Author Topic: Thoughts on managed vs brokerage account?  (Read 2425 times)

cisman

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Thoughts on managed vs brokerage account?
« on: August 17, 2015, 12:00:39 PM »
We have some IRA's with a larger management company because we like our advisers. They are always straight and too the point and don't pressure us.

We had to rollover an IRA from my wife's work and they are offering 2 options.

1. A brokerage account like our Roth's are in with Class C shares where we pay $75 to them annually and the usually annual fund fees.

2. A managed account where they completely managed and switch funds as needed although this fund they charge 1.5% annually as a fee.

The 10 year rate of return is higher with #2, but so is the fee in my opinion.

Thoughts? Again they are not presurring and will do either one. We're just trying to do some research before making a decision.

seattlecyclone

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Re: Thoughts on managed vs brokerage account?
« Reply #1 on: August 17, 2015, 12:12:15 PM »
Option 3) Dump your advisors and move all of your money to Vanguard. Your advisors, no matter how likeable they are, are salesmen who will likely earn hundreds of thousands of dollars worth of commissions from your investments over your lifetime. This is money that rightfully belongs to you. The service they provide is not remotely worth what you pay for it. Ignore the rate of return over the past ten years. No fund can be expected to beat the market over the long term. The fees are the thing you control, and they are charging you way too much. 1.5% plus underlying fund expenses is absolutely insane and there is no good reason to consider it.

BarkyardBQ

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Re: Thoughts on managed vs brokerage account?
« Reply #2 on: August 17, 2015, 12:15:48 PM »
+1 for Option 3

$75/year just to click a few buttons on a screen?

https://itunes.apple.com/us/book/little-book-common-sense-investing/id381144376?mt=11

GGNoob

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Re: Thoughts on managed vs brokerage account?
« Reply #3 on: August 17, 2015, 12:51:42 PM »
Another +1 for Option 3.

Travis

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Re: Thoughts on managed vs brokerage account?
« Reply #4 on: August 17, 2015, 01:27:51 PM »
Quote
1.5% plus underlying fund expenses is absolutely insane and there is no good reason to consider it.

There is nothing these folks can offer you that is worth several years worth of your retirement income.  That's not an exaggeration.  If your retirement accounts earn you 10% returns (reasonable number) over their lifetime how much sense does it make to hand over at least a tenth of those returns to someone else?  At best a manager makes your fund perform as well as the average.  At worst you vastly under perform because he's making changes counter to the rest of the market.

Charging you 1.5% is obscene. Most managers charge 1% to "manage" these accounts which doesn't include the fees of the individual funds themselves which can range from .5 to 1.5%.  You didn't mention what your actual fund(s) charges in fees. Do you know? I was in a 5% front-load plus 1% management situation a few years ago.  The fund did better than most, but when you subtract the load and the fees the return was much closer to all the other funds.  Add in a bad year or two where you have negative returns in addition to the fees you still have to pay you can see the benefits slip away.

Those Class C shares are generally used for short-term reasons and have a 1% fee attached if you don't hold onto them for at least a year.  If someone else is  playing with your funds, what's the stop them from doing that?

Aphalite

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Re: Thoughts on managed vs brokerage account?
« Reply #5 on: August 17, 2015, 01:55:43 PM »
If you think you will have less than $5 million in assets/networth by the time you pass (e.g. below estate tax limits), I would go with option 3 described above. If not, and you are likely to be close to subject to estate tax, I think an advisor could be a very worthwhile use of your money in terms of tax protection and family transfer plans, but it will probably not be the advisors you currently have. Generally, in life, you don't need stock selection advisors, but you do need advisors who can help you structure your holdings in the most legally/tax favorable way possible if you don't want to study the subject yourself