True Cost of Mutual Fund

[Telly]

I award three Pinocchios. Run.

Thank You, Travelover!
That was my first laugh of the day... and it's 11:30 PM, so I almost went without.

 

[Amethyst]

We get the dinner invitations 2-3 times a year in the mail. Since they usually are for the better area restaurants, we've gone to a number of them. Ten years ago, it would be an excellent group dinner (filet mignon, anyone?) with wine, and unlimited coffee refills, in exchange for a moderately interesting, broad-brush discussion of investments, retirement, inflation, etc. Nothing this group doesn't already know. There has never been a hard sales pitch, although they do follow-up to see if you want a personal consultation.

In recent years, the quality of the dinners has gone down dramatically: the cheapest prix-fixe menu offered by the restaurant, no wine, and sometimes no coffee or only one small cup. Then again, maybe we've turned down all the higher-rolling offers and are only hearing from the small fry now.

Amethyst

How do you find these free dinners? I never get invited to those but I get junk mail for financial newsletters all the time.

 

[jazz4cash]

We get a few invitations per year that come out of the woodwork and there are several that come on the radio. The only ones I've been to are offered by Fidelity (free box lunch) and a management firm affiliated with Penfed (no freebie). These are geared to novice investors that are not comfortable with DIY, except Fido does offer some seminars for active traders. I have a pretty high tolerance for BS and generally find these pitches entertaining, but I doubt it is worth the time and gas unless I went with a freind and DW won't go.....she would feel pressured and uncomfortable.

After attending several Fido seminars, I do get the feeling that all roads lead to purchasing an annuity.

 

[frayne]

Man, what a tough crowd!

Yes indeed and we aren't even talking about annuities !

It's nice though when you have a forum that lets people calls em az thays seez em.

 

[braumeister]

We get one of those dinner invitations at least monthly. Typically at an Olive Garden or the equivalent, no menu -- just "a gourmet meal" (i.e., eat what you're served).

We actually went to one a couple of years ago. Not again.

 

[2B]

The FP is correct when he says that the cost of the fund includes expenses other that the published ER. Some mutual funds have substantial trading costs and other related fees. That's further evidence to go with index mutual funds with inherently low trading expenses and no 12b fees. That's why I'm at Vanguard.

There's no way that the FP with his wrap fee will ever get his costs to be competitive with Vanguard index funds. He doesn't really have to. He just needs to convince enough people that he is the low cost equivalent whether he is or not (with he isn't). He also will not be statistically reliable to outperform index funds. If he was, why would he waste his time chasing your puny assets. Harvard and CALPERS would be bidding for his services.

 

[2B]

Yes indeed and we aren't even talking about annuities !

Annuities! AAAARRRRRGGGH.

 

[frayne]

For me the bottom line is much more simplistic, if the product this guy is pushing so darn good why does he have to go out and hawk it to J.Q. Public ? Because he wants to see everybody get rich and prosper because it is such a good deal or is it for him to make a living and line his pockets. Not against anyone working to make a living but selling half truths and lies by omission is unethical in my pea brain way of thinking. That said the financial industry has more smoke, mirrors and snake oil salesmen than you can count. If you doubt that just watch American Greed or read the back pages of the WSJ about folks getting into other peoples cookie jars. Unfortunately P.T. Barnum's cliché is still as relevant today as it was back in the his day.

 

[target2019]

We get dinner invites in the mail maybe 1-2 times per month. We go about every 3 months or so. I focus on the dinners held at well established restaurants.

This kind of marketing is based on several demographics. The FA has access to lists which may be based on a zip code and say, your number of kids.

If you're not getting invited, it's possible the FAs in your area just don't have turnover.

 

[mickeyd]

How do you find these free dinners? I never get invited to those but I get junk mail for financial newsletters all the time.

All of the ones that I have attended over the last 10 years or so started with an advertisement/post card in the US mail. Call an 800 # and give them a tiny bit of data and you are in. Don't know how my name ever got on the "master list" but I have received an offer from the same company numerous times. They put on their "shows" at a nearby Outback. Free steak is free steak.

 

[Amethyst]

Oh - and others' experience may vary, but only once did anyone try to pitch annuities. It was a complicated, long-term-care annuity thingy where you could somehow get your money back if you didn't die soon enough...or something. Memory decays!

Every other dinner has been hosted by financial advises looking for paying clients. I always wonder if they get any.

Amethyst

 

[Lakewood90712]

Yes indeed and we aren't even talking about annuities !

It's nice though when you have a forum that lets people calls em az thays seez em.

You just had to bring up the A word

 

[Walt34]

Ditto. I get at least a couple "invitations" per month, though I've never gone to one.

I know now what my problem is. I gotta start opening the junk mail envelopes before I throw them out.

 

[walkinwood]

I don't think the financial planner is stupid. He's smart & preying on the uninformed.

Get thee a book! and read it and read it again till you have internalized the information. You'll find a lot of recommendations in this forum, but I would start with Bogle's book. That's the only way you'll stay clear of people getting rich on your dime.

 

[Amethyst]

In addition to free dinners for investors, Mr. A., having reached RMD age, now gets invitations to tour local geriatric storage institutions.

But, these outfits are cheapskates. "Light refreshments" are sometimes offered. We recently were offered a $50.00 gift certificate to a local restaurant, which would not even cover two a la carte entrees.

Amethyst

 

[Walt34]

I'll be 65 in the spring so I'm getting lots of mail from insurance companies wanting to sell me medical insurance. But none of them offer free dinners. Or even lunch. Cheapskates.

 

[seraphim]

Morning All -

Had visit with Financial Planner other day - free seminar - I try to pick up information.

I am still leaning towards doing my own "active" management using what I have learned on here, including using low cost Vanguard funds.

In the seminar the planner mentioned that you can't just go by the prospectus expense ratio. You need to include also the other "hidden" fees - management, admin, ... His focus was when you include those fees they are not much different than his charge of 1.4%.

So my question is how do I compare apples to apples??

Do I include the expense ratio and other fees identified in the prospectus against his 1.4%? Does his 1.4% include all of the mutual funds fees or are they on top of them (i.e., 1.4% plus expense ratio + ...)?

For our FIRE we are looking to need about a net 4% long term growth on our investments. Having high expenses can really put strain on fund performance.

Thanks

Kannon

He's merely trying - unsuccessfully in my book - to justify his undeserved fees. Just remember, 1% a year over 25 works out to him getting 25% of your returns.

Vanguard VTSAX has an ER of about .06%. Total. Compare that to his his 1.4%. My 7 digit portfolio averages a total cost of .08% a year. Had I paid some parasite 1.4% I might not have a 7 digit portfolio or any.

You have to ask him what his fee covers. Be prepared for him to be squirrelly, and having to keep trying to pin him down. Good luck.

But the costs of funds differ from company to company. Vanguards costs are what the fund's ER states. I'm stuck with some Oppenheimer funds for a few years, and they're completely opposite.

You don't need to squander your returns on a salesman whose job is to sell you his company's package - which will be expensive. Look hard at Vanguard. Others suggest Fidelity. Find low cost, no load funds to meet your needs. Get a little education. It's not rocket science. It's basic math.

Costs eradicate returns.


Sent from my iPad using Early Retirement Forum

 

[frayne]

Every other dinner has been hosted by financial advises looking for paying clients. I always wonder if they get any.

Amethyst

I think in the financial world vernacular the term is called "chumming" and very appropriate.

 

[MRG]

You have to ask him what his fee covers. Be prepared for him to be squirrelly, and having to keep trying to pin him down. Good luck.

But the costs of funds differ from company to company. Vanguards costs are what the fund's ER states. I'm stuck with some Oppenheimer funds for a few years, and they're completely opposite.

You don't need to squander your returns on a salesman whose job is to sell you his company's package - which will be expensive. Look hard at Vanguard. Others suggest Fidelity. Find low cost, no load funds to meet your needs. Get a little education. It's not rocket science. It's basic math.

Costs eradicate returns.


Sent from my iPad using Early Retirement Forum

Nice post. You mention 3 fund families. Two of them do not charge 12b1 fees or loads, and offer low cost index funds, the other provides high cost funds(with "c" class funds available) that sell through advisors.

All of this information is in the prospectus as required by law.

Take a little time and read the Mutual Fund Factbook (ICI). You will see fund fees dropping over time. It's no secret that no-load index funds from several providers are more popular and perform better than "loaded" funds that are sold through advisors. This ICI download will give you cost ratios for mutual funds in general over time, the trend is index funds and low cost ETFs. Why fight the trend? This FP/FA is living in the 1990's, don't support his outdated sales pitch.

http://www.ici.org/research/stats/factbook

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[athena53]

In addition to free dinners for investors, Mr. A., having reached RMD age, now gets invitations to tour local geriatric storage institutions.

I've never encountered that term- love it!

DH and I think the Motor Vehicle Department may sell our info. How else would AARP manage to time their first solicitation? I think mine arrived just about age 50.

I'm also tempted to try one of those "free gourmet dinners"- DH and I get one or two mailings a month. One actually says it's "recommended" for seniors with $500k+ to invest. Most, reading between the lines, are pitching some sort of annuities.

It might be fun to go and ask impertinent questions.

 

[target2019]

I've never encountered that term- love it!

DH and I think the Motor Vehicle Department may sell our info. How else would AARP manage to time their first solicitation? I think mine arrived just about age 50.

I'm also tempted to try one of those "free gourmet dinners"- DH and I get one or two mailings a month. One actually says it's "recommended" for seniors with $500k+ to invest. Most, reading between the lines, are pitching some sort of annuities.

It might be fun to go and ask impertinent questions.

It is fun to go, but that's just me. I really get a lot of info by watching how others react to certain statements. Usually, someone glances over and raises their eyebrows at something bombastic.

Your data, such as age, zip code, income range, and many other characteristics is available for sale from many sources. It is just computers doing what they do best...

FYI, after attending these dinners, I usually file a report with AARP. They have a list of questions on their site, and you go down the list and fill in your answers, then email to them.

 

[haha]

I think I would rather go to the dentist that the "free" meal. Sounds like it it right up there with timeshare freebie pitches.

Agree. I went to a couple, and enjoyed my dinner companions but the food and the pitch were terrible. I don't get the draw of free food for millionaires, who for the most part are not short of provisions.

Ha

 

[robertf57]

I guess I am in ia lucky zipcode. We went to two such chicken dinners week before last (Actually, lunch and dinner on the same day) First was at Ruth Chris Steakhouse (pretty nice steak and scallops) and the dinner at another steakhouse where I had pork chops. No alcohol included.

The first was estate planning sales meeting. Mostly wrapped up around their "proprietary" living trust. The second was asset protection discussing insurance and trusts.

Well worth the hour or two invested to go to places we haven't eaten in before.

 

[mickeyd]

I don't get the draw of free food for millionaires, who for the most part are not short of provisions.

How do you think we became millionaires?

 

[Totoro]

I sometimes imagine these fund advisors pre-gathering before their leader, who then gives a short to the point pep talk:

Darth Sidious: "Wipe them out. All of them" - YouTube

Warning: star wars fans only