Help me refine my message to my advisor

[Foghorn Leghorn]

Oh, so he still sends you Christmas and birthday cards?

No, but he did give me really good bottled water, coffee and a snazzy folder for the pretty spread sheets at our yearly meetings at his office

He's an old friend and he manages my parents money ( they love him and I'd never talk them into leaving) I was much gentler on him than I woulda been on a random person on my way out the door. Never blame a wolf for being a wolf

 

[pc95]

Hello all - I posted my hello/details here (wow, more than a year ago), and things have changed! My spouse and I have started what we're calling our "sabbatical" for at least a year while we figure out if we're really the big R. My severance ended in July, spouse quit their untenable job in October, and since then we've been feeling what it's like to not have a corporate teat.

We're now on ACA within our planned budget, and getting a subsidy in 2022. Our spending in 2021 is pretty much as planned, and we have contingencies in place for lumpy expenses.

My main question is around a plan that our long-term, trusted advisor is proposing to us next week (when they retires, we'll be DIY after that). We've talked in the past about how we don't want to: buy into any new 'products' with a >~.75% fee, to avoid single stock risks/we'd rather do ETFs, and how we've been learning more about a boglehead / 3 fund strategy. Instead, they sent over a fact sheet for "Natixis Risk-Efficient Portfolios". Sad trombone.

Long story short, their plan has fees that I'm unwilling to pay (2.8-2.4%?). But I need help with bullet points/questions to stay on target in next week's conversation, so wanted to get this smart group's minds involved first.

1. How do we navigate what he's proposing with a more lean approach?
2. Has anyone have an opinion on or bought anything from Nataxis? I see some corporate stuff online, and a lawsuit where they are accused of self dealing their funds against fiduciary interests - is that as bad as I'm thinking it sounds?
3. How do we navigate from what he's proposing to a more lean/set it and forget it approach?

Thanks to any thoughts and direction you can provide to help us out

2.4%+ is quite poor - stay away. I had OptionsExpress which became Schwab. Do-it-Yourself. 0.75% is even too much. I like under 0.4%
Buy a basket of Schwab, Vanguard, or Fidelity ETFs.

By-the-way you state in earlier post you're in a Moderate Cost of Living area; spending at $100,000/yr seems on the high side. If you're taking into account Healthcare, maybe ok.

 

[OldShooter]

OP hasn't been here for almost a week. Certainly he has made his decision by now.

 

[Closet_Gamer]

Wow. Robbery.

Seriously.

At some point that should be illegal.

 

[ERD50]

Originally Posted by RobbieB View Post
Yes, you guys have told me over and over that it's just impossible. ...

Just to be clear, I have never said it is impossible. Long streaks occur but are statistically rare. The rarest of luck, though, is to have invested with a stock picker who ends up being a lucky one. Assuming you are comparing on a total return basis and your guy is winning, congratulations.

+1 to OldShooter.

RobbieB, you've got your guys, and you're happy. That's fine. But then you go and spoil it by putting Red Herring words in our mouths. Please don't do that.

None of the usual suspects that spell out the data on FA performance have ever said it is impossible to beat the market. Especially not 'over and over'. In fact, the data shows that ~ 15% do beat it over a 5 year period. And maybe ~15% of those (or less?) manage to do it for another 5 years (~ 2%). So some people will find some winners from time to time. That not only is not impossible, it's predicted that it will happen for some.

We'll never know if you just got lucky with these guys, or they are something special. But I'd estimate that based on the number of posters here who have determined that their FA underperforms, I'd say that 2% figure is about right, maybe generous. You are in a pretty unique situation, and more importantly for others, how would they ever duplicate your rare situation? The odds are very high that they are going to find the underperformers.

That's where the rubber meets the road.

-ERD50

 

[Sunnymar]

Thanks for all the thoughtful responses. It's funny how I thought I was asking one question, but you all answered the question at the back of my mind instead. I don't think we're ready to dump him yet, but I'm trying to figure out our plan to get there . FA has done a great job getting two uninvolved investors ready to retire at 50ish, so we feel like we have some loyalty to work through before we move on.

Your problem is right there. He was paid for his "great job". Loyalty (emotions) shouldn't drive a business decision.

 

[CRLLS]

In support of "some" manage to beat the market, Consider Peter Lynch who managed the Magellan find. Over his 13-year reign. From investopedia:

An investor who put $1,000 into the fund the day Lynch took over would have had $28,000 the day he left. Under his management, the fund returned an average of 29 percent per year and outperformed the S&P 500 for all but two years. Many investors commonly point to Lynch as an example that active management can achieve superior results relative to the benchmark.

He wasn't just lucky for those 13 years. Would he have continued beating the market indefinitely? He retired at the top of his career. Those who stayed in Magellan afterwards found a below average return.

There must have been any number of investment managers at the first 5 years of Lynch's career that also did well too. What are the odds that an individual would have chosen Lynch over them back then? I would say, Luck of the draw.

 

[LeeLee2021]

hello all - OP here - and the meeting happened. The FA explained the fees I read weren't accurate and we'd pay 0% on that particular investment option. But then we started into an AUM discussion (before we have paid annual planning fees) which will be continuing in the coming weeks.

Yes, we hear everyone loud and clear that we don't owe the FA any loyalty, and yes we can self-manage to lower fees (while being thoughtful of tax consequences). We have made our position clear to the FA that excessive fees won't be tolerated, and will listen to his proposals in our upcoming meetings to see if he can get fees to a reasonable point. If FA cannot meet our fee limits, we will then start to plan our alternatives and timing, whether that's using him in the future by the hour, self-managing only, or moving to some management options with Vanguard or Fidelity, which could likely be enough $ to have options.

Thank you all for your opinions! We appreciate all the helpful feedback and encouragement.

 

[OldShooter]

Thanks for the report, @LeeLee2021. I'm curious (none of my business of course) what your number is for "reasonable" fees and whether that is just the FA fees or also the expense ratios aka fees in the mutual funds he's pitching.

 

[LeeLee2021]

Thanks for the report, @LeeLee2021. I'm curious (none of my business of course) what your number is for "reasonable" fees and whether that is just the FA fees or also the expense ratios aka fees in the mutual funds he's pitching.

I'm not totally sure my spouse and I are on the same page there. I personally want ~.5%, but I suspect my spouse will say 1% or less is OK. From quickly looking at existing accounts at Vanguard and Fidelity, it seems like using those FA guided options could be in the ~.3% range.

Also, when FA mentioned AUM he did mention that that is separate from some product's fees, which would be in addition to that AUM. So we'll be vigilant from here fwd to make sure we're not setting ourselves up again.

So we shall see! FA is on the hook to propose what he will, and then we'll go from there. Viva la 2022