As someone mentioned, as this appears to be a wrap account (since he is getting paid 1% of AUM) those loads are most certainly waived. However, I would question why this advisor cannot get access to the cheaper share classes on his platform. He should be buying F2 shares with American Funds, The Pimco fund should be an I share, Templeton should be Adv shares, Hartford should be I shares, just a lot of questions about this advisors platform and why he can only get the load waived, instead of cheaper share classes.

Thus my question about getting the 12b-1 fees credited to the account (i.e. credited against wrap fee). To a large extent, the difference between A shares and I shares is the 12b-1 fee. For example, TPINX (A shares) cost 0.86%, including a 0.25% 12b-1 fee; TGBAX (Advisor shares) cost 0.61%.
My theory (based on no evidence whatsoever :-)) is that larger firms can get the I shares (perhaps because their clients' investments, aggregated meet the min?), while smaller firms/advisers deal with A shares and fee credits.

@jlev
1. If I understand this properly, your father has an IRA (1/3 of his money) with the single holding of the Blackrock Tactical Global Strategies which is inside of a Metlife variable annuity.
Current Blackrock fund summary
2. The remaining 2/3's of his retirement holdings are currently within a company 401k.
Questions:
1. The advisor has not been hired yet, yes?
2. Is the advisor's plan to rollover the existing IRA and the 401k into a new IRA account with the advisor's organization?
3. Has the advisor provided a contractual form in writing and signed that defines all fees and expenses for his/her services?
A few general thoughts and agreements with other statements already posted:
Others noted too many funds, class of funds used, choices, benchmarking and % of allocations.
Indeed.
--- likely too much overlap among funds
--- 5 investments would cover a lot of investment ground for some diversification.
One fund choice in particular strikes me as very odd; and that is the FTEXX. The 10 year return is 1.1%, the expense ratio alone guarantees an ongoing negative flow.....DUH?
As to a benchmark, although U.S.-centric:
If one invested 50/50, 10 years ago today, in VTI and AGG (not my favorite bond choice, but...) the combined annualized return, dividends reinvested, is 8%. 'Course one may have encountered what I call the "twitches"; as VTI traveled downward about -55% from October of 2007 through March of 2009.
Both VTI and AGG are U.S.-centric etf's. VTI recently is about 75% large cap and 25% mid-cap size companies. AGG notes to attempt to hold investment grade bonds; however, the current mix is about 1/3 each of U.S. gov't. bonds, investment grade and below investment grade. Not a global or sector diversified mix; but.....
For this mix in addition to the 10 year return:
---5 year = 13.9%
---3 year = 9.4%
---1 year = 10.9%
---2013 = 15.8%
---YTD = 1.3%
Best to you and your father sorting this situation; and I agree with others to investigate an account with Fidelity, Vanguard or similar (as a means of comparison for the current consideration).
Regards,
Catch

I can tell you that 75% of the portfolio is in taxable accounts because it is inherited money. The remaining 25% is in tax-deferred accounts (401K, Roth IRA, Rollover IRA). I'm maxing out my Roth IRA each year, but there's not much else I can do with this breakdown. As a result, taxes are a concern moving forward.

You mention that you're currently maxing out your Roth IRA but are you also maxing out your 401k?
The reason I'm asking is if you're not because you can't afford to, I'd suggest maybe taking some money out of the inheritance in order that you can.
For example if you're only putting in say $5500/year and can't afford any more, take $12k/yr out of the inheritance so that you can up your contributions to the max. That way you'll have more money in a tax-deferred vehicle and might not pay that much taxes on accessing that $12k. You didn't mention what form the inheritance came in (i.e. stocks, mutual funds, etc...) but if they were in any of those you'd get a stepped-up cost basis so the taxes owed on the money likely wouldn't be that much.
Just something to think about tax-wise if it applies. It won't solve your tax-problem completely but would help. I'd also suggest using some ETF's where you can as you stated just for the tax efficiency of them.

Ok, so you are saying that I could use a larger portion of my paycheck to fund my 401K and use my inheritance money to pay my bills normally funded by my paycheck. Interesting. I never thought of this concept.

Maybe it's just me, but I find this a bit incredulous.
$$ = $$. A basic plain ol' written "budget" should allow you to move $$ around (position it) in a manner most efficacious to your needs. I've got to believe this simple concept KV968 mentioned is one of the most commonly utilized by those with wealth not from income.
Depending on your age, circumstance and needs, the same idea works in using independent wealth to "Rothize" traditional IRAs. Not up on current laws, but think that that tax-dodge (let's call it what it is) may also now be allowed for employee sponsored plans like 401Ks.

I can tell you that 75% of the portfolio is in taxable accounts because it is inherited money. The remaining 25% is in tax-deferred accounts (401K, Roth IRA, Rollover IRA). I'm maxing out my Roth IRA each year, but there's not much else I can do with this breakdown. As a result, taxes are a concern moving forward.

You mention that you're currently maxing out your Roth IRA but are you also maxing out your 401k?
The reason I'm asking is if you're not because you can't afford to, I'd suggest maybe taking some money out of the inheritance in order that you can.
For example if you're only putting in say $5500/year and can't afford any more, take $12k/yr out of the inheritance so that you can up your contributions to the max. That way you'll have more money in a tax-deferred vehicle and might not pay that much taxes on accessing that $12k. You didn't mention what form the inheritance came in (i.e. stocks, mutual funds, etc...) but if they were in any of those you'd get a stepped-up cost basis so the taxes owed on the money likely wouldn't be that much.
Just something to think about tax-wise if it applies. It won't solve your tax-problem completely but would help. I'd also suggest using some ETF's where you can as you stated just for the tax efficiency of them.

Ok, so you are saying that I could use a larger portion of my paycheck to fund my 401K and use my inheritance money to pay my bills normally funded by my paycheck. Interesting. I never thought of this concept. Can you think of any downside to using this method?

I used to like Royce funds for small-value investments 10-15 years ago (late 90s to mid 2000s). Now they are just a mutual fund business that is putting their interest in gathering assets (an collecting fees) ahead of their shareholders' interest of delivering great returns at a reasonable cost. Just look at their fund offerings and see if you can easily figure out the differences between these funds: Select I, Select II, Enterprise Select, Value, Value Plus, Focus Value, etc.? Chuck Royce manages or co-manages 16 funds and Whitney George manages or co-manages 10 funds. The mutual funds returns in the past few years might be showing the changes that have taken place inside Royce in the past decade. I won't be putting my money in Royce funds anytime in foreseeable future.

I've shifted some equity profits into ST bond holdings (carefully selected from a short list of Morningstar funds with only 1 star), and am simply letting dollars accumulate from across the bond sleeve into cash. My tax advantaged account is now sitting at 52% equities, the lowest allocation to stocks that I can remember for this account. I've got significant dry powder in both pre-tax and after-tax accounts.
I've grown very concerned, and for the near term, am perfectly content to just sit and watch for awhile. If I get the urge to nibble at all, it will be to current stocks in the income sleeve...such as KMI if it continues to get knocked around.

Hi Dex,
I haven't bought a Gabelli fund since Couch Potato. I think there are other ways to cover this square.
Most gold mutual funds consist of gold mining stocks. You're better to buy a precious metals fund that also invests in silver and platinum. I also happen to like pm funds that own a wee bit of actual bullion. That leads us to Toqueville TGLDX which I have owned Taxable for over ten years. I do NOT care for the bullion ETFs like GLD but for bullion prefer Central Fund of Canada CEF.
If you want some sort of dividend return you need to stick with the major miners and that would point towards the larger pm funds. That said, they normally do not focus at all on dividends in this square so . . . .
I'm a long time believer that everyone should own some gold/silver as part of their wealth, say 5-10%. More than that is speculation. The bull market in pm's has been running since 2002/3 but had stalled into recently. Now it seems to be moving again. During the first decade the mining stocks lagged the bullion prices by a LOT. Normally, the miners and bullion track each other but at any time on can lag the other. Right now it seems as if the miners are trying to recapture some sort of equilibrium and make up for lost ground.
For example, right now I've got a momentum play on with some silver mining penny stocks. I also bought PAAS a few months back because it pays a dividend. I own PRPFX, TLGDX, SLW, SIL, CEF, PAAS, MGN, ASM, SLTOF, HUSIF but these last 4 are purely nosebleed stuff that I would NOT recommend.
I would recommend TGLDX first while taking a look at VGPMX. Also Scott had a good idea with FCX. I own BHP for the same reasons.
If you're looking for dividend yield, start with your own utility companies. Mine are paying over 4% and it softens the monthly pain.
good luck,
peace,
rono

There used to be a preferred for Anglogold. GGN has a preferred, but that's really an income investment and not something to capitalize on gold.
I'd say Freeport Copper/Gold (FCX) (although that's not all gold) is an option with yield. As for GGN's yield, see what MSF said.
There are a LOT of Canadian resource stocks that pay divs.
Article, as well:
http://seekingalpha.com/article/944711-5-of-the-highest-yielding-gold-stocks

.
Found this on the M* site:

Fed will keep short term rates near zero until the final reluctant "Little Ol' Lady" has been dragged kicking and screaming into risky assets.
---
Apologies Daves ... I should also add that I agree with the general demeanor of the advice above. I wouldn't be going from 0% equities into 75% at this time if I were her and have serious reservations about that planner in general.
In several recent monthly commentaries Professor Snowball has alluded to the "toppy" equity markets (my terminology - not his). So, a good read for your friend would be some of these recent commentaries - at least the portions relating to current valuations (which I believe are generally in the earlier portions.)
Here's one: http://www.mutualfundobserver.com/2013/12/december-1-2013/
Regards

Yep, pretty painful right now. Our town here in Central Coast imposed the following:
Declaration to reduce water usage by 20%.
Outdoor watering banned: 10 am - 5 pm
No watering on Mondays. Even/odd numbered addresses can water every other day.
Encouraging new planting to wait until fall.
Fines for run-off. Fines for watering during any rain (ha!).
Vehicle washing still permitted (it's California after all), but must use shut off nozzle.
No washing of sidewalks, driveways, patios.
50% surcharge for 1st violation. 100% for 2nd.

I agree with the general view that, as cman put it, this planner sounds like a used car salesman. For two reasons: the annuity suggestion and more importantly the pressure to invest now.
However, I'm not ready to condemn the rest. Had the annuity suggestion come with a discussion of how income might be coordinated with Social Security, how much was needed at what time, this could have been a reasonable discussion and proposal.
"In this day and age", people are getting pushed into wrap accounts, typically costing 1%/year. Compared to this, a portfolio of American Funds A shares could look like a positive bargain. The front end load, once paid, is done with. If you switch from one American Fund mutual fund to another, there is no additional charge.
Further, the family seems to give breakpoints based on total AUM (excluding MMF), not just investment in the fund being purchased. It shouldn't take many years before an American Funds portfolio (A shares) comes out less expensive than one managed as a newfangled wrap account.
The shares the planner was recommending were A shares. These have a 3.75% (or less) front end load. B shares are no longer offered by American Funds.
The fact that 3.75% was mentioned as the load for these shares says that we're talking about less than a $100K total investment (across all American Fund mutual funds). Because that's where the load drops to 2.5%.
I'm curious about the 75/25 recommendation. That's more aggressive than "conventional wisdom" suggests. Not that I necessarily disagree with it, but rather that it could suggest that the friend needed hefty returns for retirement. But that seems to contradict the comment that she was in good shape due to the life insurance policy. Perhaps this indicates the planner wasn't paying attention (which would be enough to rule him out), or perhaps there are other issues we don't know about.
In any case, it sounds like there's a fair amount of miscommunication going on.

@jlev. Good new, if true. After you do the research, perhaps you should ask to have a discussion with the CFA. Make sure about the loads. Make sure about lack of churn. Then ask, why so many funds? Is the CFA being mandated by his firm to buy many funds? What is the CFA's investing philosophy?
You'll get lots of opinions on the boards, but I like to keep as few holdings as possible. If I have more than 4-5 funds (easy to do hanging out here), I start looking to pare back.
I think it is just great you are doing this due diligence. Thanks for sharing your concern and what you learn from it with the board.

A friend recently decided she must do something investment wiseOAS she has had her money in CDs for years so she went to an advisor/planner. Her husband, my former best friend, died 6 years ago and she is alone.
She is 57, would like to retire in 10 years and has no debt. Judging from what my buddy told me before he died, his insurance policy would leave her well off.
The planner is trying to pressure her into making a decision within a couple of weeks telling her she would have been a lot better off if she would have invested back in 2009.
First he suggested annuities but after doing some research she decided she doesn 't want to go that route.
She told me today one of the funds he suggests is American Funds American High Income Trust Fund (B grade I think). I don't know much about it but it has a decent 10 year average of 7 per cent. She would have to pay a front end load of 3.75 per cent which makes me think it's not good for her.
He told her a ratio of 25 percent bonds and 75 percent equities would be best. I think she would be better talking to Vanguard or Price for advice.
I am a friend and only want to give her a little advice and not get too involved.
Any suggestions would be appreciated.
Thanks in advance.

I can tell you that 75% of the portfolio is in taxable accounts because it is inherited money. The remaining 25% is in tax-deferred accounts (401K, Roth IRA, Rollover IRA). I'm maxing out my Roth IRA each year, but there's not much else I can do with this breakdown. As a result, taxes are a concern moving forward.

You mention that you're currently maxing out your Roth IRA but are you also maxing out your 401k?
The reason I'm asking is if you're not because you can't afford to, I'd suggest maybe taking some money out of the inheritance in order that you can.
For example if you're only putting in say $5500/year and can't afford any more, take $12k/yr out of the inheritance so that you can up your contributions to the max. That way you'll have more money in a tax-deferred vehicle and might not pay that much taxes on accessing that $12k. You didn't mention what form the inheritance came in (i.e. stocks, mutual funds, etc...) but if they were in any of those you'd get a stepped-up cost basis so the taxes owed on the money likely wouldn't be that much.
Just something to think about tax-wise if it applies. It won't solve your tax-problem completely but would help. I'd also suggest using some ETF's where you can as you stated just for the tax efficiency of them.

FYI:
Regards,
Ted
http://www.sfgate.com/default/article/California-drought-spawns-investment-opportunity-5321013.php#photo-6021950
M* Snapshot Of PGRNX: http://quotes.morningstar.com/fund/f?t=PGRNX&region=usa&culture=en-US

@msf Here is the wording regarding fees that I see:
"We receive service fees from Fidelity for various custodial support services we provide, which are based upon the amount of NTF funds and total client assets held in custody by Fidelity. When support service fees are generated by retirement plan assets, we offset these fees against the account fee payable by the retirement plan."
This seems like the desired outcome you indicated, it appears from what I can read that.
Also, the wrap subadvisor indicates in its that the combined subadvising fee and CFP management fee, contractually cannot exceed 125 bps as a condition of being a subadvisor. Seemed like a good sign.
@charles looking at his decently detailed year-end summary and based on his input amounts and year end amounts it looks like the loads were waived. And the advisor is a IAR and should follow fiduciary standards I believe? I don't see much churn in general which would have perhaps suggested some of the EDJones issues discussed in that thread.
@cman There is more than just portfolio management to be done.
Other research to be done. I'm mollified about some things, but still need to do followups on other things people have mentioned.

Loads are typically waived for investments through wrap accounts. For example, quoting from the prospectus of TPINX, sales charges are waived for:

Advisory Fee Programs. Shares acquired by an investor in connection
with a comprehensive fee or other advisory fee arrangement between
the investor and a registered broker-dealer or investment adviser, trust
company or bank (referred to as the “Sponsor”) in which the investor
pays that Sponsor a fee for investment advisory services and the
Sponsor or a broker-dealer through whom the shares are acquired has
an agreement with Distributors authorizing the sale of Fund shares.

Of course the planner is receiving trailing fees (12b-1) from the funds. Not loads. An obvious tip off is the use of TRP Advisor class shares. These are shares with an extra 0.25% 12b-1 fee. Quoting from a TRP prospectus:

Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries that are compensated by the class for distribution, shareholder servicing, and/or certain administrative services under a Board-approved Rule 12b-1 plan.

The question I would ask is whether the wrap fee is reduced by the amount of trailing fees that the planner receives.
For example, here's Edward Jones' brochure about its Unified Management Account (wrap account) program.
"Fee Offsets. ... If we receive Rule 12b-1 fees for the shares in your account, we will credit the amount received to your account."

I agree with the general view that, as cman put it, this planner sounds like a used car salesman. For two reasons: the annuity suggestion and more importantly the pressure to invest now.
However, I'm not ready to condemn the rest. Had the annuity suggestion come with a discussion of how income might be coordinated with Social Security, how much was needed at what time, this could have been a reasonable discussion and proposal.
"In this day and age", people are getting pushed into wrap accounts, typically costing 1%/year. Compared to this, a portfolio of American Funds A shares could look like a positive bargain. The front end load, once paid, is done with. If you switch from one American Fund mutual fund to another, there is no additional charge.
Further, the family seems to give breakpoints based on total AUM (excluding MMF), not just investment in the fund being purchased. It shouldn't take many years before an American Funds portfolio (A shares) comes out less expensive than one managed as a newfangled wrap account.
The shares the planner was recommending were A shares. These have a 3.75% (or less) front end load. B shares are no longer offered by American Funds.
The fact that 3.75% was mentioned as the load for these shares says that we're talking about less than a $100K total investment (across all American Fund mutual funds). Because that's where the load drops to 2.5%.
I'm curious about the 75/25 recommendation. That's more aggressive than "conventional wisdom" suggests. Not that I necessarily disagree with it, but rather that it could suggest that the friend needed hefty returns for retirement. But that seems to contradict the comment that she was in good shape due to the life insurance policy. Perhaps this indicates the planner wasn't paying attention (which would be enough to rule him out), or perhaps there are other issues we don't know about.
In any case, it sounds like there's a fair amount of miscommunication going on.

@willmatt72
A note about the taxable status of the majority of the monies.
Add this to your list of things to do :) ......
Fidelity Personal Retirement Annuity
The above link is an overview with some other internal links and a short video.
This link is for the investment choices within the annuity.
Normally, I am not a fan of annuities; as sold by insurance companies. However, if our house were to inherit a sum of money beyond our current needs, we would fully review the above annuity plan in order to defer taxation. A few notes from my recall about this product......55 fund choices, no brokerage feature (so no stock, etf, index or other vendor funds available, except the few along with the Fidelity choices). The cost of the annuity is .25% added to the expense ratio of a given fund. No surrender or holding periods that lock up the money at a cost, as is common with annuities. Review the exchange restrictions among the funds; as there are limits as to how often one may move monies around within the annuity.
Fidelity is not the only company to offer a similar plan; but I don't have that MFO discussion at hand and short of time today.
The short term downside for this would be the taxation of the sale of current holdings in order to fund such a plan.
Anyhoo........perhaps something to review relative to your circumstance.
Take care of you and yours,
Catch

I had a similar reaction to the taxable account issue. (Glad you jumped in first to serve as the lightning rod :-))
To add a few thoughts here:
- VAs are a lot like nondeductible IRAs. They're not much good for tax-efficient investments. If one is using them for equity investments, I feel one needs several decades for them to pay off. Given the time frame we're talking about (say, 20-30 years), I might suggest limiting their use to bonds or perhaps balanced funds.
- There is another short term downside - you won't be able to get at this money for a decade without paying a penalty. Like IRAs, there is a penalty if you withdraw money before age 59.5. So while this can hold bond funds, it's not going to be useful for current income. It's value is more for stability - sleeping well.
- I'm not a big fan of Fidelity's VA. When they lowered the cost of the VA wrapper to 0.25%, they also changed the share class of several of the underlying funds - so they cost more. A couple of VAs that may be better are TIAA-CREF's, and Vanguard's.
For example, with Fidelity's VA, you can invest in PIMCO VIT Real Return, but the share class you get costs 0.65% (for a total cost of 0.90% including the VA wrapper). With TIAA-CREF and a $100K annuity, the wrapper costs 0.35%, but the PIMCO fund share class costs 0.55%, so the total cost is the same. And after you own the annuity for ten years, the wrapper cost drops to 0.10%. TIAA-CREF also offers 50+ funds; some in-house, mostly outside.
Vanguard's offering is, well, Vanguard. Mostly large, dull, inexpensive Vanguard funds, but then again, that's what you're looking for. Many of the 17 funds offered are index funds. While they offer conservative and moderate allocation funds, these are not clones of Wellesley or Wellington. Rather, they are managed in-house by Vanguard (not Wellington Mgmt) - they have the same team that manages Vanguard Star, and they invest in mixes of Vanguard index funds. But the Balanced fund in the annuity is managed by the same (Wellington Mgmt) team that manages Vanguard Wellington Fund.
One other VA to consider (if you're not in NY) is Jefferson National Monument Advisor VA. This is an unusual annuity in that it charges a flat $240/year (rather than a percentage of AUM). So for a $100K portfolio, the wrapper costs 0.24%. It offers a gazillion (380) funds, including some that are very low cost (e.g. Vanguard); however if the fund is very low cost, there's a transaction fee - just as brokers have NTF funds but charge TFs for Vanguard funds. The insurer is not well rated; this doesn't matter for VA subaccounts (since the assets are segregated), but does mean that you should think carefully before annuitizing or getting a fixed annuity with them.