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Old 02-26-2014, 10:20 AM   #141
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I don't think anyone has trouble believing that the front end load charges are waived. As others have pointed out, 401Ks often have that kind of arrangement where load and/or deferred sales charges are waived.

Certainly the expense ratio is a different matter. You showed us 9 funds from 9 different firms. To waive those fees would require a special relationship with each and every one of those firms. Something I have never seen. Or perhaps your FA pays those fees out of his own pocket. That I have seen. But I don't think your 1% FA fee is high enough to cover that. Unless your FA is a really close friend that is doing you a huge favor and is making almost nothing from your business.

The fees by the MFs are taken out of the fund proceeds... IP is not seeing the expenses and is being told that there are none to her... I would agree there are no direct expenses to her.... but I have no direct expense with my Vanguard funds....


I do think that IP does believe what she is saying... I am almost certain what she is saying is wrong... all funds have expenses they have to cover... except for when a fund is starting out (when some waive fees), all are going to charge for these expenses...

Since one of my prior jobs was as a trustee investing hundreds of million of dollars, I know there are hidden fees that nobody tells the clients... I remember getting in trouble with my bosses when I did not move money from one investment to another since the new investment had twice as much kickback as the first... I said I would only move it if the client agreed.... which of course they did not....
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Old 02-26-2014, 10:24 AM   #142
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I don't care. The only impact of the way my statements were received was on my willingness to go into details.

But as to your assertion that my message changed, I quite literally opened with "Hmmm, it's all about net returns after fees." Ended with "NET RETURN TRUMPS LOW EXPENSES." Chilling how very different those two statements are. (Being sarcastic, in case you are uncertain. Don't want another 100 posts or so analyzing it.)

I agree with your stmt to a degree... you have to take risk into account.. IOW, a risk adjusted net return trumps low expenses....


Right now, companies like Tesla and Netflix have had great returns.... but I would suggest that these companies are risky to invest in.... great return, but is it worth the risk
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Old 02-26-2014, 10:29 AM   #143
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I don't care. The only impact of the way my statements were received was on my willingness to go into details.

But as to your assertion that my message changed, I quite literally opened with "Hmmm, it's all about net returns after fees." Ended with "NET RETURN TRUMPS LOW EXPENSES." Chilling how very different those two statements are. (Being sarcastic, in case you are uncertain. Don't want another 100 posts or so analyzing it.)
Your first post contained the following as its second sentence. This is the fantastic claim that I and several others have repeatedly brought up in this thread:

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Our FA beats benchmark every time.
The comment about net returns after fees, is not a fantastic claim in any way.
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Old 02-26-2014, 10:52 AM   #144
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.........After reading 135 responses, all seemingly focused on trying to read the mind of one individual, I am left trying to ponder what we have learned from all of this.
On a really slow day, even the firemen enjoy a cat up in a tree.
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Old 02-26-2014, 10:54 AM   #145
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My comments implied I was not involved at all, mostly because I was more interested in furthering the realization that NET RETURN TRUMPS LOW EXPENSES than talking about FAs.
I would say that, IMHO, expenses are a factor in the Net Return. To focus only on expenses would be foolish. Remember the apocryphal story of an early computer that was programmed to minimize the expenses of a factory. It's recommendation was to shut the factory down. That does minimize expenses.

Net Return is the goal and how we get there varies according to many things, including our personal experiences, likes, dislikes and tolerances.
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Old 02-26-2014, 11:01 AM   #146
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We have learned the #1 life lesson: You can't control other people.
When reading this thread or one of the threads it referenced, I learned that somebody bought a Tesla. I have been dying to ask about it, but didn't want to go any further into the weeds.
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Old 02-26-2014, 11:04 AM   #147
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We have learned the #1 life lesson: You can't control other people.

And controlling how people think is even harder than controlling what people do.
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Old 02-26-2014, 11:20 AM   #148
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It's been a slow morning so I read through these posts trying to reach a conclusion. Now it's time to move on. Nothing has changed anyone's mindset. If you feel secure with an FA and they get your desired results, go for it. If your confident in your abilities and want to go alone, go for it.
I've always been a do it yourselfer in most aspects of life. Hence I spend way to much time evaluating investments yet sticking to a fixed AA with predominately low cost index funds. It's something I can justify and live with the consequences.
However if I had to put another timing chain in the old Dodge van I'd probably take it to a mechanic rather than spending two days in the driveway. And his labor would represent about 75% of the total cost.
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Old 02-26-2014, 11:22 AM   #149
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All that fuss over a well known fundamental of investing, especially here, net returns...wasn't that fun. Too bad low expense index funds provide better net returns than other options more often than not. I don't recall seeing any of the regulars here reporting returns before expenses, but we have seen folks report returns before FA fees. I still didn't learn anything about how one might find the exceptions, maybe I missed it.
+1

Hopefully, we protected some newbies from blindly trusting the first FA who cold calls them.
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Old 02-26-2014, 11:31 AM   #150
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+1

Hopefully, we protected some newbies from blindly trusting the first FA who cold calls them.
I guess I may still be a newbie of sorts here (based on the post counts). I do not have a "trusted FA", or any FA, for that matter.

Between this thread and Cucumber's thread on leaving Ameriprise and all that's been exposed about the tactics of the Ameriprise FA's, it appears to me that FA's need to make a living also. But at least in these instances, they are not selling variable annuities to the OP's. (or are they?)
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Old 02-26-2014, 12:07 PM   #151
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Originally Posted by Texas Proud View Post
...
My biggest concern is the churn.... there is NO reason to keep changing funds at a rapid clip... zip, zero, nada.... funds fall into a class, and the biggest difference in them are the fees... and an S&P fund is and S&P fund... there is not enough diff in them except for the fee.... or it is NOT an S&P fund....
...
Also my biggest quandary about this thread is the fund churning. I had not heard about an FA churning funds like this before. Is it common? Do they give any reason for it? Is it to get the client to think they are "earning" their keep, to hide fees? Not asking about IPs FA, but more in general. Anyone heard of this kind of thing happening before or why?
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Old 02-26-2014, 12:45 PM   #152
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Also my biggest quandary about this thread is the fund churning. I had not heard about an FA churning funds like this before. Is it common? Do they give any reason for it? Is it to get the client to think they are "earning" their keep, to hide fees? Not asking about IPs FA, but more in general. Anyone heard of this kind of thing happening before or why?
When I spoke to Fidelity Portfolio Advisory Services last year, they told me they buy and sell funds on average every 9 months. When I asked why, they gave me a very generic brush off answer about tax efficiency and AA rebalancing. It took me a while to realize the real reasons they do it. I believe there are two:

1) To make it more difficult to measure the performance of individual holdings against an index, since the holding periods are so short.

2) To create the illusion that financial management requires a complex series of transactions that only a seasoned team of advisors would know how to pull off. This makes it more difficult for the average investor, once they turn over their assets to the FA, to attempt to pull out and go back to managing it for themselves.
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Old 02-26-2014, 02:02 PM   #153
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When I spoke to Fidelity Portfolio Advisory Services last year, they told me they buy and sell funds on average every 9 months. When I asked why, they gave me a very generic brush off answer about tax efficiency and AA rebalancing. It took me a while to realize the real reasons they do it. I believe there are two:

1) To make it more difficult to measure the performance of individual holdings against an index, since the holding periods are so short.

2) To create the illusion that financial management requires a complex series of transactions that only a seasoned team of advisors would know how to pull off. This makes it more difficult for the average investor, once they turn over their assets to the FA, to attempt to pull out and go back to managing it for themselves.
I agree with your assessment and think some of this also falls under what Shiller calls "rent seeking" activities:

Robert J. Shiller on the unproductive financial workforce. - Project Syndicate

- financial wheeling and dealing that may be socially and economically useless, if not harmful.

I think this is the real reason the Fidelity people call us, sometimes to the point of harassment, saying they want to build a "relationship", which I think really means they want us to invest in higher commission generating products.

I think if I ever went bankrupt somehow the "relationship" would come to rather abrupt end.
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Old 02-26-2014, 02:06 PM   #154
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Also my biggest quandary about this thread is the fund churning. I had not heard about an FA churning funds like this before. Is it common? Do they give any reason for it? Is it to get the client to think they are "earning" their keep, to hide fees? Not asking about IPs FA, but more in general. Anyone heard of this kind of thing happening before or why?
My late MIL had a financial adviser that was constantly churning her portfolio. He'd call with a new hot tip and she, of course, would just say "you are the expert", and let him churn away. I bit my tongue, but it still makes me angry to think about all this guy stole from her.
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Old 02-26-2014, 03:20 PM   #155
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Also my biggest quandary about this thread is the fund churning. I had not heard about an FA churning funds like this before. Is it common? Do they give any reason for it? Is it to get the client to think they are "earning" their keep, to hide fees? Not asking about IPs FA, but more in general. Anyone heard of this kind of thing happening before or why?
Yes, churning happens but it's not by far the biggest complaint against FAs. Here's some data on churning cases in general: Dispute Resolution Statistics - FINRA.

A few observations about FAs; let me first say, I carpooled with one for many years and spent a lot of time chatting with him about his endeavors, I personally used several FAs before information technology obviated the need for them to execute trades or to provide just-in-time market research for me, and I have seen exceptionally sophisticated investors (including institutions and accredited individual investors) complain about the suitability of investments recommended by their FAs. Personally, I would love to have a solid trustworthy, reasonably compensated FA work out our investing situation -- I might have to wait until my children become a bit more seasoned in their careers to collectively provide me with guidance as I get older.

FAs have to earn a living, the field is frighteningly competitive, the compensation packages typically given to FAs reward those who manage the most assets per household client, and retail brokerage wire houses have been fighting competitively against the online, DIY client base that are typically captured by other players like Schwab and Fidelity, both of which have a different business model than the wire houses like MSSB. One can expect FAs to move around a lot, especially as the wire houses seek to raid FAs from other wire houses as well as the non-traditional retail brokers like Schwab, Fidelity, etc.

I wish IP the best with her FA. And with that, I'm out of this discussion.
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Old 02-26-2014, 03:25 PM   #156
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When reading this thread or one of the threads it referenced, I learned that somebody bought a Tesla. I have been dying to ask about it, but didn't want to go any further into the weeds.
The main Tesla thread is here

I should point out that I paid for the Tesla entirely by avoiding fees paid to an FA
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Old 02-26-2014, 03:41 PM   #157
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I should point out that I paid for the Tesla entirely by avoiding fees paid to an FA.
<rimshot!>
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Old 02-26-2014, 04:01 PM   #158
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Threads like this one are just so entertaining.
Sometimes when the discussion is all one-sided as this one seems to be, it seems as that the larger side is really just attempting to rationalize their beliefs.

If you are already doing the best thing, just do it. We don't need to start a WWIII over it.

If someone wants advice, they can ask for it.

This horse was dead a long time ago.
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Old 02-26-2014, 04:43 PM   #159
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On a really slow day, even the firemen enjoy a cat up in a tree.
Well, this must be a really slow week!

Here is what I've learned from this thread:

If you want to create a thread that will go on and on and get everyone fired up, do the following:

1) Wait for someone to post a very basic, well accepted piece of information, like the sky is blue.

2) Tell everyone that the sky is not really blue, and if they believe that, they are a bunch of bimbos or lemmings.

3) When forum members challenge you by asking for more information, accuse them of being hostile.

4) Tell them that you would have shared this information with them had they been nicer to you, but since they were not, you are not going to share your secret.

5) Then throw out a bunch of vague statements that don't really offer any meaningful content but include a few buzz words that sound legitimate.

6) Tell everyone you don't have time to respond to their requests for detailed information. Then continue proceeding to reply more than 30 times to the same thread, all the while reminding people how you don't have time to respond to their petty requests for more information.

7) Continue repeating steps 2-6 and see how long you can keep people coming back for more of the same insane discussion.

8) Repeatedly remind everyone how petty they are for contributing to this thread.
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Old 02-26-2014, 04:51 PM   #160
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.........

2) Tell everyone that the sky is not really blue, and if they believe that, they are a bunch of bimbos or lemmings.

......
Actually the bimbo accusation was in another thread.
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