50 year old, Rolling Over sizable 401k, Should I dump my Financial Planner?

[krldrummerboy]

Hi, I am a first time poster, but very interested in learning more about retirement investing. Specifically, whether or not I should stick with Ameriprise or go it on my own.

Age = 50 male
Desired retirement age = 60 - 65
Assets= ~ $500,000
Asset allocation= 275K in Ameriprise (mostly moderate to higher risk mutual funds. I try and max my and my wife's Roth every year)
Combined income= $200k
Expenses= 450k mortgage (3.625%), whole foods
Spouse= yes (8 years younger than me)
kids= 5 year old boy, 6 year old boy
Relevant location= San Jose, CA

As you can see, I live in the most expensive place on the planet, make a decent income, and am 50 years old with really young kids.

Aside from my Amerpirse account I have:
1- My company is being acquired so I will soon be able to roll-over $140 (401k)
2- Will instantly vest $100k (mostly unvested stock, i.e. 2/3 < 1yr held).
3- Have about $30k in online brokerage and Ally which is cash, AAPL and QQQ.

QUESTIONS
1- I want some direction on where to start on this forum learning more about personal investing?

2-This is what my brain is mulling over and I need some help: I used to invest on my own and was a firm believer in ETF buy and hold. Have used Ameriprise for 10 years and not thought about it much since (except my 401k direction). What should I do going forward?

HISTORY:
My Ameriprise planner has been good for me, but, she is flighty (she manages a lot of wealthy silicon valley engineers I suppose) in that trades are delayed and promises to summarize meetings are sometimes forgotten. She has messed up the year to allocate my Roth as well as my kids Coverdell IRAs (which caused tax issues). This was more her assistants fault, be she is ultimately responsible. The growth seems okay, except for the last few years (more market then her I suspect). I mostly trust her decisions and dont tend to think about the account after our yearly update (we meet once a year, my decision).
She wants me to roll-over my 401k to her (makes sense). She says that then the account value will be high enough for her to start actively trading stocks for me (if I bring the brokerage cash up to $100k.....which I can just about do). This will cost me 1.5% annually from the brokerage account value. She says that this is the new Ameriprise model in that mutual funds have been stagnant and that stock trading has better results. I wonder if this is more a fee driven philosophy.
Anyway, here is how she has invested my money so over the last 10 years:
My ROTH ($40k)= EAAFX , IUTBX , LGLCX , PVSBX
Wife ROTH ($40k)= CCFCX , ETCGX , OIDAX , PVSAX , PVSBX
My IRA ($75k)= RVS RAVA 4 SELECT Q
Wife 403b ($80k)= RVS RAVA 4 SELECT Q
Brokerage= SPY, DIA, VFINX (total $45k this is my picks from a long time ago, transferred to Ameriprise and just holding to avoid tax)
KIDS Education fund=$35k in Coverdell ( $3k cash each kid-not enough to qualify for Ameriprise fund purchase) and taxable funds ($25k WBGBX)

MORE QUESTIONS?
When Ameriprise told me that they wanted to start actively trading my $100k, I started wondering about Ameriprise:
1- Has Ameriprise invested my money wisely to date?
2- In general, is paying someone to actively trade for me worth it?
3- If it is a good idea, is 1.5% fee worth it? Are there better advisers that can simply recommend investments and let my use my brokerage acct. Just thinking about that...
4- A co-worker recommended I contact Stifel and use them instead of Ameriprise (he's very happy with his invester). I may talk to them or Vanguard or Schwabb. Is this wise?
5- Also, if mutual funds are stagnant, should I take control of my own holdings and simply research investing and simply buy ETF. This would be for everything (ROTH, Annuity, roll-over). Not sure what surrender fees will amount to.

EVEN MORE QUESTIONS:
I guess what I ultimately want is to be able to decide for myself: how should I handle my investments as I get closer to retirement. I can't spends hours a day trading, but, are there ways to beat the fees with simple investing strategies without investing too much time (my job takes a lot of my time currently)....

 

[REWahoo]

Do a forum search on Ameriprise - and wear protection when you start reading.

 

[Texas Proud]

I am sure you will get an ear full on the sins of Ameriprise....

However, it seems like you do not have much saved on a $200K salary...

Also, it is not the most expensive place on the planet... try London or Paris... one time I had read that Moscow was the most expensive place to live for an expat... now it is probably not since the ruble has declined so much in value...

OH, forgot to mention Switzerland!!!

 

[REWahoo]

She says that this is the new Ameriprise model in that mutual funds have been stagnant and that stock trading has better results. I wonder if this is more a fee driven philosophy.

I missed this gem on the first read. What a doozy!

Since mutual funds are composed of stocks, you were correct not to let it pass the sniff test. The "better results" almost certainly refer to the fees she will make off your trades rather than any added financial benefit to you.

 

[Whisper66]

1.5% is a lot to pay for a financial advisor if you need one. Vanguard provides service for 0.3%. However, really need to decide if you need/want an advisor. This board has many that do not use a FA and many that do use them. So you can get advise from both viewpoints.

For those that are do it yourselfer's and don't use FAs.... Many use very simple portfolios such as something from one of the documents below which really don't require anything but basic knowledge and very little time:

https://www.bogleheads.org/wiki/Lazy_portfolios
https://assetbuilder.com/knowledge-center/articles/couch-potato-cookbook

The Bogleheads wiki (https://www.bogleheads.org/wiki/) is a great library of information using the concepts generally accepted by members of this board. This ER discussion board is excellent at answering specific questions you may have and providing some guidance.

Many, many good reading resources have been recommended by members here. One of my favorites is Bernsteins "The Four Pillars of Investing". Has a whole section on Financial Advisors (since you specifically asked about this).

https://www.google.com/search?q=ber...w:l&tbm=shop&start=20&spd=3060176963828510307

Hope this helps as a start.

 

[MRG]

The funds you bought in your brokerage were good. The Ameriprise picked funds are evil. You need to understand fees. It doesn't matter how a fund performs if someone takes huge fees every year.

Read about mutual fund fees:


http://www.investopedia.com/university/mutualfunds/mutualfunds2.asp


I only went through the funds in the first Roth. What a mess! They are doing a metaphorical felony to you. Back end load of 5% what a deal for Ameriprise! (I don't know if I've everseen a back end load, how cruel are they?.)On top of 1% 12B1 and another 1% for the fund.


Run away fast.

ETA: They charging you 1.5% on top of the fund fees. Run away while throwing flaming road apples. Don't look back go to Vanguard, Fidelity, or Schwab and have them pull your assets.

 

[pb4uski]

.....
1- Has Ameriprise invested my money wisely to date?
2- In general, is paying someone to actively trade for me worth it?
3- If it is a good idea, is 1.5% fee worth it? Are there better advisers that can simply recommend investments and let my use my brokerage acct. Just thinking about that...
4- A co-worker recommended I contact Stifel and use them instead of Ameriprise (he's very happy with his invester). I may talk to them or Vanguard or Schwabb. Is this wise?
5- Also, if mutual funds are stagnant, should I take control of my own holdings and simply research investing and simply buy ETF. This would be for everything (ROTH, Annuity, roll-over). Not sure what surrender fees will amount to.

EVEN MORE QUESTIONS:
I guess what I ultimately want is to be able to decide for myself: how should I handle my investments as I get closer to retirement. I can't spends hours a day trading, but, are there ways to beat the fees with simple investing strategies without investing too much time (my job takes a lot of my time currently)....

1. Probably not.
2. No.
3. No.
4. Yes, talk with Vanguard.
5. Yes.

It's actually worse than you think. The 1.5% is an account management fee and is ON TOP of fund fees and I suspect that the fund fees are probably on the high side. For example, PVSBX has a 2% expense ratio and a 5% deferred load. So for your PVSBX, what you get is the return of the underlying portfolio less 3.5%!!! And on top if that, if you don't hold it long enough they charge a deferred sales charge of up to 5% This is an example of why Ameriprise is a total rip-off and you would be better off to move to Vanguard.

Also, PVSBX and Vanguard Wellington have similar asset allocation and their growth has been similar for 1, 3 and 5 year periods but with Vanguard you have a built-in 1.5% advantage. Even of you decide to go with their management it is only 0.3%.. a 1.2% savings. The expenses in Wellington are 0.18% compared to 3.5% for PVSBX managed by Ameriprise, not to mention the deferred sales load.

It is pretty obvious what you should do.... escape and run away... you are being raped.

 

[krldrummerboy]

PB4USKI
I was expecting some negative responses to the word Ameriprise, but a resounding hate. Wow. I will think hard about what to do next. Two posters recommended Vanguard. Perhaps, I could simply roll everything into Vanguard and let them re-position my current mutual funds?

Why is Vanguard so recommended? My wife had a bad experience with her 403B and is hesitant.

Here's a tough question: Is is fairly straight forward to transfer all of my Ameriprise holding into a brokerage acct? I worry that my tax history and dates and all that will get lost. For this reason I would worry about transferring to my personal brokerage. Would it be better to have a different advisor, like Vanguard, handle all that? Is there some complexity here?

 

[krldrummerboy]

PB4USKI
A few more comments.
The fees I am paying are not quite as bad as you make them out to be. Just to clarify, I do not pay any fees on the current mutual funds I have in that there is no monthly or yearly fee and there is no transaction fee. These fees are "hidden" in the returns. So, in your comparison PVSBX fee (expense ratio) is 2% yearly where Wellington fee is 0.18%. Is this accurate or am I missing something?
The 1.5% fee would only be on the assets in the brokerage account that they set up to buy and sell (manage) individual stocks.

I am in no way defending them. Just trying to clarify my post.

So, the question, is the 2% fee for PVSBX outrageous for a mutual fund? MRG used the term Evil when talking about 1% 12B1 and another 1% for the fund (which I assume is expense ratio)....

 

[RunningBum]

PB4USKI
I was expecting some negative responses to the word Ameriprise, but a resounding hate. Wow. I will think hard about what to do next. Two posters recommended Vanguard. Perhaps, I could simply roll everything into Vanguard and let them re-position my current mutual funds?

Why is Vanguard so recommended? My wife had a bad experience with her 403B and is hesitant.

Here's a tough question: Is is fairly straight forward to transfer all of my Ameriprise holding into a brokerage acct? I worry that my tax history and dates and all that will get lost. For this reason I would worry about transferring to my personal brokerage. Would it be better to have a different advisor, like Vanguard, handle all that? Is there some complexity here?

Vanguard has very low expense ratios for their funds, and if you decide to go with their advisor it's 1/5 the cost of Ameriprise. You'll do 1.2% better based on the lower advisor fee, plus the difference in fund expenses or transaction churning on individual stocks, plus the index funds Vanguard is likely to steer you to are likely to do better than the guesses Ameriprise will do for you.

If you aren't convinced and decide to stay at Ameriprise, at least track that closely for a year, including all expenses, with what you'd do at Vanguard with basic index funds (US/Intl/Bond). Then reconsider.

I haven't transferred funds in kind to Vanguard. I liquidated before the transfer so that made basis accounting easier, but all you should have to do is save all the purchase date and price history from Ameriprise, right? Give Vanguard a call, tell them what you want to do and what questions you have, and they will guide you through it.

 

[Sunset]

I would recommend Vanguard due to the extremely low fees. Some ETF fees are so low they are practically zero (ex 0.05%).

You phone Vanguard, and they can pull your other stuff into a Vanguard account, and all the cost basis is transferred (but do record what it is prior to move for safety and peace of mind).

It can all be transferred "in kind" so no tax effects for accounts that are not tax deferred.

 

[Sunset]

I transferred 2 accounts and all the cost basis came over, and I had recorded it prior to the transfer just to be sure and feel safe.

 

[MRG]

So, the question, is the 2% fee for PVSBX outrageous for a mutual fund? MRG used the term Evil when talking about 1% 12B1 and another 1% for the fund (which I assume is expense ratio)....

12B1 fees are added to the funds expense ratio. In this case a 1% fund fee and a 1% 12B1 fee. This makes the funds expense ratio 2% per year! Then they take you for a 1% redemption fee and a back end load of up to 5%! IMHO that's evil.

In many cases you could buy a different fund class and avoid all that, but why pay 1%? That's about twice the average fund cost. You can go much lower with index funds and generally get better returns.

Then in my understanding Ameriprise is changing 1.5% for the advice of investing in the crap funds. These guys generally get cost sharing revenues back from the fund(some might call them kickbacks) to convince them to sell you something you can't afford and is going to underperform. Get your money somewhere and start watching it grow.

 

[papadad111]

What's the house worth ?


Sent from my iPad using Early Retirement Forum

 

[krldrummerboy]

about 700k

 

[OrcasIslandBound]

We use Fidelity for post tax + IRA accounts and Vanguard for my 401k. We enjoy far lower fees than you do. Our investments are mostly indexes with about 45% stocks and the rest bonds. We've had this strategy since the great recession and have done well. I wouldn't dream of paying the fees for a service that is so likely to underperform us. Oh, and we have nearly quadruple of what you have accumulated on a smaller salary, although we're older at 58.



Sent from my iPhone using Early Retirement Forum

 

[REWahoo]

So, the question, is the 2% fee for PVSBX outrageous for a mutual fund?

It's beyond outrageous, you are being fleeced.

Do whatever it takes to move your money to Vanguard or Fidelity.

 

[travelover]

I have my stash split between Fidelity and Vanguard. Fidelity has a brick and mortar office nearby and if I need hand holding on some transaction Fidelity is there to do it. Fidelity has Spartan funds that rival Vanguard for expenses.

Run from Ameriprise, even knowing that they will take a bite out of your cookie before they let you go.

 

[savory]

1. Probably not.
2. No.
3. No.
4. Yes, talk with Vanguard.
5. Yes.

It's actually worse than you think. The 1.5% is an account management fee and is ON TOP of fund fees and I suspect that the fund fees are probably on the high side. For example, PVSBX has a 2% expense ratio and a 5% deferred load. So for your PVSBX, what you get is the return of the underlying portfolio less 3.5%!!! And on top if that, if you don't hold it long enough they charge a deferred sales charge of up to 5% This is an example of why Ameriprise is a total rip-off and you would be better off to move to Vanguard.

Also, PVSBX and Vanguard Wellington have similar asset allocation and their growth has been similar for 1, 3 and 5 year periods but with Vanguard you have a built-in 1.5% advantage. Even of you decide to go with their management it is only 0.3%.. a 1.2% savings. The expenses in Wellington are 0.18% compared to 3.5% for PVSBX managed by Ameriprise, not to mention the deferred sales load.

It is pretty obvious what you should do.... escape and run away... you are being raped.

I think pb4uski is providing some good advice as he typically does. I do use an FA but I do not use one that purchases mutual funds (only stocks and bonds) because there is a 'double' charge if they purchased mutual funds. I believe you pay your FA for the entire fund and you pay the mutual fund people to manage the fund your adviser included in your portfolio. That is how I think you are paying twice.


My experience is 1.5% for your adviser is high. At minimum, you should be able to get the same service for 1%. And, you should be able to find an adviser who will buy low cost funds, like Vanguard. Most people here will say you can do it yourself, which is a fair comment.

It's good that you are reaching out for suggestions. I recommend this forum to my friends as I think the advice is pretty good. With that said, not all advice fits your lifestyle or desires but still good advice.

 

[Big_Hitter]

why do you want to roll over your 401k?

 

[Whisper66]

PB4USKI
I was expecting some negative responses to the word Ameriprise, but a resounding hate. Wow. I will think hard about what to do next. Two posters recommended Vanguard. Perhaps, I could simply roll everything into Vanguard and let them re-position my current mutual funds?

Why is Vanguard so recommended? My wife had a bad experience with her 403B and is hesitant.

Here's a tough question: Is is fairly straight forward to transfer all of my Ameriprise holding into a brokerage acct? I worry that my tax history and dates and all that will get lost. For this reason I would worry about transferring to my personal brokerage. Would it be better to have a different advisor, like Vanguard, handle all that? Is there some complexity here?

The three companies I see most often recommended here are Vangaurd, Fidelity and Schwab. All offer low cost investment selections and you will find many positive comments about all three. Vanguard was the leader in providing low cost mutual funds but now you have good choices.

I am personally only familiar with Vanguard. To give you some feel for costs, all the mutual funds I use have (1) no front end fees (2) no 12-1b fees and (3) no closing fees. All are index funds but one and have a simple yearly fee, typically 0.09-0.13%. I have one non-index mutual fund that Vanguard actively manages, they charge 0.32%. No other hidden costs that I have been able to find.

I manage my own assets but call Vanguard when needed about specific questions I have. They provide this service free and have proved very knowledgable/helpful. If I wanted them to fully manage my assets, they charge 0.3% of the assets they manage (edit: on top of the fees mentioned above). I keep my investments simple (index mutual funds, a few stocks and one managed mutual fund) and generally hold longer term so don't feel any need for this service but have recommended it to my wife in the event of my passing before she does.

I have transferred assets from a TD Ameritrade Roth account to Vanguard. Was done in 30 minutes with Vanguard help. I set up a phone conference with Vanguard rep, he brought in a transfer specialist, we talked through what I wanted to do, they filled out forms and sent to me via email, I read and electronically signed and returned. This all took ~ 30 minutes. Then after the call was done, Vanguard worked directly with TDA to make the transfer happen and emailed me when completed (about 1 week). All cost basis, etc... came over correctly into the new Vanguard account.

I will always have one account elsewhere just to ensure not all my eggs are in one basket....but very happy with my Vanguard experiences over the years. I think you will find similar experiences from others with Fidelity and Schwab.

 

[StuckinCT]

It really depends if you are comfortable selecting the funds and investments and if you feel you need guidance/hand holding during market turbulence. Many people push the panic button like in 08 and earlier this year and have never been able to recover. Paying someone to help you avoid shooting yourself in the foot can be well worth the money.


I think up to 1.5% is reasonable, but if you have close to seven figures, closer to 1% is more reasonable for this. You can certainly save money at Vanguard if you want to try to do it yourself and fees do matter tremendously over time. The difference between 6.5% and say 7.2% over 30 years on $500k is $725k.


Manhattan is the most expensive place to live in the country in terms of cost of living. I have family out there so I know. My real estate taxes here in the sticks in Fairfield County Connecticut at the very end of the commuter line are $33k and heating cost is $7k a year on a modest $1.7mm home. I feel your pain, but at least you have nice weather!

 

[Hermit]

Another thing you can discuss with Vanguard is having them do a financial plan for you. Depending on how much you have invested with them, it can cost up to $200. I spent my $200 and got a financial plan with recommended allocations and index fund selections. This plan included my megacorp 401k index funds. I made the moves for the 401k and Vanguard moved my assets I had with them to complete the overall allocations. I continue to move the funds within my 401k to maintain the determined balance and it all works for me. Probably the best $200 I ever spent on investment advice.

 

[MRG]

It really depends if you are comfortable selecting the funds and investments and if you feel you need guidance/hand holding during market turbulence. Many people push the panic button like in 08 and earlier this year and have never been able to recover. Paying someone to help you avoid shooting yourself in the foot can be well worth the money.


I think up to 1.5% is reasonable, but if you have close to seven figures, closer to 1% is more reasonable for this. .

Guidance at 1.5% plus 2% fund fees is bullchit!

1% is outlandish for a 7 figure amount IMHO. Before my DF passed he paid a third party to manage his 300 K of investments, paying 1%, I asked and they agreed to drop down to. 75%. This was a Fidelity only advisor so no loads or 12B1 fees.

Vanguard does it for .30%! Why pay 5X for advice to buy funds with 5-6X the cost!

 

[StuckinCT]

Guidance at 1.5% plus 2% fund fees is bullchit!

1% is outlandish for a 7 figure amount IMHO. Before my DF passed he paid a third party to manage his 300 K of investments, paying 1%, I asked and they agreed to drop down to. 75%. This was a Fidelity only advisor so no loads or 12B1 fees.

Vanguard does it for .30%! Why pay 5X for advice to buy funds with 5-6X the cost!

I agree, annuities can cost up to 3.5%. They are for amateurish investor types who need "guarantees". I think 1.5% all in for under $500k is fair, including fund expenses and advisory fees.

If you are paying 3.5%, and start taking out 5% in an annuity, expect your investment to steadily drop in value over time; the annuity companies force you to have a conservative allocation to provide the guarantees so a 6% return is about what you would expect, minus 3.5% fees, minus 5% withdrawal- you are spending principal. However, depending on the contract, you may have a guaranteed withdrawal rate for life, so even if your investment goes to zero, the insurance company may still make payments.

I don't like annuities, they are expensive and there is little opportunity for growth and to provide a legacy, but for some people, they are appropriate. But when you buy one, just know you are turning over your capital to an insurance company in return for a promise. Some people are fine with that.


I should also point out that there are some lower cost annuity alternatives but the guarantees are not the same. Also, with annuities, any gain you have is ordinary income. The salespeople always tout their tax advantages and it is true that over time, you do get tax deferred growth and some contracts will allow you to be more aggressive, but at the end instead of getting tax efficient dividend income, you may be getting ordinary income. Most people don't understand this- the difference between dividend income and ordinary income is huge.