Vanguard advisors

[radgrinder2018]

Greetings to all,

 

Longtime fan of the White Coat Investor, first time poster.  My wife and I met with a financial advisor that our friends recommended the other day.

Advisory fee was 1.15% (after a .15% "friend" discount)

+

The all-inclusive costs for the investment vehicles proposed in each account:
Joint account - .14% or 14 basis points
My Roth IRA - .05% or 5 basis points
Wife's IRA - .11% or 11 basis points

 

So it averaged out to ~1.25% in fees.  Having read the previous threads and posts on this site, this seems expensive to me.

So I was looking at Vanguard, which charges a flat 0.3% fee for their services.  I was wondering if people had had good experiences with Vanguard in this capacity?

 

Also, my wife does like the advisor charging 1.25%.  I am convincing her that she will like money more.  Has anyone had any experience negotiating down advisor fees?

 

Thanks very much.

[wonka31]

Does that include the expense ratios, costs of funds and trades? I bet that is just the advisor’s fee. I may be wrong, but I would doubt it.

[WCInovice]

I use Vanguard for my investments but haven't pulled the trigger on their advisers.  I typically use a fee-only guy I meet with once or twice a year and he gives my portfolio a quick look over for about an hour or two of his time and says "OK, looks good."

I *think* I can manage everything on my own, but my clinic is very busy and I have a very young family with three kids now, so my time is limited.  I think I might pull the trigger on getting a Vanguard adviser.  Part of this is I don't completely trust my instincts when the inevitable downturn comes.  I know the data, I know not to pull back, etc.  I *think* my risk tolerance is pretty good, but having that extra voice from an adviser may be worth it to me.  0.3% is nothing to ignore though.

 

 

 

[Zaphod]

I would first ask why you need a financial advisor. Its totally fine and a great move for those who arent super nerdy about it, but define why and you'll know what you're needing more precisely and can see if this or some other type is more appropriate.

The fees are high and will be a drag on your returns. I would strongly consider giving it a go without an advisor or using the Vanguard one until you feel comfortable, at least its reasonable in costs from an ER standpoint, but as your net worth grows it becomes more unreasonable.

[DCdoc]

How much money do you have to invest? I think $5000 per year is a trainable amount for an advisor, whether AUM or flat fee. I favor flat fee once assets cross 1 million. If you have 500k or less, that 1.25% might be reasonable but it’s not that much harder managing a 2 million portfolio than a 500k one. But in a AUM model the advisor gets paid 4X as much for roughly the same work.

[Peds]

radgrinder2018 wrote:

Greetings to all,

 

Longtime fan of the White Coat Investor, first time poster.  My wife and I met with a financial advisor that our friends recommended the other day.

Advisory fee was 1.15% (after a .15% “friend” discount)

+

The all-inclusive costs for the investment vehicles proposed in each account:
Joint account – .14% or 14 basis points
My Roth IRA – .05% or 5 basis points
Wife’s IRA – .11% or 11 basis points

 

So it averaged out to ~1.25% in fees.  Having read the previous threads and posts on this site, this seems expensive to me.

So I was looking at Vanguard, which charges a flat 0.3% fee for their services.  I was wondering if people had had good experiences with Vanguard in this capacity?

 

Also, my wife does like the advisor charging 1.25%.  I am convincing her that she will like money more.  Has anyone had any experience negotiating down advisor fees?

 

Thanks very much.

Click to expand...

you need smarter and/or better friends.

[Peds]

DCdoc wrote:

How much money do you have to invest? I think $5000 per year is a trainable amount for an advisor, whether AUM or flat fee. I favor flat fee once assets cross 1 million. If you have 500k or less, that 1.25% might be reasonable but it’s not that much harder managing a 2 million portfolio than a 500k one. But in a AUM model the advisor gets paid 4X as much for roughly the same work.

Click to expand...

1.25% AUM is never reasonable.

[ENT Doc]

Why are you not comfortable doing the investing yourself?  I think you'll get fairly sound advice if you post questions to this forum and Bogleheads.  I would first start with an Investor Policy Statement before asking questions.  That will force you to set goals and define your risk tolerance.  Then it's a matter of how much you can save and where those funds should go.  The former only you and your wife can control via budgeting and frugality.  So really the most important thing you want to know is where the heck do I put my money. Admittedly, financial advisors do play a role in controlling your behavior.  So if you're prone to emotional decisions maybe best if you have one (cheaply) or have a well-defined IPS with strict guidelines for changes to your investing and both sign it.

[Rando]

First I would say that by questioning the advisory fee and coming here to ask questions you are already ahead of most people.  You don't say where you are at in your career or in investing but I'm assuming you are just starting out.

My 2 cents is that in order to be able to tell if your financial advisor is doing a good job, you have to learn enough about investing that you could do it yourself.  The trouble is that takes some time and ideally some experience, so it may be OK that you use an advisor at this point.

The 1.25% AUM is just too much, so get away from the adviser your friends recommended.  I think the Vanguard adviser is reasonable, and he/she could help you get your accounts set up and moving in the right direction.  At some point if you feel comfortable managing your investments you just drop the adviser and keep your accounts at Vanguard.  I have not used Vanguard Advisers but they will be able to give you basic advice which is probably all you need.  The likelihood the adviser you talked with will give you advice that justifies the 1.25% fee approaches zero.

 

[ajm184]

Though I have not worked with Vanguard advisors.  If your are looking for only 'investing advice', then post a question here if you feel comfortable, otherwise Vanguard advisors would be a good way to go.  The issue is that good financial advsiory is so much more holistic than just 'investment advice'.

[justlearning]

if the OP is not comfortable doing himself. There is nothing wrong getting help from financial advisor for a fair price. Here is good guide line:

https://www.whitecoatinvestor.com/the-perfect-financial-advisor/

[Hatton]

You could take the WCI course to feel more comfortable.

[ScopeMonkey]

Radgrinder, that fee is too high.  I only "saw the light" about 6 months ago after discovering the WCI and this calculator:  https://www.dinkytown.net/java/compare-investment-fees.html.  You input your fees, your starting asset amount, and how much you might contribute over time, and then for how long your investment horizon is.   The numbers are truly staggering over many years, if you've built up substantial investable assets.

After paying two different advisors over the years about 1 - 1.25% of AUM, I switched to Vanguard and now pay 0.3%, but only for about 1/4 of my investable assets; the rest are in the practice 401k, and a lot in private equity real estate funds.  As many have said including the WCI himself, it's not that hard to just do it yourself if you invest mostly in index funds, and some bond funds or individual muni bonds, depending on your age and financial situation.  I'm actually only paying the Vanguard advisor temporarily, as some of the funds moved from the previous advisor are "DFA" funds which require an advisor, and would have a big tax hit due to gains if sold right now.  After a correction, I'll probably just simplify with indexing and ditch the advisor perhaps.

[Dicast]

Here's a chart that demonstrates the effects of fees long term. https://www.bogleheads.org/forum/viewtopic.php?t=250294 It shows a chart from an old Vanguard blog post about the long term effects of fees and how they kill your portfolios return. I always direct folks to this chart to get an appreciation of the cumulative effect. It is literally the difference of having 3 or 4 million, 5 or 6 million, etc when you apply it to your expected account values.

[Larry Ragman]

There is an in between option at Vanguard. Both Select (>$500k) and Flagship (>$1M) have free access to a financial advisor. This advisor will review your goals and recommend a portfolio. Will also talk you through different life events to help form good goals. All free once you cross the relevant threshold of assets held at Vanguard.

I’ve used this service and it is helpful to validate plans, goals, and asset allocations. However, self-education remains important. I found the recommended allocation to be unnecessarily complex and I defaulted to a target retirement fund for simplicity, performance, and ease of use. Still, it is helpful just to be able to have the conversation.

However, this financial advisor will NOT provide on-going portfolio management (I.e., move your money around for you.)  If you want that level of support, you have to pay the fee. (I don’t, so I can’t verify the .3 percent, but it sounds right.)