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Class A vs F shares? Rollover 401k to Advisor Managed Account or New Company 401k?

1,693 Views | 12 Replies | Last: 4 yr ago by cjsag94
Southside AG
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AG
Question 1: Transfer Class A shares to F share class?
I have an advisor to help with personal finances and investing. We had recent discussions where they want me to change from class A mutual fund shares to class F. They stated that this will allow them some flexibility in investing. From my understanding, by owning class A shares I've paid the majority of fees up front and with class F shares, my advisor is paid an annual fee of 1%. My class A shares were a one time deposit from a previous job change years ago; other than small deposits in my 529 funds, I do not invest much on a reoccurring basis with them. When approached to change strategies from A to F shares, I feel I want to stick with A shares since I've already paid fees up front. Am I missing anything here?

Question 2: 401k Rollover?
My advisor laid out the options, pros and cons and left it up to me. I started a new job and can rollover my 401k from my previous employer to my new company's account, rollover to my advisor managed account, leave in current account or withdraw with penalties. I'm leaning rollover to my advisor managed account due to having access to more funds. Given the above, they want me in F shares where I have everything else with them in A share classification. I could leave current A shares alone and rollover the new monies into F shares? or All to A shares etc...

Am I missing anything regarding the difference between F v A share class?
Red Pear Realty
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1. Fire your investment advisor.
2. Rollover to a low cost offering with better investment options.
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
ItsA&InotA&M
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Roll over to Charles Schwab account and have Asset Builder manage. They are out of Plano and are low fee advocates. Scott Burns is a principle
nactownag
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Yeah and by the way why would anyone ever pay a realtor fee when you can sell it yourself?
Red Pear Realty
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AG
Stay calm, I didn't say don't work with an advisor. I said fire THAT advisor.
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
nactownag
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Southside AG said:

Question 1: Transfer Class A shares to F share class?
I have an advisor to help with personal finances and investing. We had recent discussions where they want me to change from class A mutual fund shares to class F. They stated that this will allow them some flexibility in investing. From my understanding, by owning class A shares I've paid the majority of fees up front and with class F shares, my advisor is paid an annual fee of 1%. My class A shares were a one time deposit from a previous job change years ago; other than small deposits in my 529 funds, I do not invest much on a reoccurring basis with them. When approached to change strategies from A to F shares, I feel I want to stick with A shares since I've already paid fees up front. Am I missing anything here?

Question 2: 401k Rollover?
My advisor laid out the options, pros and cons and left it up to me. I started a new job and can rollover my 401k from my previous employer to my new company's account, rollover to my advisor managed account, leave in current account or withdraw with penalties. I'm leaning rollover to my advisor managed account due to having access to more funds. Given the above, they want me in F shares where I have everything else with them in A share classification. I could leave current A shares alone and rollover the new monies into F shares? or All to A shares etc...

Am I missing anything regarding the difference between F v A share class?
You're not missing anything. It's a tradeoff. Lower cost long term with the A shares but less choice of investments.

How long ago did you buy the A shares? What are they? If you bought them not too long ago, you could ask the firm to rebate some of the commission paid someway? I know our firm does that.

Personally, I think the flexibility in the F shares is better. I like to be able to use whatever investment is best not be restricted to one fund family.

But it should be noted the advisor is incentivized for you to change to this structure. So do you truly believe they are looking out for you and not themselves? If the answer is anything short of 100% sure then I agree you should consider changing advisors.
JSKolache
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Advisors #1 job is sales (i.e. bring more of your money to his firm.) Job #2 is to make you money. Just acknowledge where you stand in the pecking order and make decisions that are best for you.
ATXAdvisor
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JSKolache said:

Advisors #1 job is sales (i.e. bring more of your money to his firm.) Job #2 is to make you money. Just acknowledge where you stand in the pecking order and make decisions that are best for you.


This depends on the definition of "advisor". A fiduciary advisor is bound by law (and in some cases by oath, i.e. CFP) to put the client's interest ahead of their own.

Whether OP paid a sales charge or not isn't relevant, IMO. That is a sunk cost. The larger issue is if you are currently compensating your advisor by transactional commission (the A shares do this through the upfront sales load and a 12-b-1 fee of .25%). If he is now up selling you to a fee based arrangement where the new fund is lower cost (the F shares don't have 12-b-1 fees) but then the firm adds in a 1% advisory fee, the pertinent question is how does that benefit YOU.

The advisor needs to make a living, but the compensation and what you are receiving in return should be transparent. If it isn't, you should seek out other solutions.
Baby Billy
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It really just depends how much trading you want to do in your account.

The value a good advisor brings over the course of your lifetime is far beyond 1% per year.

Notice the word "good"
one MEEN Ag
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Red Pear Realty said:

Stay calm, I didn't say don't work with an advisor. I said fire THAT advisor.


Jamie, where is that flowchart you've posted before about wealth building?

OP, read the flow chart that Red Pear's got, read up on ETFs. For anyone who is mostly maxing out tax advantages accounts, ETFs that track industries or whole markets can do incredibly well by just buying and holding, and reinvesting dividends.

Red Pear Realty
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Hey man, how are you new digs treating you?

Also, flowchart as requested:



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cjsag94
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That's a pretty flow chart. However, life doesn't come at you in such a sequential way and, in my opinion, the chart is so elementary it is useless.

I find it really interesting that cable, phone, internet, etc. Is so early on the list. Arguably, that's the philosophical problem with most people these days, especially those who need this flow chart. Most people are basically financially illiterate, so knowing how to adjust and react when life throws a curve ball is the real art form.
investorAg83
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Huell Babineaux said:

It really just depends how much trading you want to do in your account.

The value a good advisor brings over the course of your lifetime is far beyond 1% per year.

Notice the word "good"
This is true but that amount of value added from simply managing an account is negligible. Vanguard's study on the value add from an advisor is great. The majority of the alpha over time is from behavioral finance, asset location (not allocation) and withdrawal strategies. If these conversations are not taking place, the person is an asset gatherer and not an advisor.

You don't NEED an advisor to walk through the flow chart linked (and that chart has nothing to do with the OP's question). Every advisor should, but that's not where their value comes from.

For the OP...the advisor sold you a-shares, made a commission, and is looking to put you in a wrap portfolio to generate additional income for themselves. That is fine...they make a living just like everyone else. However, I have seen FAR too many wrap accounts with a lack of activity and that is a shame. If they're just going to move you to f-shares and essentially leave them alone, you're getting the short end of the stick. I'm not advocating to fire your advisor, but there needs to be additional discussions around the plan from here and the investment philosophy they're going to help you implement in the future.

Every advisor has their own beliefs in the process. Personally, I despise mutual funds in a managed account for many reasons, their fees being one of them. Advisors still use them though.

And CJSAg94...the chart is incredibly helpful and you would be shocked to hear how many successful and smart people have no clue how to navigate their savings in that way (as basic as it may be).
cjsag94
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I agree with InvestorAg on the wrap vs A share. The red flag in this situation is that everything is about the cost structure and not what you are getting for it. I absolutely agree that asset allocation/investment management isn't where an advisor's value lies. That comes in the form of managing the behaviors and execution of strategies by the investor, and identifying necessary adjustments and opportunities along the way. So, OP, I'd redirect your conversation with your advisor to those concepts.. and settle on how you will pay when you are comfortable with the answers.

As for the for chart.. i agree as i said most people are financially illiterate... l find that the folks entering retirement in the worst position followed this thinking of paying bills (necessary and discretionary), paying down debt, etc... Only to look up in there mid 50's only to realize they are way behind on savings because they never got that far down the chart. More often than not, those bills included over buying in houses, cars, stuff for kids, and misc stuff. Therein lies the value of an advisor to help you work through multiple bubbles concurrently so everything ends up favorable.
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