Got a call from my FA, good news or bad?

[jazz4cash]

He then ask what was wrong and I told him that I understood that he wasn't supposed to contact me about going with him to another firm,isn't that called "churning"? He hesitated and then said I could call him later if anything changed..

No, that’s actually NOT churning. Churning is when a FA buys and sells to generate trading commissions. This guy is probably in violation of a non compete with his ex employer. It’s pretty common but I think it gets overlooked except in the case of major accounts. I think you busted him and that’s why he said you could call him.

 

[EastWest Gal]

I recommend Charles Schwab if you use ETFs. You can get access to all the Vanguard ETFs and have much better customer service than Vanguard.

I'd definitely use this as an opportunity to change to self-management.

Schwab has an excellent website, and after some initial paperwork, much can be done online. They have some local offices too, which can be helpful for some. I've had my portfolio parked there since 1993.

I choose to use a FA, Portfolio Solutions. They charge 0.37% AUM. I have an account which does not have assets under their management. Founded by Richard Ferri, who has written 5 books on investing and ETFs, and posts on Bogleheads. I'm not a complete DIYer when it comes to money. And DH by himself would be a bit lost. But DH is also very good at not spending money.

 

[Brat]

Fidelity sells all ETFs with no charge.

 

[GoBears]

Fidelity Total Stock Market Index Fund FSKAX
Fidelity International Index Fund FSPSX
Fidelity US Bond Market Index Fund FXNAX

I see he recommends no more than 20% of the equity position in international which is a reasonable upper limit. You really don’t have to have international exposure - that’s entirely optional. Many companies in the total market index will have international exposure already.

FYI - FSPSX’s holdings are limited to international stocks in developed markets. If you want a fund that owns stocks in both developed and emerging markets, the ticker for the Fidelity Total International Index Fund is FTIHX.

 

[Time2]

Step 1: Get the money moved to Vanguard or Fidelity
Step 2: Relax, breath, Repeat
Step 3: Repeat Step 2
Step 4: Step into Uncle Clones investment advice office- have you thought about ROTH conversions...

Financial advice at a fair price!

Are Roth conversions a good idea? As I see it they have less than $400k in retirement accounts. RMDs would only force about $16k of spending the first few years. They may need that much income anyway. If that was added to their SS, they are still in a low tax bracket.
I understand there will be some growth between now and RMDs, and tax rates my increase.
I don't know the answer, I'm posing the question to see other opinions.

 

[target2019]

I recommend Charles Schwab if you use ETFs. You can get access to all the Vanguard ETFs and have much better customer service than Vanguard.

I'd definitely use this as an opportunity to change to self-management.

+1

 

[mrfeh]

FYI - FSPSX’s holdings are limited to international stocks in developed markets. If you want a fund that owns stocks in both developed and emerging markets, the ticker for the Fidelity Total International Index Fund is FTIHX.

FSGGX is another option (different index from FTIHX).

And FZILX is best of all, if you have an account at Fidelity.

More info: https://www.wallstreetphysician.com/fidelity-international-index-fund-buy/

 

[jazz4cash]

Are Roth conversions a good idea? As I see it they have less than $400k in retirement accounts. RMDs would only force about $16k of spending the first few years...

RMDs do not force spending except of course for the spend for taxes due. I only mention it because some folks seem to (over) react as if they are required to spend the distribution.

 

[Markola]

I think you may be a bit better at Fidelity than Vanguard. Just for the face to face aspect. It would be similar to the FA route you just had. I'm fine DIY but looked at VG PAS if I passed before my wife. But she was a people person and needs the face to face. She would not do well with a phone conversation. Mrs Scrapr passed before we got to the point I had to make a decision on that.

Good advice. Over the phone with Vanguard PAS works well for us but FIDO face to face might be best for others. Just remember that FIDO and Schwab’s expenses are higher because they have to rent all those expensive storefronts in downtowns all over the country.

 

[mrfeh]

Just remember that FIDO and Schwab’s expenses are higher because they have to rent all those expensive storefronts in downtowns all over the country.

Potential 3 fund portfolio at Fidelity:
FZROX: 0.0 ER
FZILX: 0.0 ER
FXNAX: 0.025 ER

Vanguard cannot beat that.

 

[Markola]

I think you need more assistance than Vanguard offers and the PAS is pretty useless for someone in your situation.

We are very satisfied with Vanguard PAS, where we have 7 figures managed in index funds by our assigned advisor. They’ve been completely excellent to work with and full service for us. I’d be interested to know what FIDO does for you that VG PAS does not do for me. Do they come mow your grass, clean your gutters or wash your car?

 

[Markola]

Potential 3 fund portfolio at Fidelity:

FZROX: 0.0 ER

FZILX: 0.0 ER

FXNAX: 0.025 ER



Vanguard cannot beat that.

No, but .04 for VTSAX is pretty cheap, no? FIDO can’t afford its loss leader fees on the above, so their incentive is to hook you with 0 fees then churn you into other funds with much higher expense ratios. If you trust them, fine, but I trust Vanguard, which is a coop owned by me. Someone above said FIDO charges .70 or so for its advisory service while we pay .30 at VG PAS. Plus we handle everything from the comfort of our home vs. fighting our way downtown to park and meet with someone in their fancy office. Potato, potahto. YMMV.

 

[MRG]

We are very satisfied with Vanguard PAS, where we have 7 figures managed in index funds by our assigned advisor. They’ve been completely excellent to work with and full service for us. I’d be interested to know what FIDO does for you that VG PAS does not do for me. Do they come mow your grass, clean your gutters or wash your car?

After 8 years of being a Fidelity Private Client with 1.3 million in Fidelity assets and I'm told to call the 800 number. Why? I complained to the Fidelity branch manager when his dirty rotten annuity salesman wasted 2 days of my time trying to sell me an annuity.

PAS works just fine for my assets at Vanguard. When I've talked about an advisor from Fidelity the price was worse than E. D. Jones.

 

[OldShooter]

... You really don’t have to have international exposure - that’s entirely optional. Many companies in the total market index will have international exposure already.

I have read this argument many times. I consider it to be fallacious.

Not having international exposure means not owning companies like Volkswagen, Nestle, Essar, Inbev, SABMiller, Cemex, ... On and on. In the list of the biggest companies in the world, US companies really don't appear until around #10.

China and India together have about 1/3 of the world's population, eight times the US population. Both are mildly protectionist, assuring that US companies will not have large shares in most market segments. They are also both considered to be emerging markets. (When you think "emerging markets" don't think Ethiopia or RSA.) So avoiding emerging markets and international stocks means ignoring a third of the world including the world's biggest economy. And India's economy will eventually pass the US, too.

Finally, no insult intended, but I have wondered whether people that are afraid of international are people who have not traveled much. We've been to over 40 countries and leave this afternoon for our seventh trip to Africa. We will eat and drink products not made or sold by US companies and we will travel in a Volkswagen kombi. Other than flying on a US airline, we will probably not use or consume anything from the US. That's not a choice; that's just how it is in the majority of countries worldwide.

And then there's the Chinese belt and road initiative. US companies' share? Probably zero.

 

[mrfeh]

No, but .04 for VTSAX is pretty cheap, no? FIDO can’t afford its loss leader fees on the above, so their incentive is to hook you with 0 fees then churn you into other funds with much higher expense ratios.

There's an easy solution: say "no", or don't even bother meeting with the adviser.

 

[Time2]

RMDs do not force spending except of course for the spend for taxes due. I only mention it because some folks seem to (over) react as if they are required to spend the distribution.

You're right, my point was, forced withdrawals that are taxed. Being a low amount when added to SS, probably wouldn't push them into a higher Tax bracket. So the need to do Roth Conversions would be reduced. However, I am asking the question, there may be some additions I don't know, like growth, future brackets and future tax rates.

 

[Another Reader]

We are very satisfied with Vanguard PAS, where we have 7 figures managed in index funds by our assigned advisor. They’ve been completely excellent to work with and full service for us. I’d be interested to know what FIDO does for you that VG PAS does not do for me. Do they come mow your grass, clean your gutters or wash your car?

Fido did not lose a transferred IRA for six weeks and tell me they had no record of receiving the money. Vanguard did exactly that. Their systems are antiquated and rules are archaic. I keep some money with them to get their low cost treasury-only money market fund and the W funds. I would not put all my eggs in that basket.

PAS works for some people. For the OP, some additional help is needed. As for the coop, let me tell you the story of the Coop grocery store in Berkeley. Wilted produce, spoiled meat, filthy store, and a lot of excuses from "the owners." Somehow, the for-profit grocers sold better quality food at lower prices. Guess who went out of business.

 

[pb4uski]

Potential 3 fund portfolio at Fidelity:
FZROX: 0.0 ER
FZILX: 0.0 ER
FXNAX: 0.025 ER

Vanguard cannot beat that.

(emphasis added)

Yet to be determined.. there is more to index funds than ER (though ER is a big part).

According to Portfolio Visualizer a 42/18/40 mix of the funds above and their Vanguard equivalents, Vanguard eeked out a slightly higher return. The time frame was so short because the FZROX hasn't been around very long.

portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=FZROX&allocation1_1=42&symbol2=FZILX&allocation2_1=18&symbol3=FXNAX&allocation3_1=40&symbol4=VTSAX&allocation4_2=42&symbol5=VTIAX&allocation5_2=18&symbol6=VBTLX&allocation6_2=40

 

[pb4uski]

Are Roth conversions a good idea? As I see it they have less than $400k in retirement accounts. RMDs would only force about $16k of spending the first few years. They may need that much income anyway. If that was added to their SS, they are still in a low tax bracket.
I understand there will be some growth between now and RMDs, and tax rates my increase.
I don't know the answer, I'm posing the question to see other opinions.

It depends on what they expect their marginal tax rate to be once SS and any pensions are on line and what it is now. We don't have enough info to know. Commonly, there is a time between ER and once SS and any pensions start that people are in a lower tax bracket and that is the opportune time to do Roth conversions.

Our conversions are a mix of 0% (covered by part of our standard deduction), 10% and 12% and have averaged 8.5% over the last 7 years... compared to 28%+ when we deferred that income and 22% once SS and my pension are going. Assuming 22% later in life our Roth conversions have saved us $50k over the last 7 years.

During that gap time, Roth conversions are low hanging fruit.

 

[Dtail]

No, but .04 for VTSAX is pretty cheap, no? FIDO can’t afford its loss leader fees on the above, so their incentive is to hook you with 0 fees then churn you into other funds with much higher expense ratios. If you trust them, fine, but I trust Vanguard, which is a coop owned by me. Someone above said FIDO charges .70 or so for its advisory service while we pay .30 at VG PAS. Plus we handle everything from the comfort of our home vs. fighting our way downtown to park and meet with someone in their fancy office. Potato, potahto. YMMV.

After 1 session with my free advisor at Fidelity, they have never tried to churn me into other high expense ratio funds.

 

[Time2]

It depends on what they expect their marginal tax rate to be once SS and any pensions are on line and what it is now. We don't have enough info to know. Commonly, there is a time between ER and once SS and any pensions start that people are in a lower tax bracket and that is the opportune time to do Roth conversions.

Our conversions are a mix of 0% (covered by part of our standard deduction), 10% and 12% and have averaged 8.5% over the last 7 years... compared to 28%+ when we deferred that income and 22% once SS and my pension are going. Assuming 22% later in life our Roth conversions have saved us $50k over the last 7 years.

During that gap time, Roth conversions are low hanging fruit.

I did assume there were no pensions since non were mentioned.I did go back and recalculated and the total tax deferred they have is $586k. So let''s assume the grow 7% a year as they are invested conservatively. They will then have $770k, although they may be spending
down now so maybe less. Average RMDs over the first 10 years is 4%.
And 4% times $770k is $31k, added to SS of I'm guessing $30k.
$61k minus $24k (standard deduction) = $37k of taxable income, but, I don't think they will even be taxed on their SS because, adjusted gross income + nontaxable interest + half of your Social Security benefits will be below $32k. That $32k has it's own yearly inflation increase, so it will be higher when the RMDs start.
It also matters if one of them dies early and pushes the other into single filing status with lower income tax brackets.
I hope I have listed enough to get the OP thinking about what to think about when making this decision. My gut feeling with only the details the OP has given is, it may cost them more if they do Roth Conversions then if they don't. But longevity and the single filing brackets needs to be in that calculation.
If the OP wants to add more info, like SS, pensions, and are you spending down your tax deferred accounts, others smarter than me can give better advice.
Now I'm going to go kick myself again, because I think I could have done a $60k+ Roth conversion and stay in the 12% bracket for 2019. This is our first full year of retirement so I need to get it figured out myself. I do have concerns RMDs pushing me into a higher tax bracket in about 8 years.

 

[Markola]

After 8 years of being a Fidelity Private Client with 1.3 million in Fidelity assets and I'm told to call the 800 number. Why? I complained to the Fidelity branch manager when his dirty rotten annuity salesman wasted 2 days of my time trying to sell me an annuity.

PAS works just fine for my assets at Vanguard. When I've talked about an advisor from Fidelity the price was worse than E. D. Jones.

LOL.

 

[Markola]

Fido did not lose a transferred IRA for six weeks and tell me they had no record of receiving the money. Vanguard did exactly that. Their systems are antiquated and rules are archaic. I keep some money with them to get their low cost treasury-only money market fund and the W funds. I would not put all my eggs in that basket.



PAS works for some people. For the OP, some additional help is needed. As for the coop, let me tell you the story of the Coop grocery store in Berkeley. Wilted produce, spoiled meat, filthy store, and a lot of excuses from "the owners." Somehow, the for-profit grocers sold better quality food at lower prices. Guess who went out of business.

Sorry to hear about the spoiled meat at the Berkeley Co-op. Still, “Vanguard going out of business” is not high (OK, nowhere) on my list of worries.

 

[Another Reader]

Sorry to hear about the spoiled meat at the Berkeley Co-op. Still, “Vanguard going out of business” is not high (OK, nowhere) on my list of worries.

I don't think Vanguard is going out of business, but I don't think "customer owned" is superior. For profit companies generally compete better to win and keep customers.

 

[RobbieB]

Yeah, you would think the customers would do a better job for themselves eh? I guess the customers are a bit incompetent.