Ditching your Financial Advisor??

[AJL]

From the information I have gathered so far from reading the posts, most of you "do not" use a financial advisor for your investments. Some have said that they use "Vanguard" or "Morningstar" because I assume that they are cheaper to deal with and you eliminate the "middle man" in the process.
Currently all I have are mutual funds, no stocks or bonds. I do occassionaly move from one fund to another in the same family so there will be no sales charge. So far this has worked out for the better. I am on my third financial advisor and it seems that one is just about the same as the other. I have never had one change a fund after it was picked originally, even if it fell on its face! They always tell you - your in it for the long haul guy!! We even had a seminar with the group, about 85 people showed up. Had a speaker from CNBC tell us the economy was looking up. The real reason for the seminar was not to give us any investment strategy but to offer to sell long term care insurance!!! Granted, if your small potatoes with less than 100k invested you may get ignored over the guy with millions invested, but we're both putting money in the financial advisor's pocket regardless. Could you give me some pointers on changing (or not changing) from using an advisor to Vanguard or some other "no load" fund or stocks. If I can save a 1/4% a year, then its money that goes in my pocket instead of others. Maybe its just me, but the two (2) mutual funds that the last two advisors picked for me have done the worst!!! Makes one wonder if they really know what they are doing??

 

[brewer12345]

Assuming you are in actively managed mutual funds, a switch to Vanguard might save you more like 1 or 1 1/2%.

It can be really easy. Put 80% of the money into VWELX and 20% into an EAFE index fund. Rebalance once a year.

 

[TromboneAl]

Speaking for others, I'd say that the main reason that most of us don't use financial advisors is that they have an inherent conflict of interest. If what they make depends on what they advise, you're screwed.

 

[ShokWaveRider]

What is and EAFE fund?

SWR

 

[brewer12345]

EAFE Index is an international equity index, roughly 2/3 Europe, 1/3 Asia. It represents developed equity markets outside the US. Analogous to EFA, the exchange-traded fund.

 

[73ss454]

AJL

I'm in the same boat as you and learning as I go. If you put 250K with Vanguard they will give you a free financal work up no commisions or fees due. I am in the middle of one as we speak, should have some results in a week or so.

If you switch your money over you may have some tax due on your taxable accounts. Tax sheltered should just roll over.

Check the expense ratios on your funds and the match them with Vanguards fees. You will see a large differense in these fees in most cases 1% or more.
If your only earning about 5% on your money 1% is about 20% of your earnings.

I also never knew that by broker was my partner with no investment or risk on his part. The only risk brokers have is if you leave. So leave as soon as possible just check your tax liability.

 

[Brat]

Vanguard is a brokerage/fund manager.  Morningstar is a firm that reports on fund performance. 

True, FEW of us use financial advisors because of the confilct of interest issues mentioned by others.  We like to do our own research.  One popular website is www.fundalarm.com  The forum has lots of current links, the website author has an 'attitude' (an advocate for the customer), and the site has listings of three-alarm and no-alarm funds.

Vanguard has a gratus advisor program (probably better than Fidelity where they are more likely to sell you their own funds first), and offers FinancialEngines at a discount.

 

[yakers]

Assuming you are in actively managed mutual funds, a switch to Vanguard might save you more like 1 or 1 1/2%.

It can be really easy. Put 80% of the money into VWELX and 20% into an EAFE index fund. Rebalance once a year.

Like Brewer said except add a bond index fund based on something like the Leahman index. I hate to be even mentioning bonds right now but I do not know your age and over time some % of your assets should be in some fixed income like bonds, prefered stock, munis or ibonds.

 

[brewer12345]

Uhhh, VWELX is about 1/3 bonds, IIRC.

 

[Sheryl]

I foolishly used someone I knew at Morgan Stanley.

Cost me a lot of money and I felt trapped. He got canned a few months ago which freed me to move all my $ out of MS and over to Fidelity.

The %@stards at MS charged me $75 to transfer my Roth. Glad to see the last of them.

Fidelity offers free portfolio review to anyone over $50K I think.

I find them very helpful and low pressure on the phone whenever I have to call.

 

[AJL]

I really appreciate the information that all of you have furnished on this subject. Its hard not to keep kicking oneself, especially when you put your trust in a financial advisor and it turns into a onesided deal - and not in the investor's favor. I guess thats why they say that the one that owns the money will watch it far better than the one that is just handling it.
When I rolled over a 401K after leaving my last job it cost me about $1600 in up front fees to move it all into a fund that was supposedly a "great deal" and turned into just a mediocre investment. I'm almost even after a year on that one.
I guess I shouldn't feel so bad, a financial advisor in PA lost 90 million for a bunch of school districts! Sad day if you weren't bonded! Oh well, it was only invested tax money anyway!!
I'm going to research the Vanguard and Fidelity and a few others that some of you had listed here. Maybe try them all!!
I guess the problem that alot of us have is moving our funds, stocks and bonds or whatever out of the hands of the people that are supposed to watch out for our welfare. Its almost like were afraid of hurting their feelings because they come across as such nice people. I guess thats the sales game, and they know it well!! Watch your wallet.

 

[Brat]

Moving your investments to either Vanguard or Fidelity would be wise. As an old (in both meanings) board lurker and member I am of the opinion that Brewer knows his stuff. No one predict the future, but his recommendations to others have been great for the person who hasn't taken the time to understand their tolerance and investment options.

 

[lazyday]

Vanguard has a gratus advisor program (probably better than Fidelity where they are more likely to sell you their own funds first),

That makes sense to me. Vanguard is sort of owned by shareholders, where Fidelity tries to maximize profits. The average Fidelity fund has a much higher expense ratio than the average Vanguard fund.

You could also (or even instead) learn about investing on your own, through books like William Bernstein's The Four Pillars of Investing

 

[garrynky]

I moved $500,000 from a company 401K to an IRA through a financial planner. I'm stuck in a bond ladder that matures in 2006, 2007, 2008 and 2009. Twenty five percent of the money is in mutual funds. Overall, the return has been about 6.5% for the first year. The expense ratio overall is .7% I have about $300,000 outside of this in mutual funds that I will manage differently but at 59 will need to move somewhere.

I'm trying to figure out if I should wait until the bonds mature and move them, or just take a $10,000 loss and move them. After a lot of reading, for the long run, Vanguard looks like the firm I should be doing business with. I'm 57 and want to retire at 59.

Any ideas?

 

[LOL!]

I wanted to interject here in this Vanguard lovefest that exchange-traded funds may be an alternative to using index mutual funds.  I found the link http://www.radicalguides.com/2005/06/the_radical_gui.html that was posted a while ago very educational.  I link it here again because it seems appropriate to the discussion and has a section on financial advisors.

 

[brewer12345]

That makes sense to me. Vanguard is sort of owned by shareholders, where Fidelity tries to maximize profits. The average Fidelity fund has a much higher expense ratio than the average Vanguard fund.

Yes, Vanguard is a mutually-owned company, just like a mutual life insurer or a credit union. I personally like doing business with well-run mutuals. As long as they are well run and don't just turn into a means to enrich their managers, mutuals are generally some of the most straight-up, trustworthy, and reasonable cost places to do business with. If Schwab ever succeeds in pissing me off enough to leave (which seems pretty unlikely), I would go to Vanguard.

Having said that, Fidelity is better than a sharp stick in the eye. We openend DW's solo 401k there because at the time nobody else would do it without charging us a big, fat fee. They made it very easy and have been just fine to deal with. There is nothing wrong with Fido's index funds, and some of their actively managed funds are decent, although I wouldn't put my lunch money in any of the Fido Selects funds.

 

[lazyday]

I wanted to interject here in this Vanguard lovefest that exchange-traded funds may be an alternative to using index mutual funds.

I agree that ETFs can be better than non-ETF index funds.
My favorite ETFs are Vanguard ETFs, like VTI,VV,VUG,VWO,VPL,VGK.

(One of my favorite index funds is not Vanguard or ETF: BRLIX. Can be good to look at all options.)

Brewer--I agree that Fidelity isn't the most evil company around, and can be a good choice for some, such as someone well informed and methodical. I'd be afraid to recc them to someone relatively new to investing though, in case they are sold the wrong funds.

 

[brewer12345]

You cannot protect fools from the consequences of their own actions. Hopefully anyone with a significant sum to invest has the sense to at least do a little reading. I presume anyone asking for input here probably will do their reading.

 

[justin]

This is a gross generalization, but it seems that someone in the early acquisition stage of wealth-building (and dollar-cost averaging) is better off buying index mutual funds in order to avoid the transaction fees. Once you get a nest egg of $100k-$200k or so, the slight expense ratio savings might make it worthwhile to be in the ETF's. I guess it depends on whether you are putting money into one fund a few times a year or multiple funds once or more per month. Even at a discount brokerage, you could potentially end up with hundreds per year in commissions. The ER savings from ETF's would hardly cover these commissions.

The ETF's are very tempting to me, especially as the nest egg grows. Switching and paying the resulting taxes stands in my way.

 

[LOL!]

I agree that ETFs can be better than non-ETF index funds.

Who are you agreeing with? I don't think I wrote that they were better than non-ETF index funds.

 

[lazyday]

Who are you agreeing with? I don't think I wrote that they were better than non-ETF index funds.

I took your words "interject here in this Vanguard lovefest" to imply that you were listing an alternative that might be better than a Vanguard fund. (Doesn't mean always better) And that maybe you weren't aware that Vanguard itself has very good ETFs. Sorry if I misunderstood you.

 

[Brat]

For those of you who think I am a party to the Vanguard 'love fest' I would like to describe what I see as a difference.

I am a Fidelity customer, have been one for many years, but have recommended Vanguard from time to time.  Several years ago I moved my mother's accounts to Fidelity (from her saftey deposit box) because they have investor centers in many cities and there was a person she could sit down and talk with.  That personal contact meant a lot to her.  They contact me from time to time when they see her cash accumulating and give me suggestions. Their financial advise isn't bad, but over the years I have noticed that they do mention their own funds before others.  Fidelity seems to have noticed that Vanguard is eating into their market and is offering low cost index funds. 

So... both are good firms.  If you want or need to meet with a person face to face Fidelity is where to go.  If costs (however small the difference) matter more than personal contact Vanguard it great.

 

[oldcrowcall]

I had a financial advisor once. He was excellent. I let him go after about a 1 1/2 yrs. because I did not want to pay the 1% fee. As they said in one of the popular books, portfolio managers don't create returns, markets do. So good asset allocation is what you should be striving for.