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Wife has 80,000 with a personal financial adviser.
Old 05-01-2016, 09:18 AM   #1
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Wife has 80,000 with a personal financial adviser.

Wife has 80,000 with personal financial adviser. Has had him for years. After reading this forum was thinking we should take money out and reinvest our selfs. Not sure how to go about any of this. Any help would be appreciated.


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Old 05-01-2016, 09:36 AM   #2
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First compare performance of the funds and his rates. Once you confirm he is underperforming and/or gouging you, tell him, "thank you for your help the past few years but we're ready to fly solo."

He will likely have a very well prepared spiel about how you need his expertise, blah blah blah, and Bologna. Be firm.

My next step was to open an account with Vanguard and they requested the funds be transferred to their temporary, money market account. Before releasing the funds, my old FA's Megacorp required a medallion signature (one step more formal than a notary is my understanding). So I had to find a bank that does this and open a $50 savings account. I had to return to the bank again to get another form signed to do the same with my old taxable account.

About a week later, I had full power over my money. It was empowering.
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Old 05-01-2016, 09:36 AM   #3
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Learn more first. Index funds are the way to go, it may depend on your/her age.

If you do not know what you are doing, it could be more expensive than using a financial adviser.
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Old 05-01-2016, 09:50 AM   #4
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I do not know what I'm doing. I'll agree with you there.


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Old 05-01-2016, 09:51 AM   #5
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I agree with the others - first figure out if you want to change the investments. If you're happy with the investments you can transfer them from FA's control to an account elsewhere... If it's a taxable account this might save you some capital gains....

The FA will for sure try to talk you out of the transfer. Depending on where you are transferring it - a rep from the new account might help you. I know Fidelity/Schwab/Vanguard all help with this stuff. They set up a conference call between you, them, and the FA.
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Old 05-01-2016, 09:55 AM   #6
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If you don't know what you are doing, but want to learn, there are plenty of threads here about learning, and folks will be happy to answer questions.

Many would recommend that you go ahead and move the money to Vanguard in either Wellesley or Wellington (60/40 and 40/60 stocks/bonds with very low expenses) and then begin to learn by reading a few books and asking questions here.

You also don't mention how this 80K fits into your overall portfolio, which would also make a difference.

First thing to do is as cooch96 stated - find out the performance and the fees. But we'd mostly bet that she is paying 1% or more per year with performance lower than benchmarks.

Also, make sure your wife is on board with the whole program.
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Old 05-01-2016, 10:14 AM   #7
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Learning how to invest effectively isn't rocket, but you do have to learn some basics. You can then do better in the long run on your own without much time or effort.

Here are some good books if you're interested https://www.bogleheads.org/readbooks.htm.

And here are some "lazy portfolios" - that will (closely) resemble the asset allocations/holdings of many DIY investors here. Each link will take you to the underlying portfolio. http://www.marketwatch.com/lazyportfolio These are meant to be almost "set it and forget" it portfolios, the investor need only rebalance periodically. There are also many balanced funds that will even rebalance for you - might be a good place to start with $80K.
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Old 05-01-2016, 10:17 AM   #8
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We both have 401k
We are both still working.
Was thinking this would be an opportunity to try something on our own before retiring.


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Old 05-01-2016, 10:32 AM   #9
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We both have 401k
We are both still working.
Was thinking this would be an opportunity to try something on our own before retiring.
It is definitely an opportunity to learn more. It may help to examine all of the pieces in your accounts. Then understand whether they are working together, or not. Do you have an overall portfolio design?

Before selling, try to appraise performance and how that advisor account fits (or doesn't).
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Old 05-01-2016, 10:34 AM   #10
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The key thing to look at is whether he is charging you a fee for managing her account and if so, how much it is. If you look at her statement for the account for the year you should be able to tell. Many FAs charge a % of your account value, also referred to as an AUM (assets under management) fee for managing the account and selecting funds. These fees can range from a reasonable 0.3% to 2.0% or more, with 1% being typical. While 1% doesn't sound too bad, if your investments are earning 5% and the AUM is 1% that means that you are paying 20% of your return to the FA for their services.

In addition to the FA fee, each fund you own will charge fees for investment management, fund administration, etc. These are commonly referred to as expenses charges. In addition, some fund may have a "load" .... a fee for buying into the fund. Some loads are up-front (aka front end loads) and others are when you sell (back-end loads) and others grade off if you hold the fund long enough but are charged if you sell before the grading period (aka contingent deferred sales charges). Other funds have distribution fees (aka 12b-1 fees) that are for the funds marketing and selling activities. IMO the better funds are no-load, no 12b-1 and low expense charges... like 0.25% or less but some funds charge as much as 1% or more.

I invest mostly in no-load, low cost index funds and my overall expense is less than 0.2%.

Another thing to look for is how the funds 3, 5 and 10 year returns compare to their benchmark indices or similar funds you might invest in.

Even if his fee is reasonable and he has you in reasonable cost funds, if those fund underperform their indices then you might as well just buy the indices. Very few managed funds consistently outperform their indices.

If his fee and fund expenses exceed 1% then I would make a change.

While the above sounds complicated, IMO it is easier to select some good funds than to select a good FA, so I prefer to DIY.
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Old 05-01-2016, 10:42 AM   #11
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I park my money in Wellesley and Wellington. But I've been reading like mad to see how to properly allocate my money. The problem I have is I'm going on an extended vacation. I doubt that I can do anything drastic when I'm on vacation. I sort out the situation when I'm back from vacation.


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Old 05-01-2016, 11:00 AM   #12
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After you have figured out with your wife if you want to do the transfer to Vanguard.

Be aware that you don't have to sell everything in the account, you can transfer some or all of it as "In Kind" as there is no tax issue capital gain with "in kind" transfers.

After all some of the money may actually be invested in things you like. I saw a FA had a fellows money invested in Vanguard Funds and other stuff, all while charging 2.0% to manage the account.
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Old 05-01-2016, 11:29 AM   #13
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....... I saw a FA had a fellows money invested in Vanguard Funds and other stuff, all while charging 2.0% to manage the account.
My hero. Get $50 million to invest that way and you can have a decent income for very little work.
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Old 05-01-2016, 11:45 AM   #14
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I know someone who recently became an FA for a well known big name brokerage. She now dresses the part, and knows all the keywords to throw at customers - beyond that there's very little depth and no personal experience. When I asked her how she likes the job, she said "it's fun, it's like putting together a puzzle." Fortunately (I guess) she's really just selling what the home office has scripted (including answers to often asked questions) her to offer. Her advice costs customers 1.35% of AUM annually. Her degree from 20 years ago was in art history, her previous work experience was all well outside financial services. We remain friends with a common interest, but I wouldn't invest a dime with her. There are some great FA's out there I am sure, few and far between according to many academic studies, but her background is probably not as uncommon as many might assume...
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Old 05-01-2016, 12:57 PM   #15
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-It is not hard to do this investing by yourself. There are good resources here and people who will provide solid advice--and the advice will be totally without conflict of interest (something that cannot be said about most FAs or any broker).
- As a rule of thumb, most studies and models say that a typical 50-65 YO retiree can withdraw about 4% of their money every year to support their living expenses without much fear of running out. If you are paying an "advisor" 1% per year in direct fees and higher costs on the funds they've selected (which is probably on the low side, many charge much more), it has to come out of that 4% withdrawal. In other words, your annual spending money will be reduced by 25% if you use such an advisor. I don't know about you, but I didn't squirrel away money over my working life just to give 25% of my annual take to somebody who does about 5 hours of work for me every year. And, really, that's all it takes.
Further, even if you stick with this advisor, you like him, and he does a good job at very low cost--someday he'll retire or move to another job, and your funds will be "managed" by somebody else. How will you know if they are ripping you off? Once you learn a few basic things you can easily do this yourself for decades, save a ton of money, and know that no one is taking advantage of you. It's very empowering, and a very good use of your time.
Your wife will need to be aboard or you can just forget the whole thing, at least with regard to her money. Still, you could manage your own funds for a few years, then she'd likely gain confidence in the idea of breaking from her FA (especially once she understands what she's paying and what she's getting).
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Old 05-01-2016, 01:07 PM   #16
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I do not know what I'm doing. I'll agree with you there.

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Quote:
Originally Posted by Andy Sr View Post
We both have 401k
We are both still working.
Was thinking this would be an opportunity to try something on our own before retiring.


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If by your own admission you don't know what you are doing, giving someone control of $80,000 of your money is probably not a wise decision.
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