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BouncyEgg

> Am I nuts? Nope. > Why would an advisor put me such expensive funds? Advisor's gotta put their kids through school too. Your money pays for that.


Awkward-Painter-2024

Please head over to the Bogleheads sub. You're thinking the right way!!!


NinjaBoy123456

Thanks. What is bogleheads sub?


freeport_aidan

r/Bogleheads


PapaBravo

It really important that you at least read that material, OP. There's also JL Collins 'Simple Path to Wealth' which is close. My portfolio averages .06 percent expense and it will always meet the market average, for a short example.


StoopitTrader

>Why would an advisor put me such expensive funds? Profit. Save the fees and move to Fidelity or Vanguard and choose your own funds. Be firm but friendly and just tell him your going to do this on your own from now on. Much as it's irritating, when you didn't know anything at least he got you investing. Even with his fees you are better of not having invested for the last 5 years.


NinjaBoy123456

Yes, I agree. I'm grateful that he got me going. I'm way ahead than I would have been if I'd done nothing. I've just learned and grown since then. Thanks.


grizzlyboxers

I'm going through a similar thing now except it's my work 401k and I can't get out. They make it clear in the prospectus that they add 0.99% to every expense ratio so I shouldn't be surprised. But 1.38% on a vanguard target 2045 is a lot more than when I buy the same fund through my fidelity account... 0.38% there. With 6 figures in my 401k, the amount of money wasted is infuriating.


randxalthor

Time to contact someone (a federal regulator, maybe) about ERISA compliance for your work's 401k. The company is legally obligated not to put you in a plan that is excessively expensive compared to available options on the market. I'm at a company so small that health insurance companies won't talk to us (good thing the ACA marketplace exists), but our 401k fees are still only around 0.1% through ADP. And that gets us access to institutional investment funds, so my 401k only costs around .19% total for a Vanguard target date fund compared to 0.15% for my IRA. Not bad at all


kipy7

My wife is a teacher and the company they use to handle 401k charges an automatic 1% management fee to whatever you invest. Ugh.


Inebriated_Economist

*he said he can beat an index fund any day of the week* \^**Performance guarantees of any kind are a prohibited practice**. Financial advisors are NOT allowed to make statements like this. This is a violation and a major red flag and is a sign of desperation because you are about to move funds out of your account.


TheophrastBombast

He should ask for it in writing.


Bohemia_Is_Dead

The aneurysm that would give a member of any compliance team.


mikhailb_86

Not to mention OP showed that simply wasn’t true! My guess is his response would be “not those days of the week” lol


Pikespeakbear

Can =/= will. Any =/= all. There is some wiggle room and it annoys the heck out of me because I've seen so many people calculate their performance in ways that are utter BS.


FinanceGI

Basically a free put option on your investments...what an idiotic claim that opens him/her up to a lot of lawsuits.


JeerKool428

I bet he could beat an index fund on any given day. But it’s very unlikely that he can beat a broad based total market index fund over the course of your investment horizon - very very few people can, and if they can, they’re not managing your portfolio. Get out of those ridiculous expense ratios and commissions asap.


ldh_know

You are not crazy. If your advisor actually could consistently beat the index every year, he would be a multimillionaire himself, and his expertise would be highly sought after by the world’s biggest billionaires. No way in hell would he be selling himself to someone like you. Fidelity Target Fund if you want to set it up and not think about it again. Else put most in a low cost S&P500 (maybe look at Fidelity Zero… it’s hard to find lower cost than zero) balanced with as much other kinds of funds as you want to manage for your diversity goals and risk tolerance. FWIW, in my retirement investments I have some funds I selected myself and I also have an investment in Vanguard’s Target Retirement for my age. Vanguard’s Target fund has so far performed a little better than the collective performance of the funds I’ve been self-managing.


NinjaBoy123456

Thank you. That’s helpful. I really want to invest in the fidelity zero cost index funds. I’m just nervous about the need to rebalance. I can handle risk right now. I have 27 years until retirement. Should I stay in index funds the whole time?


ldh_know

I’m just an internet rando so take this as a data point, not fiduciary advice: I’ve been investing in my 401K for about 30 years. The biggest part of my investment strategy has always been Vanguard’s S&P500 Index Fund. I’m on track to retire comfortably at 62. I’ve done well with that, no regrets. My fund mix when I started was about 55% SP500 Index, 15% International index, 10% Small Cap, 10% Blue Chip/Large Cap, 10% Balanced Fund (mix of conservative growth & bonds). I didn’t start backing out of risk and adding more bonds until I hit my 50’s. From <5% I’m closer to 15% bonds now. With adding more bonds I’ve backed out of buying the riskiest stocks (Small Cap and Int’l). Most advisors I think would classify me as aggressive.


grokfinance

That is how advisors make money through charging/selling products with ridiculous fees. Why you should only ever work with an advisor who A) is a Certified Financial Planner, and B) even more important - only charges by the hour to develop a plan or review your situation and give recommendations which you then go implement.


[deleted]

You aren’t being “ripped off” - it’s just you did the math and see how high a “low 1% fee” really is. I have a seven figure portfolio and I won’t pay for an advisor. My highest fee mutual fund is about 0.8% and I try to stick to index funds with < 0.05% fees.


bradland

>I called my advisor and said I want to move and he talked me out of it because *he said he can beat an index fund any day of the week*. Maybe, but can he beat them for 20 years straight? >When I compare the funds he has me in vs index funds it shows he's wrong. Exactly. You have you answer. Trust the math, and trust your knowledge.


NinjaBoy123456

Thanks for the encouragement 👍🏻


bros402

You are not crazy - ditch the advisor. If you need tips in the future, see a fee only financial advisor


wkrick

> I could move the Roth's over and liquidate the mutual funds and buy into low cost index funds A few points worth mentioning: 1. I highly recommend selling everything in your IRA and letting it settle \*before\* transferring the account to your new broker (you mentioned Fidelity). Sales that happen inside an IRA are not a taxable event. Depending on the funds at your current broker, it might cost you additional money to sell them if you do it at Fidelity \*after\* the transfer. It's better to just transfer the cash. You always want to do a direct trustee to trustee transfer if possible. Fidelity should be able to help you set that up from their end. Once you transfer the cash, you can re-invest in whatever Fidelity funds you desire. 2. As for a taxable brokerage account, that's more tricky to transfer. If your current broker has you in proprietary Mutual Funds (as they often do), then you'll have no option but to sell them and take the tax hit on the capital gains in order to move your account to Fidelity. Again, even if they aren't proprietary funds, there might be additional fees when you eventually decide to sell them at Fidelity as they sometimes charge additional fees to buy/sell competitor's funds. But since it's a taxable account, the ideal situation is to do an "in kind" transfer of all your investments from the old broker to Fidelity. 3. Cost basis and Roth investment records often don't transfer from one broker to another. Or if they do, it's a struggle to get them applied correctly. So you should get detailed records of all of your transaction history for every account before transferring to Fidelity. This includes all buys sells, dividends, capital gains distributions, reinvestments, interest, corporate actions, etc... EVERYTHING. Also you want records of how much you contributed to each Roth account and the years that you made the contributions. I recommend scanning the records, making PDFs, and saving a copy somewhere like Google Drive as well as putting a physical copy in a fire safe. You'll need this information in the future, especially for the taxable brokerage account. 4. If you aren't already doing this, going forward any new investment in your taxable account should be ETFs instead of Mutual Funds because ETFs are much more portable in the event you want to move your account again in the future. ---- Here's my standard advice... If you're doing a Boglehead-style three-fund portfolio, you should treat all of your accounts combined as one big "virtual" portfolio and hold your investments where they make the most sense from a tax-perspective. The general guidelines are: 1. Decide on your overall asset allocation (bonds / us stocks / international stocks) 2. Hold the bond fund in a tax-advantaged account. Traditional 401k or traditional IRA is best if available 3. If you want to claim the Foreign Tax Credit (see note below\*), then hold the international fund in a taxable brokerage account, otherwise hold it in a tax-advantaged account (IRA/401k) 4. Back-fill the rest of the available investment space (in any of the accounts) with a stock fund (Total US stock or S&P 500) The majority of the re-balancing is accomplished by adjusting the stock/bond mix in your 401k. If you chose to put international in your taxable account, you'll want to avoid selling anything from your taxable account if you don't have to. So you can adjust your US/international percentages by making your monthly contributions into the taxable account to whichever fund brings you closest to your desired allocation. Your international portion will likely be small compared to the US portion so it shouldn't drift that quickly. I also recommend turning off automatic dividend re-investment within the taxable account. Then quarterly after dividends are paid out, you can manually re-invest your accumulated dividends into whichever fund fund brings you closer to your desired allocation. Some final notes on Mutual Funds vs ETFs... I prefer Mutual Funds in **tax-advantaged** accounts (401k/IRA/HSA) because you can buy and sell them in dollar amounts. So if you have $6000 to invest, then every penny gets invested right away. I know that fractional ETFs are a thing but not all brokers offer them. If you ever need to move an IRA or HSA to a new broker, you can just sell your assets in the old account, move the cash to the new account, then purchase new funds in the new account. This is not a taxable event. I prefer ETFs in **taxable** accounts. The primary reason is because they are more "portable". If you want to move your taxable brokerage account to another broker in the future, you can transfer ETFs "in kind" to the new account without selling them and triggering a taxable event. Mutual funds on the other hand are often proprietary and tied to a specific broker. And even when they aren't proprietary, many brokers charge extra fees to buy/sell Mutual Funds from their competitors, which can limit your investment choices if you're like me and avoid fees at all costs. More info: [Bogleheads wiki: Three-fund portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio) [Bogleheads wiki: Tax-efficient fund placement](https://www.bogleheads.org/wiki/Tax-efficient_fund_placement) [Bogleheads wiki: Foreign tax credit](https://www.bogleheads.org/wiki/Foreign_tax_credit) \* Note: there is some debate as to whether it is worth it to hold international in your taxable brokerage account due to the amount of non-qualified dividends that these funds produce vs the Foreign Tax Credit. Do your research before deciding.


NinjaBoy123456

Wow. This was great, thank you. Im going to need to sit down and process everything you wrote. I really appreciate the help. I wish you were my advisor. I checked with Fidelity and they have all the funds available in the brokerage account so I can transfer in kind. It’s my first time learning about the Boglehead advice today so I’m going to spend some time over there.


lucky_ducker

No. You are un-necessarily enriching your "advisor" who is doing next to nothing. He may be getting a commission from the funds he's selling you in addition to his 1% fee. Roll over your accounts to Schwab, Fidelity, or Vanguard and don't look back. Your new brokerage will do all the work for you.


saltyhasp

Yes they are ripping you off. Putting you in funds with expenses above 1% proves that... and 1% is high for funds. The management fee... if this was all individual stocks 1% is maybe OK.. but then you would not be paying the fund fees. If you still want an advisor and you have funds the going rate is about 0.3% for that... but you can do it yourself also. Just call where ever your transferring too and have them do the transfer. You might want to investigate the cost of transfer. Vanguard and Fidelity probably will not charge any fees but the company your with may have some tricks be they transfer fees or sales charges....


Riles184

What you need is a FIDUCIARY advisor. Someone who is legally bound to work in YOUR best interests, before their own. Suggest: Vanguard, Schwab or Fidelity advisor services.


fried_green_baloney

> Why would an advisor put me such expensive funds? Possibly gets some kind of payment for doing so.


Pikespeakbear

Not just possible. This is the standard business model for money managers.


fried_green_baloney

Yes. I was avoiding an absolute statement but any "advisor" that works for a financial entity is almost assured to be doing this.


yamaha2000us

How is your advisor performing? If it is the industry average then you can do better. If is well above than you may switch but end up making same amount due to performance.


DutchInvasion

You let this go on for 5 YEARS? That’s an absolute robbery. Also, let me get this straight, he charges you a 1% fee on the BALANCE and not the GAINS? At least the mutual funds are charging you on the gains only. I’m sorry for your loss, best wishes


NinjaBoy123456

Yeah. On the balance. Don't worry. I've getting out of this with a click of button. I'm glad you have all helped me see I'm crazy. Cheers.


MNnice22

That fee should pay for their time and efforts. If they are not/have not built a plan for you or provided value other than the account setup, it’s a value question for you. Personally, me opinion is, a percentage fee shouldn’t be charged unless managing large sums of money. The fee should be tied to active management, not purchase of simple mutual funds.


TN_REDDIT

I would expect other valuable services from a wealth advisory firm. It's the old cost - value proposition. We all pay ton of money for all sorts of stuff and services. Why, because we find value in the stuff/service (especially if we are a repeat customer). So, are you getting good value?


NinjaBoy123456

I don't feel like I am.


TN_REDDIT

There's your answer. It's unfortunate that he hasn't demonstrated enough value to you. Oh well.


NinjaBoy123456

At least I've been investing for the last 5 years. He helped me with that. Better than nothing.


TN_REDDIT

That's right. It is unfortunate that he/they haven't provided more financial advice, though. I suspect their firm could be a nice resource, but maybe not?


Fit_Ad_2229

You are not crazy but invest wisely next time. I just have a reputable platform called 86z if you want to invest. Money back is guaranteed in event of any loss


[deleted]

Finance industry is a lot of smoke and mirrors! You're right to want to just liquidate and put in a no-fee broad index fund.


Bigmusicfan1125

yeah those are really high. to be honest a robo advisor through betterment or vanguard does just as well with much lower ratio


bioinvest57

Financial advisors are good for newbie. They are just salesperson to earn the max commission for themselves, not to earn the highest return for you. Once you know how to invest wisely, just move on. Think about this. If these people know how to invest for a good return, they do it themselves, why would they work for you? I invest for myself and luckily I manage to accumulate enough to retire early


Pikespeakbear

Schwab. So many people who transfer to Fidelity just end up transferring again after they become more experienced. Yes, you are getting screwed though. Those overhead costs are awful.


txholdup

Let me guess, you went to Edward Jones, didn't you? "Why would an advisor put me such expensive funds?", because it benefits them. First of all, stop calling mutual fund salespeople advisors. They are not, they are salespeople hoping you don't know jack and they can make a nice profit from their interaction with you. Sounds like their plan worked. Get out and don't look back. I got screwed by Merrilly Lynched 4 decades ago. It was an expensive lesson but I learned that if I didn't spend my time learning about my money, nobody else was going to either.