Deciding whether to transfer Roth IRA acct

Investing
#1

Hello Jeremy,
I established a Roth IRA years back w/ a Financial Advisor when I had very little knowledge on the benefits of index funds as opposed to mutual fees with high fees. I am 31now and have roughly 32k in American New Perspective. The break down is 27k in NPFCX, 3.6k in ANWPX, and 1.5K NPFFX respectively.

Over the years, contributions have been allotted into those three different funds for different reasons over time where I paid front load and back load fees which seem little at first glance… I used to contribute money each month but stopped recently and going to redirect to my Vanguard acct instead which i established a couple years ago. For long term efficiency, do you recommend that I transfer the mutual fund acct at Edward Jones now to vanguard ? How can i do a side by side comparison?

Would you recommend i do an “in-kind” transfer to vanguard and then sell my position so i can reinvest those funds in vanguard index funds? I appreciate your insight. Thanks!

#2

Hey @Noret7!

So one of the Principles of PFC is to “minimize fees”. I consider an annual fee of over 0.5% to be “high” and over 1% to be “ugly”. Here’s a look at the annual expense ratios of the funds you’re invested in:

  • NPFCX: 1.51%
  • ANWPX: 0.76%
  • NPFFX: 0.80%

So they’re all in the high to ugly range. It sounds like ON TOP of those annual fees, you’re paying sales loads when you buy and possibly sell the funds. I wouldn’t be all that surprised if you’re also paying monthly or annual account fees on top of that as well. All in all, it sounds like you’re getting burned by some pretty hefty fees that can really erode the value of a portfolio over time.

Here’s a comparison of how NPFCX has done vs VT (a vanguard world stock index fund) over the last 12 years or so:

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So you can see for all those fees, it’s been almost identical to the index fund… except this chart doesn’t show the loads or account fees you’re paying, so you’d actually be well behind. And statistically, the longer you’re paying those fees the more likely the actively managed fund is to trail the index.

So that said, IF IT WERE ME, I’d want to consolidate my accounts into a lower fee index fund situation. But before you do, just make sure you’re comfortable with managing your Vanguard account yourself and aware of what other help the financial advisors have been providing you to make sure you’re willing to go without.

#3

Thanks alot Jeremy!

I have been debating moving these funds for the past two years and never got around to it because of uncertainty about whether i was making the right choice since the fund has had pretty decent returns over the years. With the knowledge i have now about index funds and seeing the side by side comparison, the decision becomes a no brainer. I am comfortable managing the funds on my own because all I am doing is having the money sit but my main thing is making sure its at the right home. I am currently not utilizing any of the other services from the Financial Advisor at this time or in the past few years.

I appreciate you taking the time to respond and providing the comparison. Cheers!