Recommendations for an investment manager

[FLBiker]

My in laws are currently with a financial advisor who, based on my Googling, I suspect is a bum.  He's an AIF who has worked at Edward Jones, LPL Financial, and is now shifting to Ameriprise.  Because he's moving firms, they've asked me for advice.  I talked to them about this about 10 years ago (when they started with him) and recommended against going with him, but they went with him anyway.

I asked for info, and they sent me a 9 page PDF of marketing materials that had no info about fees, and a sales video.  I've said that I really need to see fee statements and investment options before I can have an opinion, and they haven't responded.  Accordingly to my wife, my last email had "too much information" -- it was like 3 paragraphs of some basic facts of the options available to them, and asking for some basic details of the arrangement with their current advisor.

They are not interested in managing their own money, even with my input.  And, honestly, my father in law is a pretty difficult guy so I'm happy to be at arms' length from all of this.  At the same time, I'd like to help if I can.  What are the "best" options for someone who wants someone else to manage their money.  I've suggested the hybrid robo-advisor / personal advisor model at Vanguard (w/ a .35% fee) but I think even that doesn't offer the level of handholding that they want.  This is further complicated by the fact that I think their portfolio is pretty modest.   I don't know a number (because I haven't seen anything concrete) but let's say $100-$200K.

My inlaws are near Tampa and I saw that Fidelity has some offices.  The fees would be 1.1%, and at their portfolio size they are getting a recent college grad without a CFP.  Still, that might work for them, and I suspect the advice and investment products would be better.

What would you recommend to someone who had a small portfolio but wanted a managed account?  What if they weren't comfortable with a robo advisor and wanted someone they could call?  What if they insisted on having an office they could go to?  Thanks!

[midweststache]

My in laws are currently with a financial advisor who, based on my Googling, I suspect is a bum.  He's an AIF who has worked at Edward Jones, LPL Financial, and is now shifting to Ameriprise.  Because he's moving firms, they've asked me for advice.  I talked to them about this about 10 years ago (when they started with him) and recommended against going with him, but they went with him anyway.

I asked for info, and they sent me a 9 page PDF of marketing materials that had no info about fees, and a sales video.  I've said that I really need to see fee statements and investment options before I can have an opinion, and they haven't responded.  Accordingly to my wife, my last email had "too much information" -- it was like 3 paragraphs of some basic facts of the options available to them, and asking for some basic details of the arrangement with their current advisor.

They are not interested in managing their own money, even with my input.  And, honestly, my father in law is a pretty difficult guy so I'm happy to be at arms' length from all of this.  At the same time, I'd like to help if I can.  What are the "best" options for someone who wants someone else to manage their money.  I've suggested the hybrid robo-advisor / personal advisor model at Vanguard (w/ a .35% fee) but I think even that doesn't offer the level of handholding that they want.  This is further complicated by the fact that I think their portfolio is pretty modest.   I don't know a number (because I haven't seen anything concrete) but let's say $100-$200K.

My inlaws are near Tampa and I saw that Fidelity has some offices.  The fees would be 1.1%, and at their portfolio size they are getting a recent college grad without a CFP.  Still, that might work for them, and I suspect the advice and investment products would be better.

What would you recommend to someone who had a small portfolio but wanted a managed account?  What if they weren't comfortable with a robo advisor and wanted someone they could call?  What if they insisted on having an office they could go to?  Thanks!

Until they respond, I wouldn't borrow trouble. They've asked for your advice, you've given it as much as you can based on the information they provided, and now they're likely going to do what they want (just like they did 10 years ago).

If they do respond, at a portfolio of that size, I'd say they need to shop for a flat-fee-based, local CFP who can review their investments and provide them with some recommended options based on their goals, and then meet with them as-needed and as their situation(s) change.

[FLBiker]

If they do respond, at a portfolio of that size, I'd say they need to shop for a flat-fee-based, local CFP who can review their investments and provide them with some recommended options based on their goals, and then meet with them as-needed and as their situation(s) change.

I like that plan, but that's what I recommended previously and they didn't take me up on it.  My sense (again, it's been hard to get direct answers) is that they really want someone to manage it for them.  So I'm wondering what the best version of that is.  If they're open to fee only, advice only, that would be great, but I don't think they are.

[Sandi_k]

You've made your recommendation, and they rejected it. Unless they explicitly ask for your advice, stop it.

When the inevitable downturn hits, you'll be blamed. Stay out of it.

[FLBiker]

You've made your recommendation, and they rejected it. Unless they explicitly ask for your advice, stop it.

When the inevitable downturn hits, you'll be blamed. Stay out of it.

To be clear, I totally agree with this.  They asked me a couple of weeks ago, and I responded, and they've let my wife know that they want some follow up but haven't been able to answer my questions.  I'm just trying to prepare for if / when they ask me to recommend something concrete other than Vanguard's hybrid model.

[FINate]

Since he's an AIF this means he has a fiduciary duty, yes? If you can verify this then I would let it go. For those that don't want to manage their own money a fiduciary is the least bad option, and this is where I point people in this category.

[FLBiker]

Since he's an AIF this means he has a fiduciary duty, yes? If you can verify this then I would let it go. For those that don't want to manage their own money a fiduciary is the least bad option, and this is where I point people in this category.

Interesting!  I read a bit more about AIF, and it does look like that comes with a fiduciary duty.  Maybe this is the least bad option.  And my in laws did just email me again asking for a call later this week.  I'm still going to ask for some actual data about fees and investments, but if those don't look terrible, I'm happy suggesting that they stay put if they're happy with it.  It seems like Ameriprise varies tremendously based on the particular advisor, so it's hard to have a strong opinion without seeing exactly what he's doing (and charging).

[falk]

I think i depends on what your family is looking for. My ideas would be:

• Some sort of Target or balance fund. You get no advce, but in my opinon, you don't need to hire an investment advisor to do your own portfolo when you have target or all in one funds. Even if you lose some money to taxes because you run target from from a taxable account, it's still going to be cheaper than an advisor.
• Hire a fee only advisor with a CFP designation. Typically they charge $150-$500 per hour. This seems like a lot until you remember that 1% of a $1M is around $10K per year. You set up a long meeting wiith an advisor, who then come up with a plan. You can then schedule followup every year or every couple of years. The advantage is that they don't sell you stuff like Fidelity or Edward Jones would. The disadvantage is that you typically don't call them up for questions. You probably have to scedule. Goodones may be booked out a year like good medical specialist.
• Hire an advisor that works for a fee, usually around 1% per year. The cheapest and probasbly the better option I see is Vanguard PAS, which charges 0.35% per year. The downside is that you have to use Vanguard funds. This is probably the best option if you want hand holding.
  

As a note, I have try to help various friends and relatives in the past, Many sort of falter and don't follow up. I follow up if there is a closer relationship and that their problem will eventually become my problem (say your parents).

[ChpBstrd]

Sounds like these are exactly the type of people Edward Jones / Ameriprise ought to be "serving". If they don't have enough interest to just set up an E-trade account and buy VTI, then they can pay 2% per year in various fees.

Yes, an account at Treasurydirect.gov might deliver better total returns, but if they're not even motivated to understand why, even when someone is willing to be a handholder... then just go to the costly salesmen I guess.

On a more charitable note, they might not have replied because they're too busy to worry about this thing which doesn't really interest them. If that's the case, maybe discuss it while doing something they like. E.g. Let's BBQ and set up a Schwab account, or let's go fishing and buy VTI.

[falk]

If this is possible, they can do a lot better than Edward Jones. For example, Vanguard PAS can probably provide the same advice for 0.35% instead of 1%. It's possible that they could benefit from Edward Jones, since they might constantly go to cash on a slight dip in the market. It's pretty difficult to peel someone from their advisor though based on my experience dealing with my immediate family.

[FLBiker]

So I got a follow up email on Tuesday, and we have a plan for a call tomorrow.

I like the Vanguard PAS option, but my sense is that they want someone to actually manage it for them (which I'm not personally interested in doing).  Step 1 for me tomorrow is to find out exactly what they want.  Assuming they want someone to manage it for them, I'll then try to get more details about the fees they're paying and the investments they're being put in, but the reality is they don't have a lot of good options if they want it to be totally hands off.

[falk]

So I got a follow up email on Tuesday, and we have a plan for a call tomorrow.

I like the Vanguard PAS option, but my sense is that they want someone to actually manage it for them (which I'm not personally interested in doing).  Step 1 for me tomorrow is to find out exactly what they want.  Assuming they want someone to manage it for them, I'll then try to get more details about the fees they're paying and the investments they're being put in, but the reality is they don't have a lot of good options if they want it to be totally hands off.

The Vanguard PAS option assuming they have over $500K assigns you a human CFP. There are investment restrictions, but it appears that your parents don't really care about what gets invested. The option is much better than Fidelity or Schwab's offering and definitely better than Edward Jones. However, I think you said it's modest like $300K? Most advisors usually have a min of $500K.

How much are they drawing from the portfolio? If the amount is modest, can you setup some sort of target fund where distribution are dumped to the account.

[FLBiker]

Yeah, I like the idea of a target fund or a roboadvisor, but I'm hesitant to put them into anything myself because my FIL is a difficult person and I don't really want to deal with him when it doesn't perform as he expects.  He's definitely the type of person who thinks he should always be beating the market.  I'm really just trying to figure out the best (or least worst) option for someone who wants someone else to manage their investments.

[ChpBstrd]

Investments don't need management. All one needs to do is buy VTI or VTSAX in a free online brokerage account, set the dividends to reinvest, and then DON'T "MANAGE" IT. This actually takes less effort than talking with an investment salesperson.

Tell FIL you're happy to help set this up, and to chat when the market takes a routine dip because you'll be in the same boat. If he wants more than that, he can pay somebody a couple percent of his net worth every year to do the same, in a much worse way.

[falk]

Yeah, I like the idea of a target fund or a roboadvisor, but I'm hesitant to put them into anything myself because my FIL is a difficult person and I don't really want to deal with him when it doesn't perform as he expects.  He's definitely the type of person who thinks he should always be beating the market.  I'm really just trying to figure out the best (or least worst) option for someone who wants someone else to manage their investments.

You should probably step back and don't get too involved. Your FIL is looking for an investor messiah that will part the sea and allow him to gain above market return and save them from stock market crashes. Sadly, this person does not exists and if they did, they won't settle for managing a small portfolio.

You can try to compare their return against a target fund over time, but I doubt they will even do that. Helping them may get you blame for ruining their retirement.

[FINate]

Yeah, I like the idea of a target fund or a roboadvisor, but I'm hesitant to put them into anything myself because my FIL is a difficult person and I don't really want to deal with him when it doesn't perform as he expects.  He's definitely the type of person who thinks he should always be beating the market.  I'm really just trying to figure out the best (or least worst) option for someone who wants someone else to manage their investments.

You should probably step back and don't get too involved. Your FIL is looking for an investor messiah that will part the sea and allow him to gain above market return and save them from stock market crashes. Sadly, this person does not exists and if they did, they won't settle for managing a small portfolio.

You can try to compare their return against a target fund over time, but I doubt they will even do that. Helping them may get you blame for ruining their retirement.

This^^^ For the sake of your relationships, including your marriage, don't get too involved in their finances and absolutely don't make this decision for them.

I have a family member who's very similar to your FIL. He's a difficult person in large part because he wants the best without paying for it -- in other words, he's greedy. He often asks me for my opinion on investment decisions, which I refuse to provide. Instead, I ask him if he's considered this or that, but I always end by saying something like "I'm not going to tell you want to do, only you can make this decision." Due to his greed he's almost always going to be unhappy/regretful about his decision, and I don't want to become the scapegoat, and I certainly don't want to be seen as responsible if he losses a bunch of money on something.

[FLBiker]

Yeah, I like the idea of a target fund or a roboadvisor, but I'm hesitant to put them into anything myself because my FIL is a difficult person and I don't really want to deal with him when it doesn't perform as he expects.  He's definitely the type of person who thinks he should always be beating the market.  I'm really just trying to figure out the best (or least worst) option for someone who wants someone else to manage their investments.

You should probably step back and don't get too involved. Your FIL is looking for an investor messiah that will part the sea and allow him to gain above market return and save them from stock market crashes. Sadly, this person does not exists and if they did, they won't settle for managing a small portfolio.

You can try to compare their return against a target fund over time, but I doubt they will even do that. Helping them may get you blame for ruining their retirement.

This^^^ For the sake of your relationships, including your marriage, don't get too involved in their finances and absolutely don't make this decision for them.

I have a family member who's very similar to your FIL. He's a difficult person in large part because he wants the best without paying for it -- in other words, he's greedy. He often asks me for my opinion on investment decisions, which I refuse to provide. Instead, I ask him if he's considered this or that, but I always end by saying something like "I'm not going to tell you want to do, only you can make this decision." Due to his greed he's almost always going to be unhappy/regretful about his decision, and I don't want to become the scapegoat, and I certainly don't want to be seen as responsible if he losses a bunch of money on something.

Yep, there's a lot of truth here.  I'll lay out there options, and they can do what they want.  Ultimately, I suspect they'll stay put because their advisor tells them what they want to hear.

[Mrbeardedbigbucks]

I can provide some insight on your question about Fidelity. I"m a former Fidelity "Account Executive". I was one of the people at the local investment centers that your inlaws would be speaking with but I worked at one of the Fidelity call centers and not a local investment center. All my business was based on the phone. Either way, our rolls and compensation were almost identical. If your parents want to be 100% hands off, then the managed option at Fidelity, it was called Portfolio Advisory Services (PAS) when I was there 5 years ago, is an easy solution but I feel there isn't a lot of value in the 1.1% annual fee. Yes, they would be assigned a point of contact who would reach out to them periodically and the managed account is 100% hands off but from a performance stand point, the PAS model portfolios didn't do a whole lot better then the target date Freedom Funds  or Asset Manager funds. So they would essentially be paying a 1.1% annual fee to have a relationship with someone. If they need someone to talk them off the cliff when the market is selling off, then it might be worth the 1.1% fee in the long run. It's also worth mentioning that PAS used mutual funds in their managed portfolios and each mutual fund had their own internal expense ratio.

Much of our compensation was based on how much PAS and annuities we could sell and the amount of net flows we could bring into the firm. It's unlikely this compensation model has changed much.  All recommendations to clients are based off of proprietary software after we input their risk tolerance, time frame and financial situation. Once we have that information, we would give them the option of one of the managed PAS products, target date based Freedom Funds or self management. There's a lot of incentive to steer people into the managed accounts because the basis points were pretty good (% of the dollar flows into PAS). So if they go to the Fidelity office, remind them that they're paying 1.1% of their portfolio to have someones phone number and extension. If that's important to them then go for it. But also remind them that people at Fidelity, Vanguard, Schwab are not fee only advisors. Despite anyone having their CFP at these firms, the reps are still in sales. If they bring their 200k to them, they will get sold into something and a significant fee will come along with it. If they don't like the managed account, they can close it but their assigned rep will steer them into something else and they will still get paid well. We would get dinged on the retention if they bailed out of the managed accounts but if we put them into other mutual funds or an annuity, it was almost a wash.  Personally, I'd tell them to look at a target based fund and save the 1.1% and the possibility of being sold something else down the line.

[FLBiker]

I can provide some insight on your question about Fidelity. I"m a former Fidelity "Account Executive".

Thanks for this!  This is exactly what I suspected about how all this would work.  I had a call with my FIL on Friday, and my ultimate recommendation was using the Vanguard Conservative Growth LifeStrategy Fund, and using the Vanguard Advisor (for .35%) if they feel strongly about having someone they can call.  In the course of our call, though, I realized that we're really not on the same page, so I don't really expect them to take my advice.  My FIL absolutely believes that advisors can beat the market, and didn't really understand, if he was DIYing in a LifeStrategy fund, how he would know when it was time to make a change (e.g. to time the market).  When I told him that I never did that, he was kind of flabbergasted.  For him, there's a real psychological comfort (I think) in handing this over to some "expert" and telling them to take care of it.

It's funny, because in the course of our call, I was reminded about many conversations that I've had with my FIL over the years about house stuff.  He is way more comfortable DIYing (and improvising) with house stuff, whereas I am much more in the "if I can't do it right myself I'll hire someone to do it right" camp.  Around money, our DIY comfort-level is totally reversed.

Thanks all for all the info!

[falk]

Thanks for this!  This is exactly what I suspected about how all this would work.  I had a call with my FIL on Friday, and my ultimate recommendation was using the Vanguard Conservative Growth LifeStrategy Fund, and using the Vanguard Advisor (for .35%) if they feel strongly about having someone they can call.  In the course of our call, though, I realized that we're really not on the same page, so I don't really expect them to take my advice.  My FIL absolutely believes that advisors can beat the market, and didn't really understand, if he was DIYing in a LifeStrategy fund, how he would know when it was time to make a change (e.g. to time the market).  When I told him that I never did that, he was kind of flabbergasted.  For him, there's a real psychological comfort (I think) in handing this over to some "expert" and telling them to take care of it.

It's funny, because in the course of our call, I was reminded about many conversations that I've had with my FIL over the years about house stuff.  He is way more comfortable DIYing (and improvising) with house stuff, whereas I am much more in the "if I can't do it right myself I'll hire someone to do it right" camp.  Around money, our DIY comfort-level is totally reversed.

Thanks all for all the info!

I recall back in the 90's there were a lot of people saying that index fund were unamerican (not sure if you live in the US or Canada). Over the years the index fund out advantage has beaten back those comment to the point where there is a now a large amount of inflow to index. Your FIL has outdated ideals.

Also if you can beat the market, you won't work for peanuts. I would want clients with millions to billions.