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We'll you're just one more person fooled by certifications. CFP just lets you know that they have passed a course of study.
BTW just because an adviser is a fiduciary doesn't mean that they are commission-based or fee-based. Fee-based = conflict of interest. Lots of fee-BASED fiduciaries are out there selling annuities and selling them liberally.
Fiduciary or not, they can also be wrong in their advice or mismanage things. I have a brother-in-law who was made executor of a Will. He had everyone's best interests at heart and is ethical to a fault some would say, but he continued to make a total mess out of things even though he had an attorney and accountant involved. Nice guy, but I wouldn't send him out to get a quarter of milk out of fear he'd screw that up. A totally incompetent boob when it comes to matters of money in any form.
I think what it comes down to are results and reputation of who you dealing with. If they make a choice which isn't going to give you the better return out of self-interests, then it's going to hurt them when the client reviews the performance reports.
The huge difference between the ML MFA and other programs where the FA is the designer of the plan and executing the trades is that the MFA is part of a program by ML that a huge amount of clients are using. The trades within it are following a program, not directed by the FA at all. Is there a question of fiduciary among those in research at ML who are guiding the MFA? What about the Mutual Funds themselves? It seems they have the same standard to get the best returns according to the investment model they've put into place. It's all entirely transparent what they do in the MFA.
I could have the FA do the selecting himself, but I decided not to do that for a couple of reasons. One is that he told him at best he does 1% better than the returns from the MFA at times. To me, it's much more risk involved having one person do this, than a department of 40 or so researchers. The reason being, that he is just one human and he can be out with the flu, go on vacation or leave the company, and the MFA will go along even if he doesn't come into the office. He's human, he could be having trouble with a child who's getting messed up with drugs and dropping out of college or whatever, and is distracted from doing his job at his best. That's not going to happen with a department full of researchers who are spending 40 hours a week each just watching over the MFA, or any other type of programs where they do the trading for you.
I asked the FA if he had many clients where he selected everything for them and did the trading. He said a few but most have moved over to things like the MFA. I asked what was different about them that they wanted him to do the trades. He said some clients have special requirements like, they just don't want to be in any kind of international fund no matter what. Some people have an axe to grind with a specific company or sector, and they don't want to be invested in any of that. So in that case, there isn't a pre-defined program to plug them into just for those situations so he does what the client wants. The portfolio fee is the same as the MFA for him to do that.
From Merrill Lynch we have gotten those additional services at no cost such as retirement planning, portfolio advice on a 401(k), and consulting on handling an estate. The retirement planning was a very extensive questionnaire, it wasn't some calculator on a website.
Absent from the discussion in this thread is the interaction between your retirement planning and your current investments.
Based on the retirement planning they did for you, do you feel confident you could retire TODAY? I'm guessing the answer is no, as you're still working.
Based on the retirement planning they did for you, do you feel confident you can retire on schedule and that you will have sufficient financial assets to live & thrive? Do you feel confident you will not outlive your money? Based on your comments in this thread, I'd guess the answer to this is "yes". If so, ask your advisor to show you in your retirement financial/retirement planning how the 1.5% fee is explicitly taken into account. It is possible (probable, actually) they do not show the 1.5% as an explicit line item of money going out from your accounts to ML. Make them put that in & give you a spreadsheet that shows your expected returns from now until the end of your life.
Let's say that all the above works out just fine. Let's say you have a 99.9999% chance of your financial assets outlasting you & your spouse given all the planned expenditures you gave them. If so, you're done. Done. No need to worry about anything. Go live your life.
There is an old saying that goes something like this: "If you've ever run a marathon, what are you supposed to do when you cross the finish line? Stop running." Another way of saying this is "Do not take a risk you do not need to take."
The whole purpose of investing is to take a risk -- an educated risk -- in exchange for a future benefit. The reason there is a future benefit -- the reason the ROI on investments is positive -- is that you are taking a risk that someone else didn't want to take.
Think about it this way: BY DEFINITION, for every person who "beats the market", there is someone who "lost to the market." By definition, you add those two together and what do you get? The market.
One thing your ML service is doing for you, by moving in and out of various mutual funds, is attempting to do beat the market. They may not exactly say it that way - but that is what they are attempting to do on your behalf. You need to ask yourself "why am I paying someone to attempt to beat the market on my behalf?"
Why bother to attempt to beat the market IF, given your financial/retirement plan, you are absolutely fine with just earning the market rate of return? Why take a risk of not beating the market if just getting the market return will satisfy your financial plan so you can retire on schedule and have your financial assets outlast you?
What about the Mutual Funds themselves? It seems they have the same standard to get the best returns according to the investment model they've put into place.
SportyAndMisty is right about shuffling around investment. It's nothing more than conflict of interest at work. If they don't get you to make trades then they don't make money, or more money. Google "Efficient Market Hypothesis". Beating the market is something that NO adviser should be attempting to do. Vanguard has an article about what an adviser does. Notice that beating the market is not one of them. Timing the market is not one either. A true fee-only fiduciary will recommend that you buy, hold and rebalance ETF's because ETF's (index funds) are in your best interest. NUMEROUS studies. Here's just one...
so why did more than 80% of fidelity's large cap funds beat their index the last 5 years? you could have flung darts at their large cap funds and odds are beat the index over that time frame.
that chart is really meaningless without seeing the money in those other funds that failed to make grade.
fidelity has 12 million shareholders with more than 1 trillion under management . millions of folks could have done better than that chart suggests while only a relativvely small amount of money may be in those thousands of funds that lagged.
we don't really know the break down of the money ,but you get the point.
there are loads of bad funds that are always bad, there are loads of funds that are small and internal expenses eat them up because they do not have many shareholders to share those expenses. put those same fund managers in to a fund with more money and more shareholders with lower internal expenses for keeping the lights on and those same managers may be excellent.
the point is those charts really do not tell a complete story and yoiu know me . show me the make up of the numbers.
showing all the thousands of funds that may have failed with little overall participation in comparison is really not the best way to view things. far better is your own personal portfiolio performance as a whole.
so why did more than 80% of fidelity's large cap funds beat their index the last 5 years?
How? They took on more risk during a bull market period. That's the ONLY way you can beat the benchmarks, ESPECIALLY when we're talking about large caps. ANYBODY can take on more risk. No skill involved. Taking on more risk can also backfire. You picked a time period that was ALL bull market. How did they do during 2008 - 2009?
And if you think this past performance can be used as a seal of approval for future investing, you are wrong. They've done studies about that. Not gonna give you any advantage going into the future.
Can you list a couple of the ticker symbols of these funds?
BTW how did their midcap, small cap, international and others perform versus their benchmarks?
it still proves that chart is not really a judge of anything. the chart makes a statement that may be skewed and does not tell the entire story based on investor dollars and where they went...
4000 funds may exist but 75 % of investor money may be in a handful of funds that consistantly out performed making the 75 % that lagged a moot point since they only had 25% of investors dollars maybe even less..
so yes the index may have beat 75% of the funds out there but 75% of investors money in those top performing funds may have been in very few funds.
it is like i said statistically i stand a good chance of being mugged here in nyc and the boroughs because we have lots of bad areas. but if i stay out of those known areas my odds of being mugged are very tiny. i do not even need know which are the best areas, my odds go up just by avoiding the worst areas.
see where this is going?
the only way to beat the market index is take on more risk or less risk depending if we are headed up or down.
the only real deal is how you did and not as individual funds but as a total portfolio.
it all becomes a moot point when you look at the small investor returns and see the money in these funds got 1/3 what the funds got because small investors do the wrong thing at the wrong time overall as a group..
does it matter what the group got if you stayed the course? of course not. by the same token all these statistics are really meaningless in the real world to you as an individual..
your own entry and exit points and emotions mean more than any fund statistic.
posting statistics about anything in a vaccum is really a poor way to judge anything.
like i said since 1987 my fidelity growth model has beaten the s&p 500 by 450k today based on a 100k investment.
if we mixed in other funds with that s&p 500 fund to make a portfolio how would you possibly know what would have been that outcome since it didn't exist.
there really is no way to compare portfolios equally.
which brings us back to when all things are taken in to consideration how you get to the final destination is not going to be by looking at statistics on isolated funds. only how you actually did counts when combined with your own emotions and skill at putting a portfolio together and whether you adjust it to the big picture or not.
with interest rates at lows and stock valuations at highs all bets are off as to what was as far as what the various allocations gave you in the past. most of the past averaged 5-6% interest rates. a 15% decline in equities in a 50/50 mix was offset in two years by interest and you were ready to move on , noooooooo more.
Last edited by mathjak107; 10-22-2014 at 04:01 AM..
Look at the risk statistics of that fund and I'm sure this fund is riskier than the S & P or whatever its benchmark is. Want more risk? Just add a small cap growth index fund. No need to pay some active fund managers.
By the way going back to 1987 is not a fair comparison. Back before everyone had the Internet, managers on wall street really did have an edge.
on the way down i bet it is less riskier since they can reallocate . in 2008-2009 most active mangers did just that but when the fall turned on a dime and went back up they were less invested and so many got left behind. but had we stayed down for a bit longer they would have done better than the index's those years..
so it was the fact they were less riskier that did them in.
on the way down i bet it is less riskier since they can reallocate . in 2008-2009 most active mangers did just that but when the fall turned on a dime and went back up they were less invested and so many got left behind. but had we stayed down for a bit longer they would have done better than the index's those years..
so it was the fact they were less riskier that did them in.
What's the ticker symbol of this fund. Let's see how it has done since 2000 and why.
You really can't be the judge on the value someone else perceives in their advisor and the fee they pay them. It's beyond rediculous just to spot off "you're getting robbed" and then tell someone to move all their funds to vanguard and manage their own money.
well, someone who may not know better may perceive they are getting a much better value than they really are.
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