Edward Jones Modeling?

[Republic DC-9]

I just spent over an hour with my wife’s Edward Jones fellow reviewing all of our assets and liabilities ($0) and plugging in my future pension and (derated to 70%) Social Security, along with a bunch of plugs for health insurance ($18K a year) and a few other plugs and that model failed in SPECTACULAR fashion (32% success rate) vs. FIRECalc and cFIREsim modeling that both show 100% success.

I have to jack spending up to almost 2X our current actual to get the other models to fail at the same rate.

I love modeling (was once a forecast analyst as a job), and like it even better when different models start to show same-ish results with the same inputs.

There wasn’t time to review the Edward Jones model in detail, but it did show how the money burned off each year inflation adjusted until it was poof gone about the time I’d be normal retirement age in 15 years.

I want to be able to have follow up questions to ask that I can help to make the model show success, or at least understand why this model fails where the rest succeed.

I imagine there is some element of encouraging people to invest in various Edward Jones funds or something and am aware of and waiting for the “catch”, but this guy isn’t pushy, encouraged us to pay off the house vs investing that $$$ as he likes peace of mind, likes my thought of VTSAX or he said maybe mixed with bonds, etc.  And to his credit says there are ways to make the model work and that starts with double checking assumptions.

I’m wondering if there is anyone who has gone through this modeling who can suggest what to look for?

[NotJen]

I’m wondering if there is anyone who has gone through this modeling who can suggest what to look for?

Insanely high fees?

[Tigerpine]

Is the Edward Jones model using a Monte Carlo simulation?  If so, are all the simulation results used, or just the most pessimist 50% or some such amount?  What is the inflation rate assumed by the EJ model?  What is the average rate of return for your asset classes in the EJ model?  How is the EJ model doing withdrawals?  Is it taking tax efficient withdrawal strategies into account?  Other than the "plugs", is other assumed spending automatically being calculated that you cannot control in the model? 

Fees are always an excellent point to consider.

I'd be interested to hear what his proposed portfolio would be.  That might shed some light onto how the EJ model works.  I am certain that it is designed to generate sales for EJ.

[bacchi]

I am certain that it is designed to generate sales for EJ.

Fear! Uncertainty! Doubt!

Only this Edwards Jones salesperson financial planner* can help you navigate the scary period ahead.


* Ask him/her whether they're a fiduciary. Get it in writing.

[Republic DC-9]

Is the Edward Jones model using a Monte Carlo simulation?  If so, are all the simulation results used, or just the most pessimist 50% or some such amount?  What is the inflation rate assumed by the EJ model?  What is the average rate of return for your asset classes in the EJ model?  How is the EJ model doing withdrawals?  Is it taking tax efficient withdrawal strategies into account?  Other than the "plugs", is other assumed spending automatically being calculated that you cannot control in the model? 

Fees are always an excellent point to consider.

I'd be interested to hear what his proposed portfolio would be.  That might shed some light onto how the EJ model works.  I am certain that it is designed to generate sales for EJ.

All great questions, thank you!

And yes, I agree, it’s surely designed to generate sales for EJ.

As I read in “The Simple Path To Wealth”, I’m keenly aware of the chance of being “conned” and believe I can be (because if I felt otherwise I’d take the first step to actually being conned!)

But again, I love modeling and I want to be able to say, “But what about A, B and C?”

In my Director’s gig, it is literally (almost) beaten into me to speak with data, to understand models and assumptions etc., and I want to ensure I’ve given this desire to give up on working the same level of scrutiny and understanding of assumptions and forecasting I do for any of my “work stuff”.  And then some, because it’s actually our money. :)

And to be clear we only have $12K of $1.4M invested with EJ..but I do want to understand the model.

[Republic DC-9]

I am certain that it is designed to generate sales for EJ.

Fear! Uncertainty! Doubt!

Only this Edwards Jones salesperson financial planner* can help you navigate the scary period ahead.


* Ask him/her whether they're a fiduciary. Get it in writing.

Yes!  Yes!  Yes!!!!!???  :)

Perhaps a more efficient question to ask would be, “What risks/gaps do the cFIREsim and FIREcalc models have?”


Because as I mentioned I REALLY have to spend like a drunken sailor before getting into trouble on those.

And, somewhat frustratingly (even though MMM’s articles make it very clear this would happen), the more we have the less desire to spend money on clutter and days spent going through airport security etc.  So, we don’t see that happening.

[nereo]

Run, do not walk, from Edward Jones.

[secondcor521]

I do want to understand the model.

It is a pessimistic model specifically and intentionally built that way for two very good reasons.  First, most retirees are going to be more upset with EJ if the model says they can retire but then they run out of money than if the model encourages them to accumulate more and they retire successfully -- albeit a decade or two too late.  Second, EJ makes more money via fees the more money and more accounts they have, so the more they convince you to pile up, the better off EJ is.

I'm not curious enough to know specifically what assumptions or calculations their model makes; for me it's enough that they make them and that they have a reputation for high fees and expenses and the logic of the previous paragraph.

FWIW, I used FIREcalc on my own finances.   Before I retired, I found and ran all the free calculators I could find.  They all said I was OK.  Nine years later, I am OK.  Actually more than OK.  If you understand that FIREcalc is a historical calculator and how that method works, and that you need to include all of your expenses including taxes and healthcare, and the future is no worse than the past, then FIREcalc works perfectly fine.

ETA:  Unless marital harmony is on the line, I would pull every red cent from EJ tomorrow.  Any exit fees you pay will probably be made up within six months of having your money invested with fewer fees.

[RWD]

Continuing interaction with Edward Jones is wasted life energy.

[Republic DC-9]

Thank you, everyone, for the speedy and very informative responses!

I feel good about my modeling and @secondcor521 I will make sure that my modeling does include $ for taxes and healthcare.  I’d modeled $12,500 for annual health insurance based on some web searching I’ve done, and will figure out how to estimate taxes tied to spending the $60K ish a year.

[reeshau]

I would bet they are modeling a very low proportion of stocks, which might be appropriate for old people.  (Traditional retirees)

If you look at this chart of Trinity Study data, you can get success rates around what you saw, if you take 25% or 0% stock portfolios past 30 years.

[Ron Scott]

Edward Jones is a money extraction machine, so they’re unsuitable for investing.

But ALL of these models are ridiculous, especially for long retirement periods. Using models like these to save the bare minimum you can, to retire as fast as you can, so you can spend frugally for the rest of your life? Not recommended.

It’s better to WHAT IF the future as having lower returns than the past and save enough money so you can spend 40-50% of your WR on nice-to-haves vs. needs. This gives you the cushion to weather a variety of future return patterns.

[erp]

I wouldn't be surprised if the underlying EJ model has some sort of catastrophic assumption somewhere (ie. a 3% MER) - it might be an accurate representation of investing with EJ; but not an accurate representation of investing in VTSAX or similar. I'd be surprised if the advisor has a strong understanding of the internal workings of the model (they almost certainly didn't build it).

From your discussion of the advisor (isn’t pushy, encouraged us to pay off the house vs investing that $$$ as he likes peace of mind, likes my thought of VTSAX or he said maybe mixed with bonds, etc.), it sounds like he might be a perfectly reasonable person. Even a reasonable person might fall afoul of bad incentive structures, but the things you've said are good news. If he's open to sitting around and just playing with inputs, you might be able to get a better intuition for what the model is spitting out. It's possible that you could also just honestly ask the guy "so, this isn't a great deal for me is it?" and get an answer like "we really serve less sophisticated clients most of the time".

To put my bias on the table, I think EJ tends to be downright predatory. The fees are high and many of the frontline salespeople are financially illiterate. I found this essay illuminating: https://www.joshuakennon.com/executives-edward-jones-feel-humiliated-mutual-fund-practices/

Even given my distaste for the organization, maybe this guy is worth chatting with. Smart people with lots of experience sometimes have great insight despite their incentive structure, and even a wrong model might have some interesting insight around where it's wrong. That said, I'd encourage you to have some confidence in your own calculations - if only one datapoint is an outlier, and the people who generated that datapoint have an incentive to make it look worse ... maybe the data point is wrong?

[Tigerpine]

Does the Edward Jones model assume that you will move all your money to EJ?  Or does it use your current asset allocation with the current fee structure in place?  Does the model change your current asset allocation over time?

The question, "is he a fiduciary?" doesn't directly help to understand the model, but in terms of investing with the fellow is the single best question that has been offered on this thread.  Props to @bacchi

[Laura33]

To put my bias on the table, I think EJ tends to be downright predatory. The fees are high and many of the frontline salespeople are financially illiterate. I found this essay illuminating: https://www.joshuakennon.com/executives-edward-jones-feel-humiliated-mutual-fund-practices/

OP:  read the article to answer your question. 

The combined cut, ignoring the sales load that smaller investors would face, could be as high as 3% to 4% of net worth per year, meaning that the only safe withdrawal rate to survive even a Great Depression for the portfolio owner is 0%.  As in nothing.  Nearly all of the after-tax, after-inflation rewards are being confiscated by this abomination of an arrangement. 

Try running one of your preferred models with 3-4% fees and see how that affects your results.

[ATtiny85]

* Ask him/her whether they're a fiduciary. Get it in writing.

There is plenty of room in the fiduciary grey area that the title is almost meaningless.

If they were an actual fiduciary in the spirit of fiduciary-ness, as soon as you signed on with them, they would fire themselves and give you all your money back. The band of folks whose best interest is served by EJ is very narrow.

But it would still be fun to see the rep's face when asking the question and saying "write it down and sign it," Though I would not waste a single moment with one. Though for OP, there is a spouse dynamic.

[nereo]

I would bet they are modeling a very low proportion of stocks, which might be appropriate for old people.  (Traditional retirees)

If you look at this chart of Trinity Study data, you can get success rates around what you saw, if you take 25% or 0% stock portfolios past 30 years.

Thanks for showing that chart. I would quibble that traditional retirees should have a very low proportion of stocks (e.g. less than 50%), particularly if they are preparing to live at least a couple decades more. About the only time a 25% stock / 75% fixed is if the investment horizon is five years or less.

Most “traditional” yet conservative AAs are around 60/40 precisely because even a 67 year old has roughly even odds to make it another 20 years

[Telecaster]

I love modeling (was once a forecast analyst as a job), and like it even better when different models start to show same-ish results with the same inputs.

The question I would have for the Edward Jones guy is why his model is so divergent from the others?  I mean, the others are pretty simple, just backwards looking at historical data.   Obviously, the future could be worse than that past and it is prudent to consider that for planning purposes, but the EJ model shouldn't assume the future will be much worse than the past. 

If you jack up the fees to EJ levels in cFIREsim, you can see the success rate drops off pretty quickly.   

[reeshau]

I would bet they are modeling a very low proportion of stocks, which might be appropriate for old people.  (Traditional retirees)

If you look at this chart of Trinity Study data, you can get success rates around what you saw, if you take 25% or 0% stock portfolios past 30 years.

Thanks for showing that chart. I would quibble that traditional retirees should have a very low proportion of stocks (e.g. less than 50%), particularly if they are preparing to live at least a couple decades more. About the only time a 25% stock / 75% fixed is if the investment horizon is five years or less.

Most “traditional” yet conservative AAs are around 60/40 precisely because even a 67 year old has roughly even odds to make it another 20 years

Some years ago, I eviscerated an alarmist article from a newspaper out West that screamed "your retirement is doomed!"  At the very end of the article, in a note to a graphic used, they disclosed that they had modeled 20% stocks.

I told them they needed to correct their headline to, "your retirement is doomed--if you're dumb!"

[tooqk4u22]

To put my bias on the table, I think EJ tends to be downright predatory. The fees are high and many of the frontline salespeople are financially illiterate. I found this essay illuminating: https://www.joshuakennon.com/executives-edward-jones-feel-humiliated-mutual-fund-practices/

OP:  read the article to answer your question. 

The combined cut, ignoring the sales load that smaller investors would face, could be as high as 3% to 4% of net worth per year, meaning that the only safe withdrawal rate to survive even a Great Depression for the portfolio owner is 0%.  As in nothing.  Nearly all of the after-tax, after-inflation rewards are being confiscated by this abomination of an arrangement. 

Try running one of your preferred models with 3-4% fees and see how that affects your results.

Out of curiosity I checked cFIREsim with 4% WR, 50/50 AA, 40years and 2% fees and the result was 34.78%.  30 year was 60.8%

[Turtle]

With that wide of a disparity between the models, I have to wonder if EJ modeling was accidentally counting some expenses twice. It may also be assuming some crazy amount for healthcare because models don’t account for being strategical about the ACA prior to Medicare.

 The modeling software which my work provided FP uses has mortgage and healthcare as their own separate line item, so if I had also included that amount in my monthly expenses, it would skew the results.  I’ve used the Rich/Broke/Dead model for several years, and the percentage from it came out similar to the percentage on the software my work provided FP uses. 

I’ve also tried the Projection Lab software to run my own scenarios and am finding it useful.

[Catbert]

To put my bias on the table, I think EJ tends to be downright predatory. The fees are high and many of the frontline salespeople are financially illiterate. I found this essay illuminating: https://www.joshuakennon.com/executives-edward-jones-feel-humiliated-mutual-fund-practices/

OP:  read the article to answer your question. 

The combined cut, ignoring the sales load that smaller investors would face, could be as high as 3% to 4% of net worth per year, meaning that the only safe withdrawal rate to survive even a Great Depression for the portfolio owner is 0%.  As in nothing.  Nearly all of the after-tax, after-inflation rewards are being confiscated by this abomination of an arrangement. 

Try running one of your preferred models with 3-4% fees and see how that affects your results.

Out of curiosity I checked cFIREsim with 4% WR, 50/50 AA, 40years and 2% fees and the result was 34.78%.  30 year was 60.8%

Ding, ding, ding.  I think you found the answer.  Very unlikely that the front line EJ employee will know enough about the model to answer your question.

[clarkfan1979]

I have been doing federal taxes for some family members that have an Edward Jones account. They sold some stock in 2019 that was 3-5 years old that was a profit of about 1%. After adding in fees, they were probably negative. I think the S & P 500 did about 40% during the same time. Overall, they have been happy with their agent. 

[Republic DC-9]

OP Here, first, thank you for so many insightful responses!

We have about $14K invested with Edward Jones which my wife inherited years ago upon her grandma’s death when it was $4K.  She could care less about EJ or ditching them.  And She’s a dream wife as far as Mustachianism goes*, and while she did do the sad tuba “Whomp Whomp!” noise once we’d signed off RE: the modeling, and poked at my belly, she also said she suspects the EJ model is crap so just COME HOME already (for good), that my other FIRE models are fine and if not we’ll figure it out and we don’t actually have room to buy anything new anyway, nor the urge.

Intuitively, she thinks having $2M net worth while not actually spending that much means we could go back to our just married years when we tracked every cent and quickly saved $10K for a house down payment.  We were insanely happy then, with library books and a Y membership and a free Better Homes and Gardens magazine each month by walking to the real estate agent etc etc.  Through my job I’ve brought her to France for work tons of times plus Italy, Edinburgh, Paris, London, Munich, Singapore…so now we’re kind of traveled out, and already are gradually going back to that simplicity.  I’m dragging her along on 3 upcoming domestic trips this fall which should thoroughly kill any airport travel-related urges in both of us.  We also hate riding in the car, even our brand new fancy one, for more than an hour or so.

Back to EJ and my original question, the modeling difference probably does come down to fees.  My intention is to set up a Vanguard direct fund linked to the bank account I started to handle selling of my collectibles and use it to buy VTSAX etc. 

From the discussion with EJ guy, I will for sure re-evaluate whether or not I should shift my $1M life policy I spend $1600/year on into long term care insurance or something more useful, I agree with him it’s probably served its purpose and is a waste now.

And make sure my FIRE modeling includes enough for taxes and health care premiums too.

*Dream wife but refuses to read the Simple Path to Wealth or Pathfinders, she says “What-ever, we already know what to do and are already doing it so just COME HOME already it’s very nice out” and “More firings at work, ask the where your package is!” :)”

[mistymoney]

Maybe the EJ high failure rate is due to their high fees!!

check out the rich broke dead
https://engaging-data.com/will-money-last-retire-early/

and add on their fees in the fees portion (default is 0.3) and with other defaults of the 40/1M portfolio, the success rate is 81%. given the AUM+larger fund fees I put in 2.3% as the investment fee and success went to 37%!

[RedmondStash]

It'd be funny if the only reason the portfolio failed in their model is Edward Jones's fees.

[Fomerly known as something]

I love modeling (was once a forecast analyst as a job), and like it even better when different models start to show same-ish results with the same inputs.

The question I would have for the Edward Jones guy is why his model is so divergent from the others?  I mean, the others are pretty simple, just backwards looking at historical data.   Obviously, the future could be worse than that past and it is prudent to consider that for planning purposes, but the EJ model shouldn't assume the future will be much worse than the past. 

If you jack up the fees to EJ levels in cFIREsim, you can see the success rate drops off pretty quickly.

I use Right Capital with my FA.  There are different scenarios that we can plug in.  We use the Baseline historical for general planning.  When we want to look at what happens in a worst case scenario we switch to bad decade followed by low growth or zero growth.  My best guess EJ may default to those first maybe?

[TimCFJ40]

From Edward Jones's Site here:  https://www.edwardjones.com/us-en/working-financial-advisor/fees

1.4% annual fees (starting at) and .75-5.75% Commissions and sales charges.

Stack that against Vanguard's $0 fees and .04% Expense Ratio on VTSAX and you can see where the difference might be. 

[Much Fishing to Do]

Fees are definitely a huge part of it.  I've always thought the fee % being based off the whole portfolio confuses our understanding of the magnitude of its impact.  E.g. To understand the magnitude of a 1.3% ANNUAL portfolio fee, Its best thought of instead as 32% of your expected annual safe withdrawal amount (off a $1M porfolio, the 13k fee reduces a 40k withdrawal to just 27k to spend after fee.) For 0.3% the 40k withdrawal is 37k after fee.

What an unbelievably huge difference.  I try to keep this in mind whenever otherwise ignoring e.g. fee differences from say 0.2% vs 0.5% etc, it is actually not tiny.

This is frankly why I've never seriously considered an investment advisor.  I think there are probably some that could generate more returns off the same risk...but not enough to make up for that.

[ATtiny85]

Fees are definitely a huge part of it.  I've always thought the fee % being based off the whole portfolio confuses our understanding of the magnitude of its impact.  E.g. To understand the magnitude of a 1.3% ANNUAL portfolio fee, Its best thought of instead as 32% of your expected annual safe withdrawal amount (off a $1M porfolio, the 13k fee reduces a 40k withdrawal to just 27k to spend after fee.) For 0.3% the 40k withdrawal is 37k after fee.

What an unbelievably huge difference.  I try to keep this in mind whenever otherwise ignoring e.g. fee differences from say 0.2% vs 0.5% etc, it is actually not tiny.

I also like to equate the fee with annual withdrawal arguments. "Hey, 4% withdrawal rate is often used as a safe rate for a typical retirement.  If you are paying a 1% fee, that is like taking a 25% salary reduction right here, right now. Would you do that? Yeah, me neither, so don't get into a conversation with them."

This is frankly why I've never seriously considered an investment advisor.  I think there are probably some that could generate more returns off the same risk...but not enough to make up for that.

It is also important to keep in mind that most "advisors" aren't really even trying to generate more returns. They are simply trying to get their hooks into as many people as possible. (A little nicer: they are just trying to earn a living by selling their product to as many people as possible, and that product is fees wrapped up in comfort.)

[Turtle]

Fees are definitely a huge part of it.  I've always thought the fee % being based off the whole portfolio confuses our understanding of the magnitude of its impact.  E.g. To understand the magnitude of a 1.3% ANNUAL portfolio fee, Its best thought of instead as 32% of your expected annual safe withdrawal amount (off a $1M porfolio, the 13k fee reduces a 40k withdrawal to just 27k to spend after fee.) For 0.3% the 40k withdrawal is 37k after fee.

What an unbelievably huge difference.  I try to keep this in mind whenever otherwise ignoring e.g. fee differences from say 0.2% vs 0.5% etc, it is actually not tiny.

This is frankly why I've never seriously considered an investment advisor.  I think there are probably some that could generate more returns off the same risk...but not enough to make up for that.

My late spouse’s 401k turned out to be mostly in a “Target Date” fund, which was very much a mixed blessing.  I’m sure the total amount was lower due to the high fees, but it also meant that when it was rolled to my name in mid 2022 it hadn’t dropped as much due to heavy bond allocation within that fund. 

On the one hand, it was nice to be able to DCA out of that fund into passive index stock funds during the market downturn.  On the other hand, the value of the account would have been much higher without those fees being a drag on it for a decade plus.

[bmjohnson35]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

[eyesonthehorizon]

... It's possible that you could also just honestly ask the guy "so, this isn't a great deal for me is it?" and get an answer like "we really serve less sophisticated clients most of the time".

...
Even given my distaste for the organization, maybe this guy is worth chatting with. Smart people with lots of experience sometimes have great insight despite their incentive structure, and even a wrong model might have some interesting insight around where it's wrong. That said, I'd encourage you to have some confidence in your own calculations - if only one datapoint is an outlier, and the people who generated that datapoint have an incentive to make it look worse ... maybe the data point is wrong?

This. A lot of smart people in the field wind up in that role even though it’s beneath their abilities because sales is where the money is - it’s a tightly regulated industry in which striking out on your own is often more trouble than it is worth, especially for people who want a life outside work. Among those smart folks, though, many are reasonable & honest, & those are usually bored to tears by the rote process with those “less sophisticated clients,” so show one iota of initiative & they’ll often be more than happy to have a candid conversation on your level once or twice before they have to get back to customers willing to pay.

This is true of most industries in my experience - for a lot of customers, paying exorbitant fees is the only alternative that actually gets the job done because they’d never DIY, whether it’s oil changes or appliance installations. So competent salespeople - usually people-people by self-selection - are eager to linger in that moment of reciprocated understanding, it’s a breath of fresh air, & they’ll tell you much more than they’re strictly required to about how you can go about learning things on your own.

I have no insight on their financial model, but as for the business model, equivalent reps at most of their competition can provide second opinions without you needing to transfer assets first if you are shopping around. I’d be curious to see the results from different models produced by similarly-incentivized businesses, I’ve thought about doing this myself but I can’t bear the junk mail it brings on.

[Wolfpack Mustachian]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

[reeshau]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

There is also the phenomenon that Morningstar has studied, where shareholder returns lag the posted fund returns, because their shareholders trade in and out at inopportune times, rather than holding through the full reporting period.  Their research shows actual shareholder returns lag publish returns by 1/5.  (Actual return 6%, vs. fund return of 7.7%, for the 10 years ended Dec. 31, 2022)

It's easy enough, of course, to determine for yourself if you track your purchases and sales with accounting software or manually.  Your broker's software should also calculate *your* return, not just the fund's.

[mistymoney]

To put my bias on the table, I think EJ tends to be downright predatory. The fees are high and many of the frontline salespeople are financially illiterate. I found this essay illuminating: https://www.joshuakennon.com/executives-edward-jones-feel-humiliated-mutual-fund-practices/

OP for sure needs to read this. Is is chilling, to say the least.

In particular, once accounting for the layer of fees, is seems my 2.3% into the rich dead broke was a severe underestimation.

The combined cut, ignoring the sales load that smaller investors would face, could be as high as 3% to 4% of net worth per year, meaning that the only safe withdrawal rate to survive even a Great Depression for the portfolio owner is 0%.  As in nothing.  Nearly all of the after-tax, after-inflation rewards are being confiscated by this abomination of an arrangement.  And again, for smaller investors, there’s a sales load!

[bacchi]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

I've seen such comparisons and the S&P didn't include reinvested dividends (and the LoadFund did).

[Wolfpack Mustachian]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

I've seen such comparisons and the S&P didn't include reinvested dividends (and the LoadFund did).

Great point. I didn't think of that. The fact is, these guys aren't incompetent. They're very competent..... at making themselves money. Even if I saw some proof, I distrust the source so much, I'm going to err on the side that you know how to screw me over more then I know how to detect it, and I'm going to ignore it.

[Catbert]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

I've seen such comparisons and the S&P didn't include reinvested dividends (and the LoadFund did).

Great point. I didn't think of that. The fact is, these guys aren't incompetent. They're very competent..... at making themselves money. Even if I saw some proof, I distrust the source so much, I'm going to err on the side that you know how to screw me over more then I know how to detect it, and I'm going to ignore it.

They can also pick the time period they show you.  Why 11 years rather than 10?  9 years rather than the life of the fund?  This can be a way to "hide" a bad year or time period. 

[secondcor521]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

I've seen such comparisons and the S&P didn't include reinvested dividends (and the LoadFund did).

Great point. I didn't think of that. The fact is, these guys aren't incompetent. They're very competent..... at making themselves money. Even if I saw some proof, I distrust the source so much, I'm going to err on the side that you know how to screw me over more then I know how to detect it, and I'm going to ignore it.

They can also pick the time period they show you.  Why 11 years rather than 10?  9 years rather than the life of the fund?  This can be a way to "hide" a bad year or time period.

Another trick:  Start 10 funds with 10 different managers and 10 different investment strategies.  Wait five years.  Close the 8 that underperformed the market, then point out the market outperformance of the 2 that randomly succeeded by being lucky and probably taking extra risk.

[sonofsven]

I’m wondering if there is anyone who has gone through this modeling who can suggest what to look for?

Insanely high fees?

Lol! Begs the question as to just whose retirement they are modeling for.

[Wolfpack Mustachian]

Somewhat inline with this posting, does anyone ever question the accuracy of an investment's return? For example, you are comparing mutual funds and you want to compare average return and other stats about past performance. I know these are regulated and I would like to think there are enough organizations keeping them honest, but can we fully trust mutual fund companies and other entities to provide accurate investment return data?

I have wondered that. A friend pointed to the "returns" a salesman showed them "after" fees has been taken out and had it compared to the S&P, and it showed their find significantly outperforming still. I didn't mention it to him, but I was thinking, how do you know that's accurate? I can easily get legitimate graphs of the S&P and other things, but how do I know your graph of this fee accounted-for-fund is accurate?

I've seen such comparisons and the S&P didn't include reinvested dividends (and the LoadFund did).

Great point. I didn't think of that. The fact is, these guys aren't incompetent. They're very competent..... at making themselves money. Even if I saw some proof, I distrust the source so much, I'm going to err on the side that you know how to screw me over more then I know how to detect it, and I'm going to ignore it.

They can also pick the time period they show you.  Why 11 years rather than 10?  9 years rather than the life of the fund?  This can be a way to "hide" a bad year or time period.

Another trick:  Start 10 funds with 10 different managers and 10 different investment strategies.  Wait five years.  Close the 8 that underperformed the market, then point out the market outperformance of the 2 that randomly succeeded by being lucky and probably taking extra risk.

This is all making me super excited looking forward to dealing with some down the road inheritance issues with getting everything out of some of these shenanigans /s.

[Republic DC-9]

OP here - thank you for all of the responses.

I won’t be investing any more funds with EJ (the 1% of our assets currently in an EJ fund can stay there for the moment - these were inherited along with the advisor from her grandmother and have more than quadrupled - the value of this transcends what the % increase is as it helped (and still helps) illustrate to my spouse the power of compound interest on her own money (vs. cashing it out and immediately spending it the way her sister did “”See, those couches really cost $14K not $3K”).

I’m now much more confident in my own modeling, and thank you for pointing me at the Rich, Dead, Broke calculator for even more reassurance (exceptionally handy timing since there have been various dismissals/org structure changes this week).

I’ve not been cut ( yet), that would make pulling the retirement plug an easy decision plus I’d get nearly half a year’s pay - but knowing we’re financially ready sure takes the fear away (it’s still creepy and sad to suddenly lose coworkers).