FA question

[nnkrealtor]

Ok heres my deal.....

I went to Wachovia Securities a while back to open a SEP for my wife and a RothIRA myself. Really don't know that much about the market so I spoke to a trusted friend of mine who is a little older and has been investing for awhile. He said go see 'John Smith' at Wachovia he has returned me 17 and 22% respecfully the last two years, couldn't be happier with him. So I go meet with the guy and he helps me choose several american funds that would leave me and my wife with a good mix for our ages and our risk tolerance. he said american funds takes 1% of the gain as their fee. and I never even see that 1% so when I get my report after the quarter and I see there was a 10% gain that means I actually had an 11% gain. NOW... whats in this for the Wachovia Sec. guy. does american funds pay him a fee, I asked him is that 1% the only thing taken out of my profit. he said yes thats it... I don't get how Wachovia is working this unless American Funds are paying them something.... any ideas?

 

[Telly]

Sounds like some confusion on what's what. What share class do you have? "A" shares, or something else?

Ongoing broker profit is via a portion of the Expense Ratio (ER). For example, if you had a paticular fund's A shares, and the ER was .6%, the broker gets a small portion of that .6%. The ER is on your fund amount annually, whether there is a gain, loss, or break even.

If you paid an upfront sales commision (load), that is deducted from the $ before they enter a non-Money Market fund.

 

[LOL!]

Here's what's going on:
http://www.fundadvice.com/tools/general/explode-loads!.html

 

[haha]

First of all, in your example you are not giving up 1% of the gain, but approximately 10%. I imagine what was said is that the fund takes 1% per annum of your asset value in the funds.

As to the other question, how do Wachovia and John Smith make out, read the prospectus. I imagine that you will see that some part of the 1% (if that is indeed an accurate figure) is rebated back to JS and Wachovia. This may be called a 12b-1 fee.

Also, American may send Pocahontas over to visit John when he is feeling lonesome.

Ha

 

[FinanceDude]

Ok heres my deal.....

I went to Wachovia Securities a while back to open a SEP for my wife and a RothIRA myself. Really don't know that much about the market so I spoke to a trusted friend of mine who is a little older and has been investing for awhile. He said go see 'John Smith' at Wachovia he has returned me 17 and 22% respecfully the last two years, couldn't be happier with him. So I go meet with the guy and he helps me choose several american funds that would leave me and my wife with a good mix for our ages and our risk tolerance. he said american funds takes 1% of the gain as their fee. and I never even see that 1% so when I get my report after the quarter and I see there was a 10% gain that means I actually had an 11% gain. NOW... whats in this for the Wachovia Sec. guy. does american funds pay him a fee, I asked him is that 1% the only thing taken out of my profit. he said yes thats it... I don't get how Wachovia is working this unless American Funds are paying them something.... any ideas?

I'm going to guess these are "C" shares. In that case, American Funds gives the advisor a 1% upfront fee for the new business. After that, the advisor will be paid an annual 1% trail on the assets as long as they are in the funds. After 10 years, the shares convert to F shares, which are a lot lower ER, and the advisor's "cut" drops to .25% a year on the assets.

C shares are used mostly for short time horizons. If the money is going to be in there more than 3-4 years, they are less cost effective over time..............

 

[REWahoo]

Here's what's going on:
http://www.fundadvice.com/tools/general/explode-loads!.html

LOL!, your link isn't working.

 

[LOL!]

LOL!, your link isn't working.

Link works, but this BB software does not like the ! in the name, so cut-paste entire url or maybe someone can tinyurl it. Or go to www.fundadvice.com and find it there and click.

 

[nnkrealtor]

Ok here are some details (again thanks for the help)

ME 26, Medium risk tolorance, Guaranteed income of 34k with an extra 10-50k extra possible
Guarantee comes for job with Public School System which I put an extra 200/month to my TSA
Extra is From being a RE agent. (intend to save at least 1/2 of all RE income) last two years were 32k and 15k.

Wife 25, Medium risk tolorance, 100% commission last year grossed 65k
Has no employer sponsered retirement or Health insurance (she is considered an independant contractor)
Currently has no retirement savings. I want to start putting 10%-15% of her monthly gross into her SEP IRA

Combined we grossed 115k last year.

here is the mix Wachovia recomended for my roth.

1/3 in American Mutual Fund AMFCX
1/3 in Europacific growth fund AEPCX
1/3 in Income Fund of America IFACX

Here is the recomended mix for my wife's SEP

1/3 in Capital Income Builder CIBCX
1/3 in Capital world growth and income fund CWGCX
1/3 in Growth fund of america CFACX

Again pretty new at this... any opinions or advice would be great...
Thanks

 

[FinanceDude]

here is the mix Wachovia recomended for my roth.

1/3 in American Mutual Fund AMFCX
1/3 in Europacific growth fund AEPCX
1/3 in Income Fund of America IFACX

10 yr average growth was 9.45% a year, with an ER of 1.47 for the blended portfolio

Here is the recomended mix for my wife's SEP

1/3 in Capital Income Builder CIBCX
1/3 in Capital world growth and income fund CWGCX
1/3 in Growth fund of america CFACX

Again pretty new at this... any opinions or advice would be great...
Thanks

10 yr average return was 11.88%, with an ER of 1.51% for the blended portfolio.

Doesn't seem like a lot of asset allocation, your wife is heavily in international, while you are heavy in large cap value.............