new Boglehead and now i want to fire my financial advisor

[redbeard]

Others have given great advice, so I just want to share a quick thought on the idea of proving to your advisor that sticking with him is financial stupidity (even though I agree with your position). Telling him this is not only unneeded, it is also fairly rude. If you had ridden around in a limo for the last five years, would you feel the need to tell the limo driver something similar when you decided to buy a car and drive yourself instead? This is his profession, and he may honestly believe he delivers value to his customers.

[clay]

My experience has been that once a broker realizes you have "gone over" to the other side, they forget about you after a bit and turn their time and attention to better prospects to fleece (perhaps this isn't an accurate word in the case of your broker, but it certainly is for the two I tried).

CS

[modal]

I still need to move assets from Chase over to Vanguard.

Hoping I don't have to pay the high transfer fees they have.

$75 per account okay not as bad as $175 dang!

I can do the math, I just need someone to tell me that my financial guy doesn't have my best interests in mind.

Your adviser (The salesman) does not have your best interests in mind.

[scbarwic]

I'm the OP and I am back. I went through with the meeting. After listening and reading Bogle, my eyes are truly opened. My FA and I could hardly look at one another. He knew that I knew "the other side" but I didn't have the nerve to just come out and say that his math was crazy and I don't believe in betting on historical performance. It was so surreal, I felt like he was just giving me one cheap line after another (well, not so cheap). Yes everyone, I did misunderstand the IRA max deal. He did have to put us in both traditional and ROTH because of the income issue. I just misunderstood the maximum. Here is the plan...I will get new life insurance first (since the current policies are with him...I don't want to deal with him after this phone call) then i will make the call and tell him what you all have suggested. I feel much better when I am in control of my $$. I feel so enlightened. Why didn't I know this before? Thanks everyone. I will let you know how the telephone conversation goes.

[Gregory]

Good for you!

Greg

[Taylor Larimore]

After listening and reading Bogle, my eyes are truly opened.

Mr. Bogle has opened the eyes of many of us on this forum--including my own.

You are now on the right track.

Congratulations and best wishes.
Taylor

[scbarwic]

AND I AM PUMPED UP!!!

Got my new life insurance policies, so I am ready to kick this guy TO THE CURB

YEAH!!

Will let you know how it goes.....................................

[White Coat Investor]

AND I AM PUMPED UP!!!

Got my new life insurance policies, so I am ready to kick this guy TO THE CURB

YEAH!!

Will let you know how it goes.....................................

Welcome back. Good luck investing.

[Prokofiev]

" Let's assume $1,500 grows at 10% for 30 years. It will become approximately $25,000. That is a very nice commission for picking an expensive fund "

Taylor,

That is not a fair comparison! I would love to tear up today's $200 plumber bill, and just give him $10 and say - "Invest this at 10% for 30 years and you'll have $2000!"

As much as I am against load funds and non fee-only advisors, I DO understand that everyone has to get paid and that taking the 5-6% load is not necessarily someone ripping-off an unsuspecting lamb. My girlfriend used just such an advisor until we met and I "saved" her from these fees. But after meeting the guy, I was far more sympathetic to being an advisor and trying to earn a living.

This guy works primarily with teachers setting up their 403-b programs. His typical client takes out $100-$200/mo for investing - and at least initially, most have to be convinced to set aside that much. That nets him $50-$150/yr to meet with someone for a 1-2 hour free initial review, set-up their accounts, periodically check it and have a 1 hour face-to-face meeting each year along with occaisional phone calls and hand holding. Of course he is hoping to land these clients long-term and get them to invest $10-$20k a year. His wife also offers income tax service at a reasonable rate ($100-$200 for simple returns).

He said he would love to be a fee-only advisor, charge an initial $500 for start-up and then 1% a year or $100/hr - whichever was more . . . BUT he would have almost NO clients. When you look at many of the DFA advisors, most have account minimums of $100k to $1 million just to start. Who would assist the people just getting started? Who only invest $1-$2k per year . . . and have accounts in the $5-$25K range? Asking them for $100/hr for advice would be a joke . . . not going to happen.

Just an alternative POV . . .

Cheers, -P

[White Coat Investor]

Just an alternative POV . . .

Yup, it's an awful catch-22. Those who most need an advisor can't afford it. Those who can afford it no longer need it. My beef with advisors being paid by commission is the non-transparent nature of the transaction. If the advisee wouldn't pay the load if it were listed on a menu, then why should he pay it because it is slipped in with a 30 page prospectus? Health care has the same issue, all the costs are hidden.

[Buckeye]

Well in defense of this FA he could have done much worse.

He put you in one of the best funds available for accumulators on the market, if not the best....even when considering the load.

[White Coat Investor]

Well in defense of this FA he could have done much worse.

He put you in one of the best funds available for accumulators on the market, if not the best....even when considering the load.

Hardly a defense.

CWGIX=American Funds Capital Growth and Income fund, an international (75% international) large cap value fund.

ER=0.69% (admittedly not too bad)
Load= 5.75% (hey, the advisor's kids have to go to college too)

Returns
3 month 10.95
YTD 20.55

Comparable "diehard" type funds include

DFA International Value Portfolio DFIVX

ER=0.44% + advisory fees of 0.25-1%
Load=0.00%

3 month 8.09%
YTD 15.13%

and

Vanguard International Value Fund VTRIX

ER=0.46%
Load=0.00%

3 month 10.38%
YTD 17.58%

Now, the relevant comparison. Let's compare investing 94.25% of your money into CWGIX with investing 99% of your money into DFIVX with investing 100% of your money into VTRIX:

CWGIX $94.25*1.2055=$113.62
DFIVX $99*1.1513=$113.97
VTRIX $100*1.1758=$117.58

So what you're saying is thank goodness the fund didn't underperform much until you take the load into account? What great advice. Now the long term returns may not look too bad for this fund, but keep in mind that the OPs money hasn't been in this fund for most of that time, but she still had to pay the entire load.

[diehards]

scbarwic

Remember many of us have let FA take advantage of us, and you are certainly not alone. However there are still some good FA recommending no load index funds.

CAPITAL WORLD GROWTH & INCOME FUND CLASS A (CWGIX) is an excellent American Fund. I have CWGIX in four VG accounts, I had no problems transferring my American Funds from Legg Mason accounts to VG.

My CWGIX fund has doubled in value, I had VG transfer $24K CWGIX to each of my two college kids, and they will they will transfer CWGIX to another American fund to create a taxable event and pay a 5% Capital gain tax at their lower tax rate. My long term tax rate is 15%, so we will save about 10% in capital gains or about $2,400 total.

Good Luck,

[scbarwic]

I made the call. I did have to repeat myself several times that I had made my decision and I wasn't changing my mind. I also had to tell him that he was right and I was wrong but I was still going through with it. I made sure not to get off of the telephone until it was clear that I was moving my $$$ and cancelling the life ins. policies. I felt so empowered after the talk! It was a huge relief to have that behind me.

I probably did something stupid by telling Vanguard to liquidate the CWGIX, HRAAX, FFALX, AGTHX and instead purchase the VFINX. But, I thought this was the Bogle-philosophy?? Buy index and hold?? Why are we looking at past performances? Listening to some of you I think maybe I should have held on to what I have. Well, I've already done it now. Any advice on other funds to get into? How about his bond recommendation? He said something like put your age in bonds. Well, I'm nearly 30. I know I should not put it all in VFINX. Please advise. Thanks for all the earlier posts too...I appreciate the advice.

[Laura]

scbarwic,

Congrats on making the decision to break yourself free. You are now ready to start making an investment plan. I think you would benefit from reading Investment Planning and Asking Portfolio Questions. Please post your information in the format requested. Without knowing more about you it will be difficult to answer your questions.

Laura

[660ky612]

Do you think the client might leave that easily?

The guru has already known everything about the client, and the guru might be affiliated with a huge organization with big businesses and genuine power over many aspects of the community. For example, the education sector, telecommunications, mass media, etc... The mass media is not solely a finance channel, the channel itself and with many related channels which tailor for moms, women, sons and teenagers.

Better to do what the gurus have told you. Think of a man being controlled by a string!

USA might be different though.

660ky612 from Hong Kong

PS. Obviously I have a lot more to say ... . . .