Spoke to a financial advisor yesterday - what do you think he's up to?

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rasputin
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Spoke to a financial advisor yesterday - what do you think he's up to?

Post by rasputin » Sat Mar 17, 2018 4:47 pm

Normally I wouldn't bother with such a thing but it was provided by my wife's employer (she's an assistant to the financial advisor) aaand my taxes are rather complicated this year due to moving from ny to wi. and income associated with the sale of my former employer, including severance.

Takeaways -

I understand how this guy makes his money. He takes care of the FULL picture. He pointed out that if my wife and I die and our life insurance pays out our kid will have waaaay more money than he will know what to do with. I never would have considered an estate plan without this observation.

The big one - since my wife is an employee, he's willing to manage our investments - 401k, IRA, and brokerage. Basically, he claims he can do it as efficiently as Vanguard. He says that vanguard claims low fees but they do take a cut another way - otherwise, how do they get paid managing the fund? Basically, his fee would be 0.25% which is about what vanguard takes. He says he finds more efficient funds through careful analysis - are they invested in the same thing? did one fund outperform another? boom, thats where one fund is taking a larger cut. He also suggests splitting our money across some 16 asset classes and we're currently at about six. That seems like a lot to me but he does this for a living. Its clear that he's prefer to have our funds under his roof to manage but he's also willing to recommend funds for us to use in our Vanguard account. It makes sense to me, seeems like he just wants to stick to what he's familiar with.

Anyway, I know the way that bogleheads think about things but I'm curious how you feel about this rather unusual situation.

ny_knicks
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by ny_knicks » Sat Mar 17, 2018 4:53 pm

No.

The "Vanguard gets paid in other ways comment" was a huge red flag. This guy can't cut his costs like Vanguard can. They are a scale play...he is not.

His fee is .25%. Whats the expense ratio of the funds for the "16" asset classes he wants to put you in? I am doubting it is anywhere near the .04%-.1% range of the Vanguard funds you would be in w/ them.

Outside of that I wouldn't mix my personal finance w/ work. Could get messy.

Say "thanks for the advice" and do it on your own.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by jminv » Sat Mar 17, 2018 4:56 pm

He makes most of his money taking 0.25% of your wealth each year. He puts you in index funds in 16 different asset classes which might be somehow related to his firm, where he/his firm can make more money (from the ETF fees going to him/them, not Vanguard). Bet the annual ETF % is higher than Vanguard too. Or they're actually mutual funds his company runs and it's much higher fee.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by mptfan » Sat Mar 17, 2018 4:58 pm

jminv wrote:
Sat Mar 17, 2018 4:56 pm
He puts you in index funds...
The OP did not say that the advisor would put him in index funds.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by CAsage » Sat Mar 17, 2018 5:00 pm

Solve the real problem - what is your overall estate plan should one or both of you die? That will need lots of thinking and a few magic spells (they come on parchment, and are called wills/trusts). You don't need him to play don't-peek-behind-the-green-curtain on financial fees! Clearly that part is misinformation.
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by retiredjg » Sat Mar 17, 2018 5:04 pm

He says that vanguard claims low fees but they do take a cut another way - otherwise, how do they get paid managing the fund?
Here's the thing. Vanguard does not "make money". They do not "get paid". Vanguard manages its funds at cost (overall). Yes, there are lots of salaries involved in doing that, but there are no "owners" or "shareholders" that the funds must pay a profit to. Not saying he is lying, but he may just not know (although he should).

I would not mix my financial situation with my boss. Just bad juju in my opinion. If you want a full picture, find another advisor who gets paid by the hour to help you make your financial plans.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by jminv » Sat Mar 17, 2018 5:08 pm

mptfan wrote:
Sat Mar 17, 2018 4:58 pm
jminv wrote:
Sat Mar 17, 2018 4:56 pm
He puts you in index funds...
The OP did not say that the advisor would put him in index funds.
He didn't say either way, which is why I then said or they're mutual funds with even higher fees.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by arcticpineapplecorp. » Sat Mar 17, 2018 5:10 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
The big one - since my wife is an employee, he's willing to manage our investments - 401k, IRA, and brokerage. Basically, he claims he can do it as efficiently as Vanguard. He says that vanguard claims low fees but they do take a cut another way - otherwise, how do they get paid managing the fund?
1. claims are nothing more than that. Just claims. No proof, just talk. Talk is cheap. Or expensive depending on how you look at it.
2. There are two types of funds (both of which Vanguard has) index (or passively managed) and actively managed funds. You have to be careful with his words (salesmen can be slippery buggers). Is he talking about passive or active? Reason being, how does Vanguard manage an index fund? Pretty easily, thank you very much. There's nothing really to "manage" per se, other than reconsitution once a year (I believe) when the indexes (some, not all) reconstitute. That really doesn't cost very much, which is why the index funds are so cheap. Paying for administrative costs, mailing costs, costs of compliance, etc. That being said, active management does in fact cost more, but Vanguard's funds are cheaper than most (and probably his) because of many reasons: economies of scale, lower turnover, etc. As was said, if the guy is going to charge you, that's IN ADDITION to what the funds actually cost. Vanguard doesn't charge you EXTRA unless you plan to use their Personal Advisor Service, which will cost you an additional 0.30% per year IN ADDITION to the cost of the funds themselves.

Are you sure he's charging you 0.25% per year? That sounds really low, especially for a small fry/non robo advisor. Robo advisors might charge that little, but not face to face/estate planning types of planners. The average there is around 1% per year (lower depending on how much you invest, but we're talking millions in AUM, not small potatoes).
rasputin wrote:
Sat Mar 17, 2018 4:47 pm
He says he finds more efficient funds through careful analysis - are they invested in the same thing? did one fund outperform another? boom, thats where one fund is taking a larger cut. He also suggests splitting our money across some 16 asset classes and we're currently at about six. That seems like a lot to me but he does this for a living.
Jack Bogle has said you don't need to own multiple funds. You can really get the job done with 1 fund. Yes, 1 fund. The target date retirement fund with Vanguard gets you close to 10,000 stocks (worldwide) and something like 14,000 bonds (worldwide). What makes you think more funds will get you any more than that?

Also Vanguard runs "at cost" which means they only charge what is required to run the fund. They don't charge more for funds that outperformed in the past. Besides why would you want to go with certain funds that did well in the past? Usually actively managed funds tend to underperform after having periods of outperformance. It's called reversion to the mean. Which is why it's best to just own the market and accept the return of the market. If you start betting on active management or certain sectors, you're taking additional risks for which you're not likely to be compensated. And active managment comes at a higher cost. Where does that come from? You guessed it. Your returns. You might think, "That's fine as long as I get higher returns than I would otherwise". Problem is, that's not guaranteed. Most funds do average before costs. After costs, they do worse than the market. Read here and you'll see why:

https://web.stanford.edu/~wfsharpe/art/ ... active.htm

ny_knicks gave you very good advice, info by the way.

And welcome to the group! Keep being skeptical and asking questions!
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by cfs » Sat Mar 17, 2018 5:14 pm

Sixteen asset classes, sounds like Ric Edelman. Proceed with caution, y gracias por leer / cfs
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Big Dog » Sat Mar 17, 2018 5:14 pm

if my wife and I die and our life insurance pays out our kid will have waaaay more money than he will know what to do with.
Then take a look at your life insurance needs. If he is correct, thank him for his suggestion and reduce your life insurance so you can invest the savings (in Vanguard, natch) from the premiums that you no longer have to pay.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Sandtrap » Sat Mar 17, 2018 5:16 pm

Welcome.
You don't need to pay a dime to any "helpful Harry".
Here's the first step:
GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by 123 » Sat Mar 17, 2018 5:20 pm

What funds does he normally use? What share class does he use? Does he sell front-end loaded funds, back-end-loaded funds, or just funds that have a high on-going expense ratio" There are many ways a financial advisor can skin a cat. He's not trying to help you out of the goodness of his heart.
The closest helping hand is at the end of your own arm.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by drk » Sat Mar 17, 2018 5:20 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
Anyway, I know the way that bogleheads think about things but I'm curious how you feel about this rather unusual situation.
To be frank, this is not an unusual situation, and the way you wrote about your wife's boss's sales pitch makes it seem like you don't understand the way Bogleheads think about things. I'm sure he's a great guy who looks out for his clients' best interests, but there's no "efficiency" argument for going with him over directly investing in Vanguard funds, so I'd thank him for his offer and politely decline.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by skepticalobserver » Sat Mar 17, 2018 5:28 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
He says he finds more efficient funds through careful analysis
He's better at this than a behemoth like Vanguard? At .25%? It don't pass the smell test.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by vested1 » Sat Mar 17, 2018 5:28 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
1. I understand how this guy makes his money. He takes care of the FULL picture. He pointed out that if my wife and I die and our life insurance pays out our kid will have waaaay more money than he will know what to do with. I never would have considered an estate plan without this observation.

2. The big one - since my wife is an employee, he's willing to manage our investments - 401k, IRA, and brokerage. Basically, he claims he can do it as efficiently as Vanguard. He says that vanguard claims low fees but they do take a cut another way - otherwise, how do they get paid managing the fund? Basically, his fee would be 0.25% which is about what vanguard takes. He says he finds more efficient funds through careful analysis - are they invested in the same thing? did one fund outperform another? boom, thats where one fund is taking a larger cut. He also suggests splitting our money across some 16 asset classes and we're currently at about six. That seems like a lot to me but he does this for a living. Its clear that he's prefer to have our funds under his roof to manage but he's also willing to recommend funds for us to use in our Vanguard account. It makes sense to me, seeems like he just wants to stick to what he's familiar with.
Snake oil at best, but more likely fraud.

1. So what was his solution when both you and your wife suddenly die (scare tactic)? Have him manage the life insurance money for your orphaned child?

2. This reminds me of a pitch by an advisor who was popular with my fellow retirees at megacorp. He claimed that his clients never paid him a fee, and that he was paid by the funds he invested them in. I guess he was doing it out of the goodness of his heart. He also talked several friends of mine who were still working to give him their passwords so he could go into their accounts, pretending he was them and manage their finances more efficiently. This of course is illegal, but they trusted him implicitly to their eventual regret.

It sounds to me like he's setting you up. Don't do it.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by fposte » Sat Mar 17, 2018 5:34 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
He says he finds more efficient funds through careful analysis - are they invested in the same thing? did one fund outperform another?
The three fund portfolio means you'll own everything already--why would you have funds that would overlap?
He also suggests splitting our money across some 16 asset classes and we're currently at about six.
Oh. That would be why. Did he explain why a total market fund wouldn't cover those asset classes?

livesoft
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by livesoft » Sat Mar 17, 2018 6:00 pm

Ask him:

Would you manage our portfolio of investments using at least 95% Vanguard funds for our money and pay no commissions to buy those investments?

What's the answer to that?

I am aware of at least one wealth management that will use solely DFA and Vanguard funds for about 0.5% of AUM, so it might be possible to get that also for 0.25% AUM.
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by nisiprius » Sat Mar 17, 2018 6:15 pm

He's charging 0.25% in addition to of the expense ratios of the funds themselves. That may be obvious but I thought I'd mention it anyway.

I don't want to spend too much effort on "what could he mean if he's being honest," but I supposed he means that he charges about the same amount as Vanguard's add-on personal advisory service (0.30% for Vanguard, I think).

One thing I have learned in life is never to get professional services from a family member, friend, or someone you know. There are so many ways it can go wrong. For example, if he's really doing it for 0.25% then he will feel that he's doing you a favor... and may do it grudgingly. For another thing, things change over time. I think it would be extremely awkward deciding you wanted to leave your advisor if your advisor is also your wife's boss.

I haven't used Vanguard's personal advisory service. If you must have a service, I would suggest that Vanguard, for their 0.30%, is much more likely to put you into a simple portfolio of low-cost index funds. And if you get tired of them--or don't feel you need to pay them to tell you the same simple thing every year--you can dump them without creating any workplace tension.

With regard to "sixteen asset classes" I can only quote John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" (abuss368 uses that in his sig, I don't know where Bogle said it).
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by TigerNest » Sat Mar 17, 2018 6:33 pm

This is your wife's boss that's offering to manage your money? What if you are unhappy with his performance - would you feel comfortable removing your assets? I wouldn't do it for that reason alone. But as others have said the rest of the pitch has huge red flags, so there are plenty of reasons to steer clear.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by nativenewenglander » Sat Mar 17, 2018 7:04 pm

Run away and fast.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by edge » Sat Mar 17, 2018 7:21 pm

How is this unusual?

You are clearly being played in a most usual way.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Dantes » Sat Mar 17, 2018 7:42 pm

TigerNest wrote:
Sat Mar 17, 2018 6:33 pm
This is your wife's boss that's offering to manage your money? What if you are unhappy with his performance - would you feel comfortable removing your assets? I wouldn't do it for that reason alone.
Agree with this 100%. Even if your wife's boss was offering his services gratis, it still wouldn't be a good idea.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by jibantik » Sat Mar 17, 2018 7:50 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
...
He also suggests splitting our money across some 16 asset classes and we're currently at about six. That seems like a lot to me but he does this for a living.
...
He does this for a living because of fees he charges people like you... that's a big difference than what you seem to be implying.

Many things this guy has already said is misleading or lies. Run away as fast as possible.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Grt2bOutdoors » Sat Mar 17, 2018 7:51 pm

The salesman is using smoke and mirrors to snag you. Is he going to charge you 25bps and does that include the cost of the underlying funds he places you in? It sounds like the 25bps is the fee on top of the other costs, in other words you are going to pay ALOT more than 25bps. Sixteen asset classes? Nuts. You can do it with as little as two funds but if you want to slice and dice go as high as six funds, but 16 funds? This guy is one who likes to obsfusacate so as to keep you guessing as to what is really going on.
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by FIREchief » Sat Mar 17, 2018 8:00 pm

rasputin wrote:
Sat Mar 17, 2018 4:47 pm
That seems like a lot to me but he does this for a living.
To say he does this for a living suggests not that he is adding value; more that he is subtracting value in order to make his living. Think about that.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by rasputin » Sat Mar 17, 2018 8:04 pm

I think there are a couple of big details that people are missing -

a) He's offering his services for free and will provide fund selection advice in vanguard if thats what we want. In this situation, I really do think he's providing an employee with a _free_ service.

b) He's suggesting that there are funds out there that are more expense efficient than what Vanguard offers. I'm very curious about this.

c) Its clear that he plays the market via asset class indexes. (I failed to mention this in my original post)

d) My wife says most of his clients pay a flat fee. Although that could be separate from any sort of percentage of assets fee. Its my impression that it would be 0.25%.

e) Another thing I failed to mention in my original post - He's rather anti-bond. And I kind of have to agree with him. Bonds are for stability rather than growth. Our retirement years are a ways away so we're more interested in growth.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by rasputin » Sat Mar 17, 2018 8:07 pm

drk wrote:
Sat Mar 17, 2018 5:20 pm
makes it seem like you don't understand the way Bogleheads think about things. I'm sure he's a great guy who looks out for his clients' best interests, but there's no "efficiency" argument for going with him over directly investing in Vanguard funds, so I'd thank him for his offer and politely decline.
Sometimes the responses here are so rote that its reasonable to wonder if the topic at hand is being engaged or if there's a lot of group think.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by SR II » Sat Mar 17, 2018 8:13 pm

What do I think he is up to? Taking money out of your wallet and putting it directly in his pocket!

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by togb » Sat Mar 17, 2018 8:26 pm

I'm sorry, I don't even care about his investment philosophy because the elephant in the room is that this is your wife's boss. Don't get mixed up in this. Your individual and marital assets and investments are not really something you hand over to employers. Once your wife's boss knows how much you make or don't make, have saved or not saved no career or financial decision related to her work will ever be made without that knowledge. This would just be too weird for me.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Grt2bOutdoors » Sat Mar 17, 2018 8:27 pm

rasputin wrote:
Sat Mar 17, 2018 8:04 pm
I think there are a couple of big details that people are missing -

a) He's offering his services for free and will provide fund selection advice in vanguard if thats what we want. In this situation, I really do think he's providing an employee with a _free_ service.
i will provide you with fund selection, and it won’t cost you 25 bps.
b) He's suggesting that there are funds out there that are more expense efficient than what Vanguard offers. I'm very curious about this.
think about this: the adviser will point you to a series of funds that may be 1bp cheaper, in return you will pay him 25bps, sounds like a deal to you? In layman’s terms, pay me a quarter and I will save you 1 cent, deal?
c) Its clear that he plays the market via asset class indexes. (I failed to mention this in my original post)

d) My wife says most of his clients pay a flat fee. Although that could be separate from any sort of percentage of assets fee. Its my impression that it would be 0.25%.

e) Another thing I failed to mention in my original post - He's rather anti-bond. And I kind of have to agree with him. Bonds are for stability rather than growth. Our retirement years are a ways away so we're more interested in growth.
Fine, you can put all of your assets in equity funds, but why pay someone 25bps if you can do it yourself for less?
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by sambb » Sat Mar 17, 2018 8:28 pm

dont mix personal money with employers who are bosses. regardless of the other issues.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Grt2bOutdoors » Sat Mar 17, 2018 8:31 pm

rasputin wrote:
Sat Mar 17, 2018 8:07 pm
drk wrote:
Sat Mar 17, 2018 5:20 pm
makes it seem like you don't understand the way Bogleheads think about things. I'm sure he's a great guy who looks out for his clients' best interests, but there's no "efficiency" argument for going with him over directly investing in Vanguard funds, so I'd thank him for his offer and politely decline.
Sometimes the responses here are so rote that its reasonable to wonder if the topic at hand is being engaged or if there's a lot of group think.
Sounds to me like you don’t like hearing the truth, you are getting taken. But hey it’s your money and you are free to spend it anyway you like.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Vitalspark » Sat Mar 17, 2018 8:34 pm

Some 8 years ago we made this mistake. Then we looked at the costs over 5 years & headed for Vanguard. 1st year savings $18769, his total return 5.6%. Vanguard Total return next year 14.86%

Dont go near him!

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by drk » Sat Mar 17, 2018 8:40 pm

rasputin wrote:
Sat Mar 17, 2018 8:07 pm
drk wrote:
Sat Mar 17, 2018 5:20 pm
makes it seem like you don't understand the way Bogleheads think about things. I'm sure he's a great guy who looks out for his clients' best interests, but there's no "efficiency" argument for going with him over directly investing in Vanguard funds, so I'd thank him for his offer and politely decline.
Sometimes the responses here are so rote that its reasonable to wonder if the topic at hand is being engaged or if there's a lot of group think.
If you think my response was rote, let's pro/con the situation:

Pros:
  • You could potentially help your wife's standing at work by entrusting her boss with the management of your wealth
  • He really might be able to create alpha greater than his .25% fee
Cons:
  • The attack on Vanguard's integrity is at best ill-informed and at worst deceitful
  • You open up your wife to potential retaliation if you decide to break with her boss
  • Your wife will be in a weaker negotiating position in the future if she wants to push for a raise
  • Based on your description of his strategy, this FA is likely to introduce tracking error relative to the market due to hindsight bias
  • Your costs are likely to be greater than his .25% fee thanks to transaction costs created by his strategy
  • You'll be invested in several asset classes that you don't understand, making it difficult for you to ascertain whether they fit your situation (i.e. your need, ability, and willingness to take risk)
  • You potentially forfeit primary ownership of decisions around your assets and their allocation (i.e. a major part of the Boglehead philosophy)
I mean no offense, but questions such as yours receive pretty rote responses because they've been asked and answered many times on this board. Recognizing that our individual situations are more common than we believe makes them simpler if only because we have the advantage of others' experience. Seeking to introduce complexity (by, e.g., giving our wife's boss control of our portfolio) is harmful to our expected outcomes as investors and should be avoided when possible.
Last edited by drk on Sun Mar 18, 2018 12:08 am, edited 1 time in total.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by FiveK » Sat Mar 17, 2018 8:57 pm

rasputin wrote:
Sat Mar 17, 2018 8:04 pm
I think there are a couple of big details that people are missing -

a) He's offering his services for free....
d) ...Its my impression that it would be 0.25%.
Please clarify: is he offering to suggest investments for free, or will he charge 0.25%?

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by ny_knicks » Sat Mar 17, 2018 9:15 pm

rasputin wrote:
Sat Mar 17, 2018 8:04 pm
b) He's suggesting that there are funds out there that are more expense efficient than what Vanguard offers. I'm very curious about this.

c) Its clear that he plays the market via asset class indexes. (I failed to mention this in my original post)

d) My wife says most of his clients pay a flat fee. Although that could be separate from any sort of percentage of assets fee. Its my impression that it would be 0.25%.
Stand by what I posted. I would never consider mixing my personal finances w/ work.

I am curious too on these "more expense efficient funds than Vanguard". There are funds/ETFs that might beat Vanguard's by .005% or something. But he isn't going to get you access to some secret sauce. Expenses on index funds/ETFs are already so low the savings will certainly be completely negated by the .25% AUM fee.

You posted on here stating you spoke w/ a financial advisor who invests in 16 different asset classes and claims he "plays the market via asset class indexes". And then you wonder why you get the standard response? Did you expect something different?

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Diogenes » Sat Mar 17, 2018 9:36 pm

rasputin wrote:
Sat Mar 17, 2018 8:04 pm
I think there are a couple of big details that people are missing -

a) He's offering his services for free and will provide fund selection advice in vanguard if thats what we want. In this situation, I really do think he's providing an employee with a _free_ service.
If this is the case, he should be able to provide the names of the recommended funds without seeing your personal financial information and your detailed investments. Ask him for that and post those fund names here.
The ‘since you are an employee, we can manage your money’ is a red flag. Why would he do this, and take time to pitch you? Likely he would manage anyone’s money who walked in the door. Most professionals would wish to keep an arms-length from staff. Most employees would want the same.

Since he is offering to manage the ‘whole picture’ what are his professional qualifications and designations to do that? Does he suggest he be given trading authority? If that’s the case, it’s a recommended immediate ‘no’ with a further suggestion to make sure that your wife is working for someone who is legit.
Last edited by Diogenes on Sun Mar 18, 2018 1:21 am, edited 1 time in total.
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by unclescrooge » Sat Mar 17, 2018 10:16 pm

vested1 wrote:
Sat Mar 17, 2018 5:28 pm
rasputin wrote:
Sat Mar 17, 2018 4:47 pm
1. I understand how this guy makes his money. He takes care of the FULL picture. He pointed out that if my wife and I die and our life insurance pays out our kid will have waaaay more money than he will know what to do with. I never would have considered an estate plan without this observation.

2. The big one - since my wife is an employee, he's willing to manage our investments - 401k, IRA, and brokerage. Basically, he claims he can do it as efficiently as Vanguard. He says that vanguard claims low fees but they do take a cut another way - otherwise, how do they get paid managing the fund? Basically, his fee would be 0.25% which is about what vanguard takes. He says he finds more efficient funds through careful analysis - are they invested in the same thing? did one fund outperform another? boom, thats where one fund is taking a larger cut. He also suggests splitting our money across some 16 asset classes and we're currently at about six. That seems like a lot to me but he does this for a living. Its clear that he's prefer to have our funds under his roof to manage but he's also willing to recommend funds for us to use in our Vanguard account. It makes sense to me, seeems like he just wants to stick to what he's familiar with.
Snake oil at best, but more likely fraud.

1. So what was his solution when both you and your wife suddenly die (scare tactic)? Have him manage the life insurance money for your orphaned child?

2. This reminds me of a pitch by an advisor who was popular with my fellow retirees at megacorp. He claimed that his clients never paid him a fee, and that he was paid by the funds he invested them in. I guess he was doing it out of the goodness of his heart. He also talked several friends of mine who were still working to give him their passwords so he could go into their accounts, pretending he was them and manage their finances more efficiently. This of course is illegal, but they trusted him implicitly to their eventual regret.

It sounds to me like he's setting you up. Don't do it.
I'm pretty sure this is not illegal. It's just that the advisor is now deemed to have custody, which comes with different legal requirements. The advisor may it not be running afoul it compliance.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by arcticpineapplecorp. » Sat Mar 17, 2018 10:30 pm

1. Feel that nagging sensation tugging at you? The one that asks yourself "What do you think he's up to?"

If you even have to ask this question, then why on earth would you give your money to this person? Because he's offering it for free? Only, he's not. He's charging 0.25% per year?

2. Has your wife read this post and the responses of the bogleheads who are not necessarily of one mind, but rather, are trying to get you to see things that it appears you do not want to acknowledge...but have a nagging sensation that makes you wonder what this guy is "up to?"

3. I'm not sure what the first few items are about. Taxes? So you want him to do your complicated taxes? Or were you just mentioning that for no apparent reason? If he does your taxes, fine. That doesn't mean you have to invest with him. Did you have him do an estate plan? That's fine. Again, you don't have to use him for ongoing investment advice.

Life insurance? Your child's inheritance? What does this mean? Are you saying he'll manage the large sum of money for your child that you leave through your insurance? That's up to your child. Has nothing to do with whether you or your wife use this guy's services or not.

4. Have you checked his form adv part I and II? Didn't think so. You might want to start there to see what he really charges and whether there have been any complaints, see if he's a fiduciary or not, etc:

https://adviserinfo.sec.gov/

have him complete the following form:
https://static1.squarespace.com/static/ ... w_Form.pdf

if he won't complete and sign it, do you really think you should give him your business? Your wife's employment and income are already tied to this guy. You want to be further embroiled? Do you believe you "need" to give your assets to him to or else your wife's job might be in jeopardy? That would be an uncomfortable position to be put in.
Last edited by arcticpineapplecorp. on Sat Mar 17, 2018 10:36 pm, edited 3 times in total.
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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by 9-5 Suited » Sat Mar 17, 2018 10:31 pm

There are several things in the original post that clearly indicate you do not yet have a full understanding of the “why” behind Boglehead principles.

You are saying 2+2=5, a cadre of Bogleheads are responding that it actually equals 4, and that comes across as groupthink. It isn’t that at all. It’s just a restatement of broadly known truths.

This guy is a salesman giving all the usual selling lines and except for the oddity of being the wife’s boss, this is about as common a situation as there is. There’s not a single interesting point this salesman has made. I really hope OP keeps reading more and more and reconsiders!!

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by cantos » Sat Mar 17, 2018 10:58 pm

rasputin wrote:
Sat Mar 17, 2018 8:07 pm
Sometimes the responses here are so rote that its reasonable to wonder if the topic at hand is being engaged or if there's a lot of group think.
If you don't appreciate the great advice here, that is your loss. This FA is trouble. Note also he holds power over you: he employs your wife. There is no way your decision is made without feeling pressure to sign up with him, and he knows this. That he is pressuring you (make no mistake, he IS pressuring you to sign up with him) is unconscionable. Say no, both you and your wife thinks he's a wonderful FA, but you are happy with your status quo, as it has gotten you this far after all.

As for the advice that if you & wife died your son would be left with a huge bag of dough, that is not the most blazing insight of all time. Any FA/wealth advisor would tell you that (and indeed, many Bogleheads on this very forum would've told you that as well. Read this forum for a few months and you will inevitably read about the importance of getting a will; also there is a wiki https://www.bogleheads.org/wiki/Estate_planning). The solution is to get a lawyer to write you a will. Easy as that.

FYI:
Taxes - accountant
Investments - DIY (that's why you're here right?)
Estate planning/Wills - lawyer

Each of the three can do a great job on their own. It doesn't require a genius to take a "holistic" or "overall" view of the three. So-called "wealth management" groups capitalize (prey) on how little most people know to overcharge and under-deliver for each of these 3 services under 1 umbrella. There is simply no way that one person is better than the 3 specialists above.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Doom&Gloom » Sat Mar 17, 2018 11:34 pm

At best, he's trying to make a profit from an employee and her family. At worst, he is trying to exert some leverage over an employee.

It seems you had an expectation of what you wanted to hear from the BH forum and are disappointed to be hearing something very different.

I agree with the advice you have already been given. Avoid this predicament like the plague. If you don't want to manage your investments etc on your own, please find an unbiased advisor.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Dottie57 » Sat Mar 17, 2018 11:36 pm

rasputin wrote:
Sat Mar 17, 2018 8:04 pm
I think there are a couple of big details that people are missing -

a) He's offering his services for free and will provide fund selection advice in vanguard if thats what we want. In this situation, I really do think he's providing an employee with a _free_ service.

b) He's suggesting that there are funds out there that are more expense efficient than what Vanguard offers. I'm very curious about this.

c) Its clear that he plays the market via asset class indexes. (I failed to mention this in my original post)

d) My wife says most of his clients pay a flat fee. Although that could be separate from any sort of percentage of assets fee. Its my impression that it would be 0.25%.

e) Another thing I failed to mention in my original post - He's rather anti-bond. And I kind of have to agree with him. Bonds are for stability rather than growth. Our retirement years are a ways away so we're more interested in growth.
I cannot imagine letting my wife’s boss manage my money. I don’t care how good mgr is, talented, kind.

And boss is really a glorified salesperson. He is selling his services. He will be paid in some way, whether you understand the mechanism or not.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by rasputin » Sat Mar 17, 2018 11:39 pm

Grt2bOutdoors wrote:
Sat Mar 17, 2018 8:31 pm
Sounds to me like you don’t like hearing the truth, you are getting taken. But hey it’s your money and you are free to spend it anyway you like.
The problem with much of the discussion on this thread is that just yelling YOUR GETTING SCAMMED isn't very convincing. I can agree with it or disagree with it but you're not taking the time to engage me.

The bit I find most compelling from the thread is not to mix employment and personal investments. We feel no pressure to move our money into their management. It will not happen.

There are other claims I wanted to explore such as the efficiency of vanguard funds. Maybe there's something there, maybe I was getting a salesman's pitch. I don't know. Maybe I'll figure it out in time.

This thread has revealed some of my own ignorance. I consider myself pretty handy with this stuff, especially compared to the average guy on the street. That said, how would I have considered setting up a trust in the case that my son inherits over a million dollars due to our deaths? It just never would have occurred to me. Perhaps I'm hitting some sort of unseen limitation regarding what I'm willing to read and consider regarding personal finance.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Nate79 » Sun Mar 18, 2018 12:11 am

This so called advisor lied to your face (or is really really stupid). I don't know how you could look this scumbag in the face and hand your hard earned money over to them.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by tfb » Sun Mar 18, 2018 12:19 am

rasputin wrote:
Sat Mar 17, 2018 11:39 pm
how would I have considered setting up a trust in the case that my son inherits over a million dollars due to our deaths? It just never would have occurred to me.
This is quite rudimentary in estate planning. You would've discovered it if you thought of exploring what happens after you both die and just borrowed a book by Nolo Press from the library. You haven't thought of it because you know it's a very remote possibility and you are right.
Harry Sit, taking a break from the forums.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by mhadden1 » Sun Mar 18, 2018 4:58 am

rasputin wrote:
Sat Mar 17, 2018 11:39 pm
Grt2bOutdoors wrote:
Sat Mar 17, 2018 8:31 pm
Sounds to me like you don’t like hearing the truth, you are getting taken. But hey it’s your money and you are free to spend it anyway you like.
The problem with much of the discussion on this thread is that just yelling YOUR GETTING SCAMMED isn't very convincing.
Dude are you for real? You posed a question to a financial/investing forum about your wife's skeezy salesman boss wanting to manage her investments. Dozens of people immediately advised you to RUN AWAY. THEY ARE SHOUTING BECAUSE YOU APPEAR TO BE DEAF.

Regarding Vanguard fund "efficiency": you can put together a typical Three Fund Portfolio with Vanguard index funds (or essentially identical funds from other companies) with expenses of less than 0.05% or so. That's all you pay - no extra for undercoating and doc prep. How much lower can it go? By definition, not much, because then it would be 0. That's fancy BogleHead arithmetic. And dollars to doughnuts, your salesman's Sixteen Fund Portfolio will NOT be cheaper than 0.05%.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by Edward Joseph » Sun Mar 18, 2018 6:51 am

If you feel you can personally handle your investments through Vanguard (as most of us here can), then I would just proceed on your own picking your own Index Funds through Vanguard. This, of course, includes handling all the potential Transfers or 1035x's yourself which at times can get complicated. (Not sure if this applies to you though.)
Yes, Vanguard customer service is available, but it can be spotty at best. There's no one at Vanguard you can meet with in person and hand them a file of your paperwork telling him to "take care of it".

If you'd prefer something a little more full service, his stated fee is low by industry standards. I'd tell him you would like your "all-in costs to be at 1% or less". This would include his .25% management fee as well as the Fund Expenses. The other benefit of using him would be in-person service. Someone you can let handle the potentially messy service and paperwork issues. A good Financial Advisor can also help with the psychology of personal finance and investing (stuff you can get here as well). He can "talk you off ledges" or sometimes encourage you to be "more greedy when others are fearful and more fearful when others are greedy".

Most Bogleheads don't need an Advisor for the reasons I laid out. His prices are reasonable and if you want to use him-there's a lot of worse things you can do. Also, like others mentioned, he will never be less expensive than Vanguard. The Vanguard 3-fund portfolio is about .08% in total all-in costs. No Financial Advisor will come close to that unless he's working for free.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by GCD » Sun Mar 18, 2018 7:24 am

mhadden1 wrote:
Sun Mar 18, 2018 4:58 am
rasputin wrote:
Sat Mar 17, 2018 11:39 pm
Grt2bOutdoors wrote:
Sat Mar 17, 2018 8:31 pm
Sounds to me like you don’t like hearing the truth, you are getting taken. But hey it’s your money and you are free to spend it anyway you like.
The problem with much of the discussion on this thread is that just yelling YOUR GETTING SCAMMED isn't very convincing.
You posed a question to a financial/investing forum about your wife's skeezy salesman boss wanting to manage her investments. Dozens of people immediately advised you to RUN AWAY. THEY ARE SHOUTING BECAUSE YOU APPEAR TO BE DEAF.

Regarding Vanguard fund "efficiency": you can put together a typical Three Fund Portfolio with Vanguard index funds (or essentially identical funds from other companies) with expenses of less than 0.05% or so. That's all you pay - no extra for undercoating and doc prep. How much lower can it go? By definition, not much, because then it would be 0. That's fancy BogleHead arithmetic. And dollars to doughnuts, your salesman's Sixteen Fund Portfolio will NOT be cheaper than 0.05%.
The math is obviously very simple. The problem, as is typical, is the psychological one. It's why Dave Ramsey, Dr. Laura, Suzy Orman and others like them have work. There are too many indescribable factors to analyze this over the internet. I find it utterly baffling that your wife's boss wanting to run your finances doesn't set off such enormous alarm bells that she isn't seeking another job. Why you would be comfortable with that I haven't the foggiest idea. This appears to be the same problem as telling people to LBYM. The math on that is simple too. A lot of people just can't do it.
togb wrote:
Sat Mar 17, 2018 8:26 pm
I'm sorry, I don't even care about his investment philosophy because the elephant in the room is that this is your wife's boss. Don't get mixed up in this. Your individual and marital assets and investments are not really something you hand over to employers. Once your wife's boss knows how much you make or don't make, have saved or not saved no career or financial decision related to her work will ever be made without that knowledge. This would just be too weird for me.
This. Sincerely. Please reconsider.

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Re: Spoke to a financial advisor yesterday - what do you think he's up to?

Post by vested1 » Sun Mar 18, 2018 8:05 am

unclescrooge wrote:
Sat Mar 17, 2018 10:16 pm
vested1 wrote:
Sat Mar 17, 2018 5:28 pm

2. This reminds me of a pitch by an advisor who was popular with my fellow retirees at megacorp. He claimed that his clients never paid him a fee, and that he was paid by the funds he invested them in. I guess he was doing it out of the goodness of his heart. He also talked several friends of mine who were still working to give him their passwords so he could go into their accounts, pretending he was them and manage their finances more efficiently. This of course is illegal, but they trusted him implicitly to their eventual regret.

It sounds to me like he's setting you up. Don't do it.
I'm pretty sure this is not illegal. It's just that the advisor is now deemed to have custody, which comes with different legal requirements. The advisor may it not be running afoul it compliance.
I suppose I should have been clearer. I checked with an authority and presented it as a hypothetical. It was illegal. These were working employees giving access to their 401k's to an advisor not connected to the company they worked for. He logged in as them and manipulated their accounts for an unknown payment that they never saw because they were clueless. These same employees entrusted their accounts to him when they retired. I checked further and found that he has zero credentials. He continues to graze on their accounts even today, telling them that they are paying him nothing.

Would you allow someone to log into your 401k and pretend they were you, giving them unlimited access to do anything they want? Vanguard wouldn't cover a loss in those circumstances.

Back to the point of this thread, would you give your employer power over your investments, and knowledge of your net worth?

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