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  • Not loving my financial advisor

    Hello. I am a newbie to the WCI forum. I am a PGY-3 orthopedic resident. Due to a relatively slow past several weeks due to covid, I have taken the opportunity to dive into researching and reading personal finance, etc. I have a financial advisor, one of my childhood friends. I cringe as I write this but his firm charges an AUM model and he has tried unsuccessfully to sell me whole life insurance in the past. Honestly, I don't think he was trying to trick me. I do believe he was taught that whole life is a good strategy. Regardless, the point of my post is concerning my Roth IRA account I have with him. I have access to the schwab account that the account is housed at, although my financial firm is not schwab. Currently, it is invested in three mutual funds. RYSIX, RIOIX, RIHIX. Each of these funds has an expense ratio of 1.46. I am also apparently being charged a management fee of roughly 3% of the principle (6K) I contribute to it each year. This fee comes out every three months and I noticed it as I review the history of transactions on the account. There are also fairly frequent transactions in the account, which I suppose is based on the investment strategy. Furthermore when talking to my advisor, the strategy for this account is one essentially base on the past performance of certain funds for the last 3-6 months. He states that this strategy has yielded an average 9% return since 1995. After looking into this, 9% appears to be less than the average stock market return in that time frame. Furthermore, in 2019 my returns substantially underperformed the market. The more books and forum posts I read, I become less and less confident in the capabilities of my financial advisor and his firm and am wondering if I need to leave. I feel that investing in funds with Expense ratios of 1.46 are way way too high and would like to switch to a more passively invested asset allocation. My question is twofold. Should I talk to my financial advisor about this or just leave? Like I said he is a childhood friend that I still see. I have actually found great interest and satisfaction in learning more about finance. I'm not sure that I am ready to do it on my own just yet but I think I could get there in a relatively short time. Secondly, what do you think about the way they have my account invested?

  • #2
    1. You are interested in doing it yourself
    2. You are educating yourself about how to DIY
    3. You have little money in investments now (ideal time to make mistakes)
    4. You have the opportunity to have a lot of money to invest in the not too distant future (ortho).

    Now’s the time to leave IMO. Just tell your friend “thanks so much for your help over the years, I’ve appreciated it”. No further explanation necessary.

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    • #3
      Now is the time to do it for the reasons Anne listed above. It will only get harder as time goes on.

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      • #4
        Prime example of why it's usually not a great idea to do business with friends.
        “Work” is a four letter word for good reason.

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        • #5
          Welcome to the light.

          Agree with Anne's advice. "Thanks so much" and move on. Give your friend the benefit of the doubt that he has had benign intentions for you; how he handles himself with your departure of AUM will dictate whether your friendship will continue. Be prepared for the worse case scenario.

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          • #6
            Originally posted by Anne View Post
            1. You are interested in doing it yourself
            2. You are educating yourself about how to DIY
            3. You have little money in investments now (ideal time to make mistakes)
            4. You have the opportunity to have a lot of money to invest in the not too distant future (ortho).

            Now’s the time to leave IMO. Just tell your friend “thanks so much for your help over the years, I’ve appreciated it”. No further explanation necessary.
            Agree. Anne always says it best.

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            • #7
              Agree with others; absolutely have to leave. Just move to either a retirement date fund (.14/yr at Vanguard) or DIY 3 funds, simple, for lower expense.

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              • #8
                Glad you found the light at a young age. What others have suggested is what you should do. Do you like this childhood friend outside of the area of finance? Do you want to stay friends? If so, do as others said and also assume that he wasn't deliberately trying to trick you. Read this blog post, especially the second confession:

                https://www.whitecoatinvestor.com/co...ncial-advisor/

                They really just don't know any better. Ultimately in the end they are adults so they are responsible for the choices they made but just understand they have a lot of bad influencers around them. If you like your friend, stay friends. And you can only do that by assuming he wasn't trying to scam you, and he probably wasn't knowingly doing that.

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                • #9
                  Your friend may even believe he is doing a great job for you. He may believe that actively managed high expense funds that trade frequently are "smart". His job depends on him believing this stuff. We here at this forum know how to evaluate evidence and are able to understand statistics. The debate over indexing versus actively managed funds has been over for 15-20 years. Expenses matter. In the future as an orthopedic surgeon the increased percentages he is costing you will be real money and over your lifetime you could be looking at several million less in retirement funding. How good of friend is he?

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                  • #10
                    Agree with all of the above. You can manage your own money with a 3 fund portfolio. It’s easier than nailing a femur.

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                    • #11
                      Originally posted by VagabondMD View Post

                      Agree. Anne always says it best.
                      I’m thinking of becoming an advice columnist as my encore career, inspired by your glowing review. Know of anyone hiring?

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                      • #12
                        Thank you for the advice and encouragement. I appreciate it. It has affirmed what I have been thinking for awhile. Next question- the current account is invested at schwab which is my account and I have access to it. Should I just block their involvement there and continue at schwab? I suspect for simplicity sake I will convert the investments to a 3 fund portfolio or something similar with their schwab index funds. I believe I would even have the option of acquiring vanguard ETFs through schwab. From the forum, it seems there are at least 150 portfolios better than mine currently. OR should I open a vanguard account and transfer the money there. Vanguard seems to get quite a bit of buzz on the forum. Rightfully so from what I can tell. I just wasn't sure if it would be worth the switch at this point? I read a previous post similar to this concerning staying at schwab versus opening a vanguard account.

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                        • #13
                          Originally posted by Anne View Post

                          I’m thinking of becoming an advice columnist as my encore career, inspired by your glowing review. Know of anyone hiring?
                          "Annie Knows Best" has a nice ring. You can use it free of charge. : )

                          Comment


                          • #14
                            Just so you know, you are not alone, I too had to dismiss my college roommate who was handlIng my investments and charging AUM. It was very difficult but it had to be done. I would recommend sooner rather than later, because the longer you allow it to continue, you risk resenting your friend, and the relationship may be compromised. That was my experience. I never should have entered into the arrangement in the first place, but I wasn’t yet confident or educated enough to do otherwise. Good luck, you can do this!
                            My Youtube channel: https://www.youtube.com/channel/UCFF...MwBiAAKd5N8qPg

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                            • #15
                              Originally posted by Jstephens View Post
                              Thank you for the advice and encouragement. I appreciate it. It has affirmed what I have been thinking for awhile. Next question- the current account is invested at schwab which is my account and I have access to it. Should I just block their involvement there and continue at schwab? I suspect for simplicity sake I will convert the investments to a 3 fund portfolio or something similar with their schwab index funds. I believe I would even have the option of acquiring vanguard ETFs through schwab. From the forum, it seems there are at least 150 portfolios better than mine currently. OR should I open a vanguard account and transfer the money there. Vanguard seems to get quite a bit of buzz on the forum. Rightfully so from what I can tell. I just wasn't sure if it would be worth the switch at this point? I read a previous post similar to this concerning staying at schwab versus opening a vanguard account.
                              The best big three with low expense index funds are Vanguard, Fidelity, and Schwab. In fact if you are doing the three fund portfolio the expense ratios at Schwab I think are lower than Vanguard. So if you are already with Schwab I would stay at Schwab and purchase their mutual funds. I would imagine if you buy VG funds at Schwab there will be a fee. no need to switch or even buy VG funds in your schwab account

                              Comment

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