Where do you invest your money and why did you pick that company?
I guess I never really gave much thought to what companies I invested with, until now. Usually, you ask friends and family what company they use, and then go with that. Or maybe you know someone who works for the company, or you sit down with an advisor and you like that person. These seem, to me, to be unscientific ways to choose how to invest. Yet we all do it - and did it. How you ended up with "That nice man at Madoff funds" is an interesting question.
Of course part of the problem, in addition to mutual fund yields, is the fees they charge to manage your money - or more precisely the fees you never seem to see that they charge to manage your money. One reason I am a little disenchanted about Fidelity is that when I ask our "investment adviser" what fees Fidelity charges, I get only evasive answers.
And there are fees, somewhere, sometime, down the line. They aren't running a charity. He told me that he thought my Vanguard funds had high fees. But when I asked him about Fidelity's fees, all I got was a vague answer that that were "lower".
So we want a place with low fees. We also want a place with a good Internet presence, so I don't have to deal with paper statements and calling brain-dead-Becky on the phone and trying to play "telephone operator" with her when I want to change something on my account.
I am not sure I need investment advice as the only advice all of the counselors I talked to seem to say is, "Give me your money". Do I really need an investment adviser or just a place to park my investments? There is a big difference.
My Dad, by the way, had a brief stint as an investment adviser, after he was ceremoniously booted from his job, running a rustbelt factory. He sold a plan or two, including a retirement plan, to a small company down the road. He mentioned that he got little checks from that company, for making that sale, over the years. So these guys make money at this - but how they are compensated is a well-kept secret. The customers have no idea how much the "plan adviser" takes off the top.
I recounted the horrific experience with State Farm - how they wanted me to even cash in paid-up life policies, so that the agent could skim a cool 5% off the top. So I think that leaves State Farm out of our search. And the Northwestern Mutual Life "Financial Network" I think falls along the same lines.
In fact, I am thinking of shying away from places with brick-and-mortar retail shops. It costs a lot of money to maintain and staff these, and that money goes into overhead, and as a result, well, you pay for it.
I tried contacting some local 'investment advisers' which pretty much turned me off from the idea of using a brick-and-mortar establishment.
I contacted Raymond James, and their website has a cute "locator" you can use to contact a local agent (there is one less than 20 miles away). So I filled out the form and entered the CAPTCHA numbers and.... it bombed out. I tried again, seven times, and each time, it said I did the CAPTCHA wrong. So I tried the audio version (for the vision impaired) and got the same result.
Pretty pathetic when your first contact with a company results in the site bombing out. This does not bode well for their Internet presence. I called their main number and explained the problem, and was transferred to a bored who-gives-a-shit employee who agreed that having the site bomb on the "contact" page was pretty freaking embarrassing. They said they would "look into it" but I am not holding my breath, it sounds like no one there gives a rat's ass about anything.
The other problem with storefront investment firms is that they really want the big players - people with millions to invest, not just a million. So they often don't want to talk to you, or act like they are doing you a favor by even acknowledging your existence. this is called power-shifting, and I have written about it before.
For example, our "adviser" at Fidelity tells us that even though we have nearly three-quarters of a million dollars invested with them - and want to add another $250,000 to the pile, that his services are really reserved for "people with well over a million dollars invested". In other words, he is doing us a favor by stooping down to talk to us plebes and we'd better kiss his ass. Uh, no sale.
The oddly named Edward Jones (which sounds like the lost love-child of A.G. Edwards and Raymond James) has been popping up all over the place. They are minting new agents faster than State Farm is minting theirs. There are a whopping five agents in four offices within 20 miles of my home. Check your inbox, you may already be an Edward Jones investment adviser!
I called a couple of them and the results were predictable - they have a "receptionist" (who can afford this shit these days? Must be a lucrative business!) who asks, "Who's calling, please?" and after I give them my life story, they say, "and who are you with?"
Who am I with? What an odd question to ask. And I called more than one office and they both went through the same script. Of course, if I wanted to talk to the oh-so-important agent, I would have to wait for a call-back. And since I wasn't "with" anyone, well, my name goes to the bottom of the pile. Classic power-shifting game. Please hold for the queen of England! My NML agent did this bullshit (and State Farm agents do it all the time) and anyway, he's no longer my NML agent.
You can see the game they are playing here. Their time is so, so valuable, and your are not worth squat. It is a privilege to even be allowed into "their royal presence" and perhaps, if you are lucky, after they have dined on your life's savings, they will save you some table scraps.
So I am leaning away from the agency model of investment houses. Why? Because all those offices and receptionists and agents cost and awful lot of money. You're looking at a quarter to half-million dollars per year per office just to keep up a storefront. And that's assuming the agent is making only a hundred grand or so.
Merrill Lynch "EDGE" has a linkup with Bank of America, and they allow you to access your Merrill account through the BoA website. It is an interesting alternative, but the trustworthiness of BoA and Merrill have been called into question lately. They offer a cash bonus if you transfer funds to one of their accounts. They have online chat and a 1-888 number that, unlike Fidelity was not on musical hold for 10 minutes.
The Merill system is pretty interesting. They offer free trades (up to 100 a month) if you have a balance over $20,000. That beats Fidelity's $6.99 per trade and Ameritrade's $9.99 per trade. They also offer free banking at BoA (which I already have) and better rates on money market accounts, etc. It is a pretty compelling offer. And their online presence is, well a little nicer than Fidelity's new Gee-Whiz-Bang "Like us on Facebook!" approach.
There is one disadvantage to moving mutual funds - if you want to reinvest dividends in those funds or invest more into them, this may not be possible. Thus, for example, you can hold shares in a some Fidelity funds, you just might not be able to add to them.
I'll keep searching. I think I have narrowed my choices to places that don't have storefront offices (just as I no longer use such places for insurance - I use GEICO instead). Lower overhead means lower costs, which means they can offer better benefits.
And I think I will diversify into different investment houses as well. The only real genius thing my Fidelity adviser advised me to do was to close all my accounts (spread through five investment houses) and put all the money with him. In retrospect, I should have seen this as a warning sign of things to come.
UPDATE A reader writes:
UPDATE A reader writes:
"I saw your Fidelity post. Fidelity is good but nobody tops Vanguard. Vanguard is owned by everyone who invests through Vanguard, so the natural push is to always lower fees and improve services. Unique business model. This is the reason Vanguard has more assets under management than anyone else. Also, they have a simple website with robust info and tools."
Thanks. Funny how the Fidelity guy said that Vanguard sucked.
It is hard to get really hard data on the fees they charge. All you really know, with mutual funds, is that they invest your money, pay you some back, and keep some. How much, we are never told.
Even a Mutual company (which is what you are describing, owned by the investors) has overhead. Those guys with the suits, Acuras, and walnut desks aren't working for free.
So there is overhead. If I could just figure out what the amounts were and was able to compare them!
TALK ABOUT OPAQUE PRICING!!!