Hello 'stachers. I have been reading MMM blog for some time now but am fairly new to the forum, and I have to say, it is so wonderful to have this supportive community and to be able to tap into a wealth of collective expertise. Wow, I love the internets!
There are many changes afoot in my household with respect to financial planning. Essentially, we have realized that it makes no sense for us to micromanage every nickel and dime of our income every month and completely leave our investments in the hands of a financial planner, which is what has been happening for several years. PUNCH IN FACE. SEVERAL TIMES. TKO. We need to take control now as we are down an income while I stay at home with kids, and husband has just started his own business and that will take time and money to grow.
I am starting small with the transition into self-managing. The 529s have the smallest balances in our portfolio (you may argue I should start with the largest accounts but it's a confidence thing + a relationship thing with our FP. I figured I would take baby steps and then gradually work on the bigger accounts). My 2.5 and 4 year old are enrolled in a plan that I am thinking may end up hurting potential investment growth over the course of the next 15+ years, due to the high costs. We live in NY State and are on the older end of the spectrum, so we had initially decided when the boys were first born that we were just going to save for college in our retirement plans (will be accessible to my husband penalty free before kids are in college). But then we realized that we are losing out on the tax deduction, so in Dec. of last year we reached out to our FP to set up 529 plans. I had done a little bit of research and stumbled upon the direct-sold (Vanguard) plan and sent a link to my FP, asking if I should just go ahead and sign up on my own. He sent back an email saying "No, I will handle it for you." Trusting him, I allowed him to set up two 529 Advisor-Guided J.P. Morgan plans. I deposited $5K in each plan so we could get the max deduction, but was floored when I received their first statements with the 5.25% sales charge applied. I emailed my FP about it and he told me that was standard for 'all equity mutual funds.' Not sure WTF he was talking about??? In the last month, I have been been taking a self-guided immersion course in investing, and have determined that we enrolled them in the wrong funds. I'm also now distrustful of our FP as he could have easily told me to enroll in the direct plan and suggested a fund for us to invest in from that plan.
So, here we are. I am wondering if it makes sense for us to transition from the Advisor-guided plan into the direct plan. We are 100% invested in the aggressive portfolio for 0-5 year olds. The direct plan has a very similar age-adjusted fund available. The expense ratio for these two funds is .16% (direct) vs. 1.16% (AG plan). The 1-year performance is 17.63% (direct) vs. 10.58 (AG). For the direct plan, there is no annual maintenance fee for plans with a balance over $3K (check). The AG plan has a $25 annual maintenance fee regardless. We do not plan on making huge contributions to these plans over the years, but who knows if we will get a windfall here and there and they could end up with $30 or $40K each. I'm also more than irritated because my FP does not really actively manage the fund we are enrolled in…it's like a target/portfolio fund. I can manage that myself through a direct plan. I can't think about it too much because I get really angry at myself (punch in face again).
At this point, does it make sense to roll over from AG to direct plans? I have to check into back loads, not sure if there are any for the AG plan. Given everything else, it wouldn't surprise me.
Thank you so much all of you wonderful and brilliant MMM forum members for your invaluable insight.
