sell bad MF and reinvest now?

[livingalmostlarge]

Okay my parents have been ripped off for years and I'm trying to slowly reorganize their portfolio. No they will not give up control. No I have to work with their "advisor" are raymond james. These are facts. No I do not have POA. Everything is super slow because I have to email my mom who forwards it to the advisor who try to talk them out of stuff. Anyway here's the deal of some of the bad stuff

I want to dump everything my parents own that is now and just reinvest it better. I cannnot move it from Raymond James. They have sold their soul on stuff but what choice do I have since my dad is still alive and my mom said I can't handle it until he dies? I can tell her what to tell their financial advisor but we are basically paying $10k/year for nothing on a portfolio of $1m.

Here are some of the stuff I want to dump, by the way some of it they bought less than 1 share. The horrifying reality of being ripped off is incredible.

GFFFX - initially bought 0.803 shares
AGTHX
BBN - in a IRA
FIIAX
SGENX
MEIAX
VTRS
MO - 10 shares and losing big
HD - 1 share (my parents accounts were churned)
CGIIX
GTSYX


Should I sell it all and just plow the money back into VOO 60% and 40% VBRIX?

I'd like to just KISS but my biggest fear is that the market is so high. But some of these terrible things they've held for 15 year making no money or minimal. Also most of these are IRA or Roth IRA so it's not going to create a taxable event.

 

[Luvtoride]

Living, why do you say that all of these are terrible funds that should be sold?! I own a couple of these funds myself including GFFFX and am pleased with how its done and it is well rated by Morningstar. Some of the others are pretty good and highly rated as well. what are you basing your analysis on "dumping it all" and why would you plow it all into those 2 funds (is VBRIX the correct symbol?).

 

[livingalmostlarge]

I think that a low cost index fund and not paying a manager would be 100% the way to go. I do that myself. I own mostly low cost ETF for a couple sectors but the bulk is VOO, BND, QQQ (as a sector) and that's it. I think the fees are a drag. GFFFX is 3 star rated by morningstar and it has a0.41% fee. If that same money had been invested in even something more similar but a low cost index I think it would be more worth it.

But what is your argument for a more managed fund account? I am willing to listen why I shouldn't dislike my parents investments? I'm putting it out there.

 

[njhowie]

Have your parents specifically asked for your financial assistance or did you simply take it upon yourself?

I believe it's a mistake for you to get involved.

10 shares of MO losing big? Out of a $1M portfolio? Are you being serious here?

1 share of HD that was churned? HD is sitting at all time highs, did they lose money on the churning?

Understand that regardless of how you might reinvest, should it not perform for any reason, you will be the brunt of their anger. Not Raymond James. Not the (supposed) garbage portfolio they have, YOU.

I think you should step away, leave everything alone UNLESS they specifically ask for your assistance. When they pass, you can do whatever you like with what ends out going to you. For now, bite your tongue and don't say a word. If they are not hurting financially in their retirement, then let it go.

If you want to put a stop to the (supposed) churning, simply have their agreement with Raymond James updated to indicate that they may not buy or sell anything without client approval...and then your parents can run it by you.

 

[disneysteve]

Living, why do you say that all of these are terrible funds that should be sold?

I don't know that they're all necessarily bad holdings, but what's the point of owning 0.8 shares of one fund, 1 share of HD, 10 shares of MO, etc? It makes a lot more sense to consolidate into a couple of good low-cost index funds and simplify everything.


A quick check shows GFFFX has an ER of 0.41%. VOO is 0.03%, so is GFFFX worth paying almost 14 times more to own? Probably not.



That said, I'd consider VTI rather than VOO. That will get you much better diversification.

 

[MRG]

Have your parents specifically asked for your financial assistance or did you simply take it upon yourself?

I believe it's a mistake for you to get involved.

10 shares of MO losing big? Out of a $1M portfolio? Are you being serious here?

1 share of HD that was churned? HD is sitting at all time highs, did they lose money on the churning?

Understand that regardless of how you might reinvest, should it not perform for any reason, you will be the brunt of their anger. Not Raymond James. Not the (supposed) garbage portfolio they have, YOU.

I think you should step away, leave everything alone UNLESS they specifically ask for your assistance. When they pass, you can do whatever you like with what ends out going to you. For now, bite your tongue and don't say a word. If they are not hurting financially in their retirement, then let it go.

If you want to put a stop to the (supposed) churning, simply have their agreement with Raymond James updated to indicate that they may not buy or sell anything without client approval...and then your parents can run it by you.

+1 To your entire post. The bold about MO makes me question the OPs subjectivity. Please help me understand how they are losing big on MO. What's the problem? Seriously it pays out 7% and has a constant price around $48 today.

 

[pb4uski]

I would probably focus on liquidating the smaller positions... to have less than 1% of the portfolio... less than $10,000 in any ticker probably isn't worth the effort.

However, is some of this taxable account money? If so, be cognizant of the tax implications.

I pretty much agree with howie... tread lightly unless your parents are asking for your help.

What you could do it to compare the returns of their existing portfolio to a designated blend of index funds using Portfolio Visualizer. The table at the bottom will show you total returns for 1, 3, 5 and 10 year periods and rolling returns... then you'll have some credible data suporting or refuting your hypothesis that theie portfolio is underperforming. Similarly, you could compare their actual account total returns with similar index funds.

 

[erkevin]

MO does have a pretty poor 3 year return, if you snapshot that. However, at only 10 shares (typo?) it would only amount to a $60 loss over that time frame

 

[livingalmostlarge]

Have your parents specifically asked for your financial assistance or did you simply take it upon yourself? They asked for help because my mom started wondering about some stuff. For example my parents lost a lot of money when they had a margain loan she didn't remember signing and the money disappeared. It was around $100k. This was years ago and her prior financial advisor was censured by the SEC and fired by ML at that time and they moved to RJ and were moved to this new advisor. Currently my mom got concerned with money again moving into and out of the accounts and I this summer looked evreything over. And no until now my parents have outearned stupid. But a lot of other things have happened that have not gone well. And that is why I am guiding them to more index funds and simplifying. I am NOT allowed to take over until my dad dies then my mom will sign POA and ill be on everything and do all bills. My mom barely paid the bills and there were times recently when she realized my dad hadn't and it was now falling to her since he couldn't. Can she? Somewhat. Thank god for their pension.

I believe it's a mistake for you to get involved.

10 shares of MO losing big? Out of a $1M portfolio? Are you being serious here? They bought in 2017 and are losing money on 10 shares and paid $49.95 for a broker trade. Also they are paying an AMF of about 1.5% because the broker is so nice they split all my parents IRA into two accounts so 1 is charged 3% and the other is free. So please tell me how they aren't being taken advantaged of?

1 share of HD that was churned? HD is sitting at all time highs, did they lose money on the churning? Sure it's made money but I think it only this year broke even with the $49.95 fee to buy 1 stock. If that's not churning I don't know what is.

Understand that regardless of how you might reinvest, should it not perform for any reason, you will be the brunt of their anger. Not Raymond James. Not the (supposed) garbage portfolio they have, YOU. Trust me it's a garbage portfolio that they pay over $15k/year to manage and it doesn't even return the index.

I think you should step away, leave everything alone UNLESS they specifically ask for your assistance. When they pass, you can do whatever you like with what ends out going to you. For now, bite your tongue and don't say a word. If they are not hurting financially in their retirement, then let it go.

If you want to put a stop to the (supposed) churning, simply have their agreement with Raymond James updated to indicate that they may not buy or sell anything without client approval...and then your parents can run it by you.

My fear has been how hot the market is. But when things are returning more negative than not. And being invested 15 years and the returns are 50% TOTAL for 15 years is ridiculous. Sorry for being pissed that they were ripped off all these years.

 

[easysurfer]

IMO, unfortunately, there are too many cooks in the kitchen as the saying goes.

The "advisor" and your parents want the say in things and you being the peacemaker in between.

If you were to sell your parents on the idea of KISS, would the "advisor" follow suit or steer them into the churning? Would your parents put you up against the "advisors" ... "expertise"?

Best of luck.

 

[MRG]

IMO, unfortunately, there are too many cooks in the kitchen as the saying goes.

The "advisor" and your parents want the say in things and you being the peacemaker in between.

If you were to sell your parents on the idea of KISS, would the "advisor" follow suit or steer them into the churning? Would your parents put you up against the "advisors" ... "expertise"?

Best of luck.

Raymond James isn't going to be interested in a low cost index fund solution. They've no good way to be compensated.

 

[mystang52]

Without commenting on the specific holdings, I will say there's something wrong whenever the clients do not understand their holdings.

 

[RetiredHappy]

Their portfolio is never going to perform as well as the market because of having a balanced portfolio as opposed to all equities.

 

[easysurfer]

Raymond James isn't going to be interested in a low cost index fund solution. They've no good way to be compensated.

+1. My point about the too many cooks.

 

[disneysteve]

Raymond James isn't going to be interested in a low cost index fund solution. They've no good way to be compensated.

I was wondering if you can even buy VG funds through them or if there might be a fee to do so.

 

[livingalmostlarge]

Raymond James isn't going to be interested in a low cost index fund solution. They've no good way to be compensated.

They just charge a fee for the amount of money held there about 3%. So on $1m about $30k/year.

A lot stemmed from the margin loan and not knowing why they had loans on their accounts and money was moving in and out from one account to another. Then not knowing why there were fees cropping up from money movement. It's very complicated. They have each 2 accounts of every type of account so that they are only charged on one of the accounts so they aren't paying 3% annual management fee only like 1.5%. If it was consolidated I asked they would be paying 3% or $30k/year on $1m. Yes you read that right. And it has been this way for years.

On top of that the margain loans were bad. It was pretty substantial and they had it from 2007 to 2019. They had cash sitting both in their checking/savings as well as in the accounts themselves but Merrill Lynch and Raymond James allowed them to borrowing on margain for 1 share purchases etc and charged them an average of 6-8% interest when they had enough cash to pay it off. So it was not good situation. So yes they were taken advantage off I understand they signed the paper in front of them and should have been more responsible but it happened. In 2019 I told my mom to pay off all debt and she did and that's how they got rid of their mortgage and margin loan. I flipped out then when i found out they had all this debt and $300k in cash in a checking account. Then we didn't talk about it since I pointed out she has always told me no debt and they could afford everything turns out they had loans up the wazoo at their ages.

And no we are not leaving RJ. They feel that people like them with "money" get help. Their friends are turned away for not having enough and they have enough. It's a status thing and such. To quote one of their friends "i didn't realize we had to save more while working. I don't know where all the money we earned went. We were doctors. We should have had more." Also they believe the advisor is their friend and is a good person. It's a small town thing.

 

[livingalmostlarge]

But it can't be worse than the loaded fees and expense ratios of 1%

 

[RobbieB]

You already know you can't do anything then eh?

 

[MRG]

But it can't be worse than the loaded fees and expense ratios of 1%

Loads are past. Are they paying 1, 1.5, or 3%? I'm confused because I just thought I read every one. Don't get me wrong I don't care for the 1%ers but there's a lot of room for misunderstandings of what mom and dad have told RJ. Perhaps something that could be done is a conversation with rj about their fees vs value add. Don't debate their services only the cost.

 

[pb4uski]

It should be relatively easy to look at their actual total returns for their accounts in total for 1, 3 and 5 years.... 2020, 2018-2020 and 2016-2020. Also, their AA as of the beginning and end of each period. Then select a mix of VTI and BND that best match up with the AAs and look at the total return for that period using Portfolio Visualizer.

Better yet, show them what they would have at the end of each period in the mix of VTI and BND compared to what RJ did for them.

I'm guessing that you'll find that their actual returns are ~2% or more lower than a similar portfolio of index funds. After you show them the results you can offer to simplify their portfolio, showing a current and prospective look at their holdings, AA, historical returns for 1, 3 and 5 years, etc.

But don't get your hopes up... change is hard.

 

[livingalmostlarge]

You already know you can't do anything then eh?

Actually my mom is willing to do it if I am willing to do it. I can tell her to sell everything and go to VTI and BND or BSV.

But I wonder is it a bad idea to sell everything now and get out of all these funds and just dump it all back into these low cost index funds? I mean the market feels high and yes they are already invested but they are invested in crap with advisors. If the market goes down all ships go down.

And I did already show them how much per year they have paid and made and compared it to a comparable VTI/BND portfolio. If they had invested in just VTI and BND they'd have more than double what they had now.

2012 $511k contributed $181k till now
2020 end $1.073M
-fees have been $62k but not including all the interest on the margin loan and mortgage they had but didn't need. So they have also paid more in interest to boot. Nice car there.

Trust me my mom says oh well they live well and they do. Thankfully the 2 SS and pension covers most. But now my mom is looking like they might need some care and $ and they have a big enough portfolio they should be able to draw on to help. But if they start drawing and pay more fees they'll eat into everything and my mom is 21 years younger than my dad. So there is a big discrepancy.

Plus they live large and spend a lot of money sustaining multiple households. Fortunately my dad has worked until death, he's 90 and just retired this year. So technically they haven't been needing to touch savings because of it. Not because they were smart but they always outearned stupid. They were not LBYM but instead spend and know you can keep earning more.

 

[RobbieB]

You said you can't do anything until dad...

He worked to age 90?

You'll have a hard time with 90 year old pops who just retired.

Or maybe not. Proceed with care and caution for sure.

 

[RetiredHappy]

The way I read the numbers above and based on the growth, the fees were 1% per year. They could have done worse as far as fees go.

Unless you want them to move out of asset management, you just let them be. I don't think you should do anything as long as your father is alive.

The issue with assets under management model is that there are teams behind the scene which decide on which funds/ETFs to buy, which I call it a "bundle". You cannot tell them to buy this ETF or anything because the funds are simply distributed to buy the bundle.

We have AUM for the past 14 years with 2 different firms. We were too busy working and even after retirement and a month ago we decide to DIY. We are in the process of moving our assets to another firm and today we started going through what each fund is since they are transferred straight to the other firm. The bundle is made up of around 30 index/ETFs and for most of them, we can see why they were selected. At the first pass today, it looks like we will keep at least of half of the funds alone in the taxable accounts because they are really not bad funds and we also do not want to realize the capital gains. For IRA we will probably further simplify.

 

[RetireeRobert]

And no we are not leaving RJ. They feel that people like them with "money" get help. Their friends are turned away for not having enough and they have enough. It's a status thing and such. ......

I take your word that Raymond James is going to stay in the picture.

I'd say your best bet is to build your case for a (more) simplified portfolio. Perhaps come up with some performance comparisons between their actual portfolio and your proposals. Explain to your mom the benefits of a simplified portfolio. Explain where under RJ's management, some of those strange things happened. Convince your mom she should be able to understand how their portfolio is managed and working.

In other words, get you Mom on your side.

Otherwise, since RJ is in the picture to stay, if your Mom doesn't come around, accept that and bow out peacefully.

Good luck!

 

[Qs Laptop]

I want to dump everything my parents own that is now and just reinvest it better. I cannnot move it from Raymond James.
Should I sell it all and just plow the money back into VOO 60% and 40% VBRIX?

I'd like to just KISS but my biggest fear is that the market is so high. But some of these terrible things they've held for 15 year making no money or minimal. Also most of these are IRA or Roth IRA so it's not going to create a taxable event.

This must be a source of incredible frustration. Is it possible to convince them to let you control $100K or $200K of their portfolio? Tell them you want to show them what you can do for them. Give it a time limit of 2 years or thereabouts. Then show them what you've done compared to their advisor.

Ideally, you need to get away from Raymond James and their fees, but if you had to stay there I'm sure you could find something acceptable to put $200K into.

Good luck.