $300 or less (I've seen it as low as $150)
Annual flat fee of $3000 or less (I've seen it as low as $1000/year)
% of AUM of 1%/year or less (I've seen it as low as 0.15%-0.25% a year.)

Now, $543 a year isn't an unreasonable sum of money, but think about when your portfolio hits one million. Then you'll be paying $17K a year for advice. That's way too much. So unless that AUM fee decreases significantly as your assets grow, you need a new adviser.

Re: IRA Problem Paying to (sic) much fee's (sic)

Posted: Wed Dec 26, 2012 5:17 pm
by JDCPAEsq
Tell him he's nuts. Vanguard doesn't have any funds that charge even 1%. Here's a list of all the funds with the expense ratios of each:
https://personal.vanguard.com/us/funds/ ... torder=asc
John

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:18 pm
by White Coat Investor
rentonhighlands wrote:When I am looking thought the options of funds what do I look for to tell me what is the low-cost options?
Just look up the ER and other fees associated with the mutual fund.
rentonhighlands wrote:Wheres at RBC where I am at now I have a choice to be in mutual funds, ETF's and can control the money better in a down turn of the market.
You'd best think very carefully about what you mean by this. What exactly do you plan to do in a downturn? Sell low?

Vanguard Target Funds

Posted: Wed Dec 26, 2012 5:23 pm
by Taylor Larimore
rentonhighlands wrote:I have a traditional IRA with balance of $31,000. I am paying 1.75% or $125.00 a qtr in fees. To me this is simply to much to pay to manage this money. What options does the forum suggest to do with this money. Where would it be suggested to be moved to?
Welcome to the Bogleheads Forum!

Based on the information provided, I think you should consider moving to a Vanguard Target Fund with a total cost of about 0.20%/year. You can read about them here:

https://personal.vanguard.com/us/funds/ ... rementList

Happy Holiday!
Taylor

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:39 pm
by Mudpuppy
rentonhighlands wrote:When I am looking thought the options of funds what do I look for to tell me what is the low-cost options?
My investment adviser who is currently managing this money and charging me the fee's disagrees with using Fidelity or others like because he states 1.75% fee to manage the money is much cheaper. Naturally he would say this. His reasons being is mutual funds have hidden costs and often cost much more. Wheres at RBC where I am at now I have a choice to be in mutual funds, ETF's and can control the money better in a down turn of the market.
To put it bluntly, your investment adviser is selling you a load of bull so he can keep getting the 1.75% fees off your account. Whatever choices you have currently have all of the same supposed "hidden fees" (e.g. transactional costs that lower returns slightly) AND a 1.75% management fee to boot. When have you seen a Fidelity Spartan fund or Vanguard index fund perform 1.75% less than the index it tracks? They don't, they never have, and any adviser who tells you they do should NOT be trusted.

Run away, quickly.... It doesn't matter how much it costs or where you go (any of the low-cost companies like Vanguard, Fidelity, or others mentioned already will do), because the cost of leaving will be much less than the cost of doing business with this manager over the long haul.

Edit: As for which funds to choose on your own, look at the wiki article on three fund and lazy portfolios:
http://www.bogleheads.org/wiki/Three-fund_portfolio
http://www.bogleheads.org/wiki/Lazy_Portfolios

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:43 pm
by kenyan
Note that in addition to the 1.75% in fees you are paying to your adviser, you are also paying the fees of the underlying assets he's got you invested in.

Move to Vanguard, and don't look back. Don't engage him in further dialogue, as he will just find more ways to confuse you and keep you with him (unless he decides that your relatively low AUM, from an adviser perspective, is not worth his time). Buying a Target Retirement fund such as what Taylor suggested is perfect if you wish a hands-off approach to your IRA. The "hidden fees" claptrap has been debunked several times around here. It is true that there are some hidden costs not included with the expense ratio (mainly due to transactions), but with a good index fund those costs are minimal.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 5:54 pm
by Watty
rentonhighlands wrote:When I am looking thought the options of funds what do I look for to tell me what is the low-cost options?
That would be the expense ratio which is sometimes called the ER.

For example on the Vanguard 2050 targeted retirement fund,

https://personal.vanguard.com/us/funds/ ... =INT#tab=3

under the fees and minimums tab it shows that it has an expense ratio of 0.19%. If you multiple that by your $31K then you can see that it will cost you about $59 a year. All mutual funds will have some expenses to pay for people, computers, mailing statements etc.

If you look at your current holding you will likely find that in addition to the advisors fees that you are have funds that have a much much higher expense ratio and possibly a load or 12b-1 fee too.

The targeted date funds, like the 2050 fund, are designed to be appropriate and easy choice for someone that is retiring in 2050 so you can start buy picking the one closest to when you are likely to retire. They are not perfect since they are a one size fits all solution but I would highly recommend one of these for a good vanilla solution to start out with. Even if you never move on to something a bit more refined they are still a very good choice.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 7:13 pm
by BL
I see you were struggling with the same problem back in March, and nothing has changed. If you don't choose to leave your "adviser", no one can help you. As long as you talk to him, you will be convinced by his arguments rather than by the facts at places like Vanguard or Fidelity (Spartan funds), and no one can help you if you choose not to study the Wiki here or read some suggested books, etc.
http://www.bogleheads.org/forum/viewtop ... 5#p1350115

As for ERs, you are paying them at your present location and they are probably way over 1 %. In addition, you may be paying a load of several percent when you buy the fund, and/or the higher "ER" (12B1 or whatever) which sends a cut to the broker for several years.

Re: IRA Problem Paying to much fee's

Posted: Wed Dec 26, 2012 8:05 pm
by JW-Retired
rentonhighlands wrote: When I am looking thought the options of funds what do I look for to tell me what is the low-cost options?
My investment adviser who is currently managing this money and charging me the fee's disagrees with using Fidelity or others like because he states 1.75% fee to manage the money is much cheaper. Naturally he would say this. His reasons being is mutual funds have hidden costs and often cost much more. Whereas at RBC where I am at now I have a choice to be in mutual funds, ETF's and can control the money better in a down turn of the market.
1.75% is by itself >10x what you could be paying at Fidelity/Vanguard/& other low cost fund companies. The average ER over all equity funds is 0.8%. ( http://www.icifactbook.org/fb_ch5.html ) However, there are probably a few funds that charge higher than 1.75%.

It might be a useful excercise to see just how badly you are being fleeced. Goggle the trading symbol of the fund or ETF that this joker has bought for you. Then look it up on one of the financial web sites that goggle brings up..... I like Yahoo. Then you can find the expense ratio under the fund profile and add it to the 1.75%. Also look up the fund annual turnover. The trading costs, which are probably the "hidden costs" the guy is referring to, are going to be proportional to turnover. If you are in an index fund the turnover is going to be low and the costs miniscule. e.g., Vanguards SP500 fund VFINX has an annual turnover of 4%. Lots of active funds have turnover >100%.
Let us know what total annual costs you are paying including the fund expense ratio. Did you pay a load on what he sold you too?
JW

ps: I just looked up RBC. I would avoid any advisor that has "wealth management" in their business name. Just coming in the door is asking to pay high costs. As John Boogle said, in investing you get what you don't pay for.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 1:02 am
by rentonhighlands
BL: (thank you for being blunt) I will start the process to run away as fast as I can tomorrow! 12/27/12. Now I need to make a decision if I want to move my money to Vanguard (and choose a target fund) or to Fidelity where my employer 401K currently is. I am 35 yrs of age and my target retirement year is 2038 I will be 60 yrs old.
The math says if I continue to pays these fees over the course of 30 years I will pay $15,000 just in fees. When I saw this number the alarm went off.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 1:11 am
by DiscoBunny1979
rentonhighlands wrote:BL: (thank you for being blunt) I will start the process to run away as fast as I can tomorrow! 12/27/12. Now I need to make a decision if I want to move my money to Vanguard (and choose a target fund) or to Fidelity where my employer 401K currently is. I am 35 yrs of age and my target retirement year is 2038 I will be 60 yrs old.
The math says if I continue to pays these fees over the course of 30 years I will pay $15,000 just in fees. When I saw this number the alarm went off.
----------

Keep in mind that 'investing' isn't just until you reach retirement age. Your money hopefully will stay invested in an appropriate allocation until you die, hopefully into your 90s and therefore you wouldn't just be paying $15,000, but $30,000 or more over your lifetime unless you make the change.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 9:37 am
by BL
Yes, and if you choose to draw the "rule of thumb" 4% in retirement, remember that your current 'adviser" would get 1.75%, leaving you to pay yourself 2.25% which would also have to cover any taxes you owe on it. So he is getting almost half your retirement income, besides putting you in higher ER funds on top of it.

I also suggest transferring your funds into a balanced fund at either Vanguard or Fidelity such as a Target Fund or Vanguard Life Strategy Fund, just get them out of there. You will be saving money immediately compared to where you are now! If you later decide to break them into three funds (Total Stock, Total International, Total Bond), there is no cost to make those changes, at least not in Vanguard.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 10:59 am
by Watty
rentonhighlands wrote:Now I need to make a decision if I want to move my money to Vanguard (and choose a target fund) or to Fidelity where my employer 401K currently is.
For a target date fund that is an easy decision to go with Vanguard. The target date funds that Fidelity has have an excessive expense ratio of over 0.7% compared to Vanguards that are less than 0.2%. When compounted over decades that extra half a percent will have an amazing impact.


Fidelity can make sense in other situations but in this case it isn't even close.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 11:17 am
by Watty
Just FYI,

There are several ways to move an IRA, the best way is to call the new company, like Vanguard, and let them walk you through the process. After the paperwork is filled out Vanguard will contact your current IRA company to arrange for the assets to be the directly sent to Vanguard. This way you never touch the money so there is no chance of you making a mistake.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 11:25 am
by JamesSFO
Watty wrote:Just FYI,

There are several ways to move an IRA, the best way is to call the new company, like Vanguard, and let them walk you through the process. After the paperwork is filled out Vanguard will contact your current IRA company to arrange for the assets to be the directly sent to Vanguard. This way you never touch the money so there is no chance of you making a mistake.
Mistakes can still happen, but there is definitely LESS chance. There was a fairly active thread here a few months back about a CalPERS to VG rollover that got botched on both the CalPERS and VG ends.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 11:45 am
by JW-Retired
rentonhighlands wrote:BL: (thank you for being blunt) I will start the process to run away as fast as I can tomorrow! 12/27/12. Now I need to make a decision if I want to move my money to Vanguard (and choose a target fund) or to Fidelity where my employer 401K currently is. I am 35 yrs of age and my target retirement year is 2038 I will be 60 yrs old.
The math says if I continue to pays these fees over the course of 30 years I will pay $15,000 just in fees. When I saw this number the alarm went off.
Good decision! It's pretty much a coin flip but I recommend Vanguard. We have money at both Fidelity and at Vanguard and the 401k is at a third company. I can't think of any big advantage to having everything at one company. If you decide to move to Fidelity stick to their dozen or so "Spartan" funds. These are very low ER index funds that are quite similar in cost to Vanguard's index funds.

I do think your math is lacking. It will be $15,000 in fees only if the $30k never grows and you never add to this IRA. If you make IRA contributions every year and the market does fairly well you might hope to have $500,000 in 30 years. At that point you are paying $8,750 yearly, not even counting the fund expenses.

Or maybe not......... much less likely you will grow the IRA if you are handing half the investment return over to your "wealth managers".
JW

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 2:13 pm
by BL
JamesSFO wrote:
Watty wrote:Just FYI,

There are several ways to move an IRA, the best way is to call the new company, like Vanguard, and let them walk you through the process. After the paperwork is filled out Vanguard will contact your current IRA company to arrange for the assets to be the directly sent to Vanguard. This way you never touch the money so there is no chance of you making a mistake.
Mistakes can still happen, but there is definitely LESS chance. There was a fairly active thread here a few months back about a CalPERS to VG rollover that got botched on both the CalPERS and VG ends.
I believe this was a special non-spousal inherited retirement fund which had special IRS requirements in order to extend the withdrawals, so this would not apply to a routine transfer.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 3:26 pm
by rentonhighlands
I have transferred my monies from RBC to Fidelity. I chose Fidelity because I have my 401K account there and I am familiar with the website and tools. Now it is on to picking how I want to set up my IRA account and my investment choices. I am looking at the Spartin funds now.

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 3:53 pm
by Default User BR
rentonhighlands wrote:I have transferred my monies from RBC to Fidelity. I chose Fidelity because I have my 401K account there and I am familiar with the website and tools. Now it is on to picking how I want to set up my IRA account and my investment choices. I am looking at the Spartin funds now.
Did RBC charge you any exit fees? If so, see if Fidelity will reimburse them for you.


Brian

A suggested Fidelity portfolio

Posted: Thu Dec 27, 2012 3:57 pm
by Taylor Larimore
Renton:

Fidelity has three excellent low-cost Spartan index funds:

Total Stock Market
Total International
Total Bond Market

The minimum investment is $10,000 each.

Coordinate your IRA funds with your other Fidelity investments to meet your overall asset allocation plan.

Happy Holiday!
Taylor

Re: IRA Problem Paying to much fee's

Posted: Thu Dec 27, 2012 4:24 pm
by tainted-meat
Taylor Larimore wrote:Renton:

Fidelity has three excellent low-cost Spartan index funds:

Total Stock Market
Total International
Total Bond Market

The minimum investment is $10,000 each.

Coordinate your IRA funds with your other Fidelity investments to meet your overall asset allocation plan.

Happy Holiday!
Taylor
They are down to $2,500 now for Investor Class. Advantage Class is $10,000.

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 12:38 pm
by rentonhighlands
To Forum members:
I have transferred my IRA from my fee based account at RBC to Fidelity. Things went smooth and I am ready to hear suggestions of how to invest and allocate the funds. This is what it currently looks like right now. All feedback is welcome.


As of date: 01/28/2013
Symbol Description Investment Type MorningStarCategory Quantity Price Total Value PotentialGain/Loss
QPIRQ FDIC INSURED DEPOSIT AT WELLS FARGO IRA NOT COVERED BY SIPC Cash 5283.12 $1 $5,283 $0
SLV ISHARES SILVER TR ISHARES Exchange Traded Product 60.0 $30 $1,813 $440
TIP ISHARES BARCLAYS TREAS INFLATION PROTECTED SECS FD Exchange Traded Product 11.0 $121 $1,328 $98
EEM ISHARES TR MSCI EMERGING MKTS INDEX FD Exchange Traded Product Large Blend 75.0 $44 $3,312 -$79
LQD ISHARES IBOXX $ INVESTOP INVESTMENT GRADE CORP BD FUND Exchange Traded Product 23.0 $120 $2,762 $184
IWD ISHARES TR RUSSELL 1000 VALUE INDEX FD Exchange Traded Product Large Value 20.0 $78 $1,552 $352
IWF ISHARES TR RUSSELL 1000 GROWTH INDEX FD Exchange Traded Product Large Growth 65.0 $69 $4,456 $1,033
EMB ISHARES TR JPMORGAN USD EMERGING MKTS BD FD Exchange Traded Product 25.0 $122 $3,039 $236
PFF ISHARES TR S&P U S PFD STK INDEX FD Exchange Traded Product 95.0 $40 $3,830 $102
GLD SPDR GOLD TR GOLD SHS Exchange Traded Product 13.0 $161 $2,088 $396
EWX SPDR INDEX SHS FDS S&P EMERGING MKTS SM CAP ETF Exchange Traded Product Medium Value 25.0 $48 $1,193 -$185

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 12:39 pm
by rentonhighlands
Well I guess when I pasted my data to post to the forum the formatting did not take. Is there a way to copy from Excel and post to the forum and have the formatting line up.
Sorry about that guys I did use the space bar and line up the columns before I posted but the formatting did not take.

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 12:45 pm
by nordsteve
If you post in the form suggested at http://www.bogleheads.org/forum/viewtopic.php?t=6212, more people will be willing to respond to your request for help.

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 12:45 pm
by Watty
If you look here you can see the funds for a Fidelity three fund portfolio;

http://www.bogleheads.org/wiki/Three-fund_portfolio

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 2:04 pm
by rentonhighlands
Watty:
Are you suggesting for my IRA account and balance a three fund portfolio?

Re: IRA Problem Paying to much fee's

Posted: Mon Jan 28, 2013 2:05 pm
by Default User BR
rentonhighlands wrote:Well I guess when I pasted my data to post to the forum the formatting did not take. Is there a way to copy from Excel and post to the forum and have the formatting line up.
Sorry about that guys I did use the space bar and line up the columns before I posted but the formatting did not take.
You're more likely to get the formatting you want using the CODE tags. Make liberal use of Preview to see what the results look like.


Brian