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Old 01-14-2017, 10:51 AM   #21
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Don't see why OP couldn't just get the money gradually redirected in a wealth mgmt company like Betterment or Wealthfront and be done with it. Or even simpler just use Fido or Vanguard's services. You can still claim that it's an FA doing it and not you.
+1

Vanguard PAS costs .3%, low ER funds and a CFP is doing the work. IME Fidelity charges much more.
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Old 01-14-2017, 11:39 AM   #22
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OP may benefit by getting involved in small skirmish rather than large battle.
If there is an insurance settlement, start with that amount.
"I've examined your investments and they are doing well. However, I know that we can trim expenses another 1% and get that working for you. Here is a plan that was given to me for this $100K by Vanguard. There are no fees, and in a year or two we'll have enough info to compare Uncle Johnny's company to a lower cost alternative."
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Old 01-14-2017, 12:33 PM   #23
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Your FA family member probably believes that they are doing a good job and so has no misgivings about getting paid. This is always the case with FAs that set up actively managed portfolios......they believe in what they are doing and have an infinite number of ways to ignore the true performance.

Your mother is key hear and you need to convince her that there is a better way to manage her money. If she agrees don't spare the FA family member's feelings. Be straight forward and come up with an efficient plan to move everything to somewhere like Vanguard.
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Old 01-14-2017, 01:18 PM   #24
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Besides the fees of the various mutual funds, read though the annual report and see what the management fees are that are being charged.

I did that for a relative, and found besides being in about 30 funds/etc, the FA company was charging $2,000 per year, so the actual cost for a $100K investment was close to $3,000 per year. He agreed to switch to Vanguard.
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Old 01-16-2017, 01:51 AM   #25
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As I have previously posted, my mother is coming into a lump sum life insurance payment on my father. With my father gone, I now can see what my parent's broker has been investing their money in. Besides the 40(!) individual stocks which no way she should be in all of them, I am just trying to evaluate the mutual funds that he has them in. All are managed funds, of course. They are generating decent yields, but I Have to believe on principle that these are almost certainly doing nothing special that can't be done cheaper.
The frustration I have is how far these companies and most of the finance websites bury the expense ratio information. You almost might think they don't want people to easily know what they are paying for the "privelege" of owning these funds. Of those I can find they all charge over 1% expense ratios. Trying to figure a cheaper alternative is a bit confusing as they do seem to be designed for income production. But yields are only given for the year. Whereas price performance can be compared over many years.
Anybody have a suggestion as to how to evaluate and replace these?
Right now I am looking at some money in an MLP, from Kayne Anderson, for which I Do not see any expenses. Do You suppose they provide it at no cost, out of the goodness of their hearts? Then there is the Calamos Strategic Total Return Fund, Royce MicroCap Trust, Royce Value Trust Income fund and Templeton Emerging markets Income fund, DNP Select Income Fund....

I don't think anyone has stated this explicitly yet, although Brewer mentioned the leverage. Anyway, these funds you list are all Closed End Funds. They are going to have a much higher ER than an index fund, but that's not really a good comparison. A CEF is basically like buying stock in a small-cap investment company.

So for comparison, how do the fees on what a small REIT company spends to run their business for example, compare to the ER on an index fund? I don't know but I bet it would look very high when compared to the ER on an index fund.

Anyway, you'd need to know what kind of a discount/premium the FA paid for these to know if it was a good deal or not. I have purchased some CEFs at a 15% discount before which goes a long way towards offsetting ER.

CEF's throw off a lot of income because the assets are fixed (CEFs raise money at an IPO just like a company and then shares trade on the stock exchange, they do not have constant fund flows like an open ended mutual fund), which allows the CEF to then use leverage and also buy illiquid investments. Most CEFs are invested in fixed income.

Can you replicate this on your own? Not really.

You are not going to be able to borrow at the cheap rates they can. Also most people are not going to use even the basic options strategies to increase returns (like covered calls), which most CEFs will do.

I personally use CEFs along with various ETFs and even sometimes individual stocks. Most people on financial boards are 100% bogleheads and will not consider anything else. To each his own, more than one road to Rome, and all that.
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Old 01-16-2017, 08:12 AM   #26
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...CEF...use leverage and also buy illiquid investments. Most CEFs are invested in fixed income.

Can you replicate this on your own? Not really.

... To each his own, more than one road to Rome, and all that.
But what this means is the road is riskier...it generates yield like fixed income but if interest rates rise, good bye yield. And drop in NAV too. So it trades like a stock and carries the interest rate risk of a bond. I don't know why my mother should be in this when there are less riky alternatives.
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Old 01-16-2017, 02:08 PM   #27
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But what this means is the road is riskier...it generates yield like fixed income but if interest rates rise, good bye yield. And drop in NAV too. So it trades like a stock and carries the interest rate risk of a bond. I don't know why my mother should be in this when there are less riky alternatives.
You should definitely get rid of them if you are uncomfortable with them.

Most people that buy CEFs buy them for the income and would not sell them unless they started to trade a very high premium to NAV. They are relatively illiquid which is why they often trade at a discount.

The FA probably bought them to generate consistent income, which they are very good for. As for interest rates, the CEF is not forced to buy and sell assets like an open ended fund. So I don't view gradual inflation as a problem. I also believe that the most likely scenario for the US is a stagnant economy similar to Japan ( (1)affects of baby boomer retirement have been postponed temporarily due to people chosing to delay retirement, (2) globalization is deflationary and will continue despite political changes, (3) extremely deflationary, wage destroying, technology is on its way via AI and robotics).

Anyway, you shouldn't have any trouble selling those CEFs.
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Old 01-16-2017, 02:30 PM   #28
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http://www.cefconnect.com/?utm_source=bing&utm_term=cefconnect&utm_campaign= CEF+-+CEF+Connect+-+Exact&utm_medium=cpc&utm_content=L3BPXqbo%7Cpcrid %7C5354502263%7Cpkw%7Ccefconnect%7Cpmt%7Cbe%7Cpdv% 7Cm%7C

CEFCONNECT, what I tried to link above, is a good site for evaluating Closed End Funds.

Discounts to NAV are pretty low in general right now, so probably now is a decent time to sell.
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Old 01-16-2017, 04:21 PM   #29
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Since the individual stocks are not subject to fees, and you said much of it was invested for dividends, I'll check the expected yield on the stocks, and leave everything that's not wildly out of place in the portfolio.

I might find one or two funds with the largest values, pick a suitable replacement choice, multiply-out the difference in annual costs (generating a dollar figure) and suggest a swap. But the owner would have to say "yes, please help me get out of the expensive fund and into the cheaper fund", or I'd not do it.
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Old 01-16-2017, 04:30 PM   #30
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After the OP figures out what the fees are, I'm thinking his conversation with Mom goes like this:

Mom: I like Uncle Bobby handling my money.
OP: But Uncle Bobby charges fees. You can make the same amount of money and not have to pay fees.
Mom: But if I make the same amount of money, it's okay with me if Uncle Bobby gets to keep the fees. He deserves it.
OP: <no answer>
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Old 01-16-2017, 06:23 PM   #31
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Are these jointly owned or were they in your father's name? If in your father's name, and in a taxable account, they will have a step up in basis which makes it very easy to move out of them if you do it soon.

I feel for you. I'm in a similar situation with my mother in law. Her husband put a bit of money into high expense ratio funds that I'd like to get her out of. However, figuring out the cost basis is going to be a real pain because he didn't keep the right records for 30 years, she doesn't need the money, and she's 91. I've not pushed it. The little bit of extra return we'll get over her expected life isn't worth the worry we'd cause her if we pushed her to change anything. I'd take different action if she was 10 years younger though.
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Old 01-16-2017, 10:01 PM   #32
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After the OP figures out what the fees are, I'm thinking his conversation with Mom goes like this:

Mom: I like Uncle Bobby handling my money.
OP: But Uncle Bobby charges fees. You can make the same amount of money and not have to pay fees.
Mom: But if I make the same amount of money, it's okay with me if Uncle Bobby gets to keep the fees. He deserves it.
OP: <no answer>

More like-
Me: OP: But Uncle Bobby charges fees. You can make the same amount of money and not have to pay fees. Which means You have MORE of your own money if you did not have to pay fees which are just going into his pockets instead of yours.

mom: wtf? That thieving b@$t@rd! ( not really, mom has mild dementia and will be fine with anything...it's the rest of the family that have to be dealt with)
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Old 01-17-2017, 12:21 PM   #33
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More like-
Me: OP: But Uncle Bobby charges fees. You can make the same amount of money and not have to pay fees. Which means You have MORE of your own money if you did not have to pay fees which are just going into his pockets instead of yours.

mom: wtf? That thieving b@$t@rd! ( not really, mom has mild dementia and will be fine with anything...it's the rest of the family that have to be dealt with)
I know, wouldn't that be nice if Mom got it right away? I just imagine my dear late MIL (six figures with Edward Jones in her golden years, and that wasn't even a relative) feeling bad for poor Uncle Bobby who is always so nice and works hard for those fees.... Good luck with the rest of the family!
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