Help!! TD Ameritrade wants to own my dad & I'm a Boglehead & just can't accept......

[redgtxdi]

So, basically, dad's gettin' old & wants somebody else to manage his money now. To be honest, I really don't care. This is more about "passive investiving" vs. "active" as I'm a Vanguard Boglehead & believe that after about 40 years, I'll be just as well off with about 3 Vanguard funds (asset allocation corrected) and dollar cost averaging vs. somebody who played in & out of the market for the same time & paid the fees & mistepped a buy or sell here or there.

For instance, this guy from TD Ameritrade today was talking about how the market average was down 30% in '08 while average TD acct. was down like 16% and as it went back up, the market went up 25% while average TD acct. was up 22%. (Showing they lost a lot less and gained almost as much). I wanna cry bullsh!t so much but just sat there & smiled.

Opinions?!!

 

[RavenSEAL]

I think Brett Favre might have something to say...

 

[redgtxdi]

I think Brett Favre might have something to say...

:facepalm:



This is about investing........not hookers & blow!

 

[IHateMyJob2004]

Split it between JNJ, WFC and PG. Live off dividends if possible.

 

[TheNinja]

How much do they want to manage it? I know someone like Etrade charges like 3/4 of a percent and the constantly rebalance ETF funds. For some people giving up 3/4 of a percent is well worth it to have someone with decent knowledge of the markets handle their money.

 

[DaveSimmons]

> How much do they want to manage it

... and how much will be lost to fees from them churning the accounts.

> For instance, this guy from TD Ameritrade today was talking about how the market average was down 30% in '08 while average TD acct. was down like 16% and as it went back up, the market went up 25% while average TD acct. was up 22%.

I'd compare that to the performance of a Vanguard Target 2010 or 2015 fund for the same period to see how they compare to good passive investments. Maybe they did well, who knows?

Also, "average" can be very misleading -- I'd want to know the median loss and gain for TD not the average. Did some accounts lose 90% while others only lost 5%? If so, TD has a much higher risk than a Target fund or S&P 500 fund.

 

[AgaBoogaBoo]

Here's the flaw - if they have a method that works so well, why wouldn't they just raise money from pension funds, banks, and other guys with money by the billions, rather than trying to get money by the $100k from retirement accounts?

Their incentive is in making transactions - the more active your account, the more they make. They don't care how you perform, they just want transactions. It's the same thing at the casino.

Unless you're really analyzing what goes on (full time job...) and have reason to believe you can do better than the markets as a whole, I wouldn't bother. If he wants to change it up, I would go with something pretty simple - 50% treasury bonds and 50% common stock with an index fund. You simply reallocate when times are good or bad (buy when bad, sell when good), but that requires patience, you won't do that more than once every few years.

Tell your dad to steer clear of it. If it was so easy, someone with billions would have taken advantage of it until the point where there was no gain to be made any more.

 

[PowerEngineer]

I would suggest to your father that he should find a certified financial planner who (for a fixed fee) will develop an investment plan that meets his needs. You don't want to take advice from someone who earns money by convincing you to buy what thery're selling or by churning your investments.

 

[AgaBoogaBoo]

I would suggest to your father that he should find a certified financial planner who (for a fixed fee) will develop an investment plan that meets his needs. You don't want to take advice from someone who earns money by convincing you to buy what thery're selling or by churning your investments.

You'll want a fee that has a really small fixed fee, but be willing to give a good percentage of any gains. This is helpful because it aligns your interest with their interest - if you make a lot of money, they make it too. If you don't make a lot, they don't make a lot.

If it's a large fixed percentage, they get paid no matter how you perform. Their only risk is really losing you as a client. If you work just hard enough to not get fired, that'll end up in a pretty crappy situation, so it's not something I recommend.

 

[redgtxdi]

And that's basically what this guy is. Rather than just the local TD Ameritrade guy, he's a (I think he called himself) CFA. "Chartered Financial Analyst".

The local TD guy is "retail" while this guy is "wholesale" (so to speak).

He comes up with a plan for you based on age. (He actually did say he'd like to see my dad get less risky)

Then he pools your money with the rest of his "accounts" to put into an "Institutional Fund" (sounds similar to my work's Morgan Stanley 'Portfolio Architect' thing). I get the gist, but the only reason I do it at work is to get my matching. All my personal stuff (including Roth) is with Vanguard.

He claims 1% annual fee (.25% taken quarterly) + funds' individual fees. For a net amount that is less than what a regular TD account would cost him.

But this was all recommended "BY" the TD guy *AND* it's still "WITHIN" TD Ameritrade. Combine that with the fact (it's a fact right? He said so) that TD beats the market going up and down........well pffffffffffft........it's a no-brainer right??

You know when Sh1T sounds too good to be true?? (Thus every Bogle book I've ever read)

 

[mshan]

Did the salesperson even ask questions about your father's personal situation, risk tolerance, needs in terms of drawing down money and need for appreciation, or just give him a canned pitch he gives to everyone?

If dad has built up good nest egg and most important thing is to preserve capital while drawing down modest amount for living expenses, that is one thing. If he needs to aggressively increase value of portfolio to have sufficient funds to draw down small amount and still have money for many years, that is different situation.

I would agree with others to talk to fee for service financial planner, and contact other major brokerages to see they give you exact same generic advice. http://www.mutualfundstore.com is another option (he has radio show on Saturdays; overlays his 1.5% management fee (I think it starts at 1.5% and goes down to 1% or 0.75%, I forgot, depending upon total amount of assets they manage for him) over that of underlying mutual funds, but to some weekly handholding and active adjustment of mutual fund portfolio is worth it to some).

I just read post above and it sounds like he overlays 1% management fee over those of underlying mutual funds to choose strategic asset allocation and individual mutual funds. I would think primarily about what types of questions he asked dad, and how well he would customize the strategic asset allocation an individual portfolio of mutual funds for your dad's particular needs and risk tolerance; how often does he update and how does he keep dad informed, over time, and try and educate him so he doesn't get shaken out of market with temporary corrections. 1% may indeed be fair if he knows what he is doing (sounds like capital preservation and / or conservative growth and income), listens to your dad's needs, and just doesn't put dad's age into computerized algorithm that spits out generic portfolio (plus, is portfolio a portfolio of TD Ameritrade managed mutual funds, or do they really choose from all mutual fund families available).

Ultimately, though, there is no substitute for your father educating himself about basics of mutual fund investing, strategic asset allocation, etc. Quick read for your dad on basic investor behavior that will create wealth over time, irrespective of whom he chooses to manage money: http://selectedfunds.com/pdf/SFSuccInv4Q09.pdf

If you interview money managers with your dad, just stay quiet and listen if they give you a canned pitch that everyone gets, or if they ask lots of questions about your father's personal situation before recommending specific portfolio customized for your dad. And will they follow up and make adjustments as necessary over time?