Author Topic: What happens if I fire my advisor and manage my investments myself?  (Read 17735 times)

kkel

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What happens to my assets under management if I should fire my financial advisor and manage my own funds?  They are held at Schwab and range from:

ETFs & Closed End Funds (ex: ISHARES COHEN AND STEERS... )             

Mutual Funds (ex: AMERICAN FD EUROPACIFIC... , CBRE CLARION LONG SHORT... )             

Fixed Income (ex: AMER EXPRSS CNTR, GOLDMAN SACHS BK 2.25%20 CD
   
I have a feeling that asking this question means I shouldn't be managing my own funds. ;)

Any guidance is greatly appreciated.

Best,
Krista

Aphalite

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What happens is you stop paying your financial advisor a fee for shuffling some ETFs around

You should probably do some reading at bogleheads, or maybe pick up the intelligent investor/little book of common sense investing

A lot of posters here champion going full vanguard, with some sort of mix between domestic index, international index, and a total bond index

Good luck

dandarc

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

Then fire your adviser and profit.

craigerv

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

Then fire your adviser and profit.

+1

Frankies Girl

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

Then fire your adviser and profit.


nereo

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There are two basic things you can do
1) your accounts can be liquidated (turned into cash) and then you can invest these however you see fit (please fill out an Invesor Policy Statement). You will pay taxes on any capitol gains come tax time. Depending on your income LT Captiol gains would be between 0-20% (note: that's of the gains, not the total amount). If you are married, filing jointly your ordinary income can be up to $75,300 before you have to pay LT Capitol gains.  Plan accordingly.

2) Under most circumstances you can begin an asset transfer from Schwab to a brokerage of your choosing.  I recently did this, moving funds from various mutual funds and an account from Merrill Lynch to Vanguard.  The funds will remain the same, with the same expense ratios, but everything will be held by Vanguard (or whichever brokerage you choose) and you can sell them at your leisure and re-invest in lowercost funds, ETFs, stocks, etc.

Any tax deferred accounts (IRA, 401(k), 403(b) etc) can be rolled over into an IRA of your choice.  This is not a taxable event unless you decide to convert those investments into a ROTH.

MustacheAndaHalf

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Vanguard has been drawing investors to it with low cost passive index funds.  They've done so well, that other firms have been forced to create similar funds - Fidelity and Schwab included.  At Schwab, you have the Schwab Broad US Market ETF ("SCHB") with a 0.03% expense ratio.

When you change investments, the IRS wants you to realize your profits or losses.  So first you should look for a screen called "cost basis" that shows how much profit/loss you have on each fund.  That will tell you the tax impact of selling.  In general the best approach to exit funds is to sell winners after it's been more than 365 days, so you get better tax rates.

Take a look at the tax impact using "cost basis", and switch the most expensive funds to a low cost index fund like SCHB that covers the market.  You don't have to sell everything at once, or switch to Vanguard.  But you can certainly find better options within Schwab and switch gradually.

If you decide the tax impact doesn't matter much, you could sell it all and move the money to Vanguard.  Vanguard has the advantage of not having many bad choices - the fund costs are much lower than industry average.  At Schwab, there are some low cost funds but many of the choices are not.

MDM

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Much good advice already.  See also https://www.bogleheads.org/wiki/Three-fund_portfolio.  Included in that link are recommendations for funds at Fidelity and Schwab, in addition to ones at Vanguard.

Huskie87

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I'm a big proponent of DIY investing, however it takes hard work to educate yourself to the point where you are capable of this.  Yes, most people CAN invest on their own and save the money that they would have given an advisor, however there is lots of research which shows that people WILL act in ways that are detrimental to their long term financial success.

My vote is that you do the hard work, educate yourself to the point of being capable of DIY and then pull it from your advisor.  Just recognize that a good financial advisor is not there to do your investing for you.  He/she is there to offer tax advice, behavioral counseling, financial planning, etc.  If all your advisor does is put your money in the market and thats it, it's time to find a new advisor or DIY.

This vanguard whitepaper is a very good read.  Ultimately it shows that a good advisor does add a lot of value, but it has nothing to do with their ability to pick investments.

http://www.vanguard.com/pdf/ISGQVAA.pdf

If you can knock out your own financial plan in excel...  If you can do basic investment research and understand asset allocation...  If you have a decent handle on the tax code...  AND MOST IMPORTANTLY, if you're strong willed enough to not panic when the market gets volatile and try to 'time the market'...then DIY might be more beneficial for you.

ysette9

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I'd also recommend reaching out to the smart people in the internets for advice (here or Bogleheads forum). You can run your ideas by the crowd and get a lot of good advice for your situation, risk tolerance, and goals.

nereo

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #10 on: May 04, 2016, 03:45:14 PM »
I'd also recommend reaching out to the smart people in the internets for advice (here or Bogleheads forum). You can run your ideas by the crowd and get a lot of good advice for your situation, risk tolerance, and goals.

I gotta ask - who are the "smart" people here?

kkel - in response to another poster, I just have to chime in and say that managing your own portfolio can be very, very easy - and there are people around to help.  The comment about not panicking and selling is good advice, but beyond that any functional adult is capable of managing their finances.  If you want help, a fee-only advisor can set you down a simple path that you can follow for years with no changes. People here can do the same thing.

steveo

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #11 on: May 04, 2016, 03:54:21 PM »
I'm a big proponent of DIY investing, however it takes hard work to educate yourself to the point where you are capable of this.  Yes, most people CAN invest on their own and save the money that they would have given an advisor, however there is lots of research which shows that people WILL act in ways that are detrimental to their long term financial success.

My vote is that you do the hard work, educate yourself to the point of being capable of DIY and then pull it from your advisor.  Just recognize that a good financial advisor is not there to do your investing for you.  He/she is there to offer tax advice, behavioral counseling, financial planning, etc.  If all your advisor does is put your money in the market and thats it, it's time to find a new advisor or DIY.

This vanguard whitepaper is a very good read.  Ultimately it shows that a good advisor does add a lot of value, but it has nothing to do with their ability to pick investments.

http://www.vanguard.com/pdf/ISGQVAA.pdf

If you can knock out your own financial plan in excel...  If you can do basic investment research and understand asset allocation...  If you have a decent handle on the tax code...  AND MOST IMPORTANTLY, if you're strong willed enough to not panic when the market gets volatile and try to 'time the market'...then DIY might be more beneficial for you.

Sounds good but my response is if you don't want to consider something as simple as a 3 or 2 fund portfolio then you can just buy a Vanguard all in one fund. I think everyone can do that.

Radagast

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #12 on: May 04, 2016, 08:39:40 PM »
Quote from: steveo link=topic=55100.msg1075375#msg1075375

Sounds good but my response is if you don't want to consider something as simple as a 3 or 2 fund portfolio then you can just buy a Vanguard all in one fund. I think everyone can do that.
I concur. Schwab is already one of the best places (my opinion in the top two, after vanguard) for low cost DIY index investing, but ultimately Vanguard has great balanced portfolios that take little to no research or further thought. Expense ratios as low as 0.08, or that change over time, or that include international stocks and bonds for no mental effort.

kkel

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #13 on: May 05, 2016, 05:24:52 AM »
Thank you! You all are amazing.  Lots of good advice, links, books to read (I had already purchased the Intelligent Investor), points to ponder, and general badassity (i.e. "then fire your advisor and profit"). 

It's because of this community that started me thinking that FI was more than a possibility (hence my curiosity about firing my advisor and giving it a go myself).  With a $10,000 management fee (on $700,000 in assets) plus transaction fees, it seems that I could educate myself and be better for it.  Since I am 47, debt-free, no mortgage, and cutting back to part-time, I feel like I could make this a part-time job and pay myself instead of the advisor. 

Your guidance is so appreciated.

Best,
Krista

Radagast

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #14 on: May 05, 2016, 12:28:15 PM »
If you are looking for a book the intelligent investor is pretty old. My recommendation is "The Four Pillars of Investing" by Bernstein.

NoStacheOhio

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #15 on: May 05, 2016, 02:49:20 PM »
Thank you! You all are amazing.  Lots of good advice, links, books to read (I had already purchased the Intelligent Investor), points to ponder, and general badassity (i.e. "then fire your advisor and profit"). 

It's because of this community that started me thinking that FI was more than a possibility (hence my curiosity about firing my advisor and giving it a go myself).  With a $10,000 management fee (on $700,000 in assets) plus transaction fees, it seems that I could educate myself and be better for it.  Since I am 47, debt-free, no mortgage, and cutting back to part-time, I feel like I could make this a part-time job and pay myself instead of the advisor. 

Your guidance is so appreciated.

Best,
Krista


Wait, what?

nereo

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #16 on: May 05, 2016, 02:53:28 PM »
Thank you! You all are amazing.  Lots of good advice, links, books to read (I had already purchased the Intelligent Investor), points to ponder, and general badassity (i.e. "then fire your advisor and profit"). 

It's because of this community that started me thinking that FI was more than a possibility (hence my curiosity about firing my advisor and giving it a go myself).  With a $10,000 management fee (on $700,000 in assets) plus transaction fees, it seems that I could educate myself and be better for it.  Since I am 47, debt-free, no mortgage, and cutting back to part-time, I feel like I could make this a part-time job and pay myself instead of the advisor. 

Your guidance is so appreciated.

Best,
Krista


Wait, what?

That's actually a pretty standard fee for "full-service" financial advisors...  about 1.4% of total assets per year.  I finally convinced my parents to dump their financial advisor after showing them that they could buy a brand new car every single year with what he was siphoning off in fees... and likely do better in the market.
It's also reason enough to run screaming, as a passive index fund will likely give you better results for ~$9,000 less per year.

kkel

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #17 on: May 06, 2016, 04:29:54 AM »
Thank you! You all are amazing.  Lots of good advice, links, books to read (I had already purchased the Intelligent Investor), points to ponder, and general badassity (i.e. "then fire your advisor and profit"). 

It's because of this community that started me thinking that FI was more than a possibility (hence my curiosity about firing my advisor and giving it a go myself).  With a $10,000 management fee (on $700,000 in assets) plus transaction fees, it seems that I could educate myself and be better for it.  Since I am 47, debt-free, no mortgage, and cutting back to part-time, I feel like I could make this a part-time job and pay myself instead of the advisor. 

Your guidance is so appreciated.

Best,
Krista


Wait, what?

I know, right!  The firm requires a minimum of $1 mil in assets (so the fee is 1% of assets with a mil minimum).  My husband and I got divorced and so mine dropped below that but still had to pay as if.  My beef is that I feel like a financial advisor that was looking out for me would have advised me to find other alternatives (especially since she knows that I will not be adding more to this - besides regular growth of what is already there). 

NoStacheOhio

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #18 on: May 06, 2016, 05:02:31 AM »
I know, right!  The firm requires a minimum of $1 mil in assets (so the fee is 1% of assets with a mil minimum).  My husband and I got divorced and so mine dropped below that but still had to pay as if.  My beef is that I feel like a financial advisor that was looking out for me would have advised me to find other alternatives (especially since she knows that I will not be adding more to this - besides regular growth of what is already there).

Sorry, that amount just floors me. Run as fast as you can, even if you just dump it all into a target date fund! (But seriously, the above links are great)

AlmstRtrd

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #19 on: May 06, 2016, 07:28:50 AM »
What happens to my assets under management if I should fire my financial advisor and manage my own funds?  They are held at Schwab and range from:

ETFs & Closed End Funds (ex: ISHARES COHEN AND STEERS... )             

Mutual Funds (ex: AMERICAN FD EUROPACIFIC... , CBRE CLARION LONG SHORT... )             

Fixed Income (ex: AMER EXPRSS CNTR, GOLDMAN SACHS BK 2.25%20 CD
   
I have a feeling that asking this question means I shouldn't be managing my own funds. ;)

I'm going to sort of play the devil's advocate here. Do you have any idea of your portfolio's performance after the annual fee? This forum is filled with DIY investors. Many of them are really knowledgeable and should be managing their own money. But I think it's also easy to take that knowledge for granted... and forget that it sometimes takes a long time to both educate yourself AND get to know your tolerance for risk. Not everyone can or wants to manage their own money.

I probably sound like I am in the business and therefore sticking up for the advisor. For the record, I have done everything on my own for the last 25 years but I'm also interested enough in investing to have taken the time to do my research. Not every service is worth eliminating just because it costs money.

Just something to think about.

MidWestLove

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #20 on: May 06, 2016, 08:03:05 AM »
dump advisory services as soon as possible and do not let anyone talk you out of it - stupid to pay anything for what you can very very very easily do yourself (all in one target requirement fund), especially what you are paying now. if you _need_ advisor (you will know that moment), you hire them as you hire an attorney and pay per hour but with assets under management (AUM) charge

Once you terminated that relationship you can then post the fund list ideally with cost basis (let us know if you need help finding it on Schwab website) and people will comment on what it would cost to move to Vanguard and what would options be.

whether you stay at Schwab, move for a different discount broker, or go to Vanguard, there is nothing better you can do to yourself is to get out of the financial rape you are getting now

neo von retorch

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #21 on: May 06, 2016, 08:05:50 AM »
Investing is on a spectrum, from paying huge fees to an advisor, to using a robo-advisor, to dumping everything into an all-in-one fund, to simple three/four fund portfolios, to something more advanced.

It's really easy to do any of the middle three options. The actions you would take are

1. Create an Investor Policy Statement. Again, this can be simple or sophisticated. It can be as simple as "I want 80% in stocks, 20% in bonds. All domestic (U.S.)" Or it can be a lot more granular - how often you rebalance, where new funds are placed, where equities and bonds go based on which of your accounts is more tax-efficient (i.e. put bonds in your retirement funds). People can debate all day what the "best" policy (strategy) is, but you don't have to spend all day eeking out the "best" - you can go with a damn good, damn simple one. (If you go with a robo-advisor, like Betterment, you'll still lose money to fees - the base fees on $700k at Betterment are about $1000 / year or 0.15%, plus their underlying fund ratios, which are also pretty low. But you'll basically just need to pick the stocks/bonds/cash ratio, and they'll do the rest for you.)

2. Decide where your money shall live (where it is now, or somewhere new, like Vanguard.) Get your accounts created, if needed, and do in-kind transfers (if possible), or liquidate as needed and buy the desired allocation of investments. This can be pretty easy, because if, for example, you're going to Vanguard, they can walk you through each step over the phone.

3. Stick to your Investor Policy Statement.

FrenchStache

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #22 on: May 06, 2016, 04:27:11 PM »
I just went through that exercise with my financial advisor.  I did not originally have plans to get rid of him.  I simply emailed him about the expense ratios of the funds I was invested in (about 1.6% for american funds) not even considering the 1% fee for assets under management.  He seemed to be offended I was questioning the expense ratios.  He basically told me I was free to do it on my own and my Vanguard funds would not perform as well as the American funds.  Two emails later I said I will just manage on my own, thank you very much. 
So far I have selected Vanguard funds for our 401ks and Betterment for an emergency fund and taxable account.

Tyson

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #23 on: May 06, 2016, 04:45:10 PM »
He basically told me I was free to do it on my own and my Vanguard funds would not perform as well as the American funds.

When advisors make statements like that, they really ought to provide some numbers to back that up.  And have them over a long enough timeline to be meaningful.  Beating the market for a year or 2 is worth nothing on the timeframe of a person saving for retirement.  Show me that you beat the market for 10 years straight and then maybe we'll talk.

FrenchStache

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #24 on: May 06, 2016, 07:19:54 PM »
He basically told me I was free to do it on my own and my Vanguard funds would not perform as well as the American funds.

When advisors make statements like that, they really ought to provide some numbers to back that up.  And have them over a long enough timeline to be meaningful.  Beating the market for a year or 2 is worth nothing on the timeframe of a person saving for retirement.  Show me that you beat the market for 10 years straight and then maybe we'll talk.

Yes I found it kind of arrogant and pretty much decided to move on right there and then.  I am not worried about the returns working on my own. The one thing for me where I see benefit of having an advisor would be during a downturn in the market to talk you out of selling at the wrong time.  But I will cross that bridge when i get there.

MidWestLove

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #25 on: May 07, 2016, 10:31:58 AM »
Congratulations , you are doing well. Do not over think it, right now getting out of aum fees is more important than exact tuning of equity ratios as long as moving assetzs does not generate enormous tax bill. There is always set and forget option of year X retirement fund of funds with Vanguard that does it for you.

PhysicianOnFIRE

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #26 on: May 07, 2016, 11:05:48 AM »
Well, you could very well save millions in fees over the course of your lifetime if you DIY right.

FINate

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #27 on: May 07, 2016, 11:06:38 AM »
Vanguard's Target Retirement 2045 Fund has an expense ratio of just 0.16%. At $700k invested, that is $1120/year vs. the $10,000+/year you're paying today. If you're willing to build your own portfolio of Vanguard funds you should be able to get the expenses even lower - their Total Market Admiral fund is just 0.05%.

When factoring the cost of taxes into your decision you should also consider how long it will take the switch to payoff relative to your investment horizon. For example, it hurts if it takes a few years to recoup the cost of the tax hit, but you're coming out ahead thereafter. If you're invested for 20 or 30 years then the switching cost is relatively small.

dess1313

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Re: What happens if I fire my advisor and manage my investments myself?
« Reply #28 on: May 07, 2016, 05:59:57 PM »
The books millionaire teacher, as well as bogleheads guide to investing were awesome books for learning!  Highly recommend both of them!