Leave Advisor or stay help

Investing
#1

Hello. I am new to learning on taking over my investing. Years ago, I signed up with a local Franklin Templeton advisor. I don’t completely understand the fee portion of his charge. Here is a blurb from one of the advisors in the office.
“The A share that your C shares will convert into have an annual expense of 0.72% annually. Of that we are paid 0.25%. In the C share, you pay 1.12% with 0.65% going to us. Commission is 4.25% up to $100,000. After $100,000, the commission reduces to 3.25%. If you consider the reduction in the internal expenses from 1.12% to 0.72%.”
Can you help me understand this?

  1. Am I paying extremely high fee’s for this account? I really like this fund & would like to keep it & watch it grow but I don’t want to be paying extravagant fee’s.
  2. Is my advisor getting the commission & some annual expense?
  3. If I want out, will I end up paying a lot in taxes just to switch to another?
    Any help or advice is appreciated. Thank you!
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#2

If you don’t know what you’re paying, you’re probably paying too much or being taken advantage of. I’ve been there too. I can’t exactly understand the fee structure that was explained but all of those expense ratios and fees are HUGE. Most Vanguard target date index funds are .15%, and their ETFs are even lower. The fees you currently have are going to destroy your long term growth potential. As far as I know (what I did) is that you can transfer your assets “in-kind” to another brokerage (Vanguard!) and then you can sell or manage there as you see fit. Vanguard also has a robo-advisor offering and a personal advisor service that charges .3% annually if you have $50K or more invested with them. I’d recommend you run from your current advisor and explore your other options at a low-cost brokerage. I’d buy Jeremy’s course that he’s releasing on Thursday to educate yourself on all of these topics so you feel confident managing more of this on your own and keeping more of your own money!

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#3

Thank you for responding. I was young when I started investing with him. I am learning more & that is how I learned about losing this amount of money with an advisor. I didn’t realize I could transfer my assets. I would prefer to transfer my funds. I thought I was going to have to take it out, pay taxes on it just to re-invest somewhere else. I wasn’t sure if it was cheaper to keep where it’s at, don’t add to it anymore & just start new & grow that one.

#4

Yes, in my opinion you’re paying high fees. And I agree, that language is confusing and dizzying. That alone is reason enough to avoid it. They don’t make those super confusing rules to benefit you…

So the A/C shares thing is basically a bulk discount. It’s saying once you get enough money they’re in there they’re gonna start charging you lower fees. But for now I read it as this:

  • Whenever you invest, they take 4.25% of your money and put it in their pocket as a sales commission
  • Every year you are charged another 1.12% of your total amount invested. (0.65% goes to them, the rest goes to the fund manager)

Transferring to a lower fee brokerage should not incur any taxes. (Depends on the type of account… do you know if this is a Roth IRA or just a brokerage account?) They may charge you a fee for leaving, but it will be well worth it to avoid future fees.

It’s not too hard. Go to Vanguard, Fidelity or Schwab. Open an account. Say you want to fund it from an existing account. Go through the steps… you may need to upload a statement or enter your other account number or something. It’s not too fun of a process but you’ll get your money over and can invest more simply and inexpensively! :slight_smile:

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#5

Thank you @Jeremy for giving such a really in-depth response. My husband & I are going to transfer our funds to Vanguard. It is just mutual funds. My IRA is already at Vanguard. I plan on finding my contract & see what it takes to get out of it as well. I am also hoping to convince my parents to follow suit. If it wasn’t for finding your Instagram page, I would have never known this. Thank you!

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#6

Yeah, if you switch funds… i.e. sell your existing funds and buy Vanguard funds you may owe some tax on any “capital gains”. But, that’s tax you’d eventually have to pay anyway (unless the funds lost value, which would be worse). So you should be aware of the tax implication, but avoiding taxes isn’t a good reason to stay in a bad investment. As they say don’t let the tail wag the dog.

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#7

@Jeremy I just wanted to give a little update. I have been going through all my paperwork from the last 12 yrs to get everything together. I calculated how much I have personally invested to what I have made. I am BLOWN AWAY by how much $$$ I have actually made & I am ok with the fact that I started with an advisor because I would have never made this money. I was scared to invest but ok with a savings account. At the time, it was better for me to have the advisor than nothing at all. But now it’s time for me to take over & start growing my money on my own.

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#8

That’s great! Nice to know you’re fairly happy with your investment but you’re going to manage it on your own from here on out. I’m in the same boat, I’ve just transferred my pension in the UK over to Vanguard and invest it myself. My old company had a bad pension but because I still took it out before it was law (it is now as of the last 12 months here the employers has to offer a uk pension) and I only used to contribute £7.5 a week which the company matched. I was there for 6 years nearly, been at my current job for 3 and a half years so haven’t paid anything in for that time and even though it’s not really been doing much and poorly invested it’s worth just over 9k.

Got a statement through last month with all the numbers on which prompted me to transfer it over and completed the transfer to Vanguard this week, now I can grow it myself and probably won’t contribute anymore should be worth a couple of hundred grand by retirement - or at least government retirement age here in uk.

Tom :ok_hand::+1::stuck_out_tongue_winking_eye:

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#9

I want to add on here that after you read a lot of investing books it is easy to get upset at how high advisors fees are! That being said, you are right that it is better to invest with an advisor who has high fees than to never invest at all.

I agree with the above that if you take Jeremy’s course, you will feel confident enough to manage your investments on your own and therefore can start “paying yourself” the fees you were paying to the advisors by moving the money to Vanguard, Fidelity, etc and then pay MUCH lower overall fees.

I was a little scared personally to call my advisor and ask to move the money so I called his office and his admin helped me make the move to Vanguard from Edward Jones. It was painful, however SO SO worth it.

Keep up the great work!