Investment advisor

[klpca]

Can't give too many details right at the moment. I am being asked to decide quickly on rolling over my 401k into a fund managed by an investment advisor who manages every portfolio as an all stock - growth portfolio based upon PE ratios. No cash, no bonds, just growth stocks. So far it looks like I am the only person with any hesitation so lots of pressure to just sign the docs and move forward. This is a relatively new job so it's not like we are talking about a lot of money, and it's a small plan. I'm considering not participating and investing in a conventional IRA instead. There is no company match. I'm in my late 50s and may not be accessing this money for another 15 years, honestly. Any thoughts? Am I just being a worrier?

 

[bluehende]

I think you know if there is pressure to sign now do not do it. My guess is he wants some fees. Take your time so you can make the right decision. No body is that unique that the deal will not be available after you do your homework.

 

[Talent312]

An all stock growth portfolio is a risky investment... too risky, IMHO.
Investments should be balanced between growth+value approaches.
Also, you should throw in some fixed income (bonds) for stability.

OTOH, this go-go approach could be a good fit for a portfolio that is
otherwise too conservative. Only your hairdresser knows for sure.
.

 

[WinniWoman]

Can't give too many details right at the moment. I am being asked to decide quickly on rolling over my 401k into a fund managed by an investment advisor who manages every portfolio as an all stock - growth portfolio based upon PE ratios. No cash, no bonds, just growth stocks. So far it looks like I am the only person with any hesitation so lots of pressure to just sign the docs and move forward. This is a relatively new job so it's not like we are talking about a lot of money, and it's a small plan. I'm considering not participating and investing in a conventional IRA instead. There is no company match. I'm in my late 50s and may not be accessing this money for another 15 years, honestly. Any thoughts? Am I just being a worrier?

First off- NO WAY!!!

Are you leaving a job and rolling over your 401k from a previous job into another employer's 401K? Not totally understanding.

Anyway, best to roll 401K into your own Traditional IRA so you have control over it.

 

[am1]

Only if it is ones only investment. If i am paying someone to manage investments I wa t it in a growth sector cash and even dividend stocks I could manage on my own a lot easier then growth stocks. I have no adviser.

The problem with asking and giving investment advice is everyone's situation and appetite for risk is different.

An all stock growth portfolio is a risky investment... too risky, IMHO.
Investments should be balanced between growth+value approaches.
Also, you should throw in some fixed income (bonds) for stability.

OTOH, this go-go approach could be a good fit for a portfolio that is
otherwise too conservative. Only your hairdresser knows for sure.
.

 

[sue1947]

Can't give too many details right at the moment. I am being asked to decide quickly on rolling over my 401k into a fund managed by an investment advisor who manages every portfolio as an all stock - growth portfolio based upon PE ratios. No cash, no bonds, just growth stocks. So far it looks like I am the only person with any hesitation so lots of pressure to just sign the docs and move forward. This is a relatively new job so it's not like we are talking about a lot of money, and it's a small plan. I'm considering not participating and investing in a conventional IRA instead. There is no company match. I'm in my late 50s and may not be accessing this money for another 15 years, honestly. Any thoughts? Am I just being a worrier?

I give this one 3 strikes against:
Strike 1. Your age makes an all growth fund too risky. Granted, this is likely a small portion of your total investment, but I think if you want additional growth stocks, put them in a no load, low cost index fund where the maximum amount of your money goes to work for you.
2. Advisor. That means fees for that advisor and no matter how low they might be, they are higher than a no load index fund. That means some of your money is taken off the top before it's had a chance to work for you.
3. All growth; at this time with the market as erratic as it is, with uncertainties in economic and political issues, putting that much into growth is very risky. Back to strike 1, at your age, you don't have enough time to recoup any losses. This type of fund is better suited for younger folks.

And no, you aren't being a worrier. You are being an experienced and savvy investor. I look back at the history of my investments in 401K and it's not good. Many, probably most, of the funds I had a choice of were pretty bad with high fees. Add that I didn't always pay close enough attention and I lost quite a bit over what I would have made elsewhere.
Stick to your guns.
Sue

 

[easyrider]

Can't give too many details right at the moment. I am being asked to decide quickly on rolling over my 401k into a fund managed by an investment advisor who manages every portfolio as an all stock - growth portfolio based upon PE ratios. No cash, no bonds, just growth stocks. So far it looks like I am the only person with any hesitation so lots of pressure to just sign the docs and move forward. This is a relatively new job so it's not like we are talking about a lot of money, and it's a small plan. I'm considering not participating and investing in a conventional IRA instead. There is no company match. I'm in my late 50s and may not be accessing this money for another 15 years, honestly. Any thoughts? Am I just being a worrier?

I would be a bit worried or cautious too. Especially with all of the recent market happenings. But, it could be a good time to buy a dip, imo, and that might be the reason the financial adviser wants to act now. Ask this person why they are pushing now.

Bill

 

[klpca]

Thank you all for your input. Since this is a small plan this advisor has been handpicked on our behalf. (Lol). Even though I wasn't thrilled with the idea initially I said I would take the path of least resistance and just go ahead and roll everything over. But then I decided to read the documents that I had to sign. The fee for this was 1.4%. And that is when I noticed that the all growth investment objective had been preselected. When I asked about that I was told that that is what the advisor does for *every single client*. That is the moment when I put on the brakes.

Before I left tonight, I told them that it was unlikely that I would be rolling my 401k into this plan. And I also decided to not put any money in on an ongoing basis either. I am just going to go ahead and make my IRA contributions and not worry about anything else. This just doesn't feel right.

 

[MULTIZ321]

Thank you all for your input. Since this is a small plan this advisor has been handpicked on our behalf. (Lol). Even though I wasn't thrilled with the idea initially I said I would take the path of least resistance and just go ahead and roll everything over. But then I decided to read the documents that I had to sign. The fee for this was 1.4%. And that is when I noticed that the all growth investment objective had been preselected. When I asked about that I was told that that is what the advisor does for *every single client*. That is the moment when I put the brakes on.

Before I left tonight, I told them that it was unlikely that I would be rolling my 401k into this plan. And I also decided to not put any money in on an ongoing basis either. I am just going to go ahead and make my IRA contributions and not worry about anything else. This just doesn't feel right.

Good choice. Congrats.

Richard

 

[geekette]

Good call. Nobody cares about your money more than you. this cookie cutter PE scheme could be done on your own if you wanted to choose that path.

In most every case I have seen, rolling 401k over anywhere but your own IRA is not a great choice. On an expense basis alone, you are better off.

Good topic for timeshare board, what with the high pressure tactics!

 

[geekette]

wait a sec, you are passing up the pretax 401k contributions, also? Please run numbers before deciding that tax deduction is better than pretax. Pretax can lower your salary for taxation, IRA contributions will never do that, and have much lower annual contribution limits.

If the 401k is SOLELY in this stupid "advisor" scheme, then, yeah, beat feet. If the advisor deal is merely an option for some or none of your contributions, could still be worth a look.

Could be scariest 401k ever, and I would certainly be contacting whomever in your state looks into things like these because this is most certainly NOT in the best interest of all employees, especially the oldest staff.

 

[Icc5]

If it was me (and it isn't) this would be fine to do in a small extra account. What I picture is putting money in this and the account booming (adviser collects his fee on the boom) and then goes way down as many new aggressive things do. You either break even or lose after expenses.
Again if it was me I want a combination so I can earn a decent return that ways against losses and pays a low fee. Shooting for the moon normally causes pain. The long grind is usually much safer and gets you where you want to go.
Bart

 

[bluehende]

Does this advisor have a track record you can look at?

Also do not forgo any matching from your employer.

 

[klpca]

Yes, I am passing on the tax deferral which is somewhat upsetting, but this retirement plan is a small part of our retirement funds and I am at the tail end of my (part time) career so we are not talking about a significant dollar amount - although it's not a small dollar amount either. If it was less than 10k I wouldn't worry so much, but it's not. Sorry to be coy.

I am passing because it is my only option and I'm uncomfortable with it. I work at a very small business....that usually leads to decisions that are good for some, but not others. I don't feel comfortable going into more detail but I have considered my options and feel that opting out is my best choice.

 

[klpca]

Does this advisor have a track record you can look at?

Also do not forgo any matching from your employer.

No match, so an easy decision there.

Couldn't get a good feel for his track record. It probably doesn't matter. I'm getting more conservative with my investment decisions as I get older. 30yo me wouldn't have worried about this. 50-something doesn't like it.

 

[tompalm]

Just max out your IRA at Schwab, Fidelity, Vanguard or anywhere that will provide professional advice and once you are comfortable, do an IRA rollover from previous employment to your new brokerage firm. I like Schwab the best, but do what works for you. I also suggest you get conservative with 50 percent or more in bonds real fast. This market is slowing down and you can’t expect much out of stocks in the future.

 

[Talent312]

Kudos for sticking to your guns.

 

[WinniWoman]

Thank you all for your input. Since this is a small plan this advisor has been handpicked on our behalf. (Lol). Even though I wasn't thrilled with the idea initially I said I would take the path of least resistance and just go ahead and roll everything over. But then I decided to read the documents that I had to sign. The fee for this was 1.4%. And that is when I noticed that the all growth investment objective had been preselected. When I asked about that I was told that that is what the advisor does for *every single client*. That is the moment when I put on the brakes.

Before I left tonight, I told them that it was unlikely that I would be rolling my 401k into this plan. And I also decided to not put any money in on an ongoing basis either. I am just going to go ahead and make my IRA contributions and not worry about anything else. This just doesn't feel right.

EXCELLENT decision!

 

[cp73]

You made the right choice. Never heard of a company telling the employees they must roll over any previous 401k money into their plan. Plus the 1.4% advisor fee sounds to me like the new plan because its at a small company they are passing all of the administration costs over to the employees as part of the advisor fees. I have seen this with other advisors just not this big of an amount. IMO (CPA) there is usually no good reason to roll over a 401k plan from one previous employer to a new one. I always recommend you open your own rollover IRA and move your old 401k plan from previous employers to that. Its a good way to keep your costs down. If you go through several employers during your career you eventually end up with all the money in your own directed rollover IRA at a much lower costs if you choose the correct investment company. I also dont like playing an advisor fee based on a percent of your funds. If you need an advisor pay an hourly rate for their service. Better yet learn how to do it yourself.

 

[PigsDad]

IMO (CPA) there is usually no good reason to roll over a 401k plan from one previous employer to a new one. I always recommend you open your own rollover IRA and move your old 401k plan from previous employers to that. Its a good way to keep your costs down. If you go through several employers during your career you eventually end up with all the money in your own directed rollover IRA at a much lower costs if you choose the correct investment company.

While I generally agree, there are situations where rolling a 401k may not be the best choice. In my personal situation, we don't qualify to contribute to ROTH IRAs due to our income, but every year we do the "back door" contribution where we first contribute to an after-tax IRA, and then immediately convert to ROTH. The only way this makes sense is if we have no other pre-tax IRAs, because if we did, we would be forced to pay a significant tax on that ROTH conversion. We already max out our 401k contributions, so the back door ROTH contributions are above and beyond that.

When I had the opportunity to cash out of a previous employee's pension fund (it wasn't very good, but it was a significant asset), I rolled it over to my 401k instead of an IRA for this very reason. I am lucky that my 401k that is administered by Fidelity has very low fees and tons of investment options (I can purchase any mutual fund Fidelity carries).

Kurt

 

[easyrider]

While I generally agree, there are situations where rolling a 401k may not be the best choice. In my personal situation, we don't qualify to contribute to ROTH IRAs due to our income, but every year we do the "back door" contribution where we first contribute to an after-tax IRA, and then immediately convert to ROTH. The only way this makes sense is if we have no other pre-tax IRAs, because if we did, we would be forced to pay a significant tax on that ROTH conversion. We already max out our 401k contributions, so the back door ROTH contributions are above and beyond that.

When I had the opportunity to cash out of a previous employee's pension fund (it wasn't very good, but it was a significant asset), I rolled it over to my 401k instead of an IRA for this very reason. I am lucky that my 401k that is administered by Fidelity has very low fees and tons of investment options (I can purchase any mutual fund Fidelity carries).

Kurt

From what I remember about Fidelity, if you placed a sell order, it doesn't sell until the morning of the next business day and you can't re-buy for 30 days. Is this how it still works ?

Bill

 

[TravelTime]

I am surprised that your new company is only giving you one choice for a 401K. This is technically against the fiduciary rules. I am a fiduciary for my company’s 401K. It is the fiduciary’s responsibility to ensure we do not select overly risky investments and lose our employee’s money. If they lose money above and beyond the general market, then they could be sued. As a result, most companies select several different investment types for employees to choose from, depending on their appetite for risk. The default investment is always very conservative.

 

[TravelTime]

Just max out your IRA at Schwab, Fidelity, Vanguard or anywhere that will provide professional advice and once you are comfortable, do an IRA rollover from previous employment to your new brokerage firm. I like Schwab the best, but do what works for you. I also suggest you get conservative with 50 percent or more in bonds real fast. This market is slowing down and you can’t expect much out of stocks in the future.

Ironically, I would advise the opposite when the market is slowing down. It is best to invest more in stocks when their price is low. So a market slowdown is the best time to buy stocks. There is more upside if you can wait it out. Usually that only involves a couple of years so even in your 50s and 60s, stocks are still the best investment overall, assuming you have your basic needs covered and can wait a couple years.

 

[PigsDad]

From what I remember about Fidelity, if you placed a sell order, it doesn't sell until the morning of the next business day and you can't re-buy for 30 days. Is this how it still works ?

There are no special rules for buying/selling mutual funds at Fidelity -- their transactions work the same as with any broker. Mutual funds are traded at the end of the day. Maybe you had a 401k where you were restricted on trades?

Kurt

 

[easyrider]

There are no special rules for buying/selling mutual funds at Fidelity -- their transactions work the same as with any broker. Mutual funds are traded at the end of the day. Maybe you had a 401k where you were restricted on trades?

Kurt

If restricted means having no options then no, but there were rules like sell orders took to the end of the day which seemed like the next morning. It seemed to be more of a long term investment which is the design I guess.

Bill