Gyroscopic Investing

Yeah... I think you can do physical gold IRA's, but I've chose to keep less physical gold, and have nobody know about it in the government.

foglifter wrote:

moda0306 wrote: foglifter,

My dad had his money with a Wells Fargo advisor that had him in stock and bond funds between 1.3% and 2.3% in expense ration, with a 1% back-end load.  Their performance was pretty bad for the risk (the "income" fund (stock & bond mix) lost like crazy in 2008 but didn't recover anything near the S&P 500).

I was pretty appalled.  He didn't pay her anything for her "advice."

I wonder how she got paid?

Recalling my less than desirable experience of having an Ameriprise advisor I think your dad's advisor were probably paid in either (or both) of the following ways
- %% of the sales load (front or back) of each mutual fund
- %% of the account annual fee (they love those "wrapped accounts")

I just recently took over my wife's accounts that were being "managed" by Wells Fargo. In addition to the wrap fee there were many funds with 2-3+% ER and a back in load. The more I dug into it the more horrified I became. I've spent the last few months in a mix of shock, disbelief, anger and being physically ill. IF someone were actually even OK (neutral) in their timing it would have been horrible, but bearable. As it turned out they would pick the very top (within a couple of days) to buy and the very bottom to sell. Now I'm starting to get angry just writing about it.

There was one fund that was so absurd it was almost funny. I think it was a 2.8% ER plus a 1% load and it had about 10% invested in the Japanese stock market and 90% in cash and of course was purchased before the tsunami in Japan.

Anyway we didn't lose everything, we still have time to add to it and getting her out of that saved our marriage. I can't imagine how many relationships have been ruined because one partner trusted a bad advisor.

As for a 401k I'm really jealous of the .41 ER for an S&P500 fund. I'm trying to figure out what to do with a 401k where the cheapest fund is 1.07. Since I know the CFO I may lobby to get it changed to something with a brokerage window at least. I wouldn't sweat the .41 if it gives you a tax advantage.

alvinroast wrote: I just recently took over my wife's accounts that were being "managed" by Wells Fargo. In addition to the wrap fee there were many funds with 2-3+% ER and a back in load. The more I dug into it the more horrified I became. I've spent the last few months in a mix of shock, disbelief, anger and being physically ill. IF someone were actually even OK (neutral) in their timing it would have been horrible, but bearable. As it turned out they would pick the very top (within a couple of days) to buy and the very bottom to sell. Now I'm starting to get angry just writing about it.

There was one fund that was so absurd it was almost funny. I think it was a 2.8% ER plus a 1% load and it had about 10% invested in the Japanese stock market and 90% in cash and of course was purchased before the tsunami in Japan.

Anyway we didn't lose everything, we still have time to add to it and getting her out of that saved our marriage. I can't imagine how many relationships have been ruined because one partner trusted a bad advisor.

As for a 401k I'm really jealous of the .41 ER for an S&P500 fund. I'm trying to figure out what to do with a 401k where the cheapest fund is 1.07. Since I know the CFO I may lobby to get it changed to something with a brokerage window at least. I wouldn't sweat the .41 if it gives you a tax advantage.

Its possible you got churned by Wells Fargo.  I would send an arbitration claim to FINRA.  If you're persistent, you will typically get paid off to settle the case.

MG

alvinroast wrote: As for a 401k I'm really jealous of the .41 ER for an S&P500 fund. I'm trying to figure out what to do with a 401k where the cheapest fund is 1.07. Since I know the CFO I may lobby to get it changed to something with a brokerage window at least. I wouldn't sweat the .41 if it gives you a tax advantage.

You might play to the CFO's sense of pride and ask him what it feels like to be played for a chump by his 401(k) fund provider.

You might point out to him that you as an individual can buy funds with vastly lower expense ratios than the funds in the 401(k) plan.  You might point out that having more money to invest is supposed to get you a better deal, not a worse one.

Finally, you might tell him that you know a retirement plan attorney who mentioned that a very hot area of ERISA litigation right now is suing 401(k) plan sponsors who offer high cost funds in their 401(k) plans when cheaper alternatives are available.

The CFO is a woman with two teenagers and a kid in college. She spends four hours a day commuting and another couple taking her daughter to soccer practice, etc. She also has a mortgage on her vacation cabin  as well as her house. I'm pretty sure she's not putting any extra money into the 401k herself and hasn't taken the time for a proper due diligence. Hopefully I can talk her into something, but I'll need to do a little research first to see what the options are.

I like your ideas, but I'm going to try to have to think through the best way of presenting it since she's a nice woman with good accounting sense who probably didn't even have much say in the plan personally.

alvinroast wrote: The CFO is a woman with two teenagers and a kid in college. She spends four hours a day commuting and another couple taking her daughter to soccer practice, etc. She also has a mortgage on her vacation cabin  as well as her house. I'm pretty sure she's not putting any extra money into the 401k herself and hasn't taken the time for a proper due diligence. Hopefully I can talk her into something, but I'll need to do a little research first to see what the options are.

I like your ideas, but I'm going to try to have to think through the best way of presenting it since she's a nice woman with good accounting sense who probably didn't even have much say in the plan personally.

You could tell her she's lucky she didn't have anything to do with picking the funds or fund provider, and perhaps she won't get fired when the company gets sued for not doing its due diligence and breaching its fiduciary duty under ERISA.

MG,

What is "getting churned?"


alvinroast,

If your marriage can survive it, I'd pursue legal action against Wells.  Your story is infuriating.  I thought maybe I was being a bit unfair to WF or that there was some value there that I didn't give the funds time to display.

Best of luck with everything.

moda0306 wrote: What is "getting churned?"

It means its not as bad as getting "chopped, boned and juiced"!   j/k

Churning or excessive trading claims are unfortunately very common at full service brokerage firms like Merrill Lynch, Wells Fargo, Citigroup Smith Barney, Morgan Stanley and UBS Painewebber. Churning and excessive trading claims are some of the most common claims made at FINRA (formerly known as the NASD) each and every year. Often these losses are recoverable through a FINRA arbitration lawsuit or action.

Why do brokers and financial advisors fraudulently engage in churning or excessive trading? The reason is simple…trading creates commissions and fees that go directly into the pocket of the stockbroker and brokerage firm. There is an inherent conflict of interest between the investor and his broker. A built in incentive exists to overtrade a client’s account.

In other words, stockbrokers have a built in incentive to trade a client’s account because it will increase the compensation in the broker’s pocket at the direct expense of the investor. Brokerage firms have an incentive to look the other way because the trading creates compensation for the firm as well.

MG

Churning is the opposite of the HBPP.

It really is amazing that a firm can churn an account during a huge bull market run and still manage to rack up plenty of capital loss carryovers.

WF really has a system of churning the worst funds that probably couldn't even be sold on the open market. I was pushing for a lawsuit against them, but the fine print meant we would have to go through arbitration. I would have loved to take them on, but my wife wasn't going there so I dropped it. My sister's partner is a compliance officer at a reputable brokerage and explained that most of the time people don't even file a formal complaint because they're so embarrassed that they got taken.

@ MediumTex The 401k in question is my wife's. I don't think she'd be threatening a lawsuit. I did find out a bit more and it sounds like the plan was pushed by a consultant. I wouldn't mind pushing back if necessary. I'll post if I have any luck. I'd really love to have a Vanguard 401k, but I think the firm may be too small. Thanks for your ideas though.

alvinroast wrote: @ MediumTex The 401k in question is my wife's. I don't think she'd be threatening a lawsuit. I did find out a bit more and it sounds like the plan was pushed by a consultant. I wouldn't mind pushing back if necessary. I'll post if I have any luck. I'd really love to have a Vanguard 401k, but I think the firm may be too small. Thanks for your ideas though.

Oh, I didn't mean that she would threaten a lawsuit.

I just meant that if they persist in offering funds with higher expense ratios than basic retail shares of many funds, someone is going to sue them.

There is a general movement among plaintiff attorneys right now targeting these cases because they are such easy targets.  They sue the plan sponsors, the plan sponsors realize they have been asleep at the wheel and they settle and then adopt a new fund lineup.  As usual, the attorneys pocket 30-40% of the settlement, the plan participants get a pro rata share of the remainder of the settlement (which is normally very small on a per head basis), and the attorneys move on to the next case.

MediumTex wrote: There is a general movement among plaintiff attorneys right now targeting these cases because they are such easy targets.  They sue the plan sponsors, the plan sponsors realize they have been asleep at the wheel and they settle and then adopt a new fund lineup.  As usual, the attorneys pocket 30-40% of the settlement, the plan participants get a pro rata share of the remainder of the settlement (which is normally very small on a per head basis), and the attorneys move on to the next case.

Wells Fargo need to diversify into having a nation wide firm of such plaintiff attorneys.

MachineGhost wrote:

stabiae wrote: This thread caught my attention because I am just starting to get my head around the PP philosophy. I am preparing to say goodbye to my ameriprise advisor and wonder what advice you would give to this end. What concerns and considerations should I have about moving my ameriprise accounts in to another fund? Some of it is in IRA's so I understand this has to be done within a protocol to avoid triggering tax implications. I believe they must be either transferred directly to another fund, or if they cut a check, it must be redeposited into another IRA within 60 days.  My concern is, I understand if the funds are sold off in order to transfer, there can be either capital gains and/or limitations to losses you can take in a given time period? any advice in this area?  Who should I talk to understand this better?

This is easier than you think.  You need to do a in-kind transfer of your assets (same account type to same account type) via the ACATS system.  It is like ACH for bank transfers, but specifically for shares and cash in brokerage accounts.  So you do not need to sell anything and potentially have issues with taxation reports and taxes.  Your destination broker will have all the forms necessary to do all this.  For example, if you have a Traditional IRA at Ameriprise, you simply need to open one or more Traditional IRA accounts at your destination broker, then fill in and send them the ACATS form for each account which will contain the information about your original broker, account #, etc. as well as choices for what you want to transfer, like kind transfer of shares or liquidate to cash proceeds, etc..

Remember, brokers are just acting as a trustee for your IRA.  You are free to use whichever trustee that you want to.  Just be sure to keep an eye on the fees; some brokers charge IRA annual maintenance fees, some do not.  And there are also IRA closing fees as well as ACATS transfer fees.  Usually about $50 each.

MG

WOW! I am reading the additional post since my original post and realizing even more the importance of taking control of my finances. My education continues!  Makes me think of a quote..."if there were no illusions, there would be no enlightenment" I believe the quote is attributed to Buddha. I was operating under the illusion that the people I was allowing to take charge of my financial future were working in my best interest. The enlightened moments can be painful. Awareness can be curative however, and this motivates me even more to plug along and understand  what actions I need to take.

I have something to add to the latest part of the discussion and a follow up question to my original post in hopes of clarifying my concerns upon transferring accounts in an IRA.

this is a Fund Analyzer website I found interesting. From the web site it says “The Fund Analyzer offers information and analysis on over 18,000 mutual funds, Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs). This tool estimates the value of the funds and impact of fees and expenses on your investment and also allows you the ability to look up applicable fees and available discounts for funds”?
http://apps.finra.org/fundanalyzer/1/fa.aspx

the painful part for me was when comparing some of my existing 401k and Ameriprise accounts with some of the funds recommended for use in the PP.  For example, when comparing my total Fees and sales charges on a $10,000 investment over 10 years at a 5% growth rate for two of my Ameriprise stock fund accounts , here is what I discovered.

$1942 --- (Ameriprise managed)  Columbia Portfolio Builder Moderate Aggressive Fund Class A
$2072 ---  (Ameriprise Managed) Columbia Portfolio Builder Moderate Aggressive Fund Class B
$77  ---  Fidelity Spartan 500 Index Fund Fidelity Advantage Class
$115 ---  iShares S&P 500 Index Fund

GULP!

Finally, I am after clarification regarding in kind transfers. Specifically, There are no good long  term treasury bond options available to me in my 401k.  I have an IRA currently in a 70/30 stock/bond  allocation that  I intend to transfer to an appropriate PP fund.  I have read the bond FAQ’S section in the PP forum and want to make sure I understand . There are funds available (Fidelity-vanguard) that allow me to purchase long term treasuries. My question is…does this mean I can transfer a fund originally set up  as a 70/30 stock/bond and convert it to long term treasuries once it is transferred?

In kind just relates to the account type, not the account composition.  So you can do whatever you want with the composition at source or destination.

MG