When is it worth moving to a managed account?

[rubytue]

If I were to leave my job, I know I would roll my TSP (i.e. 401(k)) balance into a managed IRA account. I know the firm I would use, too. Same firm I would be calling if I won the lottery. But, I'm not leaving my job. In fact, I'll probably retire as a fed. So, it will be 20 years before that becomes an option.

However, our IRA balances are now above their account minimums. Fees would run about 2.5% (their fee plus their average fund fees, ETFs and institutional funds).

Part of me say we shouldn't move and we can do ETFs on our own.

The other part of me just wants to say "F-it" and let someone else worry about it, someone else can watch it and let me know when I need to rebalance or other things. Someone else does the research and picks.

And a big part of the F-it attitude comes from DH who won't pull the trigger on putting his cash anywhere. His IRA accounts are over half cash! He went to cash in 07 and has been gun shy ever since. Maybe it would be worth the fees just to get his cash invested.

[njohnson1972]

As an investment manager, I think 2.5% is a high fee.

[SJ]

May 18, 2012 9:21:48 GMT -5 njohnson1972 said:

As an investment manager, I think 2.5% is a high fee.

I completely agree.

If this manager would just be putting it in ETF's and mutual funds (and not actively managing it) I think 2.5% is way too high and you can just do ETF's on your own.

For active management, we charge roughly 1% per year.

[SJ]

May 18, 2012 9:12:48 GMT -5 rubytue said:

And a big part of the F-it attitude comes from DH who won't pull the trigger on putting his cash anywhere. His IRA accounts are over half cash! He went to cash in 07 and has been gun shy ever since. Maybe it would be worth the fees just to get his cash invested.

Oh man. Does your DH like and trust this firm? Do you think he really would invest it if they were in charge?

If you have no other ways to convince him to get back in the market, I might consider moving his IRA.

[gt7301b]

Can you find an advisor with lower fees who you also like?

[rubytue]

May 18, 2012 9:23:56 GMT -5 SJ said:

May 18, 2012 9:12:48 GMT -5 rubytue said:

And a big part of the F-it attitude comes from DH who won't pull the trigger on putting his cash anywhere. His IRA accounts are over half cash! He went to cash in 07 and has been gun shy ever since. Maybe it would be worth the fees just to get his cash invested.

Oh man. Does your DH like and trust this firm? Do you think he really would invest it if they were in charge?

If you have no other ways to convince him to get back in the market, I might consider moving his IRA.

You know, it didn't occur to me that he might still say no. I just figured if we moved it all, it would all go in. hmmm He is generally against moving it b/c he "can do the same thing himself." (insert several heated discussions about him saying that then not). He would rather pay for a tax planner than a financial planner.

Also, its a tiered fee system. It would be 2% b/c we are at the lowest tier. Just $5k over the account min. And it would require moving all 4 accounts to hit that min (so I guess I more mean a "relationship" minimum or something.... all 4 account qualify on their own as long as they are grouped together). But, I didn't really 2% was too high. I totally admit I haven't shopped around. I just like this firm a lot and its always been where I thought I would put my money. FIL used them for a few years, too, and I know a bunch of other people who do.

And, I said 2.5% because it was a 2% management fee, and then I added in 0.5% for the fund fees (they say their fund fees range 0.3-0.6%).

The annual fee schedule is:
First $150,000 2.00%
Next $250,000 1.65%
Next $350,000 1.25%
Next $250,000 1.00%
Next $2 million 0.75%
Next $7 million 0.60%
Next $15 million 0.50%
Amounts above $25 million are negotiable

So that is too high? And this is why I ask MM.

[njohnson1972]

Actually, those fees seem more reasonable.

I am used to managing higher levels. We will work with less, but have annual minimum fee of $4,000 + expense fees. It starts to get expensive (which we think of as more than 1.5% all in for stock/bond management - hedge funds, private equity is a different story) so must people with less than a million end up places like Fidelity or Vanguard.

The fact that they will work with $250,000 is a start, but still considered expensive. Not expensive at the upper end, though.

Will they consider combining the relationship with your dad for fee purposes? We do that all the time so that smaller accounts don't have to pay such heavy fees when they are related to a larger relationship.

[rubytue]

Yeah, I was wondering if it was an account size thing that was make it sound high. Like I said, we are just over their minimum, which I'm guessing is much lower than most minimums.

I'll check to see if FIL is still with them. It hadn't occurred to me that they might combine the relationship. I want to say he changed firms when he left the area, but I don't know that for sure.

[SJ]

May 18, 2012 10:21:16 GMT -5 njohnson1972 said:

Will they consider combining the relationship with your dad for fee purposes? We do that all the time so that smaller accounts don't have to pay such heavy fees when they are related to a larger relationship.

Ditto. This is standard for us too.

[kadams767]

May 18, 2012 10:42:13 GMT -5 SJ said:

May 18, 2012 10:21:16 GMT -5 njohnson1972 said:

Will they consider combining the relationship with your dad for fee purposes? We do that all the time so that smaller accounts don't have to pay such heavy fees when they are related to a larger relationship.

Ditto. This is standard for us too.

This is how my planner did it too, so we are in with him based on my in-laws account balances rather than our own.

[Monarch]

We pay 1.5%. Our assets under mgmt equal about $380k.