So I guess I accidentally fired my FA yesterday....

[FIREmenow]

I had some suspicions all year that my 60/40 portfolio was under performing as I was monitoring my account balances.

I decided to wait until the end of year report to see if I was missing something important that would explain. We have only been a client for a year, and have had very good and pleasant discussions at our meetings. His general strategy was promoted as a long-view, slow, 0.5% fee, not over-actively moving things around.

I got the report and low and behold, the overall performance was about 2% lower than the bulk of the 60/40 benchmarks I researched on the web, both single funds and AA portfolios. There were even some 50/50 benchmarks that did better. I thought that was a quite a bit low, even considering his promotion of the "long-term" view.

So I sent an email (OK, maybe just a bit terse) asking why the difference? What might I be missing? Why was a significant allocation in short term bonds (which he initially said he was against)? What could "we" do in 2015 to try to make this up?

I got an email reply that was a bit of a shock. It basically said that while he appreciated a knowledgeable client, the "tone" of my email was "unprofessional, condescending and disrespectful." He said that apparently I had taken a "adversarial approach to our engagement" and he could not continue work with a relationship like that. He said that I obviously didn't understand what a "long term relationship" was all about. As such, and apparently prior to writing me the email, he had immediately terminated his firm directing of my accounts.

For the entire day yesterday, I was quite embarrassed. I wrote back a very apologetic email noting that my email may have come across inappropriately and stated that I understood that if he was uncomfortable, it was not a good way to work.

However, the more I think about this today, why would I *NOT* be a bit terse about the under performing accounts that are basically my future quality of life? Why would I not question what his plans were going forward? I am paying to have someone "manage" my accounts better than I would be able to!

What does it say when the very first reaction is to immediately cancel our relationship when any (the first time, BTW) questions are asked?

Yes, I've read *ALL* of the posts here and know the general feeling about FA's, but still.......

Am I missing something? Why am I feeling embarrassed? Did I breach some kind of "code"?

Ray
(not doing THAT again.....)

 

[utrecht]

Sounds more like he fired you....and that you should be happy about it.

 

[travelover]

Uh, oh. No more free birthday cards for you. You may just have to move it to Vanguard and save at least 1/2 of that 0.5% fee.

 

[hlfo718]

My guess is your account was too small to matter. If you had tens of millions with him, he would have kissed your azz.

What kind of funds did he invest in? Were they index or active?

 

[2B]

I'm surprised that the FA was so quick on the trigger unless you have a very small account the FA didn't think was worth much to him or you really were nasty as possible. A "why are we not meeting this index" should have been a learning opportunity for you if the FA was actually trying to be in a "long term relationship." If the FA thought that a "long term relationship" was only with clients that didn't bother him with questions than you deselected yourself.

Now to your question on performance. It's very hard to compare portfolios against some headling numbers. You have to compare large cap US with the large cap US index. For other asset classes you need to do the same.

I think the FA did you a favor. Take over your own portfolio. You don't need to do anything right away other than to have control over your assets. Was your FA directing investments held by another firm? If not, you need to move your assets ASAP.

You didn't say how knowledgeable you are about investing. It's not rocket science. I recommend if you are a beginner to read Andrew Hallam's Millionaire Teacher. If you want a deeper dip into index investing read William Bernstein's Investor's Manifesto.

 

[FIREmenow]

My guess is your account was too small to matter. If you had tens of millions with him, he would have kissed your azz.

What kind of funds did he invest in? Were they index or active?

Actually, I had more than that with him.

Here are the funds as of the end of the year:

Fidelity Balanced
Fidelity Four in One
Vanguard Total Stock Index
Vanguard Value
Pandora
Vanguard Mid Cap
IShares Russell 2000 Index
Scout Intl
Vanguard Total Intl Index
Pimco All Asset
Cap World Bond Fund
Met West TR Bond
Vangaurd S-T Bond

Pandora is my own loser that I refuse to get rid of for spite - it is only 0.1% of portfolio, however.

Doesn't mean too much without the % allocation to each, but I don't have that cut-and-pasteable-handy right now

 

[athena53]

Uh, oh. No more free birthday cards for you. You may just have to move it to Vanguard and save at least 1/2 of that 0.5% fee.

Mine sent me a gift basket of fruit and chocolate. So there.

A good FA can handle terse questions, distressed questions (mine prides himself on initiating calls to clients during really bad markets and is good at convincing people to stay the course when it makes sense) and even the occasional belligerent question. It sounds like yours can't.

I agree with the others; this is an opportunity. Get the heck out of that brokerage.

 

[jimnjana]

I think you should celebrate the anniversary of this "firing" each year. Think you broke the "Spell", and the FA knew it. Much easier to keep the ill informed as clients than someone who actually is paying attention.

 

[gauss]

Perhaps to instill fear among your friends and relatives that also have accounts with him in order to keep them from asking similar questions (that perhaps often lead to client initiated account closures?)

"The best defense is a good offense."
-gauss

 

[Dd852]

Unless you were truly abusive in your email you have nothing to apologize for or feel embarrassed about. Professionals- whether advisor, doctor, lawyer, accountant, plumber etc - who are unwilling to explain their performance shouldn't be in the business.


Sent from my iPhone using Early Retirement Forum

 

[FIREmenow]

I'm surprised that the FA was so quick on the trigger unless you have a very small account the FA didn't think was worth much to him or you really were nasty as possible. A "why are we not meeting this index" should have been a learning opportunity for you if the FA was actually trying to be in a "long term relationship." If the FA thought that a "long term relationship" was only with clients that didn't bother him with questions than you deselected yourself.

Now to your question on performance. It's very hard to compare portfolios against some headling numbers. You have to compare large cap US with the large cap US index. For other asset classes you need to do the same.

I think the FA did you a favor. Take over your own portfolio. You don't need to do anything right away other than to have control over your assets. Was your FA directing investments held by another firm? If not, you need to move your assets ASAP.

You didn't say how knowledgeable you are about investing. It's not rocket science. I recommend if you are a beginner to read Andrew Hallam's Millionaire Teacher. If you want a deeper dip into index investing read William Bernstein's Investor's Manifesto.

Thanks, all.

I was certainly no where near "nasty", so I suspect your "If the FA thought that a "long term relationship" was only with clients that didn't bother him with questions than you deselected yourself." is spot on.

All accounts are at Schwab and Fidelity, so I don't have to move anything (yet).

Yes, I will be taking over myself, and getting more education before doing anything. I would rate myself a 5-6 on a scale of 10 as far as being "knowledgable".

Thanks again,
R

 

[2B]

Actually, I had more than that with him.

Here are the funds as of the end of the year:

Fidelity Balanced
Fidelity Four in One
Vanguard Total Stock Index
Vanguard Value
Pandora
Vanguard Mid Cap
IShares Russell 2000 Index
Scout Intl
Vanguard Total Intl Index
Pimco All Asset
Cap World Bond Fund
Met West TR Bond
Vangaurd S-T Bond

Pandora is my own loser that I refuse to get rid of for spite - it is only 0.1% of portfolio, however.

Doesn't mean too much without the % allocation to each, but I don't have that cut-and-pasteable-handy right now

I don't know how to phrase this any less judgemental but you've got a collection of [-]crap[/-] funds that make portfolio management unnecessarily difficult. You have overlapping funds without what appears to be a clear focus. I can't see where the FA was doing much for you. If you want to play with 0.1% of your portfolio, that's fine but why don't you look at constructing a cleaner asset allocation of low fee funds.

The only justification for not selling/simplifying is that you've go large capital gains in after tax accounts. Even so, you should construct a target asset allocation and work towards it.

You didn't say what your portfolio size was. At Vanguard you can cut fees more with Admiral shares. They can't be bought through brokerage accounts. You could get the lower fees with ETFs.

 

[Midpack]

We'd have to hear the FA's side of it to know for sure.

But maybe he can't justify the under performance, and he's anticipating you were about to fire him/her, so he's gone on the offensive and made it all about your attitude.

I know a lot of people, especially older generations, who would expect a phone call to deliver a message like yours vs an email. Email could be seen as a cowardly way to question someone's professional abilities. And then you apologized via email, why not pick up the phone? I'm all for email, text, etc. - but some communication should be done in person, or by phone at the very least.

But he/she probably did you a favor. As others have pointed out, that collection of funds looks like throwing darts at a board. Not worth paying a fee for IMO. Most lazy portfolios make more sense.

 

[pb4uski]

I think your FA's response was "unprofessional, condescending and disrespectful" and that he did you a favor by firing you. After you have everything sorted, call or write the head of the office and let him/her know your experience (ie; throw your FA under the bus).

You say you have more than tens of millions with him? If that is the case then you can save a bundle by DIY.

Depending on the %s in each and particularly how much was in short duration bond funds, a 2% difference is plausible. I know my return for 2014 was 2% lower than my benchmark 60/40 based on the 2020 Vanguard Target Retirement fund but the difference is easily explainable in that Total Bond had a very good year last year compared to my much lower duration fixed income portfolio.

 

[travelover]

......... If you had tens of millions with him, he would have kissed your azz..........

Actually, I had more than that with him.
..........

Seriously? If you are paying 0.5% on $10 million = $50,000 a year, for an hour's work.

 

[EastWest Gal]

Scenario 1:

You paid him to manage your money. He did not perform up to your expectations. He recognized you had lost trust in him. He knew he couldn't do the job you asked him to do. He severed the relationship before you could.

Scenario 2:

He got mad at you for not putting your complete faith in him and his little ego couldn't handle it. Weird since you were the one paying him. (Sounds like the more likely scenario).

Not everyone here is anti-financial planner. I use one and I'm glad I have. Some are expensive and some don't perform well. Your FP's job is to advise you and also follow your goals, not his and take away the headaches of self managing your investments. Yours was reasonably priced but didn't seem to want direction from you. Not good at all. Your FP saved you the trouble of firing him. Count it as a blessing.

My dad had a friend who was a stock broker. Dad had his portfolio with his friend. Forever. Really stupid considering dad had 95% of his portfolio in the big oil company he worked for. The point is dad could trust his lifelong friend-from high school, who was still working at age 79.

The last thing you need is a FP you don't trust!


Sent from my iPhone using Early Retirement Forum

 

[FIREmenow]

You say you have more than tens of millions with him? If that is the case then you can save a bundle by DIY.

Yikes! I misread the post! I missed the "tens" part. No, not "tens".

 

[2B]

Seriously? If you are paying 0.5% on $10 million = $50,000 a year, for an hour's work.

There is no way a FA would throw out a $10MM account. The typical retail FA dreams of a $1MM account walking in the door.

 

[HFWR]

Fidelity Balanced
Fidelity Four in One
Vanguard Total Stock Index
Vanguard Value
Pandora
Vanguard Mid Cap
IShares Russell 2000 Index
Scout Intl
Vanguard Total Intl Index
Pimco All Asset
Cap World Bond Fund
Met West TR Bond
Vanguard S-T Bond

Done...

 

[FIREmenow]

.....was 2% lower than my benchmark 60/40 based on the 2020 Vanguard Target Retirement fund but the difference is easily explainable in that Total Bond had a very good year last year compared to my much lower duration fixed income portfolio.

An email of phone conversation with something to that effect would have been perfectly acceptable to me, and what I was expecting......

Thanks.

 

[Bestwifeever]

The best defense is a good offense, and the FA is very good. Look how he has changed the focus from "why did my portfolio not do better" to "why doesn't he want to work with me". He still didn't give you the courtesy of even a boilerplate answer to your real question. You are lucky--he could have said you wanted low management fees but you really should allow him to churn your funds to take advantage of market swings and here is how much better he would have done if you had (presto, a chart with cherry picked timing results) blah blah blah

Good riddance.

 

[travelover]

Yikes! I misread the post! I missed the "tens" part. No, not "tens".

Even if you have $1 million with Vanguard or Fidelity, they will give you a lot of free hand holding.

 

[6miths]

We'd have to hear the FA's side of it to know for sure.

But maybe he can't justify the under performance, and he's anticipating you were about to fire him/her, so he's gone on the offensive and made it all about your attitude.

+1

It would nice to see the other side and the longer story. The other possibility is that the 2% difference from the 60/40 balanced has wound up in your FA's pocket and if he allows you to persist in looking into things with him and/or his firm that there is not going to be a happy ending for him and/or is firm. Much better to dump you and erase as many traces of reports and communications as possible. Hope that you will be 'embarrassed' or whatever enough to just drop it. Neither this FA nor his company has a fiduciary responsibility to you so writing letters to the firm is unlikely to have much effect. AFAIK, the overseeing bodies are not much more effective at dealing with misdeeds if there were indeed any. Certainly your FAs response seems out of proportion to someone asking 'what happened?'. Good luck.

 

[2B]

+1

It would nice to see the other side and the longer story. The other possibility is that the 2% difference from the 60/40 balanced has wound up in your FA's pocket and if he allows you to persist in looking into things with him and/or his firm that there is not going to be a happy ending for him and/or is firm. Much better to dump you and erase as many traces of reports and communications as possible. Hope that you will be 'embarrassed' or whatever enough to just drop it. Neither this FA nor his company has a fiduciary responsibility to you so writing letters to the firm is unlikely to have much effect. AFAIK, the overseeing bodies are not much more effective at dealing with misdeeds if there were indeed any. Certainly your FAs response seems out of proportion to someone asking 'what happened?'. Good luck.

It appears that the FA had the right to make changes is the OPs accounts at Fidelity and Schwab. This eliminates most opportunities for issues unless they purchase assets their firm benefits from their purchase. The best example I can use is proprietary mutual funds from the firm. These are notorius dumping grounds for dog stocks the firm wants to get rid of for big clients.

 

[thefinancebuff]

I am paying to have someone "manage" my accounts better than I would be able to!

I don't think this should be the right expectation. You are paying to have someone take care of a chore. You are *able* to do it just as well but you don't want to because you want to spend your time elsewhere. A FA doesn't have the crystal ball to beat the market, not year-by-year or over multiple years.