A Warning to anyone (esp retirees) who aren't paying attention to their "Advisor-driven" portfolio
A little background first: I'm 50 and I only in the last 3 years actually did a forensic analysis of my own portfolio and took full control of it. I blindly contributed to a TDF for years in my 401k, then when I changed jobs years later, I just rolled that all into a Wells Trade account and worked with an Advisor (I still contributed to 401ks after that too). After my advisor retired and I started to learn more about investing (as I got older and actually started thinking about retirement), I finally opened up the portfolio to get my hands around it. Let's just say, it wasn't horrible but I cleared the table, moved everything to Fidelity, adopted a mostly Vanguard-y 3 fund strategy (of sorts). It's been a really good 3 years. I'm in a great spot, I was smart to start at 22! But I could have a hell of a lot more if I owned this process on my own from the start. But on to the primary story:
So I shared all this with my mom the other day and she was impressed with my results and allowed me to look into their own Portfolio. It was set up by an old "friend" in AZ years ago that worked at Schwab. Let's just say on initial inspection, I was kinda shocked by what I saw because I didn't recognize hardly any of the symbols. I ran it all through Claude and it basically told me their 'friend' designed a portfolio beneficial for HIM, not for THEM. It pointed out investing for retirees doesn't have to be that complicated, a few low-cost funds is all you needed. It provided an interesting analogy around going to a car dealership and asking for reliable transportation, but getting upsold into a fancy SUV with bells and whistles no one needs.
So what was in their portfolio? Well it was full of Mutual Funds with Class A shares, CEFS (never even heard of these until today and I worked on Wall Street!), and 12b-1 buried fees (these are massive upfront fees paid when the security is purchased). In short: an overly complicated and overly engineered portfolio designed to confuse them. We estimate roughly a 7-10k fee drag on this per year!! Imagine all the compounding they missed out on.
Needles to say, they are pissed but also grateful I did this analysis. So, much like myself, we're going to wipe the table and start with a simple 3F Portfolio of sorts, with low cost funds. Luckily their remaining pot is still relatively healthy.
Be careful out there folks. There are crooks and dishonest people everywhere. An 'advisor' isn't always taking your best interests into account. You HAVE to stay on top of it and them. Read the statements! Ask the hard questions, press them on fees (if you must use one of them), and consider learning about investing and doing it on your own. All you need is out there to easily learn.
Cheers