Seeking advice on upcoming meeting with financial advisor
May 7, 2024 6:45 AM Subscribe
My spouse and I have never really had any money to speak of, but we recently inherited a modest sum. Our new financial advisor is recommending that we invest the bulk of the money in a mix of American Funds. However, I have concerns about the one-time fee of 3.5%. My spouse and I will be meeting with the advisor in a couple of days, and I would like to know how to approach this topic.
The advisor is also recommending that we set aside some liquid funds to use for things like buying a new car, fixing the roof, etc. He also claims that the expected return from the American Funds will more than offset the 3.5% fee (apparently there are no other fees associated with the mutual funds). I have my doubts about this strategy.
My inclination is to take all the money and put it into a broad-based index fund, like the S&P 500, a fund that doesn't have any load fees. I'm basing my opinion on a book I once read: A Random Walk Down Wall Street, by Burton Malkiel. Malkiel argues that managed funds don't outperform the market over the long term. I found the book convincing, but perhaps this an example of a little knowledge being a dangerous thing.
I wonder if the financial advisor makes money by recommending American Funds, so we would be depriving him of income if we didn't follow his advice. Or maybe he's right about American Funds being a good investment? In any case, I want to go into the Thursday meeting prepared with some questions and some background knowledge. In case it matters, we're about eight years away from retirement.
The advisor is also recommending that we set aside some liquid funds to use for things like buying a new car, fixing the roof, etc. He also claims that the expected return from the American Funds will more than offset the 3.5% fee (apparently there are no other fees associated with the mutual funds). I have my doubts about this strategy.
My inclination is to take all the money and put it into a broad-based index fund, like the S&P 500, a fund that doesn't have any load fees. I'm basing my opinion on a book I once read: A Random Walk Down Wall Street, by Burton Malkiel. Malkiel argues that managed funds don't outperform the market over the long term. I found the book convincing, but perhaps this an example of a little knowledge being a dangerous thing.
I wonder if the financial advisor makes money by recommending American Funds, so we would be depriving him of income if we didn't follow his advice. Or maybe he's right about American Funds being a good investment? In any case, I want to go into the Thursday meeting prepared with some questions and some background knowledge. In case it matters, we're about eight years away from retirement.
+1 mskyle. This sounds super sketch. A "Fee-Only Financial Planner" is what you should be looking for if you're looking for a planner at all.
posted by Alterscape at 6:52 AM on May 7, 2024 [17 favorites]
posted by Alterscape at 6:52 AM on May 7, 2024 [17 favorites]
Response by poster: Just some more info: For various complicated reasons having to do with other family members, etc. we pretty much have to stick with the current advisor. Also, his parent company is one whose name rhymes with "Edgar Bones", in case that's relevant. (We're in the US.)
posted by akk2014 at 7:01 AM on May 7, 2024
posted by akk2014 at 7:01 AM on May 7, 2024
Look, if you want to give up 3.5% of your invested assets to make things more comfortable with your family, none of us can stop you. But this guy is not going to back down and "let" you invest in an index fund - that is not his business model. Also all the American Funds mutual funds I'm aware of have high expense ratios which I'm sure your guy is not counting as "fees" but they will still cost you lots of money.
Exploiting relationships with friends and family is an essential part of the business model of these companies, in much the same way as an MLM.
Please at least delay the meeting until you can do some more reading. Once you pay that load fee you cannot get it back no matter how poorly the funds perform relative to the indexes.
posted by mskyle at 7:06 AM on May 7, 2024 [51 favorites]
Exploiting relationships with friends and family is an essential part of the business model of these companies, in much the same way as an MLM.
Please at least delay the meeting until you can do some more reading. Once you pay that load fee you cannot get it back no matter how poorly the funds perform relative to the indexes.
posted by mskyle at 7:06 AM on May 7, 2024 [51 favorites]
Are you saying that it is this guy or no advisor at all, or are you saying the people who gave you this money require you to use this guy as a condition of getting the money? You do not have to follow his advice even if you are required to use him. The issue is that even if you tell him exactly what to invest in, he will want his cut. EJ is the last company I would go with. I see a lot of EOY statements from them when I prepare taxes and I will say I am never impressed with the returns people get. If they charge an upfront fee on top of that, I am even more wary of them.
posted by soelo at 7:11 AM on May 7, 2024 [10 favorites]
posted by soelo at 7:11 AM on May 7, 2024 [10 favorites]
Best answer: You don't really need an advisor which is another way to go and would avoid family politics. "oh we already invested it with a very low risk tolerance method we were most comfortable with.
I went with your instinct, opened a vanguards account and dumped what I had into VOO and never looked back. Took me like 20 minutes and it's way way out performed another chunk I put with a fee based manager (the good kind). There are no family politics worth throwing money away when it's a meaningful amount to you.
posted by chasles at 7:15 AM on May 7, 2024 [8 favorites]
I went with your instinct, opened a vanguards account and dumped what I had into VOO and never looked back. Took me like 20 minutes and it's way way out performed another chunk I put with a fee based manager (the good kind). There are no family politics worth throwing money away when it's a meaningful amount to you.
posted by chasles at 7:15 AM on May 7, 2024 [8 favorites]
You don't say how much the inheritance is, but if I was you, I'd invest $20k or whatever with this guy to placate your family members, and the rest that you plan on investing in some Vanguard fund - which has no load fees, and low annual fees.
posted by The_Vegetables at 7:17 AM on May 7, 2024 [6 favorites]
posted by The_Vegetables at 7:17 AM on May 7, 2024 [6 favorites]
Response by poster: When push comes to shove, he has to follow our instructions, no? We'd rather not make waves by dumping this guy altogether.
posted by akk2014 at 7:20 AM on May 7, 2024
posted by akk2014 at 7:20 AM on May 7, 2024
Sorry I missed you were 8 years from retirement - does that mean retiring at 65+ years old?
Unfortunately, the gains in the stock market generally take a long time to compound and 8 years is not a long time. Again, you don't say how much this inheritance is, how much time you need it to last before you start using it etc, what other funds you have to pay in retirement, but you need to take all that into consideration into even investing it at all.
posted by The_Vegetables at 7:20 AM on May 7, 2024 [1 favorite]
Unfortunately, the gains in the stock market generally take a long time to compound and 8 years is not a long time. Again, you don't say how much this inheritance is, how much time you need it to last before you start using it etc, what other funds you have to pay in retirement, but you need to take all that into consideration into even investing it at all.
posted by The_Vegetables at 7:20 AM on May 7, 2024 [1 favorite]
Ok, I'll assume that you do have to use this advisor. It's not 100% clear to me whether the 3.5% is a fee the financial advisor is charging, or a sales charge associated specifically with the American Funds (this type of charge, where you pay a % upon buying into the fund, is also called a "front end load" in contrast to a "back end" fee that you would pay upon selling the shares later).
If it's the fund itself, then you may be able to avoid this by investing in a different fund. I would ask if you have access to any low-cost index funds. You may be able to invest in funds offered by major brokerages like Vanguard and Fidelity even though your account won't be with those brokerages. e.g., my 401(k) is administered by Empower, but some of the investment options offered include Fidelity's total stock and bond market funds, so I just assembled a portfolio of those and skipped over the worse options, which I think did include some of these American Funds.
Can you get, in advance of the meeting, a full listing of mutual funds that you would be able to invest in? This information would let you go in with a plan instead of having the advisor lead you toward something that's better for them than you.
posted by egregious theorem at 7:22 AM on May 7, 2024 [5 favorites]
If it's the fund itself, then you may be able to avoid this by investing in a different fund. I would ask if you have access to any low-cost index funds. You may be able to invest in funds offered by major brokerages like Vanguard and Fidelity even though your account won't be with those brokerages. e.g., my 401(k) is administered by Empower, but some of the investment options offered include Fidelity's total stock and bond market funds, so I just assembled a portfolio of those and skipped over the worse options, which I think did include some of these American Funds.
Can you get, in advance of the meeting, a full listing of mutual funds that you would be able to invest in? This information would let you go in with a plan instead of having the advisor lead you toward something that's better for them than you.
posted by egregious theorem at 7:22 AM on May 7, 2024 [5 favorites]
Response by poster: We inherited about $200,000. We'll be 66 years old in eight years, and we'd like to retire then. As I understand it, the 3.5% fee would be charged by American Funds. The financial advisor doesn't seem to charge any fees directly, at least not as far as we can tell.
posted by akk2014 at 7:25 AM on May 7, 2024
posted by akk2014 at 7:25 AM on May 7, 2024
If you have a list of the funds themselves, you can do a return calculation for an arbitrary amount of time (like, last ten years or whatever) and compare that to a Vanguard total-market fund (or even a Bogleheads-style Three Fund Strategy).
...then run the numbers (including fees). Walk into the meeting saying you want Vanguard. When he starts suggesting otherwise, point out the numbers THEN (and this is key) say that if he is willing to guarantee in writing that the American Funds will beat Vanguard over the *next* ten years you'll go for it. He personally commits to making up any under-performance, and similarly commits to you being a "super-senior" creditor in that event (in case he tries to escape via bankruptcy).
...because nobody would ever put that in writing, and he'll be forced to admit that.
Alternatively, invest a minimal amount in the AF funds at the outset, saying you'll put the rest in Vanguard. If AF is up after a year, then you'll consider adding more (it won't be up).
posted by aramaic at 7:32 AM on May 7, 2024 [2 favorites]
...then run the numbers (including fees). Walk into the meeting saying you want Vanguard. When he starts suggesting otherwise, point out the numbers THEN (and this is key) say that if he is willing to guarantee in writing that the American Funds will beat Vanguard over the *next* ten years you'll go for it. He personally commits to making up any under-performance, and similarly commits to you being a "super-senior" creditor in that event (in case he tries to escape via bankruptcy).
...because nobody would ever put that in writing, and he'll be forced to admit that.
Alternatively, invest a minimal amount in the AF funds at the outset, saying you'll put the rest in Vanguard. If AF is up after a year, then you'll consider adding more (it won't be up).
posted by aramaic at 7:32 AM on May 7, 2024 [2 favorites]
I assume you're able to buy individual stocks through this guy? If so, you also have the option of buying the ETF versions of index funds. Watch out for transaction costs but this could be a good option.
posted by mskyle at 7:33 AM on May 7, 2024 [2 favorites]
posted by mskyle at 7:33 AM on May 7, 2024 [2 favorites]
Best answer: Look, I get not wanting to make waves with family. But this is your retirement plan we're talking about. Why risk even a little bit of it to make someone else feel more comfortable?
The financial advisor doesn't seem to charge any fees directly, at least not as far as we can tell.
This is not a good thing! You actually WANT a "fee-only financial advisor." Fee-only financial advisors are required to act as fiduciaries for their clients; they are required by law to do what is in the best interests of their clients. "Fee-based financial planners," on the other hand, work on commission (and sometimes ALSO charge a fee that they don't talk about up front) and they are only required to sell products (SELL.) that are "suitable" for their clients. The percentage that fee-only advisors make is generally only 1% of the client's assets per year.
This person does not, and will not, have your best interests at heart. And to be honest, he's likely scamming your family member(s), too. Make the waves. Don't go. Find a reputable fee-only financial advisor and protect your retirement.
posted by cooker girl at 7:36 AM on May 7, 2024 [38 favorites]
The financial advisor doesn't seem to charge any fees directly, at least not as far as we can tell.
This is not a good thing! You actually WANT a "fee-only financial advisor." Fee-only financial advisors are required to act as fiduciaries for their clients; they are required by law to do what is in the best interests of their clients. "Fee-based financial planners," on the other hand, work on commission (and sometimes ALSO charge a fee that they don't talk about up front) and they are only required to sell products (SELL.) that are "suitable" for their clients. The percentage that fee-only advisors make is generally only 1% of the client's assets per year.
This person does not, and will not, have your best interests at heart. And to be honest, he's likely scamming your family member(s), too. Make the waves. Don't go. Find a reputable fee-only financial advisor and protect your retirement.
posted by cooker girl at 7:36 AM on May 7, 2024 [38 favorites]
When push comes to shove, he has to follow our instructions, no?
Yes but he may straight up not offer S&P 500 and the index funds he sells will have additional costs because:
As I understand it, the 3.5% fee would be charged by American Funds. The financial advisor doesn't seem to charge any fees directly, at least not as far as we can tell.
He gets a commission out of that 3.5%: https://www.investopedia.com/articles/basics/04/022704.asp#toc-criticisms-of-commission-based-advisors
Totally understand that everyone in the family uses this guy, he's a family friend, etc, etc. It's just gonna cost you because that's his job and that's how he gets paid - similar to how my family always uses a certain realtor that charges standard commission plus an extra fee that we as the seller have to pay directly to him.
posted by Nonsteroidal Anti-Inflammatory Drug at 7:40 AM on May 7, 2024 [8 favorites]
Yes but he may straight up not offer S&P 500 and the index funds he sells will have additional costs because:
As I understand it, the 3.5% fee would be charged by American Funds. The financial advisor doesn't seem to charge any fees directly, at least not as far as we can tell.
He gets a commission out of that 3.5%: https://www.investopedia.com/articles/basics/04/022704.asp#toc-criticisms-of-commission-based-advisors
Totally understand that everyone in the family uses this guy, he's a family friend, etc, etc. It's just gonna cost you because that's his job and that's how he gets paid - similar to how my family always uses a certain realtor that charges standard commission plus an extra fee that we as the seller have to pay directly to him.
posted by Nonsteroidal Anti-Inflammatory Drug at 7:40 AM on May 7, 2024 [8 favorites]
I was surprised when you mentioned Edgar Bones. My guy is also affiliated with them and he seems like a workable mid-level advisor. He does make suggestions that I don't or can't follow for various reasons, but nothing like this American Funds thing. (He forwards me emails promoting annuities, which drives me a bit batty but he does so without comment and does not seem to expect me to follow up on them. So maybe there is some sort of pressure from the parent company to push stuff?)
See if you can get out of this relationship and just go straight to Vanguard. If your family members are really pushing, sit them down and explain what you are trying to do and what is going on with this American Funds thing. This is important if you are depending on this money.
posted by BibiRose at 7:44 AM on May 7, 2024
See if you can get out of this relationship and just go straight to Vanguard. If your family members are really pushing, sit them down and explain what you are trying to do and what is going on with this American Funds thing. This is important if you are depending on this money.
posted by BibiRose at 7:44 AM on May 7, 2024
Also - make sure you know how much you're actually paying. You already know about the 3.5%, there's probably some other ongoing fees, and the returns are on average going to be worse.
If you go with his funds, he's going to show you how AF beat returns on the S&P 500. It's true to that some AF products had better returns than index funds but no one knew which ones those were until after the fact.
If I were in your shoes, I'd look up the cost of a few index funds or target retirement funds on Vanguard and then compare that to the fully loaded cost of using the AF guy. Compare those two numbers and then decide if it's worth the family headache of not using him.
posted by Nonsteroidal Anti-Inflammatory Drug at 7:44 AM on May 7, 2024 [2 favorites]
If you go with his funds, he's going to show you how AF beat returns on the S&P 500. It's true to that some AF products had better returns than index funds but no one knew which ones those were until after the fact.
If I were in your shoes, I'd look up the cost of a few index funds or target retirement funds on Vanguard and then compare that to the fully loaded cost of using the AF guy. Compare those two numbers and then decide if it's worth the family headache of not using him.
posted by Nonsteroidal Anti-Inflammatory Drug at 7:44 AM on May 7, 2024 [2 favorites]
Best answer: Ask if he has a fiduciary duty to you. If he says anything other than yes (including trying something like "I have your best interests at heart"), know that he's a salesperson on commission. You'll at least want advice from someone else.
I get that he's a family friend, but is that worth $7k today, plus thousands more in lost returns? That's your call.
posted by Garm at 7:49 AM on May 7, 2024 [16 favorites]
I get that he's a family friend, but is that worth $7k today, plus thousands more in lost returns? That's your call.
posted by Garm at 7:49 AM on May 7, 2024 [16 favorites]
Is not making waves worth losing $7,000, and possibly more from the mediocre investments this guy recommends?
posted by bq at 7:50 AM on May 7, 2024 [7 favorites]
posted by bq at 7:50 AM on May 7, 2024 [7 favorites]
I would go into the meeting curious and wanting to learn more about what he is suggesting and why, but committed to not making any decisions at the meeting. And, also explicitly stating that you want to think about it and instruct him not to do anything until you come back to him.
Then, you can consider that information and any other information you receive to plot the best course of action for you in your own time.
I expect you will find the path that is right for you, and you should take that path.
posted by bruinfan at 7:54 AM on May 7, 2024 [4 favorites]
Then, you can consider that information and any other information you receive to plot the best course of action for you in your own time.
I expect you will find the path that is right for you, and you should take that path.
posted by bruinfan at 7:54 AM on May 7, 2024 [4 favorites]
Here is a Money Guys link to "8 Questions to Ask Your Financial Advisor."
You will have to enter an email address to get it. Use a throwaway address or unsubscribe when convenient. While these guys are geared towards helping people in their 20s and 30s accumulate wealth, I've found them to be reliable, and they have some very handy tools like this one.
I also would rather see you get a Vanguard account and invest in an Index Fund, if you can get there. Good luck.
posted by happy_cat at 7:54 AM on May 7, 2024
You will have to enter an email address to get it. Use a throwaway address or unsubscribe when convenient. While these guys are geared towards helping people in their 20s and 30s accumulate wealth, I've found them to be reliable, and they have some very handy tools like this one.
I also would rather see you get a Vanguard account and invest in an Index Fund, if you can get there. Good luck.
posted by happy_cat at 7:54 AM on May 7, 2024
I also have a sum of money that was a gift that is tied to using a family friend as an advisor, so I get it how it can be complicated. I remind myself that it's money I wouldn't have without that stipulation, so it's still a net gain.
You can still ask him how you can keep this money with him while keeping your expense ratio down. He should be able to come back with another plan. It won't be as cheap as getting an index fund from Vanguard, but it should get you closer to getting market returns.
posted by advicepig at 7:55 AM on May 7, 2024 [3 favorites]
You can still ask him how you can keep this money with him while keeping your expense ratio down. He should be able to come back with another plan. It won't be as cheap as getting an index fund from Vanguard, but it should get you closer to getting market returns.
posted by advicepig at 7:55 AM on May 7, 2024 [3 favorites]
On the plus side, my family friend retired recently and I'm closing that account and taking that money to Vanguard.
posted by advicepig at 7:56 AM on May 7, 2024 [3 favorites]
posted by advicepig at 7:56 AM on May 7, 2024 [3 favorites]
Complicated family stuff would cost you 7,000 dollars. Absolutely not. Put the money in a low cost index fund with Fidelity or Vanguard. The money will do as well, or not, as the stock market. Index funds outperform most other basic investments, and the ones that win involve shrewd investors and luck. This person does not, and will not, and has not had your family's best interests at heart. He has sold underperforming investments that made hefty commissions.
I bought American Funds to help a buddy get started as a financial advisor. Bad decision, got low returns, he ended up doing something else, the guy training him made the money. The Financial Advisor is making an initial and annual commission. It's okay to deprive anybody in the financial industry of funds, just like it's legal for them to deprive you of funds.
Read (I haven't read these, but a knowledgeable friend and lots of lists recommend)
The Little Book on Common Sense Investing by John C. Bogle
Rich Dad Poor Dad by Robert Kiyosaki
The Millionaire Next Door by Thomas J. Stanley and others
200,000 in index funds is a terrific addition to retirement savings, don't let old family loyalties deprive you of your money to enrich someone who can and will make money elsewhere. For what it's worth Warren Buffett said he revises his will every three years, and he still advises his wife to allocate 10% of her inheritance to short-term government bonds and 90% to a low-cost S&P 500 index fund. He knows more than the advisor. Edgar Bones can sell you these things. The advisor will be fine. If they start charging significant account fees, take the money elsewhere.
posted by theora55 at 7:58 AM on May 7, 2024 [6 favorites]
I bought American Funds to help a buddy get started as a financial advisor. Bad decision, got low returns, he ended up doing something else, the guy training him made the money. The Financial Advisor is making an initial and annual commission. It's okay to deprive anybody in the financial industry of funds, just like it's legal for them to deprive you of funds.
Read (I haven't read these, but a knowledgeable friend and lots of lists recommend)
The Little Book on Common Sense Investing by John C. Bogle
Rich Dad Poor Dad by Robert Kiyosaki
The Millionaire Next Door by Thomas J. Stanley and others
200,000 in index funds is a terrific addition to retirement savings, don't let old family loyalties deprive you of your money to enrich someone who can and will make money elsewhere. For what it's worth Warren Buffett said he revises his will every three years, and he still advises his wife to allocate 10% of her inheritance to short-term government bonds and 90% to a low-cost S&P 500 index fund. He knows more than the advisor. Edgar Bones can sell you these things. The advisor will be fine. If they start charging significant account fees, take the money elsewhere.
posted by theora55 at 7:58 AM on May 7, 2024 [6 favorites]
We too inherited a financial advisor, and we're using him now, but a script for you: "Thank you, please transfer the money to this account [one of your existing index funds]. We prefer to have everything in one place for easier management."
No muss no fuss, it's his job to do this. If he doesn't do it without complaint, you definitely don't want to be working with him.
posted by straw at 8:03 AM on May 7, 2024 [19 favorites]
No muss no fuss, it's his job to do this. If he doesn't do it without complaint, you definitely don't want to be working with him.
posted by straw at 8:03 AM on May 7, 2024 [19 favorites]
I am no financial whiz myself, but I do agree with the rest of the comments above that this guy is pushing his own agenda and that you should get someone with a fiduciary duty to you, preferably someone who is experienced with working with someone at your stage of life rather than 30-somethings.
But to speak to the apparent relationship side of this instead - it sounds like some family members may be very invested in you working with "their guy". If you want to keep everything smooth with them, you need to find some way to politely tell them that you're not going to work with this guy without implicitly giving off the message that they're a bunch of chumps for working with this guy.
The way my spouse and I typically manage this is by the one whose family is not involved "taking the bullet" for the one who is. For example, if it's your blood family that's putting the pressure on, maybe the two of you can do a whole song and dance about how nice the planner sounded on the phone and how he seems like he'd be great to work with, but spouse is just having cold feet about investing everything so fast and wants to spend a little more time researching first. Take the money elsewhere while you pretend to hem and haw, and then after the issue has calmed down you can just vaguely allude to having made some compromise with your spouse without giving further details. Obviously this depends on your relatives not being pushy enough to insult or pick fights with your spouse directly, but it's worked out pretty well for the two of us so far.
posted by nanny's striped stocking at 8:07 AM on May 7, 2024 [10 favorites]
But to speak to the apparent relationship side of this instead - it sounds like some family members may be very invested in you working with "their guy". If you want to keep everything smooth with them, you need to find some way to politely tell them that you're not going to work with this guy without implicitly giving off the message that they're a bunch of chumps for working with this guy.
The way my spouse and I typically manage this is by the one whose family is not involved "taking the bullet" for the one who is. For example, if it's your blood family that's putting the pressure on, maybe the two of you can do a whole song and dance about how nice the planner sounded on the phone and how he seems like he'd be great to work with, but spouse is just having cold feet about investing everything so fast and wants to spend a little more time researching first. Take the money elsewhere while you pretend to hem and haw, and then after the issue has calmed down you can just vaguely allude to having made some compromise with your spouse without giving further details. Obviously this depends on your relatives not being pushy enough to insult or pick fights with your spouse directly, but it's worked out pretty well for the two of us so far.
posted by nanny's striped stocking at 8:07 AM on May 7, 2024 [10 favorites]
Depends on how comfortable you are with a white lie, but to preserve the family relationship consider saying/implying to the advisor that need all of the money liquid for the moment, and transferring the funds to your savings account "for the moment" or "until you know how much you need [for the roof/car/unexpected expense X]." Once the money is in your account, move to Vanguard/Schwab/Fidelity and invest as you wish. You can vaguely suggest that you will consider working with the advisor in the future, and just never do so.
posted by Caz721 at 8:35 AM on May 7, 2024 [6 favorites]
posted by Caz721 at 8:35 AM on May 7, 2024 [6 favorites]
You sound organized, so you probably have retirement savings. You can tell everybody you want your retirement savings in one place, and move the funds to wherever your retirement account is. Not to your 401K, this is inherited money, so can be in a separate investment with your finance company. Though, make sure they're doing a good job.
posted by theora55 at 8:48 AM on May 7, 2024
posted by theora55 at 8:48 AM on May 7, 2024
You shouldn't invest in this, but assuming you have to invest in it for family reasons...
The advisor has already opened the door to you keeping things in liquid funds, meaning that they don't expect you to put the entire 200K in their shoddy product. The financially ideal choice is to invest none of it, but if you have to maybe do something like keeping 50K in a high yield savings account (the liquid funds) outside of his control, telling the advisor to invest 100K in vanguard or other low expense ETFs, and letting him put 50K in the American funds. He'll get $1K or so out of that, and you can always say "let's see how these perform over the next few years or so and we can discuss rebalancing" (but never do).
You can move the numbers above as you see fit, but if you have to invest in these funds to keep the peace I'd recommend figuring out the smallest possible number that does that, and put the rest elsewhere (either with the advisor or preferably outside of their control).
posted by true at 9:01 AM on May 7, 2024 [4 favorites]
The advisor has already opened the door to you keeping things in liquid funds, meaning that they don't expect you to put the entire 200K in their shoddy product. The financially ideal choice is to invest none of it, but if you have to maybe do something like keeping 50K in a high yield savings account (the liquid funds) outside of his control, telling the advisor to invest 100K in vanguard or other low expense ETFs, and letting him put 50K in the American funds. He'll get $1K or so out of that, and you can always say "let's see how these perform over the next few years or so and we can discuss rebalancing" (but never do).
You can move the numbers above as you see fit, but if you have to invest in these funds to keep the peace I'd recommend figuring out the smallest possible number that does that, and put the rest elsewhere (either with the advisor or preferably outside of their control).
posted by true at 9:01 AM on May 7, 2024 [4 favorites]
Given how close you are to retirement, I would add to some of the above suggestions that a blanket "index fund" recommendation may not be ideal (by this people usually mean stocks, which is potentially more risky than you want over a shorter timeframe). You might begin by looking into the concept of a three fund portfolio, which essentially involves mixing index funds in different markets to reduce risk. (A one-stop alternative is of course a target date retirement fund.)
Also: you don't really need a dedicated advisor at all to do some of the best strategies, including a 3 fund portfolio; vanguard/fidelity/schwab (etc) brokerages would let you do it yourself. I wonder if you could escape the family obligations simply by not using one? ("Oh, if we were going to use one we'd definitely use him, but we decided not to." And then maybe don't mention if you do some one-off consults with a fee-only advisor...)
Finally, I'll observe that 7k may not seem huge, but compounded at relatively conservative but plausible rates could be like 20k during your lifetime, which is potentially very non-trivial (a chunk or all of a car, a furnace, a roof, a gift to a family member you actually choose, or...)
posted by advil at 9:08 AM on May 7, 2024 [6 favorites]
Also: you don't really need a dedicated advisor at all to do some of the best strategies, including a 3 fund portfolio; vanguard/fidelity/schwab (etc) brokerages would let you do it yourself. I wonder if you could escape the family obligations simply by not using one? ("Oh, if we were going to use one we'd definitely use him, but we decided not to." And then maybe don't mention if you do some one-off consults with a fee-only advisor...)
Finally, I'll observe that 7k may not seem huge, but compounded at relatively conservative but plausible rates could be like 20k during your lifetime, which is potentially very non-trivial (a chunk or all of a car, a furnace, a roof, a gift to a family member you actually choose, or...)
posted by advil at 9:08 AM on May 7, 2024 [6 favorites]
I admit to not having read and researched all previous answers. I will just ADD (not detract from) the above with my story, in case it's of any value.
When the Bank I worked for got absorbed in 1997 I and a friend of mine ended up at the same new employer. My friend was the kind of guy who carried one of those rubber coin things in his pocket, did a lot of his shopping at Walmart, and had shopped around for a Financial Planner to give opinions about his plan to rollover his 401k. My wife and I met with him physically or virtually and discussed our debts/assets/current investments every 6 months until my recent retirement the end of 2023.
He was not high pressure, and answered all our questions. Each session he sent us a complete report of our net worth. There was a mix of annuities and investments. He also discussed our budget with us, and we were able to work our monthly cash flow expectations into the plan.
So I suppose my point is to look to friends and relatives you TRUST, who ALREADY HAVE HAD SUCCESS. And of course to insure that you understand the pros and cons of every decision he/she asks you to make.
Last point would be to realize that your tax situation will probably change in retirement (at least ours did, both at the Federal and State level) and so it is important to check with a CPA as that date approaches, and/or if an Annuity is involved.
posted by forthright at 9:23 AM on May 7, 2024
When the Bank I worked for got absorbed in 1997 I and a friend of mine ended up at the same new employer. My friend was the kind of guy who carried one of those rubber coin things in his pocket, did a lot of his shopping at Walmart, and had shopped around for a Financial Planner to give opinions about his plan to rollover his 401k. My wife and I met with him physically or virtually and discussed our debts/assets/current investments every 6 months until my recent retirement the end of 2023.
He was not high pressure, and answered all our questions. Each session he sent us a complete report of our net worth. There was a mix of annuities and investments. He also discussed our budget with us, and we were able to work our monthly cash flow expectations into the plan.
So I suppose my point is to look to friends and relatives you TRUST, who ALREADY HAVE HAD SUCCESS. And of course to insure that you understand the pros and cons of every decision he/she asks you to make.
Last point would be to realize that your tax situation will probably change in retirement (at least ours did, both at the Federal and State level) and so it is important to check with a CPA as that date approaches, and/or if an Annuity is involved.
posted by forthright at 9:23 AM on May 7, 2024
If the inheritance/will doesn't state that you will only get the money if this advisor manages it, don't use this advisor. What everyone has said above. Lots of ways to keep the family peace with good quotes above. Keep it all liquid. Cancel the meeting. Then invest it in some quality index and/or big mutual funds. No need to give this "advisor" $7,000 and then end up with some crappy high load fund.
posted by Windopaene at 9:25 AM on May 7, 2024 [1 favorite]
posted by Windopaene at 9:25 AM on May 7, 2024 [1 favorite]
He also claims that the expected return from the American Funds will more than offset the 3.5% fee (apparently there are no other fees associated with the mutual funds).
This is objectively terrible advice and more than enough of a reason to run for the hills. Anything you can do with American Funds, you can do with cheaper investment products at Vanguard or Fidelity. The expected return is the same across similar funds, so the only thing you are getting with American Funds is more expense. This person is a terrible financial advisor and you should not trust them. This is not complicated or a gray area.
posted by Mid at 9:46 AM on May 7, 2024 [7 favorites]
This is objectively terrible advice and more than enough of a reason to run for the hills. Anything you can do with American Funds, you can do with cheaper investment products at Vanguard or Fidelity. The expected return is the same across similar funds, so the only thing you are getting with American Funds is more expense. This person is a terrible financial advisor and you should not trust them. This is not complicated or a gray area.
posted by Mid at 9:46 AM on May 7, 2024 [7 favorites]
I ended up with some of my money tied to a banking relationship that I don’t want for a reason that is actually good (discounted mortgage). It is terrible because despite not being a scam, I don’t do things that I know I should do because instead of logging onto a website and doing whatever, like with the other assets I have in Vanguard, I have to talk to a mildly incompetent guy that I don’t like at all. That means I procrastinate.
Rip the bandaid off and avoid getting into a financial relationship with someone who gives you bad gut feels. It’s not just a one time (ridiculously high! 3.5% is highway robbery!) cost.
posted by A Blue Moon at 9:57 AM on May 7, 2024 [3 favorites]
Rip the bandaid off and avoid getting into a financial relationship with someone who gives you bad gut feels. It’s not just a one time (ridiculously high! 3.5% is highway robbery!) cost.
posted by A Blue Moon at 9:57 AM on May 7, 2024 [3 favorites]
If you are stuck with this guy you should tell him that a front-end load fund is not acceptable and you would like to understand what the other options are. Tell him you are focused on index investing and low cost funds. There is zero reason to pay a front-end load on a mutual fund in 2024 - it is a flat out ripoff, pure and simple, and it should be insulting to you that he is even proposing it. It is a total con. There is no non-scam explanation for it.
posted by Mid at 9:59 AM on May 7, 2024 [9 favorites]
posted by Mid at 9:59 AM on May 7, 2024 [9 favorites]
(apparently there are no other fees associated with the mutual funds)
That's not true. They're actively managed funds that you'll lose a percentage to every year. A much higher percentage than an index fund like VTI or VOO.
Remember the old (by Internet standards) adage - if you're not paying him, you're not the customer, you're the product. He's selling you to American Funds, not vice versa.
The above line about asking whether he has a fiduciary duty to you or not is important. Real advisors do. And why would you take advice from someone not obligated to give you good advice?
posted by Candleman at 10:08 AM on May 7, 2024 [5 favorites]
That's not true. They're actively managed funds that you'll lose a percentage to every year. A much higher percentage than an index fund like VTI or VOO.
Remember the old (by Internet standards) adage - if you're not paying him, you're not the customer, you're the product. He's selling you to American Funds, not vice versa.
The above line about asking whether he has a fiduciary duty to you or not is important. Real advisors do. And why would you take advice from someone not obligated to give you good advice?
posted by Candleman at 10:08 AM on May 7, 2024 [5 favorites]
It is equally insane to blindly follow this Financial Advisor's advice as it is to follow people on the internet with their own biases advice.
What I suggest is to say to him that you are still learning and trying to figure out what the best course of action is. You are not comfortable making a decision about a load fund without learning much more about it and about investing in general. To that end, you want to put the money in a no load fund, perhaps the Vanguard fund you mentioned. After a learning period, you will reconsider his American Funds. Then put your money where it is not going to have upfront fees that lock you into an investment while hoping to make your money back and losing time. 8 years is not long in investing time frames.
posted by JohnnyGunn at 10:10 AM on May 7, 2024 [1 favorite]
What I suggest is to say to him that you are still learning and trying to figure out what the best course of action is. You are not comfortable making a decision about a load fund without learning much more about it and about investing in general. To that end, you want to put the money in a no load fund, perhaps the Vanguard fund you mentioned. After a learning period, you will reconsider his American Funds. Then put your money where it is not going to have upfront fees that lock you into an investment while hoping to make your money back and losing time. 8 years is not long in investing time frames.
posted by JohnnyGunn at 10:10 AM on May 7, 2024 [1 favorite]
It is equally insane to blindly follow this Financial Advisor's advice as it is to follow people on the internet with their own biases advice.
No. OP has been given a lot of specific advice with references and explanations. Looking into that advice is not "blindly following it."
Fiduciary Duty is a legal term. I suppose it's technically an opinion that one's financial advisor should be required to give you good advice but not really.
posted by Candleman at 10:33 AM on May 7, 2024 [12 favorites]
No. OP has been given a lot of specific advice with references and explanations. Looking into that advice is not "blindly following it."
Fiduciary Duty is a legal term. I suppose it's technically an opinion that one's financial advisor should be required to give you good advice but not really.
posted by Candleman at 10:33 AM on May 7, 2024 [12 favorites]
Can this dude discuss your finances with your family? Presumably not. Place a grand with him to continue being his client so he can't even say "oh they aren't with me anymore" and remind him that you don't want your business discussed elsewhere even if he's a family friend.
posted by Iteki at 10:43 AM on May 7, 2024 [4 favorites]
posted by Iteki at 10:43 AM on May 7, 2024 [4 favorites]
Here's some examples of American Funds performance.
Most of the funds have pretty miserable performance but there's a few that claim to beat the indexes. But that's based on a 50+ year timeline. Here's a chart of the three best performers against two flagship Vanguard funds over the past decade. Please note that stockcharts.com assumes that dividends are reinvested with no taxes. And that's without the 3.5% hit that the commission would suck out of your holdings.
These are facts, JohnnyGunn, not opinions.
Opinion mode: active managed funds should have made a killing in 2020-early 2021. I as a talented amateur substantially beat the indexes every year since 2019, often with 100-800% gains within 3 years. If an active fund didn't exceed the indexes during that time, I'd seriously question what you're paying for.
For example, compare Fidelity's Contrafund performance.
As a note, I have no connection to any of the companies mentioned other than holding VTI, VOO, and FCNTX. I am not a financial advisor and I am not your financial advisor.
posted by Candleman at 11:22 AM on May 7, 2024 [4 favorites]
Most of the funds have pretty miserable performance but there's a few that claim to beat the indexes. But that's based on a 50+ year timeline. Here's a chart of the three best performers against two flagship Vanguard funds over the past decade. Please note that stockcharts.com assumes that dividends are reinvested with no taxes. And that's without the 3.5% hit that the commission would suck out of your holdings.
These are facts, JohnnyGunn, not opinions.
Opinion mode: active managed funds should have made a killing in 2020-early 2021. I as a talented amateur substantially beat the indexes every year since 2019, often with 100-800% gains within 3 years. If an active fund didn't exceed the indexes during that time, I'd seriously question what you're paying for.
For example, compare Fidelity's Contrafund performance.
As a note, I have no connection to any of the companies mentioned other than holding VTI, VOO, and FCNTX. I am not a financial advisor and I am not your financial advisor.
posted by Candleman at 11:22 AM on May 7, 2024 [4 favorites]
Look, this person basically wants to steal $7000 from you. You don’t owe him the time of day.
If you absolutely cannot cancel the meeting, befoee you go into the meeting, put the money (all of it) into a 6 month CD. Say, “sorry the money is tied up for 6 months. We’ll have to wait on making any changes.” Then ignore his calls.
posted by haptic_avenger at 12:36 PM on May 7, 2024 [17 favorites]
If you absolutely cannot cancel the meeting, befoee you go into the meeting, put the money (all of it) into a 6 month CD. Say, “sorry the money is tied up for 6 months. We’ll have to wait on making any changes.” Then ignore his calls.
posted by haptic_avenger at 12:36 PM on May 7, 2024 [17 favorites]
Money isn't really about money, a lot of the time. It is all tied up with emotion, whether that be shame, greed, love, pride, all are possible. So I am sympathetic to a family situation where a bequest comes with strings attached. (Sure, ideally that doesn't happen except for very good, individual reasons, but we live in reality.) I am also sympathetic to those many posters who have pointed out that 3.5% load is shockingly high, even when compared with other actively managed funds. Full disclosure, my money is all in Vanguard index funds and it would drive me crazy to be paying a fee like that. But I also would not look a gift horse in the mouth. People in general do not hand out six figure gifts for no reason. So I would take some time to understand the situation. What's the motivation behind the gift, behind the use of this financial advisor? Call me a pushover if you want, but I would want to be very, very grateful for a gift, even with strings attached. And people do not appreciate having their mistakes pointed out, even if choosing a subpar financial advisor is a big mistake indeed.
But overall I think the advisor's strategy is not a bad one, even if the implementation is one that in all honesty only makes sense for the advisor. A mix of stocks, bonds, and some short term "fun" money is a great use of a large gift. It does depend on your personal situation, obviously, but also your tolerance for risk. Just to put a couple numbers out there, I looked at the asset allocations between two Vanguard funds, the Target Retirement Income fund and the 2035 Target Date fund, which is a bit beyond your time horizon but will be helpful for comparison. The income fund is designed to be your main source of stable (ish) income in retirement. It is allocated 70% to bonds and 30% to stocks. The 2035 fund is the reverse. So over a 10 year period, roughly, a reasonable person would swap about 5% from stocks into bonds, even if their only investment opportunities were high-cost, actively managed funds.
If you want to defer the decision entirely, it's also not a bad idea to punt and put the whole amount in a 1 year U.S. Treasury bill. Note that I do not mean a treasury fund with a 1-year average maturity, I mean a single actual T-Bill. Or a 1-year CD, if that's easier. Either will earn you 5-something percent of guaranteed risk-free return in these times of higher interest and higher inflation, and give you some breathing room to make decisions about how to manage the money going forward. Are you leaving some potential appreciation on the table? Sure, yes. But you will probably sleep better.
posted by wnissen at 1:20 PM on May 7, 2024 [1 favorite]
But overall I think the advisor's strategy is not a bad one, even if the implementation is one that in all honesty only makes sense for the advisor. A mix of stocks, bonds, and some short term "fun" money is a great use of a large gift. It does depend on your personal situation, obviously, but also your tolerance for risk. Just to put a couple numbers out there, I looked at the asset allocations between two Vanguard funds, the Target Retirement Income fund and the 2035 Target Date fund, which is a bit beyond your time horizon but will be helpful for comparison. The income fund is designed to be your main source of stable (ish) income in retirement. It is allocated 70% to bonds and 30% to stocks. The 2035 fund is the reverse. So over a 10 year period, roughly, a reasonable person would swap about 5% from stocks into bonds, even if their only investment opportunities were high-cost, actively managed funds.
If you want to defer the decision entirely, it's also not a bad idea to punt and put the whole amount in a 1 year U.S. Treasury bill. Note that I do not mean a treasury fund with a 1-year average maturity, I mean a single actual T-Bill. Or a 1-year CD, if that's easier. Either will earn you 5-something percent of guaranteed risk-free return in these times of higher interest and higher inflation, and give you some breathing room to make decisions about how to manage the money going forward. Are you leaving some potential appreciation on the table? Sure, yes. But you will probably sleep better.
posted by wnissen at 1:20 PM on May 7, 2024 [1 favorite]
If your plan is to go to him and make him do a thing you already decided, independent of him, that you're doing... why are you having the meeting?
There is very little point in involving someone you don't trust in your money IMO and others above have detailed why you probably should not trust this guy.
posted by eirias at 1:29 PM on May 7, 2024 [2 favorites]
There is very little point in involving someone you don't trust in your money IMO and others above have detailed why you probably should not trust this guy.
posted by eirias at 1:29 PM on May 7, 2024 [2 favorites]
Meaning absolutely no offense to theora55, but please do not use Rich Dad Poor Dad as investment advice. I recommend the If Books Could Kill episode on the book (link has a transcript as well as the podcast). The short form is that a) Rich Dad didn't exist in the form Kiyosaki presents, and b) Kiyosaki didn't make his money on investing. More specifically, Kiyosaki made his money on writing these self-help books and running seminars. Even there, his career didn't really take off till Oprah gave him a platform.
He also recommends a lot of things which are simply tax fraud.
posted by Bryant at 1:35 PM on May 7, 2024 [13 favorites]
He also recommends a lot of things which are simply tax fraud.
posted by Bryant at 1:35 PM on May 7, 2024 [13 favorites]
The one reason to go with an advisor like this is if you want white glove service.
As the family retainer, this advisor is focussed on relationships rather than transactional value. He will remember birthdays, hobbies, family news, and make you feel special. He will take weekend phone calls and keep track of details for you. He will likely refuse the sketchy transfers when somebody gets scammed, and offer to liaise with your tax accountant and estate lawyer.
This kind of advisor doesn't charge by the minute for the extras and the handholding and the nice office where you can come by and talk over a cup of coffee. His time and attentiveness feel like a gift because it comes out of the fees. Some people are happy to pay extra for this.
So this is probably where your family is coming from. Either they get premium everything else or they distrust their own ability to handle financial details, or both. There's a lot of good advice here on superficially acquiescing while doing things your own way. Ideally, you talk to the guy and convey a friendly understanding that you appreciate how much they do for your family but you can handle this yourself.
posted by dum spiro spero at 2:32 PM on May 7, 2024 [2 favorites]
As the family retainer, this advisor is focussed on relationships rather than transactional value. He will remember birthdays, hobbies, family news, and make you feel special. He will take weekend phone calls and keep track of details for you. He will likely refuse the sketchy transfers when somebody gets scammed, and offer to liaise with your tax accountant and estate lawyer.
This kind of advisor doesn't charge by the minute for the extras and the handholding and the nice office where you can come by and talk over a cup of coffee. His time and attentiveness feel like a gift because it comes out of the fees. Some people are happy to pay extra for this.
So this is probably where your family is coming from. Either they get premium everything else or they distrust their own ability to handle financial details, or both. There's a lot of good advice here on superficially acquiescing while doing things your own way. Ideally, you talk to the guy and convey a friendly understanding that you appreciate how much they do for your family but you can handle this yourself.
posted by dum spiro spero at 2:32 PM on May 7, 2024 [2 favorites]
“ The one reason to go with an advisor like this is if you want white glove service.”
But it’s only 200k. Yes I realize that is more than a lot of people have, but many many of us have around that amout in 401ks and don’t need any services at all. It’s just not necessary.
As for going with this advisor because the departed relative wanted it - I sort of doubt a will could actually bind you to a particular service provider.
And I do not think that OP should feel obligated to use this guy out of respect for anyone’s wishes. He’s literally trying to rip them off. Who knows if he’ll limit his bad advice to just this investment. Absolutely zero moral or ethical reason to subject yourself to that risk.
posted by haptic_avenger at 3:00 PM on May 7, 2024 [7 favorites]
But it’s only 200k. Yes I realize that is more than a lot of people have, but many many of us have around that amout in 401ks and don’t need any services at all. It’s just not necessary.
As for going with this advisor because the departed relative wanted it - I sort of doubt a will could actually bind you to a particular service provider.
And I do not think that OP should feel obligated to use this guy out of respect for anyone’s wishes. He’s literally trying to rip them off. Who knows if he’ll limit his bad advice to just this investment. Absolutely zero moral or ethical reason to subject yourself to that risk.
posted by haptic_avenger at 3:00 PM on May 7, 2024 [7 favorites]
Don't use this guy to appease your family unless your family is also willing to reimburse the thousands of dollars he will cost you, first up-front, and then yearly from being in a managed fund. This guy is not just charging you unnecessary fees, he is being a shameless liar about it, 70s style, and in a properly run country he literally would not have a job that involved handling money. (Someone stole my mother's retirement money like this, with a 5.95% front-end fee (that was of course kicked back to him), and years after finding out I am still fuming.)
I know $200K may feel like a lot, but, speaking strictly from an implementation perspective, a thirteen-year-old could manage it. Put it in an IRA [and, when you hit the limit, in a brokerage account] at Vanguard in their Retirement Target 2035 Fund and it will be fine. There are ways you could try to tinker with it, but this is a "safe" (quotes because nothing is ever guaranteed) option that at least won't have you spending money on useless junk. Over the years, those small percentages end up being big differences in outcomes.
posted by praemunire at 4:04 PM on May 7, 2024 [4 favorites]
I know $200K may feel like a lot, but, speaking strictly from an implementation perspective, a thirteen-year-old could manage it. Put it in an IRA [and, when you hit the limit, in a brokerage account] at Vanguard in their Retirement Target 2035 Fund and it will be fine. There are ways you could try to tinker with it, but this is a "safe" (quotes because nothing is ever guaranteed) option that at least won't have you spending money on useless junk. Over the years, those small percentages end up being big differences in outcomes.
posted by praemunire at 4:04 PM on May 7, 2024 [4 favorites]
But it’s only 200k. Yes I realize that is more than a lot of people have, but many many of us have around that amout in 401ks and don’t need any services at all. It’s just not necessary.
It's not just that it's not necessary, though that's true. No one's giving you "white glove service" with $200K AUM on its own. Nobody!
posted by praemunire at 4:05 PM on May 7, 2024 [8 favorites]
It's not just that it's not necessary, though that's true. No one's giving you "white glove service" with $200K AUM on its own. Nobody!
posted by praemunire at 4:05 PM on May 7, 2024 [8 favorites]
Obviously, without the complicated family reasons, the decision is very, very clear.
Since the reasons are there, it would help to at least seek to understand where they are coming from.
posted by dum spiro spero at 4:22 PM on May 7, 2024 [1 favorite]
Since the reasons are there, it would help to at least seek to understand where they are coming from.
posted by dum spiro spero at 4:22 PM on May 7, 2024 [1 favorite]
The one reason to go with an advisor like this is if you want white glove service.
No way! High net worth people do not pay for "white glove service" through 3.5% front end load fees! They pay their advisor some percentage on their AUM, but nothing close to 3.5%, and not embedded in some non-transparent front-end fee and kick-back program. This type of fee is the hallmark of a scam product and a scammy advisor. It is absolutely not the hallmark of a "white glove" experience.
posted by Mid at 4:46 PM on May 7, 2024 [7 favorites]
No way! High net worth people do not pay for "white glove service" through 3.5% front end load fees! They pay their advisor some percentage on their AUM, but nothing close to 3.5%, and not embedded in some non-transparent front-end fee and kick-back program. This type of fee is the hallmark of a scam product and a scammy advisor. It is absolutely not the hallmark of a "white glove" experience.
posted by Mid at 4:46 PM on May 7, 2024 [7 favorites]
Best answer: Just adding my one voice to the choir here: run, don't walk, cancel that meeting, away from EJ and American funds. Open a vanguard account and invest in a low cost index fund.
posted by Dashy at 5:53 PM on May 7, 2024 [3 favorites]
posted by Dashy at 5:53 PM on May 7, 2024 [3 favorites]
Along the white lie approach, you could always tell the advisor you want to do some more research and figure out which of these great funds is the best option. While you're doing that, though, you don't want the money sitting idle, so have him put it into some exchange traded funds (ETFs) like SPY for the S&P 500 and/or whatever bond ETF you'd like. Tell him it's a stop gap, and then just never acquiesce to moving it. Once it's invested, he can't move it without your approval.
This isn't ideal since you'll pay a commission on the ETF purchases. Double check, but it should be much less than 3.5%, and since the advisor is making some money off of you and gets to keep the assets, it may smooth over the family side of things. Good luck!
posted by limagringo at 5:07 AM on May 8, 2024
This isn't ideal since you'll pay a commission on the ETF purchases. Double check, but it should be much less than 3.5%, and since the advisor is making some money off of you and gets to keep the assets, it may smooth over the family side of things. Good luck!
posted by limagringo at 5:07 AM on May 8, 2024
“ Since the reasons are there, it would help to at least seek to understand where they are coming from.”
I mean, why? What could the legitimate reason possibly be?
posted by haptic_avenger at 5:29 AM on May 8, 2024
I mean, why? What could the legitimate reason possibly be?
posted by haptic_avenger at 5:29 AM on May 8, 2024
Here is an article on Bloomberg about front-end load funds that is pretty informative. This is a gift link that will expire in a week or so. Key quote: In no event should you ever buy a load fund,” Princeton University professor Burton Malkiel advises in his best-selling investment guide “A Random Walk Down Wall Street,” now in its 10th edition. “There’s no point in paying for something if you can get it free.”
posted by Mid at 6:16 AM on May 8, 2024 [2 favorites]
posted by Mid at 6:16 AM on May 8, 2024 [2 favorites]
Response by poster: Thanks go out to everyone for the useful information. Just a clarification: Our money is already being held by "Edward Bones" because my father-in-law was using them when he died. So my spouse and I pretty much have to meet with the financial advisor. I expect that he will push back against the decision to avoid any front-load mutual funds. I like the idea of telling him that we just want to put the money into an unmanaged fund to give us some time while we do more research. He might see through that ploy, though.
I'm not eager to move the money out of that account altogether. The current financial advisor was very good to my father-in-law and fixed a bunch of messes that were created by the previous advisor (who continued working even after he became ill and developed cognitive issues).
posted by akk2014 at 8:25 AM on May 8, 2024 [1 favorite]
I'm not eager to move the money out of that account altogether. The current financial advisor was very good to my father-in-law and fixed a bunch of messes that were created by the previous advisor (who continued working even after he became ill and developed cognitive issues).
posted by akk2014 at 8:25 AM on May 8, 2024 [1 favorite]
These kinds of funds are meant to be held for a long time, such that paying all the fees up front makes sense. HOWEVER, scumbag advisors like to put people in this sort of fund, and then in a few years tell you that it's not performing as well as they'd like, so you should move it to a different fund, that (surprise!) has another big lump sum fee.
You DO NOT have to meet with this advisor at all. You can open an account at any place of your choosing (e.g., Vanguard, Fidelity, etc.) and contact the new company about transferring the existing holdings over. They will do all of the work for you and you won't even have to have an awkward conversation about it.
Don't let the Ed Jones guy make you feel like this is anything other than YOUR money. If you want your money in an unmanaged fund, you don't need any "ploys" to make that happen. It's your money. You can put it in an index fund, or blow it on a McLaren, or light it on fire in the park if you want.
The "personal finance" forum on Reddit has a lot of good resources for managing a windfall that can help you decide what to do with it.
posted by Blue Jello Elf at 8:37 AM on May 8, 2024 [5 favorites]
You DO NOT have to meet with this advisor at all. You can open an account at any place of your choosing (e.g., Vanguard, Fidelity, etc.) and contact the new company about transferring the existing holdings over. They will do all of the work for you and you won't even have to have an awkward conversation about it.
Don't let the Ed Jones guy make you feel like this is anything other than YOUR money. If you want your money in an unmanaged fund, you don't need any "ploys" to make that happen. It's your money. You can put it in an index fund, or blow it on a McLaren, or light it on fire in the park if you want.
The "personal finance" forum on Reddit has a lot of good resources for managing a windfall that can help you decide what to do with it.
posted by Blue Jello Elf at 8:37 AM on May 8, 2024 [5 favorites]
Places like Vanguard really really like having your business (for non scammy reasons). If you open a Vanguard account you can just tell them you want to transfer money in, tell them where it is and roughly how much is there, and they will just sort out the whole thing for you. You can do this all online, without even calling Vanguard.
If you think that this advisor of yours is going to use the meeting to scam you out of multiple thousand dollars, or pressure you into doing anything else you don't want to do, that's even more reason to not meet with him, but talk to an advisor who's not on commission.
Just because your current advisor previously had some basic level of competence at their job when doing it for your father in law, doesn't mean you now owe them several more thousand dollars yourself. Your father in law has already paid for the guy's services that he performed in the past. That doesn't obligate you to use those same services yourself any more than you're obligated to use FIL's favourite baker, plumber, or auto service place.
Remember, this is business, not personal. Stopping using someone's services is not like dumping them as a friend or insulting them or anything of that kind, and if they try to imply such a thing then that's extra scammy and a massive red flag.
posted by quacks like a duck at 10:11 AM on May 8, 2024 [5 favorites]
If you think that this advisor of yours is going to use the meeting to scam you out of multiple thousand dollars, or pressure you into doing anything else you don't want to do, that's even more reason to not meet with him, but talk to an advisor who's not on commission.
Just because your current advisor previously had some basic level of competence at their job when doing it for your father in law, doesn't mean you now owe them several more thousand dollars yourself. Your father in law has already paid for the guy's services that he performed in the past. That doesn't obligate you to use those same services yourself any more than you're obligated to use FIL's favourite baker, plumber, or auto service place.
Remember, this is business, not personal. Stopping using someone's services is not like dumping them as a friend or insulting them or anything of that kind, and if they try to imply such a thing then that's extra scammy and a massive red flag.
posted by quacks like a duck at 10:11 AM on May 8, 2024 [5 favorites]
If you choose to meet with the the American Funds advisor, here are some specific questions to ask.
Where is the advisor's fiduciary duty? Is it to you, the estate or someone else?
Is the money in an existing set of funds? Can it be maintained as is or has it already been dispersed to cash through the estate?
American Funds has different share classes with different fees. You should ask which share class the advisor suggests purchasing and why it is the most efficient purchase. E.g. It used to be more efficient to buy C shares upfront with a lower sales charge, but a higher maintenance fee. They would then age into A shares after 10 years which have a lower maintenance fee.
$200k is not a large account with American Funds. If you have additional money you can add to the account, you should ask to file a Rights of Accumulation (ROA) with the investment. Basically, it says that you plan to invest further funds into the account over a time range and may purchase the entire investment at a lower sales charge. This could significantly reduce the sales charge as there is a large reduction at $250k.
posted by graxe at 12:14 PM on May 8, 2024 [1 favorite]
Where is the advisor's fiduciary duty? Is it to you, the estate or someone else?
Is the money in an existing set of funds? Can it be maintained as is or has it already been dispersed to cash through the estate?
American Funds has different share classes with different fees. You should ask which share class the advisor suggests purchasing and why it is the most efficient purchase. E.g. It used to be more efficient to buy C shares upfront with a lower sales charge, but a higher maintenance fee. They would then age into A shares after 10 years which have a lower maintenance fee.
$200k is not a large account with American Funds. If you have additional money you can add to the account, you should ask to file a Rights of Accumulation (ROA) with the investment. Basically, it says that you plan to invest further funds into the account over a time range and may purchase the entire investment at a lower sales charge. This could significantly reduce the sales charge as there is a large reduction at $250k.
posted by graxe at 12:14 PM on May 8, 2024 [1 favorite]
I'm not eager to move the money out of that account altogether. The current financial advisor was very good to my father-in-law and fixed a bunch of messes that were created by the previous advisor (who continued working even after he became ill and developed cognitive issues).
Buy this guy a $500-$1000 gift for all he did for your family, and move your business elsewhere, ideally by formally requesting a transfer to low cost vanguard funds that you can - and should open yourself online, that will cost you <1>profits.
If he refuses, you know what he really did: rip your family off, with a helpful smile on his face.1>
posted by lalochezia at 1:37 PM on May 8, 2024 [2 favorites]
Buy this guy a $500-$1000 gift for all he did for your family, and move your business elsewhere
This is actually a great way to think about it. 3.5% of $200k is $7,000. If you were planning to cash it out for a down payment on a house or something, would you ever in a million years think that you owed him a $7,000 "thank you" gift afterwards?
posted by Blue Jello Elf at 1:42 PM on May 8, 2024 [2 favorites]
This is actually a great way to think about it. 3.5% of $200k is $7,000. If you were planning to cash it out for a down payment on a house or something, would you ever in a million years think that you owed him a $7,000 "thank you" gift afterwards?
posted by Blue Jello Elf at 1:42 PM on May 8, 2024 [2 favorites]
This isn't ideal since you'll pay a commission on the ETF purchases.
This is no longer true. Every major broker will let you buy and sell with no commission at this point (if you do it yourself online).
posted by Candleman at 9:55 PM on May 8, 2024 [1 favorite]
This is no longer true. Every major broker will let you buy and sell with no commission at this point (if you do it yourself online).
posted by Candleman at 9:55 PM on May 8, 2024 [1 favorite]
Response by poster: Not sure if anyone is still following this thread, but I wanted to give an update. My spouse and I attended the meeting with the advisor today... and it turned into an hour-long ordeal while he berated us for questioning his judgment (because we had inquired about no-load index funds) and attempting to deprive him of income after everything he had done for our family. His behavior today was quite unexpected and out of character based on his earlier actions. My spouse and I left the meeting in shock. We'll be moving our money to Vanguard very soon.
Incidentally, I had somewhat of a bad feeling about him from the start, since I don't trust people who wear their religion on their sleeve. He has pictures of Jesus everywhere and peppers his speech with religious references.
Thanks again to everyone who commented. You guys were right!
posted by akk2014 at 8:43 PM on May 9, 2024 [15 favorites]
Incidentally, I had somewhat of a bad feeling about him from the start, since I don't trust people who wear their religion on their sleeve. He has pictures of Jesus everywhere and peppers his speech with religious references.
Thanks again to everyone who commented. You guys were right!
posted by akk2014 at 8:43 PM on May 9, 2024 [15 favorites]
Best answer: Thanks again to everyone who commented. You guys were right!
Honestly, your own instincts were 100% right from the get-go! You had doubts and concerns and wanted to put the money into a broad-based index fund. Mefi just had your back.
posted by Text TK at 6:44 AM on May 10, 2024 [5 favorites]
Honestly, your own instincts were 100% right from the get-go! You had doubts and concerns and wanted to put the money into a broad-based index fund. Mefi just had your back.
posted by Text TK at 6:44 AM on May 10, 2024 [5 favorites]
Oooh, based on your update OP, that is much much worse than I was thinking. That "advisor" does not have your best interests at heart, obviously.
posted by wnissen at 8:37 AM on May 10, 2024 [3 favorites]
posted by wnissen at 8:37 AM on May 10, 2024 [3 favorites]
Yikes!
...OK, once your money is free of this shitlord, maybe consider filing a complaint with his employer.
posted by aramaic at 10:19 AM on May 10, 2024 [2 favorites]
...OK, once your money is free of this shitlord, maybe consider filing a complaint with his employer.
posted by aramaic at 10:19 AM on May 10, 2024 [2 favorites]
Best answer: Ah crud, I lost the rest of my comment: when moving to Vanguard, have a look at the Bogle Three-Fund Strategy. It's about as bulletproof as investing gets.
posted by aramaic at 10:21 AM on May 10, 2024 [3 favorites]
posted by aramaic at 10:21 AM on May 10, 2024 [3 favorites]
Also, Vanguard offers very reasonable advisor services, if that is what you want. They have different levels of cost/service - the cheapest just puts you into a "robo" portfolio that is constructed by algorithm to match your age, risk tolerance, etc. I would do something like this if I didn't know anything about investing and didn't want spend a lot of time on it. The prices/fees are very low.
posted by Mid at 1:55 PM on May 11, 2024 [1 favorite]
posted by Mid at 1:55 PM on May 11, 2024 [1 favorite]
attempting to deprive him of income
And this is precisely why fee based financial advisors are best. They set their fee based on what they feel their time is worth. If someone accepts a session with them, they get paid no matter whether the client follows their advice or not.
posted by Candleman at 10:35 PM on May 11, 2024 [2 favorites]
And this is precisely why fee based financial advisors are best. They set their fee based on what they feel their time is worth. If someone accepts a session with them, they get paid no matter whether the client follows their advice or not.
posted by Candleman at 10:35 PM on May 11, 2024 [2 favorites]
And this is precisely why fee based financial advisors are best.
I'm assuming you meant "fee-only" because "fee-based" is what this lousy financial advisor was. Fee-only is the way to go.
posted by cooker girl at 10:21 AM on May 22, 2024
I'm assuming you meant "fee-only" because "fee-based" is what this lousy financial advisor was. Fee-only is the way to go.
posted by cooker girl at 10:21 AM on May 22, 2024
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Don't even go to the meeting, your instincts are good, you do not need this guy. Read some Bogleheads books.
posted by mskyle at 6:48 AM on May 7, 2024 [62 favorites]