Vanguard “advisory” services?

Along with the 401k program, company offers a discount on..

Vanguard Managed Account Program

.. which it says is services from "Edelman financial engines" for a monthly fee. When I try to read some reviews, info about this service seems to be co-mingled with something called..

Vanguard Personal Advisor Services. 

The fees seem similar. My story is that I've been hiding income from myself for 30 years through my 401k and there's a nice nest egg but I can't help but feel like my general lack of knowledge about investing is costing me dearly.

Have any of you dorks used either of these services and what did you think?

And another question. Anyone familiar with Vanguard Robo Advisor service? That is apparently an option as well. 
 

My goal this Christmas break is to get my financial house in order. 

I dont know much about it, but i recall a financial person at a previous job, he made it very clear he could not tell me what to invest in, but could show me things that performed well. So maybe its just a buffer between a human saying "do this" so nobody gets in trouble? 

Here's some decent background knowledge. 

Here's an article where the guy who started Vanguard tells people how to invest:
https://www.bogleheads.org/wiki/Three-fund_portfolio

And the free tool on the Vanguard website that tells one what to pick:
https://investor.vanguard.com/tools-calculators/investor-questionnaire

Finally, know that other wealthy people endorse the 4 fund portfolio for the common man such as Warren Buffett and Dave Ramsey.

OHSCrifle said:

The fees seem similar. My story is that I've been hiding income from myself for 30 years through my 401k and there's a nice nest egg but I can't help but feel like my general lack of knowledge about investing is costing me dearly.

It is impossible to be well educated enough to actively invest effectively.

Here's a good video explaining that.

You want your long term investments in a solid, diversified portfolio earning you a good, steady return.

Actively managed accounts are usually a bad investment. The humans don't reliably pick better investments. You get charged a greater service fee that eats into your returns.

Best to find a reputable investment service with the lowest fee you can. If you could find one that charges less or none annually, but takes a larger cut when you cash out, that would probably be better (but I don't know where to find one of those).

Actively managed financial accounts are really only beneficial for people who need to the ability to leverage or liquidate investments easily. Where you want to still earn interest, but convenience and ability to get cash are more important than maximizing returns. That really means retired people, or very rich people.

Are you retired or super rich? No? Then don't worry about it.

Ford offered Edelman services. While we had other one by then, others I knew tried it. And didn't like them at all. 
 

Ultra low or no fee index funds are the way to go. Just need to know how to diversify them over time. (The data for index funds is easy to get- just look at the long term trend of the market they represent. Like s&p's find is like 9% average over the last 60 years. )

In reply to OHSCrifle :

Go to the forum at bogleheads.org and search for these topics. There are plenty of threads that include personal experiences with these services, and lots of in-depth conversation about their merits and shortcomings.

After that, dive into their wiki (which is difficult to navigate but covers all the topics you need). Keep reading. Your lack of knowledge about investing will go away.

Sixteen hour later I'm back. Thank you for the replies.

This time last year we consolidated a bunch of stuff into vanguard. Roth IRAs, traditional IRAs from previous  employers, current employer 401k, wife's 403B, and a cash account. About half of the total retirement money is in growth funds VASGX and VIGAX and the other half in some Vxxxx target age based fund.

The local conservative talk radio channel (that I listen to for the traffic) is full of investment guys on weekends and they ridicule the target funds unmercifully - so I'm kinda sitting here guessing whether I should do the Bogle method or just let it ride. Gonna be on vacation in a week so I'll settle in and do some reading. I just feel like this stuff is so foreign to me and I hope that simply stuffing twenty grand away year after year will ultimately work out alright. All I gotta do is live long enough to stop working and enjoy it. 

A word of warning: My father passed away earlier this year. He had his retirement account at Vanguard. Dealing with them was one of the worst experiences I've ever had with any financial institutions. 

In reply to CAinCA :

I'm sorry for your loss. Can you share any lesson learned to make that less stuff difficult? I'm sure there is a whole marketplace of fraud related to people dying so there must be a lot of protective steps. 

In reply to OHSCrifle :

There is a financial conflict of interest for many of the investment taking heads. 
 

The data speaks for itself. 

OHSCrifle said:

The local conservative talk radio channel (that I listen to for the traffic) is full of investment guys on weekends and they ridicule the target funds unmercifully ...

If the investment talking heads actually had useful information and knew what direction markets were going to take, they wouldn't share that information. It would only be valuable if you knew something no one else did.

They host those shows to enrich themselves, not to help you.

Heard about a semi-joke fund (I think it's actually just tracking a hypothetical position, not riding actual money) that takes the position of the exact opposite of whatever Jim Kramer of 'Mad Money' says to do. I believe with a small time delay. Tracking, it's actually *more* successful than following Kramer's advice. Not because Kramer's picks are inherently bad, but because so many people *follow* them, that there is more money to be gained by taking advantage of the followers. If Kramer says "buy" lots of people will buy. So wait a couple hours for that to start, that will drive prices up above where they should be, and you'll make money from selling. If he says 'sell', it will drive prices down artificially. You can pick things up cheap, let them return to their natural state, and profit.

Sure, you *can* make greater returns with lucky picks. But it's either luck or insider trading. There's always the chance of winning big at the casino. But you're ultimately better off betting *with* the house, not against it. The stories of a big jackpot are just a lot more exciting than the ones about the house taking a steady 10% of everything.

In reply to Beer Baron :

Yes, the Inverse Cramer Method. It has proven to be true too often to ignore :).

I don't stock pick, but it is fun to follow WallStBets on Instagram and see just how wrong he is.

Back to the subject at hand. Definitely don't go active manage. Good information in the John Oliver clip above. Another resource I have used to guide my strategy is a podcacst called MoneyWithKatie. 
There is an episode specifically called "How to construct a diversified stock portfolio of major index funds" that delves into a few different strategies to set up your money - and what the results would have been over the last 20 years had you varied your portfolio. 

There's another epsiode called "Is now a good time to pick stocks? The pros & Cons of active investing" which does touch on that subject as well.

There are also the "2-fund" or "3-fund" methods mentioned above that can be ways to garner strong returns with pretty low management fees and less complexity.

I like the podcast above because it uses real numbers. I'm sharing because I found it useful, and it has helped sway my opinion on this stuff to what feels like a more educated, confident place.

Good luck!

The only active investing I've heard generally paying better-than-market is diverse angel investing.

Invest in a BUNCH of startups that have a solid concept behind them. The overwhelming majority will fail. But you only need a couple to land to make a huge winning. Bonus points because the tax system allows you to deduct your investment losses from the gains.

Unfortunately, this means you have to already have a lot of money to start playing this game.

You may want to look for a "fee based" fiduciary financial advisor and pay a few hundred bucks for a consultation . 

fee based means you pay the person for their time, not buy buying their "products". And fiduciary means they are legally bound to act in your best interest.

it is all well and good to say "pick a low cost index fund and let it ride", but that doesn't take into account any personal circumstances. You may have kids and want to pay for their school and therefore you might want some money in a 529 plan (doing the same low cost index fund and ride strategy). There are real mistakes that can be made that can cost a lot in taxes. 

In reply to Robbie (Forum Supporter) :

The one thing that scares people from that is the cost. Especially compared to commission based advisors- which people don't know cost them more for "free" for a few decades. 

I wish I was better at DOING some of the things I know to be true. 

alfadriver said:

In reply to Robbie (Forum Supporter) :

The one thing that scares people from that is the cost. Especially compared to commission based advisors- which people don't know cost them more for "free" for a few decades. 

Right.

It is also hard to find fee-based advisors, because, guess what, commission-based is often much more lucrative.

SV reX said:

I wish I was better at DOING some of the things I know to be true. 

Haha me too.

Now if I could just focus my money and energy on one single project car...

In reply to OHSCrifle :

I'm an advisor and I thought it may be helpful to clarify a couple things for you, I'm also happy to talk you through it anytime.

Fee based v. transactional/brokerage

I understand that terms can be used in varying ways but, really, fee based means that you are being charged a given percentage per year, transaction costs are paid by the advisor and that person charging you the fee would also be a fiduciary. So you determine with your advisor (or Vanguard in this case) what that fee is, you have no transaction costs and 9/10 times the advisor has discretion over the account meaning they make the investment decisions. There are certainly cases where an advisor will charge a fee to give a client periodic advice but generally that would mean the advisor does not have discretion and the account is held elsewhere. What Vanguard is offering is more and more common. You're paying some fee to Vanguard to be the recordkeeper of the 401(k), you are paying a fee to own whatever investments you own, if there's a separate advisor on the plan you're paying that person and then you'd pay Vanguard a additional fee on top of that. 

A brokerage relationship is purely transactional. You pay the broker a transaction fee every time something is bought or sold. The broker can solicit products and ideas but is not bound by the fiduciary standard which means, technically, they don't have to act in your best interest. Primarily though, the account owner is the one determining the strategy, specific investments, etc. 

Target Date Funds (the age-based funds you mentioned)

Someone making a blanket statement that target dates are no good must be, in my opinion, coming at it from a very specific angle. These funds have become the norm for a default investment in a 401(k) because they're well diversified and remain age appropriate as a plan participant moves through their career. 

Stuffing a lot of money away year after year will likely work out

I'd totally agree with this. Different advisors, talking heads, people on the internet will always have what they think is the very best investment, strategy, etc. The fact of the matter is that the single biggest driver of what you have socked away when you go to retire is how much you've socked away. Over time, investments have proven to have a positive impact on the total amount but the first step is that the money has to be there. 

Feel free to reach out anytime. I'm always happy to lend knowledge and help point people in the right direction.

OHSCrifle said:

In reply to CAinCA :

I'm sorry for your loss. Can you share any lesson learned to make that less stuff difficult? I'm sure there is a whole marketplace of fraud related to people dying so there must be a lot of protective steps. 

Thank you. 

Re: Vanguard. My brother was the executor of my dad's will so he had more first hand experience than I did with them, but in short they were a royal PITA to work with. We were both named on the account as beneficiaries. We went round in circles trying to get the paperwork they needed to the correct department. I think my brother had to send it 2-3 times. Then once we provided them all of the paperwork they needed they wouldn't just send us each a check, we had to open a new account and transfer the funds to it. It took 3-4 WEEKS to open the accounts and transfer the funds. Once the funds were transferred they tried to get us to invest in their funds. We asked to close the accounts and to receive a check for the proceeds. That took another week or so. Then they made the checks out to my dad and each of us. Our banks both tried to refuse to accept the checks. It took a couple trips before my bank finally accepted the check. My brother's bank wanted a new check made out to only him. He went round and round with Vanguard and his bank before they finally deposited the check. 

Their phone service was horrible. We were given 3-4 different numbers to call. Each time we'd explain what we were trying to do and got transferred to some other department. You can't just call the number on their website. That's an automated phone tree and it couldn't handle our situation.

In all it took about 2 months to get the funds. We both swore that we would never work with them ever again.

In reply to AxeHealey :

Great info. The angle the radio guys seem to spew is that bonds are killing profits in the target date funds.

In reply to OHSCrifle :

Sure. Any target date suite will have bonds in it. They're right about that. What they are leaving out is this isn't a problem specific to target date funds. Just about any "diversified portfolio" that exits would/should include bonds in some capacity. Historically, they act as a buoy when stocks are sinking. It just so happens that we're in the worst bond market since the 1800's at the same time stocks have been pounded. 

The best performing asset class so far this year - commodities. The second best? Cash. It wouldn't surprise me if these are the places they say you should invest instead of bonds. Commodities and cash have been the bottom of the barrel for the last 12 or so years.