Anonymous
Post 03/10/2024 14:06     Subject: Re:Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:OP, a better option would be to meet with a financial planner, that will go over your estate plan, all of your insurances, tax planning , retirement planning and investment management for a year. After the year, you can decide if you need them further. If your life is not complicated, you might not need to see a financial planner till you are a few years from retirement. This approach will save you money in the long run.


OP here. This is what our FA did the first time we met with him. Isn’t it the same thing or very similar?


It depends on the level of diligence that was provided. How long have you been with them? Can you tell us investments the advisor put you in and how much money roughly is in them?


We’ve been with him since 2018 and this was all new to us at the time. We’re currently in our early 40s with two young kids and I just feel like everything is so conservative with him and we’re not making enough to justify his fees. To be fair, I have a higher risk tolerance than my husband but my husband has gotten on board with my more aggressive suggestions of investing. The main reason we signed up with him was because of the all of the pre-clearance requirements and we were just a bit overwhelmed with where to start. When the kids are done with daycare, we’ll be able to add even more cash in addition to what we contribute on a monthly basis.


OP, pull out your latest statement and provide the fund and dollar amount. That info is key to helping you figure this out.


OP here: here’s for our main account.
$186k in mutual funds: CMINX, EGRIX, PGINX
$265k in individual stocks. Lots of FAANG (to be fair, we asked for these a few years ago).
$248k in ETFs (lots of wisdom tree ones): XLK, EPS, DLN, DON, KOMP, EZM, JEPI, DWM, DES, FES, DEM, AOR.
$21k in cash.

Does this help?


More than likely your advisor uses a brokerage to hold your assets (e.g. TD Ameritrade). Tell them you want to manage funds on your own and ask them to transfer ownership to you. I did this a couple of years ago and they just created new accounts and moved the money from their custody to mine. Literally happened the next day. You need to do this because other brokerages may not even transact in those mutual funds.

Next deal with taxes. At the simplest level, you can offset profits and losses. I'm assuming some of your positions are in the red and most are black. Sell enough to offset the red (you'll have to sell both). For example, if you have a profit of $10K with XLK and a loss of $5K on EPS, sell all of EPS and enough of XLK to realize $5K in profit. Even otherwise, your mutual funds are not that much. Assuming even half of your fund balance ($93K) is profit (unlikely), you are talking about a $20k tax. You just need to sit with a good CPA to find enough losses to offset that profit to minimize taxes. Remember that you will also be saving 10K/year now that you've fired the advisor.

If you like the brokerage's interface, etc. just stay with them. if not, move to a Schwab or Fidelity, engage a plan-only advisor elsewhere before you make your moves.
Anonymous
Post 03/10/2024 14:00     Subject: Re:Am I overpaying my financial advisor?
If you can get the Schwab advisor to do everything that needs to be done with your current FA, I would have him or her do so. I wrote earlier about the various levels of Schwab service, and am guessing you will need the highest level for now to sort out the mess.

Your FA has unconscionably fleeced you. And he will try to talk you into not leaving. No matter how nice he may seem, do everything you can to avoid talking to him ever again. For this alone, I would pay the 0.8% Schwab assets under management fee temporarily.

Anonymous
Post 03/10/2024 13:43     Subject: Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:OP here. Ugh I feel sick hearing this. Just spoke with DH and advisor had recommended deploying the mutual funds slow and steady in case the market crashed. The mutual funds were supposed to just beat inflation and do better than a savings account while we slowly deploy. I guess it’s all relative to risk tolerance, and we’re not being aggressive enough. What if I just tell him to move it all to a cleared S&P 500 index fund? We have time to ride the waves and understand there’s no guarantee.


I agree this has nothing to do with risk tolerance and everything to do with you being fleeced by fees.

Now that I think you have bought on to this, we need to help you get out of this. You need to exit every single one of those funds. Keeping the individual FAANG stocks is a personal risk choice; at least they are not generating expense fees. But I would move them to Vanguard, Schwab, or Fidelity to take them out of your assets generating an AUM fee. While you are at it, move the cash to one of their money market funds.

Tell us the extent to which these funds are held in a taxable account, that is, not held in a retirement account like a Roth IRA. (I am assuming that you do not have an active IRA because you are doing backdoor Roths.) You can sell all the funds in a retirement account immediately with no tax implications and move the funds over to a Roth account to wherever you are moving your stock and money market funds.

But as a previous PP has said, selling all the other funds, could generate taxable income if they are not in a retirement account, and you will need advice on how to unwind them. I think this is particularly a concern for you because I am quite sure Vanguard would not accept a portfolio of these funds; you' have to check if Schwab or Fidelity would. This might mean you would need to liquidate them with your current financial advisor and continue to pay those fees until they are liquidated.

You need to hire a good tax CPA or one-time advise only financial advisor to figure out the liquidation exit plan in a way that balances out taxes dues from sales and fees from continuing to hold.

Once these funds are liquidated you can figure out a new deployment plan for the cash. Don't try to ride the wave; you already have a hefty share of FAANG for that should you keep that. You should be planning for optimizing your returns for the long-run, not for whatever further gains you may think are possible this year--absolutely no one is able to predict that.


Excellent advice. Saved me the time to type up what I would have said, with more info. OP, this is your guide right here.


Op here. Thank you so much! I think I’m going to go with Schwab because it’s an approved brokerage listed by my husband’s company. I have no idea how to find a good fee-only based advisor (any specific recommendations?)so I’ll probably just go with someone through Schwab to help me liquidate all the other funds with the current FA, assuming they can’t be transferred over. Then as I get more comfortable, I’ll ditch the Schwab help and mange myself. And when I said “ride the wave,” I meant getting the most ROI while continuing to grow our portfolio. I’ll keep the individual stocks (for now) and move them over to Schwab as well. [At the moment, the individual stocks are like our fun gambling pot which we don’t touch]. As far as tax implications, if the Schwab level of support can’t help me, I can ask our CPA who does our taxes.

And once my Schwab accounts are set up, we’ll start adding funds to those accounts instead of sending to our current FA. I’m assuming my FA will be notified by Schwab that we’re moving our money? Is this a conversation I should have with him before they do (assuming they’ll help me through this)?
Anonymous
Post 03/10/2024 13:42     Subject: Am I overpaying my financial advisor?
Poster who changed from FA to mostly self-managed. How we switched, which isn't that helpful in your case, but here you go in case anything helps:

One, we first switched TO the FA, which as mentioned by other posters required several tax events. (Yes, we were incredibly naive and I truly get angry just thinking about how they took advantage of that naïveté and the money we lost when we first started.) Then realized what a racket it was.

Two, we had a long-time relationship with our big bank, and had/have a person who makes his money through the amount he has under management. But it's a % that the bank pays him. We don't pay anything other than the fee for any funds we buy. (Started with SPY, SDY and SHY. Have started using VOO because of the lesser fee.)

He took care of everything to get us from the FA firm back into the bank. We sat down and came up with a plan for how to deploy before he did it. (There are protocols for how this is done.)

Thankfully, a lot was in tax-free or retirement accounts, plus way too much cash from assets they liquidated. I saw pretty quickly that it wasn't for us, so wouldn't let them put the cash to work while I started doing research.

As to our bank FA, we used to have a weekly call with him on strategy, tweaking, and frankly a lot of learning. Now we talk regularly but not nearly as often because we are mostly set and not a lot to do.

Separately, we have (and always have had) a CPA who does our taxes. No question some are better than others.

We have quite a bit of money, and our person doesn't take new people on anymore, but there has to be younger people who are trying to grow their own book of business who would be thrilled to take on your account.

Someone here might know if Vanguard, Schwab or Fidelity could do this for you. The only person I know who is at Schwab and has an advisor does pay a fee. I wonder if once you are set if you can then go to self-managed?
Anonymous
Post 03/10/2024 13:09     Subject: Re:Am I overpaying my financial advisor?
12:53 here. While I was typing my response you asked a question about moving to Schwab.

If Schwab is who you would like to go with, I would definitely call them first thing Monday to move over the stock and money market funds. You will need to see if they can accept the funds you have in your Roth. If not, sell off everything in the Roth, then move the cash funds to Schwab and re-invest.

Schwab has a range of investment advisory services. See here: https://www.schwab.com/investment-advice#panel--full-text-79601

The highest service level is 0.8% AUM starting at $500,000, with lower (unlisted) fees at higher levels. You need to find out if the highest level could sort out the mess of uncommon funds you are in while minimizing any tax or fee hits. If they can, go for it definitely. You can always drop down to a cheaper or no advisory service level later.

If they can't sort it out, you may need to hire a CPA to help.

Anonymous
Post 03/10/2024 13:01     Subject: Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:OP here. Ugh I feel sick hearing this. Just spoke with DH and advisor had recommended deploying the mutual funds slow and steady in case the market crashed. The mutual funds were supposed to just beat inflation and do better than a savings account while we slowly deploy. I guess it’s all relative to risk tolerance, and we’re not being aggressive enough. What if I just tell him to move it all to a cleared S&P 500 index fund? We have time to ride the waves and understand there’s no guarantee.


I agree this has nothing to do with risk tolerance and everything to do with you being fleeced by fees.

Now that I think you have bought on to this, we need to help you get out of this. You need to exit every single one of those funds. Keeping the individual FAANG stocks is a personal risk choice; at least they are not generating expense fees. But I would move them to Vanguard, Schwab, or Fidelity to take them out of your assets generating an AUM fee. While you are at it, move the cash to one of their money market funds.

Tell us the extent to which these funds are held in a taxable account, that is, not held in a retirement account like a Roth IRA. (I am assuming that you do not have an active IRA because you are doing backdoor Roths.) You can sell all the funds in a retirement account immediately with no tax implications and move the funds over to a Roth account to wherever you are moving your stock and money market funds.

But as a previous PP has said, selling all the other funds, could generate taxable income if they are not in a retirement account, and you will need advice on how to unwind them. I think this is particularly a concern for you because I am quite sure Vanguard would not accept a portfolio of these funds; you' have to check if Schwab or Fidelity would. This might mean you would need to liquidate them with your current financial advisor and continue to pay those fees until they are liquidated.

You need to hire a good tax CPA or one-time advise only financial advisor to figure out the liquidation exit plan in a way that balances out taxes dues from sales and fees from continuing to hold.

Once these funds are liquidated you can figure out a new deployment plan for the cash. Don't try to ride the wave; you already have a hefty share of FAANG for that should you keep that. You should be planning for optimizing your returns for the long-run, not for whatever further gains you may think are possible this year--absolutely no one is able to predict that.


Excellent advice. Saved me the time to type up what I would have said, with more info. OP, this is your guide right here.
Anonymous
Post 03/10/2024 12:56     Subject: Re:Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:OP, I'm the one that asked for the funds.

Here is the quick analysis.

1) You do not have a financial advisor, you have a salesperson.

2) Salespeople, big banks, brokerage firms and bad advisors use a large number of funds to trick you into thinking they have some magic formula. They are full of sh.t.

3)You probable got bad financial planning advise based on your portfolio. I hope this firm does not also sell annuities and life insurance.

4) You are paying way more than 1.25% when you add in the cost of the fees.

What you should do>


A) Do not tell him to do anything. He can really screw things up more. Are these funds in an IRA or taxable account?

B) Find an independent, fee-only firm that does financial planning along with investment management. They will be able to clean your mess up in a cost effective manner.


Op here. In taxable account and the IRAs from the rollovers.


OP here again. If we opened an account with Charles Schwab, and signed up for the basic financial advisor plan (assuming they have one). Would this person be able to help me get all of our stuff transferred over? And then provide advice on how to streamline the account into an S&P index fund while also keeping the individual stocks? I’d like to get someone to help me to start and then as another poster suggested, manage it myself as I become more comfortable.


Charles Schwab is not a fiduciary firm. They have their own best interest in hand first. Google how they put people in very low interest earning accounts for their cash money. They also do not provide tax advice, either does Vanguard, and also not a fiduciary.

You do not want to put all your money into the S&P fund along with your individual stocks. A fiduciary advisor is also going to recommend you get out of individual stocks in a tax efficient manner. You do not need them. You can keep a little in your gamble pot.

You need a fee-only advisor to help you with this. Check out NAPFA.org and look for someone who does financial planning, tax planning, estate planning,... It will take some work to find the good ones, but will pay off in the long run.
Anonymous
Post 03/10/2024 12:55     Subject: Re:Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:It should never be more than 1%. But I agree asset under management fees are generally not worth it unless you really are allergic to doing this yourself, in which case, I would just go with Vanguard Personal Advisors or similar, which runs 0.30% for all index to 0.40% for mix of indexes and individual investments.

But at $750,000 you can do it yourself. The clearance list would not be an issue for a broad based index fund like the S and P 500, so you wouldn't need to worry about that. If you need bonds, you can do a government bond fund, which also should not need clearance. So I don't think that service is worth much. And really, why does anyone need to invest outside of these indexes unless it a hobby or passion (clearly not your case)?

A backdoor Roth is super simple and takes very little time once a year through an account at Vanguard, Fidelity, or Scwab. Google whitecoatinvestor backdoor Roth for step by step instructions.

I would move everything at once to Vanguard or the other two. Pay for the really cheap personal advisor option and drop it once you are comfortable doing everything on your own.




Do you have sizable IRAs? Then a back door Roth is going to cost you $$$ in taxes. Beware of internet posters bloviating about which they know little. Your advisor may be worth his fee. Most great advisors don’t take on accounts of your size so that may be his fee for smaller households.


Coming back to this,.now that we have the full picture from OP. Financial advisors, like real estate agents, get really prickly about all the "services" they offer and why it's worth it. In both fields there are true experts who can actually add value, but mostly they are just looking for whales who don't realize how little value many FAs add. I do feel bad for the true experts who do good work for reasonable fees. But this example is exactly why so many of us attack the industry as a whole - so much of it is basically based on scamming people.
Anonymous
Post 03/10/2024 12:53     Subject: Am I overpaying my financial advisor?
Anonymous wrote:OP here. Ugh I feel sick hearing this. Just spoke with DH and advisor had recommended deploying the mutual funds slow and steady in case the market crashed. The mutual funds were supposed to just beat inflation and do better than a savings account while we slowly deploy. I guess it’s all relative to risk tolerance, and we’re not being aggressive enough. What if I just tell him to move it all to a cleared S&P 500 index fund? We have time to ride the waves and understand there’s no guarantee.


I agree this has nothing to do with risk tolerance and everything to do with you being fleeced by fees.

Now that I think you have bought on to this, we need to help you get out of this. You need to exit every single one of those funds. Keeping the individual FAANG stocks is a personal risk choice; at least they are not generating expense fees. But I would move them to Vanguard, Schwab, or Fidelity to take them out of your assets generating an AUM fee. While you are at it, move the cash to one of their money market funds.

Tell us the extent to which these funds are held in a taxable account, that is, not held in a retirement account like a Roth IRA. (I am assuming that you do not have an active IRA because you are doing backdoor Roths.) You can sell all the funds in a retirement account immediately with no tax implications and move the funds over to a Roth account to wherever you are moving your stock and money market funds.

But as a previous PP has said, selling all the other funds, could generate taxable income if they are not in a retirement account, and you will need advice on how to unwind them. I think this is particularly a concern for you because I am quite sure Vanguard would not accept a portfolio of these funds; you' have to check if Schwab or Fidelity would. This might mean you would need to liquidate them with your current financial advisor and continue to pay those fees until they are liquidated.

You need to hire a good tax CPA or one-time advise only financial advisor to figure out the liquidation exit plan in a way that balances out taxes dues from sales and fees from continuing to hold.

Once these funds are liquidated you can figure out a new deployment plan for the cash. Don't try to ride the wave; you already have a hefty share of FAANG for that should you keep that. You should be planning for optimizing your returns for the long-run, not for whatever further gains you may think are possible this year--absolutely no one is able to predict that.
Anonymous
Post 03/10/2024 12:46     Subject: Re:Am I overpaying my financial advisor?
Anonymous wrote:
Anonymous wrote:OP, I'm the one that asked for the funds.

Here is the quick analysis.

1) You do not have a financial advisor, you have a salesperson.

2) Salespeople, big banks, brokerage firms and bad advisors use a large number of funds to trick you into thinking they have some magic formula. They are full of sh.t.

3)You probable got bad financial planning advise based on your portfolio. I hope this firm does not also sell annuities and life insurance.

4) You are paying way more than 1.25% when you add in the cost of the fees.

What you should do>


A) Do not tell him to do anything. He can really screw things up more. Are these funds in an IRA or taxable account?

B) Find an independent, fee-only firm that does financial planning along with investment management. They will be able to clean your mess up in a cost effective manner.


Op here. In taxable account and the IRAs from the rollovers.


OP here again. If we opened an account with Charles Schwab, and signed up for the basic financial advisor plan (assuming they have one). Would this person be able to help me get all of our stuff transferred over? And then provide advice on how to streamline the account into an S&P index fund while also keeping the individual stocks? I’d like to get someone to help me to start and then as another poster suggested, manage it myself as I become more comfortable.
Anonymous
Post 03/10/2024 12:45     Subject: Am I overpaying my financial advisor?
Performing the Backdoor Roth IRA for my spouse and I literally takes me about 5-10 minutes total every January. The fact that you are paying someone to do this makes me want to become a financial advisor and charge 1-2%.
Anonymous
Post 03/10/2024 12:41     Subject: Re:Am I overpaying my financial advisor?
Anonymous wrote:OP, I'm the one that asked for the funds.

Here is the quick analysis.

1) You do not have a financial advisor, you have a salesperson.

2) Salespeople, big banks, brokerage firms and bad advisors use a large number of funds to trick you into thinking they have some magic formula. They are full of sh.t.

3)You probable got bad financial planning advise based on your portfolio. I hope this firm does not also sell annuities and life insurance.

4) You are paying way more than 1.25% when you add in the cost of the fees.

What you should do>


A) Do not tell him to do anything. He can really screw things up more. Are these funds in an IRA or taxable account?

B) Find an independent, fee-only firm that does financial planning along with investment management. They will be able to clean your mess up in a cost effective manner.


Op here. In taxable account and the IRAs from the rollovers.
Anonymous
Post 03/10/2024 12:39     Subject: Am I overpaying my financial advisor?
Didn’t even read your post….just the topic. Yes you are overpaying for a financial advisor. Anything more than $0 is too much.
Anonymous
Post 03/10/2024 12:38     Subject: Re:Am I overpaying my financial advisor?
OP, I'm the one that asked for the funds.

Here is the quick analysis.

1) You do not have a financial advisor, you have a salesperson.

2) Salespeople, big banks, brokerage firms and bad advisors use a large number of funds to trick you into thinking they have some magic formula. They are full of sh.t.

3)You probable got bad financial planning advise based on your portfolio. I hope this firm does not also sell annuities and life insurance.

4) You are paying way more than 1.25% when you add in the cost of the fees.

What you should do>


A) Do not tell him to do anything. He can really screw things up more. Are these funds in an IRA or taxable account?

B) Find an independent, fee-only firm that does financial planning along with investment management. They will be able to clean your mess up in a cost effective manner.
Anonymous
Post 03/10/2024 12:36     Subject: Am I overpaying my financial advisor?
OP here. Point taken. What would be the quickest/smartest way to get out of this? I welcome all ideas. Thank you, DCUM!