Author Topic: "Beating the market"  (Read 9673 times)

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
"Beating the market"
« on: May 13, 2015, 12:24:36 PM »
So, all of our investments aside from pension currently sit with our Edward Jones investor. I've been reading up on investing and would like to start investing some or all of our money, but I am reluctant and my husband even more so (his argument is that it is our investor's job to do this so he should be better at it than we are as he does this full time). When I talk about all the fees we are paying, our investor's argument is that we are beating the market. His evidence is that our portfolio is consistently 2-3% above the Toronto Stock Exchange after fees. But some of our money is in bonds, US market, and global market, so that is not a fair comparison, right? Pardon my naivete on this, I'm trying to learn.

MDM

  • Walrus Stache
  • *******
  • Posts: 9806
Re: "Beating the market"
« Reply #1 on: May 13, 2015, 12:29:49 PM »
Your investor's job is to make money for himself and his company.

We could provide much generic advice about high fee brokerages in general and/or Edward Jones in particular.  More specific comments might be available if you would post your current holdings, including ticker, load, fees, and amount invested (either $ or %).

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #2 on: May 13, 2015, 12:39:04 PM »
Your investor's job is to make money for himself and his company.

We could provide much generic advice about high fee brokerages in general and/or Edward Jones in particular.  More specific comments might be available if you would post your current holdings, including ticker, load, fees, and amount invested (either $ or %).

Well, he does make more money if our holdings grow.

$200 K invested. He says we pay 1.5% in fees to Edward Jones, plus of course the expensive mutual funds in our account. I don't know what ticker and load mean, sorry.

MDM

  • Walrus Stache
  • *******
  • Posts: 9806
Re: "Beating the market"
« Reply #3 on: May 13, 2015, 12:46:24 PM »
I don't know what ticker and load mean, sorry.
Ticker = the symbol used for the investment.  E.g., VTSAX, FSTVX, AMCPX, etc.
Load = the amount you pay (if any) up front for the investment.  E.g., see http://www.morningstar.com/funds/XNAS/AMCPX/quote.html: the load on that one is 5.75%.

In other words, what are your investments now, what did you pay to get into them, and what are you paying to stay with them?

DrF

  • Bristles
  • ***
  • Posts: 464
Re: "Beating the market"
« Reply #4 on: May 13, 2015, 12:46:39 PM »
There is a huge psychological barrier for some concerning managing their own money. His 'beating the market' comment is a cheap trick to keep you as a customer.

If you reach the point where you and your husband are ready to pull the trigger, you can easily open an account with a low fee broker (Fidelity, Schwab, Vanguard) and instruct them to do an account transfer. You never have to even speak with the adviser again.

Best of luck!

velocistar237

  • Handlebar Stache
  • *****
  • Posts: 1422
  • Location: Metro Boston
Re: "Beating the market"
« Reply #5 on: May 13, 2015, 12:51:30 PM »
Depending on the portfolio, it might be tough to make an apples-to-apples comparison, but the comparison he made to the Toronto exchange is disingenuous.

I can say this for sure: your investor makes more money if he makes particular choices, and those choices are often worse for you. For example, he gets commissions for steering people toward certain high-load funds, and he makes more money if he spreads your investments across more funds, so that you don't meet lower-fee thresholds in any particular fund. He might not even be that great at investing, because that's not really his job. Sales is his job.

Like DrFunk said, if you switch to another brokerage (e.g., Vanguard, Schwab, Betterment?), they have representatives who will handle the account transfers for you. It might be even possible to do in-kind transfers for taxable accounts.

Well, he does make more money if our holdings grow.

He makes the most money by taking as much money as he can from you right now, and then investing that money for himself.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 14646
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: "Beating the market"
« Reply #6 on: May 13, 2015, 01:07:38 PM »
Judging by your investment guy's response, you're Canadian.  If so, it is absolutely worth reading this website over:

http://canadiancouchpotato.com/couch-potato-faq/


Investing isn't scary, hard, or complicated to do on your own.  The odds are that you are paying far too much for what you're getting.

mizzourah2006

  • Bristles
  • ***
  • Posts: 479
  • Location: NWA
Re: "Beating the market"
« Reply #7 on: May 13, 2015, 01:13:45 PM »
The unfortunate thing is they've paid the majority of what they will pay. The load fee is the big thing for EJ. Obviously they have some high ER funds, but I've seen funds with ERs below .7. Paying .7 instead of .1 for an advisor isn't a huge issue IMO. The real hit IMO is the 5.75% load fee. If I were OP I'd open up a vanguard for all future investments and make sure you are in low ER funds in EJ. A good advisor should advise you on all of your money, not just the money they hold. If they don't offer that then pull it all out.

This is of course assuming you would both feel more comfortable with a "professional" helping you. I quote the term because there are some EJ advisors that are great and some that are sharks.

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3557
  • Age: 37
  • Location: Madison Heights, Michigan
Re: "Beating the market"
« Reply #8 on: May 13, 2015, 01:31:06 PM »
The unfortunate thing is they've paid the majority of what they will pay. The load fee is the big thing for EJ. Obviously they have some high ER funds, but I've seen funds with ERs below .7. Paying .7 instead of .1 for an advisor isn't a huge issue IMO. The real hit IMO is the 5.75% load fee. If I were OP I'd open up a vanguard for all future investments and make sure you are in low ER funds in EJ. A good advisor should advise you on all of your money, not just the money they hold. If they don't offer that then pull it all out.

This is of course assuming you would both feel more comfortable with a "professional" helping you. I quote the term because there are some EJ advisors that are great and some that are sharks.

Some might argue that an ongoing fee of 1.5% off the top (like the op described) is the real hit.  It's the hit that keeps on hitting, year after year. 

mizzourah2006

  • Bristles
  • ***
  • Posts: 479
  • Location: NWA
Re: "Beating the market"
« Reply #9 on: May 13, 2015, 01:39:26 PM »
The unfortunate thing is they've paid the majority of what they will pay. The load fee is the big thing for EJ. Obviously they have some high ER funds, but I've seen funds with ERs below .7. Paying .7 instead of .1 for an advisor isn't a huge issue IMO. The real hit IMO is the 5.75% load fee. If I were OP I'd open up a vanguard for all future investments and make sure you are in low ER funds in EJ. A good advisor should advise you on all of your money, not just the money they hold. If they don't offer that then pull it all out.

This is of course assuming you would both feel more comfortable with a "professional" helping you. I quote the term because there are some EJ advisors that are great and some that are sharks.

Some might argue that an ongoing fee of 1.5% off the top (like the op described) is the real hit.  It's the hit that keeps on hitting, year after year.

oh wow. If that's the case you are absolutely right. I must have missed that. I know people that work for EJ and invest in EJ. At least in the US it is a 5.75% load fee that EJ takes as their advisory commission and the Expense Ratios go to the funds you choose. I am not aware of an ongoing 1.5% fee on all assets, perhaps that's if you go a different route than the class A shares. I would definitely move to Vanguard and make bi-annual appointments with a fee only advisor.

frugalnacho

  • Magnum Stache
  • ******
  • Posts: 3557
  • Age: 37
  • Location: Madison Heights, Michigan
Re: "Beating the market"
« Reply #10 on: May 13, 2015, 01:43:06 PM »
The unfortunate thing is they've paid the majority of what they will pay. The load fee is the big thing for EJ. Obviously they have some high ER funds, but I've seen funds with ERs below .7. Paying .7 instead of .1 for an advisor isn't a huge issue IMO. The real hit IMO is the 5.75% load fee. If I were OP I'd open up a vanguard for all future investments and make sure you are in low ER funds in EJ. A good advisor should advise you on all of your money, not just the money they hold. If they don't offer that then pull it all out.

This is of course assuming you would both feel more comfortable with a "professional" helping you. I quote the term because there are some EJ advisors that are great and some that are sharks.

Some might argue that an ongoing fee of 1.5% off the top (like the op described) is the real hit.  It's the hit that keeps on hitting, year after year.

oh wow. If that's the case you are absolutely right. I must have missed that. I know people that work for EJ and invest in EJ. At least in the US it is a 5.75% load fee that EJ takes as their advisory commission and the Expense Ratios go to the funds you choose. I am not aware of an ongoing 1.5% fee on all assets, perhaps that's if you go a different route than the class A shares. I would definitely move to Vanguard and make bi-annual appointments with a fee only advisor.

It was in the third post.  It seems quite common for a financial adviser to take a cut right off the top (between 1-2%) just for managing your money.  The expense ratios and loads for the funds are a separate expense.

Frankies Girl

  • Magnum Stache
  • ******
  • Posts: 3081
  • Age: 82
  • Location: The laboratory
  • Typical Ghoul Next Door
Re: "Beating the market"
« Reply #11 on: May 13, 2015, 01:46:39 PM »
http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/



And then read through the rest of the series if you're interested in learning how the stock market works.

http://jlcollinsnh.com/stock-series/

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: "Beating the market"
« Reply #12 on: May 13, 2015, 01:48:05 PM »
I'm not Canadian, but I think the S&P TSX is a good Canadian index. The US S&P 500 has crushed the TSX in the last year 12% vs 2%
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1431547200000&chddm=100487&chls=IntervalBasedLine&cmpto=INDEXSP:.INX&cmptdms=0&q=INDEXTSI:OSPTX&ntsp=0&ei=lalTVbG3EtLGrAGas4FI

So anyone owning a North American market cap weighted index would have crushed the Canadian market. And they would have crushed it much more if they hadn't been paying 2% or more to their overpriced financial advisors.

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #13 on: May 13, 2015, 02:13:14 PM »
Thanks, all. Gaining confidence :)

MDM, I checked all of our investment tickers (thank you for explaining the terminology). Most of them have MER's of close to 2 or above. For all the loads, it says "back-end load", which I assume is a good thing based on previous replies?

And yes, we pay 1.5% of total portfolio to EJ. You don't see this of course, all they show you is after-cost numbers. I really is a lot! But his argument is that he more than makes up for it since he is "beating the market" and by market he means the TSX. I'm not convinced. For the same reason that forummm posted, as well as the moderating influence of bonds in a bad year (like 2011 when the TSX was down 11% but we were "only" down 5%).

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: "Beating the market"
« Reply #14 on: May 13, 2015, 02:15:49 PM »
"back-end load" means they charge you to sell. I'm sure they are also charging you an annual % fee as well, in addition to the 1.5%.

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #15 on: May 13, 2015, 02:19:33 PM »
"back-end load" means they charge you to sell. I'm sure they are also charging you an annual % fee as well, in addition to the 1.5%.

How much do they charge? In that case, would it be better to leave them in current holdings or transfer them to lower MER funds/ETF's?

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: "Beating the market"
« Reply #16 on: May 13, 2015, 02:40:09 PM »
"back-end load" means they charge you to sell. I'm sure they are also charging you an annual % fee as well, in addition to the 1.5%.

How much do they charge? In that case, would it be better to leave them in current holdings or transfer them to lower MER funds/ETF's?

Since you haven't told us what funds you own, we can't tell you what the expenses are. You should be able to figure that out. Your advisor should tell you (and should already have told you).

I would be really surprised if you wouldn't be better off just selling what you have now, investing on your own, buying Vanguard funds, and just holding them forever.

Interest Compound

  • Pencil Stache
  • ****
  • Posts: 658
Re: "Beating the market"
« Reply #17 on: May 13, 2015, 03:05:31 PM »
So, all of our investments aside from pension currently sit with our Edward Jones investor. I've been reading up on investing and would like to start investing some or all of our money, but I am reluctant and my husband even more so (his argument is that it is our investor's job to do this so he should be better at it than we are as he does this full time). When I talk about all the fees we are paying, our investor's argument is that we are beating the market. His evidence is that our portfolio is consistently 2-3% above the Toronto Stock Exchange after fees. But some of our money is in bonds, US market, and global market, so that is not a fair comparison, right? Pardon my naivete on this, I'm trying to learn.

Usually I'd simply recommend calling Vanguard, telling them you want a Target Retirement Fund, and give them your age.  They take care of everything for you, at about 1/10th the fee.  And 1/10th the fee can go a LONG way:





But it doesn't look like Canada has a comparable option.  I recommend taking a look at:

http://canadiancouchpotato.com/model-portfolios-2/

Personally, I'd go with Option 3.

MDM

  • Walrus Stache
  • *******
  • Posts: 9806
Re: "Beating the market"
« Reply #18 on: May 13, 2015, 03:09:58 PM »
For all the loads, it says "back-end load", which I assume is a good thing based on previous replies?
Maybe, maybe not.

See http://en.wikipedia.org/wiki/Mutual_fund_fees_and_expenses:
Quote
Back-end load

Associated with class "B" mutual fund shares. Also known as Deferred Sales Charge, this is a fee paid when shares are sold. Also known as a "back-end load," this fee typically goes to the Stockbrokers that sell the fund's shares. Back-end loads start with a fee about 5 to 6 percent, which incrementally discounts for each year that the investors own the fundís shares. The rate at which the fee declines is disclosed in the prospectus. The amount of this type of load will depend on how long the investor holds his or her shares and typically decreases to zero if the investor holds his or her shares long enough.

Thus your exit cost may depend on how long you have owned the shares.  Maybe you could post a screen shot (or similar dump) of your portfolio (without personal IDs)?

TexasStash

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: "Beating the market"
« Reply #19 on: May 13, 2015, 03:19:49 PM »
I don't think it is wise to keep any money in EJ just because it's already there and you've already taken part of the hit. Always keep the long-term view in mind:

1. Whether you move the funds now, or you cash out later, you've already paid any upfront load. Don't make your decision based on taking this hit. It's there either way.
2. 0.7% is very different than 0.1%. I sometimes will waffle if the difference in funds is less than 0.2% but really the costs do matter, and 0.6% is not insignificant. Especially if you're viewing this over the course of decades. It adds up.
3. Always keep in mind that you don't keep this money in any investment to never use it. You might not use it today or even 10 years from now, but the only way it benefits you in the end is to pull it out and use it. If back end load fee is constant over time or only drops slowly, I would advocate getting out. You will benefit from the lower expense ratio that will help you recover that back end load over time. If the back end load drops to zero within the next 10 years, you might consider leaving the money where it is.
4. The important thing is to be calm, act rationally, and not jump from firm to firm chasing low fees. Research now, make the choice once, find the investor you like with the most reasonable fees, and stay there. One-time hit can make sense to find a better investment firm, but you can lose a lot jumping around, especially if you play in the funds that have up front or back end loads.

Read The Little Book of Common Sense Investing by John Bogle. It isn't a difficult read. He hammers home the point over and over that anyone who promises you that they can beat the market over a simple diversified index fund over 10+ years is fooling you. The math is brutal but it's at least honest. This is why people care about cost so much. It's not an attempt to be "pennywise and pound foolish". It's simply a recognition that cost matters because the odds are stacked heavily against anyone beating the market year after year.

The best point made earlier is that investment advisors are experts in sales. They have just enough knowledge to fool all of us common folk who don't work in investing, but they aren't automatically going to make better returns because their interests often aren't directly aligned with ours.

Good luck!

Rubic

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: "Beating the market"
« Reply #20 on: May 13, 2015, 04:35:00 PM »
Hey Travelling Biologist.

Others have given you great reasons why you should move from EJ, but I'd like to address a practical hurdle that is sometimes difficult to overcome.  Your advisor has a special relationship with you, his client.  There are usually some subtle psychological elements in play and since he knows more about investing than you do, he'll be well prepared to rebut any arguments you provide -- in favor of retaining your business (and his fees).

Instead of starting this discussion with EJ, once you've decided to switch to indexed funds, just create an account on the web site (e.g. vanguard.com) and authorize them to transfer your assets.

Simple, no fuss.

Your action essentially eliminates the bogus/manipulative discussion that could possibly ensue.  If Mr. EJ wants to contact you afterward, he's operating from a weaker position and is forced to acknowledge that you've essentially made your decision.

FWIW.  Best wishes.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1218
  • Age: 40
  • Location: Texas
Re: "Beating the market"
« Reply #21 on: May 13, 2015, 05:09:36 PM »
I'd at least switch to vanguard and let them be your advisor. That would still give your husband peace of mind that someone is watching over your portfolio, but it would be way cheaper.


Sent from my iPhone using Tapatalk

Interest Compound

  • Pencil Stache
  • ****
  • Posts: 658
Re: "Beating the market"
« Reply #22 on: May 13, 2015, 05:14:16 PM »
Hey Travelling Biologist.

Others have given you great reasons why you should move from EJ, but I'd like to address a practical hurdle that is sometimes difficult to overcome.  Your advisor has a special relationship with you, his client.  There are usually some subtle psychological elements in play and since he knows more about investing than you do, he'll be well prepared to rebut any arguments you provide -- in favor of retaining your business (and his fees).

Instead of starting this discussion with EJ, once you've decided to switch to indexed funds, just create an account on the web site (e.g. vanguard.com) and authorize them to transfer your assets.

Simple, no fuss.

Your action essentially eliminates the bogus/manipulative discussion that could possibly ensue.  If Mr. EJ wants to contact you afterward, he's operating from a weaker position and is forced to acknowledge that you've essentially made your decision.

FWIW.  Best wishes.

Agreed.  The advisor has already shown him/herself to be unscrupulous with their false comparison to the Toronto Stock Exchange as a benchmark.  Expect even more false information from them if you decide to talk to them about it:

4 advisor moves that shouldn't be legal

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1437
Re: "Beating the market"
« Reply #23 on: May 13, 2015, 06:44:16 PM »
Thanks, all. Gaining confidence :)

MDM, I checked all of our investment tickers (thank you for explaining the terminology). Most of them have MER's of close to 2 or above. For all the loads, it says "back-end load", which I assume is a good thing based on previous replies?

And yes, we pay 1.5% of total portfolio to EJ. You don't see this of course, all they show you is after-cost numbers. I really is a lot! But his argument is that he more than makes up for it since he is "beating the market" and by market he means the TSX. I'm not convinced. For the same reason that forummm posted, as well as the moderating influence of bonds in a bad year (like 2011 when the TSX was down 11% but we were "only" down 5%).

Given the TSX's performance the past 5 years beating it doesn't say a thing... especially if you have been invested in US stocks.  Saying you beat the TSX when you were using US stocks the past 5 years is like saying you drove your car and won a race against someone who was on foot.
1 year returns  TSX = 2.05%  SP500 = 10.59%
5 year average returns TSX= 4.34%   SP500=12.64%. 
Even looking at 10 year average returns TSX = 4.91%  SP500 =6.16%

If you are paying him 1.5% and you have expense ratios north of 1% that means 2.5%+ in fees.  That is insane.  That means if your portfolio grew by 5% you would only actually see 2.5%. 

As a side note... of the advisors likely to beat the market I rank EJ advisors as a 2 on a scale of 1-10 with 1 being a blubbering idiot and 10 being Warren Buffett's past performance(since we can't know the future).  They have a reputation within the industry for having advisors who are lacking in investment knowledge.... they hire based more on 'sales' experience than investment experience.  Successful used car salesmen > Finance major with 4.0 from a top business school.  I've met a few that were really nice people, but they didn't understand things that I thought would be pretty basic if you were managing someone else's money... like investing tax efficiently & backdoor roth contributions.   They also use very expensive and highly tax inefficient investments.  This creates a huge handicap to trying to beat the market.  Beating the market is hard enough, add in 2.5% in fees and 1% in tax disadvantages and then brokerage fees.... and when the market has only averaged 10% over the long term it's really hard to work from a 3-4% disadvantage.


So yes, call Vanguard.  Get the money moved.  You can either do a target retirement fund(self managing portfolio) which will do 99% of the work for you if that makes the husband feel better, or you can hang out hear and learn how to build a portfolio from scratch... that will probably end up looking very similar to a Vanguard Target Retirement fund. ;)

daverobev

  • Magnum Stache
  • ******
  • Posts: 3430
  • Location: France
Re: "Beating the market"
« Reply #24 on: May 13, 2015, 06:49:14 PM »
OP, if you didn't get it from Canadian Couch Potato already, there are three options to (sort've) DIY; from easiest to hardest:

Get ONE FUND with Tangerine. Balanced Growth is good, in that it is 1/4 each of Canadian, US, International stocks, and Canadian bonds. It has a 1% MER and that's it. It is broad based, diversified, etc.

More tricky, but not much, is TD eSeries funds. The MER on these is about 0.35%. But you have to buy 4 funds. And rebalance back to your preferred asset allocation yourself.

Another step up in difficulty is opening an account with a discount brokerage (there are a dozen or maybe more; find one thats structure fits you. If you want margin, lots of foreign exchanges and so on - Interactive Brokers is hard to beat. For what you probably want, I find Questrade to be ideal as there is no cost to buy, and selling is only $5-10 each transaction). You will have to select ETFs (exchange traded funds) yourself, and as with TD, rebalance. In addition, you have to initiate all buys and sells yourself - where with mutual funds you can have automatic withdrawals from your bank account AND HAVE THAT MONEY INVESTED.

TL;DR: GET THAT MONEY OUT OF Edward Jones and in to Tangerine or TD ASAP. They are robbing you blind (though they think they are doing you well.. maybe).

"Beat the TSX" is bullshit because the TSX is 4% of GLOBAL market cap. It is that that you should compare against, and the TSX hasn't done that well lately.

AllTheMarshmallows

  • 5 O'Clock Shadow
  • *
  • Posts: 4
  • Location: Canada
Re: "Beating the market"
« Reply #25 on: May 13, 2015, 07:29:29 PM »
For Mutual Funds in Canada, use this calculator:
http://www.getsmarteraboutmoney.ca/en/tools_and_calculators/calculators/Pages/mutual-fund-fee-calculator.aspx#.VVP3HZI4nTY

Will give you a complete breakdown of what you are paying in fees for the funds you may have. If you have high DSC charges (back-end), and the impact will be too high to switch over in one shot, consider a brokerage account, Questrade perhaps, and moving the funds over in-kind. The fees generally decrease over time, and as they do you can move over into ETF's. EJ should be able to give you the information if you request it directly as far as what you are dealing with. I'd start there.

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #26 on: May 13, 2015, 07:34:15 PM »
Thank you everyone. I am reading your posts carefully and the included links. I really appreciate your answers. I will discuss with my husband. I am due to give our EJ guy another 33000, which is why I am trying to figure this out now before I give him the money.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: "Beating the market"
« Reply #27 on: May 13, 2015, 07:57:19 PM »
Thank you everyone. I am reading your posts carefully and the included links. I really appreciate your answers. I will discuss with my husband. I am due to give our EJ guy another 33000, which is why I am trying to figure this out now before I give him the money.

Don't do it! Don't waste more money!

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1437
Re: "Beating the market"
« Reply #28 on: May 13, 2015, 08:25:10 PM »
Thank you everyone. I am reading your posts carefully and the included links. I really appreciate your answers. I will discuss with my husband. I am due to give our EJ guy another 33000, which is why I am trying to figure this out now before I give him the money.

Please don't.  Even if you feel like you do need an advisor, and millions of people do, you can do better than EJ!  At the very least call Vanguard... or schwab even.  Call Vanguard..... but if you somehow doubt everyone telling you to call Vanguard and think its some conspiracy... then call Schwab.  ;)

I know forummm recently posted this
http://forum.mrmoneymustache.com/investor-alley/vanguard-introduces-a-low-cost-advice-service-to-more-investors/
I don't know if that is available outside of the US, but 0.3% for an advisor using low cost index funds seems a whole lot better than 1.5% + expensive active funds. 

daverobev

  • Magnum Stache
  • ******
  • Posts: 3430
  • Location: France
Re: "Beating the market"
« Reply #29 on: May 14, 2015, 06:14:06 AM »
There are lots of fee-only advisors in Canada. CCP is one, and while I don't like how self-referential the site has become (now he's in bed with PWL), I'm sure if you actually paid the little bit of cash they'd walk you through how to extricate yourself from EJ.

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #30 on: May 14, 2015, 07:58:36 AM »
There are lots of fee-only advisors in Canada. CCP is one, and while I don't like how self-referential the site has become (now he's in bed with PWL), I'm sure if you actually paid the little bit of cash they'd walk you through how to extricate yourself from EJ.

Yeah, I am starting to lean towards something like this. The $4500 price tag seems a bit steep off the bat, but we pay almost that much every year with EJ, and the number will just keep rising as our investments grow.

We do like our advisor as a person, and I honestly don't think he is trying to swindle us. I also think his strategy has been pretty tax efficient so far, from what I can tell. But his advice is costing us an awful lot.

691175002

  • 5 O'Clock Shadow
  • *
  • Posts: 69
Re: "Beating the market"
« Reply #31 on: May 14, 2015, 08:32:45 AM »
Advisors who DSC the majority of their sales are generally frowned upon as it is ethically questionable.  There is the possibility DSC will be eliminated in the future due to the conflict of interest it creates.

Bob W

  • Magnum Stache
  • ******
  • Posts: 2947
  • Age: 61
  • Location: Missouri
  • Live on minimum wage, earn on maximum
Re: "Beating the market"
« Reply #32 on: May 14, 2015, 08:34:59 AM »
Just so you know ---  I worked for Edward Jones as a "Broker."   Nothing special there.   Their training was 95% sales and just enough about investing so you were smarter than the buyer.   

You should know the your Investment Advisor is actually a sales person.   This leaves you open to all sorts of motivation issues.  For example each investment they sell to you has a different payout percentage to the sales person so there is the motivation to sell the highest commission products.   Another example is "churning."      "oh this product I sold you last year isn't doing so well,  let's move you to x."  chaching

My suggestion is that you research and find a "fiduciary" investment advisor.   They are by law not salesmen.   They may charge you a straight up fee or a percentage of assets under management.   Find a good one!   

That or just follow the advice over at boogleheads.  You would be miles ahead by doing that. 

rmendpara

  • Pencil Stache
  • ****
  • Posts: 602
Re: "Beating the market"
« Reply #33 on: May 14, 2015, 08:52:41 AM »
He's not beating the market. What he told you is equivalent to saying, "look, this balanced portfolio of stocks and bonds outperformed that pile of sh*t over there, I must be doing well".

The point is, you can't benchmark a diversified portfolio to a non-diversified one.

Until you educate yourself, it's probably best to not manage your own investments. Fear and lack of experience may cause irrational moves like selling everything at the bottom of a market. At that level, 1.5% fees are cheap. However, you should definitely look into your "adviser" today to make sure they are a Registered Investment Adviser (or international equivalent) and not a broker. A broker can sell you almost anything. A RIA has a legal requirement to look after your portfolio. That doesn't mean all RIA's are legit and honest people, or that all brokers are jacka$$es, but just understanding their motivations and how they make money will make a big difference.

Over the next year, continue reading and learning, Bogleheads is a good place for beginners, and see if you believe you have the fortitude to rationally manage investments (not emotionally). If so, you can certainly take the small hit to get out of everything with EJ and handle it yourself.

AllTheMarshmallows

  • 5 O'Clock Shadow
  • *
  • Posts: 4
  • Location: Canada
Re: "Beating the market"
« Reply #34 on: May 14, 2015, 04:51:50 PM »
If you are not looking for an advisor to hold your hand through ups or downs or to provide a specific financial plan as far as a fee advisor is concerned a "robo-advisor" might be the best hybrid solution.

In the U.S. that would be Betterment or Wealthfront, and in Canada your options for something similar is Questrade Portfolio IQ or Wealthsimple. You can have a peek at:
http://www.questrade.com/portfolio-iq
Or https://www.wealthsimple.com

Fee wise that would be the lowest cost option if you need someone else to make some decisions for you, without charging for additional services. Both options are ETF portfolios. If you require the whole plan, then by all means seek out a fee-only advisor who will offer a balanced ETF portfolio for you.

smilla

  • Stubble
  • **
  • Posts: 145
  • Location: Canada
Re: "Beating the market"
« Reply #35 on: May 14, 2015, 04:54:05 PM »
Thank you everyone. I am reading your posts carefully and the included links. I really appreciate your answers. I will discuss with my husband. I am due to give our EJ guy another 33000, which is why I am trying to figure this out now before I give him the money.

Please don't give him the money.  By all means leave things as they are with EJ for a month or 3 while you learn about investing (and your specific investments) and decide how to move forward, but stop all further contributions. 

Unfortunately in Canada you can't get an account directly through Vanguard but you can open self-directed accounts at a discount brokerage like Questrade or any of the big banks and buy Vanguard funds to follow the CCP option 3 model portfolio. 

Questrade has cheaper commissions but you may feel more comfortable with one of the big banks, especially if you already deal with (and are happy with) one for your day-to-day, and mortgage etc..  Whichever you choose, once you open an account with them, be it RRSP, TFSA, taxable, or all three, they will be happy to do all the work to transfer your holdings from EJ and refund any transfer fees too.

You and your husband should take as much time as you need (within reason) to get comfortable with your new direction BUT:

If I were you, I would just open a self-directed account immediately wherever I felt most comfortable (without too much analysis) at my big bank or at Questrade.  I would send any new contributions there to sit while I did some reading (esp. at CCP and jlcollins but also some Bernstein and Bogle).  I would make a tentative plan (investment policy statement) and then if necessary, I would find a fee-only adviser that I could work with to review and refine the plan.  Then I would invest all those contributions that have been building up, according to the plan and then I would have any accounts at EJ transferred over and do the same to them.  I would personally try to never speak to anyone at EJ again.

Good luck!
(And remember, there is no real rush. A couple of months to get things sorted in your heads before making any moves, isn't a disaster.)

« Last Edit: May 14, 2015, 04:58:20 PM by smilla »

FrugalFan

  • Pencil Stache
  • ****
  • Posts: 910
Re: "Beating the market"
« Reply #36 on: May 14, 2015, 07:35:19 PM »
Thanks all. We are about to leave to a remote field site for a few weeks so I was feeling the pressure to make a decision (and to put those dollars to work). But I think we will hold onto the extra money for now and I will do some more reading and researching in the meantime.

HowMuchCanAKoalaBear

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: "Beating the market"
« Reply #37 on: May 15, 2015, 12:30:59 AM »
You are being royally ripped off!! 2% Mer's and 1.5% to EJ that's $7000 p.a. in fees on your $200,000.

80% of fund managers don't even beat the index. Get into some low fee index funds right away.

He's a salesman doing a good job making money for his boss not you.