Roboadvisors and 401k

[dolodoc]

Hello all,

 

This is my first post and I was just wanting some general advice and questions answered. I work solely as an 1099 physician. I file my taxes as a sole proprietor. I plan to incorporate as a LLC and still file as an S corp either later this year or the beginning of next year. My current portfolio consists of a Individual 401K, Roth 401K, Roth IRA and brokerage account all managed by a financial advisor through TD ameritrade. I also just opened a HSA that i am managing myself. I am considering leaving my personal advisor and going with a roboadvisor. my current financial advisor is charging 1% AUM and is also charging an additional $1500/year for "financial planning". I have been more proactive with my fiscal situation over the last 6-8months and i am wanting to make the jump to do things myself which will (hopefully) save money, help empower myself to have control over my money and life and from what i have read possibly save some money tax-wise with the tax loss harvesting provided by some robo advisors. I have been thinking about using wealthfront vs. betterment but from what i understand they do not manage your 401K? is this correct? if so, could i keep my 401K with  TDA? and what other options would I have? ideally i'd like to have my entire portfolio under one place for the ease of management.  I have also considered using a fee only advisor during tax season to help with filing. i know thats a lot of info, any advice or information would gladly be appreciated.Thank you

[Peds]

feel free to leave the portfolio where it is, but fire the advisor and have either us or the bogleheads forum (https://www.bogleheads.org/forum/viewtopic.php?t=6212) help you out.

i have never used the roboadvisors so cant comment. i manage everything myself, it takes 10 minutes per year if i really add it up.

you definitely are being hosed by those fees and you are getting no return from it.

[ajm184]

No sure where to start, but I'll try.

a. Get an ISP: https://www.physicianonfire.com/you-need-an-investor-policy-statement/

b. If you are going to take responsibility for the management of your investments, fire TD.  Really 1% AUM and $1,500; guessing these 'services' didn't include the above or any useful estate planning documentation.

c. Both betterment and wealthfront will do asset allocation/tax loss harvesting using ETF's.  Appears both will be able to do a rollover of 401K assets to an IRA. You can ask the companies, but may not be appropriate if you want everything in one place.

d. Not knowing the assets (mutual funds/stock) you have, risk tolerance, current asset allocation, you can move your retirement assets to Fidelity/Vanguard or other companies without too much of an issue.  Maybe cost prohibitive for an HSA as an individual, usually fairly costly for stuff other than the basics until your are able to build the account up a bit.

e. For tax planning use a CPA, should need a fee only adviser unless the TD person has done some incredibly foolish things.

If you put the time in to learn and plan for yourself, it will pay off in many more ways than money alone.

 

[Donnie]

I don't think there is much advantage of a roboadvisor in a tax deferred account.  Roboadvisors rebalance and tax loss harvests (TLH) automatically.  TLH doesn't do you any good in tax deferred.  Buying a target date fund or life strategy fund would get you to the same place (i.e. automatic rebalancing) with less fees.

[dolodoc]

Great information guys and I apologize beforehand for my naivety. I do need an ISP and I already have ideas to formulate one. Once I do fire my advisor where do I begin as far as moving my money to other accounts. I would like to invest in low cost index funds preferably Vanguard. I also plan to shoot for an asset allocation of 75 stocks (85US 15world); 15 bonds (90us 10 world); 10 alternatives (REITs, gold). Since I am self employed I can put 54k in my 401 and 5500 in a backdoor Roth. My financial advisor has been doing this the last 3 years but I can learn how. Also with the HSA I can put an additional 3400 away. Thus is correct right?

[jz]

I enjoy the TD Ameritrade television commercials, but would be loathe to pay the AUM. Agree with Donnie that the Robos can exploit  tax loss harvest potential of TAXABLE accounts.

[ajm184]

dolodoc wrote:

Great information guys and I apologize beforehand for my naivety. I do need an ISP and I already have ideas to formulate one. Once I do fire my advisor where do I begin as far as moving my money to other accounts. I would like to invest in low cost index funds preferably Vanguard. I also plan to shoot for an asset allocation of 75 stocks (85US 15world); 15 bonds (90us 10 world); 10 alternatives (REITs, gold). Since I am self employed I can put 54k in my 401 and 5500 in a backdoor Roth. My financial advisor has been doing this the last 3 years but I can learn how. Also with the HSA I can put an additional 3400 away. Thus is correct right?

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a.  Fidelity/Vanguard will help you when you call in generically, provide the direct transfer paperwork, answer questions with respect to the form(s), etc.  Hardest thing is usually finding someone who can do a medallion signature guarantee I've found.

b. Though you may want to move to Vanguard if your current holdings are primarily individual stock and bonds, I would be especially cognizant of the sell implications within any taxable accounts you may have; may want to ask an accountant with respect to the cost basis/tax implications etc.  Depending upon the your total pot of investment accounts, Vanguard at over $500K can do a 'free' one time financial plan for you.  I'm sure there are other providers who have similar services based on total invested assets.

c. $3,400 per year is the max contribution for HSA as a single person (extra $1,000 if 55 or older).

[PhysicianOnFIRE]

You've got a good start on an IPS with your desired asset allocation. You can build it up from there.

Any stocks or ETFs in a taxable account may be able to be transferred to Vanguard (or Fidelity, etc...) in kind, meaning not sold, so you won't incur capital gains. With the tax deferred accounts, there are no tax worries.

I wouldn't tell your advisor anything before making the switch. Call your broker of choice (Vanguard, Fidelity, etc...) and they will walk you through the process. I helped someone through this process last year, detailed in this post. We never talked to the former advisor. I believe we spoke with a secretary to ensure there would be no departure fees, but otherwise Fidelity handled everything or showed us how over phone and email.

 

[jsr52]

I ditched my financial advisor six-months ago. It was awkward but that was because it was a family friend. But its the best decision I've ever made, and I have to thank this forum for giving me the courage to start managing my money on my own. (Moved funds over to Vanguard). If you are a physician you have more than enough smarts to manage your own books.

[adventure]

dolodoc wrote:

I plan to incorporate as a LLC and still file as an S corp either later this year or the beginning of next year.

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Why?

dolodoc wrote:

I am considering leaving my personal advisor

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You seem like a smart enough cookie - probably a sound decision.

dolodoc wrote:

to do things myself which will (hopefully) save money, (likely) help empower myself to have control over my money (assuredly) and life and from what i have read possibly save some money tax-wise with the tax loss harvesting provided by some robo advisors (likely).

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dolodoc wrote:

but I can learn how

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absolutely. Keep asking if you have questions.

PhysicianOnFIRE wrote:

I wouldn’t tell your advisor anything before making the switch. Call your broker of choice (Vanguard, Fidelity, etc…) and they will walk you through the process.

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Absolutely agree. Get the new accounts set up, get the paperwork ready to go, even if there are departure fees, etc, being done would be great.

dolodoc wrote:

i am wanting to make the jump to do things myself

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You can start with a HSA, if you don't have one already. HSABank and Optum are common. You can start today. (and, if you plan to leave some cash in these and invest in them, HSAbank's relies on TDA's platform, so don't completely close the TD account. You can close the 401ks, etc, but you may want the TD sign in for later, but you can just start with the HSABank or optim or other side of things today, if you quality (have a HDHP).

dolodoc wrote:

I have been thinking about using wealthfront vs. betterment but from what i understand they do not manage your 401K?

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As I understand this, sometimes they aren't able to do the "401k" you have with your employeer. I believe they can do a rollover 401ks/IRAs. I agree with others about the need for TLH (only in taxable accounts).

[Guest]

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[Hank]

Financial_Consultant wrote:

The general idea is that an advisor will manage investments but a great advisor will do a ton more than that. You can manage (or think you’ll be managing) your accounts but you’ll either won’t have the time to understand what you should be invested and why, when to buy and sell and when to hold, ...

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Surely you aren't suggesting that a financial advisor can time the market consistently and profitably, are you?  If someone could do that, then he or she should invest on margin for their own profit, not waste time investing other people's money.