My small company has its 401K plan hosted at Schwab and I was looking to invest into some mutual funds that were recommended by Kiplinger Magazine and part of the Kip25 group of mutual funds. And to my dismay , they came with a $75 fee . If I was buying $2,000 - $3,000 just in that mutual fund , that was a 3.75 % fee at that level and I realized that my first 3.75 % return would go to the providers of the mutual fund.
I have been liking the trading in the 401K I was doing with the commission free ETF's at Schwab , it was easy to park some $ in some of those etfs without worrying about commission. But as I looked at my Vanguard 529 plan , I realized that Vanguard had a lot more commission free mutual funds and etf's . Further investigation yielded that TD Ameritrade had more etf's that were commission free than Schwab.
But I liked the fact that Schwab had an office right around the corner from my office , and I wanted to really see what advantage that fact would give me . I had met with the consultant assigned to my account and there was not a good personality fit between her and me , I was more of an annoyance to her probably because my account was not that large. So, I went down to the office and asked to speak to the manager of the office , and he put me in touch with another consultant . This consultant , let's call him Joe , was a better fit to help me review my portfolio on a quarterly basis . I wanted somebody that I could discuss investment ideas with , who could help guide me , not necessarily someone to handle my account. I am an MBA in Finance from NYU , but have spent most of my career in the commercial real estate development world. So, I know about risk , risk management but I have done all of my investing on my own . I stated that I had no ego in managing my portfolio , that I wanted to see what he might help me with in strengthening my portfolio so that I could consistently earn a 7-8 % return . He said that was reasonably and practically possible and probable . I had invested in the deed of trust world , where I earned 12-13 % every year , but those investments ended up in a ponzi scheme and obviously that return was not sustainable .
What I liked is that we discussed the "core" components of my portfolio and how to build that . Having read the personal finance magazines , and keeping up somewhat with stocks on programs like "Mad Money " I was somewhat familiar with the stocks in play by many investors. What Joe confirmed for me was a better way to bolster the different layers of my portfolio . For example , I have held the Loomis Sayles retail bond fund as part of my bond component , but he recommended two other bond funds that work well with Loomis Sayles and the proportions that I could / should hold of the other two bond funds . That is exactly the type of thing I wanted to hear . We talked about international funds that he has had success with in the past and how he thought about them - one of them was more the "bread and butter " fund and the other asia fund was more of the high octane fund where positive returns could be greater , but losses could be greater as well.
We discussed using the "portfolio checkup" feature that is part of the Schwab site where one identifies a target portfolio and your current portfolio is compared to that . I think this is a great tool by the way . It showed where I might want to trim my portfolio , take some $ off the table , and move those $ in other sectors / categories that I was shallow in . I believe that portfolio management is largely about diversification and rebalancing the portfolio on a regular basis . We have all heard this , haven't we ? But Schwab has some good tools to help you with this .
I walked away thinking that I would see how my quarterly discussions with Joe would go and stay with Schwab. I will say that he is a frustrated "portfolio manager" put in a position at Schwab to bring more $ into the firm . So, he might be a special case , and one might not always find this type of response from Schwab consultants - but I thought I would share my experience. It was good to discuss strategies with someone that lives in this world , who is familiar with strategies that have worked in the past . I was looking for an "investment buddy" and I think I found one .
Having that type of service is far more important to me than just having more etf's that slice and dice the SP500 differently and I thought I would share that story .
Let me know if you have any thoughts .....