Recently we have started working with Vanguard PAS Select program and have a dedicated advisor. Our ultimate goal is to have a human advisor to oversee our finance if and when I go before my time, and my wife and kids will be well care for. For now this is a new experiment for us.
After several rounds of discussion with my advisor, I have gained further insights on Vanguard capabilities that may to answer some of Hank’s and Old_Joe questions above.
1. VCCM uses a Monte Carlo algorithm based on historical financial data with respect to inflation rates, interest rates, market returns of stocks and bonds. Nevertheless, these are backward looking data and may have challenges in predicting future returns. Thus the model can look at various scenarios and calculates for the probabilities of various future outcomes. Realistically, there is no model exists today. AI and machine learning will likely be use more in assisting the Monte Carlo simulation in the future. Right now, their algorithms are simply not robust enough to enable self-driving cars are reliably, for example.
2. I asked my advisor the scenario question where it has higher than average 2% inflation rates for longer period, higher interest rates, and below average market return below, and how would VCCM model predicts and recommends the asset allocation. My advisor said that is a “good question” meaning he does not have the answer. But he said one needs to reconsider the withdrawal rates and monitor the portfolio to ensure that is still on track if this scenario plays out. That is a honest answer I can accept.
3. In the proposed plan I requested to have no emerging market exposure, especially in passive investing. This eliminated Total international market index fund and geopolitical risk of 30% EM. Developed market is acceptable. So we will use developed market index ETF instead. In our self-managed accounts, we will use specific active managers outside Vanguard managed accounts.
4. In Vanguard proposal plan, there is no cash position. There is only stocks and bonds for periodic rebalance purpose. Cash is considered a drag on portfolio performance. The plan is highly flexible that the advisors will work with clients to produce an asset allocation will meet the withdraw rate, portfolio return and volatility. Also the clients can choose all active and passive Vanguard funds aand ETFs available. One closed mutual fund, Capital Opportunity, was made available to PAS clients. Primecap, however, was not available (bummer). We chose 50:50 active:passive with 50% stocks and 50% bonds.
5. Lots of customerization from client’s perspective, we added short- and intermediate-term corporate bonds in addition to the total bond market index. In the future, we may add their newly created Core or Core-plus active ETFs. Outside the managed accounts, we compliment these bonds with other active managed bonds - high yield, bank loans, and global bonds.
Addition: PAS Select program provides few other services that we did not engage with the advisor in this early phase of working relationships. The human touch aspect is very good and their advisor phone number answer quickly.

LINK 2
FUNDS. Mid-cap growth JAENX follows the GARP strategy. Its portfolio includes 26% techs, 24% industrials (reshoring themes), healthcare, growth utilities (renewables, grid improvements). (By @lewisbraham at MFO) (Also, a strange placement near the end of the issue)
EXTRA, FUNDS. With the NAMES-RULE, the SEC has cracked down on misleading fund names. Funds must invest 80% of the assets according to what is in their names, e.g. growth, value, big-data, green, AI, etc. When terms are vague, funds must define them along with applicable criteria in their prospectuses and those will become part of funds’ official investment policy. Fund firms with $1+ billion AUM will have 12 months to comply, smaller firms 18 months. Future flexibility will only be during fund launches when it takes some time to build portfolios, but beyond that, any deviations must be fixed within 90 days.
INCOME. As bond-proxies, UTILITIES (XLU, the worst among 11 S&P sectors) have suffered as rates have risen. But rates are peaking, and utilities should have better prospects ahead, especially growth electric utilities, those involved in renewables and improving grid infrastructure. Mentioned are AEP, CNP, NI. (This previously regular column is now ON/OFF)
ECONOMY. A new plan by the LA Senator CASSIDY and the ME Senator KING to fix SOCIAL SECURITY may work. It will leave the SSA Trust Fund (really, an IOU) alone, but would BORROW $1.5 trillion over 5 years to invest in STOCK index funds. The total US stock market-cap is $43.4 trillion, so this inflow shouldn’t cause much disruption (but don’t underestimate the impact of the inflow of $300 billion/yr. That would be almost double of the US IPOs in a best/hot year like 2021) (Also not mentioned is the increase in the US debt, but what is another $1.5 trillion added to $33 trillion?). This stock investment may cover 75% of the SSA shortfall with the rest coming from COST-CUTTING via increasing the FRA (well, this is the US, not France), raising salary caps, adding means test for higher income earners (so, they pay max into the SSA but may be limited in their SSA benefits). (No mention of how/if this $1.5 trillion would be repaid, but keep in mind that Social Security is a mandatory obligation of the government) (By guest author Allan Sloan)
Dave GOODSELL, Natixis Center for Investor Insights. Most Americans aren’t prepared for RETIREMENT and may be overly optimistic. For many, 2022 was a year when reality hit (with bad stock and bond markets). Financial advisors have been suggesting that fixed-income now has generational opportunities, yet the pain isn’t over for many sectors of fixed-income. Allocation 60-40 makes good sense now. SOCIAL SECURITY may cover only 35-40% of retirement needs, and many Americans would have difficult time covering the rest from their portfolios. LONGEVITY is an underestimated risk, higher than what investors perceive in surveys (#1-volatility, #2-risk of loss).
RETIREMENT. A government SHUTDOWN (federal FY24 starts October 1) won’t disrupt the monthly SSA payments (as that is mandatory spending), but other SSA services would be affected. The announcement of COLA (est +3.2%) would be delayed (without the BLS CPI data). We went through the debt-ceiling fiasco earlier this year, and now this.

Many years ago, Fidelity was my 401(k) plan administrator. A planning tool, the Financial Engines was made available in their Net Benefit portal. Here is more information on it.

https://www.edelmanfinancialengines.com/about-us/

The users have the ability to input a number of variables into the model and it generates the probability of outcomes. That model works well with index funds but not so much with active managed funds. Nevertheless, I came to appreciate asset allocation as the most direct factor on long term return. @lynnbolin 2021 also mentioned Financial Engines in a recent post.
https://mutualfundobserver.com/discuss/discussion/comment/166992/#Comment_166992
It appears that both Fidelity and Vanguard use some version of the Financial Engines that can accommodates active funds just as index funds. Our Fidelity planning report provides a full picture of our finance before we engage with Vanguard PAS. You are correct that Vanguard cannot legally advise on external funds. Their plan only advises those $ that you direct them to manage. This is a new experience for us working with advisors but being prepared really help to guide the planning discussion accordingly. Unlike Vanguard customer lines that customers complain about, the advisor phone numbers and Secure Messaging are excellent. Again, thank you for sharing.

As a follow-up to their robo-advisor evaluation, M* conducted additional research.
Two hypothetical investor profiles were created.
Only seven of the 20 robo-advisors allow investors to complete risk assessments without registering.
Their sample recommendations varied widely.
Four robo-advisors recommended identical portfolios for both investor profiles.
This was surprising since the investors' time horizons differed by 18 years.
Conclusion
"Robo-advisors have one key purpose: to simplify and automate the investment process.
However, our research underscores the fact that the resulting portfolios often vary.
The upshot is that while robo-investing delivers on its promise to automate the investment process,
investors should still do their own research and make sure they’re comfortable with the recommended
portfolio before signing up with a specific provider."
Not All Robo-Advisors Are Created Equal

Schwab & Wealth Enhancement Group:
Partnering for a Superior Client Experience
https://network.wealthenhancement.com/
From there, follow the full services link to:
https://network.wealthenhancement.com/services
Then to Financial Planning:
https://network.wealthenhancement.com/financial-planning
That has the link to Dynamic Cash Flow Tax Plan- Roth IRA Conversion (the sample spreadsheet)
The key is the "network" part of the URL (working with Schwab), as opposed to using "www".
The spreadsheet illustrates a straightforward strategy. "Prepay" taxes (via conversions paid for out of taxable account) as a way of moving that tax money into sheltered accounts. If it weren't for graduated tax rates, one might want to convert all of an IRA up front. Instead, convert gradually over many years, going up to but not into the next tax bracket.
(Since some states exempt some or all of the conversion amount, the combined fed/state rate on some conversions can be less than your current bracket even if you edge into the next bracket).
A first order approximation for the ultimate target is to convert enough over many years that what one is left with in the T-IRA generates RMDs not greater than one's cash flow needs (after accounting for SS, pensions, and taxable account assets). Notice in the spreadsheet that this couple never depletes their taxable account and that their RMDs are below their cash flow needs.
(Depleting taxable assets would be a good thing, because then assets would all be in tax-advantaged accounts. This couple can't do that without the conversions moving them into a higher (32%) bracket.)
This strategy depends on the assumption that one's tax bracket in retirement will not be much less than one's tax rate for the conversions. (It can be somewhat less because of the tax-sheltering effect of prepaying taxes.) Given today's low tax rates (even the spreadsheet assumes a future increase in rates), that's an assumption I've been willing to make. In the end, what taxes will be 30 years from now is a crap shoot.

I just got off the call with this guy [at Wealth Enhancement Group]. I was generally impressed. ( While he was not calling form his yacht, he was calling from second home in Maine!) They have a model which will calculate Roth Conversions and expected taxes with breakeven points ( Example says 2040!). Assumes 5% return in taxable and 7% in Roth

Is this the example you were shown?
https://static1.squarespace.com/static/5ed7df046f291c4a9e5546fc/t/63ffc63f2a2d1c36743d9803/1677706815803/Sample+Roth+Conversions+DCFI+-+2023_with+notes+-+JH.pdf

They will do financial plan free of any fees, but of course want to manage your money. The fee is fairly reasonable at 1% for first 1,000,000 up to 0.7% over 5,000,000, so in line with most firms that do portfolio management only, and a bit higher than many mutual funds.

That is certainly in line with the industry:

From: https://www.advisoryhq.com/articles/financial-advisor-fees-wealth-managers-planners-and-fee-only-advisors/
Comparison of types of services and typical fees:
https://smartasset.com/financial-advisor/financial-advisor-cost
Fees do depend on what you get. I was just looking at someone's Separately Managed Account (SMA) portfolio with a couple of hundred large cap stocks (with little S&P 500 overlap). Real portfolio, outperformed the S&P 500 net of fees since owned (about 2.5 years), fees closer to 1/2% than to 1% (well under $1M in assets). Would perform tax harvesting except it is in an IRA. Don't know about other services included.

I agree the Vanguard info is pretty comprehensive, but to me it is predictably Vanguard, ie 60/40, 20% International, tax loss harvesting. Not sure that is worth their fees which I think are 0.3% correct ?

As @hank observed, Vanguard builds a glidepath. I noted in the Robo advisor thread that per M* this is unusual for low cost (i.e. robo) advisors. Also note that that 20% international is out of 60% stock, i.e. 1/3 of equity is foreign. Vanguard, being enthusiastic about matching market attributes, observes that 40% of the equity market is abroad.
Vanguard Digital Advisor costs 20 basis points all in, or 15 basis points excluding underlying fund expenses. One adds another 15 basis points (30 basis points excluding underlying expenses) in order to get human attention and financial planning. More services, higher fees.
https://investor.vanguard.com/advice/compare-investment-advice#comparison-chart

Having a more complete portfolio picture helped in our planning. Remember, the initial plan is merely a proposal. The clients need to review it thoroughly and make adjustments (asset allocation (risk tolerance), investment vehicles, and % active vs. % passive). We have VG to manage part of several IRA accounts for us with the objective of capital appreciation (the third bucket). We manage the other half for generating income (first and second buckets).
As @lynnbolin21 said earlier there is an element of "leap of faith" when using financial advisor. This is new to us so we take it slow. Our ultimate goal is to have a human advisor to help manage our retirement funds if and when I can no longer able to manage it.
On Vanguard site, there is other links on the bottom that have many useful information on financial planning and templates for their advisors.
https://advisors.vanguard.com/advisors-home
I found particularly informative is under the "Advisor's Alpha®" tab where it goes into Advisor's Alpha® overview, Investors' view on advice, and Behavioral coaching. On the Wealth Management tab, it goes into useful tools for Health Care Cost Estimator, Intergenerational wealth, and Roth Conversion Calculator.
I believe sharing these information is helpful for everyone's planning in the future.

@Derf
Funny you should ask. After asking my Schwab rep if he had some way to help me calculate Roth conversions amounts, he suggested talking to the "Wealth Enhancement Group" for a no commitment plan. WEG guy says they are the 6th largest independent advisory firm in the country with over 70 Billion in assets
I just got off the call with this guy. I was generally impressed. ( While he was not calling form his yacht, he was calling from second home in Maine!) They have a model which will calculate Roth Conversions and expected taxes with breakeven points ( Example says 2040!). Assumes 5% return in taxable and 7% in Roth
They will do financial plan free of any fees, but of course want to manage your money. The fee is fairly reasonable at 1% for first 1,000,000 up to 0.7% over 5,000,000, so in line with most firms that do portfolio management only, and a bit higher than many mutual funds.
For this you get the plan, quarterly reviews, tax planning etc. Their "value dividend growth " portfolio has returned 12% net of fees since 2007, pays 3% and lost only 7% in 2022. They also have a growth portfolio, and buy individual bonds for income. They have on site CFA, CFPs, tax lawyers estate planners etc.
I agree the Vanguard info is pretty comprehensive, but to me it is predictably Vanguard, ie 60/40, 20% International, tax loss harvesting. Not sure that is worth their fees which I think are 0.3% correct ?

@Observant1- In the many years that I've been with MFO I've never seen anyone present such complete, detailed and interesting information with respect to a retirement plan that was recommended by a financial firm. Nice job! It should be useful to other MFO members, and initiate some healthy conversations.
Regards- OJ

Thanks, OJ!

Vanguard's spending strategy and recommended actions are sensible*.
The Vanguard Capital Markets Model is proprietary but appears to be robust.
Approximately half of my total portfolio is held outside of Vanguard.
While the corresponding dollar amounts are included in Vanguard's financial plan,
asset allocation for outside investments is not reflected in the current asset mix.
Examples:
Recommendation #3 - increase international to 18%
Portfolio X-Ray indicated 24.48% international exposure
Recommendation #4 - decrease U.S. large caps to 27%
Spreadsheet indicated 24.87% large cap fund exposure (actual large cap stock exposure will be less)
Consequently, Vanguard suggests making unnecessary trades (with tax consequences)
to align my portfolio with the 60/40 asset allocation target.
* Edit: Recommended actions are sensible assuming your entire portfolio is managed by Vanguard PAS.
If this is not the case, some of the recommended actions may not be prudent.

@Observant1- In the many years that I've been with MFO I've never seen anyone present such complete, detailed and interesting information with respect to a retirement plan that was recommended by a financial firm. Nice job! It should be useful to other MFO members, and initiate some healthy conversations.
Regards- OJ

I contacted Vanguard a few weeks ago regarding an unrelated issue.
The Vanguard rep suggested a complementary meeting with a Personal Advisor Services (PAS) professional.
A preliminary financial plan was developed and sent to me yesterday.
I won't delve into all the specific details but will provide an overview since this info may be helpful to others.
Age: Early 60s
Goal: Retire in two years
Withdrawal rate: I requested a specific dollar amount which equaled 3.03% of my total portfolio
Asset allocation to age 80: 60% stock/40% bond - completed questionaires and discussed with Vanguard
Asset allocation from age 80 to 85: 55% stock/45% bond
Asset allocation from age 85 to 100: 50% stock/50% bond
The Vanguard Capital Markets Model (VCMM) is used to forecast returns for stocks, bonds,
and short-term reserves as well as inflation rates.
Monte Carlo simulations are run to project outcomes to age 100.

I'm inclined to think that with respect to advisory services, there are two major axes: degree of assistance desired (ranging from DIY to fully discretionary accounts) and degree of financial complexity involved.
M* suggests that as a first approximation, portfolio size is a fair indicator of complexity. The more money you have, the you tend to have special needs (e.g. complex estate planning). To this end, Exhibit 1 shows basic robo advisors targeted at the mass market (up to $100K), hybrid robos targeted more toward mass affluent ($500K to $2M), and wealth managers useful for some investors with over $2M in assets.
Obviously these are fuzzy divisions with much overlap. A not-so-wealthy individual with a complex family situation may need more help than a wealthy senior with no heirs or other issues. As you said, YMMV.

M* evaluates robo-advisors for 2023.
Best
1) Vanguard Digital Advisor and Vanguard Personal Advisor
2) Fidelity Go
3) Schwab Intelligent Portfolios
Link
Video

Earlier this year, Romick delivered the keynote at Morningstar’s investment conference, reflecting on his 30 years of successful investing across multiple cycles.
We asked Romick to share insights and lessons learned navigating major crises like the tech bubble, financial crisis, COVID crash, and 2022’s meltdown. Interestingly, he believes Crescent has survived by “first considering what can go wrong.”
Hear Romick’s wisdom on defensive investing, managing risk, contrarian thinking, and preparing for an uncertain future—a rare chance to learn from a legendary investor.

The same poster stated:
"$100K is not meaningful to change someone's life."
..........AND..........
"Why not open a new thread and ask what a windfall of $100K would mean..."
Say what?
These are two inherently conflicting statements which beg several questions, the first rhetorical one of course being,
IF $100K is not meaningful to change someone's life, how in the world can it be regarded by anyone as a "windfall"?
To wit, per Experian (bold added):
A financial windfall is money you didn't expect to receive. Financial windfalls can range in size from hundreds to millions of dollars, but whatever the amount, they offer an opportunity to improve your financial situation.
Perhaps what the poster was trying to state was best expressed recently by Agent Orange...
(Click twice on below)

See his buffonish comments at 1:00 of video:
"I know this. I don't even know that!"
Got it!

"The turnover ratio measures fund yearly trading activity. It is calculated by taking the lesser of purchases or sales, dividing that number by average monthly net assets. Securities with a maturity of less than a year are not considered."
Fund reports show the report period turnover plus annual those for several FYs. Anything more may have to be calculated manually.
https://icfs.com/financial-knowledge-center/turnover-ratios-and-how-compute-them

https://www.sec.gov/Archives/edgar/data/711080/000168386323006232/f36172d1.htm
497 1 f36172d1.htm 497
TOUCHSTONE STRATEGIC TRUST
Touchstone Dynamic Allocation Fund (the “Target Fund”)
Supplement dated September 13, 2023, to the Fund’s Summary Prospectus, Prospectus and Statement of Additional Information (“SAI”), each dated April 28, 2023, as may be amended or supplemented from time to time
IMPORTANT NOTICE REGARDING PROPOSED CHANGES TO THE TARGET FUND
Proposed Reorganization
In supplements dated February 24, 2023 and March 14, 2023, the proposed conversion of the Target Fund, a mutual fund series of Touchstone Strategic Trust, from a mutual fund to an exchange-traded fund (an “ETF”) through the reorganization of the Target Fund into a newly-created ETF series of the Touchstone ETF Trust (the “Reorganization”), was announced. A Proxy Statement/Prospectus (the “Proxy Statement”) dated July 20, 2023, which contains more information regarding the Acquiring ETF (as defined below) and the Reorganization, was filed with the Securities and Exchange Commission (the “SEC”), and was mailed to Target Fund shareholders of record as of June 30, 2023.
The newly-created ETF, Touchstone Dynamic International ETF, is proposed to serve as the acquiring fund in the Reorganization (the “Acquiring ETF” and together with the Target Fund, the “Funds”). A special meeting of shareholders of the Target Fund commenced on August 29, 2023 and was adjourned until October 2, 2023 (the “Special Meeting”), at which time shareholders of record of the Target Fund will vote on the proposal to approve the Reorganization of the Target Fund into the Acquiring ETF. The Reorganization is expected to be tax-free for U.S. federal income tax purposes.
Under the terms of the Agreement and Plan of Reorganization (the “Plan”), the Target Fund would transfer all of its assets to the Acquiring ETF in exchange for shares of the Acquiring ETF. The Acquiring ETF would also assume all of the Target Fund's liabilities. The shares of the Acquiring ETF would then be distributed to the Target Fund's shareholders, and the Target Fund would be terminated.
Prior to the Reorganization, any dividends paid by the Target Fund will be paid in accordance with the current dividend option of an account; accounts in which the dividend reinvestment option has been chosen will receive any dividends in the form of additional shares of the Target Fund.
The Target Fund's shareholders will be required to approve the Reorganization. If the Reorganization is approved at the Special Meeting and subject to additional conditions required by the Plan, the Reorganization is expected to be completed on or about October 20, 2023. Shareholders of the Target Fund will not pay any sales load, commission, or other similar fee in connection with the Acquiring ETF shares received in the Reorganization. Expenses associated with the Reorganization will be borne by Touchstone Advisors, Inc. (“Touchstone”).
In connection with the Reorganization, the Target Fund closed to new shareholders on May 15, 2023. Current Target Fund shareholders may continue to purchase shares of the Target Fund until September 29, 2023.
After the Reorganization, shareholders may only purchase or sell shares of the Acquiring ETF on a national securities exchange at prevailing market prices through a broker-dealer.
More Information About the Funds
Although the Target Fund and Acquiring ETF are similar in various ways, there are some differences. For example, the Acquiring ETF will have a different sub-adviser, principal investment strategies, risks, fees, and expenses than the Target Fund. The Acquiring ETF will also be subject to certain risks unique to operating as an ETF. A comparison of the investment policies, strategies, fees, expenses, and risks of the Target Fund and the Acquiring ETF are included in the Proxy Statement.
The Target Fund seeks to provide investors with capital appreciation as its investment goal. The Acquiring ETF also will seek to provide investors with capital appreciation as its investment goal. The principal investment strategies and principal risks for the Funds are similar, although they do differ in certain respects. The Target Fund is a “fund-of-funds” that invests in a diversified portfolio of fixed-income and equity oriented underlying funds. These underlying funds, in turn, invest in a variety of U.S. and foreign equity and fixed-income securities. The Acquiring ETF will invest, under normal circumstances, at least 80% of its assets in equity securities of non-U.S. companies. Touchstone serves as the investment adviser to the Target Fund and will also serve as the investment adviser to the Acquiring ETF. The Target Fund is sub-advised by Wilshire Associates Incorporated (“Wilshire”), while the Acquiring ETF will be sub-advised by Los Angeles Capital Management LLC (“Los Angeles Capital”).
Los Angeles Capital is an SEC-registered asset manager based in Santa Monica, California, with $28 billion in assets under management as of December 31, 2022. Formed in 2002 by former Wilshire employees, Los Angeles Capital is independent and employee owned. Founding members include Tom Stevens CFA, Chairman; Hal Reynolds CFA, Chief Investment Officer; Stuart Matsuda, Chief Trading Officer; and Daniel Allen CFA, CEO & President. The portfolio managers of the Acquiring ETF will be Hal Reynolds CFA, Ed Rackham Ph.D., and Daniel Arche CFA.
1
Prior to the Reorganization, Wilshire will continue to sub-advise the Target Fund in accordance with its investment goal and principal investment strategies.
You can obtain a copy of the prospectus or SAI for the Acquiring ETF, by visiting the website at TouchstoneInvestments.com/ETFs, by calling (833) 368-7383, or by contacting your financial adviser.
The foregoing is not an offer to sell, nor a solicitation of an offer to buy, any shares in connection with the Reorganization, nor is it a solicitation of any proxy. For important information regarding the Funds, or to receive a free copy of the Proxy Statement, please contact your financial adviser or Touchstone at 800.543.0407. The Proxy Statement contains important information about Fund goals, strategies, fees, expenses, risks, and the Board's considerations in approving the Reorganization. The Proxy Statement is also available for free on the SEC's website (www.sec.gov). Please read the Proxy Statement carefully before voting on the Reorganization.
 
* * * * * 
Please contact your financial adviser or Touchstone at 800.543.0407 if you have any questions.
P.O. Box 534467 Pittsburgh, PA 15253-4467
Ph: 800.543.0407 TouchstoneInvestments.com
Touchstone Mutual Funds are distributed by Touchstone Securities, Inc.*
*A registered broker-dealer and member FINRA and SIPC
A Member of Western & Southern Financial Group
Please retain this Supplement for future reference.
 
TSF-54CC-TST-TSMAX-S15-2309
 
2

@dtconroe- Exactly- same here.
However...if answering this question prior to maybe five years ago the answer would have been entirely different. The financial positioning is entirely different when comparing accumulation years and preservation years.