Look you and I know this, and we would find it rather easy to execute if we chose to. Iām not asking for investing advice. An intelligent old lady who knows nothing about stocks and bonds and isnāt interested wants someone to manage her money. My advice to her was to find something inexpensive - it doesnāt have to be overly complicated.
agreed.
And make sure she gets 2 contacts at the B/D. Those front offices are a revolving door. And from your description, she may not log in a lot. just keep it simple. Vanguard and Fidelity are sound choices.
Been there with family, and the security is pretty strict on seniors accounts.
Your win here might be getting your friend to use a true fiduciary. Unfortunately, many of the worst operators will conceal the true cost of their services. The first question to ask a prospective advisor is āhow will you be compensated?ā If the answer is not completely straightforward, that is not the advisor that you want.
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This could b e a good option for someone who wants little to no effort.
But here was my problem with this (copied and pasted right from the Schwab webite):
The rebalancing was heavy handed. I really disliked it.
- They rebalanced too often, causing long and short term capital gains, and TOO MUCH CURRENT YEAR TAX LIABILITIES. Having 51% of my balance in S&P 500 when the target is 50% is way less of a problem for me than hitting me up for a couple of thou in taxable gains.
- Their methodology caused wash sales. You could deposit on a monday, and they would deploy the cash by Tuesday. The next day they could rebalance, selling off the shares you just bought a single day earlier. Why canāt they just use the new money to rebalance?
- They churn investments, even within a single asset class. Again, if I am in an asset class like the S&P 500, I donāt really care too much about how it is deployed. Just pick the method with the lowest frictional costs and use it. Donāt sell SPY to buy VOO (or the equivalent) just so Schwab can collect their spread, and thus push money out of my pocket to the IRSās at my marginal rate.
Rebalancing, as they practice it, is almost a crime.
We have had very different experiences with this product. I have had a piece of my money in these accounts for years, and for me it does not rebalance much. I have tax loss harvesting option turned on, so Iām wondering if that could be the difference.
I looked back at all transactions in 2024. It did 5 moves over the year:
Twice it bought more stock with reinvested dividends.
Once it sold IAU (Gold) after itās runup and bought stocks.
Twice I took out a little cash, and it sold a little to hit their cash % target.
Realized capital gains were relatively minimal for me in this account this year. No positions were churned at all.
When the stock market tanked during COVID, it did churn a bunch of positions due to tax loss harvesting offsetting prior gains. Seemed like a good time to do that to me. Whenever we see the next big market drop I imagine Iāll see a lot of tax loss harvesting again.
My biggest criticism of the robo advisor there is that it recommends a fairly high cash allocation. Seemed out of line to me at my age when I opened the account, but I somewhat offset that in other accounts by carrying zero cash in them. Now that Iām retired and a bit older I donāt mind the higher cash position as much.
Thereās 80 portfolios to choose from. Wasnāt there one with low cash? I think the one I had was roughly 80% stocks (mixed LG cap, small & mid cap, international) 17% Bonds & fixed income and 3% cash.
Iām not sure they had TLH as an optionable feature when I was in it
I think we are talking about 2 different offerings. You donāt pick a particular portfolio with the Schwab Intelligent Portfolio offering. You answer a series of questions about risk tolerance, time horizon, goals, age, etcā¦ and it sets a portfolio mix for you.
This is where I got that from. I think you answer the questionnaire and it picks a default portfolio for you that varies by your risk tolerance, timeframe, etc. THatās what I think the 80+ variations are.
I wouldnāt care for that either. I prefer M1 financeās version of rebalancing where you decide the frequency of rebalancing. Now I recognize that under the M1 system many people would never rebalance.
And I have not seen anything on the M1 platform that I would even remotely call financial advice.
There might be 80+ portfolio options generated by their scenarios but itās not offered as a buffet to pick which one you want. They give you their recommended portfolio based on your responses in the interview.
What investment banker runs that one?
ETA: OK that looks like a New-to-me online investment banker with some interesting deals such as: HYSA, cash-back credit cards, and margin loans with better-than-HELOC rates.
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Out of curiosityā¦if my underlying securities were a basket of options, would this little machine simply execute a delta hedge?
If your assets were a basket of options, this little machine would convert it to cash and the steps taken, as listed above, would be
Step 1
Determine which risk group that Schwab could put you in that makes Schwab the most transaction spread dollars.
Step 2
Place you into the ETFs of their choosing that make Schwab the most expense ratio dollars
Step 3
Rebalance early and often to generate for Schwab the most spread and frictional expense dollars, often working against the clientās best interest by the generation of long term capital gains, short term capital gains, and non-deductible wash sales.
umā¦Okay. Iāll take a big ixnabber on that ricki-zicki.
whole rebalance stuff is designed of folks that donāt want to spend time and energy on their investments. Typical of those seeking financial advisors. Just do it quarterly. If peeps cannot see themselves signing in 4 times a yearā¦well maybe the advisor is a sound choice. Find one with low fees, flat being best.
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