$500,000 in No-Risk Savings Account?

[reubenray]

My money is with Wells Fargo Advisors which used to be A. J. Edwards. They have made me a lot, but this year has been bad. I have already contacted my advisor for any more balanced/safer options.

 

[REWahoo]

I have already contacted my advisor for any more balanced/safer options.

Stand by for an annuity sales pitch.

 

[ERD50]

Stand by for an annuity sales pitch.

Yep, that, and/or a 'chasing performance' scene.

Oh, that investment is down? Let's sell, and switch to this other super-duper investment that has been doing great (hey, I though the other investment was 'super-duper' when we bought it?)!

Sell low, buy high. Rinse, repeat. Advisor collects fees. Investor loses all around.

These threads play out in one of two ways, from what I've seen:

A) The OP gets mad at everyone, and never comes back.

B) The OP keeps listening and learning, eventually dumps the advisor, and later tells us how he can't believe he was paying all those fees for all those years for substandard performance, when DIY is so simple, and provides better returns.

Which will this be?

-ERD50

 

[Gill]

OP, you've received some excellent advice. You simply don't need a so-called financial advisor, and you certainly don't need to be dumping $5,000 a year, $50,000 every ten years, $100,000 every 20 years, down the drain so that your advisor can retire comfortably.

OP, in looking back over your earlier posts, it was exactly two years ago you were discussing this subject and the fees taken by your advisor. You were told then by many that you were being gouged and you needed to part ways with this individual or firm. You need to listen to this advice. We don't know how many different ways to say it - run from this guy! He is making more from the portfolio than you are.

Invest your $500,000 in the Vanguard Retirement Income Fund, pull $20,000 a year out of it to live on, hop in your RV and enjoy life without giving your investments another thought.
Bruce

 

[RE2Boys]

I am not concerned as much about the fees (tax deductible)

You only benefit from this deduction if:

1. Itemized deductions, and the benefit is limited to that portion that exceeds your standard deduction, and

2. you only get to count the investment expenses (along with income tax preparation, unreimbursed business expenses, other misc deductions) to the extent that the total exceeds 2% of your AGI.

Otherwise, it is a pure expense not helping your tax situation.

 

[Gill]

You only benefit from this deduction if:

1. Itemized deductions, and the benefit is limited to that portion that exceeds your standard deduction, and

2. you only get to count the investment expenses (along with income tax preparation, unreimbursed business expenses, other misc deductions) to the extent that the total exceeds 2% of your AGI.

Otherwise, it is a pure expense not helping your tax situation.

RE2Boys is correct. My guess is you get absolutely no tax benefit from this expense based on the facts you've given. I suspect the advisor has told you this in an attempt to soften the impact of his fee. Get rid of him.
Bruce

 

[Katsmeow]

I have that plus another hotspot. The issue is we stay a lot a state or national parks which are to far away to receive any dependable phone or internet service. I really do not want to manage my own retirement buying and selling!

We get out money from our Vanguard account. It requires very little buying and selling. You can set up in advance monthly transfers for money you need to live on (or at whatever interval you want).

I occasionally rebalance which is about once a year.

That's it in terms of buying and selling.

So, set up the automatic transfers. Rebalance as needed. It is really super easy and, when done right, doesn't involve much buying and selling.

 

[pb4uski]

OP, your best bet would be to dump WFA, move your money to Vanguard and invest it in their Wellesley Income Fund and set up a monthly automatic withdrawal to the bank account you use to pay your bills with. Since Wellesley is a balanced fund, they do the rebalancing for you. Set it and forget it.

The expense ratio is 0.25% or $1,250 a year on $500k vs today you're paying that 1% management fee plus fund expenses that are probably much higher than 0.25%. You'll probably save $8,750 a year on expenses alone.

Wellesley has had a bad year as well.... they are only up 1.32% YTD as of last Friday but their 3, 5 and 10 year returns are 5.47%, 7.36% and 6.72% respectively.

 

[Walt34]

Due to us (wife & myself) doing a lot of traveling in our RV managing something myself would be impossible. A lot of time we may not have phone or internet for days or weeks.

That's not a problem, that's a feature.

All the investment books I've read say that the best thing to do is set up your asset allocation and rebalance, at most, quarterly. Most say once per year is fine.

 

[braumeister]

I just noticed that the OP went through a similar exercise here a couple of years ago, but didn't share what his adviser told him then or now.

http://www.early-retirement.org/forums/f28/fees-taking-a-third-of-profit-68751.html

I think we're heading down the same path.

 

[Gill]

I just noticed that the OP went through a similar exercise here a couple of years ago, but didn't share what his adviser told him then or now.

I pointed this out in an earlier post. He seems to be rehashing the same discussion that he posted exactly two years ago. I'm afraid he is fearful of leaving this guy and it's sad to see him wasting $5,000 a year out of his rather limited retirement fund.
Bruce

 

[ERD50]

I pointed this out in an earlier post. He seems to be rehashing the same discussion that he posted exactly two years ago. I'm afraid he is fearful of leaving this guy and it's sad to see him wasting $5,000 a year out of his rather limited retirement fund.
Bruce

Oh my! I guess I'll need to add an option "C" to my list:

Yep, that, and/or a 'chasing performance' scene.

Oh, that investment is down? Let's sell, and switch to this other super-duper investment that has been doing great (hey, I though the other investment was 'super-duper' when we bought it?)!

Sell low, buy high. Rinse, repeat. Advisor collects fees. Investor loses all around.

These threads play out in one of two ways, from what I've seen:

A) The OP gets mad at everyone, and never comes back.

B) The OP keeps listening and learning, eventually dumps the advisor, and later tells us how he can't believe he was paying all those fees for all those years for substandard performance, when DIY is so simple, and provides better returns.

Which will this be?

-ERD50

C) The OP doesn't listen to anyone, and comes back and asks the same questions again years later.



-ERD50

 

[meierlde]

I have that plus another hotspot. The issue is we stay a lot a state or national parks which are to far away to receive any dependable phone or internet service. I really do not want to manage my own retirement buying and selling!

Assuming you occasionally have to buy grocieries at a grocery store that does imply going to a nearby town. It seems today that most towns big enough for a reasonable grocery store either have an internet cafe or a library with internet access. In addition once in town the cell phone will work in most cases (you may have to look at coverage maps a bit to decide which carrier. In addition over 11k mcdonalds have wifi now. As others have stated you should not have to check on things more than once a month or so, in particular if you pick index funds or target date funds. One might ask further how you get your mail on the road, as you can still get statements by mail.

 

[Danmar]

Yep, that, and/or a 'chasing performance' scene.

Oh, that investment is down? Let's sell, and switch to this other super-duper investment that has been doing great (hey, I though the other investment was 'super-duper' when we bought it?)!

Sell low, buy high. Rinse, repeat. Advisor collects fees. Investor loses all around.

These threads play out in one of two ways, from what I've seen:

A) The OP gets mad at everyone, and never comes back.

B) The OP keeps listening and learning, eventually dumps the advisor, and later tells us how he can't believe he was paying all those fees for all those years for substandard performance, when DIY is so simple, and provides better returns.

Which will this be?

-ERD50

I'm guessing it's A or maybe comes back in a few years to see if the advice might be easier to swallow.

 

[nash031]

I can relate a little bit to this in dealing with my mom. I've told her on several occasions that she's paying thousands of dollars to their advisor for stuff that I could set up with them for free for about 1/5th of the cost. Not interested. They are convinced the advisor has done really well for them, even after I've pointed out that he hasn't beaten SP 500 returns in the time working with them. I've said my piece with her, and repeated it several times including showing them how he's buying them into funds with loads, 3% ERs, etc. on top of his management fee. The guy's robbing them blind.

In short, some people just refuse to learn on their own about this stuff for whatever reason, perhaps because they are convinced that it's just too complicated or hard to do.

OP - you've gotten a lot of good, easy to follow advice that will save you thousands of dollars and other advice that will further MAKE you thousands more. At this point, it's up to you to take action on it.

 

[racy]

Now for something completely different...

Call Vanguard and put it all in Wellesley.
*You'll save on fees.
*You'll get inflation protection since the fund is 36% stock.
*You'll get income from the dividend stocks and bonds. (At $500K you could expect about $24K per year in distributions, plus or minus).
*You won't have to manage anything: set it, forget it, and stay the course (quit looking at daily performance!)

 

[pb4uski]

^^^^^ I guess you missed post #33.... but an excellent idea if I must say so.

 

[RE2Boys]

reubenray,

You must remember that your FA is primarily a salesman. Doesn't matter how good he is at investing or or even if he has your interests at heart. He just has to sell YOU on the idea that he is any good.

I went through FA at Merrill Lynch and again at Edward Jones. After a while, I realized that they were bringing little value for the money they charged. Occasionally, I'll listen to a FA (usually for something free and a few hours of my time) hoping the gain some new ideas or insight. Found little added value, the last one just wanted to sell an annuity to cover what he perceived was my concerns for the future. Waste of time.

FAs were helpful in getting me started in investing when I was in my 30s, (was in mostly CDs prior), but as I gained knowledge and confidence, they were fired.

 

[kcowan]

Due to us (wife & myself) doing a lot of traveling in our RV managing something myself would be impossible. A lot of time we may not have phone or internet for days or weeks.

If you cannot spare an hour a day, and a cell phone with a data plan, then leave it in the hands of a financial manager.

 

[samclem]

The safest return you could make is to save the 1% you are paying to this investment firm! Learn a bit more about investing and manage your own money.

+1

Due to us (wife & myself) doing a lot of traveling in our RV managing something myself would be impossible. A lot of time we may not have phone or internet for days or weeks.

Reubenray,
It takes about 2 hours per year to do this yourself. You have enough time. What you don't have is enough money to give away $5000 every year to this "advisor".
You came here two years ago and a lot of people gave you some very good advice in this thread http://www.early-retirement.org/forums/f28/fees-taking-a-third-of-profit-68751-3.html#post1367080 . If you had taken it, you'd probably have a lot more in your account and you wouldn't be paying out all these fees every year. I recommend that you save time and money and re-read those previous suggestions, because they were good ones. I don't think you are being fair to us or, ultimately, to yourself.

 

[O2Bfree]

Reubenray, the good folks here offer sound advice. Fact: you can move your money to investments with comparable returns and lower fees, and there are many great set-and-forget options to choose from.

How much of your hesitation is due to thinking about confronting your FA and possibly being made to feel foolish, having to engage in a debate about investments, or having to "break-up" with someone you consider a friend?

I've had these concerns about some of the financial moves I've made the past few years. Mainly, the fear of confronting a financial expert and having to concede. FAs are trained killers, and sure to have convincing counterpoints to any argument regarding managing your own retirement accounts. Plus, they have personality. They are salesmen. They wouldn't have survived so far as FAs otherwise.

When I think about how I got set up by FAs in the past, well, . Never again. Had I known over the years what I learned from this forum in a few weeks, I'd probably be at least 20% closer to my retirement goal.

 

[Mulligan]

reubenray,

You must remember that your FA is primarily a salesman. Doesn't matter how good he is at investing or or even if he has your interests at heart. He just has to sell YOU on the idea that he is any good.

I went through FA at Merrill Lynch and again at Edward Jones. After a while, I realized that they were bringing little value for the money they charged. Occasionally, I'll listen to a FA (usually for something free and a few hours of my time) hoping the gain some new ideas or insight. Found little added value, the last one just wanted to sell an annuity to cover what he perceived was my concerns for the future. Waste of time.

FAs were helpful in getting me started in investing when I was in my 30s, (was in mostly CDs prior), but as I gained knowledge and confidence, they were fired.

The senior level suits at Ed Jones must really be cracking the commission whip now. Just this morning before my morning walk I had a dressed up man knocking on my door. I assumed it was some religious person making there usual rounds so I didn't answer. Went out the door shortly later and there was an Edward Jones card in the door.
If I had known I would have had a little fun with him. I would have told him I would move all my money to his company if he could correctly tell me what the ticker symbols of my 3 biggest stock holdings mean.....AILLL, CNLPL, and CHSCL. Poor kid wouldn't have had a chance.


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[ERD50]

... I would have told him I would move all my money to his company if he could correctly tell me what the ticker symbols of my 3 biggest stock holdings mean.....AILLL, CNLPL, and CHSCL. Poor kid wouldn't have had a chance.

Mine is TANSTAAFL

-ERD50

 

[O2Bfree]

The senior level suits at Ed Jones must really be cracking the commission whip now. Just this morning before my morning walk I had a dressed up man knocking on my door. I assumed it was some religious person making there usual rounds so I didn't answer. Went out the door shortly later and there was an Edward Jones card in the door.

Same here, an EJ guy came to my door several months ago. He seemed downtrodden, looked tired, and was wearing a rather limp, ill-fitting suit. I wonder if that's part of the act these days?

 

[Mulligan]

Same here, an EJ guy came to my door several months ago. He seemed downtrodden, looked tired, and was wearing a rather limp, ill-fitting suit. I wonder if that's part of the act these days?

This was the first time it has ever happened to me. You have to feel a bit sorry for them. Takes a lot of gumption to take rejection over and over and knocking on peoples doors. But I guess, I don't feel sorry enough to give him my business. But still, he is out there trying to make a buck so I have to give him some credit.


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