Help me refine my message to my advisor

[racy]

OP, those fees to the FA are costing you a lot more than you probably realize. Jack Bogle used to warn about the 'tyranny of compound costs'. For an eye opener, check this calculator (scroll down the article): https://tinyurl.com/yyxw7pj6

From the article, "Every fee you pay to your financial advisor, to an expense ratio, a bank, or a transaction fee is money that isn’t compounding and making you more money.
Investment fees often seem small, but can add up to be a large part of your portfolio over time. Many investment fees can be avoided – either by choosing different funds, switching to a lower-cost brokerage or investing for yourself."

 

[mrfeh]

Not being flippant, just thank him for the guidance over the years and that you’re taking over management of your portfolio.

This times 1000.

Stop trying to be nice. It's your money this "advisor" is trying to get their hands on.

 

[mrfeh]

FA has done a great job getting two uninvolved investors ready to retire at 50ish, so we feel like we have some loyalty to work through before we move on.

No. You don't owe the FA anything. They have been paid for their service.

Take over your finances.

 

[donheff]

Yikes - he is just proposing to turn you over to a new advisory firm with lots of complex looking advice to make potential clients feel over their heads. Run, do not walk away from Naxis. And do not talk to them since they will be able to run rings around you.

If you feel compelled to meet with your current FA next week, explain that you want to move to a simple DIY index fund/EFT portfolio at an outfit like Vanguard or Schwab and would like his advice on how to make the transition. It should be very easy with tax differed accounts and may need some thought with taxable assets. If he won't do that, ask the receiving firm for advice on how to get it done.

I agree with others that you don't owe this guy anything. At best, he kept you from panicking in downturns and saved you from clueless mistakes. At worst, he sucked a fortune from you over the years and left you thinking you were ahead when you were actually way behind. You will never know for sure.

 

[whatnot]

I would suggest calling Fidelity or Vanguard prior to your meeting. Tell them what you want and see what they recommend based on your desire for low fees.
Then compare their proposal to your current advisor. Especially the fees! You have been given resources above to help you navigate the changes.
Simplify your investments.

 

[target2019]

What is the relationship you now have with the adviser?

Thanks for all the thoughtful responses. It's funny how I thought I was asking one question, but you all answered the question at the back of my mind instead. I don't think we're ready to dump him yet, but I'm trying to figure out our plan to get there . FA has done a great job getting two uninvolved investors ready to retire at 50ish, so we feel like we have some loyalty to work through before we move on.

I just checked out "The Bogleheads Guide to Investing" to be clearer in our long term plan and our message to him.

BTW, the fee relationship so far has been a very, very modest annual fee, and I'm sure some skin in previous products sold to us.

LeeLee2021,

It sounds to me that you do not have enough of a plan to execute, and want to rely on the FA to help. This is a big guess from me, but I've read many, many threads on this board, and I think you need to pay close attention to the following.

1. It was your hard work and investing that got you ready for retirement. This FA has not been helping you maximize your investments.
2. You have paid fees that are not easily discovered. You mentioned a "very, very modest annual fee." That tells me that you haven't examined all of the costs.
3. The FA has mentioned 2.5-2.8% to help you going forward. This tells me that he is now getting at least 2.5% from managing your accounts.
4. Given the above, it seems likely to me that you are in proprietary funds that cannot be converted to low-expense ETFs very easily. The worst case is that you will need to sell everything, pay Capital Gains taxes (may be very, very expensive to get rid of this relationship).
5. You probably need professional help to get away from this relationship with FA. This means paying for a solid plan that lets you know everything about the plan to move away. Others can recommend how to find a planner that charges only for the plan.

I wish you well with this. You've done a great job in saving and creating a large portfolio. Keep learning and you'll find a much simpler way to take care of the portfolio in the future.

 

[ERD50]

... We've talked in the past about how we don't want to: buy into any new 'products' with a >~.75% fee, ...

Long story short, their plan has fees that I'm unwilling to pay (2.8-2.4%?).

OK, true colors shown. You owe the FA nothing, you've paid him too much for too little in the past, just get out. Now.

We went through that. Sent an email, and followed up with a FTF meeting with our FA that we were moving out of the relationship and why. We offered up a proposal as to how he could keep us, but on our terms. He could not meet our terms, and within a week, he was notified by the new firm for transfer of the accounts. ....

Yes, OP should get out. You already gave the FA a chance, don't meet again, that is just wasting your time. It is very likely that the FA knows far more about "selling" clients on ideas, than the FA knows about financial matters. Don't give them a chance to sell you something you don't need/want.

Set up an account at Fidelity/Vanguard/Schwab/ETrade, and do as above, tell that company to pull the assets in-kind from your old account. They will get it done easier and faster than your FA would.

You can do this, it's not hard at all. Pick an AA (and even that is not a big deal, anything from 45/65 to 90/10 will work), pick a few broad index ETF/Funds, Maybe rebalance once a year, maybe not. EZ.

-ERD50

 

[PatrickA5]

Reminds me of the time I tried out a Schwab advisor. Set me up a meeting in a really nice office. Told me he was a VP with hundreds of satisfied clients. I told him I was a DIY investor and had retirement money in VG Lifestrategy funds with a .12% ER. He said he could "do better than that". About a week later I get an email with a flashy brochure about some fund family I'd never heard of. AUM of 1.5% and ER's in the .80% range. I guess when he said he could do better than that, he really meant HE'd do better than that.

 

[LeeLee2021]

OP here - Thank you all for the variety of replies - they have fortified me and my spouse. Our plan is to use the FA meeting this week to plan how to get to a leaner, set / forget approach that we will eventually take over and self-manage (thanks Aerides, your post was very much our mindset).

We know we've lost money in fees/missed gains in the past , but now have more time and ability to focus on managing it going forward and refuse to take on any new investments with any high or unclear fees.

We also will start building a plan to 'unwind' some of our existing investments in the best way possible (target2019, your post is where my head is at when we leave our FA...what are the next tax or migration complications to worry about).

Thank you all! I'll post an update once we get through that meeting and know exactly what we're doing next.

 

[travelover]

...........Right now what you need to figure out is how to extricate yourself with minimal tax liability and other unnecessary costs associated with scraping this guy off the bottom of your shoe.
............

.........
We also will start building a plan to 'unwind' some of our existing investments in the best way possible (target2019, your post is where my head is at when we leave our FA...what are the next tax or migration complications to worry about)...........

As I posted previously, you need to hire an independent advisor temporarily by the hour, to help you unwind these investments with minimal tax implications. I would not rely on your current FA to direct this, as he has a huge conflict of interest. I know that hiring yet another person seems like a waste of money, but a wrong tax move could make that expense seem trivial. If you are moving enough money, you may get this service for free at one of the recommended brokers.

 

[OldShooter]

As I posted previously, you need to hire an independent advisor temporarily by the hour, to help you unwind these investments with minimal tax implications. I would not rely on your current FA to direct this, as he has a huge conflict of interest. I know that hiring year another person seems like a waste of money, but a wrong tax move could make that expense seem trivial. If you are moving enough money, you may get this service for free at one of the recommended brokers.

This may be good advice depending on the complexity of the portfolio, but there is no rush. As someone said above, just transfer the assets "in kind." This simply moves the portfolio to another house and has no tax consequences. Then, sometime during your sabbatical you will start to become more confident on the DIY front and capable of making a decision on hiring an advisor to help you make a plan. A common joke around here, though, is that by the time you learn enough to select a good advisor you don’t need one.

I think your idea of using this advisor to do anything at all with your current portfolio is a bad one. He has already shown you that his interest is his wallet.

 

[latexman]

^^^^^ Agreed. Transfer it, then forget it until you are ready. Just because the "trusted advisor" no longer has his fingers in the pie, doesn't mean the funds won't make money for you while you learn to DIY!

 

[freedomatlast]

Their plan has fees that I'm unwilling to pay (2.8-2.4%?).

So they're asking for over half of a 4% withdrawal rate in fees? No need to be nice. Run away with no opportunity for further discussion.

 

[LarryMelman]

Our plan is to use the FA meeting this week to plan how to get to a leaner, set / forget approach that we will eventually take over and self-manage

That won't be the FA's plan. It just won't happen. He has an emotional commitment from you that you don't seem to want to sever.

 

[mystang52]

That won't be the FA's plan. It just won't happen. He has an emotional commitment from you that you don't seem to want to sever.

I commented earlier in this thread, but this comment deserves a hearty +1. Good Car Salesmen know how to read a customer and what spiel to use. OP has made it clear, to us here, his [misplaced] sense of duty to the FA. Like a car salesman, the FA is very well aware of OP's feelings and will use it to his (i.e., the FA's) benefit.

 

[NgineER]

That won't be the FA's plan. It just won't happen. He has an emotional commitment from you that you don't seem to want to sever.

+1 - Don't even meet with the FA, he will just try to guilt you into remaining with him. Connect with FIDO or Vanguard and transfer your assets and set up a low fee 0.3%-0.5% for basic hand holding.

There is no need to meet with the FA as they will do whatever they can to milk you. They can't do anything to help you with the transfer. If you have no exotic or uncommon funds you should be able to transfer in kind without any tax implications, and again, your FA won't help you with that either.

Run away!

 

[target2019]

Assumptions are being made. No one knows what is in the investment package. Maybe we'll find out.

 

[Exchme]

The dirty little secret is that for basic investing, most folks don't need advisors at all. It's an entire job class built on fooling the customers into believing things that are not so.

The simple Boglehead approach will beat the vast majority of advisors (and the Boglehead advantage gets bigger and bigger with time) as advisors just can't overcome the drag of their own fees.

We had an advisor for a few years and finally got rid of them. He kept asking why we were leaving and I composed a detailed answer but ultimately never sent it, figuring that he was trained in countering reasons, so it it was better to just present the decision with no discussion. He then sent literature trying to "prove" their products were better than a basic Boglehead 3 fund portfolio.

I looked at what he sent and noticed a few little things he did:
-cherry picked the start date in his favor,
-ignored his fees and his funds operating costs (and it turns out his funds bought other funds, which also had operating costs, those were also ignored),
-ignored dividends from the S&P that they used as a comparison (just that was enough to destroy the "advantage")
-shouldn't have used the S&P as a comparison as their funds were riskier than that,
-ignored gross tax inefficiencies of their high turnover funds.

It required great restraint not to reply to the pack of lies he sent, but again, why bother, it would have just given him another pitch to swing at.

Even so it took 2 months to get the money moved as he kept playing games. In a move that should shock no one, he complied on the last day of the quarter, meaning he didn't have to refund any fees.

While we were paying customers, we were well treated, got phone calls and regular meetings and friendly chit-chat. But make no mistake, it was just business to him and his business was putting our money in his pocket.

 

[travelover]

............While we were paying customers, we were well treated, got phone calls and regular meetings and friendly chit-chat.....

And birthday cards. Don't forget the birthday cards.

 

[OldShooter]

And birthday cards. Don't forget the birthday cards.

That's cheapskate stuff. I had a small ($100K, negotiated 50bps fee) test portfolio with an advisor friend and he sent me his first-tier gift every Xmas, a box of Harry and David pears. Funny friendship, though. The pears stopped coming after I closed the account.

 

[Doingitwrong]

+1
The fact you showed up will tell him there’s a chance. And a pretty good one.
He’s used to finding out he lost a client when they disappear from his book. Lol.
I know I found out about tax clients I’d lost when an admin would ask permission to transfer files to XYZ accounting firm.

It might be too much for you to send everything off to Fidelity or Vanguard on a form and a prayer. Large transfers can be nerve racking when you don’t have a person in front of you.
Just another option- I have a 401k at a local community bank’s Trust Department (ie a fiduciary). It’s self directed and they charge me 40 basis point (.4% or .004).
Now that’s still $4000 on a million, but we each named the trust department successor executor. And we dump all kinds of when we get too old documents on them. They are the pre-cancellation people to be notified if we don’t pay our LTC policies. No change! Because they aren’t doing anything but wait. But they have all the info they need.

 

[OldShooter]

... It might be too much for you to send everything off to Fidelity or Vanguard on a form and a prayer. Large transfers can be nerve racking when you don’t have a person in front of you.

@LeeLee2021, if that is a problem for you, I suggest you call the local branch, Fido or Schwab, and ask the branch manager to assign one of his/her troops to help you make the transfer. Make a face-to-face visit to establish contact. Then you will have someone to call if necessary. I have done two or three of these between Fido and Schwab and they have gone without a hitch.

(Depending on the size of the accounts you are transferring, you may be assigned a permanent rep. and get customer service priority. At Schwab the threshold is $1M. I don't know about Fido.)

... they charge me 4 basis point (.4% or .004).

You mean 40bps? That's actually quite a bit relative to advisor options like VG, I think. Schwab will be trustee for our testamentary trusts and IIRC they will charge 70bps but not until we're dead.

 

[latexman]

Fidelity Premium Services kicked in at $1M.

 

[RobbieB]

I would not do business with a financial services company that I couldn't do face to face.

 

[Doingitwrong]

You mean 40bps? That's actually quite a bit relative to advisor options like VG, I think. Schwab will be trustee for our testamentary trusts and IIRC they will charge 70bps but not until we're dead.

Good catch-edited. To old for a little iPhone. Lol
It’s cheap insurance for my wife who is on 100% disability. She has access to passwords for other online accounts and would have trusted people to help her consolidate things at the trust department if I die.