Author Topic: HELP - Not Happy with Financial Advisor & Not Impressed with Another Prospect  (Read 16164 times)

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Age 66 here and by my calculations have enough in taxable investment holdings to pay-off 4.5% mortgage and in social security, a pension and deferred investments to get me through retirement, requiring a steady 1.2% annual return to stay cash positive for the remainder of my days. Am not worried much about inflation as both social security and the pension have COLA adjustments, and I figure I am not exposed to all that comprises inflation.

My current mutual funds based financial advisor says don't do it, just continue to shell out $18K per year in interest and principal payments for the next 23 years. They also sold me an annuity with quarterly fees that have just about eaten away all of three years earnings. If I wait much longer to get out, it will yield less than my original investment after the surrender charge is deducted. My taxable investments with them have out-performed tax deferred investments with them.

A prospective ETF supplying financial advisor says pay off the mortgage and we'll charge you 1.5% (on the monthly total divided by 12) on your investments held by us and we'd only charge you 1.0% on a million dollars or more. So until my holdings with them total >$1M, I'd be paying more in fees that the person who already has $1.2M? I'd be paying roughly $12K per year in fees hoping to realize roughly $8K per year after fees. My age 70.5 IRA/401(k) annual RMD is shaping up to be about $21K, a good portion of which would be re-invested, provided the mortgage is paid off. Heck, I'll even consider scattering CDs all over the place.

I'd like to take more control of this, reducing the fees coverage driven portion of investment risk and it may take some work to free up about $200K of my taxable investments, while keeping capital gains to a mininum, to pay off the mortgage.

Help! This is not fun. Do I need a fiduciary, even for a short period of time?

Thank you

steveo

  • Handlebar Stache
  • *****
  • Posts: 1891
Go and invest in Vanguard. Choose your bond allocation and put the rest into stocks. You can choose to split the stocks however you want between domestic and international.

PhysicianOnFIRE

  • Bristles
  • ***
  • Posts: 452
  • Location: Up North
    • Physician On FIRE
I'm having a difficult time completely understanding your situation. It may be your explanation or my homebrew.  It is Friday night, after all.  But if I understand this, you will be in good shape if the markets return 1.2% or greater.

You should be able to do this yourself.  If you were able to amass a 7 figure portfolio, you should be able to manage the money you've earned. Look up the lazy portfolio, set it and forget it.

Don't forget to send your former advisor a Christmas card every year.


steveo

  • Handlebar Stache
  • *****
  • Posts: 1891
You could even just dump it all into a vanguard all in one fund and not worry about it ever again.

cchrissyy

  • Pencil Stache
  • ****
  • Posts: 708
  • Location: SF Bay Area
you don't need a "prospective ETF supplying financial advisor"  to take 1% of your large balance as a service fee for an incredibly small and simple task.

here's how you buy an ETF. it's the same as buying any stock and almost the same as buying mutual funds.

open a brokerage account at schwab.com. free, online, right now.

while in there, set up a transfer from your current financial company to this account. print and sign whatever is required.

in a few days, when your money is electronically moved to the new account, go online and buy the ETF(s) you want. The one-time cost is $8.95 per order.

if you want some handholding or general good advice, call them.

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
I really appreciate all of the responses.

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
I'm having a difficult time completely understanding your situation. It may be your explanation or my homebrew.  It is Friday night, after all.  But if I understand this, you will be in good shape if the markets return 1.2% or greater.

You should be able to do this yourself.  If you were able to amass a 7 figure portfolio, you should be able to manage the money you've earned. Look up the lazy portfolio, set it and forget it.

Don't forget to send your former advisor a Christmas card every year.

Cashing in some taxable investments without getting dinged too badly for capital gains to pay off the mortgage now will make that possible. Then I need to get a handle on doing the RMD and re-investing what isn't spent, if and when the time comes a few years from now.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 38
  • Location: NYC
Since you seem to be very comfortably retired (if you only need 1.2% return), you could consider the ultimately simple option of a managed payout fund

https://personal.vanguard.com/us/funds/snapshot?FundId=1498&FundIntExt=INT

This vanguard fund pays you 4% per year, and the underlying assets are a well diversified portfolio of vanguard funds.
So basically in years where the funds perform better than 4% (plus fees), your fund will go up, otherwise you will draw down.

Yes you pay 0.38% in fees, but it's super simple, it is automatically diversified and if you need less than 4% you can always reinvest the rest.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1891
Since you seem to be very comfortably retired (if you only need 1.2% return), you could consider the ultimately simple option of a managed payout fund

https://personal.vanguard.com/us/funds/snapshot?FundId=1498&FundIntExt=INT

This vanguard fund pays you 4% per year, and the underlying assets are a well diversified portfolio of vanguard funds.
So basically in years where the funds perform better than 4% (plus fees), your fund will go up, otherwise you will draw down.

Yes you pay 0.38% in fees, but it's super simple, it is automatically diversified and if you need less than 4% you can always reinvest the rest.

I reckon this is the best approach. Also that fee is really low compared to the financial advisor fee of 1.5%. The financial advisor will have to beat Vanguard by 1% every year. I can't see it happening.

Another Reader

  • Magnum Stache
  • ******
  • Posts: 4737
The folks over at early-retirement.org are closer to you in age and net worth.  Suggest you post your question over there.  The advice to dump the FA will be the same, but it will come from folks that have done that successfully.

In short, these "advisers" are not acting in your best interest.  They siphon off a large percentage of your returns and put you in egregiously expensive products such as annuities.  Dump your adviser and don't look back.

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
The folks over at early-retirement.org are closer to you in age and net worth.  Suggest you post your question over there.  The advice to dump the FA will be the same, but it will come from folks that have done that successfully.

In short, these "advisers" are not acting in your best interest.  They siphon off a large percentage of your returns and put you in egregiously expensive products such as annuities.  Dump your adviser and don't look back.

Thank you. I'll check them out.

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Since you seem to be very comfortably retired (if you only need 1.2% return), you could consider the ultimately simple option of a managed payout fund

https://personal.vanguard.com/us/funds/snapshot?FundId=1498&FundIntExt=INT

This vanguard fund pays you 4% per year, and the underlying assets are a well diversified portfolio of vanguard funds.
So basically in years where the funds perform better than 4% (plus fees), your fund will go up, otherwise you will draw down.

Yes you pay 0.38% in fees, but it's super simple, it is automatically diversified and if you need less than 4% you can always reinvest the rest.

Thank you. I will look into this. Will see if they have even lower payout percentages with even lower fees and risk.

Interest Compound

  • Pencil Stache
  • ****
  • Posts: 658
No matter which Vanguard option you go with, you'll be fine. That said, after speaking with hundreds of people about investing, I've come to recommend Vanguard's automatic accounts. MrMoneyMustache also recommends an automatic portfolio for his readers. Psychologically it makes sense. It takes the newbie's decision making out of the equation, as they put their portfolio in the hands of an expert. And what better expert than Vanguard? The only investment firm that's legally obligated to act in our best interests?



You have two amazing options:

1. "I want Vanguard's experts to do everything for me. I'll just tell them my age and they'll put it in the appropriate Target Retirement Fund"



2. "I want Vanguard's experts to do everything for me. I'll just tell them how much risk I want, and they'll put it in the appropriate LifeStrategy Fund"



Then forget about it.

Choosing a Vanguard automatic account is effectively like saying, "Hey Vanguard. Will you manage that 3-fund portfolio for me that I keep hearing so much about?" These accounts:
  • Don't require advanced knowledge of the market to invest (anybody can do it with a few button pushes)
  • Are professionally managed automatically, by the only company which generates just enough profit to cover its costs, and with no outside owners (they are owned by people like you who invest with them) truly operates with your best interests in mind.
  • Relieve you of the burden of choosing your own asset allocation, and does so with no tracking error. Reducing behavioral mistakes and possible emotional abandonment to the strategy, the biggest risk to your portfolio.
  • Automatically rebalance.
  • Gradually get less risky as you age (TargetRetirement).
  • Keep you from tinkering with your portfolio.
  • Let you easily schedule automatic contributions while keeping your allocation balanced ($500 a paycheck automatically invested for example).
  • Let you easily schedule automatic distributions while keeping your allocation balanced ($4000 a month automatically deposited to your bank account for example).
  • Let you "Set it and forget it". You can literally login once, schedule automatic contributions, and come back 30 years later knowing everything has been taken care of for you.
  • Reinvest dividends automatically.
  • Don't try to beat the market by adding 10% of this and 5% of that. The aim is not to separate winners from losers, but rather to hold the entire market.
  • Give you the most diverse portfolio possible, with 21,600+ individual holdings across the world.
  • Allow you to easily invest money separately based on goals. Short-term money vs long-term money vs retirement money, for example.

You only need a 1.2% return? Great job! No need to take any more risks, you've already won the game. :)
« Last Edit: April 30, 2016, 01:36:49 PM by Interest Compound »

cchrissyy

  • Pencil Stache
  • ****
  • Posts: 708
  • Location: SF Bay Area
great advice here

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2148
  • Location: Cleveland
you don't need a "prospective ETF supplying financial advisor"  to take 1% of your large balance as a service fee for an incredibly small and simple task.

here's how you buy an ETF. it's the same as buying any stock and almost the same as buying mutual funds.

open a brokerage account at schwab.com. free, online, right now.

while in there, set up a transfer from your current financial company to this account. print and sign whatever is required.

in a few days, when your money is electronically moved to the new account, go online and buy the ETF(s) you want. The one-time cost is $8.95 per order.

if you want some handholding or general good advice, call them.

Schwab (and Vanguard and Fidelity and others) have plenty of no-transaction-fee ETFs. Why would you pay $8.95?!

SCHB has a freaking 0.03% ER with no fee to buy!

But yes, transfer everything to a DIY broker (like one of the aforementioned). Worst case scenario, choose a target date fund and dump everything in there. Otherwise, choose an asset mix that matches your goals/risk tolerance, and then forget about it.

BodegaHead

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Even less exciting, I am now trying to figure out how to break things up and determine a schedule of maturity dates based on my age 70.5 RMD date, based on investing in IRA CDs. I'm considering a three year ladder (projected 1.55 APY after three years) for the deferred earnings, withdrawing the earnings plus each time a CD matures after I reach age 70.5, still leaving me $140K to invest in taxable earnings and money to live on between now and age 70.5.