It is so good to hear (again) that people’s experiences with Vanguard FAs have been positive and helpful. We are about to set one up, and I have a deep-seated mistrust of financial advisors from some horrible ones my mother used, so it is calming my fears to know that at least we are looking in the right place for what we need.
@profparent, as you might have gathered, I’m a big fan of Vanguard. That said, I want to add one caveat: Vanguard has undergone tremendous growth in # of clients and AUM, so sometimes you might be getting customer service from someone who is new to the company. I don’t think that’s as much of a problem with FAs as it is with people answering the phones.
If the service isn’t good, inexperience is most likely the cause, and you can request that someone else help you out (or be patient). The one thing I believe that I can guarantee is that they aren’t confused about whose interests they have to put first, and they’re acting in your best interests as they perceive them.
I’m not a cheerleader for many companies (Tesla and Zappos come to mind), but Vanguard’s structure means that you, rather than shareholders, are their focus.
@IxnayBob, we currently have some assets in a Wells Fargo brokerage account. I’ve been thinking of moving to Vanguard but my spouse is concerned that Vanguard might put all the assets into Vanguard funds. If that were to happen, H’s fear is that in the event of things going south we’d be potentially hit twice, once through the adviser and again through the tanking fund . Could you comment? @Dstark amd others, would love your thoughts also.
If your assets are put into a low cost index fund, it doesn’t really matter whether it’s Fidelity Spartan or low cost from Vanguard or any other company. It seeks to mimic the index it’s modeling after. The big thing is the annual fees and if there is a LOAD, where you are charged to invest or divest with the fund. The load means you are paying extra for the privilege of putting your money in the fund–either when you start out or when you take your money out (or maybe even both). Annual fees can really add up, even though they may sound small at 1%–especially since they are taken out whether you make or lose money and are on top of commissions and other fees charged by any funds or investments.
@hayden, what are the assets? Are you talking individual stocks? Are you talking mutual funds? Etfs? Bond funds?
You aren’t paying any fees at Wells Fargo?
Why do you want to shift to Vanguard?
Vanguard won’t “put all the assets” anywhere without your instructions to do so. If you like where your assets are invested, but don’t like WF, you might be able to move them “in kind,” depending.
My personal belief is that a limited number of funds (eg, 3 or 4) works best for most people. Vanguard is not immune to a market going south, but they add on very little additional expense. In taxable, I use Total Stock (a very broadly diversified fund of US equities) and munis. In tax-advantaged, I use Total Stock and Total Bond (mostly high credit quality bonds). All of the funds track their underlying asset class pretty closely, but if the equity market goes down, well, so will Total Stock, but it won’t be dragged down much more than the market (0.05% more) or be hammered by an active fund manager’s bad judgment. IMO, getting market returns without additional friction is the best that most people can expect to get, and Vanguard funds serve their interests well.
The biggest question to answer is what a reasonable asset allocation is for you. It should be based on your ability, need, and appetite to take on risk. If you’re tempted to sell during a market downturn, you have too high an equity allocation. It’s a bit fuzzy in our situation (eg, do I count DW’s cash pension, vested but not received?), but our target allocation is 50/50 equity/bonds.
We have had Skype conferences with a Vanguard advisor. He has been there for a very long time, not the first person answering phones. He looked at all of our assets (we gave him the figures and approx asset allocation for things not held at Vanguard) and then he made recommendations for moving us to a 50/50 stock/bond ratio. DH recently retired and was required to roll his 401k out of the co. plan within 30 days. Advisor proposed moving into 4 index funds (domestic stock, international stock, domestic bonds, international bonds). He had sent a multi-page document via email before, so we had everything in front of us as we skyped. No pressure, no sales pitch. He was very knowledgable about tax implications although he did qualify that he wasn’t a tax advisor.
The funds he was recommending are all the same ones and % distributions as in their target retirement 2015 fund. We could have shaved a tiny tiny fraction off the costs by handling them individually but decided to KISS (keep it simple, Stupid), and went with the all in one of the Target Retirement fund. We are moving our other Vanguard accounts into this over time as well.
The bigger decision is how many of our eggs to put into Vanguard’s basket.
OK - between last week and Friday, we got answers and are up to date from our FA, Don. I still have some work to do on my end, but we are satisfied with the answers.
When we first started with Don, Trust Co of America was the custodian, and Horter was the Registered Investment Adviser (RIA). Our statements (and on-line access) came from both. Don was always looking to lower fees and obtain better services. Then moved to Custodian Fidelity and RIA Precision Capital, with lower fees (.5% less) - again statements and on-line access from Fidelity. Now we are moving to Don’s group being the RIA (he has gotten large enough with clients to make this move), with another drop in fees (dropping another.45%). Don has been always working to get the on-line tools that would integrate all the client’s accounts and also have other capabilities. Now he is getting that built with Wealth Access out of Atlanta, so he (and we) will have better on-line capabilities.
Don is a Fiduciary, so the SEC directly regulates him (no buffer) - and he has license 66 and license 7 in AL which is how he is regulated. Non-fiduciaries are regulated by SEC through Federal Individual National Reg Assoc (FINRA), which is the buffer/oversees the brokerage which then has the individual brokers. Don can be a broker and a RIA. The SEC (which is overseen with state regulations/regulators, licensing etc) - and evidently our state, AL, is very strict on regulations and the AL SEC monitors well. Don was routinely audited starting in 2012 and ended in 2014. He has never had a complaint with state regulatory/SEC nor been found deficient. The audit information (which had a 'Show Cause Order:on-line) had inaccurate information relating to Non-Traded REIT transactions. He is not currently trading with those products. The Commission staff calculated the investor’s percentage of liquid net worth, but they had inaccurate information (net worth restriction, 10% of liquid net worth ratio). The transactions were suitable.
Don’s fee to us is 1% charged annually but is billed on a quarterly cycle (staying more accurate) which equates to .083% per month. SEC by state also regulates FA fees. He has had an office in our mid-sized town for 15 years, and I do know one of his long time clients - and they have been pleased with him. The annuity products, he earned his fees with us purchasing those products and are not part of our direct fees.
Don has two other partners - the partner Charlie has CEP (estate planning) designation and is working towards CFP. Don was working towards CFP, but during the market tanking in 2008/2009 timeframe, his clients only lost 2% of their portfolio value, while the market was down 38%; there were 30 area financial advisers (including 4 CFP) that had heavy client losses, including one CFP whose clients lost 45% portfolio value. A seasoned/older CFP advised Don that Don had the knowledge; with his young family (4 kids) he was better spending non-office time with family instead of getting the CFP designation.
Managing our finances includes income, investments, taxes, and risk. Don “works with pre-retired, retired, and conservative investors. Specialize in wealth management, investing, financial and retirement planning, insurance strategies and social security planning. All portfolios are designed for those who appreciate conservative and secure investments and who want to reduce risk of moving backwards financially. We work with individuals who are searching for alternatives to the traditional buy and hold strategy that left invests at a deficit over recent years.”
With our reduced risk, we are SWAN (sleep well at night). We do not have pensions - I think investing is much different for those with a pension, as they can risk more with their other retirement assets. It may be that some on this thread can manage their portfolios exactly the way they want with really low trading fees. Don said if he wasn’t using Fidelity, TDAmeritrade has more going for it than Schwab (he sees Schwab as technically not as good).
We have no reason to move any more 401k money over to Don at this point, although we can at any time now that H is over 59.5. More of our assets are there.
Ed Slott’s tax advisors were on a retainer paid by Don (he had also gone through their training, more than the initial conference), until one client situation Don knew about (from another FA) had Ed Slott’s team stumped - so now he uses tax adviser Denise Appleby (she runs her company in Atlanta) - pays her a retainer, so tax questions involving clients can be best resolved. The client’s case involved some funds in Vanguard IRA, and Vanguard wanted to handle something “it is our policy” but when Denise Appleby pointed out the tax consequences, was able to get Vanguard to ac-quest in the client’s favor. He also talked about another qualified domestic rollover case that dealt with a divorce situation and went back 4 years - also something that Appleby was able to utilize the tax laws to client favor. Our tax considerations may not be complicated, but it is good to know we are getting very good advising. Same with SS and how it affects us.
My sister in Iowa (H is older, she turned 62 in Dec) - I don’t think her FA understood how she can properly utilize SS to her benefit. I told her to call SS directly - she may have to wait a long time to get a hold of a person in queue, but she plans to do so.
The Allianz products for our IRA is a conservative income tool. So based on tax laws having us begin minimum payments at age 70, we are 11 years away from that.
The Nationwide product we added is a growth tool, and also reduced our risk. Thru 12/31/14 (the end of last year info wasn’t generated by Nationwide yet or made available) the historical rate of our product was 5.53% - we are in the JPMorgan Mozaic Strategy A, initial strategy term 3 years, initial equity indexed allocation 140%, and initial strategy spread of 1.2%. Over the last few months being in this product, our balanced allocation value is up 4%, while the stock market over that same period was down 6%. With 140% equity index allocation, return is 7.742%, but generally expect 4 - 5%. iShareCore AUS (AGG) yield over that time, 2.27% “Best” w/o fee consideration. We were very glad to get into this product as an alternative to the bond fund in H’s 401k.
The Allianz 360 Annuity product we have has now been altered (the product we have is not available at our terms), but it has an internal 10% annual increase (interest rate credited to our accumulation value). The current product maybe has an internal 7% annual increase. With annual decision, we decide what point to point (we started S & P 500 index, but now are 50-50 with S & P 500 index and Barclays US Dynamic Balance Index), or can also decide monthly average, monthly sum, and fixed interest. Cash surrender value and death benefit value (if death before annuity payments start).
When it does come time to draw off our assets during retirement, I look forward to being smart about it. We also own some “whole life” type insurance, Northwestern Mutual Life, so have cash value in that which we could also borrow off of in our retirement years.
Thanks for the questions and concerns on our FA situation. H and I did fail to question more, however at each step of the way, we have been learning. In the car going back to work, H shared with me that he didn’t follow our meeting with Don yesterday (however H was sick with URI too, almost didn’t go to work).
On the real estate note, owning real estate in a smallish town or more rural area perhaps may not appreciate well and also be hard to sell. Friend is trying to sell her parents’ home in more rural NY - ouch on the taxes and has been on the market way too long.
If one of my siblings stayed in our home town, we would have kept very well built apt building that parents owned (dad’s construction company built). Brother had added some more garages so that each unit had a garage in the event that we wanted to sell them as condos (the town homes on the two ends of the larger building had double car garage). When brother decided to move and no-one in near vicinity to manage, we did sell - but not at full appraised value. Still got a good return. Had those been in a larger city (the state capitol and state flagship school, 50 miles away) our profits would have been bigger and appraisal and sale at a lot more.
Parents’ home was across the street from the golf course. Had the house been on the golf course, immediate sale at full price. A nice family purchased at a good value.
In our mid-sized town, builders keep building new homes further and further out. So although we have convenience of location, always competing against the new stuff. We are on the high end of 4BR 3 BA, so I believe we need a big spruce up, take advantage of sq footage we didn’t utilize - when we need new A/C - heat units get sized and have architect design the new spaces. We had this home custom, and going to 5BR 4 BA in our market will have us get our $$ out and a profit too. That will give us flexibility to downsize here (there are some very nice spots of land with the land/location being the selling feature). That way, if we decide to own a place in the north, or have a 5th wheel, or rent a few months in the north over summer, it would work out with us not having so much tied in our home.
SOSConcern,
Yes. Pensions make a very big difference regarding financial planning. We have to be able to SWAN if at all possible.
I think the fees are way to high.
At some point, talking to a non commisioned FA who charges by the hour, Might help you.
If an index returns 4 percent a year, and there are fees or costs of 1 to 3 percent a year, you are going to make 1 to 3 percent a year.
I hate the stock market volatility. Hate it. So…I accept lower potential returns and invest less in stocks. I know I am going to make less money. I know this. I am going to have less downside. I am still going to have some downside.
There are tradeoffs. I asked you if you were ok making 1 to 3 percent a year. If you are, that’s great. With interest rates at the levels they are…the opportunity costs aren’t that high. You aren’t missing out too much.
@SOSConcern , good luck. Don sounds like an excellent salesman, the kind I would run from as fast as possible. I hope you and your husband continue to earn and save more every year, and that whatever products Don has you in perform well enough so that you have not just security but some luxury in retirement. In the meantime, it’s good to hear that you also have a 401K.
“I think investing is much different for those with a pension” - So true. Early in my career I was headed toward an annuity pension, but my company switched to a cash accumulation plan for younger employees. Still very glad to have that. It just adds more burden on investment choices etc. When it gets closer to retirement time, I’ll explore the option for converting it to lifetime monthly payments.
@colorado_mom , I’m older than you, but part of the generation that had that wicked switch to cash accumulation plan pulled on us. Other than being in poor health or having a significant genetic predisposition to a shortened life, I hope neither of which is the case for you, usually taking the annuity is better than taking the lump sum. The nice guy in me believes it has to do with current interest rates and government guidelines; the cynic in me thinks it’s because plan administrators know that, everything else being equal, people have a hankering to get the money now.
@MomofJandL , I saw on Bogleheads that brokerage account 1099-Bs will be provided at the end of February. Since DW’s compliance requires it, we have “mutual fund only” accounts and get ours earlier, an unknown bonus 
Thanks for everyone’s comments on my question regarding WF vs Vangard. Our assets consist of a package of various mutual funds including some bonds. We both have fixed pensions from our employers, so we count those as cash equivalents when we calculate our asset allocation. Currently we are invested about 50/50 equities to fixed income (again, not counting pensions) across our entire portfolio.
We asked the Wells Fargo financial guy how much he amd WF get paid by us. He said 1% fee to him, total. I just doubt that. I could have sworn the FA got 1% amd W F collects fees for managing the actual accounts. Does anyone know? That’s the reason I am pushing my H to switch: I just doubt we got told the truth, amd I don’t want to do business with so one like that. If I’m wrong, though, and the 1% is both accurate amd standard, I’ll stop.
And to rephrase my other question, what are the downsides of investing in Vanguard?
IxnayBob’s comment reminded me that we are somewhat limited in what we can invest in. DH is a regulator and has to do federal disclosures every year (this includes my pension accounts). To keep everything tidy and avoid even more intrusiveness, we stick to mutual funds and stay out of the market sector in which DH works. We hold one company’s stock, which we purchased in the mid-80s and is a rather small amount. I’m sure that company would glad for us to cash out. Other than a reluctance to purchase individuals stocks because of disclosure and unforeseen potential future areas of conflict, the market sector he regulates is for investors far more sophisticated and wealthy than we are.
We have never spoken with a financial advisor, though the reports from Vanguard accountholders here makes me contemplate it a little just to make sure we are OK. I am sure they would say we are not liquid enough – probably 90% of our assets are retirement accounts and the equity in our house.
I worked for many years for a third party pension administration firm and the principal also sold insurance and annuities. I have seen the commission checks roll in – which is why I will NEVER purchase an annuity with our 401(k) or personal savings. The agent and the insurance/annuity company have a back end deal for payment, which doesn’t show up on the annuity document as a payment to the agent. OTOH, that commission comes from the (invisible) adjustments to rates on return, actuarial considerations, etc. Back end commissions can be as high as 6-7% on an annuity purchase. The client will never know about it.
I worked for Vanguard at the beginning of my career. The lack of face-to-face is probably the biggest downside, but it is not something we have missed. That one-on-one comes with a pricetag. We’re happy to take the low fund expenses and let the quants do their thing. We have probably missed many opportunities, but I don’t spend time worrying about it.
DH has heavy fin expertise and I know pensions/IRAs and 401(k) plans. While we are not necessarily expert in the minutiae, we know enough to ask specific, detailed questions and how to get past the sales pitches/marketing materials. SWAN is our thing.
Historically, banks have been terrible for ‘wealth management’.
I hold credit unions in higher esteem than banks just from history and current operations. Our current mortgage (10 year note) was through one of our member credit unions (one that H use to work for) - we got the lowest rate and low closing costs, win,win.
It would be great for someone knowledgeable can compare or at least mention the pros and cons of any that they can comment on : Dreyfus, Fidelity, Vanguard, Prudential, etc and any other sizable Financial Custodian that has Registered Investment Advisers and also when you can trade yourself. Also if knowledgeable about the ins and outs of TD-Ameritrade and Schwab.
I will go back and read the other posts later, but to answer, yes Don is good at sales - but even if we may not have done our best with one product he ‘sold’ us, we are now wiser. And his fees are going down. The aggregate software that is going to go live with his office, and for clients, is going to have his clients more involved and more client transparency, which is good for us - and will have Don and his staff continue to work to our benefit IMHO.
@hayden, the downside of investing at Vanguard, as others see It, is that you won’t have your hand held, you won’t get phone calls reminding you that they appreciate your business, and mostly, you won’t be infantalized. As a customer who would be subsidizing those activities, those are upsides to me.
We have a smaller amount at Fidelity, and while they’re polite, they do check often to see if they can be of any assistance. The one time I needed Fidelity to do something, I went to the store and they put me on the phone to an “expert” (so much for having a brick and mortar presence), and in spite of detailed and explicit instructions, they made a small (non-fatal) error which left ~$1k as a residual balance in accounts I wanted emptied.
I don’t know what fees you pay WF, but my in-laws have a trust that they receive distributions from at WF, and I once tried to figure out their fees. This was a roughly million dollar trust, and WF had them in 23 equities funds, 25 bond funds, and some private REITs. I lost track of the expenses, but the funds had ERs of 1.25% average, might have had sales loads (it was obscured from me), and the overall trust charged 1%. Knowing that no good deed goes unpunished, I stopped at pointing out to my MIL/FIL that they were over-paying, but my wife and I discussed how it bordered on churning and illegal.
Our sole experience with WF was that my SisIL had some IRAs with them when she died. The executor was working with them to transfer those assets to her surviving bros and 2 years after they had been working on this (long after all other financial institutions transferred benefits), they suddenly declared her assets were unclaimed property and would be turned over to the state of CA! We had them transfer immediately. We have never desired any accounts with them since.