Author Topic: Awkward questions with family Wealth Manager @ Morgan Stanley  (Read 28900 times)

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #50 on: April 16, 2015, 02:09:36 PM »
Alright! Well I spoke with Renee at Vanguard for my initial assessment of what I'd like to do and where I currently stand with my advisor @ Morgan Stanley. I also let my parents know that I was questioning my relationship with our advisor and they were totally encouraging for me to do whatever I thought was best with the money. So I'm making baby steps.
After talking with Renee at Vanguard, I'm now wondering about their .3% advisor service. Renee confirmed that with my assets being under 500k, but over 100k, that .3% fees would get me quarterly checkups from an advisor (not always the same one, unfortunately). For somebody like myself who still has very little knowledge of how this all works, do you guys think that's a service that would be beneficial to me?
Other than that, I've got another appointment setup with Kevin at Vanguard who will try to paint a more specific picture for me of our options to limit the taxes I'll be paying if we move the money to Vanguard and into different funds.
I think I now need to read up on how complex I want my setup to be, right? I can't just dump it all in VTSAX...i think. I'm hoping Kevin will help me with this but please let me know if you guys can point me to any good reading.
Thanks, as always, for all the help!

intellectsucks

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #51 on: April 16, 2015, 03:59:49 PM »
Tacocat, I also work in the financial industry and see investment management from the advisors side too.

Advisors are paid by fees, whether upfront or ongoing.  After 13 years of working with lots of advisors, I can tell you with experience that most are not worth the fee.  Here are the services they should be providing to justify those fees:

-AT LEAST yearly meetings to review your portfolio, your financial situation and the general state of the economy.

-Reports showing how your portfolio is performing in relation to achieving your goals.  For example, if these funds are going to provide your income for early retirement in ten years, and need to grow an average of 6% during that time, how often are your funds hitting or exceeding that number?

-Advice on how much risk you are taking vs your goals.  Using the above example, if you need an average return of 6% to retire in 10 years, but you’ve been earning 12%, perhaps you are invested too aggressively and could benefit from dialing down your risk by moving funds from stocks to less volatile asset classes (this may not be a popular opinion here).  When you retire in 10 years will you be able to afford a 40% drop in the value of your investments?

-Advice on tax consequences of any investment strategies or changes.

-Advice on estate planning (who will handle your finances if you are in a coma?  Who will take care of your kids if you die?  Who will get your money when you die?).

-General financial advice and guidance.

If you are NOT getting these services, then you are paying your advisor for nothing and will definitely be better off moving the funds to Vanguard.  There is no justification for your advisor putting your into American Funds versus ETFs without providing other services.  As others here have ably pointed out, Vanguard will kick the crap out of all your funds when using the “buy and hold” strategy that you have been.

If you ARE getting these services, then you need to ask yourself whether or not the 2%+ fee you are paying is worth it.  You can certainly learn enough about each of those areas on your own to be able to do it yourself, however it will not be easy, and you will need to constantly stay on top of them, as there will be lots of changes over time.


sisto

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #52 on: April 16, 2015, 05:48:20 PM »
tacocat good for you! This is definitely moving in the right direction. I was planning on telling you to look at moving a portion each year to avoid the penalties, but it sounds like Vanguard has you covered to figure out a plan for that. Congratulations!

Vertical Mode

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #53 on: April 16, 2015, 08:19:18 PM »
Just heard back from advisor –

He reasons that American funds and active management is far superior to passive.

Further, he let me know that Vanguard likes to ride the wave of bull markets and passive management and low fees but tend not to mention their poor performance in bear markets . He says he has illustrations that are telling of the whole story.

He's also not a fan of ETF’s because he says he can't go along with low fees making something better. To him, it should be the rate of return after fees that is what's truly important .

And on top of this, he has concerns with all the “weak money” in no load indexes and Vanguard funds and how fast they'll empty out when times get tough. He claims that if they would time weight the returns they would not show as well.
 
Finally, he advises me to not "dwell so deeply into the weeds" because this is why I employ him. He tells me to let him guide me and to follow his lead and then I'll be quite successful and rewarded.

His advice ends by telling me that taxes are part of the equation and a necessary evil. But that there is always money left over after taxes are paid. Finally, he tells me that there's too much emphasis in media about taxes and fees, that it's all they want to talk about rather than long term returns and the BEST managers. Everything "cannot and should not be Walmart", according to him.
 
Anyway, I'd be interested to see these illustrations he has that show how poorly Vanguard does in the bear markets.

You guys think there's some good truth in what he's saying?

Thanks, as always, for the help.

That's bullshit. All of it.

I hate being the bearer of bad news, but you're being fleeced. You deserve better.

Take Dodge/MDM/others' advice upthread and consider a low-cost index fund, or a basket of them.

Edited to add:

intellectsucks' point is well taken. A financial advisor worth his/her fee will provide a number of services that are peripheral or external to the money itself. To the extent that they can help you plan, coach you to avoid panic-selling or other destructive behavior, help with estate/tax planning, their fees can be totally worth it.
« Last Edit: April 16, 2015, 08:31:14 PM by Vertical Mode »

marty998

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #54 on: April 16, 2015, 08:29:42 PM »
Further, he let me know that Vanguard likes to ride the wave of bull markets and passive management and low fees but tend not to mention their poor performance in bear markets . He says he has illustrations that are telling of the whole story.


The adviser is trying to illustrate that index funds go up in bull markets and down in bear markets?

Captain Bright Spark, come on down to accept your award for pointing out the obvious...

kib

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #55 on: April 16, 2015, 09:21:01 PM »
Finally, he advises me to not "dwell so deeply into the weeds" because this is why I employ him.
  How marvelously circuitous is that!  You employ him - rather reluctantly -  because you inherited him and you feel uncomfortable about asserting authority over Grandpa's Pet Accountant and the long term family relationship he represents, you did not chose this based on his ability to protect you from the Big Bad Weeds, and he knows it.  Come on Red Riding Hood, it's time to take a walk on the wild side.
« Last Edit: April 16, 2015, 09:38:11 PM by frufrau »

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #56 on: April 16, 2015, 10:29:04 PM »
Again, thanks to everyone for the informative and supportive replies.

At this point, I am really liking Betterment as an alternative. With the amount of money I have, my fees would only be .15% on top of the Vanguard account expenses. For the services they provide in tax harvesting and automatic rebalancing, this fee seems fair to me right now. It's also cheaper than Vanguard's fee for their own advisors (.3%) while offering what looks to me like a better set of tools for my current value of around $140k.

Now I'm just struggling with how I can get all these American Funds into Betterment easiest. Here's what I've got:

~$81k in a "Basic Securities Account" with about $20k of that in unrealized gains - $20,134.57 Long term,  $80.38 Short term. This account has AWSHX, SMCWX, ANWPX, and AIVSX.

~$48k in a Roth IRA with about $10k of that in unrealized gains - $10,304.52 Long Term, $47.82 Short Term. This account has CWGIX, AIVSX, and AWSHX.

~$6k in a Traditional IRA with about 1k of that in unrealized gains - $1,085.87 Long term, $11.11 Short Term. This account has ITSLX and ILLLX.

I think this is the information I need to start to assess what would type of taxes I'd pay to move this money, right?

Like I said, Betterment is very appealing to me for the low fee of .15%, but I'm very scared of what taxes I'll pay to move this money around now.

Any help or tips you guys might have about moving this around, or where to head with it, are very much appreciated.

Also, if anybody has any way of giving me a ballpark of preparing how much money i might be paying in taxes on this, or a way for me to figure it out, I'd sure would appreciate it.

Thanks as always for the help.
« Last Edit: April 17, 2015, 12:33:52 AM by tacocat »

MDM

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #57 on: April 16, 2015, 11:05:27 PM »
Also, if anybody has any way of giving me a ballpark of preparing how much money i might be paying in taxes on this, or a way for me to figure it out, I'd sure would appreciate it.

Many pertinent links in http://forum.mrmoneymustache.com/ask-a-mustachian/help-moving-between-funds/.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #58 on: April 16, 2015, 11:31:22 PM »
Again, thanks to everyone for the informative and supportive replies.

At this point, I am really liking Betterment as an alternative. With the amount of money I have, my fees would only be .15% on top of the Vanguard account expenses. For the services they provide in tax harvesting and automatic rebalancing, this fee seems fair to me right now. It's also cheaper than Vanguard's fee for their own advisors (.3%) while offering what looks to me like a better set of tools for my current value of around $140k.

Now I'm just struggling with how I can get all these American Funds into Betterment easiest. Here's what I've got:

~$81k in a "Basic Securities Account" with about $20k of that in unrealized gains - $20,134.57 Long term,  $80.38 Short term. This account has AWSHX, SMCWX, ANWPX, and AIVSX.

~$48k in a Roth IRA with about $10k of that in unrealized gains - $10,304.52 Long Term, $47.82 Short Term. This account has CWGIX, AIVSX, and AWSHX.

~$6k in a Traditional IRA with about 1k of that in unrealized gains - $1,085.87 Long term, $11.11 Short Term. This account has ITSLX and ILLLX.

I think this is the information I need to start to asses what would type of taxes I'd pay to move this money, right?

Like I said, Betterment is very appealing to me for the low fee of .15%, but I'm very scared of what taxes I'll pay to move this money around now.

Any help or tips you guys might have about moving this around, or where to head with it, are very much appreciated.

Also, if anybody has any way of giving me a ballpark of preparing how much money i might be paying in taxes on this, or a way for me to figure it out, I'd sure would appreciate it.

Thanks as always for the help.

1.  Betterment is not the equivalent of Vanguard's 0.3% advisor.  Betterment is the equivalent of Vanguard's LifeStrategy funds, for double the fee.  The math I pointed to in my earlier reply unequivocally details how the extra fee will inevitably dwarf any possible gains from tax loss harvesting.  This is simple math, no opinion involved.  Going with them for tax loss harvesting is demonstrably a losing move.  And I didn't even get into the part where every single poster (besides one) in my Value investing/tilting with funds is utter crap thread, agreed with the premise of the thread.  Guess who uses a value tilt in all of their funds?

2.  If you just need someone to walk you through things, help you get setup, Vanguard can do that for free (just like Betterment does that for free).  See for yourself:

----------------------------------------------
Whether you're opening a new account, rolling over a 401(k), or adding to your portfolio, our associates in Concierge Services make investing at Vanguard easy.  Call us and see how we can help you.

Here's how we can support you:

Guide you from start to finish.
Explain your investment choices.
Assist you with the paperwork.
Talk to your current plan administrator.
----------------------------------------------

Since you have over $50,000 to invest, you will also receive Voyager Services...for free:

----------------------------------------------
"We'll help you work toward your investing goals with confidence. As your assets grow with us, so do your Vanguard benefits. Our Voyager Services provide an extra level of personal assistance, cost savings, guidance, and advice"

"Investment professionals who will listen to you, address your questions, and direct you to an advice solution that best suits your needs."

"And when you receive investing help from Vanguard, know that our professionals are salaried and don't receive commissions. So you can be confident that we'll make every decision with only your needs in mind."

https://investor.vanguard.com/what-we-offer/personal-services/voyager-and-voyager-select-services
----------------------------------------------

However, if you want someone to sit down with you for an hour or two every few months, to "review your portfolio, your financial situation and the general state of the economy." you won't be getting that anywhere with your current assets, without paying at least 0.3%...and sorry but that just smells like someone trying to justify their fee (and you will be paying an additional fee for this.  What in the portfolio is there to review multiple times a year?  If you are 100% invested with index funds, what exactly are you reviewing that you can't login to Vanguard.com and see in 15 seconds?  What does the state of the economy have to do with anything?  When you're 100% invested with index funds, you don't change things around based on the state of the economy.

I guess if you feel the need to have a service like this...to each their own...but in my opinion it's a waste of time when your plan is to buy and hold index funds for the rest of your life.

3.  You don't pay taxes in any IRA accounts.  You'll probably pay about $3,000 on your $81k, it depends on your tax bracket.  But no matter what you'll have to pay this, so it shouldn't factor into the decision of where to go.

Literally the only thing you mentioned at Betterment, that makes it different than Vanguard Lifestrategy, is:

1.  Tax Loss Harvesting - which has already been shown to be an unequivocal loser

2.  0.15% fee - However you made the error of comparing it to Vanguard's 0.3% advisory service, which offers substantially more than either Betterment or Lifestrategy.  The proper comparison to the 0.15% extra fee, is Lifestrategy's 0% extra fee.


Edit: Fixed bad math.  You'll likely pay about $3,000 taxes on your $81k move.
« Last Edit: April 16, 2015, 11:53:32 PM by Dodge »

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #59 on: April 17, 2015, 12:24:37 AM »
Thank you, Dodge.

When I talk to Kevin at Vanguard next week, I'll be excited to ask about Voyager Services. Thanks for finally making me understand how the services actually line up.

A few other tidbits I'm wondering (seriously....apologies for more questions.) –

Is the automatic rebalancing that Betterment offers if my portfolio skews more then 5% away from my target risk allocation worth anything and is there an equivalent that I would receive at Vanguard?

Would he IRAs still not be taxed even if I had to switch them all out to Vanguard from the American Funds? I'm scared that they'll have to liquidate them in order to get them invested into Vanguard in which case they'll be taxed. Hoping I'm way off on this one, as per usual!

Getting very excited over here – Sounds like I need to have about 3 or 4 thousand bucks ready for next tax season and pretty soon I can have some shiny new Vanguard funds!

Thanks again to everybody for all the help.

MDM

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #60 on: April 17, 2015, 12:43:16 AM »
Is the automatic rebalancing that Betterment offers if my portfolio skews more then 5% away from my target risk allocation worth anything and is there an equivalent that I would receive at Vanguard?
Might want to read the info Dodge linked about Vanguard's LifeStrategy Funds....

Quote
Would he IRAs still not be taxed even if I had to switch them all out to Vanguard from the American Funds? I'm scared that they'll have to liquidate them in order to get them invested into Vanguard in which case they'll be taxed. Hoping I'm way off on this one, as per usual!
You should be able to transfer the funds "in kind."  Or you can liquidate to cash with the current broker, then transfer the cash directly from the broker to Vanguard.  Check with Vanguard and the current broker for the costs to sell the funds.

Spondulix

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #61 on: April 17, 2015, 01:29:13 AM »
There's no taxes involved in moving your IRA from one to another. Even if you cash out, there's no tax due assuming you transfer within 60 days. You'll get a tax form at the end of the year (1099-INT?) but you just have to make sure it's noted as a transfer, not a dispersement. Super easy.

There will probably be fees for closing your accounts at your old advisor - just another trick they do to try to get you to stay. You'll more than make it up by getting into lower cost funds.

Better Change

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #62 on: April 17, 2015, 11:47:38 AM »
Tacocat,

You asked me about my experience so far, and about the taxes....so....

I liquidated about $140,000 of my mutual funds over 1 year old to buy Vanguard index funds.  Between federal and state, I'll owe ~ $6500 in capital gains tax in 2016.

To put things in perspective, my financial advisor netted me about $6000 in returns last year.  My Vanguard funds are already up significantly over that tax bill above ($250k portfolio) in the first quarter.

It was totally worth it to be free of the fees at Edward Jones (ugh, and the loads) AND to trigger the capital gains tax.  At least so far.

The market will eventually shift, but knowing that I was paying THOUSANDS of dollars in fees and expenses every year has me resting easier with my decision.

handsnhearts

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #63 on: April 17, 2015, 03:44:50 PM »
Tacocat
As another newbie, I am so glad to follow your journey and hear your questions.  FYI...

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #64 on: April 17, 2015, 03:53:07 PM »
Thank you, Dodge.

When I talk to Kevin at Vanguard next week, I'll be excited to ask about Voyager Services. Thanks for finally making me understand how the services actually line up.

A few other tidbits I'm wondering (seriously....apologies for more questions.) –

Is the automatic rebalancing that Betterment offers if my portfolio skews more then 5% away from my target risk allocation worth anything and is there an equivalent that I would receive at Vanguard?

Would he IRAs still not be taxed even if I had to switch them all out to Vanguard from the American Funds? I'm scared that they'll have to liquidate them in order to get them invested into Vanguard in which case they'll be taxed. Hoping I'm way off on this one, as per usual!

Getting very excited over here – Sounds like I need to have about 3 or 4 thousand bucks ready for next tax season and pretty soon I can have some shiny new Vanguard funds!

Thanks again to everybody for all the help.

I understand you're overwhelmed here, so you may have missed it:



https://investor.vanguard.com/mutual-funds/lifestrategy/#/

It's funny to hear that you're excited about getting some shiny new Vanguard funds.  Because even if you choose Betterment, that's what you were going to end up with :-P (Betterment takes your money and puts it in Vanguard for you). 

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #65 on: April 17, 2015, 04:47:01 PM »
Alrighty, latest update –

Can't stress how much I appreciate everybody weighing in with their expertise and assistance.

I sent out a mail to my advisor last night which I thought was pretty stern. Paraphrased –

"Thanks for the information about our funds. I'm including a graph that shows some of our funds, ITSLX, vs the similar mid-cap Vanguard fund, VMGRX. It looks as though our funds actually do worse in the bear markets of '08 and worse in the bull market of the last few years, too. I'm having trouble figuring out how we can be doing ok with this information as well as the 2.14% expense ratio and 53% turnover ratio on funds like ITSLX. I’m leaning quite heavily towards the ETF’s and index funds to eliminate some of these fees, even though I've tried to hear you out about being against them.

While I really would rather not have to be dwelling in the weeds like you say, I'm feeling uncomfortable with some of the answers you've given me. My financial future and portfolio are important to me and I’d like to be able to make some decisions, based on as much information as I can gather. So please provide any info or illustrations you can offer that show that we're doing better than we would be if all our funds were just invested in Vanguard Total Stock Market Index. Sorry to cause you a headache, but I felt the need to be honest with you about questions I currently have.

Its not an issue of trust of course – I understand your track record and how kind you've been to my family; I just like knowing what my money is doing and how my dollars are being invested. Therefore, I find it a bit insulting that you state you can provide me with tons of information (but you don't) and that I should just trust blindly.

Thanks for the help."

Attached this image –



Since sending this last night, I've heard back from him 3 times, with 4 separate American Funds information packets.

In his response, he stresses to me that in the attached info it explains why, there is "simply no protection in bear markets with indexes". Which, as we've discussed here, seems pretty obvious. He goes on to say that active management is now this year beating indexes and passive just when everyone is jumping on the low cost ETF and index bandwagon . He says he saw this in 2000 and 2007 and BOTH ended poorly,  and that things cycle.

He goes on to say that it also comes down to asset allocation and that is what he does well that Vanguard and passive indexes can not.

Finally, he stresses that investing doesn’t not boil down to just fees, and that there is way more to it. He says he does comprehensive wealth management  that I will see it in time, much more than just placing mutual funds or stocks. He does offer me the option to change the funds we're in, but says he's not concerned or upset with the gains we've made. He closes by saying there are also new managers that he generally gives more time to operate. But that it's up to me and that he's happy to visit this.

Here are the main points from his attached documents....The funny thing is, i think all the documents were FROM American Funds, Ha. But I could be wrong, perhaps they just said american funds on them and it's information he gathered.







What is he trying to prove to me by showing these SP500 graphs vs. barclay?   

Anyways, the writing seems pretty clear on the wall to me, just nice to have you guys' continued support while I wait to talk with Vanguard again next week.

Thanks, as always, for all the help.

MDM

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #66 on: April 17, 2015, 05:22:50 PM »
What is he trying to prove to me by showing these SP500 graphs vs. barclay?   
No idea what he is trying to show.

What he is showing is a 5% Withdrawal Rate from a non-rebalanced portfolio starting at 60% stocks / 40% bonds, and assuming 3% inflation, from 2000 through 2013.  The 5% is higher than the usually-assumed Safe Withdrawal Rate of 4%, and the 3% inflation is higher than actual (see http://www.statista.com/statistics/191077/inflation-rate-in-the-usa-since-1990/).  He may be trying to imply that using indexes will cause you to lose money, but it's a "misleading at best" example if so.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #67 on: April 17, 2015, 05:40:33 PM »
Wow.  Just.  Wow.

I actually had to break out Excel to determine what was happening here...

$500,000 portfolio, not rebalanced, with a 5% withdrawal rate, 3% "inflation" increases (despite inflation being well below 3% during this time), timed exactly at the peak of the market in the year 2000, just before the two biggest crashes since 1929.

?!  Really !?  That's his argument?

This is a fantastic combination of idiocy, and worst timing ever.  But I still don't see how any of this helps his point, because your American Funds portfolio would have performed ***worse*** during this period.  Again, he either doesn't know what he's doing, or he's purposely treating you like an idiot.
« Last Edit: April 17, 2015, 05:50:23 PM by Dodge »

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #68 on: April 17, 2015, 05:49:25 PM »
Ahh, Ok. THis is my bad – I think I understand what he's trying to show now. I failed to include pictures from the other handout as well, which compare the last pics (index bonds and index equities) to the following pics which compare against mutual funds:









He is showing that the indexes will lose while you withdraw, right?

Thanks again, to all.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #69 on: April 17, 2015, 05:50:40 PM »
Even worse than not rebalancing, he is purposely withdrawing the same amount from both stocks and bonds, despite the fact that stocks halved in value twice during this period.  No one does this.  The whole point of having bonds is so you don't have to touch stocks when they crash, and if things get too out of bounds, to rebalance.  Seriously, this entire example is contrived with the assumption that you, the person being sold on their expensive funds, knows absolutely nothing about investing.  Otherwise they wouldn't show people this obvious crap.

Tacocat, it doesn't seem like you're offended by this.  Don't worry.  I'm offended enough for us both.  Stop treating this guy like he's doing you a favor.  You don't have to preface your statements with "sorry to give you a headache", "it's not an issue of trust", and "I know how kind you've been to my family".  He's literally calling you an idiot to your face.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #70 on: April 17, 2015, 06:36:50 PM »
He is showing that the indexes will lose while you withdraw, right?

No, he's showing that he's willing to call you an idiot, with a smile, while asking for money.  This is wrong on so many levels.  The more I look at it, the more I see:
  • Why is he using a 5% withdrawal rate?  Does he think you're an idiot?
  • Why is he using 3% inflation, when inflation was much lower?  Does he think you don't know how to look this up?
  • The funds he's show you here, all of them rebalance, and all of them withdraw more from bonds when stocks are falling.  Why don't the index funds do this?  This is standard practice.
  • these three funds are a combined 70% USA/International stocks, and 30% cash/bonds/other.  A 60% S&P500, 40% Barclays portfolio isn't even close to being a good benchmark for this.
  • If these specific American funds are so great, why aren't you in them?  Are these funds cherry picked?  Will the brochure in 10 years from now, have different cherry picked funds to "prove" active funds are superior than passive funds?  Interesting that these funds have an average fee of 0.58%, while you're being put in 2.14% funds...

The only thing this shows you, is that he's willing to manipulate data to get a sale.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #71 on: April 17, 2015, 07:04:34 PM »
If we're going to cherry pick, let's at least have fun with it!  These are the same three funds from the brochure:





And now with the ridiculous 5% withdrawal rate:




PROOF that index funds beat active funds!


Spondulix

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #72 on: April 18, 2015, 02:45:13 AM »
The only thing this shows you, is that he's willing to manipulate data to get a sale.
Any chance he doesn't understand it himself? Drinking someone else's Koolaid?

Catomi

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #73 on: April 18, 2015, 05:23:27 AM »
The only thing this shows you, is that he's willing to manipulate data to get a sale.
Any chance he doesn't understand it himself? Drinking someone else's Koolaid?

If a financial manager doesn't understand when data is being manipulated, then I don't want him handling my money.

fa

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #74 on: April 18, 2015, 06:04:55 AM »
I would not waste my time getting in a debate with your advisor.  It is your money.  You do with it as you wish.  Give him the order to transfer the funds.  Period.  End of story.

Many years ago a family member gave us some American Funds.  I was an inexperienced investor at the time, but even then I could see how terrible they performed.  I couldn't stomach it any more and moved to Vanguard.  It has been great.  That was when we had AF without an advisor.  The AF funds  are awful.  Great decision for you to move.

frugaliknowit

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #75 on: April 18, 2015, 06:38:59 AM »
Take a deep breath.

This is what you tell him:  You're fired.

Stop getting ripped off, because that is the reality.

Riff

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #76 on: April 18, 2015, 06:48:11 AM »
I would not waste my time getting in a debate with your advisor.  It is your money.  You do with it as you wish.  Give him the order to transfer the funds.  Period.  End of story.
When I switched to Vanguard, I never had to contact my old advisor to transfer the funds.  I called Vanguard, and they took care of that for me.  No awkward phone calls or emails to say goodbye to the old advisor.

lemanfan

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #77 on: April 18, 2015, 07:03:53 AM »
I would not waste my time getting in a debate with your advisor.

This.

CordMcNally

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #78 on: April 18, 2015, 10:10:54 AM »
I, too, was in a similar scenario with you about 10 years ago. I had some money invested with Edward Jones that was placed in American Funds. After doing my own research, I went with Vanguard. I filled out the necessary paperwork and Vanguard took care of everything. I never let my "investment advisor" know because it didn't concern him. Nevertheless, he called when Vanguard began transferring the money and I explained that I could do it for better and cheaper and that I have my own interest as my highest priority (unlike him). He wanted a meeting so you could go over the data, etc., but I politely refused and hung up. I've never looked back.

Don't get into a back and forth with him. This is what he's trained to do. Seek out your own graphs and information if you want true data because his will be tampered in his favor. He's continually slapping you in the face and so far you've been taking it. Fill out the paperwork from Vanguard (it literally couldn't be any easier) and they'll take care of it. Once the money is with Vanguard, then you can sit down and execute a plan on transferring to better (and cheaper!) funds.

PS: Regardless what his relationship with your family has been, he's been far from good to them.

Spondulix

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #79 on: April 19, 2015, 02:25:47 PM »
I would not waste my time getting in a debate with your advisor.  It is your money.  You do with it as you wish.  Give him the order to transfer the funds.  Period.  End of story.
When I switched to Vanguard, I never had to contact my old advisor to transfer the funds.  I called Vanguard, and they took care of that for me.  No awkward phone calls or emails to say goodbye to the old advisor.
Same here. Unless the guy is a personal friend I'd just move on.

FIRE me

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #80 on: April 19, 2015, 09:36:23 PM »
Being such a newcomer to investing, I'm first to admit that I could very well poop my pants when the portfolio suddenly drops 30% one day.

I'd poop my pants at a 30% one day drop too. But for a completely different reason. If the market dropped 30% tomorrow, I would joyfully put $100,000 in an index fund tomorrow.

Buy low, sell high. What in the heck is so hard about that?

Holyoak

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #81 on: April 20, 2015, 06:05:51 AM »
Friend,  would you let anyone basically steal from you, if you knew they were doing it?  Pay a $200 tip at Pizza Hut?  FA's from my experience have a handbook they quote from, and yours is no different...  Make it seem like this is big scary stuff, shame you on your lack of investing acumen, everything will be OK if you stick with me, degenerate the competition with flat out lies or skew things with BS, razzmatazz, etc.  Even the tactic of a not so soft dig, well shown by one of the posters here, is a tactic... 

"(index funds) are good for the typical everyday investor who doesn't want to spend a lot of time or effort learning about the stock market and the ins and outs of investing."

Translated:  You are too unsophisticated and lazy to do "REAL" investing, better let me handle (loose/take waaaaaaayyyy to much of your money), that I will spend a few minutes a month myself handling your account using a computer program, and a colored printer to show you some snappy charts, filled with a ton of buzzwords."  Ask him what "ins and outs" cost???  Your FA knows he better keep you hooked, and his tone is demeaning and desperate, last breaths from a dying man.

Lets see all the buzzwords when the actual return you receive by those insane level of fees is way below the tracking benchmark.  At best, go with a pay by the hour fiduciary to help you decide, but listening to the fox running the hen house will have you achieve so much less than could have been.  As mentioned, do not spar with these sleazy used car salesmen, just do the transfer via whomever, and cut this parasite out of your life.

I have been with Vanguard for decades, and they have about $3 trillion under management, over $1MM of it being mine ...  Recently while doing a 401k rollover, VG apologized for the potentially long processing time; I was told they are overwhelmed with inflows.  Please listen the the wise advice of folks here, get switched over to low cost index funds from someone, and enjoy the fruit of your labor.  I wish you the very best of luck!



Singularity

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #82 on: April 20, 2015, 07:16:45 AM »
Agreed Vanguard rocks and I have accounts with them.  I also use betterment for an emergency fund and mid term goal investing (buying a new used car).  Betterment has a great website and has been extremely easy but of course they have higher fees.

Either option will be a massive improvement from where you are now.  More important that choosing Vanguard or Betterment is that you add money every paycheck or every month.  That is by far the most important thing to do.  Every weekly paycheck I add money both my taxable and tax-advantaged (Roth/401k) accounts.  Make the move and track what percentage of your monthly income you are saving and keep trying to increase it. 

tacocat

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #83 on: May 06, 2015, 06:02:05 PM »
It's finally done!

Out of nowhere, my financial advisor emailed to say he's switching firms, from Morgan Stanley to Benjamin F. Edwards & Co., and so I let him know I would not be following him to his new company. After I congratulated him on his new job, I asked for a hand in getting my accounts transferred. He wrote back two sentences:

"I would really like to help you however your assets are at Morgan Stanley and I am at Benjamin F Edwards.   I wish you the best of luck."

And that was that. Yeesh.

Luckily, my accounts were transferred to a very kind advisor at Morgan Stanley who assisted me in getting everything transferred over to Betterment. He was very helpful.

I was all ready to invest with Vanguard directly and still have an empty account opened with them, but wound up transferring both IRA's and my taxable account to Betterment. I went with Betterment against the advice of some of you kind friends because of a reply I got from MMM himself to an email I sent him where he reported how pleased he's been with Betterment, its portfolio, and the amount it's already saved him with tax loss harvesting. He also mentioned money from a rental property he's selling this year going directly to Betterment because of how pleased he's been w/ his accouts there. Add to this how much more I like their interface and ease and I'm sold on Betterment for the time being. Because I have more than 100k, the fee will only be a .15% and I'm alright with that for now.

Thank you all so much for answering all of my dumb questions. It's been the start of an education that I'm excited to keep adding to! I really appreciate all the links, crunched numbers, words of wisdom, and shared stories you all brought to share. Thank you again! I'll let you know how things go with Betterment in the future.

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #84 on: May 07, 2015, 08:12:36 PM »
I went with Betterment against the advice of some of you kind friends because of a reply I got from MMM himself to an email I sent him where he reported how pleased he's been with Betterment, its portfolio, and the amount it's already saved him with tax loss harvesting.

Sorry to say it, but MrMoneyMustache isn’t exactly an investing mogul.  I’ve pointed out to him many times that the math of tax loss harvesting doesn’t overcome the extra Betterment fees, and he’s never responded.  He responds to my other points, but not that one.  In his latest blog update he talks highly of the money he’s saved in tax loss harvesting, claiming that the amount received from tax loss harvesting has exceeded his extra Betterment fees, but he embarrassingly misses the fact that his biggest loss was a wash sale.  The “W” in Box 1f:



This means he won’t be able to claim that loss on his taxes.  Here’s Intuit’s page highlighting what a “W” in Box 1f means:

https://ttlc.intuit.com/questions/1901026-how-do-i-enter-a-wash-sale

In other words, his statement was wrong.  The tax loss harvesting did not overcome his fees.

-Corrected by Cathy below.  His numbers are still off, but just barely (74 cents).

Add to this how much more I like their interface and ease and I'm sold on Betterment for the time being. Because I have more than 100k, the fee will only be a .15% and I'm alright with that for now.

It really befuddles me when people say that.  For me, I login, hit "LifeStrategy Growth", put in how much I'd like to buy, and I'm done.  It already has my bank account information pre-filled in, it's literally a 15 second process.  Do a lot of people really choose where invest their life savings based on how pretty the website interface is?  People think the pretty boxes for 15 seconds are worth paying hundreds of thousands of dollars in extra fees over their lifetimes?  ¯\_(ツ)_/¯

I think I'll make a new thread comparing the interfaces to get the bottom of this.  Their entire product is literally a website-wrapper on top of Vanguard funds, and the fee they charge for this wrapper is many times higher than Vanguard's fee to manage the funds themselves!  Technically, they are a broker that holds Vanguard funds for you, but no other broker charges their own percentage fee on your holdings.  Their marketing trickery is really fascinating to me, I don't understand how they convince people who already know about Vanguard to do this...

Anyway, back on topic.  CONGRATS on moving Tacocat :D  I was worried there for a minute when we hadn't heard from you.  Keep one thing in mind regarding your quote above, "for the time being" and "I'm alright with that for now".  Your $100,000 (I'm sure it's more, but let's start there) is expected to double every 7 years or so.  If you go on autopilot for 10 years, and get the long term stock market average, your $100,000 will have more than tripled.  Let's round down and say it grows to $300,000.

If you try to cash out and move to Vanguard (or some other low fee provider, like WiseBanyan, who is even cheaper than Vanguard), you'll have to pay capital gains taxes on those $200,000 gains.  This will probably result in a tax bill of around $36,000.  If you choose not to pay the tax bill, and move your Betterment account "in-kind" instead, you'll end up managing the complicated 10-20 fund portfolio Betterment throws your money into.

In other words, you'll be penalized pretty heavily if this is a "for the time being" or "for now" decision.  You might end up locked-in, turning this into a forever decision.  I'd think long and hard before making a move like this.  If you have your heart set on it, why not move just the IRA accounts over, and put the taxable in Vanguard?  This will allow you to compare them both directly, and if you decide to leave Betterment, there will be no tax penalty.  You won't be locked-in at all, you can simply cash out and go wherever you want, almost like a free trial :)  Win/Win!
« Last Edit: May 08, 2015, 10:14:34 AM by Dodge »

Cathy

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #85 on: May 07, 2015, 08:22:29 PM »
I went with Betterment against the advice of some of you kind friends because of a reply I got from MMM himself to an email I sent him where he reported how pleased he's been with Betterment, its portfolio, and the amount it's already saved him with tax loss harvesting.

Sorry to say it, but MrMoneyMustache isn’t exactly an investing mogul.  I’ve pointed out to him many times that the math of tax loss harvesting doesn’t overcome the extra Betterment fees, and he’s never responded.  He responds to my other points, but not that one.  In his latest blog update he talks highly of the money he’s saved in tax loss harvesting, claiming that the amount received from tax loss harvesting has exceeded his extra Betterment fees, but he embarrassingly misses the fact that his biggest loss was a wash sale.  The “W” in Box 1f:



This means he won’t be able to claim that loss on his taxes.  Here’s Intuit’s page highlighting what a “W” in Box 1f means:

https://ttlc.intuit.com/questions/1901026-how-do-i-enter-a-wash-sale

In other words, his statement was wrong.  The tax loss harvesting did not overcome his fees.

Dodge, what this form tells you that is 74 cents of the loss is non-deductible. The remaining $326.43 is deductible (*).


((*) Of course, the deductibility of the loss is ultimately determined by the law, not by the entries on Form 1099-B. But in this context, we have no reason to think that the form is wrong.)
« Last Edit: May 07, 2015, 08:31:11 PM by Cathy »

Dodge

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Re: Awkward questions with family Wealth Manager @ Morgan Stanley
« Reply #86 on: May 07, 2015, 09:05:33 PM »
I went with Betterment against the advice of some of you kind friends because of a reply I got from MMM himself to an email I sent him where he reported how pleased he's been with Betterment, its portfolio, and the amount it's already saved him with tax loss harvesting.

Sorry to say it, but MrMoneyMustache isn’t exactly an investing mogul.  I’ve pointed out to him many times that the math of tax loss harvesting doesn’t overcome the extra Betterment fees, and he’s never responded.  He responds to my other points, but not that one.  In his latest blog update he talks highly of the money he’s saved in tax loss harvesting, claiming that the amount received from tax loss harvesting has exceeded his extra Betterment fees, but he embarrassingly misses the fact that his biggest loss was a wash sale.  The “W” in Box 1f:



This means he won’t be able to claim that loss on his taxes.  Here’s Intuit’s page highlighting what a “W” in Box 1f means:

https://ttlc.intuit.com/questions/1901026-how-do-i-enter-a-wash-sale

In other words, his statement was wrong.  The tax loss harvesting did not overcome his fees.

Dodge, what this form tells you that is 74 cents of the loss is non-deductible. The remaining $326.43 is deductible (*).


((*) Of course, the deductibility of the loss is ultimately determined by the law, not by the entries on Form 1099-B. But in this context, we have no reason to think that the form is wrong.)

Ah, thanks Cathy (our resident tax expert!) that makes much more sense.