Should I keep my financial advisor?

FM117 wrote:

Good advisers will earn their fees. I'd talk to the guy and tell him your not

happy, ask him to give you a plan to what he wants to do to increase your return.

Maybe give him a year or so and see how it goes.

Some of advisers do NOTHING.....just take their fees and act concerned when

you talk with them. If he's not contacting you about every few months it

might be time to shop around.

There are good ones out there..... and like anything else, some just suck at what

they do.

This is wrong. 80% of passive index funds beat actively funds. Why pay a advisor on top of that? You can invest in a wife array of Vanguard funds for as little as 0.02% annual fees. No front load - no back loads. Why do you need an advisor sucking $5,000 from your portfolio when you can do better for nothing?

Danny Bandana wrote:

Well my plan was to move it over to an account that I manage and put it all in index funds and bonds.

Well, if you already have an account that you manage, I guess it won't be any extra work.

Nice screen name, by the way.

Most financial advisors are just salesmen. They put every client in the same handful of stock and bond funds, and take their 1% off the top every year and sit back as the pot gets bigger. They may have more experience and knowledge of tax advantages but their job is to keep you invested, not lose principal but not beat the market. Your advisor has no special talents. He just sells to clients what his company tell him to.

You certainly can do it all yourself with some low cost index funds and compounded, that 1% adds up. As previous posters mentioned, you're going to want to avoid necessarily trading it as that's what is going to get you in trouble and where passive funds tend to outperform.

Danny Bandana wrote:

Well my plan was to move it over to an account that I manage and put it all in index funds and bonds. Probably about 70% US index fund, 20 International Index Fun d and 10% Bonds and just let it go with the market.

It just seems like to be $5,000 a year is a lot to pay when I can just sit it and forget it.

Plus I could actually use that $5,000 each year to donate around my community instead.

I live in a small Midwestern town.

You are spot on with what to do with the money.

Ditch the finance guy. He's not adding any value now that you've read up on finances.

Invest 100% into an S&P500 index fund (VOO or SPY at like a 0.05% fee)

Adjust 80/20 stocks/bonds or 70/30 as you get closer to retirement, say 10 years out.

S&P 500 is the gold standard of what to beat when investing... since hardly anyone beats it, why not just invest in it?

Full disclosure, I have about the same amount as you across a few 401ks and trading accounts.

It's 100% in S&P500 index funds. 8 years to retirement.

You beat me to the punch in recommending Bogles Little Book on Common Sense Investing. That book was an eye opener. I become angry thinking about all the fees I paid out. One quarter my fees were within a few dollars of my gain. Fees are constant

To the original Poster: do you want to pay at least $50,000.00 in the next decade and still underperform the market? Besides fees you are most likely paying additional capital gain taxes due to trading in the funds. Invest in Index funds and Bogles book.

I talked to my advisor yesterday and started the transfer of the account to my Fidelity. He actually helped me do it so I wouldn't have to have Capital Gains Tax on it.

I still have an Annuity and a Roll-Over IRA with him so I didn't cut him completely out.

I feel like that is the best case scenario since I still get to work with him but I get to grow the other part of my portfolio by myself.

Good job

X-Runner wrote:

It may be more trouble than you think to switch over and maintain and you would damage this relationship.

If you think you'd be OK and don't care about the family friendship, then move on.

Right now, it's something you don't have to think about.

This is a business relationship. If you cannot have a friendship with this person after ending the business relationship, then you do not have a friendship now.

We actually had a great talk and he understood exactly where I was coming from.

He told me, "well you didn't think I was just gonna let you go without a fight did you?"

He tried to justify the fees to me, but I explained to him that I actually wanted the responsibility of running the account and I actually enjoyed it.

It all worked out very well I think.

If your time horizon is 20+ years, ditch the adviser, toss it in a simple three-fund portfolio with Vanguard, re-balance once a year, and otherwise forget about it. Just saved you $5k/yr. You're welcome.

https://www.bogleheads.org/wiki/Three-fund_portfolio

Good question - I wondered the same for years. So I put it to the test - had an adviser manage 1/3rd of my portfolio for 18 months. I averaged a 13% return with my 65/35 equities to bonds portfolio while he managed only 4.5% after fees.

He made numerous trades throughout the period for reasons I can't understand and he fumbled while explaining.

I stick with low cost ETF's and Investment Grade Bond funds - also some short and long term bond funds.

Good luck

Dude, you should drop that adviser like a hot potato RIGHT NOW! If your "long time family friend" is offended because you want to do with your money what you want to do with it, then he's no friend. You don't owe him any business.

I hope you are investing in addition to this inherited money. Vanguard Index funds OR split it up into a bunch of other Vanguard funds, OR use Fidelity OR both. I have investments with Vanguard AND Fidelity and would not consider putting my money anywhere else.

Going forward, you should:

1) Let that inherited money sit and not touch it for 20 years as you have planned.

2) Take your income from your "good job" and make sure to be investing at least 15% of that into retirement accounts at Vanguard and/or Fidelity.

3) Plan to be 100% debt free by the time you retire including EITHER a paid-for house or money set aside specifically for housing that will last the rest of your life.

Good luck.

It is coming in 80/20 with the following vanguard funds.

Should I even mess with changing anything?

I don't want to sell anything and have to pay Capital Gains on anyting

Stock Side

VANGUARD FTSE DEVELOPED MARKET ETF

VANGUARD INDEX FUNDS S&P 500 ETF USD

VANGUARD INDEX TR VANGUARD EXTENDED

VANGUARD INTL EQUITY INDEX FUND INC FTSE

Bonds Side

VANGUARD BD INDEX FD INC INTERMEDIATE

VANGUARD BD INDEX FD INC LONG TERM BD

VANGUARD BD INDEX FD INC SHORT TERM BD

VANGUARD CHARLOTTE TOTAL INTL BD INDEX

VANGUARD SCOTTSDALE FDS VANGUARD

Danny Bandana wrote:

It is coming in 80/20 with the following vanguard funds.

Should I even mess with changing anything?

I don't want to sell anything and have to pay Capital Gains on anyting

Stock Side

VANGUARD FTSE DEVELOPED MARKET ETF

VANGUARD INDEX FUNDS S&P 500 ETF USD

VANGUARD INDEX TR VANGUARD EXTENDED

VANGUARD INTL EQUITY INDEX FUND INC FTSE

Bonds Side

VANGUARD BD INDEX FD INC INTERMEDIATE

VANGUARD BD INDEX FD INC LONG TERM BD

VANGUARD BD INDEX FD INC SHORT TERM BD

VANGUARD CHARLOTTE TOTAL INTL BD INDEX

VANGUARD SCOTTSDALE FDS VANGUARD

I'm not a fan of bonds ever, but especially not for someone 20 years away from wanting the money. I agree that you don't want to do anything that would make you have to pay anything now. If you want to keep those bonds, then fine. I recommend going very aggressive with any investing you do with your income...stocks only, mostly in growth or aggressive growth-type stocks...since you have some conservatism already with those bonds.

I knew you had an annuity with that family friend of yours (you mentioned he had a insurance company). He loves it that you kept that with him. For most people, annuities are crap investments. The only way I would ever stomach someone having an annuity is if they had a TON of money and were using one to more easily pass on money when they die. Other than that (and even there, I would do it differently), the ones who make money on annuities are the ones who sell them.

Honestly though, if you don't want to rock the boat and want to keep that annuity, you can...it just won't do much for you.

The $500,000 alone getting just 7% annual return over 20 years will turn into $1,808,263.76. Not bad for something you just inherited. You really should be investing from your income too. If you can do just $10,000 a year, that will bring you another right on about $400,000 in 10 years at 7% return (and you might do better than that).

So, assuming you had no other money to begin with, that leaves you with about $2.2 million in 20 years. Using the 4% withdrawal rule, you can take $88,000 in your first year. Assuming you also have Social Security available to you, you will easily be up over $100,000 per year in retirement. That's not a TON of money, but if you have NO DEBT including a paid-for house by then and hopefully no dependent children living with you, you can live a decent life with no financial worries.

Thanks for the great reply Flagpole.

Actually we are in pretty good shape.

I put $12,000 a year in Roth IRAs for my wife and I.

We have another IRA from my parents in the low 6 digits that we take the mandatory distribution on each year.

The Annuity.

We will both get pensions as public school employees when we retire.

We both have smaller 403b plans.

He have a HSA.

I switched my normal banking to a higher interest online saving and checking where I keep our 6 month emergency fund.

Finally we don't have any debt with house and cars paid for.

We are just very thrifty and I hate seeing any money "go to waste" so I always want to make sure my plan makes sense. We have a 2 year old and are both in our mid 30s.

All that wasn't inherited but it helped us get on the right track.

how old are you again? Why not go 100% into equity? I don't really understand taking a 80-20 split in a bull market like this. Either go all in or truly diversify down to 60/40. If you're going to go 80/20 I think 80% equity 20% gold is a better diversification play.

I might try to move to a straight S&P 500 index fund but I also don't want to pay a bunch of capital gains tax for redoing my portfolio.

real talk wrote:

X-Runner wrote:

It may be more trouble than you think to switch over and maintain and you would damage this relationship.

If you think you'd be OK and don't care about the family friendship, then move on.

Right now, it's something you don't have to think about.

This is a business relationship. If you cannot have a friendship with this person after ending the business relationship, then you do not have a friendship now.

This was an inheritance, not money earned through a business.

My initial response was based on the little information from the start, before he said he was already managing other money.

He asked "is there any reason to consider staying with him?"

So I gave a possible reason.

It all worked out.