Years ago I inherited a lump sum and in my youth had no idea what to do with it and no interest, so I have had a financial advisor manage it for me. Fast forward to today where I have taken an enthusiastic interest in educating myself and investing (partially with this course for example). However I’m still a casual investor, a layperson. Mostly it just sits in Index funds. I’m already doing that on the side already. What he does, I think I can do (mostly for now).
One part of my plan is to terminate this relationship and save the management fee. And hire a fee only advisor a couple times a year. Yet to compare costs on that.
My primary concern is, if I end the relationship will I be forced to liquidate everything that he manages, and start over?
What is common practice in this situation?
He has done an excellent job overall I’m just trying to squeeze out savings where I can. Of course I could just ask him. But it feels kind of like a marriage break up, it feels personal. So I am just mulling it over right now. As far as the brokerage he is using, it’s not a retail household name, but I believe it is well regarded in the industry. As far as trading costs, I don’t know. Thanks for any input.
The process should be seemless outside of finding out what funds your portfolio is invested in. If you are happy with the investments, and they are low cost, then you should just be able to take over the account and self-manage or transfer the assets in-kind to your brokerage of choice. However, if you’re invested in high-fee mutual funds that you no longer want to hold, you will have to sell and deal with the associated brokerage fees and tax consequences. Only you can decide this, but if managable, you’ll probably save more money long term by biting the bullet now than keeping the high fee investment long term.
I did this myself BTW. If you still like the idea of a low-cost advisor managing your money, I’d recommend Vanguard personal advisor service. They charge .3% annually and invest you in low cost index funds. You could do a free consultation with them and you can ask them your above questions and get their free, fiduciary advice. As far as brokerages, Vanguard is usually at the top of list but their UI leaves something to be desired. I personally self manage my accounts using M1 finance which has some great auto-rebalancing features, kind of like self-managing your own target date index fund but at a fraction of the cost.
Thank you so much this is very helpful. The portfolio right now is highly diversified low cost ETFs. I am satisfied in general though I have not analyzed the portfolio in depth. Like I said, he has done well for me and I trust him. However I might appreciate more education, and mostly it just sits and I assume he watches it if anything comes up. It’s mainly about taking over what is there and saving the management fee, which is 1%. When you compound that yearly… well you get the point. Damage done up until now, but I am now paying attention. Once or twice a year he thinks I should sell this and buy that, and we do that.
Of course the Vanguard name is at the top but why is that so exactly? They have good ETFs and maybe low costs? I would be managing online so UI is important. I have been playing with some investments in eTrade lately, which has been going well, though maybe there are pros and cons I am not aware of.
I have a bookmark to read about the Vanguard advisory services so based on your suggestions I’ll highlight that to look at.
Thanks so much
You don’t need anyone advising you on your investments, there is so much information online these days. Jeremy is a big fan of TDFs, you could pick one close to your retirement age and stick it all in there. Or, if you’re 45 or younger, you could do one better than that and put your investments into a total market index fund. I’m partial to Schwab because not only do they have a full line of investment products, but they also have by far the best customer service of the big 3 firms.
IMO you should divorce yourself from your advisor, and save that 1% fee. That’s going to make a big difference down the road to your bottom line. Then stick your money into SWTSX, Schwabs total market index fund, it has an expense ratio of only .03% You can read up on it here
If you’re in proprietary funds then you’ll need to transfer/rollover them to another company. Call Schwab, they will answer all your questions