How I ended up at Vanguard robo-advisors

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WhiskerBiscuit
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How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sat Oct 28, 2017 1:48 pm

Just thought I’d sign up and introduce myself and describe how I got from here to there:

For many years, I left my savings in about a half dozen mutual funds. Some were lost cost index funds, others were managed. I kept meaning to do it myself, but I could never get myself over the hump to go reallocate. Part of this was fear of having to learn something new, and if I’m frank about it part of it was due to the fact that I suffer from depression and just doing some simple things causes a lot of stress. I’m sure there are a lot of people who just can’t bring themselves to manage their own investments due to psychological issues. If this sounds crazy to you, I agree, but for me it’s real.

Fortunately I don’t pay any attention to the stock market, so I’ve never lost any sleep over things, even in the 2009 market crash. When I got married, I took over all of our investment portfolios. But still, things just sat there. One day my folks got invited to one of those free AXA advisors dinners where they pitch their investment strategy. One thing I have to say about AXA, the dinner was really good!

We decided to go in and interview the guy who did the pitch. Things got immediately off to a bad start; The secretary greeted us and treated me like I was in charge and my wife like she was a second class citizen. Then when we got into the boardroom we realized we were bait and switched. Instead of speaking to the main guy, we got his assistant. My wife found a list of questions that you should ask financial advisors, but I only remember one. She asked him “Why did you get into this line of work?” And to his credit, he answered truthfully. He cocked his head back and his eyes looked towards the sky and said “It’s lucrative.” It wasn’t a total waste of time. I did say the dinner was good!

So I talked to a friend and told him about the experience and he suggested I call Ric Edelman. If you are unfamiliar with him, he has a syndicated radio show based in Washington DC where he discusses all sorts of personal financial issues. His advice is pretty basic, but he advocates low cost funds, amongst other things. He has own financial advisor firm with several offices around the country. Our experience interviewing one of his advisors was completely different from AXA. His employees all “buy in” to his theory on investing. My biggest fear with any FA is that I will be steered towards investments that benefit the FA, not me. I didn’t have to ask this question, they brought it up first saying they have zero incentives for steering clients to specific funds and they would put that in writing. She also brought up a lot of things we didn’t think about, like our parents financial situation; would we have to plan for their future as well as ours. Knowing we weren’t going to do it ourselves, we went ahead and signed up. Yes, a 1% fee is a real kick in the pants (even though those percentages drop on a progressive basis), but it was either go with someone like them, or do it ourselves and we knew the latter was just not going to happen.

They were very helpful in making the whole thing happen. Especially with getting an annuity my wife had that was a pain in the neck to transfer over. So our overall experience was mostly positive. We didn’t end up using most of the “services” they offer as part of the 1% fee, which I assume most people don’t. The one thing they did offer that was helpful was tax harvesting. They were concerned about minimizing our taxes, and they saved us a lot of money because I would have never thought of doing that, much less knowing how. Yes, I proably could learn that, but once again, I probably wouldn’t do it. The one thing that I didn’t like was their reporting services. There were several accounts that I had to login to in order to see all of our accounts, and it was still hard to get an idea of how we were doing overall. I complained about this for a couple of years, and they kept telling me better reporting was “coming soon”.

Then another friend told me how he was unhappy with his FA. He’d see his FA posting on Facebook about the golf trips he was taking all over the world. Occasionally he’d give my friend a few baseball tickets. I told my friend he was a swell guy for financing these junkets. My friend said he was thinking of switching to Vanguard robo-advisors because of the .3% fee. I immediately called Vanguard and setup an interview. Unbeknownst to me, my family has some trusts setup at Vanguard, and after I re-activated my account (I used to have some Vanguard funds) I learned I was a “high worth” individual based upon the trust, so I was entitled to a concerige point of contact. He was able to get an interview setup with a Vanguard FA. He explained this theory of investing, basically low-cost funds, diversification, having a proper ratio of stocks to bonds based upon retirement age, etc. Nothing mind blowing. He also confirmed that tax harvesting was also part of the management fee.

So we did the switch. Since all of our funds were at Edelman, it was fairly easy. Just a few forms had to be signed, and a trip to a notary. I’ve been happy with the reports available at Vanguard. I’ve also been REALLY happy with the management fee. Sure, it’s probably too much for many of you here, but to me .3% is a lot less than 1%, for essentially the same service. Maybe I’ll “fire” the advisor someday and keep that .3% for myself. But I’m pretty pleased with the savings so far.

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nedsaid
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Re: How I ended up at Vanguard robo-advisors

Post by nedsaid » Sat Oct 28, 2017 3:27 pm

You are the perfect person for an advisory service. Human psychology is a powerful force and I give you lots of credit for recognizing your limitations. Most people tend to overestimate their own investment abilities, we are mostly legends in our own minds, particularly after long bull markets. Congratulations on taking the bull by the horns and finding advisory services, Rick Edelman was probably okay, you will be pleased with Vanguard and their lower fees. 1% a year is just too much to pay in my opinion.

By the way, your first post was very interesting and well written. Please post again and tell us how things worked out at Vanguard.

Best wishes,

Ned
A fool and his money are good for business.

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Taylor Larimore
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Re: How I ended up at Vanguard robo-advisors

Post by Taylor Larimore » Sat Oct 28, 2017 3:44 pm

WhiskerBiscuit:

Welcome to the SatuMedia Forum!

Thank you for your first post recounting your experience with Rick Edelman and your subsequent transfer to Vanguard's PAS advisory service. It will help countless investors who are (unknowingly) paying unreasonable fees for sub-optimal advice.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

drzzzzz
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Re: How I ended up at Vanguard robo-advisors

Post by drzzzzz » Sat Oct 28, 2017 4:38 pm

Whiskerbiscuit
A nice summary, however regarding this statement "He also confirmed that tax harvesting was also part of the management fee." - Please let us know if it happens, when and if the time arises within your account. Vanguard Advisor Services mention that they tax loss harvesting as appropriate for the client. My concern is that Vanguard Advisor Services, by default, uses average cost for their account's mutual funds, rather than specific identification - so I really am not sure how, or how effectively they can tax loss harvest using that methodology since the average of the position would have to be underwater to harvest a loss.

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sat Oct 28, 2017 5:19 pm

nedsaid wrote:
Sat Oct 28, 2017 3:27 pm
You are the perfect person for an advisory service. Human psychology is a powerful force and I give you lots of credit for recognizing your limitations. Most people tend to overestimate their own investment abilities, we are mostly legends in our own minds, particularly after long bull markets. Congratulations on taking the bull by the horns and finding advisory services, Rick Edelman was probably okay, you will be pleased with Vanguard and their lower fees. 1% a year is just too much to pay in my opinion.

By the way, your first post was very interesting and well written. Please post again and tell us how things worked out at Vanguard.

Best wishes,

Ned
I should also point out that between my wife and me, we have around 8 accounts at Vanguard, just between ourselves. Taxable brokerage, IRA, Sep-IRA, Roth-Ira, etc. Besides selecting a portfolio of funds, one also has to consider in which accounts they should be purchased. Unfortunately a lot of our money is in taxable accounts, not because we haven’t been contributing to non-taxable accounts, but because of some windfall events. Yeah, 1st world problems, right?

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sat Oct 28, 2017 5:24 pm

drzzzzz wrote:
Sat Oct 28, 2017 4:38 pm
Whiskerbiscuit
A nice summary, however regarding this statement "He also confirmed that tax harvesting was also part of the management fee." - Please let us know if it happens, when and if the time arises within your account. Vanguard Advisor Services mention that they tax loss harvesting as appropriate for the client. My concern is that Vanguard Advisor Services, by default, uses average cost for their account's mutual funds, rather than specific identification - so I really am not sure how, or how effectively they can tax loss harvest using that methodology since the average of the position would have to be underwater to harvest a loss.
It already happened last December. He called us early in the month explaining what he wanted to do and what the implications would be for us come April. I absolutely hate the idea of having to sell a position from our funds in order to pay taxes, so I try and make sure I have enough in my checking to cover it, but eventually that is going to happen as our portfolio in taxable accounts starts generating larger returns.

pkcrafter
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Re: How I ended up at Vanguard robo-advisors

Post by pkcrafter » Sat Oct 28, 2017 6:16 pm

Welcome WB,

That is a great introduction, and it will likely benefit other new posters. I am a little puzzled as to why you joined, since you don't seem to be interested in any self management and apparently don't have any questions.

I don't suppose you would want to post your holding for an official Boglehead review. I am confident that Vanguard would do a good job, but we do have some very knowledgeable members who might offer some new insight. To put it another way, they might offer something for you to think about. :shock: :happy

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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nedsaid
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Joined: Fri Nov 23, 2012 12:33 pm

Re: How I ended up at Vanguard robo-advisors

Post by nedsaid » Sat Oct 28, 2017 9:22 pm

WhiskerBiscuit wrote:
Sat Oct 28, 2017 5:19 pm
nedsaid wrote:
Sat Oct 28, 2017 3:27 pm
You are the perfect person for an advisory service. Human psychology is a powerful force and I give you lots of credit for recognizing your limitations. Most people tend to overestimate their own investment abilities, we are mostly legends in our own minds, particularly after long bull markets. Congratulations on taking the bull by the horns and finding advisory services, Rick Edelman was probably okay, you will be pleased with Vanguard and their lower fees. 1% a year is just too much to pay in my opinion.

By the way, your first post was very interesting and well written. Please post again and tell us how things worked out at Vanguard.

Best wishes,

Ned
I should also point out that between my wife and me, we have around 8 accounts at Vanguard, just between ourselves. Taxable brokerage, IRA, Sep-IRA, Roth-Ira, etc. Besides selecting a portfolio of funds, one also has to consider in which accounts they should be purchased. Unfortunately a lot of our money is in taxable accounts, not because we haven’t been contributing to non-taxable accounts, but because of some windfall events. Yeah, 1st world problems, right?
Always good when fortune smiles upon you and you get some windfalls. Vanguard will help you in the proper placement of investments to minimize your taxes. What I will say though is keep good records, you never know when they will come in handy particularly at tax time! Sounds like you and your wife are doing really well and I wish you both the best.

Ned
A fool and his money are good for business.

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sat Oct 28, 2017 9:41 pm

pkcrafter wrote:
Sat Oct 28, 2017 6:16 pm
Welcome WB,

That is a great introduction, and it will likely benefit other new posters. I am a little puzzled as to why you joined, since you don't seem to be interested in any self management and apparently don't have any questions.

I don't suppose you would want to post your holding for an official Boglehead review. I am confident that Vanguard would do a good job, but we do have some very knowledgeable members who might offer some new insight. To put it another way, they might offer something for you to think about. :shock: :happy

Paul
Mostly curious to see what responses would be to robo-advisors. When I get some time, I might post my positions. But I’m loathe to report the actual amounts.

pkcrafter
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Joined: Sun Mar 04, 2007 12:19 pm
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Re: How I ended up at Vanguard robo-advisors

Post by pkcrafter » Sat Oct 28, 2017 10:01 pm

WB:
Mostly curious to see what responses would be to robo-advisors. When I get some time, I might post my positions. But I’m loathe to report the actual amounts.
I don't know what about listing your portfolio would be so disturbing, but the only reason I can think of is you don't like it. Do you have a lot of holdings with very small amounts in them? A lot of small holdings can overwhelm an investor and make it very difficult to manage a portfolio. Also, a lot of small holdings don't provide any benefit. We've seen it all, but If you don't want to, that's OK.

I have no problem with robo-advisors, and for some investors, they are the best choice.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sun Oct 29, 2017 12:47 am

I meant putting actual amounts in. I suppose I could download them and put a percentage.

epictetus
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Re: How I ended up at Vanguard robo-advisors

Post by epictetus » Sun Oct 29, 2017 7:34 am

putting the amounts in percentages would be just fine. you don't have to put in the actual dollar amounts.
Focus on what you can control

David Scubadiver
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Re: How I ended up at Vanguard robo-advisors

Post by David Scubadiver » Sun Oct 29, 2017 5:27 pm

WhiskerBiscuit wrote:
Sat Oct 28, 2017 5:24 pm
drzzzzz wrote:
Sat Oct 28, 2017 4:38 pm
Whiskerbiscuit
A nice summary, however regarding this statement "He also confirmed that tax harvesting was also part of the management fee." - Please let us know if it happens, when and if the time arises within your account. Vanguard Advisor Services mention that they tax loss harvesting as appropriate for the client. My concern is that Vanguard Advisor Services, by default, uses average cost for their account's mutual funds, rather than specific identification - so I really am not sure how, or how effectively they can tax loss harvest using that methodology since the average of the position would have to be underwater to harvest a loss.
It already happened last December. He called us early in the month explaining what he wanted to do and what the implications would be for us come April. I absolutely hate the idea of having to sell a position from our funds in order to pay taxes, so I try and make sure I have enough in my checking to cover it, but eventually that is going to happen as our portfolio in taxable accounts starts generating larger returns.
The Tax loss harvesting is not a sale to pay taxes but a sale to generate a tax loss that will be used to reduce your taxes in the event you sell and realize a gain.

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sun Oct 29, 2017 8:42 pm

drzzzzz wrote:
Sat Oct 28, 2017 4:38 pm
Whiskerbiscuit
A nice summary, however regarding this statement "He also confirmed that tax harvesting was also part of the management fee." - Please let us know if it happens, when and if the time arises within your account. Vanguard Advisor Services mention that they tax loss harvesting as appropriate for the client. My concern is that Vanguard Advisor Services, by default, uses average cost for their account's mutual funds, rather than specific identification - so I really am not sure how, or how effectively they can tax loss harvest using that methodology since the average of the position would have to be underwater to harvest a loss.
I’m going to cut and paste this to my FA. I’ll let you know what he says.

WhiskerBiscuit
Posts: 7
Joined: Sat Oct 28, 2017 1:02 pm

Re: How I ended up at Vanguard robo-advisors

Post by WhiskerBiscuit » Sun Oct 29, 2017 8:45 pm

David Scubadiver wrote:
Sun Oct 29, 2017 5:27 pm
WhiskerBiscuit wrote:
Sat Oct 28, 2017 5:24 pm
drzzzzz wrote:
Sat Oct 28, 2017 4:38 pm
Whiskerbiscuit
A nice summary, however regarding this statement "He also confirmed that tax harvesting was also part of the management fee." - Please let us know if it happens, when and if the time arises within your account. Vanguard Advisor Services mention that they tax loss harvesting as appropriate for the client. My concern is that Vanguard Advisor Services, by default, uses average cost for their account's mutual funds, rather than specific identification - so I really am not sure how, or how effectively they can tax loss harvest using that methodology since the average of the position would have to be underwater to harvest a loss.
It already happened last December. He called us early in the month explaining what he wanted to do and what the implications would be for us come April. I absolutely hate the idea of having to sell a position from our funds in order to pay taxes, so I try and make sure I have enough in my checking to cover it, but eventually that is going to happen as our portfolio in taxable accounts starts generating larger returns.
The Tax loss harvesting is not a sale to pay taxes but a sale to generate a tax loss that will be used to reduce your taxes in the event you sell and realize a gain.
I understand that, however transactions in my taxable accounts could cause me to have income which is reinvested. But I stil have to come up with the money to pay the tax on that.

David Scubadiver
Posts: 522
Joined: Thu Mar 24, 2016 8:40 am

Re: How I ended up at Vanguard robo-advisors

Post by David Scubadiver » Sun Oct 29, 2017 8:48 pm

Maybe I misunderstood. But you can’t be liable for any tax based upon a Tax loss harvest that they do for you. So if there is a negative tax consequence it is from something unrelated to Tax loss harvesting.

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Taylor Larimore
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Re: How I ended up at Vanguard robo-advisors

Post by Taylor Larimore » Sun Oct 29, 2017 9:07 pm

"I understand that, however transactions in my taxable accounts could cause me to have income which is reinvested. But I still have to come up with the money to pay the tax on that."
WhiskerBiscuit:

When you harvest your tax-losses, you sell only shares of funds that have a loss--so there is no capital gain to pay the tax on.

The net result of tax-loss harvesting is that you save taxes because the loss on the sale can be used to offset capital gains and possibly taxable income.

Knowledgeable investors take capital losses in taxable accounts when they can.

Boglehead Wiki--Tax Loss Harvesting

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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nedsaid
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Re: How I ended up at Vanguard robo-advisors

Post by nedsaid » Mon Oct 30, 2017 3:49 pm

WhiskerBiscuit wrote:
Sat Oct 28, 2017 9:41 pm
pkcrafter wrote:
Sat Oct 28, 2017 6:16 pm
Welcome WB,

That is a great introduction, and it will likely benefit other new posters. I am a little puzzled as to why you joined, since you don't seem to be interested in any self management and apparently don't have any questions.

I don't suppose you would want to post your holding for an official Boglehead review. I am confident that Vanguard would do a good job, but we do have some very knowledgeable members who might offer some new insight. To put it another way, they might offer something for you to think about. :shock: :happy

Paul
Mostly curious to see what responses would be to robo-advisors. When I get some time, I might post my positions. But I’m loathe to report the actual amounts.
Over time, I have posted a lot of detail about my own investment portfolio. I have listed my top 15 holdings and the top 10 stocks that I own individually. I also have posted my actual investment results. Don't want to go much further than that as I don't want the additional criticism and also my portfolio isn't as complex as it appears. I can remember the folks here that had a cow when I admitted to a very relaxed attitude towards rebalancing.

It does take some courage posting your portfolio as you will get criticism. Everyone has their own opinions and we all see things a bit differently. When I do portfolio reviews, I look at the big picture and try to focus on what the investor is doing right.

I can't tell you how many times people have posted their portfolios utterly convinced that they messed everything up, when in fact they had done most things right. In many cases, it is a matter of tweaking. The portfolios most criticized here are the ones put together by "experts" at Edward Jones and Ameriprise.

Pretty much, I ask about the rationale behind the portfolios. Is there a plan or is the investor just collecting assets? I often suggest that the investor craft an Investment Policy Statement. A good investment advisor should have a well thought out plan.
A fool and his money are good for business.

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