financial manager

[Tyro]

You might consider reversing the two for better tax efficiency.

Ok, thanks -- I got that backwards. I was thinking the higher stock weighting would be in tax-deferred to grow over time (weathering market swings) and the higher income weighting would help current expenses while still being low enough not to trigger tax threshholds.

 

[MichaelB]

Wellington QDI is 59.2% vs Wellesley at 38.6%. I would have expected a bit greater difference. Still, if your marginal tax rate is 25%, keeping them as REW suggests would add about 0.5% (of income) per year to the bottom line. Not a bad outcome, considering the cost.

 

[smjsl]

I kind of like the idea of this strategy using Wellington (67/33) for tax-deferred and Wellesley (33/67) for taxable accts.

Does this make sense, or am I missing something?

Tyro

It makes sense (modulo reversal) if you like / believe in these funds and/or their managers. I avoid any actively managed ones.

 

[Hermit]

I really do not feel confident in managing my money so I am looking at financial manager.... does anyone know anything of fisher investor group

I have a couple of small IRA accounts at Vanguard and paid them about $200.00 to review my situation and all my accounts including my 401k accounts. They provided a plan that I thought was as good as a plan prepared for me by a broker several years ago. The plan identified asset allocations along with specific funds and amounts to invest in each fund including specific funds available in my 401k. If you want I think they can help you implement it for the Vanguard accounts. It was pretty easy to move the money around in my 401k and that was all I had to do by myself get the allocations right. I'm pretty sure Fidelity and other discount brokerages have the same kind of service.

 

[Don46]

About four years ago I decided to go with one of the Charles Schwab Advisor Network investment managers. I've been happy. I considered going it alone and just using index funds on automatic pilot. But I have a little over $2.3 million with Schwab and I want something more than mutual funds can provide. The commission varies from one manager to the next, but the one I went with charges 1 percent for the first million and .75 percent for the remainder. In my case it comes out to about .85 percent of the total. This is usually about $20k, a lot of money, but tax deductible as an investment expense and this brings the effective rate down to about .5 percent which is close to index fund commission rates.

He has me in individual stocks, individual bonds, and some limited partnerships. The latter have proved lucrative and I would not have had any clue about how to get into those. Bond funds, I am warned, can be volatile and are affected by your fellow investors in the fund, the herd that might decide to bail and bring down the value of your shares. My manager has me in some higher yield but lower rated bonds and, so he tells me, by looking closely at individual bonds one can lower risk and get decent returns.

i'm 67 and planning to retire in another year. I'm a university professor and have never had high earnings, but I know how to save and, over the course of 42 years, have been heavily invested in the stock market. I got walloped in 2000, again in 2008, and after that I decided I need the expertise and discipline a hired professional investment manager can bring to this. I'm happy with the results. I thought I would miss tinkering with my investments every few weeks. I don't at all.

I wanted to note that what I'm describing is an "investment manager" not a "financial manager." I do not get advice on long term retirement planning per se. He does not look after funds in my other retirement accounts with my present employer. His job is to manage my Schwab accounts. When I retire, I will likely roll over my other accounts into my Schwab IRA and let my man manage those as well.

One additional benefit. I have gotten to know this guy. We meet once or twice a year and go out for drinks and dinner. I can contact him anytime by email or telephone. We talk about the economy, politics, history, and life plans. I trust his judgment and feel like I have a friend on my side. This is worth something to me.

I hope this is helpful.
Don

 

[travelover]

.........
One additional benefit. I have gotten to know this guy. We meet once or twice a year and go out for drinks and dinner. I can contact him anytime by email or telephone. We talk about the economy, politics, history, and life plans. I trust his judgment and feel like I have a friend on my side. This is worth something to me.

I hope this is helpful.
Don

For $20,000 I will be your friend, too.

 

[target2019]

For $20,000 I will be your friend, too.

For $10,000 I will be twice the friend you will be.

 

[Don46]

What would it cost to manage 2.3 million using mutual fund managers? I suspect it is about the same and not tax deductible.

 

[travelover]

What would it cost to manage 2.3 million using mutual fund managers? I suspect it is about the same and not tax deductible.

You don't want to know, because it will make you cry. And Vanguard doesn't send me a birthday card.

 

[Hermit]

... The commission varies from one manager to the next, but the one I went with charges 1 percent for the first million and .75 percent for the remainder. In my case it comes out to about .85 percent of the total. This is usually about $20k, a lot of money, but tax deductible as an investment expense and this brings the effective rate down to about .5 percent which is close to index fund commission rates.

He has me in individual stocks, individual bonds, and some limited partnerships. The latter have proved lucrative and I would not have had any clue about how to get into those. Bond funds, I am warned, can be volatile and are affected by your fellow investors in the fund, the herd that might decide to bail and bring down the value of your shares. My manager has me in some higher yield but lower rated bonds and, so he tells me, by looking closely at individual bonds one can lower risk and get decent returns. ...

My $200 plan did not get me any individual bond recommendations. Nor did it get me any opportunities in limited partnerships. But I don't think I have the kind of resources to invest in those types of securities. I don't think I make enough money in annual income to deduct $20,000 from taxes. I may be persuaded to pay a one time expense for individual bond purchasing advice if I could be convinced I have the resources to do it. Until then, I am hoping bond funds don't track stock funds too closely in the future.

I guess an individual's management style choice has a lot to do with resources, knowledge, and investment comfort.

 

[REWahoo]

What would it cost to manage 2.3 million using mutual fund managers? I suspect it is about the same and not tax deductible.

Using Vanguard funds with 0.2% expense ratios your cost would be $4,600/yr - not tax deductible of course. But if, as you say, you want "something more than mutual funds can provide", you've got yourself a $15,000/yr friend - a tax deductible one to boot!

 

[Don46]

I did get a birthday card from my investment manager in fact! I think my point about the personal relationship is that he knows more about me and where I'm headed in life. Also, and more important, he doesn't just park the money and put it on automatic pilot; he sells assets and increases cash reserves when he sees dangers in the market, and he watches for bargains. This is not a market timing day trading program, but it is more than just placing the money with a fund and setting it on automatic pilot. I thought I was pretty smart about investing and it took me a couple of nose dives to realize I needed some help from a pro.

 

[photoguy]

As an academic, you might want to read what other academics have found about "professional investors". Take a look at A Random Walk Down Wall Street by Burton Malkiel (prof. economics at princeton).

 

[travelover]

Using Vanguard funds with 0.2% expense ratios .......

Now see, you are going for the high expense funds. I use the Total Stock Market Admiral fund at 0.06%, but again, sadly, no birthday card.

 

[REWahoo]

Now see, you are going for the high expense funds. I use the Total Stock Market Admiral fund at 0.06%, but again, sadly, no birthday card.

You're just trying to run up the cost of his friendship.

 

[urn2bfree]

What would it cost to manage 2.3 million using mutual fund managers? I suspect it is about the same and not tax deductible.

$1000 or $250 per quarter. And that does not increase with the size of the portfolio...because you are paying for the time it takes to manage the portfolio, which can be done in the same amount of time whether $5 million or $2 million when you are a passive investor using low cost index funds.

 

[Animorph]

Don46, if you are going to use a manager, then one that picks individual stocks and bonds rather than just another layer of managers is the way to go. Make sure your turnover rate is low to minimize trading costs. Benchmark your returns, even if it's just checking to see how you would have done in your favorite Vanguard Target Retirement fund. Then you'll know if it's worth it.

 

[Don46]

Now see, you are going for the high expense funds. I use the Total Stock Market Admiral fund at 0.06%, but again, sadly, no birthday card.

That is great for stocks. But what about bonds and other investment vehicles? I think that is where I felt more at sea.
I realize I let myself in for ridicule by alluding to this friendship, but I am buying some expertise and access to markets that I don't possess. What do the smart people on this forum do besides put all their assets into stock funds?

 

[Don46]

$1000 or $250 per quarter. And that does not increase with the size of the portfolio...because you are paying for the time it takes to manage the portfolio, which can be done in the same amount of time whether $5 million or $2 million when you are a passive investor using low cost index funds.

I'm not sure I understand this. Who gets paid $1000 to manage 2.3 million? And is this the only commission? No mutual fund management fees?

 

[target2019]

2.3 million x .06% = $1380 per year. I think the concept is that you put it into one fund and take what the market will give you.

Don, your method is valid. For comparison, my in-laws have an AUM on three accounts. They are paying about $2K per year for management of funds with underlying expense ratios of 1%. They say management, but it is a really a computer program.

Your later post about adding the advisor fees to your Schedule A is a valid one.

If you don't mind me asking, how does the advisor rate his performance. For instance, does he baseline to a 60/40 portfolio or maybe the S&P500?

 

[travelover]

That is great for stocks. But what about bonds and other investment vehicles? I think that is where I felt more at sea.
I realize I let myself in for ridicule by alluding to this friendship, but I am buying some expertise and access to markets that I don't possess. What do the smart people on this forum do besides put all their assets into stock funds?

Sorry, Don. We were having a bit of fun at your expense. For bonds I just use Vanguard Total Bond and TIPS

https://personal.vanguard.com/us/funds/snapshot?FundId=0584&FundIntExt=INT

 

[urn2bfree]

I'm not sure I understand this. Who gets paid $1000 to manage 2.3 million? And is this the only commission? No mutual fund management fees?

I did not include mutual fund fees, because they are common to whatever you do. Just talking about the cost of advising. And my advisors do NOT make it up on having me in loaded funds or high cost funds or any of that stuff. All of my funds aggregated which include only NO LOAD index funds -no active management funds-average to 0.35% fees. For emerging markets the fees are higher, for bond funds the fees are much lower...the weighted average is 0.35%. I own Vanguard and DFA funds. The DFA funds are academically based on FamaFrench Unof Chicago research. DFA funds are still low cost and in some analyses have a superior return (by several percentage points and with lower volatility) to other index funds by weighting toward value and smaller cap, DFA offers coverage of some markets not otherwise available thru any other index funds. They have low turnover and low cap gains pass thrus because they are only accessible thru advisors and therefore less prone to the jumping in and out seen in more widely available funds. When you have people in and out they have to sell stuff to liquidate positions which generates the cap gains. You cannot buy DFA FUNDS WITHOUT AN ADVISOR. Finally, unlike many DFA advisors, my advisor Evanson Asset Management- charges a flat rate- which varies by account-but it is based on hours -none of that assets under management percent nonsense. and that is the only charge--there are no commissions on DFA or on Vanguard funds. the quarterly charges may be a little higher, but never based on the size of the portfolio. Evanson pioneered this approach but are not the only ones. They might be one of the bigger ones, as they manage over $2.7 billion in assets.

 

[Huston55]

2.3 million x .06% = $1380 per year. I think the concept is that you put it into one fund and take what the market will give you.

Don, your method is valid. For comparison, my in-laws have an AUM on three accounts. They are paying about $2K per year for management of funds with underlying expense ratios of 1%. They say management, but it is a really a computer program.

Your later post about adding the advisor fees to your Schedule A is a valid one.

If you don't mind me asking, how does the advisor rate his performance. For instance, does he baseline to a 60/40 portfolio or maybe the S&P500?

Don-

Same question. What benchmark do you measure your advisor against, and how's he done for you?

 

[Don46]

I'm not annoyed by your questions or even the suggestions that I am wasting my money. On the contrary, I'm giving this some serious thought. Once I roll over my current IRA accounts, and sell a piece of commercial property I own, I'm going to have close to 3.8 million to manage. I'm giving the DIY scheme some serious thought. I don't want to spend much time managing money, but I would be willing to set up an initial plan on flat fee program, then maybe do it again in 10 years as situations change. I'd like to learn more about the flat fee advisory services just to get started.

 

[travelover]

I'm not annoyed by your questions or even the suggestions that I am wasting my money. On the contrary, I'm giving this some serious thought. Once I roll over my current IRA accounts, and sell a piece of commercial property I own, I'm going to have close to 3.8 million to manage. I'm giving the DIY scheme some serious thought. I don't want to spend much time managing money, but I would be willing to set up an initial plan on flat fee program, then maybe do it again in 10 years as situations change. I'd like to learn more about the flat fee advisory services just to get started.

Good for you - seriously. You seem like a smart guy. I think that you might find a few of these books interesting and give you a whole different perspective. Even investing dummies like Warren Buffet recommend that the average person just invest in index funds.

Investment Books