Financial adviser advice (1 Viewer)

[gianmarco]

Long story short, my wife and I started with a financial planner about 12 years ago through our work. After moving a couple years later, we switched to another adviser in the same company. In that time, we've definitely been able to save and grow our money well and our performance has been fine from what I can tell. I'm not a financial guru and don't regularly follow markets but at least have a general idea of what's expected, different vehicles we have our money in, etc.

My issues are the following:

1) The adviser I work with is someone that I like and have grown to trust. He seems to adapt with changes in our lives but has never tried to "sell" us on anything but instead gives us options and pros/cons for those options.

2) Our adviser is with Ameriprise. Reviews of Ameriprise are generally awful. We did not know this when we first started but, now that we've been there for a while, it's just been something to stay with.

3) I don't have an accurate number of just how much we actually pay Ameriprise. Some fees are included in statements but others are "buried" within the funds themselves. We don't pay an actual fee to our adviser as he's compensated by Ameriprise, but we I was told a while ago that the % he makes is tied to our performance so it's in his best interest to make us more money. How true that really is I can't really say.

4) Our adviser doesn't live where we are currently so all of our business is done over the phone and through email. Not a huge sticking point, but finding someone local would be nicer.

I've just recently decided that watching our money grow isn't enough. While I like him and I've seen our money do good things in the last 10 years, I'm willing to move elsewhere. My dilemma is how do I find out if I'm truly overpaying and not doing as well as I can? I've gotten some recommendations of local financial planners through colleagues and I plan on meeting with at least one of them just for an initial consultation. But if I know they'd like to have our business, how can I trust what THEY say if they come back and say we've been overpaying for bad service all this time? Is it possible that someone else will look at our overall financials and say "hey, you're in good shape, no need to move elsewhere"? Aside from trusting a friend's recommendations and getting away from the consensus "bad Ameriprise", I wouldn't be any more sure of what was happening compared to where I am now.

Any thoughts and ideas on what to do next, if anything, would be appreciated. How much, say % wise, is an acceptable amount to pay a financial planner?

 

[johnnycakes]

Chances are very strong he's selling you funds that are laden with 12b-1 fees... you don't pay him directly, but if you were to compute your cost-per-share for any purchases you make, the price per share on any funds in which you invest are probably much higher than market... because the 12b-1 fee is your advisor's compensation. That said, there are some very good funds out there that are heavy with 12b-1 fees (American Funds is one). So you are paying your advisor... you just didn't realize it.

Btw, if he's a CFP®, he's required to disclose his compensation to you.

 

[eoMMan]

Are you learning anything? How much are you paying him? What has been your returns over the past 10 years?

 

[Rattle and Hum]

I'm going to assume you only have mutual funds so please correct me if I am wrong. Can you post the mutual funds (COMPLETE fund names or symbols) which you own through Ameriprise and approximately how long you have owned them? From there, the board should be able to compare those funds to overall market performance of same time, taking into account the fees of the funds. If your fees are tied to performance you should have a signed agreement of such...I doubt this is the case for you. I know that it is possible to have an agreement to pay a certain percentage of assets under management (.5-3%) each year ALONG with paying annual sales/management mutual fund fees. My guess is you are paying the mutual fund fees AND a percentage of assets under management (i.e. they get more if your assets grow but they still get an annual cut either way through fund and portfolio asset fees) because Ameriprise is, I believe, still a fee-based advisory service. To correctly analyze your portfolio it will be important to find out if you are paying this annual fee for assets under management along with normal mutual fund fees... call your advisor and ask if you cannot find in quarterly/annual statements. I don't believe the annual mutual fund fees will be itemized on statements but any other add-on fees should be.

At the end of the day, if your portfolio is under-performing the overall market it makes sense to simply invest in a low-cost index fund or two. A majority of mutual funds under-perform the overall market.

 

[Juxtatarot]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

 

[gianmarco]

Chances are very strong he's selling you funds that are laden with 12b-1 fees... you don't pay him directly, but if you were to compute your cost-per-share for any purchases you make, the price per share on any funds in which you invest are probably much higher than market... because the 12b-1 fee is your advisor's compensation. That said, there are some very good funds out there that are heavy with 12b-1 fees (American Funds is one). So you are paying your advisor... you just didn't realize it.

Btw, if he's a CFP®, he's required to disclose his compensation to you.

He is a CFP. And yes, I know I'm paying my adviser indirectly through these funds. There's just no way for me to truly figure out how much easily. I actually called today and asked him for this information and we will be speaking on Friday. I know the fees that I have on my statements, but those are so small that I'm clearly paying much more through the funds I own. I'm curious to see what he actually provides but he didn't seem taken aback by my request.

I did not know about that last statement. Do I have to ask him to disclose his compensation from me? How do I get that information?

 

[gianmarco]

I'm going to assume you only have mutual funds so please correct me if I am wrong. Can you post the mutual funds (COMPLETE fund names or symbols) which you own through Ameriprise and approximately how long you have owned them? From there, the board should be able to compare those funds to overall market performance of same time, taking into account the fees of the funds. If your fees are tied to performance you should have a signed agreement of such...I doubt this is the case for you. I know that it is possible to have an agreement to pay a certain percentage of assets under management (.5-3%) each year ALONG with paying annual sales/management mutual fund fees. My guess is you are paying the mutual fund fees AND a percentage of assets under management (i.e. they get more if your assets grow but they still get an annual cut either way through fund and portfolio asset fees) because Ameriprise is, I believe, still a fee-based advisory service. To correctly analyze your portfolio it will be important to find out if you are paying this annual fee for assets under management along with normal mutual fund fees... call your advisor and ask if you cannot find in quarterly/annual statements. I don't believe the annual mutual fund fees will be itemized on statements but any other add-on fees should be.

At the end of the day, if your portfolio is under-performing the overall market it makes sense to simply invest in a low-cost index fund or two. A majority of mutual funds under-perform the overall market.

Sure, I can try and post these later today when I get home.

 

[johnnycakes]

Chances are very strong he's selling you funds that are laden with 12b-1 fees... you don't pay him directly, but if you were to compute your cost-per-share for any purchases you make, the price per share on any funds in which you invest are probably much higher than market... because the 12b-1 fee is your advisor's compensation. That said, there are some very good funds out there that are heavy with 12b-1 fees (American Funds is one). So you are paying your advisor... you just didn't realize it.

Btw, if he's a CFP®, he's required to disclose his compensation to you.

He is a CFP. And yes, I know I'm paying my adviser indirectly through these funds. There's just no way for me to truly figure out how much easily. I actually called today and asked him for this information and we will be speaking on Friday. I know the fees that I have on my statements, but those are so small that I'm clearly paying much more through the funds I own. I'm curious to see what he actually provides but he didn't seem taken aback by my request.

I did not know about that last statement. Do I have to ask him to disclose his compensation from me? How do I get that information?

What I can tell you is that disclosure of advisor compensation, especially with respect to the fee-only label, is a very hot topic with the CFP board now. You do not have to ask him to disclose his compensation, and he does not have to tell you exactly how much he made off you... but he DOES have to disclose HOW he is compensated.

My guess is you can ballpark his compensation by comparing the listed market value on date of purchase for a particular fund with the per-share price you were charged on your statement. There is probably a material discrepancy attributable to those 12b-1 fees, most of which go back to your advisor.

 

[Fat Nick]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

I was a CFA with Morgan Stanley a while back. Just didn't like the industry and changed professions. A few points from my view...

First, Juxtatarot is spot on here. This is what I do now. Most of my money is in QQQ, SPDR, etc. I like exchange traded funds, but in general, ETF or just index fund, the underlying concept is the same. Can you beat the market? Sure. Will you do it consistently? Maybe. Will you pay to do it? Most likely. I'm fine with the return of the market as a whole. I've seen a lot of studies that say that one of the big reasons why it's hard to beat the S&P is that merely being IN the S&P boosts a company's performance. Why not just have a fund that simply owns the S&P, right?

Re. mutual funds and what you pay your broker...He's getting paid. They all are. It's either by you directly (commissions), by the fund via 12b-1 fees, or by his company via a managed money account. When I first started in the business, we were heavy into commission-based trades. We got paid if we traded. If we held, we didn't. I had a lot of pressure to trade to generate revenue, even if it wasn't the best thing to do for the client. Towards the end of my time, the move was to managed money on a fee based account. Broker got paid a small percentage of the account value every year, regardless of the trade volume. The pitch was, "Trade all you want, for one low fee." The real swing was, "We get paid no matter what." It depends on your style and views on investing as to wheter managed money is beneficial for you or not.

There is no one-size-fits-all investment strategy. For me, I've got a few decades before retirement. I'm OK with some risk. I don't have the time to be an active investor. Index ETF's in a normal commission account are the best fit for me. Might not be for you, but I'd strongly consider it.

The value of a broker who doesn't ever offer advice is minimal. If you want someone who can be a sounding board, go transactional, not fee based. If you're going to charge me a fee every year, I want you actively looking for investment ideas.

 

[gmbacm]

.

 

[gianmarco]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

I was a CFA with Morgan Stanley a while back. Just didn't like the industry and changed professions. A few points from my view...

First, Juxtatarot is spot on here. This is what I do now. Most of my money is in QQQ, SPDR, etc. I like exchange traded funds, but in general, ETF or just index fund, the underlying concept is the same. Can you beat the market? Sure. Will you do it consistently? Maybe. Will you pay to do it? Most likely. I'm fine with the return of the market as a whole. I've seen a lot of studies that say that one of the big reasons why it's hard to beat the S&P is that merely being IN the S&P boosts a company's performance. Why not just have a fund that simply owns the S&P, right?

Re. mutual funds and what you pay your broker...He's getting paid. They all are. It's either by you directly (commissions), by the fund via 12b-1 fees, or by his company via a managed money account. When I first started in the business, we were heavy into commission-based trades. We got paid if we traded. If we held, we didn't. I had a lot of pressure to trade to generate revenue, even if it wasn't the best thing to do for the client. Towards the end of my time, the move was to managed money on a fee based account. Broker got paid a small percentage of the account value every year, regardless of the trade volume. The pitch was, "Trade all you want, for one low fee." The real swing was, "We get paid no matter what." It depends on your style and views on investing as to wheter managed money is beneficial for you or not.

There is no one-size-fits-all investment strategy. For me, I've got a few decades before retirement. I'm OK with some risk. I don't have the time to be an active investor. Index ETF's in a normal commission account are the best fit for me. Might not be for you, but I'd strongly consider it.

The value of a broker who doesn't ever offer advice is minimal. If you want someone who can be a sounding board, go transactional, not fee based. If you're going to charge me a fee every year, I want you actively looking for investment ideas.

Thanks for this post.

Yeah, I'm not looking for him to educate me on how to invest. What I want is to review my holdings and see which are performing and which aren't and are there better places for my money to be. He has not ever recommended a lot of transactions or trading. Maybe once 1-2 years, he'll say something like "this fund, which did well 5 yrs ago, has been underperforming the last couple years. I suggest we move that money into XYZ fund instead." Or, it'll be like "The foreign market is a good spot to get some more money into. You're currently 5% invested there, let's bump it up to 10% and move it from this small-cap fund". Similarly, through our work retirement 403b that is done through Vanguard, I've given him the entire list of available funds and he gave me the list and %'s that I should invest in each of those. Over the last 6 yrs that I've been at my employment, I've seen about 15% return in that time based on his selections. He's similarly told me to take it out of 2 of those funds in that time that started underperforming.

So, we talk every 6 months about the overall portfolio where he pulls up performance and says that 90-100% of it looks good and we either do nothing or maybe switch one fund around. He helps us with my wife's IRA to roth conversions every year. And he's helped give advice when we were planning for our new home and where would be the best places to secure funds if we needed it (i.e. HELOC vs. borrowing against VUL vs borrowing against 403b).

 

[Fat Nick]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

I was a CFA with Morgan Stanley a while back. Just didn't like the industry and changed professions. A few points from my view...

First, Juxtatarot is spot on here. This is what I do now. Most of my money is in QQQ, SPDR, etc. I like exchange traded funds, but in general, ETF or just index fund, the underlying concept is the same. Can you beat the market? Sure. Will you do it consistently? Maybe. Will you pay to do it? Most likely. I'm fine with the return of the market as a whole. I've seen a lot of studies that say that one of the big reasons why it's hard to beat the S&P is that merely being IN the S&P boosts a company's performance. Why not just have a fund that simply owns the S&P, right?

Re. mutual funds and what you pay your broker...He's getting paid. They all are. It's either by you directly (commissions), by the fund via 12b-1 fees, or by his company via a managed money account. When I first started in the business, we were heavy into commission-based trades. We got paid if we traded. If we held, we didn't. I had a lot of pressure to trade to generate revenue, even if it wasn't the best thing to do for the client. Towards the end of my time, the move was to managed money on a fee based account. Broker got paid a small percentage of the account value every year, regardless of the trade volume. The pitch was, "Trade all you want, for one low fee." The real swing was, "We get paid no matter what." It depends on your style and views on investing as to wheter managed money is beneficial for you or not.

There is no one-size-fits-all investment strategy. For me, I've got a few decades before retirement. I'm OK with some risk. I don't have the time to be an active investor. Index ETF's in a normal commission account are the best fit for me. Might not be for you, but I'd strongly consider it.

The value of a broker who doesn't ever offer advice is minimal. If you want someone who can be a sounding board, go transactional, not fee based. If you're going to charge me a fee every year, I want you actively looking for investment ideas.

Thanks for this post.

Yeah, I'm not looking for him to educate me on how to invest. What I want is to review my holdings and see which are performing and which aren't and are there better places for my money to be. He has not ever recommended a lot of transactions or trading. Maybe once 1-2 years, he'll say something like "this fund, which did well 5 yrs ago, has been underperforming the last couple years. I suggest we move that money into XYZ fund instead." Or, it'll be like "The foreign market is a good spot to get some more money into. You're currently 5% invested there, let's bump it up to 10% and move it from this small-cap fund". Similarly, through our work retirement 403b that is done through Vanguard, I've given him the entire list of available funds and he gave me the list and %'s that I should invest in each of those. Over the last 6 yrs that I've been at my employment, I've seen about 15% return in that time based on his selections. He's similarly told me to take it out of 2 of those funds in that time that started underperforming.

So, we talk every 6 months about the overall portfolio where he pulls up performance and says that 90-100% of it looks good and we either do nothing or maybe switch one fund around. He helps us with my wife's IRA to roth conversions every year. And he's helped give advice when we were planning for our new home and where would be the best places to secure funds if we needed it (i.e. HELOC vs. borrowing against VUL vs borrowing against 403b).

This kind of stuff is very important. I know CFA's can't give true tax advice (leave that to CPA's), but understanding the tax implications of various investment moves, especially with respect to employer-granted options and retirement stuff is very important, and certainly a spot I was weak when I was a CFA. There was a guy I worked with who was a wiz at that kind of thing. He just got the big picture, and was very good at seeing the best way for a client to secure funding for a life event.

It's not always about JUST the investing.

 

[tri-man 47]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

The Board's Finance Committee for my university (where I'm Controller) regularly meets with our external investment manager. The manager (part of a firm) helps to determine an asset allocation policy and then monitor the specific investments. An ongoing discussion is whether to use active or passive management for the individual market segments. One of our Committee members, who works for a large investment firm and who is very savvy, is the one who most actively pushes for passive funds. Why pay 125 basis points when you can get a comparable passive fund that only incurs costs equal to 40 basis points? Does the manager's selections achieve enough extra return to offset that higher cost?

My general sense for investment advisors for individuals is that their fees can be quite substantial, so I agree with Juxt that passive investing is a very good choice. The trick is determining an appropriate blend of assets - equities (U.S., international, emerging markets), fixed income (domestic or international), real estate, commodities.

 

[gianmarco]

I'm going to assume you only have mutual funds so please correct me if I am wrong. Can you post the mutual funds (COMPLETE fund names or symbols) which you own through Ameriprise and approximately how long you have owned them? From there, the board should be able to compare those funds to overall market performance of same time, taking into account the fees of the funds. If your fees are tied to performance you should have a signed agreement of such...I doubt this is the case for you. I know that it is possible to have an agreement to pay a certain percentage of assets under management (.5-3%) each year ALONG with paying annual sales/management mutual fund fees. My guess is you are paying the mutual fund fees AND a percentage of assets under management (i.e. they get more if your assets grow but they still get an annual cut either way through fund and portfolio asset fees) because Ameriprise is, I believe, still a fee-based advisory service. To correctly analyze your portfolio it will be important to find out if you are paying this annual fee for assets under management along with normal mutual fund fees... call your advisor and ask if you cannot find in quarterly/annual statements. I don't believe the annual mutual fund fees will be itemized on statements but any other add-on fees should be.

At the end of the day, if your portfolio is under-performing the overall market it makes sense to simply invest in a low-cost index fund or two. A majority of mutual funds under-perform the overall market.

ACERX

ACUIX

AMERICAN CENTURY VP VALUE

AMERICAN CENTURY VP VALUE

AMERICAN CENTURY VP VALUE

CBLCX

COL INCOME OPPORTUNITIES CL3

COL INCOME OPPORTUNITIES CL3

COL VP EMERGING MARKET FD CL3

COL VP EMERGING MARKET FD CL3

COL VP EMERGING MARKET FD CL3

DHMCX

FESGX

FIXED ACCOUNT

FIXED ACCOUNT

FTVIPT FRNKLN MUT SHRS VIP CL

FTVIPT FRNKLN MUT SHRS VIP CL

GOLDMAN VIT MIDCAP VALUE

GOLDMAN VIT MIDCAP VALUE

INVESCO INTL GROWTH SER II

INVESCO INTL GROWTH SER II

JANUS ASPEN OVERSEAS

JANUS ASPEN OVERSEAS

JANUS ASPEN OVERSEAS

JANUS ASPEN SERIES GLOBAL TEC

JCLGX

MORGAN STANLY UIF GLBL RST CL

MORGAN STANLY UIF MD CA GR CL

OGLCX

PIMCO VIT ALL ASSET PORTFOLIO

PIMCO VIT ALL ASSET PORTFOLIO

PIMCO VIT ALL ASSET PORTFOLIO

SVBCX

TEDSX

TIBCX

VBLTX

VBLTX

VCVSX

VCVSX

VCVSX

VDIGX

VDIGX

VEIEX

VEIEX

VEIEX

VEIPX

VEIPX

VEIPX

VFORX

VFORX

VGSIX

VHCOX

VMGRX

VMGRX

VP MOD AGGRESSIVE CLASS 2

VP MOD AGGRESSIVE CLASS 4

VP PARTNER SMALL CAP CL3

VP PARTNER SMALL CAP CL3

VUSTX

VWENX

VWENX

VWENX

VWIGX

VWINX

WANGER INTERNATIONAL

 

[SeveredHorseHeads]

Just checked a few of the non-Vanguard funds above - 1.9% expense ratios with 1% loads.

I would never let a financial advisor manage a dime of my money.

 

[Sand]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

 

[gianmarco]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

 

[sbonomo]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

I was a CFA with Morgan Stanley a while back. Just didn't like the industry and changed professions. A few points from my view...

First, Juxtatarot is spot on here. This is what I do now. Most of my money is in QQQ, SPDR, etc. I like exchange traded funds, but in general, ETF or just index fund, the underlying concept is the same. Can you beat the market? Sure. Will you do it consistently? Maybe. Will you pay to do it? Most likely. I'm fine with the return of the market as a whole. I've seen a lot of studies that say that one of the big reasons why it's hard to beat the S&P is that merely being IN the S&P boosts a company's performance. Why not just have a fund that simply owns the S&P, right?

Re. mutual funds and what you pay your broker...He's getting paid. They all are. It's either by you directly (commissions), by the fund via 12b-1 fees, or by his company via a managed money account. When I first started in the business, we were heavy into commission-based trades. We got paid if we traded. If we held, we didn't. I had a lot of pressure to trade to generate revenue, even if it wasn't the best thing to do for the client. Towards the end of my time, the move was to managed money on a fee based account. Broker got paid a small percentage of the account value every year, regardless of the trade volume. The pitch was, "Trade all you want, for one low fee." The real swing was, "We get paid no matter what." It depends on your style and views on investing as to wheter managed money is beneficial for you or not.

There is no one-size-fits-all investment strategy. For me, I've got a few decades before retirement. I'm OK with some risk. I don't have the time to be an active investor. Index ETF's in a normal commission account are the best fit for me. Might not be for you, but I'd strongly consider it.

The value of a broker who doesn't ever offer advice is minimal. If you want someone who can be a sounding board, go transactional, not fee based. If you're going to charge me a fee every year, I want you actively looking for investment ideas.

Thanks for this post.

Yeah, I'm not looking for him to educate me on how to invest. What I want is to review my holdings and see which are performing and which aren't and are there better places for my money to be. He has not ever recommended a lot of transactions or trading. Maybe once 1-2 years, he'll say something like "this fund, which did well 5 yrs ago, has been underperforming the last couple years. I suggest we move that money into XYZ fund instead." Or, it'll be like "The foreign market is a good spot to get some more money into. You're currently 5% invested there, let's bump it up to 10% and move it from this small-cap fund". Similarly, through our work retirement 403b that is done through Vanguard, I've given him the entire list of available funds and he gave me the list and %'s that I should invest in each of those. Over the last 6 yrs that I've been at my employment, I've seen about 15% return in that time based on his selections. He's similarly told me to take it out of 2 of those funds in that time that started underperforming.

So, we talk every 6 months about the overall portfolio where he pulls up performance and says that 90-100% of it looks good and we either do nothing or maybe switch one fund around. He helps us with my wife's IRA to roth conversions every year. And he's helped give advice when we were planning for our new home and where would be the best places to secure funds if we needed it (i.e. HELOC vs. borrowing against VUL vs borrowing against 403b).

This kind of stuff is very important. I know CFA's can't give true tax advice (leave that to CPA's), but understanding the tax implications of various investment moves, especially with respect to employer-granted options and retirement stuff is very important, and certainly a spot I was weak when I was a CFA. There was a guy I worked with who was a wiz at that kind of thing. He just got the big picture, and was very good at seeing the best way for a client to secure funding for a life event.

It's not always about JUST the investing.

any chance you are a "CFA"?

 

[Sand]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

In your biggest account what is the count of mutual funds? I can see how you'd have some repeats and different ones between your wife's and your 401k, but with the IRA there is no need to have a whole other set of funds.

If the numbers of funds in your portfolio is over 10 or so you have way too much complication in there. There just aren't that many asset classes out there.

 

[gianmarco]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

In your biggest account what is the count of mutual funds? I can see how you'd have some repeats and different ones between your wife's and your 401k, but with the IRA there is no need to have a whole other set of funds.

If the numbers of funds in your portfolio is over 10 or so you have way too much complication in there. There just aren't that many asset classes out there.

Our IRAs have 3-4 each. Our VUL's each have 10 each. Our work retirement funds have 8 each. The thing is that these accounts were created at different times so different funds were chosen at each time based on what he thought was best. Unless there was significant underperformance, the funds haven't been changed. That's why over the years, each of those accounts have all but 1 or 2 of the funds originally purchased for that particular account and why we make relatively few moves.

My work retirement funds, which aren't even with Ameriprise but were based on his recommendations of which Vanguard funds to choose from have performed at 13% over 5 yrs, 15% over 3 yrs, and 9% over the last year, as an example.

 

[Rattle and Hum]

The challenge is two-fold. How did each fund perform versus stock market (index fund) and how did it perform when you plug in fund expenses versus index fund. A daunting task.

Many of these funds have a 1.8% or greater annual fee plus some sales charges. Some have a 1% fee if you sell within 12 years of purchase (FESGX for example). Vanguard stock index funds @ .3%. So, let's assume your funds cost you 1.5% per year over index investing. Assuming your portfolio performs the same as the index you are investing in (a tough feat since >60% of mutual funds don't) and funds return 10% a year, a $10K investment in index fund would be valued at $15,975, $25,500, and $104,036 for 5, 10, and 25 year periods. Your funds with fees, $14,600, $21,500, and $69,200 for same time frame.

Of course, the stock market does not advance every year and its not always the same percentage so actual calculations are tricky. I used this site to get figures: http://research.scottrade.com/qnr/Public/MutualFunds/Expenses?symbol=VFINX I compared VFINX to FESGX knowing it has 1.87 expenses each year. Plug in $10K initial investment and increased 'expected return' bar to 10%.

 

[Rattle and Hum]

If your financial planner states XYZ fund had such and such performance always find out 1) how did that compare to the index of that category, and 2) did those past results take into account loads (up front and deferred sales charges) and annual fees?

 

[Binky The Doormat]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

In your biggest account what is the count of mutual funds? I can see how you'd have some repeats and different ones between your wife's and your 401k, but with the IRA there is no need to have a whole other set of funds.

If the numbers of funds in your portfolio is over 10 or so you have way too much complication in there. There just aren't that many asset classes out there.

Our IRAs have 3-4 each. Our VUL's each have 10 each. Our work retirement funds have 8 each. The thing is that these accounts were created at different times so different funds were chosen at each time based on what he thought was best. Unless there was significant underperformance, the funds haven't been changed. That's why over the years, each of those accounts have all but 1 or 2 of the funds originally purchased for that particular account and why we make relatively few moves.

My work retirement funds, which aren't even with Ameriprise but were based on his recommendations of which Vanguard funds to choose from have performed at 13% over 5 yrs, 15% over 3 yrs, and 9% over the last year, as an example.

What Vanguard funds was he recommending? I have everything with Vanguard (along with muni bond paper) and would like to see where he is headed.

 

[Judge Smails]

Very interested in this thread. My brother in law is my broker at Wells Fargo Advisors and has me in a managed portfolio. We just did our review, and I questioned the managed fund vs. straight index fund. I'm a bit older though so risk is more moderate.

My friend has an Ameriprise office. All I know is he does very well for himself.....

 

[glvsav37]

:Black$dot:

 

[Binky The Doormat]

Very interested in this thread. My brother in law is my broker at Wells Fargo Advisors and has me in a managed portfolio. We just did our review, and I questioned the managed fund vs. straight index fund. I'm a bit older though so risk is more moderate.

My friend has an Ameriprise office. All I know is he does very well for himself.....

With retirement coming, and having to shift my focus on something besides just growth (income stream now) I couldn't justify the fees with the kind of relatively conservative portfolio I had. So I went on my own and moved everything to Vanguard. Adding their .75% - 1% and up fees on top of mutual fund fees (especially the "fancy - named after a guy" funds) it really eats into your returns.

 

[gianmarco]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

In your biggest account what is the count of mutual funds? I can see how you'd have some repeats and different ones between your wife's and your 401k, but with the IRA there is no need to have a whole other set of funds.

If the numbers of funds in your portfolio is over 10 or so you have way too much complication in there. There just aren't that many asset classes out there.

Our IRAs have 3-4 each. Our VUL's each have 10 each. Our work retirement funds have 8 each. The thing is that these accounts were created at different times so different funds were chosen at each time based on what he thought was best. Unless there was significant underperformance, the funds haven't been changed. That's why over the years, each of those accounts have all but 1 or 2 of the funds originally purchased for that particular account and why we make relatively few moves.

My work retirement funds, which aren't even with Ameriprise but were based on his recommendations of which Vanguard funds to choose from have performed at 13% over 5 yrs, 15% over 3 yrs, and 9% over the last year, as an example.

What Vanguard funds was he recommending? I have everything with Vanguard (along with muni bond paper) and would like to see where he is headed.

All the Vanguard funds are listed above.

 

[FUBAR]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

They are but they aren't all in one account. Some of those are my retirement fund at work, some are my wife's at work, some are my IRA., some are her IRA, etc.

In your biggest account what is the count of mutual funds? I can see how you'd have some repeats and different ones between your wife's and your 401k, but with the IRA there is no need to have a whole other set of funds.

If the numbers of funds in your portfolio is over 10 or so you have way too much complication in there. There just aren't that many asset classes out there.

Our IRAs have 3-4 each. Our VUL's each have 10 each. Our work retirement funds have 8 each. The thing is that these accounts were created at different times so different funds were chosen at each time based on what he thought was best. Unless there was significant underperformance, the funds haven't been changed. That's why over the years, each of those accounts have all but 1 or 2 of the funds originally purchased for that particular account and why we make relatively few moves.

My work retirement funds, which aren't even with Ameriprise but were based on his recommendations of which Vanguard funds to choose from have performed at 13% over 5 yrs, 15% over 3 yrs, and 9% over the last year, as an example.

I'm no expert but 40 funds seems about 4X what is reasonable.Eta: just looked through our accounts, between the TSP, two Roth IRAs, four educational IRAs, and our future home account, we have 18. Which is more than I'd like

 

[Ned]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

 

[mquinnjr]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

Thanks for the insight

I don't "read" prospectuses front to cover, but I'll get one for something I am interested in investing in and do three things:

1) Control-F "Fee"

2) Control-F "Commission"

3) Review the investment strategy summary, and top holdings.

It takes maybe 5 or so minutes to get all the info that an average investor needs. Heck, I use Schwab and their website will lay this out for you when researching in an organized grid based upon ETFs/MFs/Stocks, etc. that you feed into it. I'm reasonably sure every brokerage has this level of functionality. Doing the above within a PDF of a prospectus would actually be the long-hand way to do research.

 

[Ned]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

Thanks for the insight

I don't "read" prospectuses front to cover, but I'll get one for something I am interested in investing in and do three things:

1) Control-F "Fee"

2) Control-F "Commission"

3) Review the investment strategy summary, and top holdings.

It takes maybe 5 or so minutes to get all the info that an average investor needs. Heck, I use Schwab and their website will lay this out for you when researching in an organized grid based upon ETFs/MFs/Stocks, etc. that you feed into it. I'm reasonably sure every brokerage has this level of functionality. Doing the above within a PDF of a prospectus would actually be the long-hand way to do research.

If only more people would do this!

Although, I guess if they did, the brokers would have less money which in turn means paying me less or not at all.

 

[gianmarco]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

This is awesome info, thanks.

So for someone that isn't nearly this savvy and not knowing where exactly to look for all this (and being confident that if I did that I would find it all), do you have any recs to try and avoid as much of the overpriced fees as possible?

 

[Fat Nick]

I decided long ago on do-it-yourself passive investing with index funds. I'm always surprised by how few people go that route.

I was a CFA with Morgan Stanley a while back. Just didn't like the industry and changed professions. A few points from my view...

First, Juxtatarot is spot on here. This is what I do now. Most of my money is in QQQ, SPDR, etc. I like exchange traded funds, but in general, ETF or just index fund, the underlying concept is the same. Can you beat the market? Sure. Will you do it consistently? Maybe. Will you pay to do it? Most likely. I'm fine with the return of the market as a whole. I've seen a lot of studies that say that one of the big reasons why it's hard to beat the S&P is that merely being IN the S&P boosts a company's performance. Why not just have a fund that simply owns the S&P, right?

Re. mutual funds and what you pay your broker...He's getting paid. They all are. It's either by you directly (commissions), by the fund via 12b-1 fees, or by his company via a managed money account. When I first started in the business, we were heavy into commission-based trades. We got paid if we traded. If we held, we didn't. I had a lot of pressure to trade to generate revenue, even if it wasn't the best thing to do for the client. Towards the end of my time, the move was to managed money on a fee based account. Broker got paid a small percentage of the account value every year, regardless of the trade volume. The pitch was, "Trade all you want, for one low fee." The real swing was, "We get paid no matter what." It depends on your style and views on investing as to wheter managed money is beneficial for you or not.

There is no one-size-fits-all investment strategy. For me, I've got a few decades before retirement. I'm OK with some risk. I don't have the time to be an active investor. Index ETF's in a normal commission account are the best fit for me. Might not be for you, but I'd strongly consider it.

The value of a broker who doesn't ever offer advice is minimal. If you want someone who can be a sounding board, go transactional, not fee based. If you're going to charge me a fee every year, I want you actively looking for investment ideas.

Thanks for this post.

Yeah, I'm not looking for him to educate me on how to invest. What I want is to review my holdings and see which are performing and which aren't and are there better places for my money to be. He has not ever recommended a lot of transactions or trading. Maybe once 1-2 years, he'll say something like "this fund, which did well 5 yrs ago, has been underperforming the last couple years. I suggest we move that money into XYZ fund instead." Or, it'll be like "The foreign market is a good spot to get some more money into. You're currently 5% invested there, let's bump it up to 10% and move it from this small-cap fund". Similarly, through our work retirement 403b that is done through Vanguard, I've given him the entire list of available funds and he gave me the list and %'s that I should invest in each of those. Over the last 6 yrs that I've been at my employment, I've seen about 15% return in that time based on his selections. He's similarly told me to take it out of 2 of those funds in that time that started underperforming.

So, we talk every 6 months about the overall portfolio where he pulls up performance and says that 90-100% of it looks good and we either do nothing or maybe switch one fund around. He helps us with my wife's IRA to roth conversions every year. And he's helped give advice when we were planning for our new home and where would be the best places to secure funds if we needed it (i.e. HELOC vs. borrowing against VUL vs borrowing against 403b).

This kind of stuff is very important. I know CFA's can't give true tax advice (leave that to CPA's), but understanding the tax implications of various investment moves, especially with respect to employer-granted options and retirement stuff is very important, and certainly a spot I was weak when I was a CFA. There was a guy I worked with who was a wiz at that kind of thing. He just got the big picture, and was very good at seeing the best way for a client to secure funding for a life event.

It's not always about JUST the investing.

any chance you are a "CFA"?

Used to be...Got out of that line of work over 10 years ago and all my licenses are long expired.

 

[tri-man 47]

And let's not forget the most important investment element of all this: Much more important than the fees or the funds selected is the importance of starting early with investments/retirement funds ...the power of compounded returns!

 

[Ned]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

This is awesome info, thanks.

So for someone that isn't nearly this savvy and not knowing where exactly to look for all this (and being confident that if I did that I would find it all), do you have any recs to try and avoid as much of the overpriced fees as possible?

mquinnjr's post is your best bet. Go to the mutual fund's website and find the prospectus; do a find on 'fee', 'commission', '12b-1', etc. Jot those down and compare accordingly. You also will need to check the Statement of Additional Information (SAI) to find some of the fees. A lot of the SAI's will tell you more info on the 12b-1, such as which classes are aging for a year before charging. This of course is what you're paying your advisor to know......

This mutual fund game is set up for big money; small ball is going to be way behind the 8-ball. So unless you're dealing with 5-6 figures, I'd just follow the advice from others - index ETFs.

All of this changes depending on your account type. So if you're dealing with a 401K as part of a big company, a lot of this stuff will be moot since they will have you in a Class R or I share which typically has no up front costs and lower 12b-1s. The MF just gets their nut by sheer volume on these.

 

[stubby]

I work behind the scenes on the mutual fund side for a large investment firm. Odds are most of FBG's accounts have gone through my hands at one point in time....

Fees are all over the place in this business, and they're not all going to the advisor. There are a number of different mutual fund types that will have some of these fees where others will not. If your advisor is worth a damn, he's taking this into account when giving you advice. All of this info is readily available in the prospectus, but how many people are really reading those god awful things?

Front-end commission*: This is going straight to your brokerage firm the moment you place the purchase order. The percentage will depend on how much you buy. The more you buy, the lower the percentage. How they divvy that up internally is up to them. Most of the time the mutual fund (MF) is going to get a cut of this.

Back-end commission* (CDSC): This is taken on redemption based on the age of the shares. The longer you've held your shares, the lower the percentage. Class B shares are a dying breed, but they're the biggest culprit. Some funds won't be fully aged until 96 months, but most are around 60 months. Once they're fully aged, you no longer will be charged.

Short Term Trader Fee (STTF): MF's want your money to stay put, so many of them charge an STTF on redemption. A typical rule is 2% on any redemption within 90 days of purchase.

Trails (12b-1): Brokers are encouraged to keep your money in these funds. Depending on the fund and the share class, the fund won't start paying 12b-1's until the shares have aged for 1 year. Others, typically Class A shares only, will pay 12b-1's immediately. Some other off the wall funds will pay on a sliding scale, based on age (Invesco XPRTX comes to mind). Trails are paid either monthly or quarterly and range anywhere from 25-100 basis points, depending on the share class.

Service Fees: This is a much lesser known fee, but most of your big time brokers are being serviced by a sub accounting agent. The broker is charged a flat monthly fee per account. Typically around $15 per account.

*There are variations to the front-end/back-end commission, but that's for jumbo trades (> $1M). Jumbo's are usually fronted, meaning the commission is paid to the broker by the mutual fund; the shareholder gets in at NAV. Most will have a 12mos back-end fee tagged to this to ensure the MF get's their fronted commission back if you redeem within a year. Typically 1%.

This is awesome info, thanks.

So for someone that isn't nearly this savvy and not knowing where exactly to look for all this (and being confident that if I did that I would find it all), do you have any recs to try and avoid as much of the overpriced fees as possible?

mquinnjr's post is your best bet. Go to the mutual fund's website and find the prospectus; do a find on 'fee', 'commission', '12b-1', etc. Jot those down and compare accordingly. You also will need to check the Statement of Additional Information (SAI) to find some of the fees. A lot of the SAI's will tell you more info on the 12b-1, such as which classes are aging for a year before charging. This of course is what you're paying your advisor to know......This mutual fund game is set up for big money; small ball is going to be way behind the 8-ball. So unless you're dealing with 5-6 figures, I'd just follow the advice from others - index ETFs.

All of this changes depending on your account type. So if you're dealing with a 401K as part of a big company, a lot of this stuff will be moot since they will have you in a Class R or I share which typically has no up front costs and lower 12b-1s. The MF just gets their nut by sheer volume on these.

Most of this info is available on Morningstar.com

Just type in the symbol of the mutual fund or ETF in the quote box, and you'll be directed to the individual fund page. It's available to anyone, and it will save you the time/hassle of pulling up each fund company's website.

 

[siffoin]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

 

[El Floppo]

.

 

[gianmarco]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

I don't necessarily agree here.

While no one will actually care about my money more than I do, the same could be said about virtually anything that anybody provides a service for. No one cares about my hair more than I do, but I'm still going to see a barber to cut it because that's the service that he provides and I'm willing to pay someone that can do a better job at it than me. No one cares about my car more than I do, but if I have a problem with it, I'm going to find a mechanic and pay them to fix it because they can do a better job at it than me.

Similarly, I recognize that I simply don't have the time nor the interest to learn enough about finances that I'd do as good of a job as someone else who does it as a career. And sure, there are going to be people out there that would rather make money than provide a good service. But, there are also good people in the field that genuinely work hard for their clients and get paid for what they do (as they should). If I see a mechanic about my car, there are guys that will recommend I do more than I should so they can make more money. There are also honest mechanics that will recommend what I need and nothing more because they believe in providing a good service and will build a client base around that good service they provide. I'm simply trying to find that person in the financial sector.

Thus, I'd rather pay someone money to help me get the most out of mine. Does it mean I couldn't make more if I did it myself? Of course I could if I was willing to spend the time and effort to both research the best ways to invest and at least follow along and keep up with these things. But this is an area that I choose not to do so. That said, if I'm paying someone X amount for a service and there's a good way for me to find someone else that can either a) do the same for less or b) do more for the same, then I'd like to find out how to do that. That's the point of this thread.

 

[George Jefferson Airplane]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

I don't necessarily agree here.

While no one will actually care about my money more than I do, the same could be said about virtually anything that anybody provides a service for. No one cares about my hair more than I do, but I'm still going to see a barber to cut it because that's the service that he provides and I'm willing to pay someone that can do a better job at it than me. No one cares about my car more than I do, but if I have a problem with it, I'm going to find a mechanic and pay them to fix it because they can do a better job at it than me.

Similarly, I recognize that I simply don't have the time nor the interest to learn enough about finances that I'd do as good of a job as someone else who does it as a career. And sure, there are going to be people out there that would rather make money than provide a good service. But, there are also good people in the field that genuinely work hard for their clients and get paid for what they do (as they should). If I see a mechanic about my car, there are guys that will recommend I do more than I should so they can make more money. There are also honest mechanics that will recommend what I need and nothing more because they believe in providing a good service and will build a client base around that good service they provide. I'm simply trying to find that person in the financial sector.

Thus, I'd rather pay someone money to help me get the most out of mine. Does it mean I couldn't make more if I did it myself? Of course I could if I was willing to spend the time and effort to both research the best ways to invest and at least follow along and keep up with these things. But this is an area that I choose not to do so. That said, if I'm paying someone X amount for a service and there's a good way for me to find someone else that can either a) do the same for less or b) do more for the same, then I'd like to find out how to do that. That's the point of this thread.

Nothing wrong with that approach at all IMO. I would go with a fee based advisor and a fiduciary, avoid anyone who peddles annuities of any kind, and do some research by using resources like this. Bigger doesn't necessarily mean better either, but having a good amount of assets on hand is something that is comforting. Interview 3 or 4 of them and you'll find the right fit. If they start bragging about gains or accomplishments while making it about them, I would avoid. Sales pitches to get your business wreaks of instability, the best advisers will make it about you and what your goals are over time.

 

[johnnycakes]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

I don't necessarily agree here.

While no one will actually care about my money more than I do, the same could be said about virtually anything that anybody provides a service for. No one cares about my hair more than I do, but I'm still going to see a barber to cut it because that's the service that he provides and I'm willing to pay someone that can do a better job at it than me. No one cares about my car more than I do, but if I have a problem with it, I'm going to find a mechanic and pay them to fix it because they can do a better job at it than me.

Similarly, I recognize that I simply don't have the time nor the interest to learn enough about finances that I'd do as good of a job as someone else who does it as a career. And sure, there are going to be people out there that would rather make money than provide a good service. But, there are also good people in the field that genuinely work hard for their clients and get paid for what they do (as they should). If I see a mechanic about my car, there are guys that will recommend I do more than I should so they can make more money. There are also honest mechanics that will recommend what I need and nothing more because they believe in providing a good service and will build a client base around that good service they provide. I'm simply trying to find that person in the financial sector.

Thus, I'd rather pay someone money to help me get the most out of mine. Does it mean I couldn't make more if I did it myself? Of course I could if I was willing to spend the time and effort to both research the best ways to invest and at least follow along and keep up with these things. But this is an area that I choose not to do so. That said, if I'm paying someone X amount for a service and there's a good way for me to find someone else that can either a) do the same for less or b) do more for the same, then I'd like to find out how to do that. That's the point of this thread.

The point he was trying to make is (especially) commission-based salesmen will have a conflict of interest that does not exist with respect to your barber or your mechanic. It's a valid point... But quickly becomes less valid (but not necessarily invalid) when one moves up the food chain to more professional (fee-only, et al) type advisors. So no matter how good you think they are, an attitude of professional skepticism is always a healthy thing.

 

[gianmarco]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

I don't necessarily agree here.

While no one will actually care about my money more than I do, the same could be said about virtually anything that anybody provides a service for. No one cares about my hair more than I do, but I'm still going to see a barber to cut it because that's the service that he provides and I'm willing to pay someone that can do a better job at it than me. No one cares about my car more than I do, but if I have a problem with it, I'm going to find a mechanic and pay them to fix it because they can do a better job at it than me.

Similarly, I recognize that I simply don't have the time nor the interest to learn enough about finances that I'd do as good of a job as someone else who does it as a career. And sure, there are going to be people out there that would rather make money than provide a good service. But, there are also good people in the field that genuinely work hard for their clients and get paid for what they do (as they should). If I see a mechanic about my car, there are guys that will recommend I do more than I should so they can make more money. There are also honest mechanics that will recommend what I need and nothing more because they believe in providing a good service and will build a client base around that good service they provide. I'm simply trying to find that person in the financial sector.

Thus, I'd rather pay someone money to help me get the most out of mine. Does it mean I couldn't make more if I did it myself? Of course I could if I was willing to spend the time and effort to both research the best ways to invest and at least follow along and keep up with these things. But this is an area that I choose not to do so. That said, if I'm paying someone X amount for a service and there's a good way for me to find someone else that can either a) do the same for less or b) do more for the same, then I'd like to find out how to do that. That's the point of this thread.

The point he was trying to make is (especially) commission-based salesmen will have a conflict of interest that does not exist with respect to your barber or your mechanic. It's a valid point... But quickly becomes less valid (but not necessarily invalid) when one moves up the food chain to more professional (fee-only, et al) type advisors. So no matter how good you think they are, an attitude of professional skepticism is always a healthy thing.

Oh, I get the point he was making. I disagree that there isn't the same conflict of interest for the mechanic who gets paid more for more work he does (i.e. unnecessary work). Or a Dentist, for example, telling me I need X and Y done when I truly don't and just don't know any better. It's just on a smaller scale.

So is a fee-only type adviser the better way to go? If he's getting paid a flat fee, for example, what's to keep him motivated to reevaluate things and make sure I'm maximizing my money? My amount of professional skepticism is what brought this thread about in the first place and I completely agree. I initially agreed to work with our current adviser years ago because he explained that the better our money performs, the more money he makes. It all made sense at the time and he has always appeared very interested in our behalf and helpful to any calls or questions I've ever had without ever trying to sell me on all these different trades. I'd like to think that my judgment of him and his character is good and that he is doing right by us. I just have no way to know for sure based on what I currently know now. This thread has helped already in trying to answer some of those questions.

I guess my bottom line question is how do I make sure, from a relatively naive financial viewpoint that I have, that the person that is working as my adviser is doing the best they can and doing the right thing for me? Is the answer "go to a fee-only?" Is there more to it?

 

[Rattle and Hum]

Looking to help OP compare his funds to index funds. Is there a free site that allows someone to accurately look up a funds past performance taking into account fund's actual sales fees (loads, 12b-1, etc.) and management fees? I.e. Invest $10K into fund ABCDX and one would have made $X over 1, 3, 5, 10, 20 years.

All the ones I found do not factor in the fees. Thanks

 

[Chadstroma]

Not a fan of Ameriprise.

In general, the investment angle is very lucrative for banks. If it is lucrative that means that are moving money from your pocket to theirs. There are a number of ways that they do this which looks like it has already been hashed out from others here as I scanned through the posts.

My general advice is that unless your situation is overly complicated- you are usually going to be better off in the long run by going through a discount self-directed brokerage and buying low fee index funds. It really does not take much financial acumen to do this and there is plenty of research to suggest that the vast majority of people would be better off by going this route than by using a financial advisor/broker etc.

However, if you feel like you are over your head, don't have or want to spend time and/or would like the peace of mind of being able to talk to someone that is knowledgeable, I would suggest getting a flat fee financial adviser- you pay them their flat fee and there is no conflict of interest of them getting more money through 'hidden' fees etc.

 

[Steve Tasker]

I'll offer my two cents here.

You've said nothing but nice things about your current advisor so far in this thread. You believe yourself to be a good judge of character, and believe he's doing a good job, your investment returns have been in line with what you expect, etc. There's nothing wrong with shopping around and investigating your options; it's important to understand the fees involved, for certain.

Honestly, straight-up, you should discuss this with your current advisor. Be honest with him. You're worried about fees. Ask him directly how he gets paid off of your investments. Talk to him and see what he says. Is he wishy-washy? Dodging the question? Trying to bull#### you? Or does he lay out facts, numbers? How do you feel about his responses? Even if you don't directly tell him you're shopping, he'll know what you're getting at.

I only say this as a financial service professional (CPA). Sometimes my clients shop around and look for a better deal, it's the nature of the business. It WILL happen if you're in the client-service business. But there is nothing worse than finding out a client is going elsewhere when I had no idea there was even a problem. Maybe the Ameriprise fees are just too high and there's nothing he can personally do, and you need to go elsewhere to get better fees or service. I'm not a big fan of Ameriprise (just see the Ameriprise thread on here from a year or so ago), but I won't write off every single person who works there as a shyster without knowing them. If he's been good to you, you at least owe him an honest and open discussion about it, IMO.

 

[DA RAIDERS]

.

 

[siffoin]

I think you are asking questions because you realize this universal truth...

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO!

And if you take that just one tiny step further you will realize that your financial adviser is following the same universal truth. He cares more about his money than he does yours. (he will act in his self-interest above your self interest)

I don't necessarily agree here.

While no one will actually care about my money more than I do, the same could be said about virtually anything that anybody provides a service for. No one cares about my hair more than I do, but I'm still going to see a barber to cut it because that's the service that he provides and I'm willing to pay someone that can do a better job at it than me. No one cares about my car more than I do, but if I have a problem with it, I'm going to find a mechanic and pay them to fix it because they can do a better job at it than me.

Similarly, I recognize that I simply don't have the time nor the interest to learn enough about finances that I'd do as good of a job as someone else who does it as a career. And sure, there are going to be people out there that would rather make money than provide a good service. But, there are also good people in the field that genuinely work hard for their clients and get paid for what they do (as they should). If I see a mechanic about my car, there are guys that will recommend I do more than I should so they can make more money. There are also honest mechanics that will recommend what I need and nothing more because they believe in providing a good service and will build a client base around that good service they provide. I'm simply trying to find that person in the financial sector.

Thus, I'd rather pay someone money to help me get the most out of mine. Does it mean I couldn't make more if I did it myself? Of course I could if I was willing to spend the time and effort to both research the best ways to invest and at least follow along and keep up with these things. But this is an area that I choose not to do so. That said, if I'm paying someone X amount for a service and there's a good way for me to find someone else that can either a) do the same for less or b) do more for the same, then I'd like to find out how to do that. That's the point of this thread.

The point he was trying to make is (especially) commission-based salesmen will have a conflict of interest that does not exist with respect to your barber or your mechanic. It's a valid point... But quickly becomes less valid (but not necessarily invalid) when one moves up the food chain to more professional (fee-only, et al) type advisors. So no matter how good you think they are, an attitude of professional skepticism is always a healthy thing.

Oh, I get the point he was making. I disagree that there isn't the same conflict of interest for the mechanic who gets paid more for more work he does (i.e. unnecessary work). Or a Dentist, for example, telling me I need X and Y done when I truly don't and just don't know any better. It's just on a smaller scale.

So is a fee-only type adviser the better way to go? If he's getting paid a flat fee, for example, what's to keep him motivated to reevaluate things and make sure I'm maximizing my money? My amount of professional skepticism is what brought this thread about in the first place and I completely agree. I initially agreed to work with our current adviser years ago because he explained that the better our money performs, the more money he makes. It all made sense at the time and he has always appeared very interested in our behalf and helpful to any calls or questions I've ever had without ever trying to sell me on all these different trades. I'd like to think that my judgment of him and his character is good and that he is doing right by us. I just have no way to know for sure based on what I currently know now. This thread has helped already in trying to answer some of those questions.

I guess my bottom line question is how do I make sure, from a relatively naive financial viewpoint that I have, that the person that is working as my adviser is doing the best they can and doing the right thing for me? Is the answer "go to a fee-only?" Is there more to it?

I'm on your side here. I wish you could realize that.

From what you've written (at least from my understanding) you're adviser has you in way too many funds and he's underperforming the benchmark $SP500.

5 Year CAGR on the $SPY= 15%

3 Year CAGR on the $SPY= 20%

1 Year CAGR on the $SPY= 13%

So my question is: What is the "advice" you're getting that is worth under-performing the SPY?

Todem is a poster here who is a financial adviser - and he got all of his clients out of the market in July 2008 (if I recall correctly). That is financial advice. That is worth every penny you pay for. I'd hire him.

If that's not possible, I'd ask a guy:

Do you believe there is such a thing as a bull market and a bear market?

If he says: "yes", I'd ask him how he will manage my money in each of those types of markets and have him show me how he managed clients accounts from 2007-09.

If he says "no", I look elsewhere, but that's just me.

A key to making money is not losing it.

 

[lod01]

ACERX

ACUIX

...

I sure hope you're not in all those funds. What a list.

VUSTX rocks.

 

[NewlyRetired]

Gianmarco,

You may have mentioned this and I missed it.

While we all agree that the amount of funds he has you in is outrageously high, just as important is how often is he buying and selling these funds?

If he is buying a selling a lot, that is a red flag.

 

[Balco]

Gianmarco,

You may have mentioned this and I missed it.

While we all agree that the amount of funds he has you in is outrageously high, just as important is how often is he buying and selling these funds?

If he is buying a selling a lot, that is a red flag.

Huge red flag if so.

Investing yourself is easy. Invest in low cost index funds, find your desired asset allocation, and you are good to go.