What kind of rebalance do I need? EFTs

[Deej]

Hi All,

I don't much about this stuff but have a guy who has my money in Blackrock EFTs. He buys what he think is best (he's an FA whose company uses Blackrock...I was with Fidelity with him). I recently sent him a message asking if we should look at a rebalance and he said "we can, based on the market". I'm considering telling him to buy into AI and 5G...thoughts? Let me know if you need more info. Here's what he listed as to where my funds are currently. It's a few hundred K. Our 401K holds most of our investments.

ESGE - ISHARES INC ESG MSCI EM ETF - Emerging Markets
TLH - ISHARES TR 10-20 YR TREAS BD ETF - Domestic Bonds
IVV - ISHARES TR CORE S&P 500 ETF - Large Cap Blend
IJR - ISHARES TR CORE S&P SMALL-CAP ETF - mall Cap Blend
IUSB - ISHARES TR CORE TOTAL USD BD MKT ETF - Domestic Bonds
ESGU - ISHARES TR ESG AWARE MSCI UAS ETF - Large Cap Blend
FALN - ISHARES TR FALLEN ANGELS USD BD ETF - High Yield Bonds
IXG - ISHARES TR GLOBAL FINLS ETF - Specialty
IXN - ISHARES TR GLOBAL TECH ETF - Specialty
EFG - ISHARES TR MSCI EAFE GROWTH ETF - Foreign Large Cap
EFV - ISHARES TR MSCI EAFE VALUE ETF, Foreign Large Cap
USMV - ISHARES TR MSCI USA MINIMUM VOLATILITY FACTOR ETF - other
VLUE - ISHARES TR MSCI USA VALUE FACTOR ETF - Large Cap Value
TIP - ISHARES TR TIPS BD ETF - Domestic Bonds
IYE - ISHARES TR U S ENERGY ETF - Specialty
GOVT - ISHARES TR U S TREAS BD ETF - Domestic Bonds
COMT - ISHARES U S ETF TR COMMODITY DYNAMIC ROLL STRATEGY ETF -
Large Cap Value]
RFI - LIQUID INSURED DEPOSITS - Cash (about $5K here)

Thanks.

[Helen]

How much is your advisor charging you?

[OldShooter]

What you have is a fairly common advisor-created portfolio. The objective of the exercise is to make investing look so complicated that the client will not consider running their money by him/herself. There is so much duplication there that it is a joke.

Spend some quality time reading, then take over your portfolio and sell it down to just a few broad and inexpensive index funds. Here's your reading:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Gu.../dp/0470067365

"Winning the Loser's Game" by Charles Ellis https://www.amazon.com/Winning-Loser.../dp/1264258461 (latest edition, May 2021)

For a comparison, DW and I may be a little extreme, but we hold very serious seven figures in equities, almost all it one fund: VTWAX. On the fixed income side, most of what we hold is in one TIPS, the 2s of 26. I think that you will find that most people here hold a small number of equity funds, nothing like the crazy list your advisor has saddled you with.

As far as trying to pick sectors, remember that you don't know anything that everyone else doesn’t also know, so at a minimum the price of a stock reflects a very well considered consensus on its value. Above minimum can happen with various manias. Below consensus value is mathematically impossible. The "Quilt Chart" illustrates the futility of picking sectors: https://www.callan.com/periodic-table/

[Deej]

He said I don't pay him anything, rather, he gets paid as an advisor via either the company he works with or Blackrock for having my funds with them and based on what my money makes is how he's paid (though he isn't employed by Blackrock). I've asked him numerous times how he gets paid and its always the same answer. My guess is hidden fees probably.

[Deej]

Also, when I asked him if I could move my money how I see fit, he told me to let him know where I want to move it and he will do it. I don't have the option to move my own money myself...one of the factors that I'm not happy about. He moved my money from Fidelty where he was investing for clients, but, when he changed the company he works with, he moved it to Blackroad, the company that his new employer uses, I suppose. When I contacted him last year about my Fidelty account, he said, I could make more in the long term moving everything to EFT's and that's what he is/was advising his clients at that time. My guess is that since he is with a different employer that doesn't use Fidelity, he moved it with an investment company used by his employer as stated above. I've seen red flags since this happened last year.

[Gotadimple]

Blackrock has a solid reputation as a manager of ETFs/Index Mutual Funds. So there is nothing wrong with using them vs. using some other ETF ASSUMING the expense ratios are the same. The expense ratio is the percentage of ETF share price the manager (iShares) retains to cover their costs. Their costs can include paying a fee to the broker who placed the order to buy the ETF. So,

iShares retains the percentage and then there is an arrangement between them and the broker who placed funds with them (your FA's employer). The broker receives a fee for placing the fund, they pay their employee for managing the account. What you don't pay directly is a commission because it's covered in the expense ratio.

Your question was about rebalancing and doing it yourself.
1. You have an arrangement with a FA to do the investing for you, so you can't do it yourself. That said, if you want to do the research he will change your investments around based on your instructions. If that's not what you want, you need to move all of this to a different broker like: Fidelity, Schwab, or Vangard (to name a few) who support individual investors.
2. You have a boatload of funds here with many replications and you probably don't need all of them. But! You need to understand asset allocation. The Coffee House Investor or the Bogleheads Guide can help you determine what your asset allocation should be given your age and tolerance for risk. Pick one of them to read. At the very least you end up educating yourself about what your asset allocation could be and what kind of volatility you can tolerate.

- Rita

[aja8888]

Can you post a pie chart of all those Ishares ETFs with percentages of each in relation to the whole portfolio value?

That may help us to understand what you have here. You can't "re-balance" anything until you look at the portfolio makeup on a percentage basis.

[Chuckanut]

Quote:

Originally Posted by Deej ESGE - ISHARES INC ESG MSCI EM ETF - Emerging Markets TLH - ISHARES TR 10-20 YR TREAS BD ETF - Domestic Bonds IVV - ISHARES TR CORE S&P 500 ETF - Large Cap Blend IJR - ISHARES TR CORE S&P SMALL-CAP ETF - mall Cap Blend IUSB - ISHARES TR CORE TOTAL USD BD MKT ETF - Domestic Bonds ESGU - ISHARES TR ESG AWARE MSCI UAS ETF - Large Cap Blend FALN - ISHARES TR FALLEN ANGELS USD BD ETF - High Yield Bonds IXG - ISHARES TR GLOBAL FINLS ETF - Specialty IXN - ISHARES TR GLOBAL TECH ETF - Specialty EFG - ISHARES TR MSCI EAFE GROWTH ETF - Foreign Large Cap EFV - ISHARES TR MSCI EAFE VALUE ETF, Foreign Large Cap USMV - ISHARES TR MSCI USA MINIMUM VOLATILITY FACTOR ETF - other VLUE - ISHARES TR MSCI USA VALUE FACTOR ETF - Large Cap Value TIP - ISHARES TR TIPS BD ETF - Domestic Bonds IYE - ISHARES TR U S ENERGY ETF - Specialty GOVT - ISHARES TR U S TREAS BD ETF - Domestic Bonds COMT - ISHARES U S ETF TR COMMODITY DYNAMIC ROLL STRATEGY ETF - Large Cap Value] RFI - LIQUID INSURED DEPOSITS - Cash (about $5K here) Thanks.

This list of holding makes me think you can replace all of them with a Total USA Mkt index, Total International Mkt index and Total USA bond Index.

The advisor seems to have built a complicated version of a very basic asset allocation using three index funds.

[OldShooter]

Quote:

Originally Posted by Deej He said I don't pay him anything, ... My guess is hidden fees probably.

Quote:

Originally Posted by Deej ... I've seen red flags since this happened last year.

Quote:

Originally Posted by Gotadimple ... Their costs can include paying a fee to the broker who placed the order to buy the ETF. So, ... iShares retains the percentage and then there is an arrangement between them and the broker who placed funds with them (your FA's employer). The broker receives a fee for placing the fund, they pay their employee for managing the account. What you don't pay directly is a commission because it's covered in the expense ratio. - Rita

There is something wrong here. If the broker is getting compensated as you and Rita theorize, then he is not a fiduciary. IOW, he is not legally required to take all actions in your best interest. He is a "registered representative" of his firm and his loyalty is to the firm and not to you. I have also never heard of a broker getting compensated solely from the expense ratio of a fund. Partial compensation, yes, via "12b-1" charges. But regardless, you think this smells bad because it does smell bad. You have a good nose. Irrespective of the ridiculous portfolio you should dump this guy.

In the mean time you should run a brokercheck on him (https://brokercheck.finra.org/) to see what might be there in terms of customer complaints. You will also be able to see his licenses, which may be only the most basic registered rep license, a Series 7.

Quote:

Originally Posted by Deej Also, when I asked him if I could move my money how I see fit, he told me to let him know where I want to move it and he will do it. I don't have the option to move my own money myself...one of the factors that I'm not happy about. He moved my money from Fidelty where he was investing for clients, but, when he changed the company he works with, he moved it to Blackroad, the company that his new employer uses, I suppose. ...

This is also quite stinky. First, he cannot legally move your (cash account or IRA/Roth) money or anyone else's between custodians. At best he can convince you to sign an asset transfer form directing your new custodian (Schwab, etc.) to contact your current custodian and transfer your assets. At worst, if this supposed FA did move the money he did it by forging your signature on the paperwork. And you always have the option to move your own money. That's why it is called "your own money."

401K money is handled differently and generally cannot be transferred between custodians. You should talk to your HR department to understand your rights and options there.

Quote:

Originally Posted by Gotadimple ... you need to move all of this to a different broker like: Fidelity, Schwab, or Vangard (to name a few) who support individual investors....

Please consider @Gotadimple's advice carefully. You are not in a good place right now, as you are starting to realize. But also please get to work doing some reading as I suggested above. Managing your money is not difficult but it is very, very important. The investment business is full of sharks whose goal it is to make your money their money. Here is a video prepared and distributed by investment guru and Nobel prize winner, Dr. William Sharpe:

https://www.youtube.com/watch?v=Vv4HQG2Hz0I

[Out-to-Lunch]

I am with Old Shooter here.

[mrfeh]

Quote:

Originally Posted by Deej Hi All, I don't much about this stuff but have a guy who has my money in Blackrock EFTs. He buys what he think is best (he's an FA whose company uses Blackrock...I was with Fidelity with him). I recently sent him a message asking if we should look at a rebalance and he said "we can, based on the market". I'm considering telling him to buy into AI and 5G...thoughts?

Yikes.

Please take OldShooter's post seriously. You are at a crossroads - you can take control of your investments or continue filling the pockets of others.

[target2019]

Quote:

Originally Posted by Deej Hi All, I don't much about this stuff but have a guy who has my money in Blackrock EFTs. He buys what he think is best (he's an FA whose company uses Blackrock...I was with Fidelity with him). I recently sent him a message asking if we should look at a rebalance and he said "we can, based on the market". I'm considering telling him to buy into AI and 5G...thoughts? Let me know if you need more info. Here's what he listed as to where my funds are currently. It's a few hundred K. Our 401K holds most of our investments. ESGE - ISHARES INC ESG MSCI EM ETF - Emerging Markets TLH - ISHARES TR 10-20 YR TREAS BD ETF - Domestic Bonds IVV - ISHARES TR CORE S&P 500 ETF - Large Cap Blend IJR - ISHARES TR CORE S&P SMALL-CAP ETF - mall Cap Blend IUSB - ISHARES TR CORE TOTAL USD BD MKT ETF - Domestic Bonds ESGU - ISHARES TR ESG AWARE MSCI UAS ETF - Large Cap Blend FALN - ISHARES TR FALLEN ANGELS USD BD ETF - High Yield Bonds IXG - ISHARES TR GLOBAL FINLS ETF - Specialty IXN - ISHARES TR GLOBAL TECH ETF - Specialty EFG - ISHARES TR MSCI EAFE GROWTH ETF - Foreign Large Cap EFV - ISHARES TR MSCI EAFE VALUE ETF, Foreign Large Cap USMV - ISHARES TR MSCI USA MINIMUM VOLATILITY FACTOR ETF - other VLUE - ISHARES TR MSCI USA VALUE FACTOR ETF - Large Cap Value TIP - ISHARES TR TIPS BD ETF - Domestic Bonds IYE - ISHARES TR U S ENERGY ETF - Specialty GOVT - ISHARES TR U S TREAS BD ETF - Domestic Bonds COMT - ISHARES U S ETF TR COMMODITY DYNAMIC ROLL STRATEGY ETF - Large Cap Value] RFI - LIQUID INSURED DEPOSITS - Cash (about $5K here) Thanks.

When the market crashes, fire the advisor. We'll sell certain assets and begin to invest like: 50% VTI, 25% VXUS, 25% VUSB.

Don't use EFT's though, use ETF's.

If you send me half of his fee for one month, I will send you a birthday postcard each year.

[target2019]

Quote:

Originally Posted by Deej Also, when I asked him if I could move my money how I see fit, he told me to let him know where I want to move it and he will do it. I don't have the option to move my own money myself...one of the factors that I'm not happy about. He moved my money from Fidelty where he was investing for clients, but, when he changed the company he works with, he moved it to Blackroad, the company that his new employer uses, I suppose. When I contacted him last year about my Fidelty account, he said, I could make more in the long term moving everything to EFT's and that's what he is/was advising his clients at that time. My guess is that since he is with a different employer that doesn't use Fidelity, he moved it with an investment company used by his employer as stated above. I've seen red flags since this happened last year.

Call Fidelity and tell your story. He may have violated his agreement with them. If the account is small, just ditch this shark.