Author Topic: Advisor Advice  (Read 1752 times)

Wakanda

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Advisor Advice
« on: February 24, 2018, 03:47:05 PM »
Greetings! Ive been watching from the side lines for a few years, and finally decided to join in on the great conversations. My financial advisor, who a portion of my 401k is handled by, gave me the following response when pressed about high fee , actively managed funds vs. passive index funds. I know who my unction says, but does his statement have any validity to you all?

"active (non-index funds) are superior in asset classes that are less efficient like MLP’s, emerging markets, etc. and that investors should seek out passive/index providers in efficient asset classes like US stocks, treasury bonds, etc. Our portfolios are constructed based on that philosophy. "

Thoughts?

MDM

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Re: Advisor Advice
« Reply #1 on: February 24, 2018, 04:08:13 PM »
Wakanda, welcome to the forum.

You might consider the information in Swedroe: Killing An Emerging Market Canard | ETF.com, relative to the FA's emerging markets claim.

Wakanda

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Re: Advisor Advice
« Reply #2 on: February 25, 2018, 06:43:19 AM »
Thank you! Great info.

harvestbook

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Re: Advisor Advice
« Reply #3 on: February 25, 2018, 07:44:45 AM »
What funds does this person have you in?

Wakanda

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Re: Advisor Advice
« Reply #4 on: February 25, 2018, 09:58:56 AM »
12 different funds. CAMWX, DFIEX, RWGIX represent the largest holdings.

Another Reader

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Re: Advisor Advice
« Reply #5 on: February 26, 2018, 07:07:28 AM »
He has you in crappy, overpriced funds.  The DFA funds are generally well managed, but the performance of RGWIX relative to the index is appalling. 

Do some reading here and over at Bogleheads and then fire this guy.

Car Jack

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Re: Advisor Advice
« Reply #6 on: February 26, 2018, 11:12:35 AM »
Would those MLPs he touts be illiquid investments that are nearly impossible to sell when you want to cash out and you end up selling for pennies on the dollar?  Seeing outperformance for years isn't a good thing when you can't take the money out in full.

Mighty-Dollar

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Re: Advisor Advice
« Reply #7 on: February 26, 2018, 04:50:00 PM »
My financial advisor, who a portion of my 401k is handled by, gave me the following response when pressed about high fee , actively managed funds vs. passive index funds. I know who my unction says, but does his statement have any validity to you all?

"active (non-index funds) are superior in asset classes that are less efficient like MLP’s, emerging markets, etc. and that investors should seek out passive/index providers in efficient asset classes like US stocks, treasury bonds, etc. Our portfolios are constructed based on that philosophy. "
He's cherry picking time periods. For example perhaps last year, the last 2 years or last 3 years, or 2 out of the last 3 years maybe the indexes were beaten in a category or two. It varies by year. But over the long term index funds win.

Ask this "advisor" to present actual data, to back up his sweeping claim.

The bottom line is that if you are working with a "free" advisor (who doesn't charge you anything) or a fee-based advisor (who is allowed to earn back door commissions off the products he sells) instead of a fee-ONLY advisor then you WILL get conflict of interest. They WILL sell you investments other than low cost index funds.

I agree to stay away from MLP's.

« Last Edit: February 26, 2018, 04:51:39 PM by Mighty-Dollar »