if you have a financial advisor-question on fees from mutual funds

[Anonymous]

Up to this point we have invested for ourselves. When the market
went down in 2008 I just stopped out of fear and then life got
busy and I wasn't actively paying attention and have too much in cash (within IRA not in my pocket)
We want to invest with someone but for those of you who do and are happy with your
financial advisor ( and I would love some Montgomery
county recommendations) does the advisor choose funds
that have a high front load fee?( learned about that yesterday) and/or a high yearly
expense ratio and if so has it been worth it?
I am really worried about handing over $ knowing for every 100K to just get
into the funds I've lost 5.7k just for an entrance fee.
I know the other extreme is keeping it in low cost vanguard or Trowe accounts but
realistically I don't know how much we will
follow every market trend and change things when we need to avoid
another bear market. thanks for your help! I
know the market will
go up and down no matter what but with almost 20 yrs until
retirement we know we need to take some risk.

[Anonymous]

With most advisers, you can tell them what to do and in fact you two sign and agreement stating your risk profile and desires.

But anyway, the trick is to pick an adviser who doesn't work for a company offering funds. So dont' go with someone at Fidelity,etc..

Our adviser chooses mostly DFA funds, which I think may even be restricted to people whose funds are managed by advisers, with an unspoken agreement that the funds won't be day-traded (it's annoygn for the funds.. causes cash calls).

[Anonymous]

we met with someone but he said he can get almost
any fund he wants and out of 8 funds only one
was from his holding company. We told him we were concerned
about fees but I realize when we met he didn't
disclose what the exact costs were. just gave us a selling point of why he could do better for us even with the fees.so I just looked them all up and they are the highest fee funds out there. what company does yours work for? is it in MD?

[Anonymous]

The money we have with a financial advisor is mostly in individual stocks, bonds, etc. That's what they get paid for. We invest separately in funds.

[Anonymous]

so PP if you were me you would invest
the rollover money in funds within accounts where they are and then maybe
invest future money with an advisor for stocks and bonds? maybe we said
we are
conservative so he thought funds would be safer than
individual stocks? I think individual stocks are what helped
pay for college for me-Johnson and Johnson. IBM. I
like the idea of having stocks too. good point.
maybe we are just struggling to find someone
who feels like a fit for us.

[Anonymous]

Argh. First, put no money in individual stocks unless you have a massive appetite for risk. You're not a professional trader.

Our advisor charges a fixed fee of assets managed. It's in the 0.75%-1% range depending on portfolio size. Worht every penny, because you can use them for everyhting else. I had them review our wills for how the trusts are set up and beneficiaries; evaluate some refinancing options on our house and rental property, etc.

Don't get caught up on the funds. ALl you need to do is figure out risk level, then they'll come up with a mix of equities/bonds based on that (more bonds if you are lower risk). Then, in each of those groups, they'll choose funds that are cheap, let you diversify, etc. Then, they'll keep track of all the tax issues, and do loss harvesting, etc.

Myself and DW both have MBAs; we understand finance.. and yet we still use a financial advisor. Why? A mix of time and expertise. For example, during a complex refi of our primary home and a rental property, the advisor pointed out a rarely-used tax provision for additional deductible interest that will save us $4k/year. They also set up a back-door roth IRA (google it) to let us get into a Roth despite our income levels. Neither of us have time to become experts in this stuff -- it's worth the 1%, because we benefit much more than that over the course of the year, compared to our previous "strategy" (haphazard picking of mutual funds, no rebalancing, etc).

[Anonymous]

Oh and regarding risk-reward, read about CAPM (capital asset pricing model). If your advisor is getting you a return based on your risk profile in line with that,you're fine.

[Anonymous]

Anonymous wrote:Argh. First, put no money in individual stocks unless you have a massive appetite for risk. You're not a professional trader.

Our advisor charges a fixed fee of assets managed. It's in the 0.75%-1% range depending on portfolio size. Worht every penny, because you can use them for everyhting else. I had them review our wills for how the trusts are set up and beneficiaries; evaluate some refinancing options on our house and rental property, etc.

Don't get caught up on the funds. ALl you need to do is figure out risk level, then they'll come up with a mix of equities/bonds based on that (more bonds if you are lower risk). Then, in each of those groups, they'll choose funds that are cheap, let you diversify, etc. Then, they'll keep track of all the tax issues, and do loss harvesting, etc.

Myself and DW both have MBAs; we understand finance.. and yet we still use a financial advisor. Why? A mix of time and expertise. For example, during a complex refi of our primary home and a rental property, the advisor pointed out a rarely-used tax provision for additional deductible interest that will save us $4k/year. They also set up a back-door roth IRA (google it) to let us get into a Roth despite our income levels. Neither of us have time to become experts in this stuff -- it's worth the 1%, because we benefit much more than that over the course of the year, compared to our previous "strategy" (haphazard picking of mutual funds, no rebalancing, etc).

Thank you. I feel like we are in similar boats financially to you or similar lifestyles etc. would you willing to share who you work with?

[Anonymous]

Anonymous wrote:
Thank you. I feel like we are in similar boats financially to you or similar lifestyles etc. would you willing to share who you work with?

Savant Capital in Tysons. If they want to know who referred you, you can tell them it was the client who is merging home lots and owns a business abroad, and they'll figure it out.

[Anonymous]

I think you should take a few weeks to learn about personal investing. Check out a few books from the library. Seriously.

[Anonymous]

Better yet use an advisor who will get into ETF's. They function like mutual funds but with MUCH lower expenses.

[Anonymous]

You can talk to people at Vanguard for free. I'm not saying that you should only be in their funds, but (as I'm sure you know) they have good index funds.

[Anonymous]

Look at lifecycle funds at vanguard.

[Anonymous]

I generally think its a bad idea to hand your money over to an adviser when you don't get the basics of investing, and since you've been sitting out the latest run-up of the market, you're not going to find someone who's going to magically give you great returns now. It's really easy to Google a balanced portfolio - and I'm pretty sure Fidelity and Vanguard (and many other companies) have examples on their websites using both funds and ETFs. I would throw the bulk of your money into a Vanguard ETF portfolio. Then, if you're still compelled to hire an adviser, give him a small amount to invest in individual stocks. He should give you some general advice about your total financial picture (obviously in the hopes of getting more to invest, but please refrain from doing this for at least 5 years until you understand what you're doing a bit more).

[OTAlexFA]

There are tools out there that will help you determine exactly what you are paying. One of the 3rd party tools I use (as a paid membership) when I do a portfolio comparison includes a tab for expense ratios that will let you know exactly what it's costing you. More importantly, you need to share with your advisor your concerns re: bear market, expense ratios, et al. to see if those are the right funds for you. They should be able to drill down and get you that info on their own.

As someone said, if your performance is in line with your risk profile, then you may need not worry. All returns should be quoted net of fees.