Hiring an Adviser or not, totally confused ?

[suchda]

Dear Forum Members

I've posted similar thread earlier. After receiving different opinions, I'm totally confused whether it is worth to hire a Vanguard Personal service advisor with an expense of .30%. I need your help, please.

I've been investing in Vanguard since 2005. From the beginning, with my zero knowledge in investing, I started put as much money as possible into my Vanguard retirement and non-retirement funds. As a result of it, at my age of 55, I have an asset of 2.5 mln at my vanguard account with a 65/35 . My assets allocation is as follows:

Retirement funds ( IRA, Rollover IRA, SEP-IRA ) : 1.5 mln. with 50/50 of stock and bonds.
Stocks: Domestic 67%, international 37%
Bonds: 100% Taxable Bonds.

Non-Retirement account: 1 mln. with 86/12 in Stock/Bond and 2% in short term reserve.
Stocks: 82% US and 18% International
Bonds: 99% Municipal and 1% Taxable.

Mostly all my assets are in 4 Vanguard Index Funds: Total Stock Market Admiral, Total International Stock Market Admiral, Total Bond Market Admiral, Total International Bond Market Admiral. Few money are for High Yield Tax exempt, NY State Tax exempt, US Growth Index Admiral etc.

Now, I found that Vanguard changed their policy and I don't get a dedicated Flagship advisor with whom I used to talk and get some advice regarding my asset allocation. Recently, I noticed that they want me to enroll with Vanguard Personal advisory services with a charge of .30%.

At this stage, I really like to get all your input regarding this matter as Vanguard is pushing me to get this services as there is no dedicated Flagship Service representative anymore from Vanguard.

So, my questions are to you ALL ;

1. Is it worth to get Personal Advisory Services from Vanguard ?

Last time, one advisor told me that I don't have any assets in ETF, so he can put some money into ETF and get some relief with expenses and Taxes.
By looking at my portfolio, do you have any suggestion regarding my asset allocation.

Thank you All.

 

[Another Reader]

The Personal Advisory service is a waste of money. Nothing "personal" about it. In your shoes, I would dump Vanguard and move all the money to Fidelity. You will get more personal attention. You can keep the same funds. Just buy the equivalent Vanguard ETF's with new money (no commission) or buy the Fidelity versions.

$2.5M should earn you better service...

 

[OldShooter]

What problem are you trying to solve? Your strategy looks reasonable and your assets are far above the average 55YO. Read "The Bogleheads' Guide to Investing" and realize that you probably don't need to pay $7,500 for advice. Probably you don't need any advice at all.

If you really want someone to talk to, I'm 99% sure that you will get assigned an advisor at no cost if you move your assets to Fido or Schwab. Our Schwab guy is there for advice and help with administrivia. He is not allowed to advise buying or selling specific products. His compensation is based on keeping his book of bigger clients happy plus on bringing assets to Schwab. I don't know about Fido but you could ask there too. If you go that direction, tell both branch managers what you want from an advisor (age, sex, experience, interests, whatever ...) and that you'd like to interview at least two candidates. The person is probably more important than the name over the door.

 

[MRG]

PAS is great for someone with no experience. You're doing exactly what they do as far as assets.

I have funds at both Vanguard and Fidelity only to have two separate entities for redundancy. Having over a million in Fidelity doesn't do anything for me I can call an 800 number. I used to have a dedicated advisor until I said no to a crappy annuity salesman.

I know there's a lot of Fidelity love on this site, no longer a fan.

 

[RunningBum]

I always thought the Flagship rep was to be your first point of contact for any questions or issues. I guess I never tried, but I didn't think they were there to give advice. Maybe it was different for you, or the flagship advisor put you in touch with a portfolio advisor.

At Vanguard, I believe ETFs have the same expense ratio as tax ramifications as admiral index funds. If they were talking about non-VG funds, I think there may be some tax advantages on distributions, as well as slightly lower expenses. Generally speaking, there's no magic with ETFs.

Overall you seem to have a pretty solid plan. Whether the municipal bonds make sense for you depends on your tax rate. They don't for me so I keep them all in my tIRA and Roth, as per the Bogleheads fund placement recommendations. https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

I also keep all of my internationals in taxable, so I can take advantage of the foreign tax credit. In your retirement accounts, the foreign taxes are still paid by the fund, and you have no chance to recapture any of it at tax filing time.

Are you still working? If you've ER'd, have you given thought to doing Roth conversions on your tax deferred money, to smooth out the taxes you'll hit at RMD+SS time? I'm not sure if VG even gives this kind of advice.

One option is to use the portfolio advisor for one year, make sure you understand the strategy, and then drop it and keep your portfolio in line with their strategy. If you've already been getting that advice previously, maybe you know enough to do that know. If you have a change in your life situation, you could always restart it.

0.3% is a better rate than most places, but on 2.5M that's still $7,500. Are you getting your money's worth, or can you manage it yourself and pocket those fees.

 

[Mykle57]

"...with my zero knowledge in investing, I started put as much money as possible into my Vanguard retirement and non-retirement funds"

That already makes you smarter than two-thirds of people.

"...at my age of 55, I have an asset of 2.5 mln"

Imo, that puts you well into the 90th percentile.

...with an 65/35 assets allocation"

And the fact that you know that, means you should be charging for your advice instead of paying for theirs.

 

[Markola]

Some comments above are wrong. DW and I have $1.7M managed by Vanguard PAS and we have an assigned advisor we speak with regularly, as does anyone with $500K + invested with the program. We have not been informed of any changes pending.

Is .30 worth it?

Yes, if, like me, you find a lot of financial peace having a highly knowledgeable third party to hop on the phone with together when you need to make major financial decisions, like remodeling the house. You also trust that Vanguard PAS will only recommend simple Vanguard products (index funds in our case.)

If you and your spouse always see eye to eye happily on your spending desires and decisions, then no, you don’t need a neutral and knowledgeable 3rd party to supply evidence or recommend plan adjustments according to things that come up that you want to fund.

Yes, if, like me, you take comfort in the knowledge that your spouse has a knowledgeable expert to turn to in the event of your incapacitation or worse.

Maybe not if your spouse is equally ready as you to take charge of finances on your demise.

Yes, if, like me, you find the spending phase of FIRE entirely different than the accumulation phase, mentally and emotionally, causing you to doubt your self-designed plan, thus fiddling with it too much based on the last thing you read which contradicts the prior thing you were so certain of, thus losing money. Rather than DIY stress, you take comfort in relying on Vanguard’s proprietary, Monte Carlo-based software, which has cost them millions to develop and which tells you exactly how much you can spend sustainably this year and next, etc, within a very manageable adjustment band from year to year. In fact, you are delighted that, based on your individual situation, you can spend a heck of a lot more than some one-size-fits-all 4% Rule with 98% confidence you’ll never run out of money, and that you can retire far earlier than a 4% Rule allows.

Yes, if, like me you understand investments enough to have made yourself a millionaire, as you have, but you notice a lot of other millionaires timing the market and doing other demonstrably foolish things and you know that Not Making Mistakes is at least equally as important as Maximizing Returns, thus making .30 for mistake-prevention insurance well worth it TO YOU.

No, it’s not worth it if you and your family want to do it all yourself with no help.

 

[ukwildcat]

I have an independent financial advisor. We use Schwab, primarily Vanguard or Schwab index funds ETF. I like using a financial advisor. He keeps me from doing something stupid and on track for investing success. 60% equities, 30% bonds, 10% gold. No investor needs a financial advisor, until the stock market drops 30% like 2008 time period. My wife has no interest in investing. if I predecease her, she will need solid investment advice. I have been with same independent financial advisor for 14 years. Very satisfied. Advisor expense is 75 basis points (.075%) assests under management. I sleep very well at night. Peace of mind is very important to me.

 

[Starsky]

You have a nice portfolio. It seems common for financial companies to do this because of the recently aborted fiduciary rules. J.P. Morgan/Chase did the same thing when that happened and tried to get us to sign up for an advisory service. We get much less free advice from them than when we started. You just have to know what questions to ask. Getting the names and varying returns of their CD funds for holding cash and getting interest, is almost impossible. It's a complete cluster. Fidelity and Vanguard [and e-Trade] have much better market information.

Regarding advisors: I long-ago bailed on Fidelity advisors after one year, when they couldn't get me a return that exceeded the bond return for the year. I didn't feel the 'personal' service. Instead, they would try to figure out your risk profile to match you with one of their existing investment strategies/buckets. Maybe Vanguard is better - I doubt it.

My biggest problem with all these advisors is that we have built a portfolio of different assets - including property - that opens us up to many more types of long-term investment strategies. There are many other opportunities that high-net-worth investors use to make good returns and spread the risk - and that most importantly account for the tax, timing and cash flow consequences to the retired investor. (i.e. minimizing/deferring taxes, ACA subsidies, etc.)

At this stage, I feel like we are beyond just picking stocks, funds and ETFs now, and we need broader strategies that smartly leverage what we have built through our retirement. The next advisors I hire will be my fiduciaries and not be from any brokerage service.

 

[davebarnes]

Advisor expense is 75 basis points (.075%) assets under management.

Isn't 75 basis points = 0.75% ?

 

[RunningBum]

Isn't 75 basis points = 0.75% ?

I dislike the term "basis points" for just this reason. Why not just use the decimal number and make it clear to all, especially when it's not even clear to the person posting?

 

[travelover]

I dislike the term "basis points" for just this reason. Why not just use the decimal number and make it clear to all, especially when it's not even clear to the person posting?

Because it makes investing seem all that more complicated and justifies higher fees.

 

[travelover]

What problem are you trying to solve? Your strategy looks reasonable and your assets are far above the average 55YO......... .

I totally agree and don't see a problem. Just keep on doing what you are doing -you have a great , simple investment plan. You don't need anyone to approve or improve your plan.

 

[zippy2020]

>>At this stage, I feel like we are beyond just picking stocks, funds and ETFs now, and we need broader strategies that smartly leverage what we have built through our retirement. The next advisors I hire will be my fiduciaries and not be from any brokerage service. >> [Starsky, 1/11/2020 9:08 a.m.]

I appreciate Starsky's comment. I handled all our investments while we were working, but after a few years in retirement I brought our accounts to the independent CFP firm which we had selected for my MIL's accounts, when she came to live with us.

I was fortunate to receive a personal referral to this firm; I had worked with the (now semi-retired) CFP who trained this particular firm's founder. As a result the founder/sr partner has always handled our accounts, even though at first we barely met their minimum portfolio standard.

The issues of disbursement, tax strategies, and eldercare planning are entirely different than the stages of savings and investments advice which are the usual topics of retirement planning.

My spouse can handle the financial/legal/tax/eldercare decisions - BUT he just doesn't enjoy doing the research and staying up-to-date on such topics as I do. And our heir is completely unfamiliar with dealing with any of these issues (we expect to have to help her when she retires in a few years, because she really has almost zip assets).

Thus, it makes sense for us to use a professional to handle our assets. My spouse, or our heir, may still make bad decisions....but it won't be because they didn't have someone knowledgeable and experienced to assist them, starting from Day 1.

My spouse says it's hilarious that our meetings with our adviser take about 90 minutes. We talk about the portfolio performance for 15 minutes and then the rest of the conversation between me and the adviser starts going into global trends, changing regulations, legal and tax issues, etc. - and my spouse's eyes start glazing over.......LOL!

 

[steelyman]

Because it makes investing seem all that more complicated and justifies higher fees.

Even if you’re not receiving fees it still means you’re a very important person who knows a lot about finance.

 

[teetee]

I am in my early 40s, single, no debt, have all my money invested in sp500 or total stock market index funds with zero or low expense ratio that counts 99% of my net worth and have the rest in money market account for emergencies.

After reading about 3-fund lazy portfolio on Bogleheads I figured I am lazier than tracking even the simplest portfolio they suggested. The major reason using inidex is because I think the risk of having my money actively managed or market timing is greater than the risk of tracking long-term stock market trend from several sources. Getting an advisor basically means I would buy into the the paradigm I don't believe in.

There is a chance I may hire a tax preparer or a lawyer for will and estate planning in the future after my net worth valuation is in million range but now I am keeping it simple.

 

[ziggy29]

IMO, they are offering a solution in search of a problem. I see absolutely nothing wrong with what you are doing now, assuming you are in a high enough tax bracket to make munis better than taxable bonds.

 

[kgtest]

I say, do it yourself. Ask any questions you may have!

My ole man "qualifies" for Flagship with VG and I am close but neither of us would use it. They don't understand our risk tolerance like we do.

https://investor.vanguard.com/investing/benefits/flagship

We do get some advice from time to time though. I cross-check their advice on things like 529, roth conversions, child roth's, rollovers, and other simple matters, and I always get valuable advice.

I was impressed when a regular phone rep advised me to hire my children, and put their earned wages into a roth. He did not need to tell me about that but he took the time to indulge. One thing they really shy away from is specific tax advice, but I do catch them distributing general tax knowledge as it pertains to things relevant with current laws that apply to EVERYONE...they never really get into our specific tax situations, which does effect our risk tolerance etc. YMMV. I've used FIDO, and currently I use VG and Schwab, my advice always varies depending on the individual I speak with at any of these institutions.

One thing with VG, I've noticed they will xfer to another rep if you aren't "speaking there language" for instance my dad was having a tough time understanding something, he had it on speaker, I understood but dad didn't...the rep conference called in his buddy to explain it a different way...my ole man finally understood and the xfer-in dropped off after my ole man was clear. I thought that was above and beyond IMHO.

We aren't quite at Flagship Select...

 

[teejayevans]

The Personal Advisory service is a waste of money. Nothing "personal" about it. In your shoes, I would dump Vanguard and move all the money to Fidelity. You will get more personal attention. You can keep the same funds. Just buy the equivalent Vanguard ETF's with new money (no commission) or buy the Fidelity versions.

$2.5M should earn you better service...

In my experience, the fidelity’s advisors are worth what you paid for them. I’ve talk to advisers from Fido, VG, banks, etc , the best one was one from a credit union FWIW.

 

[Dtail]

If one has Private Client status at Fidelity (usually over 1mm invested assets), one can get much free advice fronm your personal rep and still not have to pay any fees.
This advice can include a review of your portfolio, Roth conversion viability, tax torpedo reduction strategies, etc.

 

[Markola]

OP, If you’ve had two threads about this, you are straddling the two camps of investors on this thread: Those of us like me who see the value of Vanguard PAS or other modest-price advisors for our situations and those confirmed DIYers. We internet strangers have provided all the well intended advice we probably can. What if you signed up but made clear your reservations that it is a trial basis for 1-2 years? That way, no harm, no foul and you can decide for yourself.

In memory of the late, great Neil Peart, songwriter and drummer for Rush, who died last week, a lyric from “Free Will”: ...If you choose not to decide, you still have made a choice.

Good luck!

 

[RonBoyd]

I am unsure of the relevance to this thread but interesting just the same: https://www.bloomberg.com/news/arti...-bonus-culture-as-machines-invade-wall-street

He’s moving traders toward electronic systems as the era of legendary gamblers stalking the markets in search of the $100 million payday becomes a distant memory. What’s coming is increased bureaucratization, an evolution that renders individuals’ judgment less important -- and with it the need to reward them as they might have once expected.

 

[Brat]

Investment-wise I think you are doing great. What you may be missing is estate planning, something you do not get from an investment firm. Find the best estate planning lawyer in your state, make sure that he/she also knows the laws in other states you may choose to move to.

 

[OldShooter]

Investment-wise I think you are doing great. What you may be missing is estate planning, something you do not get from an investment firm. Find the best estate planning lawyer in your state, make sure that he/she also knows the laws in other states you may choose to move to.

Yes. People, not just here, tend to get mixed up on "Investment Advisor" vs. "Financial Advisor." The former is more or less what you get from the brokerage houses but the latter helps more broadly. Like nagging the client to get his/her estate plans done, looking at family financial strategies for non-retirement costs like college, life insurance needs, etc.

Underline, too, "best estate planning lawyer." DW retired as an SVP from a megabank trusts & estates department and frequently came home fuming about bad documents drafted by a non-specialist and even by some who claimed to be specialists. This stuff has to be right, as there are no do-overs for problems that emerge after you are dead.

 

[I am He]

I wish I could speak with authority but I'm notorious for being on the fence.

I will say that with the amount that I've been reading for the past 2 years, that most people are somewhat well versed sales associates and few are true experts. Considering your portfolio is pretty sane, I'd stay away from an advisor other than maybe a one time fee. (Can you enroll and disenroll a month later?)

Possibly most important is that question of what is it you're hoping to achieve? I've read that many advisors now ask that up front and tailor their answer to you. So if you know your question, you will probably better answer it yourself unless you know they are truly experts. Find a retirement or withdrawal expert, a CPA in tax minimization (not a preparer) and estate planner, etc.