Is Fidelity Wealth Services worthwhile?

I was considering using Fidelity Wealth Services to manage my investments. The primary purpose is for retirement.

I would be having them stick to using Index funds to help reduce costs. I have spoken with them and they are quoting me an expense ratio / advisory fee of 1.07%, which can apparently go down as more money is invested.

Based on the conversation, they will act as a Fiduciary via Strategic Advisers LLC.

One advantage I can see is that they would be able to management the investments to reduce the potential taxes owed and claimed that I could see a positive number here instead of a negative one (i.e. a negative number would be taxes owed).

I was just interested in opinions on this. The expense ratio is higher, by ~.31%, then if I were to do it more myself, but I have little interest in handling day-to-day investment details and thought this may be worthwhile over using a, perhaps, overly simple target date retirement fund or robo-advisor.

Both Fidelity and Vanguard will periodically contact their investors for fee services. It seems to coincide with quarterly and annual dates and is probably linked to revenue goals for the companies.

My strategy has always been to keep it as simple as possible. I’ve experimented with half a dozen “expert” investor advisors and when you add on their fees, none of them have matched my own amateur performance.

I have found that no one is as interested in profitably managing my money as I am… :nerd_face:

Why would you pay a 3rd party to manage your investment in index funds?? You can just do that yourself. Most financial managers don’t beat the S&P anyways.

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You are correct.

However, they did bring up the point that their management can take into account tax law and work to minimize or eliminate the tax consequences of my investments. While I could do that myself as well, the level of effort is far beyond what I am willing to do.

Whether or not that tax advantage if worth the cost of paying them is part of the question.

Part of the issue is that I do not wish to spend much, if any, effort in managing my money. My favored alternative would be to just use their target date retirement fund. Part of the question is whether the fund would be better then their more active management.

I would guess they put some of their best people to work managing things like their target date retirement fund. I would also assume your personal account manager would be a junior starter position at Vanguard. It’s probably a good place for newbies to cut their teeth.

I am sure they have good people managing their target date retirement fund. While such funds work well, they are one-size-fits-all solutions and are not designed to be tailored to the needs of an individual investor. There is a cost to use them which goes beyond their expense ratio because they are one-size-fits-all.

As for the my personal account manager being a junior, that doesn’t matter. They are not the ones making the investment decisions. That’s not how it works. The ones who do are skilled people as well. One just pays for them. In this case, because they are not one-size-fits-all, one can see the additional cost clearly.

Hey it sounds like a great deal… go for it!

You may want to consider a financial adviser who is less expensive than Strategic Advisers and who primarily uses low cost index funds. Note that similar to H200h and butler I currently self-direct my portfolio**

The link has information about Strategic Advisers funds. The majority of the funds are described as Blended and appear to be actively managed. They have 3 funds listed as Fidelity. I checked their Total Stock Market fund. The fund has a turnover rate of 35% and expense ratio of 0.36% so it also appears to be actively managed. You might want to ask them what are the low cost index funds that offer.

Financial advisers use well known techniques to minimize taxes. The methods include which funds to put in taxable accounts and which to put in tax-advantaged accounts, tax-loss harvesting, and deciding if and when to do Roth conversions, etc.

When it comes to the average person, tax avoidance strategy as an important part of investment planning has always puzzled me a bit.

I can see it if you are in the top three percent of income earners, but if you’re below the 90th percentiles it doesn’t make a lot of sense, it significantly restricts the playing field for what is a relatively small amount of money. And to play that margin effectively you need professional help, which, unless you are up in the +15% effective FIT rates rarely if ever pays for it’s cost. For a married filing jointly that’s a taxable income of over $200,000.

I use vanguards personal advisory service which I assume is similar. They charge .3% management fee and generally invest in etfs and index funds.

I believe they are saving me more than enough money in taxes to pay for the service. This is through strategic allocation and tax loss harvesting. You can always use them to set up your portfolio and discontinue the advisory after a quarter or whatever and run things on your own. Or you can take the plan they devise for you and implement it yourself without paying a dime. There’s no pressure.

it’s a personal choice whether or not to use an advisor but I’m pretty happy with them.

@EricG97477 I’m a little confused. You say this is primarily for retirement. Are the funds in tax sheltered (eg. IRA) accounts? If so, then tax efficient management is not a concern. But then again, PAS charges substantially lower fees for nontaxable accounts than for taxable.

Here’s a graph showing returns on after-tax, pre-tax and tax-free investments for a married couple filing jointly making over $186K and less than $364K (24% marginal FIT rate.) with 4% tax-free return 8% taxable return. $100K to start with $25K/mo invested for 20 years.

tax brak

I don’t understand how this is relevant

You said:

So, unless you are in the top 5% of household income earners you are very likely losing money paying for Vanguard’s advisory service.

How else, other than tax-free investments, are they saving you money in taxes?

One advisory that does similar style tax loss harvesting found their algorithm gave clients an almost 2.5% greater yield over the past 10 years than if they simply bought and held. This is multiples of the .3% management fee vanguard charges.

Of course you can tax loss harvest yourself — and I hope everyone did last year — but my contention which is unprovable is that their algorithm which runs every day and scans for tax loss harvesting opportunities would do it better than I could. Certainly it doesn’t have to do much to produce a greater than .3% lead.

If I were selling advisory services I would use a pitch like that.

But if I had a method that yielded an additional 2.5% gain over everyone else, why would I give it away for my cut of the company’s paltry 0.3%? Wouldn’t it make more sense to keep the 2.5% advantage myself and retire in a couple of years?

You are accepting a salesman’s pitch based on cherry-picked historical date that happened to work out. But if you’re convinced… go for it… it’s only $3K a year per $M… X inflation adjustments.

Cherry picked data? It’s a valid tax move that people have been doing since forever. Here’s a study that back tests all the way back to 1930: WSJ: Just How Valuable Is Tax-Loss Harvesting? | by Derek Horstmeyer | Research Shorts | Medium

First… The cherry picked data I referred to was your reference to your statement in post #15 which stated “One advisory that does similar style tax loss harvesting found their algorithm gave clients an almost 2.5% greater yield over the past 10 years”

Second… Your source, Derek Horstmeyer, has a position which is dependent on the popularity and viability of the wealth management industry. He currently serves as Director of the new Financial Planning and Wealth Management major at George Mason University. He probably believes in what he’s doing but he’s hardly an unbiased source.

Third… Horstmeyer’s conclusions and recommendations in the article you linked are not based on actual transactions, they are based on simulations of historical market data. ie: “My research assistant Kanwal Ahmad and I decided to tackle this question by running simulations”