Choosing an adviser

[FinanceDude]

If you want to explore a financial advisor I highly recommend a visit to an Edward Jones office for a sit down... it won't cost you one thin dime for some good advise, no sales pitch and it may open your financial world alot more than these folks expounding how they save money. We don't all want to spend time worrying.

Ed Jones? Seriously? Most Ed Jones reps have NO background in personal finance. And for most of them, if they don't sell the majority of their clients into American Funds, they get fired.........

 

[FinanceDude]

He stated he receives no commissions.

Unfortunately, he is lying to you about that.

 

[seraphim]

FinanceDude

It occurred to me he wasn't being specific about all his sources of revenue - when we meet and discuss the accounts and get into expense ratios, I'll probe the matter deeper. I expect he was referring to direct commissions from the investor, and mentally not including commissions from PNC or the company providing the product. There should be an indication of those in the ratios, if I understand it correctly.

We'll see what we see, but I suspect you are right. He wasn't fully disclosing without actually lying, and I didn't push on the topic. I will later. If I'm not happy, the money will go elsewhere.

 

[Finance Dave]

Update: After speaking with the PNC FI on the phone, I learned he charges a 1% fee for equity acoounts he actively manages. He stated he receives no commissions. Fee is paid quarterly. We will accrue no charges on money being transferred into retirement accounts. We'll meet again when the majority of the estate settles to decide if we want to cash out equities, or continue holding the stock accounts as they are. I'll have time to learn more before then.

Thanks again for all the information.

I'm sorry I did not read all prior posts, but read the prospectus in terms of the 12b-1 fees if any. Sometimes the fees are "hidden" in there.

 

[nun]

FinanceDude

It occurred to me he wasn't being specific about all his sources of revenue - when we meet and discuss the accounts and get into expense ratios, I'll probe the matter deeper. I expect he was referring to direct commissions from the investor, and mentally not including commissions from PNC or the company providing the product. There should be an indication of those in the ratios, if I understand it correctly.

We'll see what we see, but I suspect you are right. He wasn't fully disclosing without actually lying, and I didn't push on the topic. I will later. If I'm not happy, the money will go elsewhere.

Unfortunately you have an all too typical set up. The 1% your "adviser" takes should be compounding in your account. Fire this guy and move your money over to Vanguard, Fidelity or Schwab etc. Roll over the IRAs etc and let the money sit in a money market account until you have developed a plan and an asset allocation. To get that worked out ask questions on here, at Bogleheads.org and if you think it's necessary pay an adviser a fee to help you out.

 

[seraphim]

. I'm sorry I did not read all prior posts, but read the prospectus in terms of the 12b-1 fees if any. Sometimes the fees are "hidden" in there.

I'm making that kind of assumption myself.

. Unfortunately you have an all too typical set up. The 1% your "adviser" takes should be compounding in your account. Fire this guy and move your money over to Vanguard, Fidelity or Schwab etc. Roll over the IRAs etc and let the money sit in a money market account until you have developed a plan and an asset allocation. To get that worked out ask questions on here, at Bogleheads.org and if you think it's necessary pay an adviser a fee to help you out.

That's what I'm thinking about. It will probably take quite a few months for the estate to settle.

 

[nun]

I'm making that kind of assumption myself.



That's what I'm thinking about. It will probably take quite a few months for the estate to settle.

You are taking the first steps to financial independence. It isn't just having money, it's also knowing how to manage it and being confident and knowledgeable enough to set your own path.

 

[73ss454]

My Xbroker had a good line when I asked him about his commissions.

"you don't pay me anything the fund company pays me" Hmmmmm, I wonder where the fund company gets the money?

 

[Buckeye]

Update: After speaking with the PNC FI on the phone, I learned he charges a 1% fee for equity acoounts he actively manages.

So, what does he charge for managing a "buy and hold" account?

Be sure to get invoiced and write a check for the quarterly fee so you can be sure to feel the pain! It will be much too painless if he just takes his fee out of the account.

 

[seraphim]

You are taking the first steps to financial independence. It isn't just having money, it's also knowing how to manage it and being confident and knowledgeable enough to set your own path.

Thanks. Saving was the easy part, due to options set in place by my employment. This next part, I don't mind admitting, makes me nervous.

"you don't pay me anything the fund company pays me" Hmmmmm, I wonder where the fund company gets the money?

Looking at the ER ratings on Blackrock's funds (most of which appear to be around 1.5, though I saw one at .5), I KNOW where the fund gets the money lol.

So, what does he charge for managing a "buy and hold" account?

I didn't ask (yet) but I bet the same 1%. I'm not as ignorant as when I first met with him, but I'm not letting on yet I've been trying to learn. That question may surprise him.

I keep saying 'thanks', here, and I mean it. A great bunch of people.

 

[FinanceDude]

I'm sorry I did not read all prior posts, but read the prospectus in terms of the 12b-1 fees if any. Sometimes the fees are "hidden" in there.

12b-1 fees are not hidden, they are clearly stated in the prospectus, there's federal regs on that............

 

[FinanceDude]

My Xbroker had a good line when I asked him about his commissions.

"you don't pay me anything the fund company pays me" Hmmmmm, I wonder where the fund company gets the money?

It goes something like this:

Customer buys $10,000 of class A shares of a mutual fund, say Putnam:

5.75% commission the customer pays, or $575

Putnam has a "dealer concession" of .75%, so they keep $75 and give the advisor's company $500 to pay the advisor.

Advisor gets a payout on that money, ranging from 30%-92% depending on whether they pay their own freight, work at a bank, etc.

On A shares, advisor gets .25% a year in 12b-1, or $25 a year.

That's how it works. I have posted this several times in years past but it never hurts to post it from time to time so people know how it works..........

 

[FinanceDude]

Thanks. Saving was the easy part, due to options set in place by my employment. This next part, I don't mind admitting, makes me nervous.



Looking at the ER ratings on Blackrock's funds (most of which appear to be around 1.5, though I saw one at .5), I KNOW where the fund gets the money lol.



I didn't ask (yet) but I bet the same 1%. I'm not as ignorant as when I first met with him, but I'm not letting on yet I've been trying to learn. That question may surprise him.

I keep saying 'thanks', here, and I mean it. A great bunch of people.

They should negotiate on the fee based on how it is managed. Our RIA manages a lot of retirees from a megacorp in our area. On their employee stock, we waive our fee because it just sits there, and they won't sell it. Most advisor firms do this.

 

[73ss454]

It goes something like this:

Customer buys $10,000 of class A shares of a mutual fund, say Putnam:

5.75% commission the customer pays, or $575

Putnam has a "dealer concession" of .75%, so they keep $75 and give the advisor's company $500 to pay the advisor.

Advisor gets a payout on that money, ranging from 30%-92% depending on whether they pay their own freight, work at a bank, etc.

On A shares, advisor gets .25% a year in 12b-1, or $25 a year.

That's how it works. I have posted this several times in years past but it never hurts to post it from time to time so people know how it works..........

You mean to say that the fund company used my money to pay the broker? What a shock!


Thanks for the explination. As I've said before, now I know why my Xbroker sent me pictures of his kids each Christmas.

 

[seraphim]

Just got the MM prospectus in the mail for the temporary account we set up. An ER of .89, which includes a 12b-1 fee of .25. Sinc e the average total returns on the PINXX account have been 0 for the past two years..

... theat money isn't staying in that account for long.

 

[seraphim]

Found a couple of established RIAs online that will design up a 'buy and hold' portfolio for $400 to $1000 dollars. If I can find one with a good reputation around Cincinnati, that's probably the way for me to.

 

[seraphim]

. Thanks for the explination. As I've said before, now I know why my Xbroker sent me pictures of His kids...

He wanted you see the shiny, straightened teeth you paid for.

 

[Nords]

Found a couple of established RIAs online that will design up a 'buy and hold' portfolio for $400 to $1000 dollars. If I can find one with a good reputation around Cincinnati, that's probably the way for me to.

If you're determined to find an advisor, then look a little to the west and a little to the north.

Good Financial Cents -Jeff Rose Certified Financial Planner and Investment Advisor, Carbondale, Illinois
Alliance Wealth Management, Jefff Rose Certified Financial Planner
Investment Management Using Index Funds, Exchange-traded funds, ETFs: Low cost investment manager, Portfolio Solutions

Jeff Rose does a great job online. I spent a few days with him at the USAA blogger conference and he's a good guy.

Rick Ferri is well-known on the Bogleheads.

 

[FinanceDude]

If you're determined to find an advisor, then look a little to the west and a little to the north.

Good Financial Cents -Jeff Rose Certified Financial Planner and Investment Advisor, Carbondale, Illinois
Alliance Wealth Management, Jefff Rose Certified Financial Planner
Investment Management Using Index Funds, Exchange-traded funds, ETFs: Low cost investment manager, Portfolio Solutions

Jeff Rose does a great job online. I spent a few days with him at the USAA blogger conference and he's a good guy.

Rick Ferri is well-known on the Bogleheads.

Jeff Rose does things a lot like we do........

 

[Buckeye]

Don't be concerned about doing business online and over the phone. Their reputation, policies and fees are much more important than anything you might see in a face-to-face. Be sure to have them provide several references for you to contact.

 

[FinanceDude]

Just got the MM prospectus in the mail for the temporary account we set up. An ER of .89, which includes a 12b-1 fee of .25. Sinc e the average total returns on the PINXX account have been 0 for the past two years..

... theat money isn't staying in that account for long.

Putnam has underperformed for almost 10 years.......

 

[jIMOh]

When asked, the advisor should be able to explain exactly how he is compensated.
And should be able to provide you with a report of the actual dollars that have been paid in fees and commissions to him or his company.
It may be that he is a salesperson, not an actual financial advisor.
Ideally you are looking for someone who has a fiduciary responsibility.
My bias is clearly toward those with advanced designations, such as CFA, CFP, CPA with PFS, and the like.

Three types of advisors

Commission
Fee based
Fee only

Ask advisor which one he is... If an advisor is fee only, look for 2-3 specific charactoristics

Series 65 or 66
No affiliation with a specific broker dealer
Accepts no commissions on any product at any time (only fees come from client).


Generally a fee only advisor has removed most conflicts of interest and a fee only advisors will generally deal with investments and only non commission based insurance products.


Fee based means they have wrap accounts and related services, but there is probably soft money creating a conflict of interest somewhere. The soft money might be the requirement to use a specific broker dealer for all transactions or something more significant.

 

[jIMOh]

FinanceDude

It occurred to me he wasn't being specific about all his sources of revenue - when we meet and discuss the accounts and get into expense ratios, I'll probe the matter deeper. I expect he was referring to direct commissions from the investor, and mentally not including commissions from PNC or the company providing the product. There should be an indication of those in the ratios, if I understand it correctly.

We'll see what we see, but I suspect you are right. He wasn't fully disclosing without actually lying, and I didn't push on the topic. I will later. If I'm not happy, the money will go elsewhere.

Ask a better question

"what is the total compensation the advisor receives from this investment and transaction"

Look for 12b1 fees
management fees
transaction fees

 

[seraphim]

Thanks all. I'll check out those recommendations. I want to get out from this current adviser merely because he and the funds he uses are too expensive. Until the inheritance issue clears up, and we know what we have, there's nothing else I can do at the moment but research and learn. Once the smoke has cleared I can work on transferring funds to investments which are not actively managed.

I've a ton of other questions, but those belong on their own threads.