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Fees! Fees! Thoughts for me...
Old 11-24-2017, 03:55 PM   #1
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Fees! Fees! Thoughts for me...

So itís been one year with Fidelityís Professionally Managed Services. My one year return is 14.8 on managing just my 401k. Looking at my fees, I am being whacked about .88 mgt fees and with fund fees totals at 1.04%. Could have gone alone with one or a group of Vanguards Lifestyle funds and done much better and saved the mgt fees.

Should I drop these guys Monday?

I am 62.5 what funds would you suggest? Being fairly conservative at this stage of my life.
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Old 11-24-2017, 04:09 PM   #2
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Originally Posted by Floridatennisplayer View Post
So it’s been one year with Fidelity’s Professionally Managed Services. My one year return is 14.8 on managing just my 401k. Looking at my fees, I am being whacked about .88 mgt fees and with fund fees totals at 1.04%. Could have gone alone with one or a group of Vanguards Lifestyle funds and done much better and saved the mgt fees.

Should I drop these guys Monday?

I am 62.5 what funds would you suggest? Being fairly conservative at this stage of my life.
You could just go with a Lifestyle or a Target fund. Or 50/50 Wellesley and Wellington.
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Old 11-24-2017, 04:23 PM   #3
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So you have discovered that you can do just as good, if not better, by just using low-cost index-type funds. Or as suggested the target date funds to get your blended allocation taken care of. There are several good Fidelity blended funds, such as the Balanced Fund (FBALX), or Puritan Fund (FPURX) that you could use and get rid of your advisor fees, as example.
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Old 11-24-2017, 04:53 PM   #4
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Originally Posted by Floridatennisplayer View Post
So it’s been one year with Fidelity’s Professionally Managed Services. My one year return is 14.8 on managing just my 401k. Looking at my fees, I am being whacked about .88 mgt fees and with fund fees totals at 1.04%. Could have gone alone with one or a group of Vanguards Lifestyle funds and done much better and saved the mgt fees.

Should I drop these guys Monday?

I am 62.5 what funds would you suggest? Being fairly conservative at this stage of my life.
If you got 14.8% after those costs, your portfolio would not qualify as conservative in my book.

I have a 48(stocks)/48(bonds)/4(cash) and am up about 11.9% for the year with low cost funds and no FA expense. You need to qualify what conservative means to you. Can you afford to lose 24% in a downturn? That is what I could expect from an 2008 scenario on my portfolio.

I can suggest some Vanguard funds or Fidelity once I know your stock to fixed income mix.

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Old 11-24-2017, 04:57 PM   #5
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If you got 14.8% after those costs, your portfolio would not qualify as conservative in my book.

I have a 48(stocks)/48(bonds)/4(cash) and am up about 11% for the year with low cost funds and no FA expense. You need to qualify what conservative means to you. Can you afford to lose 24% in a downturn? That is what I could expect from an 2008 scenario on my portfolio.

I can suggest some Vanguard funds or Fidelity once I know your stock to fixed income mix.

VW
Very good points... it is important to be aware of portfolio risk (even if you do not intend to sell when the turbulence hits). It takes iron stomach to sit on paper losses when you are retired....with no meaningful earned income.
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Old 11-24-2017, 05:08 PM   #6
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If you got 14.8% after those costs, your portfolio would not qualify as conservative in my book. ...
That's my impression also. This site (choose 1 year in the scroll bar) shows ~ 20% total return for Total Stock Market (VYT), and ~ 4% for BND, and those have ~ 0.05% ER. So if we add back the ~ 1% added fees, your portfilio would bneed to return ~ 15.8%

PerfCharts | Free Charts | StockCharts.com

To match ~ 15.8%, the blend would be ~ 75/25. Nothing wrong with that, but most would not consider it conservative.

Up to you, but the advantage of individual stock and bond index funds/ETFs are that you will have more control of taxes, and the blended funds might need to kick off some cap gain distributions from time to time. By keeping them separate, you have max control over this, and in changing your AA if you ever decide to do that.

So once you've chosen an AA, is there anything the ongoing management from Fidelity offers you that might make them attractive? You could always seek out a by-the-hour fiduciary if something came up that you needed help on that this forum could answer. Probably far cheaper in the long run?

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Old 11-24-2017, 05:13 PM   #7
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So itís been one year with Fidelityís Professionally Managed Services. My one year return is 14.8 on managing just my 401k. Looking at my fees, I am being whacked about .88 mgt fees and with fund fees totals at 1.04%. Could have gone alone with one or a group of Vanguards Lifestyle funds and done much better and saved the mgt fees.

Should I drop these guys Monday?

I am 62.5 what funds would you suggest? Being fairly conservative at this stage of my life.
Not necessarily.

That's a comparable return to my 70/30 portfolio, so if your AA is more conservative, these guys may be doing you some good.

That you "could have done better" is curious - how did you do with the money that's not with Fidelity's PMS? Did not see you compare that to Fidelity's results.

Asking randos on the internet for fund recommendations is a sign.....
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Old 11-24-2017, 06:05 PM   #8
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Not necessarily.

That's a comparable return to my 70/30 portfolio, so if your AA is more conservative, these guys may be doing you some good.

That you "could have done better" is curious - how did you do with the money that's not with Fidelity's PMS? Did not see you compare that to Fidelity's results.

Asking randos on the internet for fund recommendations is a sign.....
Asset Allocation will answer the question, but I am not sure it is known.

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Old 11-24-2017, 06:49 PM   #9
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Not necessarily.

That's a comparable return to my 70/30 portfolio, so if your AA is more conservative, these guys may be doing you some good.

That you "could have done better" is curious - how did you do with the money that's not with Fidelity's PMS? Did not see you compare that to Fidelity's results.

Asking randos on the internet for fund recommendations is a sign.....
Don't want OP to think I'm "a Richard" and working you over on this.

You had reasons for going with Fidelity PMS. Are they still valid? Has your knowledge, comfort with decision-making or the complexity of your finances changed? I think any movement in any of those could affect your stay/go decision.

After taking in the stories at the ER Pub about how "easy it is to DIY" and how "FA expenses over time will deprive your heirs of potential millions", it's easy to lose sight of the basic (IMO) questions - What return do you need from your assets to support your goals? Assuming assets are sufficient, what is the easiest way to get there?

Personally, I've done it both ways, and am happy with my RIA and willing to pay mgmt and fund fees <1.0% at this point. One of the benefits of busting it, saving and investing for decades is that I can pay for things I once had to do on my own. Don't do my own taxes anymore, don't cut my lawn either (and taking that back in-house is an easy "10-bagger" ).

I believe one of the best aspects of being in our position is we have more choices than we once did. Great place to be
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Old 11-24-2017, 09:08 PM   #10
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Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
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Old 11-24-2017, 09:31 PM   #11
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Originally Posted by Floridatennisplayer View Post
Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
For that same period, my 70/30 did 15.30% net of fees, although it did float up a few points before trimming it back in July (moved up to 72% equity since then, which may account for some of the difference). You're at 64/29.5/6.5-ish, .

Some other rando may give you the VGD index comparison. Pretty close to me, adjusted for allocation, and there may be differences in discrete asset class performance that account for the difference.

Back to my most recent questions - what has changed for you from when you made the decision a year ago? Seems like you're doing pretty well.

Other than the ER Pub chatter, is it meeting your goals? Happy with the time you spend on it? Getting you where you want to go?
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Old 11-24-2017, 09:38 PM   #12
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For that same period, my 70/30 did 15.30% net of fees, although it did float up a few points before trimming it back in July (moved up to 72% equity since then, which may account for some of the difference). You're at 64/29.5/6.5-ish, .

Some other rando may give you the VGD index comparison. Pretty close to me, adjusted for allocation, and there may be differences in discrete asset class performance that account for the difference.

Back to my most recent questions - what has changed for you from when you made the decision a year ago? Seems like you're doing pretty well.

Other than the ER Pub chatter, is it meeting your goals? Happy with the time you spend on it? Getting you where you want to go?
I am pleased. I spend zero time thinking about it. Today on my call was the first time I looked at the fees. Listening to the posts here made me wonder if I am wasting money.
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Old 11-24-2017, 10:18 PM   #13
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Originally Posted by Floridatennisplayer View Post
Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
Was curious, with these numbers plugged in at this link:

It reports ~ 15.4% return over that time. So if that is a portfolio balance you are happy with (I guess you should be, it's is what you are in!), that seems fine, and I see no reason to change it. So you could let something like that roll, and it should take very little attention (could rebalance once a year if you want, no biggie either way from the studies I've read). And at least in this time frame, that beat your numbers. I'm sure it would bounce around in some cases, but I'd expect better performance over the long run without the drag of fees.

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Old 11-24-2017, 11:54 PM   #14
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I am pleased. I spend zero time thinking about it. Today on my call was the first time I looked at the fees. Listening to the posts here made me wonder if I am wasting money.
Neither you or I are investing in the absolute lowest cost manner and we're leaving some return on the table.

If the returns you're getting are meeting your goals, why make the change?

What I'm doing is working for me, and if at some point it stops working, I'll make a change. The next downturn/bear market will be revealing.

In the meantime, I'm going to raise my kids, hang out with the GF, pay for someone else cut my lawn, pay to have my taxes done, and do my best to ignore those at the ER Pub who want to tell me how "easy" it would be to manage it myself if I would only follow their advice.
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Old 11-25-2017, 05:51 AM   #15
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Use this calculator to see the impact of fees: Investment Fee Calculator - See How Fees Reduce Your Returns
It's the compounding effect over time that really matters.
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Old 11-25-2017, 06:52 AM   #16
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Originally Posted by Floridatennisplayer View Post
Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
I am curious about how the advisor achieved the AA. Did they buy a bunch of individual stocks that need to be tweaked (thus locking in the need for the FA)? Or is it composed of mutual funds or ETFs that can easily be matched by you going forward?
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Old 11-25-2017, 11:39 AM   #17
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Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
Comparing any 2 portfolios will not be apples-to-apples, but my portfolio is pretty similar: 62/38, I use index funds for the vast majority, although I tilt to small-value.

My return YTD is 14.6%. I suggest you do it yourself, if you're going to follow a boglehead type portfolio.
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Old 11-25-2017, 11:40 AM   #18
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If the returns you're getting are meeting your goals, why make the change?
Because over time, paying somebody 1-2% every year adds up.
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Old 11-25-2017, 01:12 PM   #19
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I had PMS when I first inherited accounts from my dad. He'd been in very poor health for the last decade of his life and really never understood how to invest anyway, so he had been using Fido's professional management. I went along with it for around 6-ish months while I got up to speed on how to invest (and discovered index investing and all that fun stuff).

I stayed with Fido, but I took over my accounts once I got my asset allocation figured out. They had me in something like 30+ different funds, and they were constantly buying and selling in lots of hundreds or maybe a few thousands each month. Once I noticed this, it pissed me off but they really enjoy micro-rebalancing in PMS (which is borderline churning). The constant buy/sell wasn't generating huge fees since most of the PMS funds were proprietary (you will not be able to hold them if you choose to self manage) but it was annoying and pointless to rebalance each month and I honestly think it was just their attempts to look busy and show they were "providing value" by trading constantly.

So based off my own experience, yes, you should fire them and simplify as soon as you get your own AA figured out.

I promise you can make a perfectly decent portfolio using just 2-5 funds to fit any asset allocation and pay well under 0.25% even using Fidelity's fund families. They have a pretty fantastic assortment of index funds and even managed funds that aren't super high ERs. Unless you have issues with checking in on your portfolio a few times a year and doing very basic math - there is no need to continue paying the professional management costs. (I could see them being useful for sickness or inability to grasp basic math and investing principles).

https://www.bogleheads.org/wiki/Fidelity
^use this to figure out what funds fit your AA

I have a 85/15 stock/bond allocation (tiny bit of cash in a savings account I lump into the 15%)

I hold three funds* across my entire portfolio:

Fidelity Total Market Index Fund (FSTVX)
Fidelity U.S. Bond Index Fund (FSITX)
Fidelity Real Estate Index Fund (FSRVX)

The Real Estate fund isn't even necessary but I have it just to say I have a small amount in property since I don't want to hold physical property or be a landlord.


*in the interest of being completely honest, I do have a tiny amount (under 1%) in a growth fund that was a leftover of my pre-index investing days. I consider it my gambling fund and do not invest any new money into it, but I still enjoy watching it bounce up and down crazily.
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Old 11-25-2017, 01:24 PM   #20
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Ok here are my positions:

44.05% Domestic stock
29.47% Bonds
20.06% Foreign stock
6.42% Short term

Rate of return 11/1/16 through 10/31/17 less fees: 14.44%
18.86% VTTHX Vanguard Target Retirement 2035 has 79% stocks
17.05% VTHRX Vanguard Target Retirement 2030 has 71% stocks
15.26% VTTVX Vanguard Target Retirement 2025 has 64% stocks
14.14% VSMGX Vanguard LifeStratey Moderate Growth has 60% stocks
Numbers from morningstar.com for same time period 11/1/16 through 10/31/17 and less fees, too.

You could have done nothing and made about 1% more.
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