Signed Up For Portfolio Advisory Services

[CABarb]

A bit of background on my investment experience. I was married to a bum who decided he didn't want to work. So I slaved away 7 days a week at a 12 hours/day job. The money I made started to accumulate and I invested some into Janus Fund. I also invested in Fidelity Magellan where my money grew. I continued to buy funds and held them with various fund companies.

Exhausted from working I asked my DH to manage the investments. He began investing through our local bank. Unfortunately, I didn't check my investments or really know the costs associated with them.

After he died, I had to take over the money matters and two years later I finally started looking at the management fees I was paying at several banks. One guy who had moved out of state was still making money off my investments was listed on the statement as getting paid 3% per quarter! I called every investment company where my money was at and told them I would manage my own money going forward.

Well, investing in equities got me good returns through the 90s and since my 401k was at Fidelity, I decided to start transferring my assets to Fidelity in 2012. I managed all my investments because I made huge mistakes and had learned from them while investing at the bank. Now almost all of my money is at Fidelity (though the investments are with various mutual fund companies).

This past December, I got a new Fidelity rep as the previous one had been promoted to VP managing business accounts. The new rep has tax background and she recommended that I have my portfolio managed for better tax benefits. The Trust acct had really high dividend earnings which are not tax free. I made a lot of money which will go to uncle Sam as I don't have any write offs. She recommended I get the Portfolio Advisory Services. I signed the paperwork and have seen my account get balanced since my last visit on January 14th.

Does anyone else have a similiar set up with Fidelity. I have always invested my own money and have been a "Buy and Hold" investor. I don't worry about market fluctuations and check my portfolio when I think about it.

This past December I was too late in taking out my charity money from the Trust fund which had really high dividends. I was waiting to hear from my rep and she never saw the email. In hindsight, I should've taken care of it with a phone call. I use the charity contributions as a tax write off instead of paying the IRS.

I could sure use input about Portfolio Advisory Services and whether it is a good thing to have. It's the first time I am letting someone else do my investing for me. So far, they've managed to take most of the money out of the (heavily taxed) Trust Fund and put it into my ROTH IRAs and Annuity accounts. I had never thought to do that because of tax consequences due to selling my holdings.

Thanks for reading and I look forward to spending more time here to learn as much as I can from you all. In between jobs; so I will be spending time online getting educated on tax efficient investing.


-Barb

 

[CABarb]

Hi I'm in between jobs and am seriously thinking about retiring in the next 4-5 years. I work in high tech in Silicon Valley and just got laid off from another start up. Most of those jobs last about 2 years at the most.

My investments are at Fidelity and I've had a Trust Fund where majority of the investments were until January of this year. Because the Market did very well, I had good returns and will have to pay a lot in taxes. My Fidelity rep got me signed up for the Portfolio Advisory Services where they will manage my holdings to make them more tax efficient. I believe the fees are around 1%. I have a large portfolio and 1 percent of that would be a lot of money. I'm seriously rethinking the Advisory Services...

Does anyone else have a similiar set up with Fidelity. I have always invested my own money and have been a "Buy and Hold" investor. I don't worry about market fluctuations and check my portfolio when I think about it.

This past December I was too late in taking out my charity money from the Trust fund which had really high dividends. I was waiting to hear from my rep and she never saw the email. In hindsight, I should've taken care of it with a phone call. I use the charity contributions as a tax write off instead of paying the IRS.

I could sure use input about Portfolio Advisory Services and whether it is a good thing to have. It's the first time I am letting someone else do my investing for me. So far, they've managed to take most of the money out of the (heavily taxed) Trust Fund and put it into my ROTH IRAs and Annuity accounts. I had never thought to do that because of tax consequences due to selling my holdings.

Thanks for reading and I look forward to spending more time here to learn as much as I can from you all. There is also a similar post in Fire and Money.

-Barb

 

[DrRoy]

I have most of my investments at Fidelity. I have a free rep with them. I am aware of the Advisory Services, but I have learned that they are not worth the fee. You are mainly a buy and hold investor, which is good. Why pay the % when there is so little that you get in return? Think of how much the fee represents in terms of your WR.

 

[LakeRat1]

I am a Fidelity client as well, two years ago I had managed services, paid the fees..... on my portfolio, on my DW portfolio I managed for the same two years and it performed better by 3.5% So, I dropped the managed services ..... Now I was talking with my FA at Fidelity with a strategy of living off dividends within the next 3 years...... The FA wants to bring in Mariner to manage the portfolio ...... I am on the fence on what to do as well...... Fees would be about .55%

 

[bingybear]

Lots of questions

you talk about a trust account. Is this just the name of an investment account? Or is it a legal trust you or someone created? If the latter is the revolvable?

You talk about putting the money into your roth and annuity accounts? Normally you can't just put money into your roth other than by contribution or conversion (usually a taxable event and the $ must come from an IRA or 401k. If you had some or part of your roth being invested by an adviser, then those dollars may not be taxable in most cases.

tax managed does not mean no taxes. In fact it can mean some trading will be actively done. The manager will do tax loss harvesting. This is where the manager will sell an asset with a loss and buy a similar (but not too similar) investment. This actually helps your tax situation. Also, qualified dividends are part of tax managed in that they are taxed at lower rates.

I looked at PAS a while back and choose not to do it. It was not for me. I'm sure it is ok for some.

More often than not an adviser will sell everything and implement their portfolios. Most do not just take your assets and try to manage what you happen to have. They don't usually have a range of portfolios to fit your risk tolerance and income needs. Fidelity PAS is one example of that.

 

[mrfeh]

Thanks for reading and I look forward to spending more time here to learn as much as I can from you all. In between jobs; so I will be spending time online getting educated on tax efficient investing.


-Barb

If you are willing to invest a little time educating yourself, you can do this all by yourself, saving the expense of portfolio management.

This is where to start: https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[pb4uski]

I think you are too preoccupied with taxes. Qualified dividends are tax preferenced... 0% tax rate or 15% depending on your income... possibly more at really high income levels. Generally, it is good to have qualified dividends in taxable account... even better is international equities where you get some qualified dividends AND foreign tax credit.

I think you would be better off to continue managing your own investments. There is a bit of a learning curve but not very steep. If you are willing to share some details there are people here who can help.

 

[Midpack]

Only you can decide if an advisory service is worth paying fees for. Many here are DIY investors and it’s not rocket science, but there are also members here who use advisors.

I wonder if Fidelity PAS is worth 0.5-1.5% annual AUM vs Vanguard PAS at 0.3% or less? I could not find detail on the Fidelity range (a little disturbing in itself), but 1.5% per year is way too much in my view. Your portfolio doesn’t need to be complex.

Like bingy notes, they usually have a mostly one size fits all portfolio they’ll promote and they just vary the split between equity and fixed income. It’s not really a unique portfolio for each client. If they start by selling off everything you own to buy their model portfolio, there could be a rough capital gains tax impact to start with.

Vanguard will do a complete portfolio review once a year showing you the portfolio they’d recommend, it’s free for Flagship accounts and not expensive for smaller accounts. I assume Fidelity will do something similar.

Investing for tax efficiency is not difficult at all, that’s a DIY task. https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

 

[bizlady]

Vanguard will do a complete portfolio review once a year showing you the portfolio they’d recommend, it’s free for Flagship accounts https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

I think Vanguard only offers the portfolio free now if you have your accounts managed with them (or maybe that is just the financial plan), but they only charge .03% which might be better than FIDO

 

[Vacation4us]

I would never advise to pay an advisory fee. However if you have over a million dollars the fee should be below 1%.

 

[braumeister]

To avoid confusion, I merged these two threads with the same title.

 

[Nick12]

I think Vanguard only offers the portfolio free now if you have your accounts managed with them (or maybe that is just the financial plan), but they only charge .03% which might be better than FIDO

You are correct. Vanguard investor for 30 years that's me. Retired early last year. My funds have done very well. Vanguard has more than 5 trillion dollars of investors money under management. No fund company comes close.

 

[Midpack]

I think Vanguard only offers the portfolio free now if you have your accounts managed with them (or maybe that is just the financial plan), but they only charge .03% which might be better than FIDO

It’s 0.3%.

 

[swakyaby]

Hi Barb,
I had complimentary investment portfolio reviews last year at Vanguard and T.Rowe Price. The CFPs I spoke to referred to themselves simply as senior investment advisors, most likely because they restrict their advice to investments within their respective companies after reviewing your entire portfolio. I received a surprisingly pushy hard-sell for ongoing Portfolio Advisory Services at 0.3% annually from the Vanguard CFP, which I declined. He did, however, provide a very helpful detailed analysis of my current investments, his recommendations for change, and the reasons why. The TRowePrice CFP gave a similar type of analysis, and her recommendations were also similar. I am a Fidelity Private Client, but I have so far never requested any investment advice, thinking 2 portfolio reviews in one year were enough.

I think that if you are a Fidelity client being charged nearly 1% annually for portfolio management, you are paying a lot and would do better receiving a one time portfolio review and then self-manage. It is not difficult and need not be time-consuming. If you are a buy-and-hold investor, you can set up your accounts and auto-invest. It worked for me, and I used to work similar long hours and weekends as you.

 

[OldShooter]

One common thing here (and pretty much everywhere) is conflating "investment advisor" and "financial advisor." The scope of the latter is much wider, including investments, insurance, retirement strategies, ideas for estate planning, details like POAs and health care powers, etc. Typically the brokerage house people are only investment advisors.

I agree with a one-time analysis but I would suggest that you work your personal network to find an independent financial advisor to look at your whole situation. Expect to pay a flat-rated fee probably well north of $1000. Remember you are not trying to hire a friend. You are trying to hire an expert, so rave reviews of "bedside manner" are irrelevant.

Absent a referral from your network, napfa.org is a good place to start though move very carefully and patiently interview advisors. Working in tech, you are familiar with very convincing "PowerPoint Engineers" who really know very little. Use your professional skills to weed out that class of financial advisor.

https://brokercheck.finra.org/ is an essential tool in your search.

Finally, do not let the tax tail wag the investment dog. Your objective is not to avoid taxes. It is to maximize your portfolio. Ruthlessly look at total return (appreciation plus dividends and interest) on an after tax basis. This is what matters.

 

[cbo111]

It’s 0.3%.

I have used the Vanguard VPAS service for the past 4 years. They were very helpful in setting up my desired initial 50/50 AA. They charge .03% service fee for all accounts under their management. I also have a self-managed Vanguard account that I set up and simply mimic the managed AA. I keep about 40% of assets in the self-managed account, saving the .03% service fee. By doing this, the actual service fee on the entire account is about .0175%, which for me is worth the cost.

 

[Midpack]

I think Vanguard only offers the portfolio free now if you have your accounts managed with them (or maybe that is just the financial plan), but they only charge .03% which might be better than FIDO

It’s 0.3%.

I have used the Vanguard VPAS service for the past 4 years. They were very helpful in setting up my desired initial 50/50 AA. They charge .03% service fee for all accounts under their management. I also have a self-managed Vanguard account that I set up and simply mimic the managed AA. I keep about 40% of assets in the self-managed account, saving the .03% service fee. By doing this, the actual service fee on the entire account is about .0175%, which for me is worth the cost.

OK, what am I missing? Directly from vanguard.com, and mind you 0.3% is much lower than most advisors and way lower than full retail brokerages:

 

[cbo111]

Yes you are correct. I misplaced a decimal point. The more salient point is that you can set up a vpas with a small amount of $$ and just mimic that AA in a self-managed account, saving a large chunk of the advisory fee.

 

[CABarb]

Wow! Thanks for all of your inputs. Been busy with stuff around the house that I haven't had much time to get on here. I'll try to clarify some things and I do appreciate the responses I've received so far.



The Revocable Trust Account I had set up so that I could leave my assets to my son. It was done while I worked at Intel. Intel used to do annual surveys while I was there and I had asked for Prepaid Legal Services to be offered. They offered it the next year and I took advantage of it to get the Revocable Trust set up at that time. Preparation for the trust was free, but I paid the notary fee at the law office.



The ROTH IRAs were transferred to Fidelity as per the reps suggestion. Her reasoning was that I would avoid paying multiple management fees at the various investment companies where the ROTH IRAs had resided (These were from the start up I worked at). It made sense to me and so I transferred them to Fidelity.



The 401(k) from Intel was transferred to me when I was laid off in 2009. The money is in the Rollover IRA account and I haven't touched the money. I prefer to take it when I retire. I've got a 56.7% yield on it today (552K balance). The FSENX is the only thing in there where I am losing money and I plan to get out of it and put the money into healtcare or something else.


So, the only thing I signed over to the PAS is the Trust under Agreement account which has about a $1,000,000. That's what is managed by PAS and I will be taking to my rep next Monday about exactly what percentage I will pay to have them manage it. She had mentioned 1 percent, but she also said it all depends on how much activity there is.



I have asked for copies of every paper I had signed on my last visit. And somehow they messed up by transferring money out of my 401K account into my ROTH which I wanted corrected. Last Friday I was told they are still working on correcting that.

 

[CABarb]

The more salient point is that you can set up a vpas with a small amount of $$ and just mimic that AA in a self-managed account, saving a large chunk of the advisory fee.

That is exactly what I want to do. I like managing my own money, but I also don't want to do something stupid and lose a big chunk of it. So far, I've invested in equities and have done well. And I am also thinking of a Vanguard account. But I don't know if that is a wise choice.

 

[bingybear]

That is exactly what I want to do. I like managing my own money, but I also don't want to do something stupid and lose a big chunk of it. So far, I've invested in equities and have done well. And I am also thinking of a Vanguard account. But I don't know if that is a wise choice.

Is Fidelity still using custom funds for their PAS accounts? IIRC, they did that some years ago with most funds.

It's been a bad time for FSENX as oil has had a rocky time recently.