Are traditional investment firms so horrible?

[UDRogue]

Our investment accounts are with one of those big traditional firms and we've been happy with them. Our manager has served us over 30 years and we have a big pile of money he's made for us.

But I keep hearing about how we're doing it all wrong, we should go with a "fee-only" advisor. Apparently we're being screwed by the big firm. The big firms are evil because they are taking commissions and fees, according to the sites I'm reading. One site just flat out said they are all "bad" because they are non-fiduciary.

It's hard for me to feel like we've been had when our net worth keeps going up under this firm. Am I supposed to be upset that it's not going up FASTER? That I'm not "even richer" than I am?

The way I figure, going with the big bad firm is a whole lot better than not investing at all. Maybe going with a fee only advisor and handling your own transactions with a deep discount broker will make you a percent more, but is it really that black and white?

Or did we luck out with a very ethical manager? Our guy took my mom's investment from a guy who really DID screw her over, and he has replenished her funds and then some.

I just feel he's done well by us, but I have anxiety because of everything I'm reading, and wondering if we need to dump him and move all our money over to some other investment under the advice of some new "fee-only" advisor. I wouldn't know how to begin doing that after 30 years with our man. But we might live 30 MORE years and I want to do the right thing.

I feel like I'm only getting one side of the story, and it's telling me I'm doing it wrong. I'm very confused. Can anybody give me any objective perspective on this?

[MakeAStash]

With any advisor you are paying someone lots of money for something you can likely do yourself for much less cost. Had you done it yourself for the past 30 years, the "big pile of money" (to quote your statement) might well be, thanks to the magic of compounding, 2 times as large.

[MonkeyMama]

The costs are absurd. We will retire many years earlier without our portfolio getting dragged down by investment fees.

I have a handful of clients in their 20s/30s who work for the big firms. Their paychecks are seven figures. That maybe gives you some perspective.

If the recommended retirement withdrawal rate is 4% and your investment house expects 1%, that is 1/4 of your retirement income! I think that *really* puts it into perspective. (Except usually you pay 1% + get stuck with lots of loads and high expense ratios, in addition to the 1%)

Of course, statistically the indexes always come out ahead. So paying someone is just throwing money down the drain. & over time, it's a lot of money.

[feh]

It's hard for me to feel like we've been had when our net worth keeps going up under this firm. Am I supposed to be upset that it's not going up FASTER? That I'm not "even richer" than I am?

Yes, you should be.

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[disneysteve]

The costs are absurd.

statistically the indexes always come out ahead

I think these are the two big reasons.

It's great that you've made money but yes, you should be upset that you haven't made more. Costs from the full-service broker have significantly eaten into your potential returns.

[UDRogue]

I don't want emotional things like not facing the fact we may have messed up for 30 years stop me from seeing the light and correcting the error. It would be really hard to leave our guy but I don't think our big pile of money is enough to support our old age if we can't get long term care insurance.

But my husband is not likely to be convinced. I've found one of those fee only advisors and I'm going to get up a meeting. Maybe all I can do is start another fund with my own income. Keep learning and go from here. We still have five more years until retirement.

Thanks for the answers, I'm thinking it's unanimous.

[Petunia 100]

I don't want emotional things like not facing the fact we may have messed up for 30 years stop me from seeing the light and correcting the error. It would be really hard to leave our guy but I don't think our big pile of money is enough to support our old age if we can't get long term care insurance.

But my husband is not likely to be convinced. I've found one of those fee only advisors and I'm going to get up a meeting. Maybe all I can do is start another fund with my own income. Keep learning and go from here. We still have five more years until retirement.

Thanks for the answers, I'm thinking it's unanimous.

Why is it that you feel you need an advisor at all? What sort of advice are you looking for?

[autoxer]

It's hard for me to feel like we've been had when our net worth keeps going up under this firm. Am I supposed to be upset that it's not going up FASTER? That I'm not "even richer" than I am?

Figure out how much it is actually costing you in fees and then you can decide if their service is worth that much money. First check if any of the funds have sales loads, those marketing expense should definitely be avoided. Then take a look at the expense ratio's of your funds and how much $ is being managed. If you have $100,000.00 in a mutual fund with an expense ratio of 0.88%, then it is costing you $880/year in fees, or $73.33/month. If you put $100,000.00 in a fund with an expense ratio of 0.05%, then it would cost you $50/year or $4.17/month. It could be much worse if the adviser is choosing loaded funds, or trading frequently.

[disneysteve]

Figure out how much it is actually costing you in fees and then you can decide if their service is worth that much money. First check if any of the funds have sales loads, those marketing expense should definitely be avoided. Then take a look at the expense ratio's of your funds and how much $ is being managed. If you have $100,000.00 in a mutual fund with an expense ratio of 0.88%, then it is costing you $880/year in fees, or $73.33/month. If you put $100,000.00 in a fund with an expense ratio of 0.05%, then it would cost you $50/year or $4.17/month. It could be much worse if the adviser is choosing loaded funds, or trading frequently.

Agreed. Also, look at trading costs. If the full service broker is charging perhaps $50 per trade, compare that to an online broker where the exact same trade might cost you $5.

[Like2Plan]

I feel like I'm only getting one side of the story, and it's telling me I'm doing it wrong. I'm very confused. Can anybody give me any objective perspective on this?

Here are a couple of links which will help explain...

Frontline: The Retirement Gamble

How Retirement Fees Cost You.

You are doing the right thing by learning and educating yourself.

[UDRogue]

Here are a couple of links which will help explain...

Frontline: The Retirement Gamble

How Retirement Fees Cost You.

You are doing the right thing by learning and educating yourself.

Thanks everyone.

I'm really kicking myself for not doing this decades ago. But in my defense we didn't have the internet back then. It was murkier and I guess we kind of just took our parents advice and went with it.

Petunia, to answer your question, I feel I need an advisor because I don't know what the heck I'm doing, ha ha. But I've been reading and learning and starting to become more comfortable with all of this. It's not as confusing as I thought. Hence, WHY didn't I do this sooner? I just avoided it because it was too confusing and overwhelming.

Right now my husband and I are about on the cusp of retirement. We don't have many more years to plan. I thought we had enough to live on in retirement but now I'm not so sure, so we need to make the most of the rest of our working years.

[scfr]

Look in to whether you could qualify for "enhanced services" at a low-cost firm. For example, if you invest $500K+ with Vanguard you can get a free Financial Plan and consultation with a CFP. https://investor.vanguard.com/what-w...vices/benefits

Like most of the other members on this forum, I like to make my own decisions about my investments, but I don't think using a professional is ALWAYS a bad idea. There are people who just have no interest in learning about or managing their investments and for those folks using a firm like Asset Builder isn't the worst thing in the world.

[Zedon]

I think you have to commit to staying active with your investments, know the basics of investing, and be able to remove your emotions from the equation. If you can't do those things perhaps having someone else help manage your money is not that bad of an idea. I have never had an adviser and it shows in my lack of returns.

[zhetrin]

yeah broker fee as mentioned above can sometimes eat up some portion that you might instead gained. but then again, relationship between your family (your husband in this case) and the broker has been going for 30 years so I can see where his reluctance comes from. It takes a long time to build trust and IMO going as you had planned - setting up separate investment using own income, might pay you better later. Anyway as always mentioned, never put all your eggs in the same basket

[YLTL_Dan]

Thanks everyone.

I'm really kicking myself for not doing this decades ago.

I manage my own investments, but I have a good friend who manages large accounts for individuals at one of the big investment firms. Honestly, he's opened up my eyes to the advantages of using an adviser, and I don't think you should be so hard on yourself. I personally don't use an adviser, but I also studied Finance in college and love managing my own money.

The way he convinced me it's right for some people is two fold. First, if you're not comfortable with investing and you don't want to learn, you're more likely to invest if you have an adviser than if you don't. The second, and most convincing, is the role he plays with people and their money - somewhere between an accountability partner and a counselor. If someone has an adviser, they might be more likely to invest on a regular basis because someone is watching them do it. Also, and this is the big one, he regularly talks people "off the cliff" when the market drops 10% and they want to sell everything. He's able to take a non-emotional view of it all and help people stick with a long term plan - which is much better than people who try to constantly time the market or react to the market... the market preys on the weak and if you are managing money yourself, your more likely to fall into its trap.

You must remember you're coming to a forum where people love managing their own money. Asking the question here is like asking a used car salesman if you should buy a new car