Another Financial Advisor Question

[OldShooter]

Quote:

Originally Posted by CoolRich59 ... Now, while I still don't have the knowledge, I'm willing to get educated if it means doing away with the advisor's fees and so be able to keep and invest more $$.

Well, good on you! Sorry I misunderstood your objective.

Since you are looking for some hand-holding, you might want to talk to Schwab and Fidelity as well as Vanguard. If you bring at least $250K to Schwab or a similar amount (don't remember $$ exactly) to Fidelity, you will get permanently assigned an actual fiduciary person to talk to and help you with your investing. No charge for that as a basic service and, depending on your location, probably face-to-face. These days all the high quality houses sell almost the same stuff, so it really boils down to finding the personal relationship that works best. You might even interview a couple of people at each house.

And, actually, many here will advise you to simply buy one fund, a total world stock fund, and one bond fund, a total bond fund, in proportions that you are comfortable with. A slightly more complex equity-side portfolio would be one total US market fund and one international total market fund in about a 70/30 split. And on the fixed income side for a little more complexity, ladders of government bonds and high-grade corporates instead of bond funds. If you go in asking about these options you will probably kick off a very educational discussion.

Re education, a book I recommend a lot is "The Coffee House Investor" by BIll Schultheis. It's a very readable, not too long, introduction to IMO a very sound philosophy of investing. There are other good books, but I met Bill on a trip evaluating investment advisors for a nonprofit I was helping and can confirm that he is the real deal. What other investment book includes a recipe for pumpkin pie?

[braumeister]

Quote:

Originally Posted by RobbieB Just got my ML statement. I am up 17.9% YTD.

That's marvelous. All equities, right?

[RobbieB]

Yes, the Merrill guys only do my equities. I have my bonds with Fidelity and Morgan Stanley.

They are all large cap dividend stocks, mostly US but a few foreign too. I just let these guys run. I get an envelope of buy /sell trades about every other month. They stick my dividends in my checking account as they arrive so I can blow more dough.

It's the typical 1% AUM deal but I get a lot of benes like a half mill credit line free and someone to talk to and meet with from time to time. Not to mention they send me Christmas presents too. Last year it was a basket of exotic chocolates -

[OldShooter]

Quote:

Originally Posted by RobbieB Just got my ML statement. I am up 17.9% YTD. I looked up the S&P 500 and it is up 15.5% YTD. So net of fees (fees already deducted) my stock traders are up 2.4% compared to the "500 index" They beat the index last year too.

I monitor just quarterly. For three quarters to 9/30 my simple 2-fund benchmark was up 15.9% and the ACWI All cap (worldwide all stocks) was up 17.7%. The market was up in October roughly 2%, so those numbers would go to 18.2% and 20%.

So your guys are pretty much doing what a passive portfolio would do, which is actually quite good considering the fees and the fact that most stock pickers can't even be competitive net of fees.

[RobbieB]

Thanks. I think so too. I've been with a few firms and lots of brokers and these guys are worth their salt.

[LOL!]

The only way to "audit" one's portfolio performance is to enter all the transactions yourself into a separate piece of software. I recommend the free MS Money to do this. Then you can calculate performance numbers for any range of dates and investments. This will only require your time and account statements with a list of all transactions plus the current prices per share of your current investments.

I think financial advisors don't really provide this kind of information as it would be quite revealing. So to get independent performance numbers, one has to do the calculations themselves.

[RobbieB]

My account statement is 33 pages long...

[Floridatennisplayer]

I am up 16.21% ytd.

What was your return? You should have access to this easily.

[RobbieB]

Read page 1

[CoolRich59]

Quote:

Originally Posted by Floridatennisplayer I am up 16.21% ytd. What was your return? You should have access to this easily.

Yep. As OldShooter mentioned, this info should be (and is) in the quarterly account statements. I just got done looking at them:

Last 12 months:

- 7.41%

- 8.88%

- 12.05%

- 8.54%

Since Account Opened (July, 2015)

- 4.73%

- 5.91%

- 7.89%

- 4.56%

[growing_older]

Quote:

While I like the "peace of mind" of having someone else watching my $$, I was only willing to do so if they are outperforming the market enough that it offsets the fees I'm paying. That's not happening from what I can tell

While this is often the promise of financial advisers, it is virtually impossible. If there were such an advisor who could consistently beat the market net of fees, they would either make millions running a fund, or simply trade on their own account. A retail adviser who beats the market net of fees was simply lucky during the period examined.

If you want an adviser because you want the warm fuzzy feeling of a professional watching your money and want them to at least not make major investing mistakes, then that is a valid reason to have an adviser. But you have to know that on average they will earn market returns and will lag by approximately their fee. That is after all what you are paying them to provide the services above.

[RobbieB]

I'll be happy with "simply lucky" as long as luck holds out.

[gcgang]

Quote:

Originally Posted by CoolRich59 Thanks for the add'l comments. Since I'm not getting any younger ( ), I spent some time this afternoon opening an account with Vanguard. Once the account is funded and set up, I will be parting ways with the financial advisor and transferring my accounts to Vanguard. (My current 401k is with Fidelity, so that obviously needs to stay put.) While I like the "peace of mind" of having someone else watching my $$, I was only willing to do so if they are outperforming the market enough that it offsets the fees I'm paying. That's not happening from what I can tell (but, as you suggest, I will be pulling out the statements tonight to check).

You've decided to "part ways" w your FA, and NOW you're going to pull out your statements to check performance? Don't let the facts stand in the way of your decision making. Lol.

I'm sure putting your $ in a Vanguard target date or other diversified portfolio will do fine.

Good luck.

[jazz4cash]

Quote:

Originally Posted by CoolRich59 Yep. As OldShooter mentioned, this info should be (and is) in the quarterly account statements. I just got done looking at them: Last 12 months: - 7.41% - 8.88% - 12.05% - 8.54% Since Account Opened (July, 2015) - 4.73% - 5.91% - 7.89% - 4.56%

I can't tell what these numbers represent. It looks like negative returns for every period represented, but that can't be right so I'm guessing the negative sign is really just a dash. If those are all positive returns, I'd say maybe its decent performance depending on weather it is net of fees.

Years ago I had a strong preference for Vanguard over Fidelity, but since my 401k was at Fido, I opened additional accounts there and have been very pleased. Have you explored all the resources on Fido's website? You could probably compare your FA's results with comparable choices from any other provider. I think Fido's website is better than Vanguard. When I log on I see all my accounts in one place. There is a feature called Guided Portfolio Service that tallies all your accounts and calculates the AA for the combined portfolio.

[Sunset]

Quote:

Originally Posted by CoolRich59 Yep. As OldShooter mentioned, this info should be (and is) in the quarterly account statements. I just got done looking at them: Last 12 months: - 7.41% - 8.88% - 12.05% - 8.54% Since Account Opened (July, 2015) - 4.73% - 5.91% - 7.89% - 4.56%

So that does not look good, unless it's simply a bad choice for bullet points

These numbers don't really mean much since I cannot tell if they are per fund, or per quarter, or if they are even positive ?

Did your statement also detail the fee they charge you, it's often buried many pages inside.

[CoolRich59]

Quote:

Originally Posted by gcgang You've decided to "part ways" w your FA, and NOW you're going to pull out your statements to check performance? Don't let the facts stand in the way of your decision making. Lol. I'm sure putting your $ in a Vanguard target date or other diversified portfolio will do fine. Good luck.

I never said I haven't been checking the performance of the portfolio. In fact, I track the performance regularly from their website. I said that I could not calculate the precise rate of return because there have been changes to the accounts over the last 2 years.

It was at OldShooter's suggestion that I look at the statement to see if the financial advisor's statements to see if they contain a rate of return.

[Scuba]

We use an FA. For years i was DIY, but a few years before ER, we hired an FA. For us, the benefits have been:
1. Helped us confirm we were financially ready to ER
2. Created a cash flow plan utilizing various investments both within and outside of FA's control
3. Thinks of things we wouldn't necessarily know (tax optimization, as one example)
4. Provides a seamless transition for DH if something happens to me. He would definitely need an FA without me.
5. Provides additional peace of mind for me as well as allows me to focus the time I used to spend on portfolio management elsewhere.

So far, our FA's performance has been close to market returns net of fees. I don't expect them to beat market returns net of fees. Someday, we may decide to go back to DIY, but so far we've been happy with the relationship.

When I did DIY, I used Fidelity. I like their website much better than Vanguard, and I believe their personalized service is better too. Vanguard's fees are ultra low for a reason. They don't provide much in the way of service. Note that you can still hold Vanguard funds within a Fidelity account.

I don't think there is anything wrong with DIY for those who feel comfortable with that. I also don't think there is anything wrong with having an FA who is also a fiduciary. Just depends on your comfort level and whether you are a DIY person in general. I tend to be a "hire a professional" person whether that be an FA, a doctor, an auto mechanic, a plumber, a housekeeper, etc. YMMV

[DrRoy]

Quote:

Originally Posted by CoolRich59 I spent some time this afternoon opening an account with Vanguard. Once the account is funded and set up, I will be parting ways with the financial advisor and transferring my accounts to Vanguard. Before, I didn't have the knowledge and didn't want to spend the time. Now, while I still don't have the knowledge, I'm willing to get educated if it means doing away with the advisor's fees and so be able to keep and invest more $$.

Good choice. Well done.

Quote:

Originally Posted by RobbieB Just got my ML statement. I am up 17.9% YTD. I looked up the S&P 500 and it is up 15.5% YTD. So net of fees (fees already deducted) my stock traders are up 2.4% compared to the "500 index"

I had a ML guy for a several years. He ran half of my $ and I ran half. I did better than he did (before fees) so I fired him.

[LiveBelowMeans]

I would suggest if you have to use a financial advisor, you choose a large company who wouldn't want to damage their reputation. I you use a small firm and they take off with your money ie Madoff, your screwed. If you use a large company such as schwab, fidelity, vanguard, they have a lot more to lose if one of their fa takes off with your money. You would likely get restitution. I know of a couple of people who have been swindled out of money at "small firms". JMHO

[Ready]

OP:

Lots of good comments already, so I"ll just summarize the few things that stand out from the posts so far:

1) Looking at 2 years of performance from an FA is pointless. As others have stated, anyone can get lucky for a couple of years. No FA can guarantee you that they will beat the market.

2) What is guaranteed by using an FA is that you will be paying a lot of fees. Whether this will work out is something you won't know until you look back after many years of returns, which of course will by then be too late.

3) Investing in index funds will yield market returns, but you are guaranteed not to pay high fees in doing so. This is the only thing you can really control about your investments. The rest is up to the fate of the market. But since you do have the ability to control fees, why wouldn't you?