Money Managers, useless criters.

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bluesideup

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bluesideup
Hi everyone.
About 1 year ago I called the co. that manage it and told them to split into 2 groups, fixed income.. and the rest I let them continue the way they were doing it but if that half got less than 3% lower than my other, to shift money into the fixed side.
Fast forward to present and there is a loss of 11 % and in it and they never made any changes.
They cannot tell me exactly who is managing the account and or why they did not follow the direction.
Add to that that they keep charging us for the "managing", what the Heck are they managing if they keep letting everything ride?
Any recourse possible, other than closing the account and manage it myself, which I hesitate this being a 401?
Thanks.
 
I mean... the S&P500 has lost 18% in the last year so if you've got a fund down 11% in that period then take that as a win.
It is simple enough to manage your retirement fund yourself and save the fees. Just look for a good index fund with low fees and don't look back. Slowly migrate a higher and higher percentage to less risky funds as you get close to retirement.

There are target date funds that do that for you but may be slightly more expensive. But still cheaper than paying someone to do what you can do yourself.
 
I’ve spoken to several “wealth management” outfits over the past few years. The one constant between ever single one has been that, no matter how poorly they do, they still get their percentage of AUM.

“We do better when you do better”… sure. And they still do pretty well when we get screwed. Thanks, I’ll keep doing what I’ve been doing.
 
Unless you’re just really incapable of managing finances, I don’t get the purpose of having some third party entity managing your future. Fire these people and put yourself in the drivers seat of your financial situation. I dunno, maybe I got lucky growing up in a family who understood investing and how to manage their own retirement account.
 
I agree with many above. Check out Vanguard or similar low fee index funds. Long-term very few beat the market - so why not just be the market?

S&P500 fund or Whole Market fund. Maybe some international and then acquire individual bonds to hold (not trade).

Something like that. You got this. Maybe pay someone to help you determine which funds to use first in retirement, tax / estate planning (lowest tax cost way to move your assets to the next generation upon death) or similar for if there is a long-term disability.
 
bluesideup said:
Any recourse possible, other than closing the account and manage it myself, which I hesitate this being a 401?
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Is this an employer 401k or your own 401k as sole participant?
 
Do not communicate instructions for your account by telephone.

I will assume that the 401 plan is employer sponsored, and they make a contribution to it.


Use email or regular mail, and specify that you have a copy. Back copy should be in the heading.

This allows you to go to court and prove that they failed to carry out your instructions.

Depending on the structure of your "Advisors", you may be able to report them to FINRA, and get a hearing with them.

Certainly, the above steps can wake the advisor up to the potential cost of failing to follow instruction,

If your employer is not contributing to the 401, open an IRA of your own, contribute regularly, and buy low cost index products.

Index funds can be more tax efficient, but do not reinvest dividends and interest.
Mutual funds can reinvest dividends and interest, but the capitol gains are also taxed. ETF's do not pay out capitol gains, they increase the value of the shares.

The IRA will mean that you will now be personally responsible for monitoring and moving money per the instructions that you write to yourself. A single sheet of paper with those instruction, WRITTEN DOWN, should guide you, and discourage emotional responses to news.

Edited to add:
Many years in the market without an advisor. Read a lot of books, and visit
https://www.bogleheads.org/forum/
for good guidance, at zero cost.
 
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Useless critters? Hardly. Leeches, more like.

If your account rules say you can run the money yourself do it. Listen to @geezer.

Read:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

Investing is actually quite easy. There is a huge industry however, trying to convince people that they must hire the industry's priests and witches. Not true and a very expensive mistake.
 
I know two important things about investment.

1. Trading in individual stocks is educated gambling.

2. Ride out the lows. If you want to know what I mean by this take any stock index- the Dow, S&P, Nasdaq, etc. Pull it up on google or your favorite stock info site. There will be a timescale option- usually when you first open it, it's a 1 day scale. Start zooming out until you're looking at the longest period. The drops this year look bad, then zoom out to 5 years and all time. The trend is always up, there are low spots that can last a few years but it always comes back up. Ride out the low points and enjoy the periods of huge growth.
 
Terry M - 3CK (Chicago) said:
I agree with many above. Check out Vanguard or similar low fee index funds. Long-term very few beat the market - so why not just be the market?

S&P500 fund or Whole Market fund. Maybe some international and then acquire individual bonds to hold (not trade).

Something like that. You got this. Maybe pay someone to help you determine which funds to use first in retirement, tax / estate planning (lowest tax cost way to move your assets to the next generation upon death) or similar for if there is a long-term disability.
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I moved most of my retirement into an index fund after learning something like less than 10% of managed funds beat the market. An index fund is still pretty diverse
 
Baked Potato said:
I also recommend A Random Walk Down Wall Street. It's good for beginners who want to learn about investing in a book that won't put you to sleep.
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That's a good book and one I have recommended over the years. But this spring Charles Ellis "Winning the Loser's Game" came out with an excellent update and revision. I think Ellis has pulled ahead in the race and I now recommend that one.

cowman said:
I know two important things about investment.

1. Trading in individual stocks is educated gambling.

2. Ride out the lows. If you want to know what I mean by this take any stock index- the Dow, S&P, Nasdaq, etc. Pull it up on google or your favorite stock info site. There will be a timescale option- usually when you first open it, it's a 1 day scale. Start zooming out until you're looking at the longest period. The drops this year look bad, then zoom out to 5 years and all time. The trend is always up, there are low spots that can last a few years but it always comes back up. Ride out the low points and enjoy the periods of huge growth.
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With very careful attention to the definition of words I agree with this. "Investment" is not gambling, though. It involves long periods of time, however, like five or more patient years. Over long periods it is a slam dunk. "Trading" is indeed gambling. Research has shown over and over that randomness is a very good approximation to the market's shorter term behavior. Short term, trading is often referred to as "noise trading" where the results of the trading are random.
 
Racerx said:
...less than 10% of managed funds beat the market...
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I believe that number is for any given year. One that consistently beats the market year after year doesn't exist.
 
Daleandee said:
What can we learn from this?

https://www.macrotrends.net/2613/stock-market-performance-by-president-from-election-date
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Absolutely nothing. The world is full of spurious correlations and full of people who think they are predictive. For those interested in this type of thing, Nate Silver's "the signal and the noise" is an excellent read. (https://www.amazon.com/Signal-Noise-Many-Predictions-Fail-but/dp/0143125087)

Mahneuvers said:
I believe that number is for any given year. One that consistently beats the market year after year doesn't exist.
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Read a few issues of the S&P "SPIVA Report" for details, but the behavior of managed funds is roughly random. In one year, maybe 1/3 of funds will outperform their benchmarks. (It's not 50/50 because of costs.) Going forward it's multiplicative, so after 5 or 10 years you get only a few lucky monkeys surviving. That is the few percent number that gets quoted. (https://www.spglobal.com/spdji/en/research-insights/spiva/)

There are some higher pweformance numbers occasionally published. These higher numbers are the result of ignoring survivorship bias. Bogus, IOW. (https://en.wikipedia.org/wiki/Survivorship_bias)
 
I knew a guy bought mutual funds at a peak, a year or two later things crashed bigtime, he was down 50 %, he got ****ed and turned that into a loss by selling. (No it wasn't me, but I learned a big lesson when I was old enough to understand.)
 
My guy was Ameriprise when I started with him, but he jumped ship from there over a decade ago for his little two man firm and I followed him. We've been pretty successful since 2006 or so when I started with him.
 
RyanB said:
Unless you’re just really incapable of managing finances, I don’t get the purpose of having some third party entity managing your future. Fire these people and put yourself in the drivers seat of your financial situation. I dunno, maybe I got lucky growing up in a family who understood investing and how to manage their own retirement account.
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I agree with you, to some extent. I used to do my own stock trading. Two times in a row, the second I turn my back (okay maybe it was a couple weeks) I nearly lost my a$$. I pay the guy 1% and he averages between 7% and 10%, better in good years. But the other reason is he has access to investments, and tax write offs, that individuals don't. And that has made a lot of money for me.
 
Sac Arrow said:
I agree with you, to some extent. I used to do my own stock trading. Two times in a row, the second I turn my back (okay maybe it was a couple weeks) I nearly lost my a$$. I pay the guy 1% and he averages between 7% and 10%, better in good years. But the other reason is he has access to investments, and tax write offs, that individuals don't. And that has made a lot of money for me.
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He doesn't have access to anything that you don't (at least not anything that you would want), and isn't looking at your account as much as you think. If it keeps you from trading individual stocks then its a deal, but that really isn't a fair comparison.
 
ja_user said:
He doesn't have access to anything that you don't (at least not anything that you would want), and isn't looking at your account as much as you think. If it keeps you from trading individual stocks then its a deal, but that really isn't a fair comparison.
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When the alternative is to let it sit in a bank account accruing 0.00001%, it works for me. I just don't have the time or energy to deal with it eight hours a day. It's not the same as hiring an electrician to change a light bulb.
 
You’re not suppose to make changes, that’s a sign you don’t know what you’re doing. 11% in this market sounds like they have you in pretty conservative investments. If you can not stand any losses you should look into getting an annuity.
If your emotional and going to panic every time there’s a bear market, you definitely need a financial advisor, just be sure they’re a fiduciary.
Average cost is ~1% of your investments.
 
MooneyDriver78 said:
You’re not suppose to make changes, that’s a sign you don’t know what you’re doing. 11% in this market sounds like they have you in pretty conservative investments. If you can not stand any losses you should look into getting an annuity.
If your emotional and going to panic every time there’s a bear market, you definitely need a financial advisor, just be sure they’re a fiduciary.
Average cost is ~1% of your investments.
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Oh don't get me wrong, I get it, you have to pay to play, and and if you don't swing, you won't get a hit and sometimes you strike out. As long as I can bury my head in the sand and focus on other things, and not watch the process I'm good.

It's the sausage theory. I like sausage. But anybody that likes sausage probably shouldn't see it get made. And how many people watch their own open heart surgery and make critical comments to the doctor as he's cutting away.
 
Sac Arrow said:
... I pay the guy 1% and he averages between 7% and 10%, better in good years.
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Many people look at their advisors this way and it is highly hazardous to their financial health. The question is whether he is producing results that beat the gains of the market overall. Almost for sure he is not. Underperformance by even a few percent compounds into big numbers. At a minimum do this: Segregate your equities into a separate account and monitor the performance of that account against an objective benchmark. An S&P 500 or a total market index fund, for example. Strong odds are that this guy is costing you serious money due to underperformance.

Sac Arrow said:
... the other reason is he has access to investments, and tax write offs, that individuals don't. And that has made a lot of money for me.
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Ack! Don't be drinking that Kool-Aid. There are no secrets and there is no magic (for you). For him the magic is probably higher commissions and the potential to lock you in by selling you investments that can't be moved to another broker. The mere fact that he is making this pitch tells me he is not working in your best interest. Does he claim to be a fiduciary?

Sac Arrow said:
... I just don't have the time or energy to deal with it eight hours a day.
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One of the things I tell the students in my Adult Ed investing class is this: "Investing is boring. If you're not bored you're doing it wrong." My wife and I are running serious seven figures and we take a thoughtful look at the portfolio once a year.

Sac Arrow said:
It's not the same as hiring an electrician to change a light bulb.
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Sadly, you're right. With the electrician you can immediately tell whether you've gotten what you paid for. In the investment business, the brokers' goals are to keep the clients in the dark.

Here is some easy reading that will make you a lot of money:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
 
Sigh. You guys don't get it. I DONT WANT TO F>~^{}{<}{^>~G DO IT!!!
 
Way too much convexity risk in fixed income - really since the early 2000s. Now with rates rising you can start looking into it.. maybe. As a general rule, most money managers don’t know jack. They’re like consultants and get paid whether things work out or they don’t. The managers you want are the ones with $5M minimums, that’s where they start tying performance into their fee. Else, I’d say go to vanguard or one of those shops and just try to match market performance. Managing it yourself on one of those platforms is very low touch. And in all reality, the entire global economy rests on US Equities, so there are pretty motivated people out there making sure it goes up more than down (even if they have to bend the rules).

Also, today is not the day to look at returns. Market went straight up from ‘09 and were really only back down to lows from 2021.

Some light reading on bond convexity that more of us should know about: https://libertystreeteconomics.newy...-risks-in-a-rising-interest-rate-environment/
 
That 1% fee comes after you have earned whatever %, let's pretend it is the stock market historical average of 10%, that 1% cost you 10%. Can't beat the market. There are what 8,000 mutual funds, half are doing better than average and half aren't.
 
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