50 year old, Rolling Over sizable 401k, Should I dump my Financial Planner?

[krldrummerboy]

Big_Hitter
My 401k is Vanguard which is looking to be a good thing. So, i wont be taking out. Will keep the account and get things moving over to it

[gcgang]

Quote:

Originally Posted by krldrummerboy Hi, I am a first time poster, but very interested in learning more about retirement investing. Specifically, whether or not I should stick with Ameriprise or go it on my own... HISTORY: My Ameriprise planner has been good for me, but, she is flighty (she manages a lot of wealthy silicon valley engineers I suppose) in that trades are delayed and promises to summarize meetings are sometimes forgotten. She has messed up the year to allocate my Roth as well as my kids Coverdell IRAs (which caused tax issues). This was more her assistants fault, be she is ultimately responsible. The growth seems okay, except for the last few years (more market then her I suspect). I mostly trust her decisions and dont tend to think about the account after our yearly update (we meet once a year, my decision). She wants me to roll-over my 401k to her (makes sense). She says that then the account value will be high enough for her to start actively trading stocks for me (if I bring the brokerage cash up to $100k.....which I can just about do). This will cost me 1.5% annually from the brokerage account value. She says that this is the new Ameriprise model in that mutual funds have been stagnant and that stock trading has better results. I wonder if this is more a fee driven philosophy.

It sounds like you currently have subpar service, either due to incompetence or negligence. Did the FA offer to "make up" for what her mistake cost you? I know she can't write you a check, but she could forgive some fees. Unless the fees are all in the funds now. But still, she should do something.

I can see that you'd be "saving" money under her new format, paying 1.5% instead of the funds' assumed 2%. But what makes you think she could competently trade stocks? I trade my own stocks, but actually have very few trades, mostly just tax loss selling when the opportunity presents itself. Trading that generates realized gains is a further drag on your returns. I'll buy you a burger if she has any sort of audited track record.

You didn't mention any planning services she provides, did you? Some sort of Monte Carlo analysis for your retirement goal would seem to be a basic service any decent FA would provide. Good FAs actually can provide added value, although many people on this forum are proof that it's not that difficult to do yourself.

Congratulations on your saving and young family, and for getting serious about how to handle your investments. I think you'll realize that you are able to handle yourself, and will enjoy much better returns as a result.

[krldrummerboy]

GCGANG
Thanks for your input. Their fees are tied up in their funds. They dont charge for things like yearly fees, consultation fees, etc... I dont think things are as bad as some are making it out to be. To say that I am getting swindled is an overstatement. But the underlying message, that I can do as well or possibly better on my own, is valid. My opinion at this point is that she is a well-intentioned adviser that works for a not-so-great company if the person is willing to put the work in on their own (like you all). So, it's better that I move out.

I looked at the Morningstar fund comparison of $10k growth over 3 years (which is normally how long I have been holding). I found this in a blog recommended by one of the posters here. The results show she is under-performing when her investments are averaged:

VWELX = 12280
S&P = 13533
Ameriprise = 11726
My old funds = 13195
my Vanguard 401k = 13315

What this shows is that the S&P beat Ameriprise, Wellington, and me. But, I was in second place simply buying essentially DIA and SPY. She lost about 13% of my money over 3 years as compared to S&P. Ouch!

My 401K is in Vanguard (FCNKX,VIMAX,VMRGX,VSMAX) and my 3 year return is better than DIA/SPY and not quite up to S&P.

Again thanks to everyone for opening my eyes. I feel foolish for not analyzing her results more closely years ago. A simple strategy kills it.

[BigBob]

Don't beat yourself up over it. At least you have time to recover and have learned from the mistake. I think that we all have made some similar mistakes, and I, personally, have learned a lot from the folks here.

[Big_Hitter]

Quote:

Originally Posted by krldrummerboy Big_Hitter My 401k is Vanguard which is looking to be a good thing. So, i wont be taking out. Will keep the account and get things moving over to it

just checking - rolling a 401k into an IRA seems to be a kneejerk reaction for some people

[Whisper66]

Quote:

Originally Posted by BigBob ......I think that we all have made some similar mistakes, and I, personally, have learned a lot from the folks here.

Well said! We all live and learn.


Sent from my iPhone using Early Retirement Forum

[Texas Proud]

Quote:

Originally Posted by krldrummerboy GCGANG Thanks for your input. Their fees are tied up in their funds. They dont charge for things like yearly fees, consultation fees, etc... I dont think things are as bad as some are making it out to be. To say that I am getting swindled is an overstatement. But the underlying message, that I can do as well or possibly better on my own, is valid. My opinion at this point is that she is a well-intentioned adviser that works for a not-so-great company if the person is willing to put the work in on their own (like you all). So, it's better that I move out. I looked at the Morningstar fund comparison of $10k growth over 3 years (which is normally how long I have been holding). I found this in a blog recommended by one of the posters here. The results show she is under-performing when her investments are averaged: VWELX = 12280 S&P = 13533 Ameriprise = 11726 My old funds = 13195 my Vanguard 401k = 13315 What this shows is that the S&P beat Ameriprise, Wellington, and me. But, I was in second place simply buying essentially DIA and SPY. She lost about 13% of my money over 3 years as compared to S&P. Ouch! My 401K is in Vanguard (FCNKX,VIMAX,VMRGX,VSMAX) and my 3 year return is better than DIA/SPY and not quite up to S&P. Again thanks to everyone for opening my eyes. I feel foolish for not analyzing her results more closely years ago. A simple strategy kills it.

You cannot compare a balanced fund with a 100% stock fund... in up markets the stock fund will always win... in down markets the balanced fund will always win (well, unless it is run really badly)....

[skibum]

I agree with petershk to consider expenses as a cut of the portfolio withdrawal rate, roughly 4%. By this measure the expenses noted are > 50% of portfolio take home pay.

The impact of expenses over time is considerable, see bogleheads example below. I encourage the OP to work thru the bogleheads wiki to create a financial plan and appropriate portfolio.

You have a great opportunity now to develop a sound financial future. It takes some time to develop and execute a plan, but is well worth it to understand and control what you can.


Results are simulated. The saving phase simulates a participant with a salary of $45,000 at age 25, linearly increasing to $85,000 by age 65, making yearly contributions of 6% of salary at age 25, increasing by 0.5% per year to a maximum of 10% and with a 50% company matching contribution up to the first 6% of salary. In retirement, $63,750 (75% of final salary) is deducted at the beginning of each year. The blue-shaded area shows ending savings with an after cost investment return of 9% assumed at age 25, linearly decreasing to 6% at age 80 and remaining constant thereafter. Inflation is assumed to be a constant 3%. The tan-shaded area assumes 1% greater return each year due to reducing the costs of investment by 1%. All amounts are in present-day dollars. Source: AllianceBernstein, as presented to the DOL/SEC Hearing On Target Date Funds And Similar Investment Options.

[krldrummerboy]

Big Hitter
I am keeping my 401k in Vanguard. As it turns out the company that is buying us also uses Vanguard. So it should be pretty cool

[krldrummerboy]

Texas Proud
I think the only balanced fund was VWELX. The Ameriprise funds were only the Roth mutual funds listed in my original post. Anyways, it seemed like a good comparison and was something that I was capable of doing.

Well, there's no going back now. I told Ameriprise my intentions and I didn't get a lot of push back.

Now, I need to figure out the best way to transfer. I believe Vanguard can do it, but, there is the annuity and the Coverdell's. That may not be as easy. I have transferred mutual funds a few times without big issues. I plan on talking to our CFO and seeing if I can get a recommendation for a good vanguard contact in a local office (san jose).

[Walt34]

Quote:

Originally Posted by krldrummerboy In those 10 years I have purchased a home, paid off all my and my spouses college debt, had two kids, now credit card debt, and saved what looks to be $500k by the end of this year. All in 10 years.

That's pretty impressive so you're doing well!

Welcome to the forum. I can't add anything to what the others have already said, and agree that Ameriprise is fleecing you.

If you go the DIY route you don't have to beat the "pro" money managers. You just have to do slightly better than equal what they do minus their fees and you're still ahead. That's why so many people like Vanguard, Fidelity, and Schwab because the fees make so much difference over time. But in reality, you'll likely do better - much better - if you pick low-cost index funds and just sit on them rather than doing a lot of trading.

Two more book recommendations are "The Millionaire Teacher" and "How a Second Grader Beat Wall Street". Easy read and they clarify what some people think is a complex subject and make it easy. They are where I learned about the "Couch Potato Portfolio". The books also emphasize more than most other books the difference that fees make over time so that's why I recommend them.

If nothing else you could just pick a low-cost target date fund, put everything in there, and you'd still be ahead from what you're getting from Ameriprise after the fees they charge.

[robertf57]

Quote:

Originally Posted by krldrummerboy GCGANG Thanks for your input. Their fees are tied up in their funds. They dont charge for things like yearly fees, consultation fees, etc... I dont think things are as bad as some are making it out to be. To say that I am getting swindled is an overstatement.

No, things are exactly as bad as some are making it out to be. Don't kick yourself over it; but, please don't underestimate the outrageous ripoff that has occurred here. Just call Vanguard and get everything moved that you can.


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[travelover]

I've advised several friends / relatives to quit their FA by pointing out how much they are paying. This comes as a big surprise to them, as the FA doesn't give them a yearly statement that says " You paid me $10,326 out of your earnings this year."

The bad news is that this triggers an emotional response. Initially it is anger at the FA, but then it turns inward and the investor feels like they are culpable for letting it happen. Then that anger is redirected onto the person that pointed it out (in my case, me ). After all, everyone was happy until the true charges were laid bare by the troublemaker.

So, my point is that one needs to get past the emotional part of it and decide if you want to continue with the FA or do something different. It truly is not your fault that the true sum and impact of these fees is not readily known. The system is rigged in favor of the financial industry.

Edit to add: For anyone happy with their FA, don't flame me - just keep doing what you are doing. It is your money.

[krldrummerboy]

travelover
You're spot on, but, I am not remaining angry with the FA at Ameriprise. That's in the past now. I am a bit pissed at myself, but moving on asap. I, for sure, am appreciative of the folks here for helping me to arrive at a solution and motivating me to act on it without haste.

I will start a new thread here when everything is moved to Vanguard. This should be completed next week. I am already reading some of the recommended books and blogs and have a basic understanding of what I should do next. I think I will need some help sometimes though, so I can make decent decisions. I am very optimistic and thankful for everyone here!

[travelover]

Quote:

Originally Posted by krldrummerboy travelover You're spot on, but, I am not remaining angry with the FA at Ameriprise. That's in the past now. I am a bit pissed at myself, but moving on asap. I, for sure, am appreciative of the folks here for helping me to arrive at a solution and motivating me to act on it without haste. I will start a new thread here when everything is moved to Vanguard. This should be completed next week. I am already reading some of the recommended books and blogs and have a basic understanding of what I should do next. I think I will need some help sometimes though, so I can make decent decisions. I am very optimistic and thankful for everyone here!

Awesome. The thing that amazed me once I'd spent a lot of time studying it, was how simple and inexpensive investing can be.

[pixelville]

OP, good move! You still have time to recover.

Another good place to get educated about investments and personal finance is the Bogleheads Wiki. The focus is on low cost index funds and tax optimization.
https://www.bogleheads.org/wiki/Main_Page

You may have come across some recent news about Warren Buffet's bet & comments on investing and index funds.
http://finance.yahoo.com/news/buffet...211351601.html

With most people withdrawing (SWR) 3-4% of their portfolio as income during retirement, 1.5-2% asset fees (+ back end load of 5%!) would mean they have the half of the income available to spend on themselves (the other half going to the FA/MF company)!

[krldrummerboy]

Thanks Pixelville
Funny thing is that prior to Ameriprise my portfolio was VFINX, DIA, SPY. Shoulda woulda coulda

[MRG]

Quote:

Originally Posted by krldrummerboy Thanks Pixelville Funny thing is that prior to Ameriprise my portfolio was VFINX, DIA, SPY. Shoulda woulda coulda

We all have those.

That which does not kill us makes us stronger/smarter.😕

[pixelville]

Don't beat yourself over it. Most of us have been there, saw the light (of index funds). Some got there early, some a little later and a large percentage of the population is still very much in the dark and will likely never realize in their lifetime.
One has to be ready & open to this and you were, so that is great.

As you will realize over the years, it is not just about the low-fees, simplicity, passive investing (low time commitment) but also about tax-efficiency and other benefits.

I do tax volunteering mostly for seniors (also in the Bay Area) and see numerous 1099s where investors are clearly being taken for a ride by their FA but they just don't understand.

[Sarah in SC]

Honestly, unless you are completely uninterested in managing your own money (and lots of folks are), it's hard to make a case for paying someone to pick mutual funds for you. I don't see anything wrong with paying an hourly fee-only planner to make some recommendations and help you with your overall financial plan, but Ameriprise is not that place. Their model is to put you in fee generating funds or active trading accounts to make money.

I'm glad you are taking control of your accounts and educating yourself about fees and expenses. A startling number of folks never do.

I spent a few quality hours last week with the CFA in our office looking at expenses on my mutual funds, comparing them to category average, and seeing how close they hew to their respective indexes. Even though I work in this environment, I'm still guilty of not always keeping up with reviewing my own accounts at least once a year.

Good luck to you in the DIY educational journey!