Leaving Fidelity Wealth Management

[VgSince1982-2]

First, hello from the past. I participated in this forum many, many years ago, and I'm forever grateful for the good path you all headed me down. More on that in another post.

We have been at Fidelity for a few years due to employer 401ks and HSA being housed there, but still have two taxable accounts at Vanguard.

About two years ago, being busy working, scared of uncertainty and recession, plus being on horizon of retirement, we agreed to Fidelity Wealth Management (FWM) for Roths and rollover IRAs (four accounts between my husband and me). This helped us relax a bit through that time, but unless they knocked our socks off, we'd go back to self-managing. That time is now.

This post is about reverse-engineering their results. And hoping some you would be interested enough to check my results with your own method.

I looked at the performance 1/1/2022 to 9/1/2023 and used Portfolio Visualizer to mimic the fund choices. I chose quarterly rebalance and dividend reinvest.

There were 12 funds used at a given time by FWM, but seven of these each held a fraction of a percent of the total. I chose to ignore those seven 'tips of the tail' funds. Another had only a few percent. The main four funds were consistent throughout, so I picked two snapshots in time.

Assume $500,000 invested.
FWM Results: $456,669

Recent FWM Allocation: FCTDX (Managed TSM) 45%, FUSIX Managed Int'l 13%, FGOMX Managed Em Mkts 5%, FIWGX Intermed Bond 33% Cash 4%... results $467,799.

Aug 2022 FWM Allocation: FCTDX (Managed TSM) 43%, FUSIX Managed Int'l 12%, FGOMX Managed Em Mkts 5%, FIWGX Intermed Bond 38% Cash 2%... results $465,128.

Mimic using common funds: FSKAX Total Stock Market 45%, FEMKX Emerging Markets 5%, FTIHX Total Int'l 12%, FTHRX Intermed Bond 35%, Cash 3%....results $469,546

My simulations exceed the FWM actual result...in about the same amount as the fees charged. For all the compute power and knowledge behind FWM, I thought they'd cover the fees at least.

Were these good simulations? If so, I'm satisfied that the robo-investing didn't add value, and the fees are a reality to accept.

LHM
.

[aristotelian]

If a market crash were to happen tomorrow, would you now be able to stay the course? What has changed between now and two years ago?

[HomeStretch]

Welcome back to the forum!

No comment on your methodology to assess whether your wealth advisor’s past investing returns covered their fees. It wouldn’t surprise me if they did not or if the advisor portfolio did not match/beat the average S&P 500/Total Stock Market fund returns over multiple years.

It seems like you do not have confidence they did. It also seems like you are going through a lot of work to analyze their results. If you desire to simplify or go back to self-managing your portfolio, it’s fairly easy at Fidelity or another brokerage. There are no tax consequences to changing your holdings.

[gotoparks]

I don't think most advisors beat the market. They are hand holders which by your post you needed. If you decide you need an advisor in the future look at Vanguard PAS.


https://investor.vanguard.com/advice/pe ... bo-advisor

[Jack FFR1846]

The only actual work the manager is doing is:

1) Choosing high expense funds to replace low expense funds that essentially do exactly the same thing.

2) Rebalance.

If you decide to do it yourself, you can and should replace the high expense funds with low expense funds.

When it comes to rebalancing, you can do this....or not. If you decide to do it, an easy way to do it is to rebalance on your birthday. Another would be to set up windows like 5% from target. I've done both. They add 15 minutes a year to my management of my investments.

[Sandtrap]

First, hello from the past. I participated in this forum many, many years ago, and I'm forever grateful for the good path you all headed me down. More on that in another post.

We have been at Fidelity for a few years due to employer 401ks and HSA being housed there, but still have two taxable accounts at Vanguard.

About two years ago, being busy working, scared of uncertainty and recession, plus being on horizon of retirement, we agreed to Fidelity Wealth Management (FWM) for Roths and rollover IRAs (four accounts between my husband and me). This helped us relax a bit through that time, but unless they knocked our socks off, we'd go back to self-managing. That time is now.

This post is about reverse-engineering their results. And hoping some you would be interested enough to check my results with your own method.

I looked at the performance 1/1/2022 to 9/1/2023 and used Portfolio Visualizer to mimic the fund choices. I chose quarterly rebalance and dividend reinvest.

There were 12 funds used at a given time by FWM, but seven of these each held a fraction of a percent of the total. I chose to ignore those seven 'tips of the tail' funds. Another had only a few percent. The main four funds were consistent throughout, so I picked two snapshots in time.

Assume $500,000 invested.
FWM Results: $456,669

Recent FWM Allocation: FCTDX (Managed TSM) 45%, FUSIX Managed Int'l 13%, FGOMX Managed Em Mkts 5%, FIWGX Intermed Bond 33% Cash 4%... results $467,799.

Aug 2022 FWM Allocation: FCTDX (Managed TSM) 43%, FUSIX Managed Int'l 12%, FGOMX Managed Em Mkts 5%, FIWGX Intermed Bond 38% Cash 2%... results $465,128.

Mimic using common funds: FSKAX Total Stock Market 45%, FEMKX Emerging Markets 5%, FTIHX Total Int'l 12%, FTHRX Intermed Bond 35%, Cash 3%....results $469,546

My simulations exceed the FWM actual result...in about the same amount as the fees charged. For all the compute power and knowledge behind FWM, I thought they'd cover the fees at least.

Were these good simulations? If so, I'm satisfied that the robo-investing didn't add value, and the fees are a reality to accept.

LHM
.

to OP:
Also: consider using either/or "Target Date Funds" or "Balanced Funds" that are self-balancing and self maintaining to reduce "behavioral pitfalls" per forun wiki. That way, for you, it's a "set and forget" matter which ight help you in the long run.

j

[Wiggums]

Based on your analysis, Fidelity did a good job for you. You can do it yourself and save a little money or stick with the managed portfolio. I think both are reasonable choices.

We have been investing in the three fund portfolio for a very long time. Just buy and hold. Ignore the financial news channels. That’s the winning strategy!

[Boglegrappler]

If you look at two years ago to today, equities are flat to somewhat down, and I believe bonds are down materially. Doesn't look to me like that result is super awful, but I get your point that you would like them to beat the market by at least the fees so that you break even against an indexed portfolio.

A good question is what would you have done with the assets if you were self managing? Possibly you are better off to have had them running it.

[student]

I think the result is within my acceptable range but I don't think a period of less than 2 years is a very good base of comparison.

[Artful Dodger]

It is depressing to see a loss over two years, but at least you know the FWM portfolio didn’t do significantly worse than your index fund benchmarks. When I looked at my FA 10+ years go, they did much worse.

You don’t have to leave Fidelity to drop their management services. I put around $500k in a managed bond portfolio around four years ago. Fidelity’s PAS fee was .4% which compared favorably to their total bond fund. In the end I didn’t see any outperformance from the managed portfolio vs the bond fund and dropped their service in January 2022.

Just decide which funds you want going forward and give them a call. They will transfer you out of the service, liquidate the holdings, and move the proceeds into a money market fund. Then you can buy whatever you like.

[WillRetire]

I think the result is within my acceptable range but I don't think a period of less than 2 years is a very good base of comparison.

+1. Agree with this.

Stocks have bounced back more than bonds, so right now, bonds are (still) a drag. However, this is not the time to change course by getting out of bonds (or stocks) unless you have a really good reason to do so for the long-term.

Focus on the effective asset allocation, and have a discussion with Fidelity as to your comfort level with that AA.

[nedsaid]

Sounds to me that Fidelity Wealth Management did about as one would expect so I wouldn't be mad about the job that they did. It is not easy for anyone to beat the market averages and generate alpha, probably the best you could expect would be for any outperformance to reduce the drag of the fees a bit. I would not expect any Advisory service to beat the market. What an Advisor can do is put you into a well diversified portfolio, what they most often cannot do is beat the market, particularly after fees.

[rkhusky]

+1 for target date funds in the IRA’s. Much less expensive.

[mikebh]

OP,

did you get any guidance, advice, planning or etc from FWM ?
the 0.4% fee is on lower end for such services IMHO
average market management fee is about 1.00%

personally I've looked into Wealth Management for several years, and every time, upon getting to know what WM team will do for me, I continued solo.
In a way I wasn't able to find true Wealth Management, but investment portfolio management for a fee 0.4% - 1.25%
everyone premised Planning, including tax planning, but after detailed questions answer was almost the same - WM will talk to my CPA, yes at my extra expense as well
I don't have free CPA

Will you do better by yourself? I think you will as you well enough educated for this matter to build and managed own portfolio.

I really think that any WM is for anyone who doesn't want to spend time for learning and managing own portfolio, but just let it be done by a professional, sure it comes with a fee.
So anyone will trade own time vs those fee - very subjective and personal case IMHO

Any robo adviser also would build and manage a portfolio, but also it comes with a fee. I think around the same 0.40%, might get less.

I have kind of the same question - why to pay extra for a service that manages funds or ETFs that already comes with a fee?
Should 3 funds portfolio, or a Target Fund, or single Total Market ETF be enough and way less expansive?

my 2c.

[dave1054]

I agree with mikebh. Not only is management fee about 0.4% but Fidelity also uses actively managed mutual funds of about 0.6%. Total of about 1% which is not cheap. In contrast Vanguard PAS total is slightly above 0.3%.
I think the real question to answer is which company would provide better service upon the demise of the spouse with the most knowledge of financing

quote=mikebh post_id=7465001 time=1694920534 user_id=196668]
OP,

did you get any guidance, advice, planning or etc from FWM ?
the 0.4% fee is on lower end for such services IMHO
average market management fee is about 1.00%

personally I've looked into Wealth Management for several years, and every time, upon getting to know what WM team will do for me, I continued solo.
In a way I wasn't able to find true Wealth Management, but investment portfolio management for a fee 0.4% - 1.25%
everyone premised Planning, including tax planning, but after detailed questions answer was almost the same - WM will talk to my CPA, yes at my extra expense as well
I don't have free CPA

Will you do better by yourself? I think you will as you well enough educated for this matter to build and managed own portfolio.

I really think that any WM is for anyone who doesn't want to spend time for learning and managing own portfolio, but just let it be done by a professional, sure it comes with a fee.
So anyone will trade own time vs those fee - very subjective and personal case IMHO

Any robo adviser also would build and manage a portfolio, but also it comes with a fee. I think around the same 0.40%, might get less.

I have kind of the same question - why to pay extra for a service that manages funds or ETFs that already comes with a fee?
Should 3 funds portfolio, or a Target Fund, or single Total Market ETF be enough and way less expansive?

my 2c.
[/quote]

[Call_Me_Op]

For all the compute power and knowledge behind FWM, I thought they'd cover the fees at least.

If you thought that, you have not been paying attention to the Bogleheads reading recommendations. Why do you think we recommend low-cost index funds?

Picking a few index funds is much easier than mowing your lawn. Yet, many people insist on paying tens of thousands to outsource the former while toiling in the summer heat (not to mention exposing themselves to noise, fumes and ticks) to save a few hundred bucks on the latter.

[557880yvi]

Agree that that the fees on the Fid funds + the mgmt fees are high. You sound savvy enough to self-manage. It can be overwhelming to pick funds as there are so many. I just recently did a very significant rebalance (after once again, doing the analyses using Portfolio Visualizer to compare managed vs. self-managed and the fees we save are very significant for ultimate estate value). An easy and great starting point is to use the Ultimate Buy & Hold Portfolio from Paul Merriman. He provides

https://paulmerriman.com/the-ultimate-b ... 23-update/

Select Portfolios, and choose which investment type you are interested in. For example, Mutual Funds will give you Fidelity, Schwab. T. Rowe Price and Vanguard funds. So if you want to stay with Fidelity, you will have a nice set of low-cost funds to choose from across a diversified range of funds.

[nedsaid]

OP,

did you get any guidance, advice, planning or etc from FWM ?
the 0.4% fee is on lower end for such services IMHO
average market management fee is about 1.00%

personally I've looked into Wealth Management for several years, and every time, upon getting to know what WM team will do for me, I continued solo.
In a way I wasn't able to find true Wealth Management, but investment portfolio management for a fee 0.4% - 1.25%
everyone premised Planning, including tax planning, but after detailed questions answer was almost the same - WM will talk to my CPA, yes at my extra expense as well
I don't have free CPA

Will you do better by yourself? I think you will as you well enough educated for this matter to build and managed own portfolio.

I really think that any WM is for anyone who doesn't want to spend time for learning and managing own portfolio, but just let it be done by a professional, sure it comes with a fee.
So anyone will trade own time vs those fee - very subjective and personal case IMHO

Any robo adviser also would build and manage a portfolio, but also it comes with a fee. I think around the same 0.40%, might get less.

I have kind of the same question - why to pay extra for a service that manages funds or ETFs that already comes with a fee?
Should 3 funds portfolio, or a Target Fund, or single Total Market ETF be enough and way less expansive?

my 2c.

There are Wealth Management firms that hire CPAs and who will do your tax returns, these firms are in the minority.
What most firms will do is put you into a more tax efficient portfolios, give you some general tax advice, and tell you to consult your tax advisor. You found that there are limits to what many Wealth Management firms can or will do. Part of the reasoning is that such firms don't want to take on the potential liability for giving out tax advice.

[VgSince1982-2]

Thanks for the many thoughtful replies.

To answer some questions - Fidelity charges 0.7% but rebates some each quarter apparently to avoid double dipping. The net is 0.5-ish

I had managed our accounts for years using a simple portfolio, and using Morningstar boxes to watch small vs large, growth vs income and overall stock vs bond percentages. I took a snapshot each quarter and have those printed in a binder. I rebalanced with new money to keep it simple. I'm prepared to go back to self-managing again, but the two years of FWM got us through a crisis in confidence - in the economy, and in self-managing.

Why use the Portfolio Visualizer? I liked the idea of taking a 'closed system' (1/1/2022 to 9/1/2023) and running different scenarios to compare to real-world results. I was just surprised that none of my choices of fund combinations did as badly as the FWM actual results. They're held to 65/35 per our choice. All I can figure is their lesser results were either 1) all because of fees or 2) the 7 funds with less than 1% of the total (comprising 7 of 12 fund choices) were real boat anchors and dragged it down.

To end FWM, we open a new Roth account and move the Roth money over, then repeat similarly for all four accounts. I/we will need to have fund choices ready.

And since we're on this topic: In addition to trying to mimic what FWM did, (and I didn't show this) I put in some simple 3, 4 and 5 fund portfolios that covered the same time period. These did a good job and also did better than the FWM portfolios.

US Stock portion: Either Total Stock Market, or split 500 Index and some Small Value
International: Total International (edited to add this)
Bond Portion: Either Intermediate Treasury fund or split TIPS and Treasury funds.

These are all retirement-account dollars, and percentages will be based on the overall taxable+retirement portfolio.

I'd welcome comments on fund selections. I'm having trouble arguing for Total Bond, besides simplicity.

Again - many thanks. This forum is a source of renewed confidence for self-managed investing.

[afan]

An interesting single data point, I suppose.

There are hundreds, at least, of carefully done academic studies that indicate no reason to expect professional management to outperform a simple cap weighted strategy. No reason to expect outperformance before fees. After fees, you should expect to do worse. The risk adjusted returns from the active management strategy will bounce around those of the market. Sometimes better, sometimes worse-again before fees.

You are better off with a simple portfolio and no extra charges.

[NDHawkFan]

"Picking a few index funds is much easier than mowing your lawn. Yet, many people insist on paying tens of thousands to outsource the former while toiling in the summer heat (not to mention exposing themselves to noise, fumes and ticks) to save a few hundred bucks on the latter." ---Call_me_OP
+1 < This... Brilliantly phrased.

[Northern Flicker]

The IRAs should not be treated as portfolios separate from the taxable account so that an overall asset allocation may be implemented. In that sense, having an advisor for just the tax-qualified accounts already is a suboptimal strategy.

[PottedPlant]

The only actual work the manager is doing is:
…

Not quite true.
Our daughter and her husband are paying for Fido advice.
I asked her why. “So [husband name] doesn’t panic and do something stupid.”

[ralph124cf]

The only actual work the manager is doing is:
…

Not quite true.
Our daughter and her husband are paying for Fido advice.
I asked her why. “So [husband name] doesn’t panic and do something stupid.”
[/

This is definitely one of the few rational reasons for paying for a Financial Advisor.

[dogagility]

I'd welcome comments on fund selections.

Total market stock and fixed income index funds are appropriate. Total International Stock. Total US Stock. TIPS Index Fund. Total Bond Market Index Fund.

The main driver for your portfolio and your psychology will be selecting an appropriate asset allocation for your entire portfolio.

I don't think the forum has enough information on your situation to give you the best advice. I'd suggest starting a new thread using this format for asking portfolio questions. https://www.bogleheads.org/wiki/Asking_ ... _questions