Thoughts on Fees ??

[LakeRat1]

Thanks for the feedback .... Today, we are in the Fidelity Private Client Group ...... Every quarter they take about roughly .0025% for fees ..... I hate seeing this money go out ..... I just don't think I need this Private Client Group, when I can just pick from all the available funds ....... Anyone got any suggestions on where I can get educated ..... Like I stated previously, when I both my DW and myself were working, I just selected from funds that were available through our 401k Plans ...... Now that we are retired, moved the money to Fidelity into individual IRAs, I am a bit confused

I am going to follow along the other thread that was mentioned ...... I too will be making a change with Fidelity ...... I do not see the value of a Private Client Manager at this time, it has already cost me more than 10k over the past 12 months

[pn3069]

If we use Schwab TSM and TBM etfs, where the ER is 0.03% and 0.04% respectively, you will get a blended ER of 0.035%... and they are as liquid as the vanguard OEFs/ETFs.

Soon.. the ETF providers will pay us money to hold their TSM/TBM etfs

[flintnational]

Quote:

Originally Posted by LakeRat1 Anyone got any suggestions on where I can get educated

Here is a link to the Bogleheads Wiki reading list. I particularly like William Bernstein's The Four Pillars of Investing. It covers just about everything you need to know to be DIY investor.

[pn3069]

Quote:

Originally Posted by LakeRat1 ...... Every quarter they take about roughly .0025% for fees ..... 12 months

Did you mean 0.25% for management fee?

[travelover]

OP, have you considered just using a Target fund? They are automatically re-balanced and adjusted in asset allocation over time. They exist for different ages, including for those already retired. You don't necessarily have to choose the date you actually retire(d), just pick the one with the stock/ bond balance you feel comfortable with.

[Sunset]

Quote:

Originally Posted by RunningBum Who actually charges 1.8%? I know you said it wasn't the OP's actual number, but shouldn't it be a realistic one? The case against management fees doesn't need to be inflated.

I convinced an old fellow to allow Vanguard to hold his $$$, as the brokerage he was using charged him $2,000 for a $100,000 account.
It was a flat $500 every quarter, listed about page 20.

That is 2% management fee, on top of the fees charged by the various mutual funds he was in which included a few vanguard funds in the 30->40 investments

[skipro33]

I have Fidelity manage my funds and I'm happy to pay them their fees. I've got lots better things to do with my time than to frustrate myself trying to figure out if I'm making the right decisions on what to invest in, when to rebalance, etc. It's like driving a car in reverse and using the rear view mirror to see out for me when I try to manage my funds. Everything is a day late and literally a dollar short! When I'd miss opportunities with investments, it would be like picking at a scab; I know I should just leave things alone, but I just can't.
Anyways, I'm absolutely convinced that their management has yielded me more returns, even after their fees, than I would have been able to do for myself. I no longer fixate on my life's savings and I get to spend my retirement doing things I actually enjoy doing instead.
I think of it like this; could I save money if I would just learn how to repair cars and do that myself? Probably, but I don't want to learn how to repair cars. I just want to drive cars and know they are reliable enough to not leave me stranded. So I hire a mechanic or I buy a new car with a full warranty. I get to drive the car and I save myself the aggravation of learning skills that don't interest me and that I'm likely to potentially hurt myself in the process.
Anyways, that's how I see it.

****EDIT****
I want to add that I am 61, ER'd at 56 and don't take draws on my accounts, but live comfortably on my pension and a few thou with my hobby of restoring motorcycles and ski instructing in the winter. I'll take SS at 62 and don't see a need to draw on my Fidelity account until I'm forced to at 70 1/2. The primary purpose of my savings is to cover long term medical expenses. I'll probably use the RMD for traveling, ski trips, a boat perhaps. Stuff that would enhance my current lifestyle since I'll have the funds anyways.

[WestUniversity]

Quote:

Originally Posted by LakeRat1 Anyone got any suggestions on where I can get educated...

Below is a link from the Bogleheads site (followers of John Bogle who started Vanguard Investments).

Taylor Larimore, who wrote this article, is an investor and writer for Forbes if I’m not mistaken. His three fund portfolio is about as simple as you can get.

(Sorry moderator I have no idea how to replace this link with a word or phrase)

https://www.bogleheads.org/forum/vie...p?f=10&t=88005

[bingybear]

Quote:

Originally Posted by MRG I sat in a Fidelity pitch on Private Client. Very expensive and they loved expensive managed funds. I thought all the fees made it almost 2%!

Quote:

Originally Posted by LakeRat1 Thanks for the feedback .... Today, we are in the Fidelity Private Client Group ...... Every quarter they take about roughly .0025% for fees ..... I hate seeing this money go out ..... I just don't think I need this Private Client Group, when I can just pick from all the available funds ....... Anyone got any suggestions on where I can get educated ..... Like I stated previously, when I both my DW and myself were working, I just selected from funds that were available through our 401k Plans ...... Now that we are retired, moved the money to Fidelity into individual IRAs, I am a bit confused I am going to follow along the other thread that was mentioned ...... I too will be making a change with Fidelity ...... I do not see the value of a Private Client Manager at this time, it has already cost me more than 10k over the past 12 months

I may have been missing all these fees for private client. But the 0.0025% would likely not bother me too much as that would be $100 per year on $1MM. I'm not aware of any extra fees for Private Client. Now there are for some added services like portfolio management.

My Private Client rep set us up to talk with a on staff lawyer when we were looking at reworking our estate plan. No, they won't write your estate plan, but they will help you understand some of your choices and what restrictions these choices have. We found it useful for reducing time with the actual lawyer we pay.

Our PC rep also helped converting our PONDX into PIMIX in an IRA.

Now if you signed up for PAS or other portfolio management, that is another issue.
I have got some good advice at times form the PC rep. But to be honest part of their job is to sell services.

Both PC reps I've had have given me some good advice at times. You just need to look at the suggestions and make your decision.

I would be interested if you are seeing fees for private client and where they show up. I just have not seen them. I don't mean fees for added services like portfolio management which are added services. Many of these are are not exclusively for PC like PAS. PAS and many other services are available to non-PC customers.

[target2019]

Quote:

Originally Posted by LakeRat1 Thanks for the feedback .... Today, we are in the Fidelity Private Client Group ...... Every quarter they take about roughly .0025% for fees ..... I hate seeing this money go out ..... I just don't think I need this Private Client Group, when I can just pick from all the available funds ....... Anyone got any suggestions on where I can get educated ..... Like I stated previously, when I both my DW and myself were working, I just selected from funds that were available through our 401k Plans ...... Now that we are retired, moved the money to Fidelity into individual IRAs, I am a bit confused I am going to follow along the other thread that was mentioned ...... I too will be making a change with Fidelity ...... I do not see the value of a Private Client Manager at this time, it has already cost me more than 10k over the past 12 months

Not sure about that fee. I don't use Fidelity, but this article states you achieve Private Client status for $1MM invested. I suppose there could be something else you are involved with.

https://thefinancebuff.com/vanguard-...e-account.html

One thing that confuses me, is paying 10K over 12 months, or a fee of .0025%. If you have 4MM invested, than the calculation works.

I realize these arrangements are very confusing. For example, my in-laws have a UMP agreement with USAA. The actual fee is calculated over three investments (taxable, IRA, IRA), but the fee comes out of the taxable account only. So if one were to calculate the fee just against the taxable account, it would appear too large.

I'm wondering if that fee is correct?

[audreyh1]

Quote:

Originally Posted by LakeRat1 Thanks for the feedback .... Today, we are in the Fidelity Private Client Group ...... Every quarter they take about roughly .0025% for fees ..... I hate seeing this money go out ..... I just don't think I need this Private Client Group, when I can just pick from all the available funds ....... Anyone got any suggestions on where I can get educated ..... Like I stated previously, when I both my DW and myself were working, I just selected from funds that were available through our 401k Plans ...... Now that we are retired, moved the money to Fidelity into individual IRAs, I am a bit confused I am going to follow along the other thread that was mentioned ...... I too will be making a change with Fidelity ...... I do not see the value of a Private Client Manager at this time, it has already cost me more than 10k over the past 12 months

Your % does not seem correct for Private Client Group fees - 0.0025% would be negligible IMO. Actually, should be 0 anyway.

We have Private Client Group status at Fidelity but no fees and no portfolio advisory services. Free turbotax. Doesn't cost us anything.

You must be talking about their wealth management services?

[ERD50]

Quote:

Originally Posted by skipro33 I have Fidelity manage my funds and I'm happy to pay them their fees. I've got lots better things to do with my time than to frustrate myself trying to figure out if I'm making the right decisions on what to invest in, when to rebalance, etc. ... .

But that assumes DIY is frustrating and takes a lot of time. It doesn't. Pick an AA (which you would have already done through discussions with your FA), choose a 2-3-4 fund "lazy portfolio", and forget about it. Even rebalancing has been shown to have questionable results. There are no ongoing decisions to make.

Quote:

Originally Posted by skipro33 ... Anyways, I'm absolutely convinced that their management has yielded me more returns, even after their fees, than I would have been able to do for myself. ...

Studies say that is unlikely. How can you be so convinced?

Quote:

Originally Posted by skipro33 ... I think of it like this; could I save money if I would just learn how to repair cars and do that myself? Probably, but I don't want to learn how to repair cars. ...

Picking a few funds and forgetting about them just doesn't compare to gaining the tools, knowledge, experience and time to learn/perform car repair. Unless we are talking about changing an air filter - that's about equivalent, assuming it's one of those air filters that is easy to change - not all of them are.

Do as you please of course, I just don't like to see posts go unchallenged that might convince others that this is as difficult as car repairs. It's not.

-ERD50

[MRG]

Quote:

Originally Posted by bingybear I may have been missing all these fees for private client. But the 0.0025% would likely not bother me too much as that would be $100 per year on $1MM. I'm not aware of any extra fees for Private Client. Now there are for some added services like portfolio management. My Private Client rep set us up to talk with a on staff lawyer when we were looking at reworking our estate plan. No, they won't write your estate plan, but they will help you understand some of your choices and what restrictions these choices have. We found it useful for reducing time with the actual lawyer we pay. Our PC rep also helped converting our PONDX into PIMIX in an IRA. Now if you signed up for PAS or other portfolio management, that is another issue. I have got some good advice at times form the PC rep. But to be honest part of their job is to sell services. Both PC reps I've had have given me some good advice at times. You just need to look at the suggestions and make your decision. I would be interested if you are seeing fees for private client and where they show up. I just have not seen them. I don't mean fees for added services like portfolio management which are added services. Many of these are are not exclusively for PC like PAS. PAS and many other services are available to non-PC customers.

I mis-spoke Private Client is zippo for fees. It was their management service..

[bingybear]

Quote:

Originally Posted by target2019 Not sure about that fee. I don't use Fidelity, but this article states you achieve Private Client status for $1MM invested. I suppose there could be something else you are involved with. https://thefinancebuff.com/vanguard-...e-account.html One thing that confuses me, is paying 10K over 12 months, or a fee of .0025%. If you have 4MM invested, than the calculation works. I realize these arrangements are very confusing. For example, my in-laws have a UMP agreement with USAA. The actual fee is calculated over three investments (taxable, IRA, IRA), but the fee comes out of the taxable account only. So if one were to calculate the fee just against the taxable account, it would appear too large. I'm wondering if that fee is correct?

The original comment was that the fee was 0.0025% per quarter, so you need to multiply to approximate the annual amount. But the math is wrong. If you have $1MM and are assented a fee at 0.0025%, then you multiply $1MM*0.000025 = $25. You can't just drop the % sign without adjusting the number.

[Souschef]

The concept that grabbed me is one I had not thought about until I read it here!
If you have a WR of 4%, and a fee of 1%, the fee is taking 20% or 25% of your yearly income..

[ERD50]

Quote:

Originally Posted by Souschef The concept that grabbed me is one I had not thought about until I read it here! If you have a WR of 4%, and a fee of 1%, the fee is taking 20% or 25% of your yearly income..

Or consider it from the portfolio angle with constant income to you - say you had saved up $1,000,000 and felt comfortable with a 4% WR, providing you with $40,000.

If the FA is charging 1%, you are now withdrawing $50,000. To maintain the same 4% WR, you need $1,250,000. The FA just charged you $250,000!

And how long would it take someone to grow their portfolio from $1,000,000 to $1,250,000? Could be a long time, depending.

Not exactly, the 1% doesn't increase with inflation, and decreases if your portfolio drops (and the fees contribute to that drop!), so actual success rates aren't impacted as much as it seems at first glance - but it's still a lot of dough.

Do people really think they will screw up a lazy portfolio so bad that they will need to drop their income withdraws by 25%? I just don't see it.

EDIT/ADD: OK, ran it in FIRECalc, asking for 100% success on initial $40,000 withdraw. With default 0.18% expenses, starting portfolio must be $1,234,804. Adding 1% fee to that, 1.18% expenses, an additional $198,727 is required at the start.

-ERD50

[bingybear]

Quote:

Originally Posted by MRG I mis-spoke Private Client is zippo for fees. It was their management service..

The management most places is expensive. I would use it only if I needed it. My PC rep is useful and does come up with some good ideas. But you do have to train them right.

Quote:

Originally Posted by Souschef The concept that grabbed me is one I had not thought about until I read it here! If you have a WR of 4%, and a fee of 1%, the fee is taking 20% or 25% of your yearly income..

25% of WR if you assume the you pay the management fee. If you assume the management fee is a drag on performance, then you need to include that in your retirement planning. If you do you own investing, one really needs to put the drag of not being invested properly if you fail at that.

[ERD50]

Quote:

Originally Posted by bingybear ... If you do you own investing, one really needs to put the drag of not being invested properly if you fail at that.

Why would you assume a drag on a DIY portfolio? The studies do not support the idea that an FA will beat a "lazy portfolio".

Many posters here who went to an FA, expecting superior performance, not only paid the 1% fee, but got put in high annual expense ratio funds that under performed a lazy portfolio.

I don't know how someone who is supposedly incapable of following a lazy portfolio is supposed to have the skill set to pick a superior FA. That's an enigma to me.

-ERD50

[Texas Proud]

Quote:

Originally Posted by skipro33 I have Fidelity manage my funds and I'm happy to pay them their fees. I've got lots better things to do with my time than to frustrate myself trying to figure out if I'm making the right decisions on what to invest in, when to rebalance, etc. It's like driving a car in reverse and using the rear view mirror to see out for me when I try to manage my funds. Everything is a day late and literally a dollar short! When I'd miss opportunities with investments, it would be like picking at a scab; I know I should just leave things alone, but I just can't. Anyways, I'm absolutely convinced that their management has yielded me more returns, even after their fees, than I would have been able to do for myself. I no longer fixate on my life's savings and I get to spend my retirement doing things I actually enjoy doing instead. I think of it like this; could I save money if I would just learn how to repair cars and do that myself? Probably, but I don't want to learn how to repair cars. I just want to drive cars and know they are reliable enough to not leave me stranded. So I hire a mechanic or I buy a new car with a full warranty. I get to drive the car and I save myself the aggravation of learning skills that don't interest me and that I'm likely to potentially hurt myself in the process. Anyways, that's how I see it. ****EDIT**** I want to add that I am 61, ER'd at 56 and don't take draws on my accounts, but live comfortably on my pension and a few thou with my hobby of restoring motorcycles and ski instructing in the winter. I'll take SS at 62 and don't see a need to draw on my Fidelity account until I'm forced to at 70 1/2. The primary purpose of my savings is to cover long term medical expenses. I'll probably use the RMD for traveling, ski trips, a boat perhaps. Stuff that would enhance my current lifestyle since I'll have the funds anyways.

Your in a great position that you do not need the money and if they do not get good returns who cares.... not everybody is in that boat...


BUT... you do not mention where you are tax wise... it might be advantageous to convert tIRAs to ROTH along the way... but if they do not tell you then what kind of FA are they?

It sounds to me that they are only picking funds and rebalancing your portfolio... that is not worth 1% IMO... heck, I rarely rebalance.... I live with a wide AA range and take money out to do the rebalance and over time it seems to work....


BTW, I am convinced they do not do better... you can get rid of them and just keep in the funds they have you in since you think they are good.... without rebalancing.... you will do better than what they are doing....

[skipro33]

Quote:

Originally Posted by ERD50 But that assumes DIY is frustrating and takes a lot of time. It doesn't. Pick an AA (which you would have already done through discussions with your FA), choose a 2-3-4 fund "lazy portfolio", and forget about it. Even rebalancing has been shown to have questionable results. There are no ongoing decisions to make. Studies say that is unlikely. How can you be so convinced? Picking a few funds and forgetting about them just doesn't compare to gaining the tools, knowledge, experience and time to learn/perform car repair. Unless we are talking about changing an air filter - that's about equivalent, assuming it's one of those air filters that is easy to change - not all of them are. Do as you please of course, I just don't like to see posts go unchallenged that might convince others that this is as difficult as car repairs. It's not. -ERD50

I've probably spent as much time trying to understand investing as I have engine repairs and it's still Greek to me. Investing that is, not engine repairs. Engine/car repairs deals with unchanging rules, like how tight to tighten a bolt. A simple youtube video can show me how to change out a timing belt on my car using very few tools. Managing my investments though, is like gambling. I never really seem to read the players at the table with me right. With investing, no one can predict future returns. Hear THAT all the time. That there is risk. I'm a magnet at finding that risk. Ha! You say it's just that easy, but it certainly isn't for people like me who worry about calling the shots on what represents decades of sweat off my brow. When I retired 5 years ago next month, and signed up for Fidelity to manage my portfolio, I was asked what my goal was. I told them I wanted to average 7% AFTER their fees. Checking yesterday, so far, they have. My portfolio has grown 42% since December of 2012. Prior to that, for the almost 30 years I managed my accounts through my 401K and 457 and the limited choices those plans had for funds, I averaged less than half that; maybe 3 or 4%.
I pretty much don't need to touch my investments, as I said before I have a pension that sees me through and SS coming up in less than a year as a nice 'pay raise' that'll carry me to 70 1/2 when I will have to take RMD. I consider this pot of money the 3rd leg of my income stool; pension, SS and IRA. I'm now financially able to meet just about anything I think might topple my stool; means testing for SS, a stock market crash, a California state pension that the governor constantly attacks though his majority held house and senate. Security is important to me, to the point that I, as an amateur, don't feel comfortable managing something that is so important to my standard of living.

Thanks for taking time to address my post. I am fortunate to have found this site and I wish I could feel comfortable managing my own investments, but it's like going to the dentist for me; terrified of the potential for pain after trying to nut through a toothache on my own. Just give me the knock-out gas and wake me gently when it's over. Ha!