Should my 21-year old nephew fire his financial advisor?

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Stinky
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Stinky »

beyou wrote: Sun Feb 11, 2024 1:02 pm
If the 21 year old is in a low tax bracket, as is often the case for someone that age, it is possible to sell at zero capital gains tax.
You may need to gradually sell over a period of time to spread out the gains and sell them all at 0 tax. No need to sell all at once.
If dividends have been consistently reinvested, it’s possible that the remaining embedded gain on the existing assets is close to zero. Taxes would have been paid on the dividends over the years.

If the current tax hit from selling all funds is small or zero, I’d much rather see them rip off the bandaid, ditch all the current funds, and start with a clean slate.
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Re: Should my 21-year old nephew fire his financial advisor?

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Re: Should my 21-year old nephew fire his financial advisor?

Post by dogagility »

herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by the_wiki »

If self managing seems daunting, At least get him into a robo advisor. Fee would be less than 1/3 and they would use a sensible portfolio of low cost index funds. Some even do tax loss harvesting automatically.

Wealthfront, betterment, fidelity go, etc.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by beernutz »

herrick55 wrote: Sat Feb 10, 2024 5:46 pm My nephew inherited a large sum of money before he was 18, and my sister hired a financial advisor to manage it. The current amount of money is $294,000 and the asset allocation on the January 2024 financial statement is 6.23%. cash, 30.19% equities, 22.87% fixed income, 8.77% other, and 31.94% undefined.

[snip]
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Re: Should my 21-year old nephew fire his financial advisor?

Post by aristotelian »

delamer wrote: Sat Feb 10, 2024 6:19 pm He certainly needs to get his money out from the advisor.

But he should proceed carefully with selling anything until he knows the tax implications.

As far as his asset allocation is concerned, the best decision will depends on how he wants to use the money. A new car next year is different than graduate school in 3 years is different than a house downpayment in 10 years is different than retirement in 40 years.
I'm guessing at age 21 he is in a low tax bracket sontax implications are likely minimal. The investment implications of getting stuck in a poor fund with 60 years of expected growth are by far the bigger consideration. Of course, I agree the youngster should understand the situation and make a plan before selling everything all at once
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Re: Should my 21-year old nephew fire his financial advisor?

Post by grabiner »

aristotelian wrote: Sun Feb 11, 2024 7:28 pm
delamer wrote: Sat Feb 10, 2024 6:19 pm He certainly needs to get his money out from the advisor.

But he should proceed carefully with selling anything until he knows the tax implications.

As far as his asset allocation is concerned, the best decision will depends on how he wants to use the money. A new car next year is different than graduate school in 3 years is different than a house downpayment in 10 years is different than retirement in 40 years.
I'm guessing at age 21 he is in a low tax bracket sontax implications are likely minimal. The investment implications of getting stuck in a poor fund with 60 years of expected growth are by far the bigger consideration. Of course, I agree the youngster should understand the situation and make a plan before selling everything all at once
The main tax consideration may be whether to sell over one year or two, and this may depend on his kiddie tax status. At age 21, he is subject to the kiddie tax only if he is a student, and does not provide half his support with earned income.

If he is not subject to the kiddie tax, he pays no tax up to $47,025 in total taxable income (total income + standard deduction), so if his capital gains would take him over that limit, he should sell the holdings with the lowest long-term gains, and anything with a trivial gain even if it is short-term, to get close to that income level; the remaining sales can wait until next year to use up the 0% rate. I wouldn't suggest waiting more than one year; since the stock market is likely to go up, the capital gains will only get larger over two.

If he is subject to the kiddie tax, then all the long-term capital gains will be taxed at his parents' rate, likely 15%; the dividends have used up the exemption. This would suggest selling everything all at once.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by momopi »

I'm really confused by the fund selection. If the goal was to have a fairly conservative portfolio using American funds, what's with the Uranium and Gold miner sector funds?? It would've made more sense to allocate that part of the portfolio to Growth Fund of America, and the rest in lesser aggressive funds like American Balanced fund and so on.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by BitTooAggressive »

momopi wrote: Mon Feb 12, 2024 12:20 am I'm really confused by the fund selection. If the goal was to have a fairly conservative portfolio using American funds, what's with the Uranium and Gold miner sector funds?? It would've made more sense to allocate that part of the portfolio to Growth Fund of America, and the rest in lesser aggressive funds like American Balanced fund and so on.
Advisor probably got a commission.

A total nonsensical portfolio.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by White Coat Investor »

dogagility wrote: Sun Feb 11, 2024 6:55 pm
herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
LPL
Edward Jones
Primerica
Wells Fargo
Northwestern Mutual
First Command
Northstar Financial

Any other large financial companies that belong on the list of companies I'll never do business with? That's all I can think of right now.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by dogagility »

White Coat Investor wrote: Mon Feb 12, 2024 8:31 am
dogagility wrote: Sun Feb 11, 2024 6:55 pm
herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
LPL
Edward Jones
Primerica
Wells Fargo
Northwestern Mutual
First Command
Northstar Financial

Any other large financial companies that belong on the list of companies I'll never do business with? That's all I can think of right now.
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herrick55
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Re: Should my 21-year old nephew fire his financial advisor?

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The dividends have been consistently reinvested. No withdrawals. My nephew has never been employed, so no earned income.
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herrick55
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

My sister also informed me that she has a Roth IRA in LPL Financial, American funds: Capital World Growth and Income Fund-A, value $7,800.

And, my nephew has College Enrollment Fund 529A (American Funds) in LPL Financial, value $73,700.

Should they move those funds out of LPL as well and into Vanguard or Fidelity?
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Re: Should my 21-year old nephew fire his financial advisor?

Post by GaryA505 »

Threads like this remind me of why some people hate all Financial Advisors.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by mhadden1 »

herrick55 wrote: Mon Feb 12, 2024 11:42 am My sister also informed me that she has a Roth IRA in LPL Financial, American funds: Capital World Growth and Income Fund-A, value $7,800.

And, my nephew has College Enrollment Fund 529A (American Funds) in LPL Financial, value $73,700.

Should they move those funds out of LPL as well and into Vanguard or Fidelity?
I use or have used Vanguard, Fidelity, and Schwab. I think most on the forum would agree that all three firms are just fine, and there are others, but LPL is not one. I would move entirely away from LPL if possible. Pretty sure the American fund you mention charges a big front-end load to buy in, if so, that's just horrible. If the 529A is being rapidly spent down for college expenses it might not be worth changing. If the A means ABLE account, and there is a need for an ABLE account for permanent use, I would not use LPL.
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Re: Should my 21-year old nephew fire his financial advisor?

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A recession is always comeing. What matters is when, for how long, and what sectors will do the best.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by peterw »

herrick55 wrote: Sat Feb 10, 2024 5:46 pm My nephew inherited a large sum of money before he was 18, and my sister hired a financial advisor to manage it. The current amount of money is $294,000 and the asset allocation on the January 2024 financial statement is 6.23%. cash, 30.19% equities, 22.87% fixed income, 8.77% other, and 31.94% undefined.

The holdings are as follows:
ABALX American Balanced CL.A $43,500
BUFD First Trust Vest Fund Deep Buffer ETF $25,200
URA Global X Uranium ETF $16,700
AMECX Income fund of America CL A $59,200
ASBAX Short term bond of America CL A $41,400
GDX Vaneck Gold Miners ETF $6,300
Insured Cash account $7,700

Unit Investment Trusts:
First Trust Shrt Dur F/Inc SEL.59 MO CA $43,200
First trust Precious Metals.SEL MO CA $17,000
First Trust CBOE VEST LGCP DEEP 49 AN CA $33,700

My sister asked for my advice this morning on whether or not she should fire the financial advisor and put her son's money in Vanguard (he already has $500 in a Vanguard brokerage account VOO).
She recently called the advisor to inquire why a 21-year old would have such a conservative asset allocation and he replied that a recession is coming.

Personally, I am all for firing the advisor, selling the funds, rollover to Vanguard and investing in total market index funds. However, I could use some advice from Bogleheads on how to fire my nephews advisor, rollover the funds to Vanguard, and what asset allocation is appropriate for a 21-year old?
Thank you
1. Yes, fire the advisor. How to do it? Tell them the relationship is ending and you need the assets transferred.to Vanguard. As far as how to rollover, what entity is holding the funds now and what is their rollover policy? Do the funds have to be sold? If so, what are the tax implications for your nephew of selling prior to rolling over? Depending on the expense ratios of those funds, it might be better to sell and use a Vanguard fund portfolio.

2. Asset allocation; Depends on how much cash he needs for immediate needs and emergencies. Bur yes, as others have said, assuming he is gainfully employed, his investments should be on the aggressive side given his age.
Last edited by peterw on Mon Feb 12, 2024 12:44 pm, edited 1 time in total.
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Re: Should my 21-year old nephew fire his financial advisor?

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herrick55 wrote: Mon Feb 12, 2024 11:42 am My sister also informed me that she has a Roth IRA in LPL Financial, American funds: Capital World Growth and Income Fund-A, value $7,800.

And, my nephew has College Enrollment Fund 529A (American Funds) in LPL Financial, value $73,700.

Should they move those funds out of LPL as well and into Vanguard or Fidelity?
Since your nephew was being taken advantage of on his $200k account, I can only assume that the same thievery is happening on the other accounts.

Run away from this advisor at LPL. Fast!
Last edited by Stinky on Mon Feb 12, 2024 12:45 pm, edited 1 time in total.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by tibbitts »

I thought LPL was primarily a platform for independent financial advisers at this point, so is this adviser actually an LPL employee, or just an independent using LPL as a platform? I'm not sure, for example, if the relationship between LPL "corporate" and independents is the same as between EJ and independently-owned EJ offices.

In any case there's a lot that none of us knows about this situation, and the OP needs to be very careful in meddling without verifying all the facts first. For example, sometimes we research a fund and yell "load fund!!!", when the load might actually be waived or reduced. The problem with doing that is that you only get one shot at credibility, and if you make even one claim that's disproven, nothing else you ever say/recommend/etc. will be taken seriously.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Stinky »

herrick55 wrote: Mon Feb 12, 2024 11:33 am The dividends have been consistently reinvested. No withdrawals. My nephew has never been employed, so no earned income.
I’ll bet that the unrealized capital gains on nephew’s account are minimal, if not zero.

That makes selling all existing funds much easier, because the tax cost for doing so will be minimal or zero.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Torino »

OP,

Yes move it all. The inherited account and ROTH. He is young, just start over and use the future to his advantage. Think about taxes but just pay them.

If he is planning on working this summer, you can also move some of the cash over to the ROTH (if in his name).

The finacial advisor clearly has no training or qualifications in financial planning and is just putting your nephew's money in many complicated funds to just sound smart - with no rhyme or reason.

Best in the long run to move everything.

Pick an asset allocation (use a Rick Ferri model) and go with it.

Edit: Just re-read that the ROTH IRA is your sisters - move it also. Your nephew can open an ROTH IRA if he works this summer.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Taylor Larimore »

Torino wrote:
The financial advisor clearly has no training or qualifications in financial planning and is just putting your nephew's money in many complicated funds to just sound smart - with no rhyme or reason.
It appears to me that the advisor selected what was a winning fund with the biggest load--an easy sell but horrible advice.

Taylor
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

I added the Cost Basis for each fund on my original post.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by hand »

Surprised to see lots of technical arguments against the specific funds and whether or not a "conservative" allocation.
While these arguments may all be true, they obscure the underlying issue and make it more complicated to understand and take appropriate action.

Fundamental issue here is costs in this portfolio both for the funds and the advisor - which are obscene.

Nephew should absolutely fire his "advisor" and do the following:
1) Direct that no additional transactions be made on the account without written authorization
2) Do the math themselves to understand impact that fees have had on their windfall over time
3) Do the math themselves to understand performance lag vs. a vanilla 80/20 or 60/40 portfolio
4) Take the appropriate action - move to a low cost provider and a reasonable asset mix
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Re: Should my 21-year old nephew fire his financial advisor?

Post by delamer »

herrick55 wrote: Mon Feb 12, 2024 2:18 pm I added the Cost Basis for each fund on my original post.
Looks like roughly $14,000 in gains. If they are all long-term and if your nephew has to pay capital gains tax of 15% on thrm all, then the bill will be roughly $2,100. More if there is a state/local income tax.

But that’s a lot of assumptions. Could be more if the gains are short-term; could be less if his income is low.

Is he a dependent student?
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Taylor Larimore »

herrick:
My sister asked for my advice this morning on whether or not she should fire the financial advisor and put her son's money in Vanguard (he already has $500 in a Vanguard brokerage account VOO).
She recently called the advisor to inquire why a 21-year old would have such a conservative asset allocation and he replied that a recession is coming.
The financial advisor(?) is a market timer. Read what experts say about "market timing":

https://www.bogleheads.org/wiki/Taylor_ ... ing_quotes

Best wishes.
Taylor
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Elric »

Not much new, but figured a consolidated list might help:
  • Firing this advisor is a no-brainer, as many others have said. But see below for the order of things.
  • Check with Vanguard on which funds they can accept as transfers in-kind, without cashing out and triggering taxes. If there are some, I'd recommend checking with Fidelity and Schwab to see if they could accept more.
  • As others have said, do check on the gains and tax implications. It may be that some or all can be sold with little to pay in taxes. That can come later for those that Vanguard or whomever will accept, but might be an immediate issue for some.
  • Do collect up all of the basis information BEFORE transferring. As others have said, this doesn't always come over as it should, and the time to get the information is BEFORE you leave the current advisor.
  • Do NOT tell your advisor that you are leaving. Work through Vanguard (or wherever he chooses to end up). They will start the ACATS transfers and it's in their interest for things to move quickly.
  • Consider him telling his advisor, in writing (email probably fine) to NOT conduct any trades, purchases, or sales for the time being. You don't need to provide an explanation. This is to prevent the advisor from trading to earn any last commissions / fees before the transfer.
  • As others have said, once the transfer is made, turn off automatic reinvestment on any funds that he doesn't want to keep.
  • Your plan to work with him on an IPS is an excellent one.
  • Consider whether he feels confident enough and is knowledgeable enough to self-manage immediately or not. If not, consider a low-cost approach like PAS at Vanguard or similar at Fidelity or Schwab. This can serve as relatively low-cost training wheels if needed, and he can always move to self-manage later.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Stinky »

herrick55 wrote: Mon Feb 12, 2024 2:18 pm I added the Cost Basis for each fund on my original post.
Thank you for posting the cost basis information.

Poster “delamer” said below that the capital gains taxes if all the assets in the $294k taxable account were sold might be $2,100, give or take.

If that’s anywhere close to what the taxes would be, I would consider that to be a small price (less than 1% of the assets) to get away from this advisor and reinvest in appropriate assets. Heck, the advisor’s bad fund choices are probably costing your nephew well more than 1% per year right now.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

My deepest thanks to you all for the advice. Especially Elric for the list. I just sent it to my sister and nephew. I also sent the Vanguard "Transfer Assets from another firm" link to my sister. She plans to initiate the transfer tomorrow and I will be available to help her if needed.

I fired my Edward Jones advisor in 2013 after I had discovered the Boglehead Forum and educated myself on investing via reading the wiki posts and books such as the Boglehead Guide to Investing. I remember calling my EJ advisor to inform him that I was transferring all assets to Vanguard and purchasing Total Market Index Funds. I don't remember his exact final words, but they were something like "Actively managed funds will always do better in the stock market than index funds". I replied that I disagree with that statement and he hung up. :mrgreen:

I will let you all know what transpires in the next several days. Cheers.

P.S. Thanks for your comments and Happy Birthday Taylor. I just returned from visiting my 92 year-old father who is a Korean War Veteran (he served in the Navy on the USS Helena). I am very proud of him.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

delamer wrote: Mon Feb 12, 2024 2:27 pm
herrick55 wrote: Mon Feb 12, 2024 2:18 pm I added the Cost Basis for each fund on my original post.
Looks like roughly $14,000 in gains. If they are all long-term and if your nephew has to pay capital gains tax of 15% on thrm all, then the bill will be roughly $2,100. More if there is a state/local income tax.

But that’s a lot of assumptions. Could be more if the gains are short-term; could be less if his income is low.

Is he a dependent student? Yes. He lives at home. No job, no income and no expenses.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Taylor Larimore »

Herrick55 wrote:
Thanks for your comments and Happy Birthday Taylor. I just returned from visiting my 92 year-old father who is a Korean War Veteran (he served in the Navy on the USS Helena). I am very proud of him.
Hweeixk55:

Please tell your father that I appreciate his contributions to the war effort while he was in the Navy.

It may interest you to know that I taught a 10-year old boy named Keith Davids to sail. Keith became an excellent sailor and I recommended him for entry into the U.S. Naval Academy.

Keith is now the highest-ranking SEAL admiral in the Navy.

His wife (also an admiral) was recently appointed Superintendent of the U.S. Naval Academy.

Best wishes.
Taylor
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Elric »

herrick55 wrote: Mon Feb 12, 2024 2:18 pm I added the Cost Basis for each fund on my original post.
Just to make sure, you are including all reinvested dividends, interest, gains in the basis, correct?
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Re: Should my 21-year old nephew fire his financial advisor?

Post by nassau34 »

barnaclebob wrote: Mon Feb 12, 2024 12:26 pm A recession is always comeing. What matters is when, for how long, and what sectors will do the best.
And good luck figuring out when to jump back in.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by nassau34 »

It's great that you have cost basis information, assuming it's correct. I was afraid some of the investments would have been from before brokerages were required to maintain cost basis.

Although I'm generally against financial advisors, in this case it might be worth going with one from Vanguard. They won't come up with any better ideas than he could get from this forum, but the question is whether he wants to spend the time to learn the basics, and maybe more importantly stay the course. Many his age just will not do it.
Last edited by nassau34 on Wed Feb 14, 2024 11:46 am, edited 2 times in total.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Katietsu »

tibbitts wrote: Mon Feb 12, 2024 12:44 pm I thought LPL was primarily a platform for independent financial advisers at this point, so is this adviser actually an LPL employee, or just an independent using LPL as a platform? I'm not sure, for example, if the relationship between LPL "corporate" and independents is the same as between EJ and independently-owned EJ offices.

In any case there's a lot that none of us knows about this situation, and the OP needs to be very careful in meddling without verifying all the facts first. For example, sometimes we research a fund and yell "load fund!!!", when the load might actually be waived or reduced. The problem with doing that is that you only get one shot at credibility, and if you make even one claim that's disproven, nothing else you ever say/recommend/etc. will be taken seriously.
It sounds like the OP’s relative has decided to move on. But, my understanding is the same as yours. I do not think using LPL as the platform for a CFP office says anything definitive about the advisor.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

Elric wrote: Mon Feb 12, 2024 7:49 pm
herrick55 wrote: Mon Feb 12, 2024 2:18 pm I added the Cost Basis for each fund on my original post.
Just to make sure, you are including all reinvested dividends, interest, gains in the basis, correct?
Yes, that is correct.
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herrick55
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

Katietsu wrote: Mon Feb 12, 2024 10:54 pm
tibbitts wrote: Mon Feb 12, 2024 12:44 pm I thought LPL was primarily a platform for independent financial advisers at this point, so is this adviser actually an LPL employee, or just an independent using LPL as a platform? I'm not sure, for example, if the relationship between LPL "corporate" and independents is the same as between EJ and independently-owned EJ offices.

In any case there's a lot that none of us knows about this situation, and the OP needs to be very careful in meddling without verifying all the facts first. For example, sometimes we research a fund and yell "load fund!!!", when the load might actually be waived or reduced. The problem with doing that is that you only get one shot at credibility, and if you make even one claim that's disproven, nothing else you ever say/recommend/etc. will be taken seriously.
It sounds like the OP’s relative has decided to move on. But, my understanding is the same as yours. I do not think using LPL as the platform for a CFP office says anything definitive about the advisor.
My nephew's advisor is an LPL Financial employee in Washington state.
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Re: Should my 21-year old nephew fire his financial advisor?

Post by White Coat Investor »

dogagility wrote: Mon Feb 12, 2024 9:19 am
White Coat Investor wrote: Mon Feb 12, 2024 8:31 am
dogagility wrote: Sun Feb 11, 2024 6:55 pm
herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
LPL
Edward Jones
Primerica
Wells Fargo
Northwestern Mutual
First Command
Northstar Financial

Any other large financial companies that belong on the list of companies I'll never do business with? That's all I can think of right now.
Raymond James
Another fine addition to the list.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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beernutz
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Re: Should my 21-year old nephew fire his financial advisor?

Post by beernutz »

White Coat Investor wrote: Tue Feb 13, 2024 9:16 am
dogagility wrote: Mon Feb 12, 2024 9:19 am
White Coat Investor wrote: Mon Feb 12, 2024 8:31 am
dogagility wrote: Sun Feb 11, 2024 6:55 pm
herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
LPL
Edward Jones
Primerica
Wells Fargo
Northwestern Mutual
First Command
Northstar Financial

Any other large financial companies that belong on the list of companies I'll never do business with? That's all I can think of right now.
Raymond James
Another fine addition to the list.
I haven't read many good experiences about Ramsey's Smartvestor advisors. Their reviews generally include that their clients were recommended high front-loaded funds.
AA: 30/55/15 - equities/positive return-zero volatility/bonds
Katietsu
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Katietsu »

herrick55 wrote: Tue Feb 13, 2024 8:54 am My nephew's advisor is an LPL Financial employee in Washington state.
I just reviewed the LPL information for advisors. Their public information seems to indicate that LPL has no clients. The advisors with LPL are considered independent and own 100% of their book of business. I have seen the listings and statements from advisors who partner with the like of LPL or Cetera, they present like Edward Jones. But if you were to file a complaint, for instance, I think there is a good chance that you would find it is a different structure behind the scenes.
ClassII
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Re: Should my 21-year old nephew fire his financial advisor?

Post by ClassII »

yogesh wrote: Sat Feb 10, 2024 10:49 pm Fire the advisor and use life strategy or target retirement fund that can be set on auto pilot

Objection! This is a taxable brokerage account. Target fund is likely going to spin off significant capital gains especially in turbulent years when the fund needs to buy and sell a bunch to maintain its ratios.

First I’d move everything to a self managed brokerage then start selling the worst offending funds (I’d start with fixed income and high expense funds) at a brisk pace. How fast depends on a lot (is the 21 yo working or in school?) but I’d be very inclined to keep it simple. Sell it all, start over and write a big check for capital gains. Just be done with it and get the poor kid into VTI as fast as possible.
nanosour
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Re: Should my 21-year old nephew fire his financial advisor?

Post by nanosour »

herrick55 wrote: Tue Feb 13, 2024 8:54 am
Katietsu wrote: Mon Feb 12, 2024 10:54 pm
tibbitts wrote: Mon Feb 12, 2024 12:44 pm I thought LPL was primarily a platform for independent financial advisers at this point, so is this adviser actually an LPL employee, or just an independent using LPL as a platform? I'm not sure, for example, if the relationship between LPL "corporate" and independents is the same as between EJ and independently-owned EJ offices.

In any case there's a lot that none of us knows about this situation, and the OP needs to be very careful in meddling without verifying all the facts first. For example, sometimes we research a fund and yell "load fund!!!", when the load might actually be waived or reduced. The problem with doing that is that you only get one shot at credibility, and if you make even one claim that's disproven, nothing else you ever say/recommend/etc. will be taken seriously.
It sounds like the OP’s relative has decided to move on. But, my understanding is the same as yours. I do not think using LPL as the platform for a CFP office says anything definitive about the advisor.
My nephew's advisor is an LPL Financial employee in Washington state.
Congratulations on helping your nephew out with this situation. Your efforts will no doubt result in $millions of dollars when it's all said and done 45 years from now. I keep a spreadsheet that I named "The cost of a Financial Advisor". It has the annual returns for ABALX and VTSAX back to 2004. Starting with $294K in ABALX at 2.5% AUM which is what it will end up being as I'm sure the Advisor fee is likely 1.5% AUM for assets under 500K, then add in all the churn which will undoubtedly end up at 2.5% overall expenses. Heck even if you just add the .51% ABALX exp ration to the 1.5% you're already over 2%. The results for $294K invested in ABLAX is $721,609 after 20 years. Results if invested in VTSAX...$2,629,905. Compound those numbers for another 20 years and we're talking generational wealth.
mkc
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Re: Should my 21-year old nephew fire his financial advisor?

Post by mkc »

White Coat Investor wrote: Mon Feb 12, 2024 8:31 am
dogagility wrote: Sun Feb 11, 2024 6:55 pm
herrick55 wrote: Sat Feb 10, 2024 6:00 pm Individual account with LPL Financial.
LPL is similar to Edward Jones... run away.
LPL
Edward Jones
Primerica
Wells Fargo
Northwestern Mutual
First Command
Northstar Financial

Any other large financial companies that belong on the list of companies I'll never do business with? That's all I can think of right now.
Morgan Stanley (other than potentially the ETrade side)
Merrill Lynch (other than Merrill Edge)
Money_Badger
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Location: Raleigh NC

Re: Should my 21-year old nephew fire his financial advisor?

Post by Money_Badger »

herrick55 wrote: Mon Feb 12, 2024 5:52 pm My deepest thanks to you all for the advice. Especially Elric for the list. I just sent it to my sister and nephew. I also sent the Vanguard "Transfer Assets from another firm" link to my sister. She plans to initiate the transfer tomorrow and I will be available to help her if needed.

I fired my Edward Jones advisor in 2013 after I had discovered the Boglehead Forum and educated myself on investing via reading the wiki posts and books such as the Boglehead Guide to Investing. I remember calling my EJ advisor to inform him that I was transferring all assets to Vanguard and purchasing Total Market Index Funds. I don't remember his exact final words, but they were something like "Actively managed funds will always do better in the stock market than index funds". I replied that I disagree with that statement and he hung up. :mrgreen:

I will let you all know what transpires in the next several days. Cheers.

P.S. Thanks for your comments and Happy Birthday Taylor. I just returned from visiting my 92 year-old father who is a Korean War Veteran (he served in the Navy on the USS Helena). I am very proud of him.
Thanks for helping your sister and nephew!

I would suggest that you let your nephew know that once he has Earned Income, he should start to move this money into a Roth IRA as fast as possible. I believe he would be able to contribute up to the amount he earns or 7K (for 2024) whichever is smaller. This would greatly reduce tax burdens later in life.
bloom2708
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Re: Should my 21-year old nephew fire his financial advisor?

Post by bloom2708 »

Much better at 21 than 41 or 51. The fees are killers after 20, 30, 40 years. Wealth killers.

Here is a tool to run some scenarios through:

https://www.dinkytown.net/java/compare- ... -fees.html
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herrick55
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Re: Should my 21-year old nephew fire his financial advisor?

Post by herrick55 »

Update: My sister successfully transferred all of my nephew's individual account and 529 account holdings from LPL Financial to Vanguard, including her Roth IRA. Next step is deciding upon an asset allocation and mutual funds to purchace once my nephew starts to sell the transferred LPL holdings. I would recommend an asset allocation of either 90 stocks and 10% bonds, or 80% stocks and 20% bonds. He will start his first job this summer. He has no big expenses planned. Regarding mutual fund holdings, I would recommend Total Stock Market, Total International Stock Market, and Total Bond Market Index Funds. He is investing for the long term, he is interested in learning more about investing and I sent him the Bodgeheads Guide to Investing for his upcoming birthday

We will appreciate any other recommends and comments on this plan of going ahead. Thank you.
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Stinky
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Stinky »

herrick55 wrote: Thu Feb 15, 2024 9:31 am Update: My sister successfully transferred all of my nephew's individual account and 529 account holdings from LPL Financial to Vanguard, including her Roth IRA. Next step is deciding upon an asset allocation and mutual funds to purchace once my nephew starts to sell the transferred LPL holdings. I would recommend an asset allocation of either 90 stocks and 10% bonds, or 80% stocks and 20% bonds. He will start his first job this summer. He has no big expenses planned. Regarding mutual fund holdings, I would recommend Total Stock Market, Total International Stock Market, and Total Bond Market Index Funds. He is investing for the long term, he is interested in learning more about investing and I sent him the Bodgeheads Guide to Investing for his upcoming birthday

We will appreciate any other recommends and comments on this plan of going ahead. Thank you.
That all sounds absolutely excellent!

Assuming he doesn’t need to touch the money in the near term, he’s investing for maybe 40 or more years. In this case, “aggressive” is good.

And you’ve done a very good thing here in (a) helping guide sister and nephew through the process and (b) gifting your nephew maybe the best single book he could be reading.

All around, this is a great report.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
spacemanspif
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Re: Should my 21-year old nephew fire his financial advisor?

Post by spacemanspif »

OP, take a bow. Nice work.

You asked about other resources you might be able to provide your nephew. I have a niece the same age and we spent some time together in a "plan your financial future" crash course this past summer. She absorbed it like a sponge. Recently she told me that she has been watching "the money guys" on youtube. I am guessing a young 20 something probably prefers to consume info on their iPhones when possible. I have watched several of their videos and they seem to give good advice.
Katietsu
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Katietsu »

herrick55 wrote: Thu Feb 15, 2024 9:31 am Update: My sister successfully transferred all of my nephew's individual account and 529 account holdings from LPL Financial to Vanguard, including her Roth IRA. Next step is deciding upon an asset allocation and mutual funds to purchace once my nephew starts to sell the transferred LPL holdings. I would recommend an asset allocation of either 90 stocks and 10% bonds, or 80% stocks and 20% bonds. He will start his first job this summer. He has no big expenses planned. Regarding mutual fund holdings, I would recommend Total Stock Market, Total International Stock Market, and Total Bond Market Index Funds. He is investing for the long term, he is interested in learning more about investing and I sent him the Bodgeheads Guide to Investing for his upcoming birthday

We will appreciate any other recommends and comments on this plan of going ahead. Thank you.
Does he understand that the value of his account could be cut in half with the aggressive allocation that you are suggesting? What do you mean by investing for the long term? Does this mean he will not use this money for a couple of decades? Does he have other resources should he need a new car? Does he have other resources if he has a child in the next few years, regardless of whether or not he is planning for it now?

Personally, I would never recommend anyone put 90% of their net worth into the stock market, let alone all at once. If a person educated themselves and truly understands the risks, that is very different than Mom & Uncle told me this would be a good idea. Most 21 year olds have lots of milestones that occur during the next decade or so of their life where money can be very helpful. Are there other funds to assist?
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Will do good
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Re: Should my 21-year old nephew fire his financial advisor?

Post by Will do good »

Suggest they came to this site and learn.
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