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Old 09-08-2010, 07:14 AM   #21
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Funny, a colleague who has an MBA, does a finance-related job and worked for an accounting firm just asked me the other day if I could recommend a financial advisor. My first thought was, weren't you paying attention the last decade of work and school? But my blunt answer was the best person to manage your money is you. If you can manage 6th grade math and reading comprehension, you can figure this stuff out. Believe me, if the average fido/amerisprise/whatever rep can do it, you definately can.

As for time commitment, it can be very small. You will have some upfront investment in time to educate yourself. After that, 15 minutes a year can do it if you choose a simple, diversified portfolio. I manage 4 portfolios in addition to my own. One is managed similarly to my portfolio: aggressive, focused on individual securities, and high tolerance for risk. This requires time and a lot of effort, but I am a securities analyst by training and profession, so no biggie for me. A second account is invested as a diversifier to the person's equity-heavy main account, in both traditional mutual funds and closed end funds. I might spend a half dozen hours a year on this account, mostly making tactical adjustments when the oddball stuff in that account gets really cheap or really expensive. The last two I literally spend under an hour a year on. They are simple, diversified index portfolios the just need to be rebalanced once a year.
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Old 09-08-2010, 08:39 AM   #22
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I would not let Fidelity manage my funds. I'm not biased, since I invest with Fidelity and love their brokerage service. Free trades on a lot of ETFs from ishares IIRC. $8 for all the rest (not sure if that is dependent on assets invested. Good trading tools and good web interface (blows Vanguard out of the water IMHO).

But all I have heard from those who have their assets managed by fidelity is that they stick them in a bunch of actively managed Fidelity funds that charge 4-5x what comparable index funds charge for the same asset classes. And charge them a fee based on assets under management for this "privilege". If you don't mind cutting your SWR in half or by a third, then go right ahead and have Fidelity actively manage your money. I would trust them a lot more than an Edward Jones/Northwestern Mutual type of investment manager.
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Old 09-08-2010, 09:05 AM   #23
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DW/me have our combined portfolios split 60/40 FIDO/VG.

We met with FIDO at their local office twice before I retired to go over our plans and how they fit with our total portfolio.

When I actually retired in 2007 (DW still is hesitant to take the plunge, even though she could), Fidelity moved us to their "Private Client Group" (similar to VG's Flagship) since my FIDO 401(k) was rolled into a FIDO commercial account, along with the proceeds of my retirement cash balance plan.

I investigated their Fidelity Private Portfolio Service option, since we did not need their trust services (we had our own and they have it as part of their FIDO Personal Trust option).

After calculating their annual fee structure for our combined portfolio, I decided to continue to manage our investments on our own. The way I looked at it was that I was being "paid a salary" (at their management rates) to manage our portfolios, and while I'm not saying we won't have them (or anybody else) in the future for fee based services, I'm just not ready for this time of my life. Even though our fee would be slightly less than 1%, I look at that 1% as a "load" and 25% of a 4% portfolio draw target, in addition to the costs involved for the underlying assets.

DW has their information and has it as an option, assuming I pass first and she feels uncomfortable with the plans I've already put in place. Since I've covered her expenses for 1-2 years after my passing via term life, she won't have the pressure to do something immediately related to portfolio withdrawls, and can review the options available to her with our elder law attorney. Additionally, the insurance provides income while she makes the decisions realated to SS and our household expenses (I'm delaying SS for her benefit, and I currently cover most/all household expenses out of "my" budget).

BTW, here's their current fee structure:

Fidelity Investments: Fidelity Private Portfolio Service Cost
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Old 09-08-2010, 09:12 AM   #24
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But all I have heard from those who have their assets managed by fidelity is that they stick them in a bunch of actively managed Fidelity funds that charge 4-5x what comparable index funds charge for the same asset classes. And charge them a fee based on assets under management for this "privilege". If you don't mind cutting your SWR in half or by a third, then go right ahead and have Fidelity actively manage your money. I would trust them a lot more than an Edward Jones/Northwestern Mutual type of investment manager.
Fido is a two-edged sword, they run a no-load house and a load house side by side. of course, the reps at Fido are "encouraged" to use the Fidelity Advisor Funds (loaded)for client portfolios because the company makes more if they do.

Wrap accounts were big in the 90's, now firms like Fido are recycling them under an asset allocation/Ibbotson mantra. Same stuff, different decade. Do you really think an Ed Jones or NML rep can't use Fido? Because that is simply not true........
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Old 09-08-2010, 09:21 AM   #25
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Wrap accounts were big in the 90's, now firms like Fido are recycling them under an asset allocation/Ibbotson mantra. Same stuff, different decade. Do you really think an Ed Jones or NML rep can't use Fido? Because that is simply not true........
I assume Edward Jones and Northwestern Mutual reps get more kick backs from other fund companies besides Fidelity. And there is the "keeping up appearances" of (a) not selling fidelity funds, because then clients may wonder why not just go to directly to fidelity for money management and (b) why is my adviser sticking me in more expensive Fidelity Adviser funds with loads instead of the equivalent Fidelity counterparts without loads.
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Old 09-08-2010, 09:47 AM   #26
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I assume Edward Jones and Northwestern Mutual reps get more kick backs from other fund companies besides Fidelity. And there is the "keeping up appearances" of (a) not selling fidelity funds, because then clients may wonder why not just go to directly to fidelity for money management and (b) why is my adviser sticking me in more expensive Fidelity Adviser funds with loads instead of the equivalent Fidelity counterparts without loads.
You really think the REPS get kickbacks? As far as Fidelity Advisor Funds goes, I think they will sell that division in the next 5 years to someone else. The internal conflict there is getting worse each year. BTW, the "soft dollar" amounts you are referring to DO NOT go to the reps, they go to the brokerage firm of the reps. This practice has been going on for years, but the new financial reform bill will probably kill it, and that's not a bad thing at all.

FWIW, if someone wants to manage their own money, they go direct to Fido or VG anyways, they don't call an advisor. Advisors can use Fidelity no-loads but many do not............
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Old 09-08-2010, 09:48 AM   #27
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BTW, here's their current fee structure:

Fidelity Investments: Fidelity Private Portfolio Service Cost
Wow, that's high!
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Old 09-08-2010, 10:18 AM   #28
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You really think the REPS get kickbacks? As far as Fidelity Advisor Funds goes, I think they will sell that division in the next 5 years to someone else. The internal conflict there is getting worse each year. BTW, the "soft dollar" amounts you are referring to DO NOT go to the reps, they go to the brokerage firm of the reps. This practice has been going on for years, but the new financial reform bill will probably kill it, and that's not a bad thing at all.
I thought the reps that have their own Ed Jones office get some of the kickbacks? I guess technically their firm gets the kickback, but since they own their own profit center or franchise, they end up getting the kickbacks.
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Old 09-08-2010, 11:02 AM   #29
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I thought the reps that have their own Ed Jones office get some of the kickbacks? I guess technically their firm gets the kickback, but since they own their own profit center or franchise, they end up getting the kickbacks.
No, corporate controls everything. Most Ed Jones reps get monetary help from the home office in their first 2-3 years to get them up and running. After that, they have to meet production requirements to get the money. On top of that, most Ed Jones reps make the same payout percentage as a wirehouse advisor, but pay their own bills.

One of these days I am going to break down an A share mutual fund purchase and show what the advisor gets W-2 wise. Not as much as folks on here think.........
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Old 09-08-2010, 12:10 PM   #30
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No, corporate controls everything. Most Ed Jones reps get monetary help from the home office in their first 2-3 years to get them up and running. After that, they have to meet production requirements to get the money. On top of that, most Ed Jones reps make the same payout percentage as a wirehouse advisor, but pay their own bills.

One of these days I am going to break down an A share mutual fund purchase and show what the advisor gets W-2 wise. Not as much as folks on here think.........
Hey, I know they don't get the whole 5.75% load or whatever. I think the guy I used to use at Edward Jones told me it was around 34% of the sales commission on A shares that they received. No idea if that was net or gross of their office expenses.
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Old 09-08-2010, 12:43 PM   #31
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Hey, I know they don't get the whole 5.75% load or whatever. I think the guy I used to use at Edward Jones told me it was around 34% of the sales commission on A shares that they received. No idea if that was net or gross of their office expenses.
Say its 5.75%. The mutual fund company keeps typically .50% and then 5.25% goes to the broker-dealer. Then the broker-dealer applies a production grid to the commissions. 34-40% is about average for Ed Jones, some firms pay more or less.

So, on a $10,000 sale, the client pays $575 in "load', and the advisor gets a gross commission or 1099 income of $210, or 40% of $525. Then he/she pays expenses for the office and things out of that, along with taxes. The mutual fund companies and broker-dealer make out the best in the current environment......... After expenses and taxes, the rep probably nets about $130 or so.........

The reality is much different than many realize..........
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Old 09-08-2010, 06:47 PM   #32
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Say its 5.75%. The mutual fund company keeps typically .50% and then 5.25% goes to the broker-dealer. Then the broker-dealer applies a production grid to the commissions. 34-40% is about average for Ed Jones, some firms pay more or less.

So, on a $10,000 sale, the client pays $575 in "load', and the advisor gets a gross commission or 1099 income of $210, or 40% of $525. Then he/she pays expenses for the office and things out of that, along with taxes. The mutual fund companies and broker-dealer make out the best in the current environment......... After expenses and taxes, the rep probably nets about $130 or so.........

The reality is much different than many realize..........
That is pretty much what I figured roughly the same split as Realtor gets on his 1/2 of a 6% sale unless they are both the buying and selling agent.

The nice thing is that really isn't that much more difficult to sell a 100K mutual fund than it is to sell a 10K. (Although generally the load drops a bit.)

What I really would like to know is how much the adviser collects on 1% warp account. That to me is where the money is really good.
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Old 09-08-2010, 09:46 PM   #33
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What I really would like to know is how much the adviser collects on 1% warp account. That to me is where the money is really good.
Depends on the place:

Banks: 28-35% (firm pays expenses)
Baird/Piper Jaffray/Ed Jones: 40% (firm pays their expenses, Ed jones gets monetary support depending on production levels)
Wirehouses: 40-50% (firm pays their expenses)
Independents: 70-80% (pay their own expenses)

So, yes, wrap accounts pay a lot more to the advisor, which is why every person out there who can pass a test that takes 2 days to study calls themself a "financial advisor"...........
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Old 09-08-2010, 10:25 PM   #34
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FD, do the advisors really spend that much time getting ready for the test?
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Old 09-09-2010, 08:05 AM   #35
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What's the test? Maybe I can free up a couple days next week.
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Old 09-09-2010, 09:10 AM   #36
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The last ten years should have taught us that "I need to get my money working" is an inept metaphor. Invested money doesn't really "work", other than when it is lent at interest in short term governments. Everything else is in fact a speculation. Perhaps a good one, perhaps a bad one. You very likely are not in a postition to have much idea which is which.

Make your self a short term CD ladder, maybe out to 3 or even five years, with maturities frequent enough to handle your cash needs. And keep a reasonable cushion in immediately available funds- Discoverbank has a savings account at 1.30% or so, that can be accessed at will. Their CD rates are not trash either. When you have filled your FDIC quota, look at Ally or other local or nationally marketing banks. I have found that for me it is not worth the hassle to have CDs all over, so I settle on one or two or three banks that consistently have good rates, depending on how much I want in CDs. Set up ACAH communication between these banks and your home brokerage and you will have a kind of hub and spokes system which is very easy to manage. Fidelity is very slick with this.

Then when your mind is clear of some of the things pressing on you now, read an investment book, perhaps from the list on this site, settle on an allocation, and buy a few funds to implement that allocation. Then go play.

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Old 09-09-2010, 09:16 AM   #37
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The last ten years should have taught us that "I need to get my money working" is an inept metaphor.
Ha
I think part of the reason is that people have the inflation mind set. If their money isn't 'working' they are loosing some of it to inflation. I don't think that applies currently.
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Old 09-09-2010, 09:50 AM   #38
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FD, do the advisors really spend that much time getting ready for the test?
They need what's called a Series 66 test. I passed mine moons ago and only studied for 2 days. However, I know folks that had to take it 3 times or more.

Most also need what's called a Series 6 test if they want to sell mutual funds and VAs, along with an insurance test through the state they do business in. It is not difficult and no more than a few days of study.

The Series 7 was the real bear. I studied for 4 months and passed, but the pass rate is only about 50% for most folks. Having a finance degree and a concentration in risk management and insurance probably helped me.

I think pretty much sure almost anyone could pass the state insurance test and a Series 6 within a month.
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Old 09-09-2010, 09:53 AM   #39
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I think part of the reason is that people have the inflation mind set. If their money isn't 'working' they are loosing some of it to inflation. I don't think that applies currently.
Even though the govt thinks they are fooling people by saying otherwise, there IS inflation out there. However, inflation at some point will come screaming back. If folks are happy being 100% in CDs and can sleep at night, god bless them. But the banks they invest with should at least send X-mas cards because they are making more that 1-2% on your money......
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Old 09-09-2010, 09:54 AM   #40
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FD, do the advisors really spend that much time getting ready for the test?
Yes, some more. Of course, there are some car salesmen who can't pass their state sales test either, no?
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