So I guess I accidentally fired my FA yesterday....

[braumeister]

OK, so you don't have much history with him, just the past year. Maybe the year before, he helped everyone earn much more than the benchmarks. Every adviser has good years and bad years.

Still, 2% under benchmarks is not really a huge underperformance, so I would have expected him to give you some kind of rationale to put it in perspective.

Unwillingness to even discuss it indicates that he did in fact see your email as combative (and I'm sure you didn't intend it that way).

Overall, put it behind you and get on with your life. The alternative could have been to go on paying his fees for years for results you could easily achieve on your own. That would have been worse.

 

[audreyh1]

I guess this guy has so many happy paying customers he can afford to fire you?

Good riddance for you I think.

 

[dd564]

I guess this guy has so many happy paying customers he can afford to fire you?

Good riddance for you I think.

1. Either the OP was mean in his post and the response was warranted.

or

2. The FA didn't really need his money that bad.



I say good for the FA and good for the OP.


Although some FA will do anything for a buck, some others do it as a lifestyle choice and don't need to chase every client.

 

[Beldar]

So I sent an email (OK, maybe just a bit terse) asking why the difference? What might I be missing? Why was a significant allocation in short term bonds (which he initially said he was against)? What could "we" do in 2015 to try to make this up?

Did the FA construct that portfolio mix based on your approval, or, was it something you handed to him/her and expected him/her to rebalance throughout the year based on the objectives you both agreed to? (just curious)

Although I have never pursued using an FA I would expect some sort of periodic communication from one on actions/recommendations rather than having to proactively monitor that persons progress.

I think you've recieved some good advice here on how to move forward.

_B

 

[2B]

Well, you know, there are leeches like for medical applications in the old days. Not necessarily beloved, but useful and somewhat appreciated. Then there are the leeches like in The African Queen. I'm sure you are much more like the former.

European leeches are used for medical applications. They are really long and nasty looking. The typical American leeches are all too short to be used. Of course, I think they are nasty looking too.

My original comment shoud have excluded fee only planners. I think they have a definite place. The commissioned FAs I have heard about have never made me think they were anything but sales people.

 

[FreeAtLast]

You can be thankful that he just cut the ties instead of pawning you off to some other F/A in the firm. My daughter just was turned over to a different F/A at the same institution. I had left a few years ago and relations were a bit shaken since then. She consequently transferred to Schwab where I do business.

Your account might end up in a better place.

 

[easysurfer]

The FA was probably thinking, "How dare the client question what I'm doing with the client's money?"

 

[inquisitive]

There is no excuse for unprofessional conduct or communication. Period.

However, allow me to just focus on the performance issue. As a disclaimer I do not use a FA and only buy individual stocks and individual bonds (mostly munis) for my own account. I own very few mutual funds because I do not see any reason to pay their fees when I can do it myself. I listen to CNBC and read the Wall Street Journal just like they do. I will not comment on allocation among funds because I do not purchase them. I am just focusing on performance 2% below a benchmark for 1 year.

The FA's performance was based on a single year. He apparently made some choices which resulted in below benchmark performance for the year. I get it. His choices involved a decision to allocate your money in a certain way that proved incorrect as compared to his peers. No one has a crystal ball. Had he made other choices (hopefully informed guesses really) you may have been 2% above the benchmark. To me, you cannot analyze performance of money management over a single year. He should be answering the question of how he has performed against the benchmark over the past 7-10 years. Hopefully you inquired before retaining him.

As stated I do not use a FA, but (except for his unprofessional conduct) his performance needs to be evaluated over a period longer than 1 year. If you did not ask the question and do not know the answer that is reason enough to switch because you do not know his history. Many money managers investing fixed income funds simply got 2014 wrong. They never expected interest rates to go down. Virtually all of them contemplated at least a 75-100 basis point rise from January, 2014. That view would have weighted them towards short term products to protect against perceived interest rate risk.

If you decide to retain another FA, get his/her history against the relevant benchmark for an extended period of time. Just my two cents.

+2

To go further, it is possible the FA DID make the correct decisions and still underperformed last yr.

But as someone who exclusively buys mutual funds/ETFs, there is massive overduplication and likely high expense ratios in your (the OP) portfolio. So regardless of the performance those selections are a mistake, and as others said, you are lucky to be in this situation when you do not have this advisor. I don't really understand how someone could have come up with those selections.

My question is, how did you end up with this FA in the first place? Were there any red flags?

I would have made a phone call for something like this instead of e-mail.

A lot of the big firms will give you great customer service and experience, with a selection of low expense ratio funds.

 

[ERD50]

...
Still, 2% under benchmarks is not really a huge underperformance, so I would have expected him to give you some kind of rationale to put it in perspective.

Unwillingness to even discuss it indicates that he did in fact see your email as combative (and I'm sure you didn't intend it that way). ...

Rather than assume that the OP's email actually was combative, I'm going with the other posters who said that it is more likely the FA could not explain the under-performance, so rather than admit he's not worth 0.5%, he attacked the messenger.

For the FA, it looks better to say "I had a customer that I just couldn't work with", than to say "I am not worth 0.5% to anyone".

-ERD50

 

[tmm99]

FIREmenow,

I am p*ssed for you.

 

[6miths]

For the FA, it looks better to say "I had a customer that I just couldn't work with", than to say "I am not worth 0.5% to anyone".

-ERD50

+1

Well said. Although, a good advisor is worth 0.5% to someone.

 

[Al in Ohio]

So how terse were you? Can you cut snd paste a sampling of what you view was the most terse paragraph?


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[FIREmenow]

So how terse were you? Can you cut snd paste a sampling of what you view was the most terse paragraph?

So I was really hoping to avoid this, for fear of dragging this on too long. Also, I am not one for tit-for-tat stuff, but to get a read on it, here is the email in its entirety (....donning flame suit):

---
Hi _____________,

Thank you for sending the net worth and performance updates for year end
2014.

I was quite dismayed to see a 4% overall return (although I suspected it
would be low as I have been monitoring the accounts). This seems
incredibly low to me.

With the Dow and S&P returning 10 and 13% percent, and a 65/35
allocation, I would have expected MUCH better than 4%.

There are numerous links on the web to 65/35 allocations (and 60/40),
both funds and portfolios, reporting 7-9% returns.
I even saw a couple of 50/50 allocation portfolios coming in at 6%.

Vanguard Wellington™ Fund (VWELX) | US News Best Mutual Funds
2014 Portfolio Review – What Strategies Worked & Didn’t Work | Pragmatic Capitalism
Global Allocation 60/40 Portfolio (I)
Early Retirement Portfolio Asset Allocation Update, Year-End 2014 — My Money Blog
Sungarden Investment Research | 2014 In Review

Nowhere did I see anything CLOSE to 4%.

Can you tell me what went wrong? What am I missing?
Why are short term bonds 16%?
I thought you said that was not one of your strategies?
There doesn't appear to be that much weight in internationals which took
a hit.

Can you tell me how we plan to recover this deficit in 2015?

Thanks,
----

 

[MRG]

You flamed no one. Maybe the guy was having a bad day or tried to turned it around as ERD50 suggested.

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[target2019]

Thanks, I will likely be building a simple bogglehead 3- or 4-fund portfolio and managing myself after a bit more research.

I have to assess the tax consequences, however, of moving stuff around at different times and from different allocations and account types.

Best,

Is this all in one account, like IRA. Or is some in taxable?

Take each fund symbol and plug into Morningstar. Review the style map to help you eliminate the funds that just duplicate the same boxes. You can probably quickly cut the list in half. Combine these three, those two, and so on.

I think you may need more than three funds, depending on the number of retirement accounts you have.

 

[Walt34]

I see nothing inflammatory in your email. I suspect ERD50 is correct and the FA is annoyed that you had the unmitigated gall and arrogance to question his perceived superior money-managing ability. In spite of the fact that any of the DIY investments others have suggested here would have done better and cost you less.

 

[haha]

Whoops. Benchmarks are only meaningful if they are directly comparable. For example you mentioned duration differences. This can be a big deal. Last year longer duration bonds hit it out of the park.

The only way to avoid confusion and mixed signals is to do it yourself. I say do it yourself, and squawk only in the case of malfeasance.

Ha


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[FIREmenow]

Whoops. Benchmarks are only meaningful if they are directly comparable. For example you mentioned duration differences. This can be a big deal. Last year longer duration bonds hit it out of the park.

Yep. Absolutely. However, I might have expected a bit of education/reasoning explaining my ignorance, instead of calling me "unprofessional, condescending and disrespectful." and an immediate cessation of our "relationship".

 

[dd564]

Email doesn't seem too bad.
Financial advisor has thin skin I guess.

If he is doing well enough to fire clients, all the power to him.


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[freedomatlast]

No loss there. There is no shortage of financial advisors.

 

[haha]

You are better off going it alone.

If I had been the advisor, not sure what I would have done but I wouldn't have liked the email, and I would have planned to lose you at my earliest convenience. The caps were a real clever touch. Also liked "incredibly low".

Potential unhappy clients are good to lose earlier rather than later, when it may be in a flurry of charges and accusations.


Like my girlfriend sometimes says, Ha, if you want to work through something with me, put me on the defensive and you are going to lose, at least lose something that you may regret losing.

Ha

 

[Sunset]

No loss there. There is no shortage of financial advisors.

True, and while I am not a professional one, for the OP I will if he truly has tens of Millions run his portfolio for him at the low rate of .25% for my fee.
After all last year it was pretty easy to get over 14%.

 

[Livin Large in MT]

It was also an unusual year performance-wise. If you had a portfolio with typical asset allocation, you had money in international, specifically European funds, and those dragged everybody's portfolios down. Most portfolios underperformed by around 2 to 3% compared to the S&P due to that and so your figures don't surprise me that much. That doesn't excuse your FA's behavior, just suggesting that your portfolio may not be all that terrible.

 

[gcgang]

I think most FAs would have done a song and dance to explain your portfolios performance. Interesting he just cut it off.
What was your understanding of what he'd do for you when you set things up?


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[clifp]

A few thoughts. I am on the investment committee for a medium size non profit. The organization has 5-10 million investment portfolio, which is used to fund new initiative, benefiting historical sites primarily the Arizona Memorial. The fund is managed by a large bank, and they in turn select money managers are fees are roughly .75% plus often additional fee by managers in the ~1%. Historically the account performance unperformed the appropriate benchmarks by about ~1%.

The portfolio is 60/40 last year it returned 4.15% Which is the same as the OPs.
The investment committee chair had a very similar reaction as the OP , and communicated essentially the same thing. "How the hell did you only make 4%"

The reaction our money manager was considerable different. We meet with them Friday, and will have dinner meeting with them in a few weeks. The two primary reasons given for the underperformance is a 20 ish percent investment in international equities. Second, they bond portfolio was given to money manager who avoided long term bonds. I found it hard to fault them for avoiding long bonds. I feel rule #1 in managing a charities money is to avoid taking silly risk, and while long term bonds did very well last year, I think it was a silly risk to own them in 2014. I'm guessing they'll put in at least a 10-20 man hours in explaining how we only made 4%. So it seems to me that your money manager at least owed
you a couple hours of discussion.

Still when my 80/5/15 (long term CDs) portfolio was up 14.5% it was hard to bite my tongue.