Author Topic: Are multiple investment accounts a good idea?  (Read 15942 times)

Doulos

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Are multiple investment accounts a good idea?
« on: March 27, 2015, 06:43:47 PM »
Right now we (my wife and I) have...

1) Fidelity 401k; hand picked mutual funds (which I need to fix).
- this I am in the process of getting brokerage access enabled with my company.  (this takes time apparently, but it is nice that my company is adding this feature based on my request.)
2) DW Old 401k rollover IRA with our financial adviser
3) DW 401k with a brokerage account through our financial adviser. (so third party runs that)
4) 2 Roths with our financial adviser; in 3 different mutual funds.
5) HSA, not invested.  (Need to fix that too, I thought I needed much bigger numbers for this.  I am hearing the requirement is only $1k though.)
6) Taxable with financial adviser.

In summary, I have way too much overhead on my investments.  Something I did not really understand until reading this forum.

So I have seen a lot of advice about switching to Vanguard and running the show yourself.
My questions are...
- Is sticking with a financial adviser a good idea?
- How wise is it to put all your investments in 1 account; A Vanguard account for instance?
- Should I get several different accounts with different companies similar to Vanguard?
- Can you invest in non-Vanguard funds through that account?


Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?

rpr

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Re: Are multiple investment accounts a good idea?
« Reply #1 on: March 27, 2015, 06:55:13 PM »

Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?

https://personal.vanguard.com/pdf/s317.pdf

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #2 on: March 27, 2015, 06:59:28 PM »
Rpr, If I read that right.
The summary is that a Vanguard account is insured up to $500k by the SIPC.
Similar to a bank account is secured up to $250k by the FDIC.

rpr

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Re: Are multiple investment accounts a good idea?
« Reply #3 on: March 27, 2015, 07:05:52 PM »
Rpr, If I read that right.
The summary is that a Vanguard account is insured up to $500k by the SIPC.
Similar to a bank account is secured up to $250k by the FDIC.

The above SPIC limit is true only for brokerage accounts. (see bullet point 3)

The mutual fund securities are themselves held at another US custodian (see first two bullet points).  These securities are supposed to be held separately and are NOT comingled with the assets of the custodian bank.

Indexer

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Re: Are multiple investment accounts a good idea?
« Reply #4 on: March 27, 2015, 07:28:32 PM »
Quote
- Is sticking with a financial adviser a good idea?
Probably not.  They are normally very high cost, and they tend to encourage actively managed mutual funds.  Active funds and trading are NOT what you want in a taxable account because it generates a lot of extra tax implications.  Fees are always bad.  If you feel that you NEED a financial advisor; for the behavioral coaching as an example then you should look at maybe a low cost(0.5% or lower) independent advisor or I think I read about Vanguard having their own advisors now you can talk to.

Quote
- How wise is it to put all your investments in 1 account; A Vanguard account for instance?
Well you want to keep retirement accounts and taxable accounts separate, but I think you meant keeping everything in 1 place.  I highly doubt you have anything to worry about with Vanguard.  For one they are taking your money and directly investing it in the market through mutual funds.  You are taking on any risk and you are gaining any returns while Vanguard gets their small expense ratio.  This structure is pretty solid.  Its not like a bank where they are taking your 'safe' money and then investing it in mortgages(sometimes not solid).   If the stock market drops 50% your stock index fund might drop 50%, but Vanguard isn't seeing a 50% loss.  Vanguard will just see their income from the expense ratio drop since the value of the fund dropped.  Now since the expense ratio on their total stock index is 0.05% even if they were in a tight spot they could just increase the expense ratio thereby charging more but they would still be cheap compared to most of the industry so they could get away with it. 

What got Lehman(any similar companies) in trouble was that they were leveraged like crazy and making investments in their own accounts.  A 50% loss in an investment could easily turn into a 150% or a 500% loss to the company.  Vanguard on the other hand sees a 50% loss in a fund, and they experience a 0.025% loss in revenues from that particular fund expressed as a % of assets.  Example:  a 100 billion dollar fund drops to 50 billion, Vanguard's revenue from said fund would drop by 12.5 million(assuming 0.05% expense ratio).  While that sounds like a lot it an easy expense for a company that large to absorb.  Mutual funds have also existed in this model since the 1930s.  Plenty of them have closed for poor performance.  I can't think of a single one that closed and investors lost money due to the fund itself or fraud, and not just because the investments did poorly.  They are highly regulated, and have to report everything to the SEC.  Mutual funds= super regulated with lots of oversight and they normally keep the investor's money with a separate trustee custodian.

What you might be thinking of when you asked this question....  Banks which can take depositor money which is guaranteed and then invest it in riskier investments(subprime mortgages) thereby exposing themselves to losses exceeding the bank's cash on hand and creating a situation where the bank has less money then it owes its depositors.  Hedge Funds= not really regulated at all(these are what you want to worry about.)

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- Should I get several different accounts with different companies similar to Vanguard?
Well Vanguard doesn't pay anything on cash so you should probably keep any emergency funds in a high yield savings account.

Quote
- Can you invest in non-Vanguard funds through that account?
You can buy non-Vanguard funds, ETFs, stocks, bonds, etc. in a Vanguard brokerage account.  While they don't charge for buying/selling their own investments they do charge additional brokerage fees for everything else.  The costs are normally pretty similar to Schwab, and cheaper than Fidelity.

kpd905

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Re: Are multiple investment accounts a good idea?
« Reply #5 on: March 27, 2015, 07:47:56 PM »
What do you pay your financial adviser, and what are the expense ratios on the funds he puts you in?

MDM

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Re: Are multiple investment accounts a good idea?
« Reply #6 on: March 27, 2015, 08:52:23 PM »
- Is sticking with a financial adviser a good idea?
+1 to previous posts with suggestions and/or Socratic questions on this topic.
 
Quote
- How wise is it to put all your investments in 1 account; A Vanguard account for instance?
Nothing wrong with having all your investments with one brokerage, e.g. Vanguard or Fidelity or Schwab.  As mentioned above you'll have different accounts within that brokerage for IRAs, Roth IRAs, HSAs, taxable, etc.

Quote
- Should I get several different accounts with different companies similar to Vanguard?
Nothing wrong with having your investments in different brokerages, e.g. Vanguard and Fidelity and Schwab.  We do, for the specific reasons of
- low cost funds for IRAs at Vanguard
- incentive from Fidelity to combine our various ESPP holding into one brokerage - and, given those holdings, a no fee HSA.  When we liquidate the stocks we'll likely put the money into Fidelity Spartan Funds rather than the "hassle" (small though it would be) of moving to Vanguard.
- Schwab has a no-fee $100 minimum for custodial Roth IRAs so we used that for our teenager.

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- Can you invest in non-Vanguard funds through that account?
Yes.  Just curious: why do you want to do so?

Quote
Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?
I won't say "impossible," but "very, very, highly unlikely" seems appropriate....

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Re: Are multiple investment accounts a good idea?
« Reply #7 on: March 27, 2015, 09:26:53 PM »
Quote
Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?


http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #8 on: March 27, 2015, 09:32:29 PM »
Ok, more information I dug up.
I do not know my adviser's fee.  Which is a bad sign; I admit.

Here are the mutual funds by ticker though.  And their expenses.
PGGAX 0.83%
MNHCX 1.82%
PFLPX 2.33%
PFLQX 2.88%
GWPAX 0.75%
MNECX 1.81%

Not sure how to read the stock information to gather if they are performing in a manner worth the expenses.  They are higher risk higher reward.
From what I have read here though, these mutual funds hare terribly expensive.

That is just our stuff through the adviser.  I am sure my Fidelity 401k is terrible too, but I can fix that myself as soon as I get a grip on all this and the brokerage is enabled.

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And MDM's question for my question... - Can you invest in non-Vanguard funds through that account? -> "Yes.  Just curious: why do you want to do so?"
I would like to diversify outside of 1 company managing the mutual fund.
My thoughts are I would like at least 4 companies managing at least 4 different types of funds.  Preferably more diverse than that.
Or another way to phrase that.  I dont want 1 company "basket" with all my investment "eggs" in it.
No matter how diverse those investments are, it would still have 1 point of failure.  Which is what some of my other questions are based on.

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #9 on: March 27, 2015, 09:33:54 PM »
Thanks Frankies Girl.  I will have to read that later and get back to you all.

MDM

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Re: Are multiple investment accounts a good idea?
« Reply #10 on: March 27, 2015, 09:40:30 PM »
PFLQX 2.88%
Ouch.  See http://www.morningstar.com/invest/funds/75232-pflqx-pacific-financial-core-equity-inv.html.  This is the only one I checked, but you can do the others similarly by putting the ticker symbol into Google and clicking on the Morningstar link returned.

Quote
And MDM's question for my question... - Can you invest in non-Vanguard funds through that account? -> "Yes.  Just curious: why do you want to do so?"
I would like to diversify outside of 1 company managing the mutual fund.
My thoughts are I would like at least 4 companies managing at least 4 different types of funds.  Preferably more diverse than that.
Or another way to phrase that.  I dont want 1 company "basket" with all my investment "eggs" in it.
No matter how diverse those investments are, it would still have 1 point of failure.  Which is what some of my other questions are based on.
The article linked by Frankies Girl should, I hope, allay your concerns about the "single point of failure."

Frankies Girl

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Re: Are multiple investment accounts a good idea?
« Reply #11 on: March 27, 2015, 09:45:14 PM »
Ok, more information I dug up.
I do not know my adviser's fee.  Which is a bad sign; I admit.

Here are the mutual funds by ticker though.  And their expenses.
PGGAX 0.83%
MNHCX 1.82%
PFLPX 2.33%
PFLQX 2.88%
GWPAX 0.75%
MNECX 1.81%

Not sure how to read the stock information to gather if they are performing in a manner worth the expenses.  They are higher risk higher reward.
From what I have read here though, these mutual funds hare terribly expensive.

That is just our stuff through the adviser.  I am sure my Fidelity 401k is terrible too, but I can fix that myself as soon as I get a grip on all this and the brokerage is enabled.

***********
And MDM's question for my question... - Can you invest in non-Vanguard funds through that account? -> "Yes.  Just curious: why do you want to do so?"
I would like to diversify outside of 1 company managing the mutual fund.
My thoughts are I would like at least 4 companies managing at least 4 different types of funds.  Preferably more diverse than that.
Or another way to phrase that.  I dont want 1 company "basket" with all my investment "eggs" in it.
No matter how diverse those investments are, it would still have 1 point of failure.  Which is what some of my other questions are based on.

OMG, those expense ratios are awful. Fire that adviser ASAP and move your stuff to Vanguard, or if you're with Fidelity, you can use their Spartan series to recreate (almost exactly in expense ratios) a Vanguard index portfolio. (I have all my accounts at Fido, all Spartan and perfectly happy).

http://www.bogleheads.org/wiki/Fidelity

And really and truly, Vanguard or Fido aren't going to fail unless there is a global meltdown and if that happens, you'd have more serious problems than how to get money out of an account...


rpr

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Re: Are multiple investment accounts a good idea?
« Reply #12 on: March 27, 2015, 09:54:16 PM »
Here are the mutual funds by ticker though.  And their expenses.
PGGAX 0.83%
MNHCX 1.82%
PFLPX 2.33%
PFLQX 2.88%
GWPAX 0.75%
MNECX 1.81%

Wow: These expense ratios are terrible. How much do you have with the FA? Can you sell all? How did you even arrive at this portfolio?

Indexer

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Re: Are multiple investment accounts a good idea?
« Reply #13 on: March 27, 2015, 10:35:58 PM »
So I'm going to give you some sour news.  Don't take it personally.  I'm ripping your advisor a new one, but holy crap he needs to be fired yesterday!  The expense ratios aren't what scare me.  Its that they are all loaded funds.

PGGAX 0.93% + 5.75% front end load.  International Stock fund.
MNHCX 1.82% (It is really 0.82% + 1% annual load.)  Large cap stock fund.
PFLPX 2.33%   (Again includes 1% annual load.) Large cap stock fund.
PFLQX 2.88%   (1% annual load.)  Large cap stock fund.
GWPAX 0.75%   + 5.75% front end load.  A fund of (large cap)stock funds... why you would mix this with other funds is beyond me.
MNECX 1.81%  (1% annual load.)    Balanced fund(normally lowers risk) of aggressive(higher risk) growth stocks and junk bonds(higher risk)... so its trying to lower risk using the riskiest asset classes... its a schizophrenic fund!  Oh, and more large cap stocks.

Loads go to the advisor so he made a killing.  Oh, and depending on the dollar amount he screwed you... really screwed you... like borderline illegal screwed you.  If the entire amount invested was less than $25,000 this doesn't matter so ignore my concern.  However most loaded mutual fund companies(like the ones above) have 'breakpoints' and if you invest more than a certain dollar amount with that particular company you get a discount.  The first breakpoint is normally 25k and then there is normally another one at 100k, 500k, 1 million, and sometimes a few fillers in between those.  If you invested 100k in mutual funds all offered by the same company(lets use American funds) those front end loads drop substantially.  However if you split that 100k over 4 different mutual fund companies in all sorts of the different share classes you probably aren't going to get any breakpoints.  In summary:  it looks like the advisor picked these funds in particular to deny you any breakpoints and make sure he got a nice pay day.  Of all the screwed up things an advisor can do... this ranks among the worst.  It might even be illegal.

The portfolio is also VERY confusing.  It does not look like it was built with an asset allocation or a particular goal(other than collecting fees) in mind.  1 international fund, 3 large cap stock funds, 1 fund of stock funds(looks mostly large cap), and a balanced fund that invests primarily in things that increase risk.  If it was an even 20% per fund you are 20% international stocks, 6% junk bonds, and 74% domestic stocks(mostly large cap).  FYI junk bonds normally perform like stocks during a crisis so they offer basically no protection in this scenario.  From a risk point of view you are basically 100% stock which can be ok if you are comfortable with that level of risk, but there are still better ways to achieve it.  In a past career I actually built portfolios using American Funds.  He could have easily built you a MUCH better portfolio than this just using American Funds and thanks to the breakpoints saved you a ton of money in fees.   


And just to give you a heads up when I was checking these funds I noticed several of them are not transferrable to Vanguard(not sure on Fido but its probably the same situation).  The American funds will transfer just fine it looks like and then you can sell them at Vanguard, but you would probably have to convert some of that other stuff to cash before transferring it to Vanguard.  Just call Vanguard(or Fido) and tell them what you are looking to do and give them the ticker symbols.  They should be able to handle it from there.  Yes, I'm assuming you will transfer these funds from this advisor. ;)

kpd905

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Re: Are multiple investment accounts a good idea?
« Reply #14 on: March 28, 2015, 07:31:14 AM »

PGGAX 0.93% + 5.75% front end load.  International Stock fund.
MNHCX 1.82% (It is really 0.82% + 1% annual load.)  Large cap stock fund.
PFLPX 2.33%   (Again includes 1% annual load.) Large cap stock fund.
PFLQX 2.88%   (1% annual load.)  Large cap stock fund.
GWPAX 0.75%   + 5.75% front end load.  A fund of (large cap)stock funds... why you would mix this with other funds is beyond me.
MNECX 1.81%  (1% annual load.)    Balanced fund(normally lowers risk) of aggressive(higher risk) growth stocks and junk bonds(higher risk)... so its trying to lower risk using the riskiest asset classes... its a schizophrenic fund!  Oh, and more large cap stocks.

Oh my god, I hope you are calling your adviser today.  Get your money away from him ASAP.  I didn't think it would be this bad when I asked the expense ratios.

I know you probably don't even want to think about it, but do you have historical data of your total contributions to these accounts to figure out how much you alone have paid your adviser via all the front end and annual load fees?
« Last Edit: March 28, 2015, 07:35:24 AM by kpd905 »

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #15 on: March 29, 2015, 12:21:43 AM »
This is where the difference between being a fiduciary and only having to meet a suitability standard really comes into play.  My guess is that your "financial advisor" isn't really one at all; my guess is that they are a broker, etc who only has to meet a suitability standard for investments offered.

If they only have to meet a suitability standard then you don't have a legal leg to stand on.  If your "financial advisor" is really acting as a fiduciary then you could go after him/her legally.  Those investments are awful because of all the fees and loads mentioned.  However, one thing to look into - sometimes when loaded funds are included in a 401k the loads are waived and only the ER is paid.  So, double check on the situation.  But even just the high ER's are enough to get into different funds.

My opinion is that it is time to either manage your investments yourself or find another financial advisor.

livetogive

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Re: Are multiple investment accounts a good idea?
« Reply #16 on: March 29, 2015, 02:56:55 AM »
Agree with posters above,  fire your advisor asap. Maybe even dramatically?

Ive often wondered myself about the mechanics of your brokerage / investment bank going under. Technically all they did for you was find the securities on your behalf. If you own say 100 shales of PG you still should own those if vanguard or Fido go under,  but I imagine its an insane pita to unwind it all.

Also,  I'll bet another poster above a nickel that Vanguard trades for its own account in one way or another.  All of the banks do.  I'm curious if vanguard has their own dark pool or what shenanigans can be played with indexing and etfs...

« Last Edit: March 29, 2015, 02:58:41 AM by TurboLT »

forummm

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Re: Are multiple investment accounts a good idea?
« Reply #17 on: March 29, 2015, 07:41:37 AM »
Also,  I'll bet another poster above a nickel that Vanguard trades for its own account in one way or another.  All of the banks do.  I'm curious if vanguard has their own dark pool or what shenanigans can be played with indexing and etfs...

I would guess that Vanguard electronically reallocates stocks between its funds instead buying and selling when possible. If VFIAX holders cash out and VTSAX has new buyers, ownership could get transfered of some of the stocks from one fund to the other without having transaction costs. So many of the funds overlap with other funds.

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Re: Are multiple investment accounts a good idea?
« Reply #18 on: March 29, 2015, 08:03:56 AM »
This is where the difference between being a fiduciary and only having to meet a suitability standard really comes into play.  My guess is that your "financial advisor" isn't really one at all; my guess is that they are a broker, etc who only has to meet a suitability standard for investments offered.

This guy is NOT a Fiduciary.  I can just about guarantee that.  He is a broker for sure, and I'm not even sure if he met the suitability standard here.  As loose as they are even the suitability standard requires talking about risk tolerance and 'trying' the minimize mutual fund commissions when it is possible(like hitting breakpoints).


Quote
Also,  I'll bet another poster above a nickel that Vanguard trades for its own account in one way or another.  All of the banks do.  I'm curious if vanguard has their own dark pool or what shenanigans can be played with indexing and etfs...

They probably do, but due to their structure they aren't going to pull the crap that Lehman, Goldman, and all the big banks were doing.  Vanguard is owned by its funds which are owned by the investors, and the company operates 'at cost.'   So any profits have to be given back in the form of lower expense ratios or higher dividends, and any losses have to be taken away in the same manner.  So they have no incentive to do anything crazy, and since they can't hold onto giant gobs of profits I don't see where they would get the money to invest for their own account. 

Now I did remember reading an article about how Vanguard did a lot of securities lending.  There was one small cap fund that actually made so much money lending securities for margin accounts that its income from securities lending was actually higher than the expenses of the fund.  They couldn't report a negative expense ratio but instead just made the dividends of the fund higher.  There isn't really any risk in securities lending from the side of the lender.  The borrower has to pay you interest, but you still own the securities so you can demand them back if you need to trade them.

forummm

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Re: Are multiple investment accounts a good idea?
« Reply #19 on: March 29, 2015, 08:13:17 AM »
This is where the difference between being a fiduciary and only having to meet a suitability standard really comes into play.  My guess is that your "financial advisor" isn't really one at all; my guess is that they are a broker, etc who only has to meet a suitability standard for investments offered.

This guy is NOT a Fiduciary.  I can just about guarantee that.  He is a broker for sure, and I'm not even sure if he met the suitability standard here.  As loose as they are even the suitability standard requires talking about risk tolerance and 'trying' the minimize mutual fund commissions when it is possible(like hitting breakpoints).
+1. The guy is a sleazeball who steals people's money because they are too trusting and because we don't have good regulation of brokers and advisors in this country.

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #20 on: March 29, 2015, 08:37:47 AM »
Here is a nice discussion of suitability vs fiduciary standards.

http://www.401khelpcenter.com/401k/chamberlain_401k_suitability_fiduciary.html#.VRgNg2d0zb0

Here is one key paragraph from the discussion:

General example of this difference: An "advisor" determines that an S&P Index 500 fund is suitable for the client. The advisor's firm has a proprietary fund that pays a 5% commission out of the sale amount with high ongoing annual fees. An identical fund from another company pays 2.5% commission. Or, the advisor could recommend that the client obtain the identical fund from Vanguard or Fidelity with no commissions at all and lower ongoing expenses. Under the suitability rule, the advisor can legitimately "sell" the high priced fund and the Suitability Standard has been satisfied. Under the Fiduciary Standard, the advisor would recommend the Vanguard or Fidelity because that is what is best for the client.

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #21 on: March 29, 2015, 08:53:41 AM »
If you decide to continue with a different financial advisor here are some things to do to make sure you are really getting one.

1. make sure they are a registered investment advisor (RIA).  That means they have to follow the fiduciary standard.
2. make sure the financial advisor is a fee-only advisor and NOT a fee-based advisor.  That means they are either charging you a fee per visit or a fee based on AUM (assets under management.).  It means that they are NOT collecting commissions based on what they have sold you, etc.
3. make sure that the financial advisor is actually qualified and not someone who just has Financial Advisor on their business card.  Look for certifications such as:

CFA - Certified Financial Advisor
CFP - Certified Financial Planner
ChFC - Chartered Financial Consultant
CRPC - Chartered Retirement Planning Counselor
CLU - Chartered Life Underwriter

The person has to pass an exam to get these certifications.  The CFA certification is very difficult.  My opinion is that the CFA or CFP are primary requirements, the others are additional training.  You can google the initials for any of them and find out more.

Indexer

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Re: Are multiple investment accounts a good idea?
« Reply #22 on: March 29, 2015, 09:57:20 AM »
If you decide to continue with a different financial advisor here are some things to do to make sure you are really getting one.

1. make sure they are a registered investment advisor (RIA).  That means they have to follow the fiduciary standard.
2. make sure the financial advisor is a fee-only advisor and NOT a fee-based advisor.  That means they are either charging you a fee per visit or a fee based on AUM (assets under management.).  It means that they are NOT collecting commissions based on what they have sold you, etc.
3. make sure that the financial advisor is actually qualified and not someone who just has Financial Advisor on their business card.  Look for certifications such as:

CFA - Certified Financial Advisor
CFP - Certified Financial Planner
ChFC - Chartered Financial Consultant
CRPC - Chartered Retirement Planning Counselor
CLU - Chartered Life Underwriter

The person has to pass an exam to get these certifications.  The CFA certification is very difficult.  My opinion is that the CFA or CFP are primary requirements, the others are additional training.  You can google the initials for any of them and find out more.

While I agree with the advice for the most part there are a couple things I want to point out.

CFA is Certified Financial Analyst(not advisor).  They specialize is being able to analyze investments.  This designation is normally more important for someone managing a pool of assets(like a mutual fund) or an analyst for an investment firm.  If you are looking for financial planning a CFP is probably the best designation to look for, and CFA is probably second.  The CFA will know more than enough about investments to build a portfolio(more than the other designations for sure), but they won't have as much background around taxes, estates, retirement planning, and insurance as the CFP.

I don't really care as much for the ChFC or the CRPC.  They are basically a CFP lite.  In other words... they are for people who think the CFP is too intimidating.  If you have the choice go with the CFP.

CLU.  If it has the name 'insurance' in the name anywhere RUN!  Life insurance agents who sell "investments" make the investment firm brokers look like saints.  Brokers normally sell expensive mutual funds(as we can see in this topic) while insurance agents who sell investments... OMG... they honestly think annuities are better growth investment vehicles than mutual funds.  It is kind of scary.  Brokers also have to get a general securities license and register with FINRA & the SEC.  While you need a Series 7 securities license to sell a Variable Annuity you don't in order to sell fixed annuities, indexed annuities, whole life insurance, etc.  This also means you don't have to register with FINRA in many cases.  Those suitability rules that brokers have to adhere to?  Oh yea, those are out the window, and annuities have much higher commissions on them so the conflicts of interest are even worse.  An insurance agent can sell deferred fixed or indexed annuities to a 20 year old with an aggressive risk tolerance.... Or worse sell them a whole life policy as a long term investment since the cash value builds up.  These guys are also often times so ignorant about investment planning that they don't even realize how unsuitable the recommendations are, and many of them invest their own money in this crap. 

Sorry for the rant about insurance agents.  If a fee only RIA has a CLU that is probably fine, but of the designations they can get this is probably the last one a RIA would bother with.  They are normally going to get the CFP or CFA or if they really want to stand out, both!
« Last Edit: March 29, 2015, 10:01:15 AM by Indexer »

rmendpara

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Re: Are multiple investment accounts a good idea?
« Reply #23 on: March 29, 2015, 10:49:14 AM »
Right now we (my wife and I) have...

1) Fidelity 401k; hand picked mutual funds (which I need to fix).
- this I am in the process of getting brokerage access enabled with my company.  (this takes time apparently, but it is nice that my company is adding this feature based on my request.)
2) DW Old 401k rollover IRA with our financial adviser
3) DW 401k with a brokerage account through our financial adviser. (so third party runs that)
4) 2 Roths with our financial adviser; in 3 different mutual funds.
5) HSA, not invested.  (Need to fix that too, I thought I needed much bigger numbers for this.  I am hearing the requirement is only $1k though.)
6) Taxable with financial adviser.

In summary, I have way too much overhead on my investments.  Something I did not really understand until reading this forum.

So I have seen a lot of advice about switching to Vanguard and running the show yourself.
My questions are...
- Is sticking with a financial adviser a good idea?
- How wise is it to put all your investments in 1 account; A Vanguard account for instance?
- Should I get several different accounts with different companies similar to Vanguard?
- Can you invest in non-Vanguard funds through that account?


Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?

An adviser can be useful, but make no mistake they are not free and you still need to do a fair amount of work to find a qualified adviser, keep up to date on your portfolio. If you are busy and prefer to have someone else do this, then that's fjne. Just be aware of how much it's costing you in fees and make sure the benefit of not doing it yourself is outweighed by the costs.

For diversifying your assets, I'll just say that it's very cheap to put assets in several different fund companies with similar expense ratios. If it helps you sleep at night, then go for it. You can find cheap funds and ETFs at fidelity, schwab and vanguard to gain exposure to many common indices.

skyrefuge

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Re: Are multiple investment accounts a good idea?
« Reply #24 on: March 29, 2015, 11:50:04 AM »
The portfolio is also VERY confusing.  It does not look like it was built with an asset allocation or a particular goal(other than collecting fees) in mind.

Yeah, damn. This portfolio is so bad, it seriously makes me think that there is some sort of sick, bar-room game that sadistic financial adviser bros play with each other where they compete to create the most-expensive, most-fucked-up portfolio they can, without their clients noticing.

Asshole Adviser A: "I'm using $100 bills from my client to wipe my ass...and, he's paying me $10 per $100 bill for the privilege of my shit-stains on his money! Y'all might as well pay up, since none of you are going to beat that!"
Asshole Adviser B: "Wait, no so fast...I've got my client in PFLPX, PFLQX, etc..."
Asshole Adviser A: "Damn. Well done. I concede victory to you. :-("

PFLPX's top holding, which comprises 35% of the fund, is VOO (Vanguard's S&P 500 ETF), which has an ER of 0.05%. The rest is made up of 8 other ETFs. They're charging 2.33% to invest in index funds. Holy shit.

A few weeks ago, I cynically and half-jokingly wondered if there are any active mutual fund advisers out there who take your money, charge a high fee, and then simply invest it all in their benchmark's index fund. PFLPX comes frighteningly close to proving that nightmare true.
« Last Edit: March 29, 2015, 11:54:35 AM by skyrefuge »

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #25 on: March 29, 2015, 11:54:49 AM »
I don't really care as much for the ChFC or the CRPC.  They are basically a CFP lite.  In other words... they are for people who think the CFP is too intimidating.  If you have the choice go with the CFP.

CLU.  If it has the name 'insurance' in the name anywhere RUN!

My advisor is a fee only RIA and has CFP, ChFC, CRPC and CLU.  From your description, I'm guessing he got the ChFC and CRPC first and then got his CFP.  I'll ask the next time I meet with him.

I agree with you about insurance.  I only use it to address actuarial risk, not for investment.  I only have term-life policies.  I agree, I would never go to someone with only a CLU; an RIA with a CLU is fine; he just knows more about insurance.

For example, I was consolidating my life insurance needs and decided to drop a policy through a professional organization (group rate) since the term life insurance through work had better rates after I entered the next age bracket (and I can keep it if I retire or change jobs).  However, the rates for my wife through work were higher and she couldn't keep her original policy since I dropped mine.

I discussed it with my advisor and he recommended www.selectquote.com.  We applied for her policy online and got a great rate quote for a term life policy.  In fact, after her blood test results came back her cholesterol levels were so low they actually reduced the premium from the initial quote by about 20-30%.  So, a great quote became even better!  We did the work ourselves and our financial advisor did not receive any compensation from this policy.


KBecks2

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Re: Are multiple investment accounts a good idea?
« Reply #26 on: March 29, 2015, 11:55:47 AM »
I have used Vanguard for years and have overall been very happy with their service.  They are generally easy to to business with (although I don't like their new phone system, it is slow but their customer service is very good).

You can put many types of accounts at Vanguard,  a taxable brokerage, traditional IRAs (rolled over 401ks) and ROTH IRAs, and custodial accounts for kids.

The nice thing about having your stuff in one place is that it's easier to review and manage one set of statements than having to go to a bunch of institutions to check on all your money.  Ease of access and paperwork is a plus in my book.

I was not able to get a Coverdell for my kids at Vanguard and had to go to Schwab.  A nuisance, but oh well. 

So, I think you can set up at Vanguard and do just fine with them as a service provider.

Fire your advisor.  You can pick very simple index funds at Vanugard for very low cost.

If you want to learn about trading individual stocks, I would recommend the services I use, Motley Fool Pro and Motley Fool options, they are fee based.  They are cheaper than an advisor because they are flat fee, and if you have a large asset base, it will be a small % of your port.

Indexes are great though, set it up, auto-contribute and forget it. 

Good for you for working on your investing plans to make them stronger.  Best wishes.

« Last Edit: March 29, 2015, 11:58:57 AM by KBecks2 »

rpr

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Re: Are multiple investment accounts a good idea?
« Reply #27 on: March 29, 2015, 12:03:21 PM »
skyrefuge -- thanks. That was eye opening. I looked at the Morningstar portfolios. All those ETFs in PFLPX have fees less than 1%. What a scam!


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a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #28 on: March 29, 2015, 12:06:22 PM »
A few weeks ago, I cynically and half-jokingly wondered if there are any active mutual fund advisers out there who take your money, charge a high fee, and then simply invest it all in their benchmark's index fund. PFLPX comes frighteningly close to proving that nightmare true.

I agree.  There is a term for it - closet index funds.  It happens a lot.

Here are a few articles:

Active fund managers are closet index huggers (3/12/2014)
www.ft.com/cms/s/0/10a5a37c-a96e-11e3-b87c-00144feab7de.html#axzz3VnbaYS3N

and one from a long time ago

How To Spot A Closet Index Fund (9/5/2004)
www.bloomberg.com/bw/stories/2004-09-05/how-to-spot-a-closet-index-fund

forummm

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Re: Are multiple investment accounts a good idea?
« Reply #29 on: March 29, 2015, 12:21:16 PM »
I'll be a financial advisor. Here's my advice: You should put your money into VTSAX, VTIAX, and Vanguard Total Bond in the percent of allocations you are comfortable with, and never sell until retirement (other than increasing your bond allocation if that is your preference).

There, now you owe me 3% of all your money each year for the rest of your life. I take cash, checks, Paypal and Bitcoin.

forummm

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Re: Are multiple investment accounts a good idea?
« Reply #30 on: March 29, 2015, 12:26:32 PM »
- Is sticking with a financial adviser a good idea?
- How wise is it to put all your investments in 1 account; A Vanguard account for instance?
- Should I get several different accounts with different companies similar to Vanguard?
- Can you invest in non-Vanguard funds through that account?[/b]

Hypothetical fears, which may are may not be founded.  If Vanguard somehow up and disbanded for some terrible reason.  For example, giant sized corporate embezzlement that has crush other giant financial companies.  Do you lose?

Firing your advisor could be the best financial decision you could make. If you were to somehow accumulate $1 million despite the outrageous fees you're being charged, a 2% annual fee is $20k per year! Think how much earlier you can retire just by cutting your fees--both by building more wealth in the accumulation phase and by not needing as much saved to retire.
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost

http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #31 on: March 29, 2015, 01:46:49 PM »
I'll be a financial advisor. Here's my advice: You should put your money into VTSAX, VTIAX, and Vanguard Total Bond in the percent of allocations you are comfortable with, and never sell until retirement (other than increasing your bond allocation if that is your preference).

There, now you owe me 3% of all your money each year for the rest of your life. I take cash, checks, Paypal and Bitcoin.

If all your financial advisor is doing is deciding what funds to buy they should be fired.  There is much more to being a financial advisor.  And most (all?) fee-based RIA's charge much less than 3% of AUM.  In fact, you can even just meet with one once or twice a year and just pay a fee for the visit.

You are recommending the three fund lazy portfolio on bogleheads website:
www.bogleheads.org/wiki/How_to_build_a_lazy_portfolio

Here is bogleheads discussion of three-fund portfolio adequacy:
www.bogleheads.org/wiki/Three-fund_portfolio#Adequacy_of_a_three-fund_portfolio

Vanguard recommends four funds in varying percentages based off of survey answers - personal.vanguard.com/us/funds/tools/recommendation
They include an international bond fund.  The answer to "Enter the amount you want to invest:" doesn't change the asset allocation.

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

Of course, if you are over the minimums required for Admiral funds you would convert to those.

Here is bogleheads discussion of Vanguard four-fund portfolio along with various asset allocations:
www.bogleheads.org/wiki/Vanguard_four_fund_portfolio

A key point to note is that Vanguard is increasing international allocations of both stocks and bonds by 10%; my feeling is that this is due to QE going on in other countries versus the Fed starting to tighten here. "The allocation changes are planned to begin in the second quarter of 2015 and be completed by the end of the year."

Maybe that is a great investing tip!?  The Vanguard four fund strategy is used in all of the Lifestrategy and Target Retirement funds - Vanguard just told us what they are going to do starting in July.  We can front run their reallocation in our four fund portfolios and get a little extra return.

If the OP is going to go without a FA then this discussion (and many, many more on this website and others) will be a start.  I don't have time right now but I will post how I am using my financial advisor (FA) which may be helpful to OP.

Indexer

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Re: Are multiple investment accounts a good idea?
« Reply #32 on: March 29, 2015, 02:36:15 PM »
Quote
My advisor is a fee only RIA and has CFP, ChFC, CRPC and CLU.  From your description, I'm guessing he got the ChFC and CRPC first and then got his CFP.  I'll ask the next time I meet with him.

Either that or he is just collecting designations!  :D   Some people like learning, and some firms will pay for you to take as many classes and get as many designations as you want... so why not?  The ChFC and CRPC might go into a little more detail in a couple areas than the CFP, but normally the CFP by itself covers all of that.

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #33 on: March 30, 2015, 03:29:12 PM »
I live without regret!  But in this case I feel my most appropriate response to allowing this to happen is...


I think I am thoroughly convinced that just blindly telling my adviser that my risk tolerance is sky high and letting him pick whatever he wants was a poor decision.
Although I probably should fix this yesterday, I am not. Instead I am going transition a little slower after getting more information.
(so as not to screw this up yet again)

So, if we can discuss recommendations (some above are great) with these goals.
- Risk tolerance High.
- Diversity High. (I would prefer International, emerging, etc)
- Dislike bonds, but I am willing to listen to suggestions for a minimum reasonable bond level, what kinds, where to put them, etc.
- Would prefer multiple companies.  So, I like the suggestions above for Fidelity Spartan and Vanguard stuff, etc.  Could that all be done through just a vanguard account?  And is that reasonable?

Still did not read Frankie's Girl's link... *shame* on me.  Will get to that soon here.

PS. In my advisers defense; He did recommend Capital one 360 account. and I do like that.  So he did do something right.
« Last Edit: March 30, 2015, 03:33:07 PM by Doulos »

rpr

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Re: Are multiple investment accounts a good idea?
« Reply #34 on: March 30, 2015, 03:55:22 PM »

- Would prefer multiple companies.  So, I like the suggestions above for Fidelity Spartan and Vanguard stuff, etc.  Could that all be done through just a vanguard account?  And is that reasonable?


If you are really keen on diversifying between different institutions and funds, then why would you do all of this through your Vanguard account.

Did you read the document about Vanguard safety that was linked earlier?  The funds are actually held at a custodian bank. It might be that Fidelity (or another company) too may use the same custodian bank as Vanguard. In that case, all your efforts at diversifying will be for nothing.

Personally, I prefer the simplicity of just one investment account. Maybe if the portfolio was in the millions of $, one might consider splitting between different places.

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #35 on: March 30, 2015, 04:06:44 PM »

- Would prefer multiple companies.  So, I like the suggestions above for Fidelity Spartan and Vanguard stuff, etc.  Could that all be done through just a vanguard account?  And is that reasonable?


If you are really keen on diversifying between different institutions and funds, then why would you do all of this through your Vanguard account.

Did you read the document about Vanguard safety that was linked earlier?  The funds are actually held at a custodian bank. It might be that Fidelity (or another company) too may use the same custodian bank as Vanguard. In that case, all your efforts at diversifying will be for nothing.

Personally, I prefer the simplicity of just one investment account. Maybe if the portfolio was in the millions of $, one might consider splitting between different places.
I am willing to accept that some of my ideas are stupid and that I require more face punching than the average bear.

kpd905

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Re: Are multiple investment accounts a good idea?
« Reply #36 on: March 30, 2015, 04:40:38 PM »

PS. In my advisers defense; He did recommend Capital one 360 account. and I do like that.  So he did do something right.

I'll recommend checking accounts to you all day for 1% of your investment balance.

So are you actually considering staying with this guy?

Doulos

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Re: Are multiple investment accounts a good idea?
« Reply #37 on: March 30, 2015, 05:15:56 PM »
Thanks again Frankies Girl; I finally read that article.   It does make me much less concerned about risks of using Vanguard.

skyrefuge

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Re: Are multiple investment accounts a good idea?
« Reply #38 on: March 30, 2015, 05:25:35 PM »
I think I am thoroughly convinced that just blindly telling my adviser that my risk tolerance is sky high and letting him pick whatever he wants was a poor decision.

Just to be clear, telling your adviser that your risk tolerance is sky high had nothing to do with the shittiness of your portfolio. In fact, it could be argued that he even failed you there: he didn't even follow that one bit of guidance that you gave him particularly well. Sure, the portfolio he created is certainly nothing anyone would ever call "conservative", but it's also not "sky-high risky". It stands out for its egregious expenses and its lack of internal logic, not for its riskiness.

Indexer

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Re: Are multiple investment accounts a good idea?
« Reply #39 on: March 30, 2015, 06:30:22 PM »
Quote from: doulos
I think I am thoroughly convinced that just blindly telling my adviser that my risk tolerance is sky high and letting him pick whatever he wants was a poor decision.

Just to be clear its not your job to determine your risk tolerance when you are working with an advisor.  Thats one of the valuable things that a good advisor adds.  To one person the word aggressive means they are ok with 100% stock.  To someone else it can mean they are 'ok' with having some money in stocks because they have only used CDs thus far, but some money really means <10%.  Someone else may say they are conservative because they want to avoid anything really speculative like individual stocks, options, shorting, etc.  However they are actually fine being 80% stocks as long as it is through broadly diversified stock index ETFs where they know they can recover after a market crash.  (Based on real people by the way.)

A good advisor will ask additional questions to figure out what you really mean.  A really good advisor won't even ask you for your risk tolerance.  They will ask completely different questions like, "if your account was down 30% in a major crisis like the one we experienced in 2008 what would you expect me[the advisor] to do?"  Then based on those answers they will tell you if you are conservative/moderate/aggressive.

forummm

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Re: Are multiple investment accounts a good idea?
« Reply #40 on: March 30, 2015, 06:33:32 PM »

- Would prefer multiple companies.  So, I like the suggestions above for Fidelity Spartan and Vanguard stuff, etc.  Could that all be done through just a vanguard account?  And is that reasonable?


If you are really keen on diversifying between different institutions and funds, then why would you do all of this through your Vanguard account.

Did you read the document about Vanguard safety that was linked earlier?  The funds are actually held at a custodian bank. It might be that Fidelity (or another company) too may use the same custodian bank as Vanguard. In that case, all your efforts at diversifying will be for nothing.

Personally, I prefer the simplicity of just one investment account. Maybe if the portfolio was in the millions of $, one might consider splitting between different places.
I am willing to accept that some of my ideas are stupid and that I require more face punching than the average bear.

Vanguard is safe. But if you're really worried, you could put half at Vanguard and half at Fidelity in their Spartan funds (which cost about the same as Vanguard's). The non-Spartan funds are super expensive though.

livetogive

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Re: Are multiple investment accounts a good idea?
« Reply #41 on: March 30, 2015, 07:25:26 PM »
Also,  I'll bet another poster above a nickel that Vanguard trades for its own account in one way or another.  All of the banks do.  I'm curious if vanguard has their own dark pool or what shenanigans can be played with indexing and etfs...

I would guess that Vanguard electronically reallocates stocks between its funds instead buying and selling when possible. If VFIAX holders cash out and VTSAX has new buyers, ownership could get transfered of some of the stocks from one fund to the other without having transaction costs. So many of the funds overlap with other funds.


I want to lead by saying I like Vanguard a lot and have used them in the past.  I do not currently use them but it's through not fault of their own.

I think we're all kidding ourselves with our perception that Vanguard is totally safe.  For every MBS they don't securitize they have a quant somewhere buying and selling shares, derivatives and probably large OTC share blocs to minimize tracking error and fees.  In other words, using algos to be as efficient as possible to save money.

So while they don't dabble in CDO^2^2 they do dabble in algos and quantitative trading, which is risky. 

My point is they are certainly not risk-less.

a1smith

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Re: Are multiple investment accounts a good idea?
« Reply #42 on: March 30, 2015, 09:55:48 PM »
For every MBS they don't securitize they have a quant somewhere buying and selling shares, derivatives and probably large OTC share blocs to minimize tracking error and fees.  In other words, using algos to be as efficient as possible to save money.

So while they don't dabble in CDO^2^2 they do dabble in algos and quantitative trading, which is risky. 

My point is they are certainly not risk-less.

MBS (mortgage backed securities) are, by definition, securitized.  I'm not sure what you mean by "For every MBS they don't securitize . . . "  Could you elaborate on that?

I'm certain that Vanguard trades large blocks of stock at a time and uses dark pools to do it.  Both things help to reduce trading costs; the first by reducing per share transaction costs and the second by reducing the large block trade's impact on market.  See lexicon.ft.com/Term?term=dark-pools for more discussion.