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Old 04-14-2010, 02:05 PM   #21
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However, Vanguard is probably the best place to find good actively managed funds with the lowest ERs.
Vanguard is a good fund company, but I would hardly refer to their funds as "actively managed".......
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Old 04-14-2010, 02:50 PM   #22
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Until recently I've been managing my own finances, but I got married last year and we're thinking about kids, house, retirement, etc, so I felt I needed financial advice. I asked my friends for a referral to a financial advisor, and got several glowing recommendations.

The first one I talked to was private, and was way too expensive for me -- something like $1100 for a series of meetings and an investment strategy, plus some kind of commission structure to manage our money (which he clearly wanted to do).

The second one was an Ameriprise guy. I hear the groans now (I found this site via the Amerprise thread Is Ameriprise any good?). But this guy was recently rated in the top 4% of FAs in Boston, and we got a great vibe from him on the phone and in a free initial meeting. He's charging us $400 for the year for planning, doesn't require that we invest with Ameriprise, and isn't recommending life or disability insurance until we have a mortgage or kids to protect. He explained his investment recommendations really well, and it fit with my own understanding of what a portfolio should look like. However, he did SUGGEST that we put it all in an Ameriprise account to consolidate our investments, and he WOULD be charging commission fees on that, of around 1%. He made it sound like that was 1% a year, and that it was basically the same as paying the ER on a fund (e.g. Fidelity), but that Ameriprise was buying Class A funds and absorbing the front-end load to eliminate/minimize the ER. It sounded good, but I was suspicious, hence my digging on the internet. I'm trying to pin him down 100% on what those fees are going to add up to, and how they compare to my current 401k at Fidelity. If anyone has any insight I can use to analyze his answers, that would be great.

So anyway, if I don't like his answers I will keep my money somewhere else and take/leave his recommendations as I see fit. BUT, I have a few questions for you smart folks about this whole idea of consolidating our investments in one place. It seems like a really good idea from a convenience standpoint, to be able to log into one website and see everything, get one statement, move things around for free within one uber-account. BUT, that also seems just a bit risky to me. What happens if the company collapses? That seems unlikely, but, y'know, AIG...

Is the money protected in any way from that scenario? Am I crazy to be worrying about that? Am I crazy to be talking to an FA who works for Ameriprise? Am I extra-crazy if I let Ameriprise handle my money? Can I, and should I, set up all my investment vehicles under one roof elsewhere? Vanguard, Fidelity, where would you suggest?

Thanks for any advice!
Ameriprise tends to be one of if not the most expensive firms to do business with. The reps are expected to use Ameriprise products, which almost always are more expensive than non-proprietary products.

What he is talking about is a mutual fund "wrap account". These have been around for 20 years, and are very expensive. Even if you get NAV or institutional pricing on the funds inside, you will pay about 1.50% percent every year. What is the FA doing to get that fee? Not much really, its not like THEY are doing the actual MANAGEMENT of your funds..way too expensive.

Sounds like he gave some good advice from his CFP side of things. It seems puzzling he didn't mention a need for life insurance.
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Old 04-14-2010, 03:25 PM   #23
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As I've posted on other Amerprise threads. My best friend despite my pleading stuck with his Amerprise (partly out of loyalty to his deceased wife.) Everytime I through up an objection "you are paying a 5.5% load on the mutual funds", his Amerprise leech adviser would find a new product like a wrap account to overcome the objection.

My advice of course is to stay clear. However, if you need help convincing the wife. I do have one concrete suggestion. The Amerprise adviser gave out (I am sure they are required by law) and big thick brochure talking about how the adviser are compensated. Even if you don't want to read the whole, thing flip to the back to the section. Where Amerprise lists all of the legal actions a dozen or so state have taken against the company for deceptive practices.
If you and the wife still want to invest after readings that, well feel free.
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Old 04-14-2010, 03:53 PM   #24
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Vanguard is a good fund company, but I would hardly refer to their funds as "actively managed".......
A lot of their active funds are index huggers for sure, but I am primarily an indexer. So, I don't mind.
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Old 04-14-2010, 04:56 PM   #25
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I would like to suggest that you can easily manage your money yourself. In fact you can go with a one fund solution. So, that you don't even need to think about it anymore.

I would suggest you open up an account with Vanguard and put your money into the Wellington fund or the STAR fund depending on how much money you have to start with. Wellington needs $10k and STAR needs only $1k to buy into the fund. From then on you can add money as little as $100. I think the Wellington fund will do slightly better than the STAR fund but not by a whole lot. You will be in good shape with either one.

This is not optimal in regards to tax efficiency but I feel pretty confident you'll get a better return by not paying high fees on the funds and no 1% fee for the management.
Ditto above. That "good vibe" with Ameriprise will cost you a lot in fees........
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Old 04-14-2010, 05:07 PM   #26
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I have heard mostly bad things about Ameriprise.

Of probably more interest, my wife worked for a sizeable Amerprise branch for about 3 years. She would never put a dime with them after her experience there, and quite a few people left while she was there because they couldn't stomach the tactics. Agents/brokers were constantly chastised/coerced to make things happen to drum up commissions. They referred to clients, behind their backs, in all sorts of degrading ways. Her boss, the branch President, was an insufferable, prima donna of the highest order - and he treated people who worked there terribly while he made a fortune. At least from the inside at one branch, it was unbelievably bad. FWIW...
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Old 04-14-2010, 05:51 PM   #27
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Before you make any decisions, you might consider educating yourself on the subject. That will help you to make an informed decision.

I think VG is a good choice as mutual fund company. They seem to have a solid track record and rock bottom fees.
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Old 04-14-2010, 08:37 PM   #28
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Everytime I through up an objection "you are paying a 5.5% load on the mutual funds".
Not 100% true, but I digress.........
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Old 04-14-2010, 10:02 PM   #29
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Awesome. Thanks for the replies. As I mentioned I am trying to pin down the exact fee structure -- I have an appt. for a phone meeting in a few days. Trying to do my homework first, so I have maximum ammo for that conversation.
Careful. You sound smart, and you are asking a lot of good questions. But.... this guy is a PRO! They often have a smooth answer for everything. And they can wrap you up in info to spin your head if they think they need to. What was the top 4% rating for?

Also be careful about reccs from friends. IME, many (certainly not all) people who seek out an FA are not financially savvy, and they don't have any way to measure whether he is good or not. Maybe they measure if they 'like him' or not. I doubt they could answer a basic question like - 'how did your portfolio perform versus an equivalent risk-adjusted portfolio made up of no-load index funds?

Your bigger issue is dealing with your wife. Her feelings are pretty common, it certainly seems reasonable that a PRO should be better at it than an individual investor, but as it turns out that isn't the case if you are willing to learn just the basics, and don't have any special situations (and then you need special assistance, probably not a general FA from Ameriprise). Here's how I think about it though - once you have learned the basics in order to evaluate whether the PRO can do the job for you, you have learned enough to go it alone, and then you are ahead by all those fees.


Oh yes, a friend of mine said the biggest investment loss he ever took was the money he handed over to an Ameriprise adviser. He specifically told him he was concerned with capital preservation, and he got most his money put in a single company bond that.... defaulted. He lost 80% of his money.


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Old 04-15-2010, 12:57 AM   #30
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...legal actions a dozen or so state have taken against the company for deceptive practices.
Do you really need to know anything more?

Once Ameriprise gets their hooks into your money, you'll be a long time getting them out again. It'll be 2016 before I can get all of my money back, and even then I'll have to pay $100 for the privilege of closing my account.

My advice is: run, don't walk, to the nearest exit.
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Old 04-15-2010, 02:40 AM   #31
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So add it up: 1% for the financial plan + 1% for the privilege of not paying front loads + 1.5% ER = 3.5% of your portfolio goes to Ameriprise each year... (that's on top of custodial fees, closing fees and whatever...)
$35000 on every million. There are quite a few here with multiples of millions invested, on their own, in low-cost funds. Just think, with Ameriprise's service (and costs), you could have $2m invested, paying at least $70k a year for the privelege, and have to keep working. Or, you could invest on your own, with fees in line with lots of VG, Fido or Schwab funds (0.1%-0.4% ERs) and have most of that $70k as retirement income instead of investment fees.

My advice is to educate yourself (here, books, class, whatever it takes. You don't have to be a pro, just have a good understanding). Then manage your own, whether Fido or Vanguard or Schwab.

All of that said, you CAN end up with high ERs when using any of those companies if you have not done your homework and chosen low ER mutual funds or ETFs. If you have to ask how I know this, the only answer I can give is that I am still learning myself and still unwinding some investments in funds with ERs that are ridiculous. I started investing without educating myself first on the basics...wrong move. But at least I didn't do it at Ameriprise.

Good luck to you.

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Old 04-15-2010, 08:37 AM   #32
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Mickey,

I think you have some good advice on this thread and I'm not going to add to it except to stress that you have plenty of time which you should use to educate yourself and your wife, if she is interested. At least you need to have your wife on board with the making of the decisions. I'm sure your Ameripise guy is going to be pressing you for an answer and that will be a dangerous time, financially speaking, because it will be hard for you to reverse your decision if you go with him and later regret it.

Since you have a Fidelity office nearby it could well be worth making an appointment and hearing what they have to say and to offer.

My 401(k) is managed by Schwab, and we have accounts with both Fidelity and Vanguard and I've been very pleased with all three, and that includes ease of use and advice as well as fees. The advice comes in the form of telephone and e-mail discussions with advisors plus on-line tools.

At age 38 I went through the same process as you are going through now, and it took 2 years before I had settled on a way forward, with fund choices to match a chosen Asset Allocation. I'm 55 now and have made a number of changes since then but I'm so pleased I took the time back then to educate myself enough to manage my own investments.
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Old 04-20-2010, 01:41 PM   #33
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I chatted with my Ameriprise guy for a while. He verified I'd be paying him 1% annually on top of the ERs of the funds, and that Ameriprise would be absorbing the front-end loads of those funds. He verified that I can set up exactly the same thing myself and save that 1% (and get funds with lower ERs). He claims confidence that he can outperform index funds even under those conditions. He stressed retail fees I'd be paying for funds purchased through someone like Fidelity or TD Ameritrade, so I need to research that, but I'm highly dubious those would come anywhere remotely near 1% of our portfolio.

He also asserted that if I went with Vanguard I would be invested 100% in one fund family, and that would be risky. As there are so many Vanguard champions here, I encourage you to tell me if that is BS, and why.

Thanks again for sharing your experience.
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Old 04-20-2010, 01:47 PM   #34
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Very few retail fees at Fidelity. They have some transaction fee funds, but a huge number of funds that can be bought without transaction fees.

And you can always buy directly from the mutual fund company to avoid the transaction fees.

And the "invested in just one fund company" line is BS. Each mutual fund is diversified, and if you hold several mutual funds you are even more diversified. You do not put yourself at risk by holding the funds through Vanguard or because all the funds might be managed by Vanguard. Each mutual fund is its own entity and operates independently of the others.

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Old 04-20-2010, 01:53 PM   #35
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Very few retail fees at Fidelity. They have some transaction fee funds, but a huge number of funds that can be bought without transaction fees.

And you can always buy directly from the mutual fund company to avoid the transaction fees.

And the "invested in just one fund company" line is BS. Each mutual fund is diversified, and if you hold several mutual funds you are even more diversified. You do not put yourself at risk by holding the funds through Vanguard or because all the funds might be managed by Vanguard. Each mutual fund is it's own entity and operates independently of the others.

Audrey
I agree - the question of the risks of a single company has been raised and discussed here before, and you can rest assured that if a company like Fidelity or Vanguard went bust, the funds would not be affected.
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Old 04-20-2010, 01:58 PM   #36
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And am I correct that each fund's performance is a function purely of its holdings and fees, and has nothing to do with the company who owns it, so performance could not be affected either?
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Old 04-20-2010, 02:01 PM   #37
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I chatted with my Ameriprise guy for a while. He verified I'd be paying him 1% annually on top of the ERs of the funds, and that Ameriprise would be absorbing the front-end loads of those funds. He verified that I can set up exactly the same thing myself and save that 1% (and get funds with lower ERs). He claims confidence that he can outperform index funds even under those conditions. He stressed retail fees I'd be paying for funds purchased through someone like Fidelity or TD Ameritrade, so I need to research that, but I'm highly dubious those would come anywhere remotely near 1% of our portfolio.

He also asserted that if I went with Vanguard I would be invested 100% in one fund family, and that would be risky. As there are so many Vanguard champions here, I encourage you to tell me if that is BS, and why.

Thanks again for sharing your experience.
Well, my Ameriprise guy once confessed that the only way for him to outperform index funds is to take a lot of risks with my money so that the (hopefully) higher returns minus the higher fees can (hopefully) come above market returns. It didn't work for me and I doubt it will work for you. So you would need something like a 80% stock portfolio at Ameriprise to (hopefully) achieve the same results as a 60% stock portfolio at Vanguard. You are basically taking extra, uncompensated risk so that the advisor can make a living.

As Audrey explained, Vanguard funds are separate entities. They are not owned by Vanguard. In fact Vanguard is owned by the funds. If one fund or even Vanguard goes bust, the other funds will keep on rolling just fine. If you invest all your money with an advisor, he could easily cash in your accounts and disappear with your money. It has happened before. It will happen again.
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Old 04-20-2010, 02:12 PM   #38
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As Audrey explained, Vanguard funds are separate entities. They are not owned by Vanguard. In fact Vanguard is owned by the funds. If one fund or even Vanguard goes bust, the other funds will keep on rolling just fine.
That is true of a lot of fund companies, including Fidelity and American Funds, among others.
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Old 04-20-2010, 02:19 PM   #39
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And am I correct that each fund's performance is a function purely of its holdings and fees, and has nothing to do with the company who owns it, so performance could not be affected either?
Vanguard does not own the funds, the funds own Vanguard. https://personal.vanguard.com/us/whatweoffer
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Old 04-20-2010, 08:26 PM   #40
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I think the simplest way someone on this board explained this was this: If they are taking 1% out of your portfolio, remember in retirement, you will be living off of about 4% of your portfolio - so they are taking a sizeable chunk of your future available funds...

If you actually do the math and see how much compounded over time the fees rob you of, you will run - not walk away...
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