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Old 02-07-2016, 11:56 AM   #61
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Financial advisors

1)should the money stay in the 401k?
That depends. Some 401k's offer reasonable investments, others are sadly inadequate and are milking the investors with fees that might make the average Financial Advisor jealous.

2)if you move the money out should you use a FA?
That also depends. You could be fine doing it yourself. Here are 8 good possible constructions from obliviousinvestor.com
http://www.obliviousinvestor.com/8-s...le-portfolios/

Your tax situation may be complex and professional advice could help.
You may believe that DFA funds are worth investing in.
http://www.bloomberg.com/news/articl...eaking-indexes
"Over the past 15 years, almost 90 percent of the company’s stock and bond strategies with a track record that long have topped their benchmarks, Dimensional data show."
You MUST use an advisor if you want to invest with DFA (or have access thru an institution like the Utah 529 accounts or a 401k). If you want to go that route use a low cost advisor with low flat fees or low AUM if your portfolio is small enough that the AUM fee is less than the flat fee. (Portfolio Solutions charges 0.37% for access to DFA. I have a large enough portfolio that my flat fees amount to less than 0.07% - and will get less percentage wise if my portfolio grows)



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Old 02-07-2016, 11:57 AM   #62
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I'm not chastising the word choice. I'm fine with "skittish", "hand-holding" or "guidance" and "perspective". I just wanted to point out that I learned a lot from an FA along the way to managing my own investments. And I still question DW's FA on investment choices. My point is that FA's are and have been helpful to some of us that now manage our investments.
Why and what did they provide that was helpful?
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Old 02-07-2016, 12:24 PM   #63
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Why and what did they provide that was helpful?
Primarily AA assistance. I was 31 in 1986 when I first got into a 401k. There wasn't a plethora of information out there on investing for retirement. Our 401k FA would meet with each employee annually, discuss their situation, and give advice on how to allocate 401k $ into the funds (+/-8) available to us.

He also prepared spreadsheets projecting 401k $ at retirement, and updated us with new 401k laws (catch up contributions, loans, etc).

DW's FA also sheds some light on tax issues, SS, rollovers, stock sales, annuities, etc.
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Old 02-07-2016, 12:50 PM   #64
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I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.

I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.

Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.

I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.
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Old 02-07-2016, 12:52 PM   #65
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Primarily AA assistance. I was 31 in 1986 when I first got into a 401k. There wasn't a plethora of information out there on investing for retirement. Our 401k FA would meet with each employee annually, discuss their situation, and give advice on how to allocate 401k $ into the funds (+/-8) available to us.

He also prepared spreadsheets projecting 401k $ at retirement, and updated us with new 401k laws (catch up contributions, loans, etc).

DW's FA also sheds some light on tax issues, SS, rollovers, stock sales, annuities, etc.
So, generally speaking, your FAs provide guidance.

The issue I've expressed to my mom is that she can't really put her finger on what the FA does, yet she pays him more than $6,000 per year (her third highest annual expense after mortgage payments and income tax) in direct fees, and this does not include the loads and expenses for the funds he puts her in. She's said to me, "he does very well for us," but seems surprised when I show her how he doesn't even meet market benchmarks that she could meet with an index fund. So for her, it really boils down to "hand-holding", and very expensive hand-holding at that.

I think many people who use FAs do not understand what their FA does and in particular how much they cost. It is, in my opinion, the most expensive "service" there is, and one that is most easily replaced when compared to auto service, plumbing, etc., for many people. An investment in learning and understanding this stuff for yourself is one of the best investments in time one can make.

The "1% AUM" is just very, very misleading. I'd argue it's borderline dishonest.

/rant
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Old 02-07-2016, 01:00 PM   #66
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I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.

I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.

Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.

I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.
I think this is spot-on.
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Old 02-07-2016, 01:12 PM   #67
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It's true that pre-internet many folks didn't perceive they had the ability to invest without an advisor. That was LAST CENTURY! The majority of the FAs charging 1% AUM are not in it for anything but themselves. My 94 yo DF'S FA neighbor hooked him, sold home the exact same Pimco funds dad could have bought himself at an extra 1% ER on top of his 1% fees. Special kind of place in he!! for that kind of FA.
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Old 02-07-2016, 01:23 PM   #68
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I know some of us preach DIY when it comes to investing. And claim that those with FA's require "hand-holding" or are "skittish". Although I manage most of my investments now, I was lucky enough to have an experienced FA managing our company 401k for almost 30 years. He certainly provided me with some investment knowledge and "hand-holding" along the way.

Did you have to pay for the FA to manage your 401k?


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Old 02-07-2016, 02:14 PM   #69
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Did you have to pay for the FA to manage your 401k?


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I did not pay the FA personally. But the funds were loaded, so I imagine he got a % of the loads. I remember that the company total 401k dollars eventually reached a point where loads were reduced or eliminated. FA also handled government 401k reporting for the company, so I imagine the company paid fees for this, but I can't remember the details.
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Old 02-07-2016, 02:51 PM   #70
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I did not pay the FA personally. But the funds were loaded, so I imagine he got a % of the loads. I remember that the company total 401k dollars eventually reached a point where loads were reduced or eliminated. FA also handled government 401k reporting for the company, so I imagine the company paid fees for this, but I can't remember the details.
I just got my 401k statement in the mail a few days ago and "actually" read all the paper work that comes along with it each quarter. (about 10 pages of info) Usually I just look at the current balance/gains and toss it aside. I knew our plan fees were very low but I was surprised to see this quarter the fees were "zero". Not sure if they charge fees on an annualized basis or waive them you have reached a certain level and/or if you don't make any changes in a particular quarter. I'm going to dig out some of the old statements just out of curiosity.
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Old 02-07-2016, 08:33 PM   #71
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I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.



I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.



Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.



I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.

Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".
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Old 02-07-2016, 09:03 PM   #72
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In the mid 80's I started listening to Bob Brinker's radio program and he advocated DIY using low cost mutual funds and other things like Treasury Direct. That's primarily how I got the confidence to DIY.


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Old 02-07-2016, 09:05 PM   #73
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Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".
I think you are saying you can't figure out a LOGICAL reason for people to hire an FA. There are lots (approximately 3 or 4 anyway) of logical reasons (which are in reality may actually be emotional reasons) that lead investors to hire an FA. I think you could see them if you kept your logical mind from interfering.

(No offense meant in the above paragraph).
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Old 02-07-2016, 09:19 PM   #74
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Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".
I agree entirely.

I have close friends that are my age, have a ton of financial assets, and use an FA (in this case, Ameriprise ). We have had some discussions about this and these intelligent and successful friends of mine would rather pay the fees than be burdened with learning and investing on their own to save the fees. Nothing I could do will change this so I don't even mention investing or anything related to it with them.
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Old 02-07-2016, 09:36 PM   #75
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I feel a slight tinge of nausea at the thought of an FA getting 1%+ of anyone's savings. It's all such a racket. Still can't believe the number of my colleagues that go that route.
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Old 02-07-2016, 10:08 PM   #76
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I am one of the people who does DIY and also uses a FA.
Currently around 10% of our total investable assets are with a FA in a taxable account (Schwab but the FA is independent and charges 1% of assets managed).
31% of our total investable assets are done by me in taxable accounts (Schwab and Vanguard).
31% of our total investable assets are in tax deferred company 401K (Vanguard).
28% is a mixture of real estate (not primary home) and company lump sum pension.
I primarily set up the FA account to compare what they can do versus what I can do over time. I have used them since Nov. 2010 and their performance, including fees, has been slightly higher than mine over the same period. They do not "churn" my account and normally only hold on average around 30-40 assorted stocks at any one time. They do not actually perform that many trades during the year. They also provide me other financial services, guidance and advice.
The current arrangement works for me right now but we will retire next year and I may look at moving completely to Vanguard and self management in 2018.
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Old 02-08-2016, 12:16 AM   #77
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I think you are saying you can't figure out a LOGICAL reason for people to hire an FA. There are lots (approximately 3 or 4 anyway) of logical reasons (which are in reality may actually be emotional reasons) that lead investors to hire an FA. I think you could see them if you kept your logical mind from interfering.

(No offense meant in the above paragraph).

Yes, plenty of reasons... Just no good ones for many or most, IMO.
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Old 02-08-2016, 02:36 AM   #78
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https://www.cfp.net/news-events/late...-best-interest

Investors' use of financial advisors has risen, according to this survey.
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Old 02-08-2016, 07:06 AM   #79
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I just got my 401k statement in the mail a few days ago and "actually" read all the paper work that comes along with it each quarter. (about 10 pages of info) Usually I just look at the current balance/gains and toss it aside. I knew our plan fees were very low but I was surprised to see this quarter the fees were "zero". Not sure if they charge fees on an annualized basis or waive them you have reached a certain level and/or if you don't make any changes in a particular quarter. I'm going to dig out some of the old statements just out of curiosity.
Some employers (my present one included) pick up all administration and tax compliance testing fees, leaving only the underlying fund fees for the participants--and those underlying fees are not itemized on quarterly statements. Maybe your employer is doing this as well? Unlikely that they'd waive after reaching a certain level, as the third-party administrator's job is a constant baseline...

This is one of those situations in which "paternalistic" is a good label.
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Old 02-08-2016, 08:13 AM   #80
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Some employers (my present one included) pick up all administration and tax compliance testing fees, leaving only the underlying fund fees for the participants--and those underlying fees are not itemized on quarterly statements. Maybe your employer is doing this as well? Unlikely that they'd waive after reaching a certain level, as the third-party administrator's job is a constant baseline...
The main reasons I left my 401k money with my past employer was the wide range of investment options and very low plan fees. I know when I was working, I once saw the fees posted "somewhere". It was something like .0012 percent. Not zero, but pretty low. As I mentioned, my last quarterly statement the fees were zero. I've been to lazy to dig out my previous statements. Maybe it's other retiree benefit that I didn't know about.
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