Wannabe Retiree Looking Ahead

[a60dan]

I'm in a minority....started with a family owned company in the early 1980s and planning to make some changes in 2022. I've worked there my entire career, and know I can't quit "cold turkey". I do enjoy "practice retirement days" with my golfing buddies.

Having mismanaged my 401K during the dot-com bubble, I sought professional help in 2008 and am paying 1% to a fiduciary advisor we trust. He helped me correct my mistakes.

Right now he's only charging for the ~20% of our retirement assets that are under his direct control. Neither of us can control the company profit sharing plan, and I cannot contribute to it. It's grown to be about 40% of our retirement portfolio.

The other 40% is a 401K that he advises me on without additional charge. He can't make trades or control the investment options.

I'm cleared to retire in 2022.

I'm monitoring the expenses and net worth more closely using Mint.com because I'm too disorganized to manually track it. :-(

I'm reluctant to post too many personal details in a public forum, so I'll be listening and learning from the wealth of posts I've seen elsewhere on the board.

I turn 59-1/2 in September, which gives me a one-time option to transfer the profit-sharing balance elsewhere. His recommendation is that I combine it with the 20% of the assets he is currently managing for a few reasons I agree with:
- the only statement I receive is an annual valuation
- there is no detailed breakdown of the assets, making it difficult for him to know the risk

Obviously he would earn a lot more too. I'm so fee-averse that I'm considering rolling to the same brokerage, but in an IRA that is not managed while I think about it.

I am wondering what the going rates are for clients who are highly satisfied with their advisors, and how the fees vary with the balance under management.

Have a great Sunday!

 

[socca]

I am wondering what the going rates are for clients who are highly satisfied with their advisors, and how the fees vary with the balance under management.

I don't have anything under management, but I know some people who do. The rates for very-high-net-worth (VHNW) folks are often reduced to 2/3% from the 1% typical for 'only' high-net-worth folks. Definitions of VHNW vary but >$5M or >$10M under management will probably do the trick.

BTW: many financial advisors are eager to grow their assets under management (AUM), and love to discover that a client has more money squirreled away that can be added to their pot. Some of these advisors can be surprisingly aggressive as they try to uncover hidden client assets. I'm not fond of this behavior.

 

[38Chevy454]

Is there a reason you can't just duplicate your profit sharing balance transfer to an IRA to be the same as your 401k? Seems an easy solution to me. Or just put it all into a simple 60/40 asset allocation type fund that does the balancing for you; or a mix of a few funds to get whatever AA you decide to go with.



The bigger question is what is the profit sharing money for in your longer term plans? Is it money you will access in 1 year, 5 years, 10 years, longer? That is where the AA decision can give a different answer than your current AA.


There is no reason that you need to put the profit sharing money under FA control. You can do it, especially with some reading on here and educating yourself. You have already done some of this with what you learned from the current FA. But he costs money, reading here and other sources is only time.

 

[travelover]

I recognize that you got burned in the past, but there is a really simple solution. Transfer your profit sharing balance to a place like Vanguard and put it in a Target 2022 fund. Done. Automatically asset allocated, re-balanced as needed and changes yearly to a more conservative allocation as you approach retirement. And no annual 1% bleed off to the FA.

 

[VanWinkle]

I'm with you on the golf, and I think you should take your time and do a little research before committing an additional large amount to the 1% adviser. It would be simple to DIY it your self with a little reading. This stuff is not brain surgery. Try this link to start a short 16 pages about investing.

https://www.etf.com/docs/IfYouCan.pdf

Best to you,

VW

 

[Abe Frohman]

Normal fees are 1% up to about 2mm. After that it goes down.

The fee you are getting charged is fine. My concern is that you are only getting management of the account.

For that fee he should be advising you on everything financial in your life.

 

[travelover]

.........The fee you are getting charged is fine. ..........

Fine with who?

 

[EastWest Gal]

We pay 0.37% AUM. But not all the assets are under their management. When I switched FAs in 2015, we did some major and tax expensive rebalancing. I decided not to rebalance all of it, and have one third in the old account they can’t see. If I need to sell, I’ll sell from the old account.

The FA is a group started by a Boglehead.

I think you should be paying less than 1%. Shop around.

I would have been too chicken to invest had I not hired a financial advisor who had a whole program to discuss different kinds of risk. Inflation risk was the one that started us in after tax investing and always maxing out the 401K. Putting the extra in the portfolio became habit.

I needed someone else to handle it while I was out earning the dough to put in the portfolio. DH is pretty clueless about money too. He’s fortunately just as terrible at spending it[emoji38]

 

[DrRoy]

Do NOT put more money under fee. Think of how much the fee is in terms of your WR (25% or more). If you won't do it yourself, find a robo-advisor for around .25%.

 

[tdv2]

Do NOT put more money under fee. Think of how much the fee is in terms of your WR (25% or more). If you won't do it yourself, find a robo-advisor for around .25%.

+1. I would not put more money under management at 1%. Spend a little time with Vanguard and invest the money in an appropriate basket of index funds with an asset allocation that suits your time horizon.

 

[a60dan]

I'm in a minority....started with a family owned company in the early 1980s and planning to make some changes in 2022. I've worked there my entire career, and know I can't quit "cold turkey". I do enjoy "practice retirement days" with my golfing buddies.



Having mismanaged my 401K during the dot-com bubble, I sought professional help in 2008 and am paying 1% to a fiduciary advisor we trust. He helped me correct my mistakes.



Right now he's only charging for the ~20% of our retirement assets that are under his direct control. Neither of us can control the company profit sharing plan, and I cannot contribute to it. It's grown to be about 40% of our retirement portfolio.



The other 40% is a 401K that he advises me on without additional charge. He can't make trades or control the investment options.



I'm cleared to retire in 2022.



I'm monitoring the expenses and net worth more closely using Mint.com because I'm too disorganized to manually track it. :-(



I'm reluctant to post too many personal details in a public forum, so I'll be listening and learning from the wealth of posts I've seen elsewhere on the board.



I turn 59-1/2 in September, which gives me a one-time option to transfer the profit-sharing balance elsewhere. His recommendation is that I combine it with the 20% of the assets he is currently managing for a few reasons I agree with:

- the only statement I receive is an annual valuation

- there is no detailed breakdown of the assets, making it difficult for him to know the risk



Obviously he would earn a lot more too. I'm so fee-averse that I'm considering rolling to the same brokerage, but in an IRA that is not managed while I think about it.



I am wondering what the going rates are for clients who are highly satisfied with their advisors, and how the fees vary with the balance under management.



Have a great Sunday!

Thanks for all the input. I see that the founder of Vanguard funds passed away. I’ll be speaking to them to explore the options.

Their fees are 0.3% for assets under management, and I like the concept of investor-owned.

Vanguard, like Schwab, does not have HSA like Fidelity, so I plan to move the majority of our HSA from Key Bank (0.2% interest with loaded options to invest in funds) to Fidelity, who claims I’ll have the same investment options as Schwab, including new CDs with no transaction fees (currently 2+% for short term).

 

[VanWinkle]

Thanks for all the input. I see that the founder of Vanguard funds passed away. I’ll be speaking to them to explore the options.

Their fees are 0.3% for assets under management, and I like the concept of investor-owned.

Vanguard, like Schwab, does not have HSA like Fidelity, so I plan to move the majority of our HSA from Key Bank (0.2% interest with loaded options to invest in funds) to Fidelity, who claims I’ll have the same investment options as Schwab, including new CDs with no transaction fees (currently 2+% for short term).

Congrats on moving to lower expenses, you will not regret the move.

 

[travelover]

..........Their fees are 0.3% for assets under management, and I like the concept of investor-owned. ...........

You don't even have to pay that at Vanguard. Once you settle on an asset allocation, there is little need to pay an ongoing fee. As I posted earlier, you can simply invest in a target year fund and it is on autopilot.

 

[a60dan]

You don't even have to pay that at Vanguard. Once you settle on an asset allocation, there is little need to pay an ongoing fee. As I posted earlier, you can simply invest in a target year fund and it is on autopilot.

Understood. I still want to “interview” them to see what the Advisory side offers. I always learn something new from those conversations.

 

[Nick12]

Went down that road but did not pull the trigger. All these professionals think they can beat and or time the market. No one has beaten the Vanguard mutual index funds. Invested in Vanguard for 30 years. Retired last year at 51. The fees that these so called experts charge are outrageous.

 

[Bir48die]

So here's a scenario for a couple of you. One person has a low fee on own managed accounts. Let's say .4% just for giggles. They match the market on returns and generate maybe 2.5%-3% on dividends. Another person has a goodly portion with a money manager. Not just a FA who could just be an insurance person but a focused group that doesn't use funds and not much in the way of trading fees. Let's just say they mirror the own managed portfolio in terms of increase/decrease in value and dividends. However half of the remaining portfolio that is invested in other (not risky) strategy that returns 7%-8% giving them an average yield of 6%. So, on a portfolio of $1.0 million and all being equal the self managed group yield $30k a year while the managed group yields $60k. In that scenario is it possible that the .6% ($6k) in additional investment fees might be a good idea? I hear the same answers all the time for those who manage their own portfolios but most of their assumptions are that FA's follow the same strategy as those that use funds. Just throwing it out for discussion.

 

[earlyretirementwanted]

That is a difficult question without some relevant data. Most profit sharing plans gives an option to view account information anytime you want; most are in company stock so strength of company is important, i.e. I had Philip Morris PS so no reason to sell because dividends are awesome.
If you take the one time, and you have a decent 401K (Fidelity, Schwab, etc) with brokerage, if you don't want the company stock (or keep it) transfer to your 401K and then when you are ready, you can trade the shares. It also keeps this out of the balance if you ever do a Roth conversion (many companies don't tell the truth about this).
If you can't do cleanly, roll to an IRA, then to your 401K if it allows it.

I considered an advisor but with accounts at 5 institutions (no choice due to employers and certain NQ deferrals and NQSO) I did not want to spend the money. Continue to educate your self, look at your balance of Large Growth, Small, Med, etc and stocks in sectors to see where your risks.
Also consider how you want to live in retirement and what income you need/want

 

[earlyretirementwanted]

Based on the fund and who owns, the fees are not necessarily equal. (Vanguard doesn't charge for Vanguard funds, Fidelity doesn't charge transaction fees for Fid, etc)

 

[a60dan]

Fast forward to 2020.

My profit sharing plan is valued once per year and the investments are not shared other than the year old tax filings I can find on the Department of Labor web site.

I decided that in the middle of the pandemic, I'd take the 12/31/2020 valuation and pulled the trigger to move it to Vanguard.

I have to take it in cash, and will probably dollar cost average my way back in.

I'd really like to hear from those already retired, how their Vanguard funds are doing through the downturn, especially those funds on which they rely for monthly income.

My "moving target" retirement is currently 2022. Although I felt some angst with the current volatility, the only action I took was to realize that I should move the profit sharing to have full transparency on the investments.

 

[MBAustin]

You can look at performance data and dividends for all Vanguard funds and ETFs on their website without having an account. What you can do between now and the end of the year is to figure out what asset allocation is right for you and how you want to invest (managed funds, index funds, ETFs, etc.).