Fee Only Advisor wants to use Schwab

[Tork]

Hey there FIRE experts. I am considering using a fee only advisor (one fee per year not percentage based). He wants to use Schwab as he says they have the best digital platform to allow both of us to have access to reporting, etc. When I asked about Vanguard he said they do not have a platform for 3rd party investment advisors. I have been burned in the past by advisors so I want to know if there might be any other reason that he is very pro-Schwab? Does he get a kickback for total investments under his name or anything?

We are not planning to use any funds with "loads" that would be paid to him.

 

[dallas27]

I don't know anything about schwab, but they are your assets and he is your advisor, and you are the only person whose happiness matters. If he is telling you he can't advise you on vanguard funds, i would look elsewhere.


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[audreyh1]

Nothing wrong with Schwab. But why go through an advisor if what you want are Vanguard funds? Vanguard has very low cost advisors available.

 

[bingybear]

Schwab is not a bad custodian. If you are happy with the pricing of adviser.. and loads he may have you pay, Schwab is not a bad place. Vanguard may not provide a good platform for your adviser. Make sure you like what your adviser is proposing to do and the cost of his advice.

 

[Tork]

I don't know anything about schwab, but they are your assets and he is your advisor, and you are the only person whose happiness matters. If he is telling you he can't advise you on vanguard funds, i would look elsewhere.


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He is using many Vanguard funds within a Schwab account. I apologize i dint make that clear.

I am mostly trying to make sure that there is no ulterior motives for using Schwab other than their online interface.

 

[Tork]

Nothing wrong with Schwab. But why go through an advisor if what you want are Vanguard funds? Vanguard has very low cost advisors available.

I want an advisor that I can hold accountable and also want to have the same one long term. He also helps with life planning beyond just helping with asset allocation. His input also helps my spouse an I get on the same page with our financial goals.

 

[Chris7]

Won't you be charged more for using the Vanguard funds through Schwab then holding direct at Vanguard? I have my account at Schwab, I use Schwab's ETFs. No complaints. But If I wanted to buy Vanguard funds I would pay a commission (only $9.95, I think). I handle my account on my own. Why does he need access to the account?

 

[bingybear]

He is using many Vanguard funds within a Schwab account. I apologize i dint make that clear.

I am mostly trying to make sure that there is no ulterior motives for using Schwab other than their online interface.

I had an adviser a while back who used Schwab. I got admiral shares at no loads or transaction fees. I got many loaded funds load free. I'm not sure on all the ways brokerages make $, but it did not seem negative to me personally.

As an individual investor, Schwab gives me no transaction fee access to non-admiral shares of Vanguard funds (not available generally to individual investors @ schwab).
I would expect that Schwab and Fidelity have more convenient platforms for advisers than Vanguard.

Do you trust this adviser? If so, ask him/her the difference and why he likes Schwab. From an individual perspective I like Schwab's site and research better than others. This may be your adviser's preference.

 

[bingybear]

Won't you be charged more for using the Vanguard funds through Schwab then holding direct at Vanguard? I have my account at Schwab, I use Schwab's ETFs. No complaints. But If I wanted to buy Vanguard funds I would pay a commission (only $9.95, I think). I handle my account on my own. Why does he need access to the account?

I pay NTF if I hold standard Vanguard funds per the standard NTF Schwab requirements. Advisers can do that for admiral funds.

 

[samclem]

I want an advisor that I can hold accountable

? C'mon. You know you have no means to "hold him accountable." What are you going to do, give him a severe talking to? All you can do is try to make him feel bad if his recommendations don't work out (that's unlikely to be effective).
I can't see why he'd need you to be with Schwab. If you are buying Vanguard funds, then you'll have more (low cost) options at Vanguard. If he's really planning to put you into ETFs, then a Schwab brokerage account would probably be okay.
I'd ask him outright if he receives any compensation from Schwab (or >anyone< other than you), and have that in writing in the contract you sign with him. You want him to be compensated only by you, and you want him meeting fiduciary standards.
You probably don't want to be paying this guy's fee every year forever, so get your accounts set up the way >you< want them. If I already had accounts at Vanguard, I would certainly not open a new relationship with Schwab and complicate my life just for his convenience (or his monetary benefit).

 

[Tork]

.

 

[jazz4cash]

I guess I am very surprised that a fee only FA would need account access. I always envisioned they provide advice and the individual would implement.


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[samclem]

When I asked about Vanguard he said they do not have a platform for 3rd party investment advisors.

Vanguard absolutely does have a way for him to see and act (if you want) on your accounts. You can make him your "agent" and there are quite a few controls you can put into place to help prevent hanky-panky (e.g. you can allow him to see your holdings but not buy/exchange/sell, you could allow him to exchange funds within your account but not to forward any funds to any banks, etc). You can call Vanguard and ask them about this yourself, see if it would meet your requirements.
I wonder what this FA is up to.
As always, once you know enough to identify if an FA is really competent (which is not hard), then you already have the skills to do the job yourself (which is also not hard).

 

[COcheesehead]

Fidelity has every tool this guy has available to him, available to you. You pick your needed retirement income and work backwards, for free. You will have an AA in detail and all you need to do is implement it, for free. Did I mention it is for free? You do not need this guy.

 

[RE2Boys]

I guess I am very surprised that a fee only FA would need account access. I always envisioned they provide advice and the individual would implement.


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This is the arrangement I would want to have, otherwise you a expecting him and permitting him to be more than an advisor, your essentially giving him the money to manage. Is his fee like 1% per year??

 

[Onward]

Most advisors have a relationship with a single custodian. The advisor's business is built around the forms, software, personnel, policies, procedures, etc. of that custodian.

I would bet your advisor's custodian is Schwab. That's why he wants to custody there.

 

[braumeister]

Be sure you look the adviser up on this site:
https://www.adviserinfo.sec.gov

You may learn a bit more about him or her.

But basically, I think Onward's answer is correct.

 

[jazz4cash]

Most advisors have a relationship with a single custodian. The advisor's business is built around the forms, software, personnel, policies, procedures, etc. of that custodian.

I would bet your advisor's custodian is Schwab. That's why he wants to custody there.

That seems reasonable for an advisor that is compensated by the custodian but not with a fee only advisor. If they're helping with workplace accounts there is no choice of custodian. I've spoken to some commission based advisors that seem reluctant to help with 401k assets.


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[FUEGO]

I think he's getting economies of scale because all his clients are custodianed at Schwab. It's easier for him to handle all client accounts at one place instead of bothering with logging in to Vanguard, Fidelity, etc etc etc. A single software solution to handle all workflow.

A friend here in Raleigh works for Schwab's software group and his sole product is the management platform that third party money managers use to manage clients' money at Schwab. Apparently their interface is good for money managers as they have tons of business. He goes to trade shows and investment conferences and hawks the wares to investment managers (and he's one of the ugliest booth babes I've ever seen...).

Edit: what Onward said.

 

[MRG]

I think he's getting economies of scale because all his clients are custodianed at Schwab. It's easier for him to handle all client accounts at one place instead of bothering with logging in to Vanguard, Fidelity, etc etc etc. A single software solution to handle all workflow.

A friend here in Raleigh works for Schwab's software group and his sole product is the management platform that third party money managers use to manage clients' money at Schwab. Apparently their interface is good for money managers as they have tons of business. He goes to trade shows and investment conferences and hawks the wares to investment managers (and he's one of the ugliest booth babes I've ever seen...).

Edit: what Onward said.

You're correct there are management platforms for third-party managers. If I were doing the j*b I'd pick one and go with it, for the reasons you mentioned.

It's been suggested to just ask how the compensation works. I'd do that. This is the time to trust or run away. That said there are no red flags going off. I don't know of Vanguard funds that allow for third-party compensation.

 

[Sunset]

Vanguard absolutely does have a way for him to see and act (if you want) on your accounts. You can make him your "agent" and there are quite a few controls you can put into place to help prevent hanky-panky (e.g. you can allow him to see your holdings but not buy/exchange/sell, you could allow him to exchange funds within your account but not to forward any funds to any banks, etc). You can call Vanguard and ask them about this yourself, see if it would meet your requirements.
.....

+1

I am an agent on a relative's Vanguard account.
It's very convenient as I see that account as a section on mine when I do a login, so not even a need to log into multiple accounts.

 

[Sunset]

? C'mon. You know you have no means to "hold him accountable." What are you going to do, give him a severe talking to? All you can do is try to make him feel bad if his recommendations don't work out (that's unlikely to be effective).
......

+1

So funny, that is what I was also thinking as I read it, but I was thinking a tongue lashing would set him straight .

 

[pb4uski]

+1

I am an agent on a relative's Vanguard account.
It's very convenient as I see that account as a section on mine when I do a login, so not even a need to log into multiple accounts.

How do you go about doing that? It would be real handy to me as I manage not only my own account, but DW's, DS's and DM's as well.

 

[samclem]

How do you go about doing that? It would be real handy to me as I manage not only my own account, but DW's, DS's and DM's as well.

Just contact Vanguard. I am an agent for my MIL. IIRC, they will send the account owner some forms to sign appointing you as their agent with some check boxes with the authorities that are granted. It has worked really well for us. You log in once and see your own accounts plus those for whom you are an agent. If there's stuff you >don't< want to see (i.e. named beneficiaries for the accounts, etc), make sure the correct boxes get checked.

 

[gerntz]

Is his fee like 1% per year??

Only if the fixed annual fee - as stated in the original post - is at or more than 1% of the assets.