Vanguard FA, Should we do it?

[Rianne]

I responded on a couple of other posts about Fidelity FA. VG charges .3%.
That's $4500/yr on 1.5M. This market is too volatile. Cannot keep track with all the index funds falling like flies. If we'd had a VG FA in 2008, we'd have twice what we have now. Out of fear we stayed out the market too long.


Opinions on the fee? We can talk to the FA as often as we like. He will move funds based on tax advantage/disadvantage. We will not touch this portfolio until 2022 as we have outside bonds and cash to hold us over. Plus DH does side consulting.

 

[travelover]

........ This market is too volatile. Cannot keep track with all the index funds falling like flies. If we'd had a VG FA in 2008, we'd have twice what we have now. Out of fear we stayed out the market too long........

What is it you want the FA to do for you? A FA can't predict the market nor jump in and out at opportune times. If all you need is someone to talk you down occasionally, use a pay per hour advisor and in the meantime put your stash in a Target Year fund with the stock/bond allocation you want.

 

[38Chevy454]

As several comments in the other "Hired a FA" thread stated, sometimes the value of an FA is to keep you from making decisions based on your emotions and reactions to market events. If you need the discipline, then it could be you are candidate to have the FA. At least Vanguard is a lot better at 0.3% instead of the typical 1%.


Another option could be to use a fee-based advisor, where you just pay an hourly fee for consultation and advice. You will need more discipline as each time you talk the bill will add up. But this fee advisor will give advice that can save you from yourself, if you listen and follow the guidance.



Not knowing size of your nestegg, both Fidelity and Vanguard offer some FA services once you hit certain levels. These are free, but you do have to meet the min balance values. Fidelity or Vanguard make their money by being your brokerage house for the accounts. I believe Schwab has similar free advisor type service based on value as well.

 

[travelover]

.........Not knowing size of your nestegg.......

OP said $1.5 million

 

[ERD50]

... This market is too volatile. ....

And a 0.3% fee can change that?

-ERD50

 

[Texas Proud]

If you have fear on getting into the market a FA will not change that fear... they cannot force you to do anything... so the stmt that you would have more money now is just false... there is no evidence that a FA would have changed your mind...

 

[Dtail]

If you wish the FA to manage your portfolio, then fine.
If you just want the psychological aspect, I would vote no.

 

[Ready]

I get as much free financial advise from Vanguard as I need, but I rarely talk to them. Assuming the OP has at least $1M at Vanguard, they should be eligible for free advice. There is no need to pay the .3%.

 

[TwoByFour]

I responded on a couple of other posts about Fidelity FA. VG charges .3%.
That's $4500/yr on 1.5M. This market is too volatile. Cannot keep track with all the index funds falling like flies. If we'd had a VG FA in 2008, we'd have twice what we have now. Out of fear we stayed out the market too long.

You don't need a FA, you need a stiff drink! Seriously, if volatility is your worry, a FA is not going to fix that except maybe talking you into a crazy AA like 30/70.

A FA is really an adviser and you still own and control all your assets. If you are freaking out about the volatility you can still dump everything when the market tanks, a FA cannot prevent that. The best thing to do is (1) get an AA that lets you sleep at night (2) stay the course, (3) ignore the noise. By the latter, I mean don't hover over your portfolio, especially when the news is full of doom and gloom. It will be fine on its own.

 

[target2019]

Pay the $4500.
BTW, index funds are correcting, but not dead.

 

[caninelover]

I am using Vanguard Personal Advisor services for now. I have too much going on to properly manage my own portfolio (I have just over $1 M with them). Their advisors do take over the rebalancing of your accounts, based on their initial consultation with you, so if you don't trust yourself to get scared and sell when the market is tanking, this can help. Note that you are always able to initiate trades yourself, so you'll still have to control yourself . On assets outside if Vanguard they can offer advice, but not manage directly.

The advice, as others have mentioned, is available free. If you need someone to do the actual trades/rebalancing according to your plan, then it is up to you if the 0.3 percent is worth it to you or not.

 

[Retch The Grate]

I mean you can always come on here and have us tell you to stick the money in index funds, ignore it until it is time to rebalance once a year, repeat as necessary. We won't charge .3%.

 

[Midpack]

I get as much free financial advise from Vanguard as I need, but I rarely talk to them. Assuming the OP has at least $1M at Vanguard, they should be eligible for free advice. There is no need to pay the .3%.

I may have asked the wrong question, but I’m Flagship and there isn’t really any advice in my 10+ years experience. They’ll give you a portfolio analysis once a year, but it’s basically boilerplate. They have a special standard portfolio of funds, they’ll adapt to your chosen AA, and tell you how to buy-sell get there. It’s more mechanics than advice IME, it’s not tailored to any individual beyond AA. Not worthless by any means, but not what I’d call “advice” either.

The biggest benefit to an FA may be preventing panic selling, more than selecting funds. If you can hold on and sleep at night when sustained corrections are happening like ‘08-‘09, you may not need an FA.

 

[Another Reader]

I don't know about the OP, but 2008 and the prior market meltdown taught me that over the long term things will likely turn out ok, even if not exactly as expected. Staying the course with some adjustments worked for me both times.

I suspect we all learned a lot from these experiences. The older we get, the more of them we have. I think that I might approach the next disaster with a bit more confidence and I suspect the OP might do the same. With a cushion of reserves, I might even start loading up on beaten down assets when things look bleak. Worked out well last time with the real estate.

ETA: I don't think you will get a lot of hand holding for your 0.3 percent. You will get a portfolio assigned by your risk profile and a phone number to call if you have questions. When things go bad and you call to sell in a panic, I suspect you won't get much resistance. Too much liability for that.

 

[TwoByFour]

The biggest benefit to an FA may be preventing panic selling, more than selecting funds.

How does a FA prevent panic selling? The assets are yours to do what you want with. You can sell them, or you can tell the FA to sell them and he/she has to oblige your request.

 

[DrRoy]

For $1.5M you should be able to get a free advisor at Fido.

 

[flintnational]

Vanguard would be okay or a fee only adviser would be okay. But (and it's a big but) as others have mentioned, neither can stop you from selling at a market low. Hopefully they can supply data and reassurance that would talk you out of selling.

Additionally, I would work on the emotional aspects of investing. (BTW, W. Bernstein believes this is the toughest aspect of investing successfully and I agree.) Read more about market cycles/long term index investing and establish a written investment plan. Prepare yourself mentally for severe market downturns. They are inevitable and to be expected.

Remain calm. All is well.

 

[Dtail]

For $1.5M you should be able to get a free advisor at Fido.

+1 absolutely.

 

[Dawg52]

I get as much free financial advise from Vanguard as I need, but I rarely talk to them. Assuming the OP has at least $1M at Vanguard, they should be eligible for free advice. There is no need to pay the .3%.

My Fidelity Private Client rep is there for me to bounce ideas off of in addition to the standard boilerplate phone conversation we have every year or so. Unless you want someone to take total control of your portfolio seems like this set up is good enough.

 

[Rianne]

Ok, VG suggests 30% in International index stock funds. My Roth has 100% international to offset the rest of the portfolio which has much less. Down -8%. And with the turmoil in the EU right now...hope it gets better.

The bond funds down, thought they were supposed to hedge the market. Our allocation is 60/40, pretty normal. Am I alone in trying to understand bond funds and how they stabilize your portfolio? I'd have to move to Fidelity to get their advice, I assume.



I walked the VG advisor, not a paid FA, to firecalc.com. He went through the process with me. My question is the asset allocation in firecalc similar to stock/bond funds that VG use? I'd feel more comfortable if I knew we had the right funds.

 

[Dtail]

Ok, VG suggests 30% in International index stock funds. My Roth has 100% international to offset the rest of the portfolio which has much less. Down -8%. And with the turmoil in the EU right now...hope it gets better.

The bond funds down, thought they were supposed to hedge the market. Our allocation is 60/40, pretty normal. Am I alone in trying to understand bond funds and how they stabilize your portfolio? I'd have to move to Fidelity to get their advice, I assume.



I walked the VG advisor, not a paid FA, to firecalc.com. He went through the process with me. My question is the asset allocation in firecalc similar to stock/bond funds that VG use? I'd feel more comfortable if I knew we had the right funds.

Relating to your bond fund statement, there are many opinions on both sides on this site.
Me personally and having retired just last year, I got out of my bond funds earlier this year and substituted CD's and am looking into individual bonds. I will review again when the Fed stops raising rates.
The bond fund reinvests into the increasing yield securities over time, but can have short term losses in a rising interest rate environment. JMHO.

 

[TwoByFour]

The bond funds down, thought they were supposed to hedge the market. Our allocation is 60/40, pretty normal. Am I alone in trying to understand bond funds and how they stabilize your portfolio?

Bonds and bond funds stabilize a portfolio because they are not correlated with the equities market. In other words, the forces that move bond prices are not the same forces that move stock prices. But that is a statistical statement and does not mean that bonds will always be up when stocks are down, and vice-versa.

So, you have to take the long view with investing and not get too hung up on daily or short term performance. If you do, it will cause endless heart burn.

One caveat about bond/equity correlation - US Treasuries are much less correlated to equities than corporate bonds, so if you have bond funds that are partly or all corporates, they will be affected by equity movements. Corporates yield better, but they also hedge worse.

 

[VanWinkle]

Ok, VG suggests 30% in International index stock funds. My Roth has 100% international to offset the rest of the portfolio which has much less. Down -8%. And with the turmoil in the EU right now...hope it gets better.

The bond funds down, thought they were supposed to hedge the market. Our allocation is 60/40, pretty normal. Am I alone in trying to understand bond funds and how they stabilize your portfolio? I'd have to move to Fidelity to get their advice, I assume.



I walked the VG advisor, not a paid FA, to firecalc.com. He went through the process with me. My question is the asset allocation in firecalc similar to stock/bond funds that VG use? I'd feel more comfortable if I knew we had the right funds.

You are right about the international funds being down this year, but that really makes them a bargain for next year. Bonds add diversification, most of the time. This year is unusual in that bonds are losing money due to interest rate increases. If you are spending bond money, you should be in short term bonds to reduce losses to principle.

 

[kgtest]

Investing is not rocket science...it really is not. Is it scary, sure anything you know nothing about can be scary but that fear is reduced by gaining knowledge and wisdom.


FA's are not going to "beat the market".



I think my questions to you would be, what makes you uncomfortable about the idea of self-managing? What is it...risk, fear of the unknown, distrust in yourself?


Honestly the hard part is paying yourself first. Maybe followed by tax-friendly withdrawal strategies. But actually selecting and investing in funds...that is the super super easy part.


Especially once you understand/know what you want.

 

[pb4uski]

....The bond funds down, thought they were supposed to hedge the market. Our allocation is 60/40, pretty normal. Am I alone in trying to understand bond funds and how they stabilize your portfolio? I'd have to move to Fidelity to get their advice, I assume. ...

While historically bond funds zig when stock funds zag, the magnitudes are very different... the don't hedge the market, but they do serve to provide a smoother ride. You can see that in the line graph in the link below.... blue line is 60/40 blend, red line is 100/0 and yellow line is 0/100.

There is no "right" fund, but the three funds in the link.... or better yet their Admiral or ETF versions that have better ERs... are really all that one would need to have a prudent 60/40 portfolio.

https://www.portfoliovisualizer.com...bol3=VBMFX&allocation3_1=40&allocation3_3=100