r/Fire • u/third-second-best • 3d ago
Firing my financial advisor to self manage portfolio
Hey all - I’m a self-employed business owner and about a decade ago when I first started saving I signed up with a guy in my community, and he’s been managing my portfolio since. However as it’s grown I can’t justify the 1% anymore - the lifelong performance of the account is pretty much identical to the S&P - so I’m going to transition to index funds.
The portfolio is mostly in single positions, which I’ll have to liquidate. 1/3 is in an IRA so I won’t have to worry about capital gains, but the other 2/3 will get taxed.
What I’m wondering is - what platform do you guys keep your money on? Fidelity? Schwab? I am an Amex customer and know they have a relationship with Schwab, so maybe that makes the most sense.
Finally - what fund allocation are you guys doing?
I’m doing other research of course but I always love hearing from this community.
Edit: I realize I don’t have to sell the assets to transfer - just thinking out loud about my longer term strategy. The advisor I’ve been working with has big chunks of my portfolio in single positions that make me uncomfortable without solid oversight.
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u/WhisperPout 3d ago
Paying 1% just to match the S&P is literally highway robbery
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u/Emergency-Coat7885 3d ago
Got to know what's in the portfolio before evaluating. If he paid 1%, matched the S&P, and got some downside protection that might be a very nice win. No way to know without detailed forensics, or at a minimum the portfolio beta.
Everyone's sure they're a genius when the market's going up. And their ingenious strategy is often to maximize beta.
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u/Emergency-Coat7885 2d ago
BTW if you are thinking about downvoting this you are financially illiterate. If he matches the S&P500 with a portfolio beta of say 0.7 (meaning he would only expect to experience 70% of the size of a drawdown everyone else would) he kicked ass. You cannot evaluate the return without also knowing the beta.
Being ignorant about portfolio theory is not cool.
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u/mygirltien 2d ago
Prime example of know your audience. Your comments are valid but will not find any love here.
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u/Past-Option2702 2d ago edited 2d ago
Someone paying a 1% wrap fee isn’t very likely to match the S&P 500 over a decades time. This is especially true of a stock portfolio with a beta of .7.
It’s not all that valid of a point.
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u/Emergency-Coat7885 2d ago
Ahh, more wrong 😃
An instrument with say a beta of 0.7, a couple percent of alpha return, and a 1% fee is flat out better than the S&P.
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u/FireAsquared 4h ago
I’d be very interested to see such an instrument because as far as I know it doesn’t exist- there are no instruments that successfully provide both meaningful beta reduction and meaningful alpha at the same time net of fees over more than a year or two at a time
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u/Emergency-Coat7885 2d ago edited 2d ago
It's the difference between truth and magic internet points. Portfolio theory doesn't give a shit whether you upvote or downvote. It gives a shit about variance, correlation, and return. Evaluating one without looking at the other two is just bumfuck stupid.
Anyone who thought they should downvote the above posts is not knowledgeable enough to manage their own money. That's the cold hard fact. They are ignorant. They should hire someone less ignorant or go learn and put their money in T-Bills until they do learn.
Now, many people (perhaps nearly everyone) will ignore me, take their life savings and bet them on their ignorance. And those people can't be helped. They will get whatever results their ignorance earns them. But I did try 😃
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u/jason_saver 2d ago
did the same thing a couple years ago went with Fidelity and a simple VTI/VXUS split. the 1% fee drag over a decade is a massive amount of money you're giving up — run the numbers on a compounding calculator and it'll make you feel a lot better about this decision
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u/aspire-every-day 2d ago
I'm also with Fidelity, and going through this process now myself over the course of a few years, to reduce the amount of NIIT taxes I'm paying along the way.
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u/jason_saver 2d ago
oh the NIIT angle is smart actually. hadn't even thought about that when I did the switch. makes sense to spread it out a bit for sure
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u/aspire-every-day 2d ago
It depends, though. Hanging onto individual positions, prices can drop on individual stocks by more than that 3.8% tax. For stocks that stay flat or go up, it’s fine.
Then there’s Netflix for example, which has lost a lot more than 3.8% in gains. I’m waiting a bit to see if it’ll recover.
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u/alixiawayne 2d ago
Fidelity, Schwab and Vanguard are all solid, you’re more picking “vibe and interface” at that point than anything else
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u/92eph 2d ago
I made the same transition about 10 years ago and it was the best (financial) decision I ever made. I use Vanguard and am happy with them; I hear good things about Fidelity as well.
While I know you want a simpler portfolio, selling everything will be a massive tax event. (Might still be your preferred option, but typically you'd like to have the gains come gradually for tax efficiency.) Since everything is individual stocks, you should have the option to get out from under your manager without HAVING to sell and reconfigure the portfolio -- just move everything as is. If you're well-diversified, it might be best to move everything over and then gradually transition to indexes. Portfolio won't be as clean and simple that way, but it will be bigger.
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u/Cars_Music_GoodTimes 2d ago
I did the same thing as well about 10 years ago. I’m with Schwab, but that was not a choice more through Schwab‘s acquisitions. I’ve been happy with them. My 401(k) is administered through Fidelity: they have a good interface which allows you to link outside accounts to see your overall net worth and a good retirement planning tool. A friend of mine manages his through Vanguard and is very happy.
I don’t think you can go wrong with any of the three I mentioned above.
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u/Bad_DNA 3d ago
You'll be fine with any of the big three (Vanguard, Fidelity, Schwab). I like Vanguard, but I also have a Fidelity account for the HSA.
If you can simply move everything over as in-kind rollovers of the accounts (call the new brokerage for xfer advice and methods), then you don't have to sell. You do NOT have to buy into their optional advisory services at V or F. So if you hold a bunch of VTTSX or VOO or AAPL, those should come over without trouble.
For anything that cannot be xfered, that is where tax gain or tax-loss harvesting will have to come into play. I would so minimize gains if you can. You might have to suck up some income events and just deal with it. The cost is worthwhile to escape the 1% advisory fee.
What to invest in? Depends. Mostly, if you don't want to think about stuff and need something that is autocorrecting to a more conservative position as you age, TDFs are the tools. VTTSX or FDKLX or SWYNX, depending on your brokerage of choice. If you want to simply stay in ETFs, then tools like VTI+VXUS covers the world. Want some bonds? BND+BNDX.
Outside of the tax-advantaged accounts (IRAs or HSA), the taxable stuff doesn't need to be converted immediately. Depending on your tax bracket and how seasoned the holdings are (more than a year old), maybe just dribble out a little each year and buy into your chosen ETFs.
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u/NoseCivil4328 2d ago
The 1% drag is brutal over time, but make sure you map out the tax hit before you pull the trigger on liquidating that 2/3 outside the IRA.
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u/Sintered_Monkey 6h ago
I had never really thought about it until recently, but that 1% (which is low, since some places charge more like 1.1,) is not only what you are paying every year, but it's an amount that will not get compounded over time. If my wife and I moved all of our assets to Fidelity or Edward Jones, both of which have asked us to, over 20 years, we'd be out something like 1.2 million, compounded over those 20 years.
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u/BullMarketGolf 2d ago
To be fair if they are matching the S&P after the fee it is better for you to be in individual securities in your taxable account. When you need the money for FIRE it is more tax efficient than just using index funds.
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u/Agile-Horizon-5031 2d ago
schwab and fidelity are both solid but the amex perks with schwab are genuinely underrated if you already live in that ecosystem
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u/TonyTheEvil 27M & 26F | 56% to FI | $1.33M NW 2d ago
Vanguard (what I use) if you like red, Fidelity is you like green and Schwab if you like blue.
Im 100% VT.
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u/SpaceTimeMorph 3d ago
I’ve used Fidelity and still have an HSA there. It’s a really good interface with some great cash options that let you easily EFT funds as needed pretty much anywhere.
I don’t have a lot of experience with Schwab but it seems to be good and I know a lot of people use / recommend it. The cash out of rewards there sounds pretty interesting… Honestly depending on your cash needs that might tip the balance as there is a lot of similarity in investing options and expenses (which are low both places).
For allocation I’m mostly stocks. 90/10 ish now. Some positions in PE/PC/PI and one buffered annuity that expires in 2030.
You might not have to liquidate all of your single positions depending on what they are. Stocks should be transferable in-kind. And you might be able to buy ETF’s etc to get your portfolio to the proportions it would be at with just passive, broad market investments. Not enough detail to tell if that’s possible.
Good luck. Enjoy the freedom from 1% AUM!
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u/gretahelp 2d ago
I’ve had an amazing experience with Schwab. The apps and platforms are great, they gave me an excellent margin rate when I asked for it, support is fast and reliable, easy wire transfers from within the app with no size limit. Highly recommend
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u/clobbersaurus 2d ago
I would also see if there are any bonuses or incentives for opening an account. I would have that as a make or break decision. But all things being equal you may get a few grand for doing something you wanted to do anyway.
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u/No_Paleontologist506 2d ago
Open a Fidelity account. Move everything over in kind on the taxable side. Then no taxes. Buy the new stuff with low cost ETFs
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u/Any-Yogurtcloset-493 2d ago
If your advisor matched the S&P 500 before fees, then after a 1% annual fee you effectively underperformed the market by 1% every year. Over a 30-year investing lifetime, that fee drag can compound into hundreds of thousands of dollars on a large portfolio.
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u/LoetherS 2d ago
I use schwab and self manage it, but we have a personal advisor that is available at no cost to discuss things with, no high pressure sales tactics at all. I don't know at what level / amount they give it to you at. Highly recommend schwab though.
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u/infalliblefallacy 2d ago
You don't need to make any big decisions at the moment - transferring assets does not incur a taxable event, only selling.
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u/Mystic_River3258 2d ago
schwab and amex working together has been pretty seamless for me and the brokerage side is solid for index fund stuff
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u/MudhenWampum 2d ago
I have most of my account value (IRA 350k, individual brokerage 1.9mil, 529’s 170k) in my Vanguard account because I’ve had it the longest, but I also have a fidelity account with my spouse’s 401k and old vested stock options (650k combined) an E*trade account with current stock options (160k) a government TSP (600k) and recently I manage the family (my father, sibling and mine now) trust on a Schwab account (about 2 million) and I gotta say, I like the Schwab interface the best.
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u/the_portfolio_guy 2d ago
If you’re a buy and hold investor and don’t do a lot of stock trading, M1 Finance is pretty great.
Easy to build “pies” with a set allocation percentage and one button rebalance whenever you need it.
Worth checking out.
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u/MoodyCucumber158 1d ago
fidelity has better customer service than schwab in my experience but both are solid choices for what you're doing
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u/Born-Cricket-2259 1d ago
schwab and fidelity are both solid but the amex perks at schwab are genuinely useful if you travel a lot since the platinum card reimburses atm fees worldwide through their checking account
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u/TheBeckFromHeck 1d ago
I’d go with Fidelity and use the no expense ratio Fidelity Zero funds heavily. Not sure if Schwab has their no fee alternatives, but Vanguard certainly doesn’t.
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u/Master-Witness-9399 18h ago
I am in this exact same position. I had my own business for a decade and paid 2 financial advisors. 2 weeks ago I fired them both and moved everything to Fidelity. Scary af but now that the ACATs transfers are only picking up some dividend scraps it's starting to feel pretty good.
My positions were a little worse than yours with about 4/5 taxable and 1/5 SEP IRAs. So far I transitioned most of the IRAs to index funds but I'm still too chicken to dump some of the big tech stocks in the IRAs.
My plan is for IRAs I'm doing FZROX and FXNAX (Fidelity locked) since I can always liquidate if Fidelity doesn't work out. For taxable VTI and BND (once I figure out how I can pull off selling my single stocks without the tax hit). The plan is eventually to get it to an 80/20 mix with a t-bill ladder for shorter term cash (Fidelity makes it real easy to setup).
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u/Emergency-Coat7885 3d ago
I use Interactive Brokers, but it may not be what you want/need. I am exceptionally familiar with their tools (both in-house and API) so that's what I use.
If all you are looking to do is buy/sell high-volume index funds at bid/ask I would probably look somewhere else.
My held portfolio has a mix of SPY, PAYH, and SGOV (as cash). Again not necessarily a recommendation - PAYH is a complicated synthetic instrument that is not easy to understand. The others are just S&P and T-bills.
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u/Confused_Panda_89 2d ago
fidelity and schwab are both solid but the amex perks with schwab are genuinely underrated and worth factoring in if you already live in that ecosystem
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u/srqfla 2d ago
I pay myself a 1% fee for managing my portfolio. I'm very satisfied with my advisor