Creative Planning vs Vanguard PAS

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boglemoe
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Re: Creative Planning vs Vanguard PAS

Post by boglemoe » Wed May 30, 2018 4:11 pm

flroots wrote:
Tue May 29, 2018 11:48 am
retiredjg wrote:
Tue May 29, 2018 6:08 am
Are there other things that Creative Planning offers that make this cost worth it for you?
I am retired so there is no work-related accounts to worry about. Yes, there are numerous services performed by Creative Planning above and beyond asset location. In fact they refer to themselves as a "home office". Rather than reciting all the services they provide, I would refer you to their website at: http://creativeplanning.com/. I think some of the services are more or less one time only so the value is diminished over time.
estate planning, legal advice, real tax related issues (tax returns) and so on...all are EXTRA fees.

they are competitive with some of these services but the charge is in addition to the AUM fees.

is it valueable even one time? you decide but it's a bit like getting 2$ off at costco after you pay to be a member... :P

moe

boglemoe
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Re: Creative Planning vs Robo-advisor

Post by boglemoe » Wed May 30, 2018 4:31 pm

flroots wrote:
Wed May 30, 2018 10:54 am
tfb wrote:
Wed May 30, 2018 9:50 am
flroots wrote:
Wed May 30, 2018 5:27 am
based on my reading, ETFs are likely to be more tax efficient than mutual funds.
Someone sold you a number of exaggerations: on asset location, tax loss harvesting, and tax efficiency of ETFs.
Well if that's true all the popular robo-advisors such as Betterment and Wealthfront are marching to the same tune with things like Smart Beta, Direct Indexing, and Fractional Shares thrown in for good measure. I believe that asset location is real and an obvious benefit. So far I haven't seen any effect from tax loss harvesting and am unlikely to going forward. The tax efficiency of ETFs seems real according to everything I've read. Why go with mutual funds when ETFs offer known advantages. Yes, tax efficiency is very much on my mind now that I'm forced to take RMDs with the resulting tax consequences. In the end everything is a tradeoff. In my case I have a very good advisor, but I may be at the stage where I can no longer justify the fee based on the value added. We shall see.
are there DFA funds in your allocation?

have you looked at what 'type' of funds DFA provides?
__________________

basically CP will provide you with a slice n dice portfolio that is 15-25 slices (are the 4 mlps one slice or 4? :wink: )

as others have suggested it will be just complicated enough that you 'need help' to manage the slices.

and so many slices under 5% of the total portfolio...does that really impact YOUR return?

eventually something held in the taxable accounts will drop enough, and a 'tax loss harvesting' opportunity will present..once you see this in practical application, it's pretty simple to replicate.

their 'opportunistic rebalancing' formula is not fool proof, the tool they use is only as good at the formating and mistake can be made.

it is very easy to rebalance periodically yourself.

when our assets are growing at 8-12% annually the AUM fee may be easier to swallow, but IF our account values are moving sideway, or down or up only 3-5%, giving 20% of that to them may be harder to swallow.

also IF you ever want to get to a simpler 3-5 fund porfolio it's a challenge to UNslice and UNdice.

in the mid 70s you may not want to do any of this yourself...i get that, but you can buy a LOT of highly personalized advice for the AUM fees.

all the best!

moe

KSActuary
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Re: Creative Planning vs Vanguard PAS

Post by KSActuary » Wed May 30, 2018 7:40 pm

I guess I just don't get it.

Any advisor worth their salt should perform asset location allocation. It just makes sense.

CP is a very well-known advisory firm who uses the planner/advisor structure where the advisor is the relationship manager and the planner performs the asset allocation strategy.

CP charges a fairly high fee for their "home office" services where, as some have said, the value diminishes fairly quickly over time. How many times due you need an estate plan review?

The building blocks of the CP allocation are rumored to be similar to robo portfolios built by BlackRock with a few tweaks.

As I always say, ask for the returns over time and see what they say. If you had reviewed the returns for Betterment, Wealthfront, etc, you never would have spent much time considering them.

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tfb
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Re: Creative Planning vs Robo-advisor

Post by tfb » Wed May 30, 2018 9:13 pm

flroots wrote:
Wed May 30, 2018 10:54 am
I believe that asset location is real and an obvious benefit. So far I haven't seen any effect from tax loss harvesting and am unlikely to going forward. The tax efficiency of ETFs seems real according to everything I've read. Why go with mutual funds when ETFs offer known advantages. Yes, tax efficiency is very much on my mind now that I'm forced to take RMDs with the resulting tax consequences.
You still have to quantify the benefits and not just look at it as binary yes there is a benefit or no there isn't a benefit. If you have 90% of your assets in IRAs, asset location isn't that obvious a benefit because you can only optimize at most 10% of your portfolio. The less tax efficiency of 10% of your portfolio just doesn't make much difference to your entire portfolio. The same is true if you have 90% of your portfolio in taxable accounts. Again figuring out which 10% to put into your IRAs just doesn't make much difference to the entire portfolio.

ETFs are more tax efficient than actively managed funds but they are not that much more tax efficient than index funds. Vanguard ETFs and Vanguard mutual funds are exactly equally tax efficient anyway because they are simply different share classes of the same fund. You'd have to look at how much the specific ETFs you own are more tax efficient than the mutual funds you otherwise would own. The answer is likely none whatsoever or very little.

So before you think they are a must-have, quantify how much difference they actually make to you.
Harry Sit, taking a break from the forums.

flroots
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Re: Creative Planning vs Robo-advisor

Post by flroots » Thu May 31, 2018 5:33 am

tfb wrote:
Wed May 30, 2018 9:13 pm
flroots wrote:
Wed May 30, 2018 10:54 am
I believe that asset location is real and an obvious benefit. So far I haven't seen any effect from tax loss harvesting and am unlikely to going forward. The tax efficiency of ETFs seems real according to everything I've read. Why go with mutual funds when ETFs offer known advantages. Yes, tax efficiency is very much on my mind now that I'm forced to take RMDs with the resulting tax consequences.
So before you think they are a must-have, quantify how much difference they actually make to you.
Yes, all good points. In my case, the taxable account is about equal in size to my IRA, but will grow percentage-wise as RMDs are withdrawn from the IRA with a significant portion reinvested in the taxable account. This suggests that asset location will have a real and beneficial effect. I have even looked at tables which compare after tax returns and you are right, in some cases, there is little if any difference between mutual funds and ETFs. While I may not have quantified everything, I still believe that any advisor that does not provide asset location as a standard feature should be disqualified without further consideration. Also, I maintain that given a choice between ETFs and mutual funds I would take the ETFs. Having said that I did not disqualify any robo-advisor on that basis.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Thu May 31, 2018 5:37 am

KSActuary wrote:
Wed May 30, 2018 7:40 pm
I guess I just don't get it. Any advisor worth their salt should perform asset location allocation. It just makes sense.
I agree with you. On that basis I had to disqualify Fidelity Go, Schwab, and SigFig. Check it out!

flroots
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Re: Creative Planning vs Robo-advisor

Post by flroots » Thu May 31, 2018 6:52 am

tfb wrote:
Wed May 30, 2018 9:13 pm
flroots wrote:
Wed May 30, 2018 10:54 am
I believe that asset location is real and an obvious benefit. So far I haven't seen any effect from tax loss harvesting and am unlikely to going forward. The tax efficiency of ETFs seems real according to everything I've read. Why go with mutual funds when ETFs offer known advantages. Yes, tax efficiency is very much on my mind now that I'm forced to take RMDs with the resulting tax consequences.
Vanguard ETFs and Vanguard mutual funds are exactly equally tax efficient anyway because they are simply different share classes of the same fund.
I would dispute that statement. They are not equal because the IRS treats them differently even though they may hold the exact same securities. For example, the IRS requires the fund manager to report all capital gains accruing from buy/sells within the tax year they occurred. No such rule applies to ETFs.

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tfb
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Re: Creative Planning vs Robo-advisor

Post by tfb » Thu May 31, 2018 12:25 pm

flroots wrote:
Thu May 31, 2018 6:52 am
tfb wrote:
Wed May 30, 2018 9:13 pm
Vanguard ETFs and Vanguard mutual funds are exactly equally tax efficient anyway because they are simply different share classes of the same fund.
I would dispute that statement. They are not equal because the IRS treats them differently even though they may hold the exact same securities. For example, the IRS requires the fund manager to report all capital gains accruing from buy/sells within the tax year they occurred. No such rule applies to ETFs.
Such rule applies to ETFs as well. Some ETFs distributed capital gains. From ETF.com, December 18, 2017:
Why ETFs Pay Out Cap Gains

However, none of this means ETFs are immune from paying out capital gains. There are many reasons funds might still make yearly distributions, including: ... ... This year, State Street issued the most capital gains payments to investors, with 34 of its 131 ETFs (26%) making distributions.
http://www.etf.com/sections/features-an ... nopaging=1

Vanguard (and only Vanguard) ETFs also share the capital gains from their mutual funds. From Morningstar, April 11, 2018:
That could negatively affect ETF shareholders, the bad behavior, say a mass exodus from the admiral or the investor share class of a Vanguard mutual fund that also has an ETF share class--any gains that are unlocked by that behavior, that selling on behalf of shareholders of the mutual fund share classes will be shared pro rata with investors in the ETF share class.
http://www.morningstar.com/videos/85848 ... vangu.html
Harry Sit, taking a break from the forums.

flroots
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Re: Creative Planning vs Robo-advisor

Post by flroots » Thu May 31, 2018 1:18 pm

tfb wrote:
Thu May 31, 2018 12:25 pm
flroots wrote:
Thu May 31, 2018 6:52 am
tfb wrote:
Wed May 30, 2018 9:13 pm
Vanguard ETFs and Vanguard mutual funds are exactly equally tax efficient anyway because they are simply different share classes of the same fund.
I would dispute that statement. They are not equal because the IRS treats them differently even though they may hold the exact same securities. For example, the IRS requires the fund manager to report all capital gains accruing from buy/sells within the tax year they occurred. No such rule applies to ETFs.
Such rule applies to ETFs as well. Some ETFs distributed capital gains. From ETF.com, December 18, 2017:
Why ETFs Pay Out Cap Gains

However, none of this means ETFs are immune from paying out capital gains. There are many reasons funds might still make yearly distributions, including: ... ... This year, State Street issued the most capital gains payments to investors, with 34 of its 131 ETFs (26%) making distributions.
http://www.etf.com/sections/features-an ... nopaging=1

Vanguard (and only Vanguard) ETFs also share the capital gains from their mutual funds. From Morningstar, April 11, 2018:
That could negatively affect ETF shareholders, the bad behavior, say a mass exodus from the admiral or the investor share class of a Vanguard mutual fund that also has an ETF share class--any gains that are unlocked by that behavior, that selling on behalf of shareholders of the mutual fund share classes will be shared pro rata with investors in the ETF share class.
http://www.morningstar.com/videos/85848 ... vangu.html
I rest my case; one cannot equate ETFs with mutual funds from a tax efficiency standpoint even if they hold the same securities.

delamer
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Re: Creative Planning vs Vanguard PAS

Post by delamer » Thu May 31, 2018 1:35 pm

Planning at your age should take into account two possibilities — cognitive decline on your part and that you may die before your wife, leaving her to deal with whatever you put into place.

RetiredArtist
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Re: Creative Planning vs Vanguard PAS

Post by RetiredArtist » Thu May 31, 2018 2:14 pm

Please define "Asset Location". How is it different from Asset Allocation?

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Thu May 31, 2018 2:34 pm

delamer wrote:
Thu May 31, 2018 1:35 pm
Planning at your age should take into account two possibilities — cognitive decline on your part and that you may die before your wife, leaving her to deal with whatever you put into place.
Yes, this is a very valid point and is a significant advantage of Creative Planning's "home office" team. My wife really likes them for that reason. As I originally mentioned, my goal was to determine if a robo-advisor could offer similar capabilities for less cost. I have pretty much disqualified all those considered.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Thu May 31, 2018 2:43 pm

RetiredArtist wrote:
Thu May 31, 2018 2:14 pm
Please define "Asset Location". How is it different from Asset Allocation?
This was asked and answered earlier in this thread. Check out:
viewtopic.php?f=1&t=250401#p3948154

Sandi_k
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Re: Creative Planning vs Vanguard PAS

Post by Sandi_k » Thu May 31, 2018 6:15 pm

flroots wrote:
Thu May 31, 2018 2:34 pm
delamer wrote:
Thu May 31, 2018 1:35 pm
Planning at your age should take into account two possibilities — cognitive decline on your part and that you may die before your wife, leaving her to deal with whatever you put into place.
Yes, this is a very valid point and is a significant advantage of Creative Planning's "home office" team. My wife really likes them for that reason. As I originally mentioned, my goal was to determine if a robo-advisor could offer similar capabilities for less cost. I have pretty much disqualified all those considered.
We have a pretty standard portfolio, with index funds comprising most of it. I manage it as a Google spreadsheet, shared with DH. A couple of times a year, I sit down with him and discuss it.

My current goal is to simplify accounts a bit. With the lower marginal tax rates, we'll be rolling over traditional and SEP IRAs into our Roths, which will also simplify record-keeping - and which will also give us a larger proportion of post-tax accounts.

Once that simplification is in place, it's pretty steady state. We have a forecast for withdrawals the first 10 years of retirement, all in the shared spreadsheet - as well as the milestones he needs to know, such as when the marginal tax rates return to the pre-2018 levels, when to file for SocSec, when the house is paid off, when RMDs for each of us start, and what SWR we're aiming for from ages 55-60, 60-65, from 65-68, and 68-70.5.

My hope is that once RMDs start, we can move everything to Wellesley or Wellington, and set it on auto-distribute, above the RMD level. No fuss, no muss for him (or me!).

I think you should consider something similar, so your wife is aware of the portfolio construction and withdrawal plan, and can replicate it should something happen to you.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Sun Jun 10, 2018 8:54 am

I've been doing a little research on asset allocation and now realize that there are both segregated and differentiated types. I was only aware of segregated until now. Wealthfront uses differentiated which is explained here:
https://blog.wealthfront.com/differenti ... investors/

In my case, the taxable account is only 40% of the IRAs so differentiated is not appropriate per the above reference :( I really have doubts about the analysis since in my mind, segregated makes so much sense.

As an aside, Betterment seems to use segregated which would be better for me:
https://www.betterment.com/resources/re ... 1528639437

The Betterment methodology matches the asset location used by Creative Planning

simas
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Re: Creative Planning vs Vanguard PAS

Post by simas » Sun Jun 10, 2018 9:20 am

I struggle to see the point of this thread - OP, you are fighting severe case of (justified IMHO) of buyers remorse and trying to make yourself feel better by 'proving' how great deal is this Creative Planning thing?

Similarly, there are tons of BH (myself including) that do not do Vanguard PAS and do not see the value of paying on-going fees for one time advice (be it asset allocation, asset placement ,etc). if you want advice, buy it. however, if you want a check-up and one time guidance, why pay for it over and over and over?

OP, your entire thread screams of insecurity of making the right decision and tries to prove to the world you are not a 'bad person' for making it. Relax, you are not a bad person, different strokes work for different folks, this is not the worst decision to make, and in the future you will shake this off and move on thinking of paying for your education (or not). You should have been in Morgan Stanley or worse so this isnt horrible (not great either in my opinion already explained above).

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Sun Jun 10, 2018 11:09 am

simas wrote:
Sun Jun 10, 2018 9:20 am
I struggle to see the point of this thread - OP, you are fighting severe case of (justified IMHO) of buyers remorse and trying to make yourself feel better by 'proving' how great deal is this Creative Planning thing?

Similarly, there are tons of BH (myself including) that do not do Vanguard PAS and do not see the value of paying on-going fees for one time advice (be it asset allocation, asset placement ,etc). if you want advice, buy it. however, if you want a check-up and one time guidance, why pay for it over and over and over?

OP, your entire thread screams of insecurity of making the right decision and tries to prove to the world you are not a 'bad person' for making it. Relax, you are not a bad person, different strokes work for different folks, this is not the worst decision to make, and in the future you will shake this off and move on thinking of paying for your education (or not). You should have been in Morgan Stanley or worse so this isnt horrible (not great either in my opinion already explained above).
You missed your calling😀 It should be perfectly clear where I'm coming from. I am simply evaluating robo-advisors to see if one would be a better choice going forward. That evaluation continues as I continue to learn more as evidenced by the above post.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Mon Jun 11, 2018 6:59 am

Here is a summary of what I've learned so far:
  • a. CP has done a good job to date
    b. Much of the CP value added is behind us
    c. The typical robo advisor would save me 0.6% (0.85-0.25)
    d. There are several robo advisors offering most if not all the same capabilities
There is one critical question I have yet to answer: will I consider robo advisors who are both advisor and custodian? This is an issue with both Betterment and Wealthfront. This concern is amplified by the fact that many robo advisors are start-ups and not yet profitable (https://www.financialsamurai.com/is-wea ... -of-money/). Sigfig, on the other hand, works with three different custodians including Fidelity.

As an aside, I am quite enamored with Wealthfront's direct indexing as it relates to tax loss harvesting and smart beta. There are no other robo advisors with this capability.

Chip
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Re: Creative Planning vs Vanguard PAS

Post by Chip » Mon Jun 11, 2018 8:27 am

I must say I'm having much trouble understanding where you are coming from.

You say you are very concerned with tax efficient asset location. In just the time you have spent on this thread you could have learned absolutely everything you need to know about that subject and would be able to execute a plan yourself.

You haven't mentioned the size of your portfolio, but let's just assume it's 5MM, 50/50 taxable/IRA. If your asset allocation happened to be 50/50 stocks/bonds, you could have all your bonds in the IRA and all the stocks in taxable. If we keep it REALLY simple we could put all of the stock allocation in Vanguard Total World (ETF = VT) and all of the bond allocation in Vanguard Total Bond. Total fund expenses are 2.5M*.1% + 2.5M*.07% = $4,250/year.

From a tax standpoint you'll get about 2% in dividends from VT (50k), 80% of which are qualified dividends. Plus at age 73 you'd have an RMD of about 4% of the IRA value (100k). Plus whatever social security and pensions you have. You'll get some foreign tax credit from the investment in VT (potentially about 2k). You won't be able to get much more tax-efficient than that other than by losing a lot of money.

With a 5M portfolio Creative Planning costs 42,500 per year. And if the earlier poster is correct, legal and tax services are additional fees on top of that. Plus the expense ratios of the ETFs. A robo will cost you ~15,000 per year, plus fund expenses.

You spent a lot of time in another thread figuring out credit card reward strategies. Do you think they will pay off 15-43k per year compared to spending an equivalent amount of time figuring out how to do it yourself?

A couple of other points:

Beware of MLPs. Here's a thread about them.

retiredjg's point about getting "locked in" with specialty funds also applies to Wealthfront's "direct indexing". You'd own many individual securities. Exiting those positions would be extremely messy.

Be very careful about trying too hard to reduce taxes. As someone who bought limited partnerships in the 80s I can tell you that sometimes the best tax shelter of all is just to pay your taxes and be glad you have enough income that you have to pay them.

dave1054
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Re: Creative Planning vs Vanguard PAS

Post by dave1054 » Mon Jun 11, 2018 8:39 am

Wow. Getting a headache reading these posts. Talk about overthinking everything. Who has time to worry about asset location, tax loss harvesting, etc.

I am a physician and before we moved our retirement to Vanguard, all the physicians self managed their accounts and the employees had their assets in a pooled account they never looked at. I was amazed that every single year the employees that had zero financial knowledge beat the so called smart physicians.

Stop microanalyzing everything. Put it in 3fund portfolio, target date fund, or PAS and enjoy every minute God has given you on this blessed Earth.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Mon Jun 11, 2018 9:01 am

I had started this post with the hope of gaining knowledge and whenever possible sharing it. Sad to say many posters want to analyze me or my motives. On the other hand, some posters have contributed valuable insights which have been helpful. I'd like to thank them.

Chip
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Re: Creative Planning vs Vanguard PAS

Post by Chip » Mon Jun 11, 2018 9:47 am

flroots wrote:
Mon Jun 11, 2018 9:01 am
I had started this post with the hope of gaining knowledge and whenever possible sharing it. Sad to say many posters want to analyze me or my motives. On the other hand, some posters have contributed valuable insights which have been helpful. I'd like to thank them.
Here is a good discussion with some references to articles on why "smart beta" may not be so smart.

KSActuary
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Re: Creative Planning vs Vanguard PAS

Post by KSActuary » Mon Jun 11, 2018 11:50 am

flroots wrote:
Mon Jun 11, 2018 6:59 am
Here is a summary of what I've learned so far:
  • a. CP has done a good job to date
    b. Much of the CP value added is behind us
    c. The typical robo advisor would save me 0.6% (0.85-0.25)
    d. There are several robo advisors offering most if not all the same capabilities
There is one critical question I have yet to answer: will I consider robo advisors who are both advisor and custodian? This is an issue with both Betterment and Wealthfront. This concern is amplified by the fact that many robo advisors are start-ups and not yet profitable (https://www.financialsamurai.com/is-wea ... -of-money/). Sigfig, on the other hand, works with three different custodians including Fidelity.

As an aside, I am quite enamored with Wealthfront's direct indexing as it relates to tax loss harvesting and smart beta. There are no other robo advisors with this capability.
Just make sure you check out Wealthfront's returns, please. Easy to find on their web site by clicking Methodology and then Historical Returns. They have a funny way of summarizing returns where you need to look at the benchmark allocation for returns after 2013. The benchmark allocation can be found in the disclosure section right below the returns. Pretty bad, IMO. I never look at their 1 Year number.

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Re: Creative Planning vs Vanguard PAS

Post by LadyGeek » Mon Jun 11, 2018 7:47 pm

flroots - Have you seen this wiki article? Robo-adviser
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: Creative Planning vs Vanguard PAS

Post by flroots » Tue Jun 12, 2018 6:28 am

deleted
Last edited by flroots on Tue Jun 12, 2018 7:14 am, edited 1 time in total.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Tue Jun 12, 2018 6:35 am

LadyGeek wrote:
Mon Jun 11, 2018 7:47 pm
flroots - Have you seen this wiki article? Robo-adviser
Thanks, but no I had not reviewed it previously. While a nice primer, they failed to mention my most important criteria and that is whether the robo-advisor is both advisor and custodian of assets. Can you imagine turning your life savings over to a non-profitable, start-up company (can you say Wealthfront, Betterment, etc) who both offers advice and requires custody of your assets. That is truly scary :( SigFig, on the other hand, leaves the assets at your choice of 3 large and reputable custodians including Fidelity. While I greatly admire the advancements made by Wealthfront offering features normally available only to the super wealthy, they are, according to reports, not yet profitable. They currently hold about AUM of $10.5B, but must hold at least $20B to break even. This could happen within the next few years. It is tempting, however, to open a small account with Wealthfront just to participate in the future of what I consider the most advanced robo-advisor.

For those considering investments with robo-advisors like Wealthfront, it's worth stating that the regulations have changed since the days of Bernie Madoff. This article explains the changes that have taken place:
https://www.sec.gov/spotlight/secpostmadoffreforms.htm

The following excerpt from the above reference is somewhat comforting:
The new custody rules require registered investment advisers who control or have custody of their clients' assets to hire an independent public accountant to conduct an annual "surprise exam" to verify those assets actually exist.
And here's how Wealthfront answers the question:
https://support.wealthfront.com/hc/en-u ... vestments-

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Mon Jun 18, 2018 4:38 am

I just came across an "eye opener" of an article:
https://medium.com/@hwayne/is-wealthfro ... b5d90e0250

Those of you Bogle 4 Fund advocates will love it. It shows that the Bogle 4 Fund portfolio is superior to Wealthfront under two different risk levels. The referenced Portfolio Visualizer site makes these comparisons easy.

I decided to use this site to compare my Creative Planning portfolio to the Bogle 4 Fund portfolio.

Summary
  • Creative Planning portfolio with 0.85% fee is about equal to Bogle 4 Fund
    Creative Planning portfolio without fee is a clear winner
This suggests using the Creative Planning portfolio in a DIY mode :happy

Chip
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Re: Creative Planning vs Vanguard PAS

Post by Chip » Mon Jun 18, 2018 7:19 am

flroots wrote:
Mon Jun 18, 2018 4:38 am
I decided to use this site to compare my Creative Planning portfolio to the Bogle 4 Fund portfolio.

Summary
  • Creative Planning portfolio with 0.85% fee is WAS about equal to Bogle 4 Fund
    Creative Planning portfolio without fee is WAS a clear winner
This suggests using the Creative Planning portfolio in a DIY mode :happy
I changed your statements so they no longer conflate past performance with future performance. Such conflation is a common behavioral finance trap. I can easily create a portfolio that beats the CP portfolio in backtests. And covers my 2% fee as well. :D

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Mon Jun 18, 2018 7:59 am

Chip wrote:
Mon Jun 18, 2018 7:19 am
flroots wrote:
Mon Jun 18, 2018 4:38 am
I decided to use this site to compare my Creative Planning portfolio to the Bogle 4 Fund portfolio.

Summary
  • Creative Planning portfolio with 0.85% fee is WAS about equal to Bogle 4 Fund
    Creative Planning portfolio without fee is WAS a clear winner
This suggests using the Creative Planning portfolio in a DIY mode :happy
I changed your statements so they no longer conflate past performance with future performance. Such conflation is a common behavioral finance trap. I can easily create a portfolio that beats the CP portfolio in backtests. And covers my 2% fee as well. :D
Yes very true but of course I have made no changes to the current portfolio. I suppose one might wonder if CP had optimized their portfolio based on backtested results.

KSActuary
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Re: Creative Planning vs Vanguard PAS

Post by KSActuary » Mon Jun 18, 2018 2:50 pm

I believe that CP is using the portfolios available from BlackRock with a few changes. Nothing magic. I would expect the returns to be actual.

boglemoe
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Re: Creative Planning vs Vanguard PAS

Post by boglemoe » Mon Jun 18, 2018 3:40 pm

of course they backtest, that's part of all MPT, factor based, smartbeta yadda yadda portfolio construction.

but all of the slicing and all of the TLH/rebalancing is about reducing risk, not a guarantee of adding return.

the only guaranteed return is the fee :shock:
flroots wrote:
Mon Jun 18, 2018 4:38 am
Creative Planning portfolio with 0.85% fee is about equal to Bogle 4 Fund
Creative Planning portfolio without fee is a clear winner[/list]

This suggests using the Creative Planning portfolio in a DIY mode :happy
unless you post the actual holdings IN the portfolio and the size of the slices, no one can offer you any useful feedback about the cards you hold.

it's not necessary to reveal dollar amounts, just the size of the many slices with their names/tickers.

you might also post how you arrived at the determination of a winner (graphs or tables of returns)

but any out-performance you think you see is almost surely a product of beta, not alpha.

best of luck!
moe

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Mon Jun 18, 2018 3:42 pm

KSActuary wrote:
Mon Jun 18, 2018 2:50 pm
I believe that CP is using the portfolios available from BlackRock with a few changes. Nothing magic. I would expect the returns to be actual.
Sorry but what do you mean by actual?

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Tue Jun 19, 2018 4:30 am

boglemoe wrote:
Mon Jun 18, 2018 3:40 pm
...you might also post how you arrived at the determination of a winner (graphs or tables of returns)
but any out-performance you think you see is almost surely a product of beta, not alpha.
You may be right about the beta vs alpha :happy Here is the result with 0.85% fee included, starting at $10,000 in 8/2007:

Code: Select all

Portfolio             FinalValue     CAGR    StdDev   SharpeRatio
Creative Planning *   18,161         5.66     14.84      0.47
Bogle 4 Fund          18,689         5.94     12.89      0.48
And here is the result without fee, starting at $10,000 in 8/2007:

Code: Select all

Portfolio             FinalValue     CAGR    StdDev   SharpeRatio
Creative Planning *   19,949         6.58     14.84      0.47
Bogle 4 Fund          18,689         5.94     12.89      0.48

* a few ETF substitutions were made in Creative Planning portfolio in order to get 
results prior to the 08/09 downturn
Since the Sharpe ratios were nearly identical, the greater return without fees could be explained by the additional risk, right? When fees are added, the Creative Planning return is slightly less than Bogle 4 Fund even though the risk was greater.

BTW, is it possible to include images from one's computer? I only see how to do it from a URL.

KSActuary
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Re: Creative Planning vs Vanguard PAS

Post by KSActuary » Tue Jun 19, 2018 9:40 am

flroots wrote:
Mon Jun 18, 2018 3:42 pm
KSActuary wrote:
Mon Jun 18, 2018 2:50 pm
I believe that CP is using the portfolios available from BlackRock with a few changes. Nothing magic. I would expect the returns to be actual.
Sorry but what do you mean by actual?
I have never spoken to a CP relationship manager, even though I have spoken with many CP planners who work in our building, so I do not know how they report past performance. I would imagine that they are either reporting CP's actual returns for the various model portfolios that they use or they are reporting BlackRock's past performance (unlikely).

pkcrafter
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Creative Planning vs Vanguard PAS

Post by pkcrafter » Tue Jun 19, 2018 12:53 pm

flroots, it appears you want to, and probably will, go with creative planning, and perhaps you are asking Bogleheads to confirm your choice. If you have decided on Creative Planning, that's fine, but you will have a hard time getting Bogleheads to agree. Also, you seem to be complicating what can be efficiently done with a lot of stuff CP says you should do.

Confirmation Bias

https://www.bogleheads.org/wiki/Behavio ... ation_bias

An earlier thread on Creative Planning

viewtopic.php?t=212743

Michael Kitces article in which Creative Planning is reviewed.

https://www.kitces.com/blog/9-out-of-to ... ure-rules/

Tony Robbins and Peter Mallouk

https://riabiz.com/a/2017/3/1/peter-mal ... till-murky

Nope, Creative Planning isn't a Boglehead option, but it is important that you have trust in the strategy you wish to use, so I wish you success.

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.

ExitStageLeft
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Re: Creative Planning vs Vanguard PAS

Post by ExitStageLeft » Tue Jun 19, 2018 1:43 pm

flroots wrote:
Tue Jun 19, 2018 4:30 am

BTW, is it possible to include images from one's computer? I only see how to do it from a URL.
A very few internet forums allow uploading an image to the forum server. Most forums rely upon you uploading the image to an image hosting web site. I use Imgur, there are many others available: https://www.thebalanceeveryday.com/top- ... es-1357014

Any of these free web sites could follow the path of PhotoBucket, so use with caution.

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BeBH65
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Re: Creative Planning vs Vanguard PAS

Post by BeBH65 » Tue Jun 19, 2018 1:55 pm

BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Wed Jun 20, 2018 3:47 am

pkcrafter wrote:
Tue Jun 19, 2018 12:53 pm
flroots, it appears you want to, and probably will, go with creative planning, and perhaps you are asking Bogleheads to confirm your choice.
Not sure how you reached that conclusion. In fact, it's exactly the opposite. Suggest you read the posts above by Boglemoe and myself. While the CP return (without fee) is greater than Bogle 4 Fund, Boglemoe correctly points out that it's probably due to increased Beta (risk) and not Alpha. My results above show that's indeed correct. What adds insult to injury is that when you add fees back in, the CP return is slightly worse than Bogle 4 Fund, but again the risk is greater. As mentioned elsewhere these results are based on backtesting and not necessarily predictive of the future.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Wed Jun 20, 2018 5:31 am

As a matter of interest, I decided to compare Betterment, WealthFront, and Bogle 4 Fund portfolios. No fees were applied (ie, DIY assumed). The results showed best to worst performance (as determined by the Sortino ratio) as follows:
  • 1. Bogle 4 Fund
    2. Wealthfront
    3. Betterment
as shown here:
Image
where portfolios 1, 2, and 3 represented Betterment, Wealthfront, and Bogle 4 Fund respectively.

and in graphical form:
Image

As seen, the results were amazingly close which suggests that any one of the above portfolios would be a good choice. These results do not include the effect of taxes not do they necessarily predict the future.

pkcrafter
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Re: Creative Planning vs Vanguard PAS

Post by pkcrafter » Wed Jun 20, 2018 10:14 am

flroots, good to hear you are not completely hung up on CP, but in many of your earlier posts it sounded like you were trying hard to justify using them. Anyway, you do appear to be open to better investing strategies.

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.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Wed Jun 20, 2018 10:47 am

pkcrafter wrote:
Wed Jun 20, 2018 10:14 am
flroots, good to hear you are not completely hung up on CP, but in many of your earlier posts it sounded like you were trying hard to justify using them. Anyway, you do appear to be open to better investing strategies.

Paul
I'm not hung up on any advisor or investment option. While CP seems an excellent advisory service and offers many so-called "home office" services, their fee does create a drag on returns as documented above. It really comes down to whether the value added justifies the fee. A review of my posts will show you that I've considered numerous robo advisors and DIY approaches. Along the way, I've learned quite a bit from several posters on this thread for which I'm grateful.

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Tue Jun 26, 2018 4:06 am

Just for the record, I'm not saying Creative Planning is good or bad. It may be the very best choice for some, but not others. These decisions are highly personal ie, one size does not fit all.

Personally, I am intrigued by the concept of robo-advisors given the value added at reasonable cost. However, after an in depth review, I have not found one that meets all my criteria :( Wealthfront comes close, however, they violate the criteria that the advisor should not also be the custodian. As mentioned in this discussion, they do create stickiness via their advanced strategies which could also be a concern going forward. Interestingly I found this quote at:viewtopic.php?t=232999. He shares my thoughts exactly and why I will keep a close eye on the evolution of robo-advisors.
The direct indexing approach can add significant value. It’s simply indexing with TLH on steroids. Also allows you to gift your super appreciated winners to charity. There is no downside other than fees (with a big caveat below). I’m going to be surprised if it isn’t a recommended Boglehead strategy for larger portfolios in 10 years. If any of Schwab, Fidelity or Vanguard offered this at a reaonable fee (25 bps or less), I would have my entire S&P 500 component in a direct indexing product. The only reason I’m not at Wealthfront is that I don’t trust such a new/young conpany with my investments (that’s the caveat) and the fees are a bit too high.
Thanks again to all those posters who have contributed their knowledge to this thread.

afan
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Re: Creative Planning vs Vanguard PAS

Post by afan » Tue Jun 26, 2018 2:30 pm

Unless you are entering the CP portfolio AS IT WAS OVER THE YEARS, you are not comparing their results to the 4 fund portfolio. It is meaningless to compare what the CURRENT CP portfolio would have done in the past to what the 4 fund portfolio actually did. Wealthfront constantly tinkers with it's portfolio and I don't know whether it would be possible to get a historical record of all the changes and when they occurred. If you can do that for CP then at least you can test what their portfolios did over the time they were held.

I would never invest with a robo, or other advisor, since I don't see them adding any value. Managers face a publicity problem. There are abundant data saying that managers cannot beat the indexes. So managers have to come up with reasons why those results do not apply to them. This involves a lot of imagination on their part and wishful thinking from their clients.

I don't see anything CP offers of value at all. I cannot imagine what CP could offer that would be worth 0.85%. I cannot see what PAS could offer that would be worth 0.3%. there just is not that much to it. Hold a 3-fund portfolio and rebalance once a year, at most. Or hold some sort of low cost index balanced fund.

Asset location matters but you don't need anyone to do this for you.

I might pay someone to collect my tax information at the end of the year, put it all together, prepare and file my return. That would be worth something to save me the effort. I would not pay much, certainly not 0.01% of assets, but I might pay a couple hundred bucks. I don't know of anyone who would do this for anything approaching a price I might pay, so I do it myself.

OP, you sound like a good client for an advice only planner. For far less than you would pay CP someone will recommend an asset allocation, location and specific funds. They can also help you with other financial questions. At the costs of CP you would need to consume, say, 100 hours of advice to break even on fees. Assuming the CP fee includes unlimited advice. If you pay separately for advice then the CP service is of near zero value before fees and has a negative value of approximately 0.85% after fees.

I agree I would not give some small company custody. If you go with an advice only planner they would never have custody or trading authority over your account. MF Global was not a small company, but they held investors assets and we're able to steal them. Not claiming that CP, Wealthfront or any other company WOULD steal customer assets. But I agree there is no point in making it possible by giving custody.

My suggestions
Save your money and don't pay anyone to manage your assets.
Hire an advice only planner if you think you need advice.
Invest in a simple 3-fund portfolio or a balanced fund and call it a day.
If, at some point, you decide that 3-fund or a balanced fund is too much challenge then you really need more than investment management. You need a trustee to manage affairs on your behalf. For that, Vanguard would be a good choice.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Tue Jun 26, 2018 3:23 pm

afan wrote:
Tue Jun 26, 2018 2:30 pm
Unless you are entering the CP portfolio AS IT WAS OVER THE YEARS, you are not comparing their results to the 4 fund portfolio. It is meaningless to compare what the CURRENT CP portfolio would have done in the past to what the 4 fund portfolio actually did. Wealthfront constantly tinkers with it's portfolio and I don't know whether it would be possible to get a historical record of all the changes and when they occurred. If you can do that for CP then at least you can test what their portfolios did over the time they were held.

I would never invest with a robo, or other advisor, since I don't see them adding any value. Managers face a publicity problem. There are abundant data saying that managers cannot beat the indexes. So managers have to come up with reasons why those results do not apply to them. This involves a lot of imagination on their part and wishful thinking from their clients.

I don't see anything CP offers of value at all. I cannot imagine what CP could offer that would be worth 0.85%. I cannot see what PAS could offer that would be worth 0.3%. there just is not that much to it. Hold a 3-fund portfolio and rebalance once a year, at most. Or hold some sort of low cost index balanced fund.

Asset location matters but you don't need anyone to do this for you.

I might pay someone to collect my tax information at the end of the year, put it all together, prepare and file my return. That would be worth something to save me the effort. I would not pay much, certainly not 0.01% of assets, but I might pay a couple hundred bucks. I don't know of anyone who would do this for anything approaching a price I might pay, so I do it myself.

OP, you sound like a good client for an advice only planner. For far less than you would pay CP someone will recommend an asset allocation, location and specific funds. They can also help you with other financial questions. At the costs of CP you would need to consume, say, 100 hours of advice to break even on fees. Assuming the CP fee includes unlimited advice. If you pay separately for advice then the CP service is of near zero value before fees and has a negative value of approximately 0.85% after fees.

I agree I would not give some small company custody. If you go with an advice only planner they would never have custody or trading authority over your account. MF Global was not a small company, but they held investors assets and we're able to steal them. Not claiming that CP, Wealthfront or any other company WOULD steal customer assets. But I agree there is no point in making it possible by giving custody.

My suggestions
Save your money and don't pay anyone to manage your assets.
Hire an advice only planner if you think you need advice.
Invest in a simple 3-fund portfolio or a balanced fund and call it a day.
If, at some point, you decide that 3-fund or a balanced fund is too much challenge then you really need more than investment management. You need a trustee to manage affairs on your behalf. For that, Vanguard would be a good choice.
Thanks, sounds like good advice overall, however, you didn't address how one would go about unwinding a CP portfolio esp. with respect to tax consequences :(

flroots
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Re: Creative Planning vs Vanguard PAS

Post by flroots » Sun Jul 08, 2018 10:10 am

I've been comparing different mutual funds and ETFs to Creative Planning. I've discovered that the Fidelity Four-in-one Fund (FFNOX) is doing amazingly well. If one were to break it down into the equivalent 4 ETFs it does even better and should be more tax efficient to boot. FFNOX is 85/15 (Equity/Bond) whereas CP is 75/15/5/5 (Equity/Bond/Real Estate/Alternatives) so it's not an apples to apples comparison. So to the degree that equities outperform alternatives and real estate that's to be expected. Anyway I've been wanting to find a "simple" basis for comparing CP performance going forward and FFNOX is the best I've found.

Kjmcclellan
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Re: Creative Planning vs Vanguard PAS

Post by Kjmcclellan » Wed Oct 10, 2018 8:00 pm

flroots:

I would be interested in speaking with you about your experience with CP. I sat down with them today to discuss their services.

I am brand new to this forum and was not able to private message you as I have not made any public posts yet.

Please contact me via PM if you would be willing to share your findings.

Regards,
Kjmcclellan

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