Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Getting Away From the Advisor and Specific Asset Allocation
Old 03-23-2015, 10:26 AM   #1
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,849
Getting Away From the Advisor and Specific Asset Allocation

Someone recently came to me after realizing that they've been paying too much to an adviser (assets under management percent, plus taking commissions). They asked me "what I would do". I know what I would do, but doing it "formulaically" is turning out to be a problem. In general, I would say to get out of the high-fee mutual funds and transfer everything to Vanguard. My first attempt was using Morningstar Instant x-ray, but that doesn't really give me what I want in a way that I can iterate to hit the specific asset allocation target.

So what I would do first is define a target asset allocation with these categories (adding to 100%, so no overlap):
Cash
Domestic Bonds
Emerging Bonds
Hard Assets
Domestic Equity
Europe Equity
Non-Europe Equity
Emerging Equity
Then I would segregate my current holdings into things I wanted to not sell, and things I could or would be willing to sell. In other words, there are some individual stocks that I might not want to sell, but instead adjust the other choices in the portfolio to compensate.

Finally I would iterate over available Vanguard ETF's and funds by trial and error until, when I combined the allocations for the selected funds plus the stocks I'm not selling, would hit my allocation target.

The problem is that instant x-ray has a breakdown by domestic stock, foreign stock, cash and bonds, so not detailed enough. They also list stock by region, so it would be possible to break-out europe, non-europe, and emerging, but there's no repeatable way to break out hard assets and no repeatable way to break out emerging from domestic bonds.

I think that the actual percentages are not highly critical, as long as the investor has a repeatable way to calculate an asset allocation, and keep consistently doing that calculation and re-balancing when called for. It's that the ability to repeatably do that asset allocation into the categories that's giving me the trouble, and worse, the trial and error with the wide variety of funds that could be made to fit.
__________________

__________________
sengsational is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-23-2015, 10:52 AM   #2
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
I don't see any reason to make things more complicated than they need to be. I would move 100% to Vanguard. That makes taking the current asset allocation and having to force it into a new asset allocation that your "someone" is comfortable with. The caveat comes from any proprietary funds held in after tax account that have substantial capital gains. Unfortunately, that would be part of the cost of doing business.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 03-23-2015, 11:02 AM   #3
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 555
If you were going to move a substantial amount into Vanguard, wouldn't they at least help you get the balance you wanted as you transfer in? Seems like a minimal service to me to get a new account.
__________________
ArkTinkerer is offline   Reply With Quote
Old 03-23-2015, 11:12 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,298
I also feel you are making this far too complex, and just might scare them right back into the arms (claws?) of the 'advisor' (salesperson).

Why not go simple:

https://www.bogleheads.org/wiki/Lazy_portfolios

Two fund portfolio:

40% Vanguard Total Bond Market Index Fund VBMFX
60% Vanguard Total World Stock Index Fund VTWSX


Or, for the obsessive:

Three fund lazy portfolios:

Bill Schultheis' Three-fund portfolio

33% Vanguard Total Bond Market Index Fund VBMFX
34% Vanguard Total Stock Market Index Fund VTSMX
33% Vanguard Total International Stock Index Fund VGTSX
or...

Scott Burns' Couch Potato portfolio

33% Vanguard Inflation-Protected Securities Fund VIPSX
34% Vanguard Total Stock Market Index Fund VTSMX
33% Vanguard Total International Stock Index Fund VGTSX

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-23-2015, 03:29 PM   #5
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,849
It is more complicated than it needs to be. Too bad they didn't ask me what I thought they should do! That would be some version of the ideas from ERD50.

As to why I make it more complicated than it needs to be, I think there's an edge to being just a little more diversified, and reducing investment in countries with restrictions on economic freedoms (2015 World Economic Freedom Levels: Heat Map for Continents and Countries).
__________________
sengsational is offline   Reply With Quote
Old 03-23-2015, 03:33 PM   #6
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,849
Quote:
Originally Posted by ArkTinkerer View Post
If you were going to move a substantial amount into Vanguard, wouldn't they at least help you get the balance you wanted as you transfer in? Seems like a minimal service to me to get a new account.
That's a good idea! .... it would get me out of the loop! As long as they would supply enough details for ongoing rebalancing.
__________________
sengsational is offline   Reply With Quote
Old 03-23-2015, 04:06 PM   #7
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 555
I could see them charging for rebalancing or not depending on account balance. But to get the account I think it would be an easy thing to ask for and get.
__________________
ArkTinkerer is offline   Reply With Quote
Old 03-23-2015, 04:26 PM   #8
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by sengsational View Post
That's a good idea! .... it would get me out of the loop! As long as they would supply enough details for ongoing rebalancing.
If "someone" you know, had over $1MM, the Flagship people would move heaven and earth. Once I said what my accounts would grow to when I moved everything, I suddenly found myself with more help than I wanted or thought necessary.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 03-23-2015, 04:38 PM   #9
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,849
Thinking more about it, I wonder if they'd be willing to build a portfolio to an asset allocation specification that was not available from the public records (prospectus, reports, etc). When I looked in a few of those PDF's, I didn't see that they had reported a split like I was calling for. So if they built that portfolio to spec, they might need to use non-public information, which would probably mean they wouldn't be able to do it. I'm sure they'd talk a great game, but in the end, they'd give you something that was close, but not something that could be rebalanced based on public information.
__________________

__________________
sengsational is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
advisor or no advisor frank FIRE and Money 10 04-29-2014 07:58 AM
Getting away from fees Rachel FIRE and Money 17 08-05-2012 12:51 AM
Asset Allocation if Future Retirement Date is Four to Fourteen Years Away? nico08 FIRE and Money 13 05-25-2011 01:32 AM
DRIPs- need some general and specific advice thefed FIRE and Money 18 03-10-2006 09:07 PM

 

 
All times are GMT -6. The time now is 09:48 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.