Not feeling bullish...
November 4, 2011 10:38 PM   Subscribe

Jumping ship from Merrill Lynch. But where to?

In observance of Bank Transfer Day, I'm going to start pulling my assets out of Merrill Lynch, for a number of reasons. I have stocks, mutual funds, and a Roth IRA, less than $100k total. Where should I take my business? My situation is similar to that of this question. Where should I go, and why? Important criteria for my new broker:

* Everything must be able to be done by internet or phone. I live in a small town, there are no local offices of national brokers except for ML. I will be moving within two years, so I don't want a small local place.

* I want a financial advisor, but a discount brokerage + independent advisor would be fine

* Approved by The 99%. That is, as little involvement as possible in the subprime fiasco and general fucking-over of the economy.

* I don't make a lot of trades. Three or four per year, tops.

* I'm in the US
posted by qxntpqbbbqxl to Work & Money (17 answers total) 7 users marked this as a favorite
posted by jchaw at 10:41 PM on November 4, 2011

You are going to move your entire account that you mention no problems with in observance of bank transfer day? You don't want local, so you will need to move it to another large ass institution that has a large web presence. Leave it at ML.
posted by JohnnyGunn at 10:45 PM on November 4, 2011

I am also a very big fan of Dimensional Funds. The reason is because they apply alot of science into their investments, e.g., Fama-French.

DFA funds are typically only available from approved financial advisors. Go to their website and have them recommend you advisors.
posted by jchaw at 10:45 PM on November 4, 2011

What about E*Trade? I don't think they ever got any bailout funds, although they were hoping to get some at one point. They do IRA stuff. If you only do 4 trades a year the cost would be just $40 a year, and the first trades would be free. It's geared towards day traders, but it works fine for 'ordinary' investment.
posted by delmoi at 10:58 PM on November 4, 2011

As far as financial advice, I think you're better off just doing your own research. You can ask questions on AskMe and that sort of thing. My mom was shopping around for financial advisers in mid-2008 and one of them told her invest in investment bank "C-Shares", whatever those are. She could have been hit hard by the collapse if she'd trusted the guy.

You're also better off investing in index funds then mutual funds.
posted by delmoi at 11:02 PM on November 4, 2011

Response by poster: You are going to move your entire account that you mention no problems with in observance of bank transfer day?

I'm doing it because I no longer trust them, I loathe Bank of America, and I feel my account over the last decade has underperformed, even considering 9/11, the mortgage crisis, and recession. And because every time I contact them by phone, I need to speak to my advisor to make mundane account changes and I'm alaways left with the impression that I'm bothering him in his busy day. I've been meaning to do it for a while. The ML yearly maintenance fee gets charged in January, so I'd like to do it before then.

It just happens to coincide with bank transfer day.
posted by qxntpqbbbqxl at 11:07 PM on November 4, 2011 [1 favorite]

posted by empath at 11:51 PM on November 4, 2011

This is a great article on why you should strongly consider running fast and far from mutual funds, sticking instead to index funds.

If you want to be a somewhat active investor, you can buy ETFs, exchange traded funds, that allow you to place stops when the market swings wildly and not ride the dip down. But the ETF lets you buy a representative share of the index itself, so there's a lot of built-in diversification.

If you don't want that, some place that lets you buy Vanguard or a similar index fund provider will be good, and this Fund Analyzer provided by the Financial Industry Regulatory Authority will help you examine just how much money you piss away on "actively managed" mutual funds that consistently fail to beat the market over the long term.
posted by disillusioned at 3:56 AM on November 5, 2011

You might want to take a look at Calvert for the fund side --- they do socially responsible investing.

Whatever you end up doing, you definitely want to look at --- it provides comparative information on index funds, mutual funds, and ETFs. Their analysis articles require a subscription, but their straight-up info on fund performance does not, and that'll let you get a quick take on whether the funds of whatever company you're looking at have underperformed or have high costs or what.
posted by Diablevert at 4:01 AM on November 5, 2011

Vanguard and index funds? Vanguard is owned by the people who invest in the funds. They have very low index fund expense ratios, too. (Disclaimer: I am currently at Schwab, but am planning on switching to Vanguard at some point. I am in index funds.)

I also highly recommend The Bogleheads' Guide To Investing. It's a very good introduction to investing and index funds.
posted by pie ninja at 4:31 AM on November 5, 2011

Vanguard meets all your criteria except maybe "approved by the 99%". I think they meet that too, but I'm not sure what it really means.
posted by Nelson at 7:15 AM on November 5, 2011

Nthing Vanguard
posted by T.D. Strange at 7:18 AM on November 5, 2011

If you aren't trading individual stocks and ETFs then you don't need a "broker" - someone like Vanguard is a good choice. If you are investing in Large Cap US stocks you are wasting your money with Active Management. In the Small Cap space and ex-US you might might possibly end up ahead with an Active manager assuming you pick the right one (huge huge huge assumption and topic I could literally write a book on). And even then fees will matter. The thing to remember is that there are only three provable exploitable market inefficiencies - size, low market price to assets and price momentum. And if you believe Fama and French et al - price momentum requires too much in trading costs so the inefficiency gets swallowed up by transactions.

If you feel like you need a financial planner I like the Dimensional idea. I also think they are a decent low cost choice if you decide active route is for you.

Personally I think active management is best used as an adjunct to a mostly passive/index portfolio and your active managers are not benchmark aware, have volatile returns, and chase after the F-F factors in one form or another. The less risk averse/younger you are the more your portfolio should be in the active guys as you get older reduce risk by going more passive, and eventually start moving into fixed.

Generic advice of course. A point might be made for example that small caps have massively outperformed, and now is not the time to be investing there. Same with your active guys - you generally want to allocate away from your outperformers to your underperformers as long as your underperformers are still doing what they told you they did when you hired them and their underperformance is congruent with that.

(I actually think 3-4 trades a year might be too much BTW)
posted by JPD at 7:56 AM on November 5, 2011

oh and of course - you should buy your funds directly from the manager. No reason to give anyone else a cut.
posted by JPD at 8:34 AM on November 5, 2011

I have retirement funds with several employers, and left them there for the sake of diversity, as well as procrastination, which has worked out quite well. My primary account is through my current employer (not invested in company stock). 2 of the 4 accounts have Socially Responsible investing options. They've performed well, and I'm happier knowing that I'm not investing in a company that makes land mines, or wrecks the environment.
posted by theora55 at 9:29 AM on November 5, 2011

Most Socially Responsible funds suffer from the same issues as other benchmark aware actively managed funds - bad performance relative to cost. For the most part they are managed exactly the same way as traditional funds, but with a list of excluded investments. The academic work on whether this leads to positive or negative performance vs funds w/o a socially aware bent is inconclusive based on empirical evidence. From a behavioural finance perspective you should expect socially aware investing to underperform, but the asset class has not been around long enough to see this empirically.

I'm happier knowing that I'm not investing in a company that makes land mines, or wrecks the environment

is pretty much spot on evidence for why you would expect them to underperform from a behavioural perspective.

Having said that, its all sort of theoretical and today you should exclude them for the same reason you should exclude most actively managed funds.
posted by JPD at 10:18 AM on November 5, 2011

Another vote for Vanguard.
posted by pmurray63 at 12:38 PM on November 6, 2011

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