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Old 10-16-2013, 08:28 AM   #41
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Sounds like they have you in a platform wrap account. A lot of banks use these programs, which were "invented" in the 90's and still pushed today. I have yet to see one that could not be duplicated for a LOT less, even with a different FA, much less on your own.

3% fees are ridiculous. You are right to question it and understand what is being charged and why.
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Old 10-16-2013, 10:07 AM   #42
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The OP is not paying 3% in fees even though that is what she stated. That number seems to have been miscalculated as several others have pointed out. If that were the case, she would be earning dividends and/or interst of $12,000 on a $133,333 investment. She has apparently paid $4,000 on a total of about $403,000 in investments which works out to a 1% fee. Not great but certainly not unusual. Without the actual investments being identified and without seeing the actual buys and sells, there is no way to determine whether there is churning of the account. The trades that she is seeing every month could simply be dividends/interest payments in each month and repurchases. While I don't see a need for a broker/advisor in my life, an assumption that everyone of them is a crook is simply not true. There are people who benefit and that benefit comes at a cost. If you need or want it, then you pay the cost.
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Old 10-16-2013, 10:50 AM   #43
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Originally Posted by reubenray View Post
1) $250,406 has given me $1,639 in dividends over a 5 month period. The fees for this portion is about $3,200 dollars for this year.
That's 1.28% over 5 months, which projects out to 3% for the year if the rate holds. The fees on the other parts seem less but I'm not clear what the fee structure is. Sounds like a base fee + fees on transactions, and that one group has a lot of churn.

It's up to the OP to do whatever s/he wants. The building isn't on fire, but the septic tank is definitely overflowing. Index funds aren't the only answer though it is a good one.

In my opinion the first mistake the OP is making is looking at dividends only, rather than total return. Compare $100K that does not grow in value and generates 4% income that you pull out, against $100K that grows 3% and generates 2% income. In the latter case you can pull out the 2% income and 2% of the gains to get the same 4% spending money, but now you have $101K. That will actually generate a bit more income the next year and/or leave you more to draw down.

The second mistake is putting up with those high fees. The OP asked for our opinion on this, specifically the fees, and again my advice is to definitely change this. You say you trust the FA and he has not steered you wrong, but what do you base this on? With all that apparent fee-generating churn and mediocre results I think your trust may be misplaced. I'm sure he can cut the fees by churning less but I still think you can do better on your own. Even if you don't have enough to get a free analysis and recommendation from Vanguard, the one time fee for it would still be worthwhile, and you might be able to negotiate to get it for free for transferring your account to them.

I think people sometimes stick with an FA because they don't want to admit making a mistake for so many years, but you can't change the past. You can, however, improve the future. You owe the FA no loyalty whatsoever. But it's no skin off my back if you decide to stay with him.
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Old 10-16-2013, 02:51 PM   #44
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For one thing I am a he and not a she. I also made an error on how I was calculating my fees.

I have been researching my 401k rollover plan which is the $250,000 one. I only started drawing dividends on it back in June. I also was able to check my fee cost back one year. The fees work out to be $0.00375. I calculated this by dividing my fee amount by the amount of the fund itself. For example back in October of 2012 I paid $434.82 for $115,984.45. In January I added another $114,000 +- to this fund. I checked this on my other quarters and they all work out to the same percent. My error in calculating this before was incorporating my wife's fees in with my mine. Her fees are the same percent, but we cannot draw dividends on her $$ yet.

I only started drawing dividends on this fund back in June/2013, so I cannot do much research on the outcome. In the last quarter (July, August & September) I was paid $983.07 and the fees for that quarter was $932.28. So the fees are basically taking my dividend money away. But this fund grew by $10,062 in this same quarter. Whether this was due to the market or the work of the FA I do not know.

The other two funds have no fees. The $114,000 one gave me dividends of $1,654.89 for the last quarter, but this fund lost over $10,000 with the market swings. The smallest fund gave me dividends of $593.08 for the quarter and the value stayed about the same.

So I do not think I am paying to much (but I don't know). My goal is to get more monthly income (dividends) and have some growth.
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Old 10-16-2013, 06:16 PM   #45
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Seeing as how you refuse to tell us what funds you are invested in and continue to think your FA is doing a swell job, I wish you the best of luck. May your FA enjoy the new car that you are helping him pay for.

You paid $932 in fees for 1 quarter on an investment of $230k, or $3728 for the year. My math says that's 1.6%
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Old 10-16-2013, 06:34 PM   #46
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You paid $932 in fees for 1 quarter on an investment of $230k, or $3728 for the year. My math says that's 1.6%
Those are just the fees to the FA, but probably not everything he's paying because of his FA. Wait until you see the expense ratios of the special funds the FA has selected. But even at 1.6%, that equates to about 40% of what reubenray should be receiving (if we assume a typical 4% withdrawal rate). If we add in typical taxes that reubenray must pay, reubenray will be taking home about the same amount as he is giving the FA. But I'm sure he gets a VERY nice Christmas card.

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Originally Posted by reubenray View Post
So I do not think I am paying to much (but I don't know). My goal is to get more monthly income (dividends) and have some growth.
You are paying too much. If you want to increase the amount you can take from your portfolio, the fastest and safest way is to stop paying those fees and keep that money for yourself. Later we'll talk about dividends--they are important, but they sometimes aren't what they appear to be.
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Old 10-16-2013, 06:47 PM   #47
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Seeing as how you refuse to tell us what funds you are invested in and continue to think your FA is doing a swell job, I wish you the best of luck. May your FA enjoy the new car that you are helping him pay for.

You paid $932 in fees for 1 quarter on an investment of $230k, or $3728 for the year. My math says that's 1.6%
I don't think he knows what funds he's in. And clearly the math needs a little more clarity. An FA may be not a total waste in this case.

ruebenray, keep working on it and eventually you'll understand your investments better. Next time you talk to the FA, or find your account statements, see if you can get a detailed description of what the heck is in your accounts. You need to know that and have a good handle on the expenses before you will know if your FA is OK or a thief. And when you know that answer, you can start investing on your own and stop paying the FA.
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Old 10-16-2013, 07:13 PM   #48
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I know exactly what is in my accounts, but as I said I am not comfortable putting out my info to total strangers. I understand ya'll are trying to help me, but this is not the way. If I am paying to much in fees I will discuss this with my FA. I am not in the position to take out my money and put it somewhere else without getting my monthly dividends.

I can you the names of the funds.
Attached Files
File Type: txt Funds.txt (1.2 KB, 75 views)
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Old 10-16-2013, 07:29 PM   #49
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reubenray, you've got a nice blend of funds. Someone else will have to look at the fee schedule as I am at work and don't have the time. Remember, you don't have to limit yourself to withdrawing dividends. There's nothing preventing you from cashing out a few shares too.

Regarding fees, most FA's would probably think that combined mutual fund operating fees and his management fees of 1.5% is reasonable. From his perspective it probably is. From my perspective (I pay about 0.2% at Vanguard) it is several times too high. The difference between his fees and the fees charged at a place like Vanguard or Fidelity is about $5000/yr in your pocket if you have $400k invested.
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Old 10-16-2013, 07:49 PM   #50
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Fund Expenses: We can't tell how good or bad the whole situation is without some idea of your weighting (percent) in each fund. Overall, the expenses of these funds aren't "crazy", but most are still about 0.5% above low-cost index funds. That's .5% every year. Together with what the FA is getting paid, it's about 1/2 of what reubenray can sustainably take out of his funds every year. The FA and the fund companies will be getting as much every year from reubenray's investments as he will. Did they work for this money for decades as he did?

That's a lot of money to give away.
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Old 10-16-2013, 08:18 PM   #51
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I know exactly what is in my accounts, but as I said I am not comfortable putting out my info to total strangers. I understand ya'll are trying to help me, but this is not the way. If I am paying to much in fees I will discuss this with my FA. I am not in the position to take out my money and put it somewhere else without getting my monthly dividends.

I can you the names of the funds.
I can understand not wanting to put out here exactly how much you have in each account. Another way to do it is to show the percentages.

AS I understand it there are basically 5 kinds of fees you can have (maybe there are more but these are the ones I can think of).

1. A fee you directly pay your FA. In your case it sounds like it is 1%. That isn't highway robbery, exactly, but is for many people a waste of money. You seem to think that the FA brings added value, but for many people who come here they could do just as well on their own. This is often because they use index funds and there just isn't that much that an FA can do. The idea that an FA can identify what funds will do well in the future is one that many people will reject.

2. The expense ratio of your fund itself. Most of our money is at Vanguard and I think our expense ratio is around .20. I haven't looked up all your funds but most non-index funds have higher expense ratios.

3. A front end load (sales fee) you pay to buy some funds. You would need to check into this on the funds you already own.

4. The same as 3 but one you pay when you sell a fund.

5. Commissions or fees to execute a trade. This is how churning an account ends up costing a lot of people. Every time they sell and buy something else they pay a fee. Do you pay a fee for trades? If so, what is that fee?

How often does your FA have you sell something and buy something else? What kind of fee does that generate? Why are you selling and buying something else.
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Old 10-16-2013, 08:27 PM   #52
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Fund Expenses: We can't tell how good or bad the whole situation is without some idea of your weighting (percent) in each fund. Overall, the expenses of these funds aren't "crazy", but most are still about 0.5% above low-cost index funds. That's .5% every year. Together with what the FA is getting paid, it's about 1/2 of what reubenray can sustainably take out of his funds every year. The FA and the fund companies will be getting as much every year from reubenray's investments as he will. Did they work for this money for decades as he did?

That's a lot of money to give away.
Is that what you want?

Short-term fixed income - 7.4%
Intermediate fixed income - 21.2%
High-yield fixed income - 5.2%
International/emerging markets debt - 7.9%
Large cap equity - 26.1%
Mid cap equity - 6.5%
Small cap equity - 9.3%
International equity - 5.2%
Emerging markets equity - 6.7%
Other Holdings - 4.5%
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Old 10-16-2013, 08:35 PM   #53
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Is that what you want?

Short-term fixed income - 7.4%
Intermediate fixed income - 21.2%
High-yield fixed income - 5.2%
International/emerging markets debt - 7.9%
Large cap equity - 26.1%
Mid cap equity - 6.5%
Small cap equity - 9.3%
International equity - 5.2%
Emerging markets equity - 6.7%
Other Holdings - 4.5%
We still can't tell you how much the expense ratio (ER) is. For each fund, what's your percentage? (for example, what percentage of your holdings is in MTRPOLTAN WST T/R BND-I MWTIX)?

Breaking it out as you've done above is helpful (it tells us your asset allocation), but we can't tell you about your annual expenses. The payoff: it will be possible to suggest different (lower cost) funds that leave you with the same basic asset allocation, but with lower annual fees.
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Old 10-16-2013, 09:54 PM   #54
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Originally Posted by reubenray View Post
I know exactly what is in my accounts, but as I said I am not comfortable putting out my info to total strangers. I understand ya'll are trying to help me, but this is not the way. If I am paying to much in fees I will discuss this with my FA. I am not in the position to take out my money and put it somewhere else without getting my monthly dividends.

I can you the names of the funds.
Here is an example that may shed light on your portfolio.

You hold JP MORGAN CORE BD FD WOBDX:

0.57% expense ratio
2.67% yield
Credit Quality is medium
YTD Return*: -1.69%

A comparable fund which many investors hold is Vanguard Total Bond Market Index Adm VBTLX:

0.10% expense ratio
2.47% yield
Credit Quality is high
YTD Return*: -1.95%

Your WOBDX has within it more longer term debt, and the bond quality overall is less. When interest rates rise, your fund will lose more in NAV. For now, that is something to note.

Another point is that one core bond fund costs .47% more than the other. In addition, let's say your advisor really does charge 1%. You have -1.47% headwind. Can your bond fund outperform VBTLX over the next year?

Finally, let's say you hold 20% of your allocation in the WOBDX fund. That means your effective expense ratio is .114% (20% x .57).

If you create a spreadsheet as I suggested, and plug in these type of numbers for all your investments, you will be far much wiser for the effort.

You may realize that -1.47% headwind over 20 years means you will be earning approximately 24% less over a 20-year period.

When you do this same set of calculations for stock funds in your portfolio, the numbers will be more negative, I am afraid.

One more example, than gotta run. Here's a stock fund comparison.

Artisan Small Cap Value Investor (ARTVX)
0.68% yield
1.22% expense ratio
YTD Return*: 17.65%

Vanguard Small Cap Value Index Admiral (VSIAX)
2.10% yield
0.10% expense ratio
YTD Return*: 24.23%

Hmmm...do I want to pay an advisor 1% every year for the rest of my life to put me in ARTVX, or do I want to hold VSIAX?

I hope this helps you.
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Old 10-17-2013, 06:29 AM   #55
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Your original question is if you should look into changing the 1/3 profits you give to the FA.

Yes, you should.

Biggest savings is getting rid of the FA and do it yourself, saving about 1% of your total account balance, around $4000. There are also fee only (hourly fee) advisers out there who do not get a percentage of your total portfolio each year.

Next get rid of the actively managed funds where you can get lower cost index funds that perform the same or better then what you have. A short look at your large cap funds shows you're paying about .5% more for the same performance as the equivalent Vanguard Indexes.

I would also suggest you simplify the portfolio, you have 22 investments, you can easily cut it in half, and could go all the way down to 1 fund if you so choose. Meaning management can be as easy as you want with little or no lose in performance.
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Old 10-17-2013, 09:01 AM   #56
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I can't remember for sure, but I believe the 401k fund is managed by a group of persons instead of a single FA. It is a package of some type. I will have to check with my FA how this works if I want to delete certain funds out of it and put them somewhere else.

Below are my percentages of the funds in this "package".

JBFFX - 7.4; PTTRX - 7.3; MWTIX - 6.5; WOBDX - 4.6; BFAFX - 2.8; AHTFX - 5.2;

WBFFX - 3.6; FMKIX - 4.3; GFAFX - 8.4; TRBCX - 4.6; WSHFX - 8.8; JPIVX - 4.4;

PEGZX - 3.3; JMVAX - 3.2; BUFSX - 4.9; ARTVX - 4.4; AEGFX - 5.2; NWFFX - 4.9;

LZEMX - 1.8; FTIXX - 0.9; CSRSX - 1.9; PCRIX - 1.6;
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Old 10-17-2013, 10:29 AM   #57
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Originally Posted by reubenray View Post
I can't remember for sure, but I believe the 401k fund is managed by a group of persons instead of a single FA. It is a package of some type. I will have to check with my FA how this works if I want to delete certain funds out of it and put them somewhere else.

Below are my percentages of the funds in this "package".

JBFFX - 7.4; PTTRX - 7.3; MWTIX - 6.5; WOBDX - 4.6; BFAFX - 2.8; AHTFX - 5.2;

WBFFX - 3.6; FMKIX - 4.3; GFAFX - 8.4; TRBCX - 4.6; WSHFX - 8.8; JPIVX - 4.4;

PEGZX - 3.3; JMVAX - 3.2; BUFSX - 4.9; ARTVX - 4.4; AEGFX - 5.2; NWFFX - 4.9;

LZEMX - 1.8; FTIXX - 0.9; CSRSX - 1.9; PCRIX - 1.6;

I did a spot check on some of the larger holding and found that the fees ran anywhere from 0.4% to 1.28%. Someone may be willing to spend the time to look of the fees of all of them for you but you can do it easily enough.

Those mutual fund fees will not be included in what is shown by your FA as his fee. There's nothing inconsistent with what we've been saying here that you are paying close to 1% in fees in addition to what you are being told about.

BTW - You have a classic "fund of funds" which the FA will tell you brings the best of the best in mutual funds together with his firm's "genius" to give you an outstanding portfolio. All this is easily duplicated with index funds with lower fees and historically proven better performance.

Also, thanks for posting the added details. You should get some more specific comments on your individual funds from people with more time.
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Old 10-17-2013, 10:54 AM   #58
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I'd mentioned in a previous post about a simple spreadsheet I had made to compare the fees between Wells Fargo and Vanguard. I did a little looking around and found it. Now if I can get it to upload properly with this message, you can take a look at it and see what you think.

It is a simplistic look at fees comparison and does not take into account down years, variable returns from one year to the next, etc., but it will give you a general idea of how much damage a one or two percent higher fee can do to a portfolio balance over an extended time.

fees comparison.xls
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Old 10-17-2013, 11:03 AM   #59
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I have to ask this question.

Is Vanguard connected to this forum in some way? From when I joined over a year ago I read a lot about Vanguard. Just checking to make sure it is not Vanguard personnel pushing Vanguard.
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Old 10-17-2013, 11:05 AM   #60
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I can't remember for sure, but I believe the 401k fund is managed by a group of persons instead of a single FA. It is a package of some type. I will have to check with my FA how this works if I want to delete certain funds out of it and put them somewhere else.

Below are my percentages of the funds in this "package".

JBFFX - 7.4; PTTRX - 7.3; MWTIX - 6.5; WOBDX - 4.6; BFAFX - 2.8; AHTFX - 5.2;

WBFFX - 3.6; FMKIX - 4.3; GFAFX - 8.4; TRBCX - 4.6; WSHFX - 8.8; JPIVX - 4.4;

PEGZX - 3.3; JMVAX - 3.2; BUFSX - 4.9; ARTVX - 4.4; AEGFX - 5.2; NWFFX - 4.9;

LZEMX - 1.8; FTIXX - 0.9; CSRSX - 1.9; PCRIX - 1.6;
Reubenray,

I am not familiar with any if these funds and am not planning to look them up. However, in general, when there are so many funds in a portfolio, their holdings tend to overlap (there are only so many corporations and so many industries out there!). Overlap leads to positive correlation in results, which defeats the purpose of diversification. At times, the many funds may be working at cross purposes, e.g fund A buys shares in X while fund B sells them. As well, every one of these 22 funds has management fees which you are ultimately paying.

Following the KISS principle (keep it simple, sister) is at least as effective and considerably cheaper. We can only try to answer your original question. Deciding whether to make a change or not is your choice.

Disclaimer: I have no affiliation with any financial institution. I don't even live in the US, but in Canada, where fees are even more of a ripoff.
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