Fidelity's "professionally managed" service

[Kabekew]

I posted here a few years ago when I sold my business and put a chunk of money into Fidelity's "professional advisory service." : http://www.early-retirement.org/for...lity-portfolio-advisors-have-me-in-41775.html

I decided to experiment a bit to see if it was worth it.

So, here are the results after three years so far, compared to the indices. I put one bucket of money with Fidelity, one based on a Yahoo "10 best-performing mutual funds" story I read one day in '08, and one a bunch of about 15 stocks from various cable TV blowhards and newspaper columnists:

S&P 500: 49.51%
Fidelity's "professionally managed" stock portfolio, after 1% fee: 49.75%
Yahoo's "best mutual funds" article from 2008 (AMAGX, JMCVX): 49.41%
Internet/TV "expert" stock tips: 54.24%
VFINX 500 index: 47.48%
VTSMX total market index: 50.62%

So is Fidelity worth it?

I really don't know, it all looks the same to me.

 

[rescueme]

So is Fidelity worth it?

Only if you believe it was.

How much would you add in perceived value since you didn't have to make day-to-day investment decisions?

That had to be worth something mentally - but you can't place a dollar value on it.

I've looked at the service, but have not gone with it since it (to me) looked like a program not to beat any index, but remove the ongoing concerns and many decisions for me; something I would recommend that my DW would use after my passing, or inability to continue to monitor/control our joint portfolio (since she has no interest/desire to do so), rather than replace what I'm doing at this time in life.

Just my simple POV.

 

[TN_INVEST]

Price is only an issue when value is in question.

I love paying extra for certain things in my life because of the perceived value I receive.

Something tells me that as a business owner, you too used a similar approach with your business because you probably realized that it's kinda crazy to try to beat out the competition based solely on price (gotta provide some other services).

So, if you think you are paying extra for a higher return, I would suggest you review your customer agreement (if that is written somewhere, ask them if they will accept an even higher fee ).

 

[panacea]

I think the service they provide is worth it if it keeps you on track. However, it's probably nothing you couldn't do yourself, as long as you have the time and inclination to stay on top of things and review your portfolio regularly.

 

[perrytime]

no

I had Fidelity Professional services, when market was going up, they did fine, when they lost 50% during crash, I had enough. their buy and hold, ride it out mentality was not acceptable. I expected better risk control for that fee. So I would say no, they will follow the market to the bottom if their is another crash.

 

[Nords]

S&P 500: 49.51%
Fidelity's "professionally managed" stock portfolio, after 1% fee: 49.75%
Yahoo's "best mutual funds" article from 2008 (AMAGX, JMCVX): 49.41%
Internet/TV "expert" stock tips: 54.24%
VFINX 500 index: 47.48%
VTSMX total market index: 50.62%
So is Fidelity worth it?
I really don't know, it all looks the same to me.

Well, if you can't tell the difference after paying 1% then it's not worth it, right? Otherwise you'd be happy with how much time you'd spent surfing or working on other projects.

In the last month I've talked with two different financial managers about this-- Mark Cortazzo, CEO of Flat Fee Portfolios, and Scott Halliwell of "Ask USAA". Both have all the three-letter acronyms of their profession after their names, and both have worked at a few different types of financial businesses over the last two decades before arriving at their chosen firms. Both are extremely well-versed and articulate on the issues, and they're quite aware that Vanguard & Fidelity have funds that only charge 10-20 basis points for passive management that captures almost all of the market returns.

They're also aware that most active managers don't beat the market, and that asset allocation & low fees make up 90% of an investor's returns.

What they're more aware of, though, is that most investors are idiots. Most investors buy high, sell low, and are generally ruled by their emotions. They don't sign up for their 401(k), they don't DCA, and when the markets get volatile then they abandon their asset allocation plans (actually the "plans" they pulled out of a money magazine or from their brother-in-law) at the pit of the market.

I think that managers like Fidelity (and Cortazzo and Halliwell) exist mainly to offer investors the hand-holding and rudimentary education that they'd never get on their own. They help them figure out what to do and when to do it-- and most importantly, when to do nothing. Their fees of 75-100 basis points help these blissfully clueless customers capture far more of the market return than they'd ever achieve on their own. They're also a lot cheaper than Edward Jones.

So, gosh, I guess active managers really can outperform the "average" investor! That's not a compliment.

I think that by the time an investor has found this board (let alone read a few hundred threads and some of the recommended books) then they don't need active management.

Greaney has also summarized this issue in a recent update:
The 4% Rule for Retirement Withdrawals -- Common Misconceptions

Check out the bar graphs at the end...

 

[clifp]

http://www.early-retirement.org/for...lity-portfolio-advisors-have-me-in-41775.html

I decided to experiment a bit to see if it was worth it.

So, here are the results after three years so far, compared to the indices. I put one bucket of money with Fidelity, one based on a Yahoo "10 best-performing mutual funds" story I read one day in '08, and one a bunch of about 15 stocks from various cable TV blowhards and newspaper columnists:

S&P 500: 49.51%
Fidelity's "professionally managed" stock portfolio, after 1% fee: 49.75%
Yahoo's "best mutual funds" article from 2008 (AMAGX, JMCVX): 49.41%
Internet/TV "expert" stock tips: 54.24%
VFINX 500 index: 47.48%
VTSMX total market index: 50.62%

So is Fidelity worth it?

I really don't know, it all looks the same to me.

First of all let me commend you for doing an experiment. Most people don't do this. I assume this was with real money not just a paper exercise.

I think Nord's advice is spot on and particularly sage. You've been around the boards long enough that you've learned most of the dumb things not to do. 80% of successful money management in retirement is avoiding doing stupid things with large portions of your assets.

I would point out that rising market makes everybody look pretty good, so that the extent that Fidelity kept you in stocks during a rebound from a Bear Market crash, the 1% was money well spent. If on the other hand you would have kept the money in the market than you didn't need to pay Fidelity.

To me it was foregone conclusion that the Market was going to rise from the Q4 2008/Q1 2009 levels. I actually predicted Dow 12,000 (albeit I predicted the market would rise faster) and we aren't to far from that point. The way forward from here is much cloudier. I would say that odds that we get a further 50% increase in the market over the next 3 years are quite slim. Relatively speaking a 1% fee when the market is going up 15% a year is pretty small. If on the other hand the next 3-5 years brings us returns in the 4-9% range then the 1% will be a pretty significant expense. Greaney bar charts are worth taking a look at although he does discount the possibility that the fees do in fact generate some positive returns.

 

[FreeAtLast]

They are providing a service for the 1% where you need to only have minimal involvement. It is probably not such a bad solution when you reach your senior retirement years and can no longer manage things yourself.

 

[Nords]

They are providing a service for the 1% where you need to only have minimal involvement. It is probably not such a bad solution when you reach your senior retirement years and can no longer manage things yourself.

They're also providing a "service" for the 1% when the market is down...

 

[Dawg52]

They are providing a service for the 1% where you need to only have minimal involvement. It is probably not such a bad solution when you reach your senior retirement years and can no longer manage things yourself.

Yes, I can't see going this route anytime soon. But who knows, if I'm lucky enough to make it another 20 years........a program like this might look pretty attractive.