Vanguard, Local, or First Republic Wealth Management?
We are fortunate to have earned quite a bit of money this year, but now we are trying to figure out how to invest the funds. We will be consulting with a CPA we've found (this was all straight income and we were heavily taxed). We now have a few million $ to invest and don't have the expertise to figure it out ourselves. Our goal is to protect and grow the $ to ensure retirement (education and house basically covered). I know some people say just put it all into index / mutual funds or do robo-investing, but I wonder if it would be more worthwhile overall to pay for more specialized portfolio balancing than that, esp. given that this market can't continue forever, and we want to hedge against downturns. Vanguard would charge .3% and FRB 1.2%; has anyone found that FRB offers much better returns, service, or opportunities to justify the higher fee? At this time we don't need the business lending and other services that they offer, but don't know if using Vanguard wealth management will limit us to their products and strategy, whereas FRB advisors might consider a wider range of vehicles. Has anyone reading this used the personalized wealth management services of either of these and found them worthwhile, or is robo-investing the way to go, even when over $2M? I feel weird handing it all over to algorithms, but have to hope that the actual manager would help in some way beyond the robot. I have also spent too much time looking at real estate investment possibilities all over the country, but it's going down a rabbit-hole and not where I'd want to park the bulk of the $ either. I saw on BPN that a couple of Berkeley wealth managers have been recommended, but are they better in terms of overall returns and strategy than using Vanguard, FRB, or maybe Schwab, or ultimately just higher fees? Thank you very much in advance for any replies, and I wish everyone a healthy and happy New Year.
Parent Replies
We've been investing with Vanguard for many years now, and I highly recommend them. They offer expertise, service, a ton of options, great returns, and a very low cost for maintenance. The reason they are able to charge such a low rate for maintenance is that they are not skimming money off the top of your investments to pay their shareholders; as with a credit union, the investors ARE the shareholders. They also offer a brokerage account if you would like to invest in non-Vanguard funds but have everything in one location.
We put our money in two Vanguard index funds. I would recommend the same for you. Vanguard is great to work with and money in the index funds does well in the long-term.
I would be wary of paying 1.2% or more to a “wealth manager.” Those high fees will eat away at your returns over time. Plus, I don’t believe that these wealth managers can truly spend the time to monitor your investments and beat the market the way they advertise. Stick with a mix of index funds at Vanguard. I love their low fees. You also may want to consider Rebalance360, which I use. They have a similar low-fee philosophy as Vanguard and will do the work for you. I used to pay a financial manager 1.5%, believing he had my best interests in mind, but he did not. He could not spend the time needed to manage my portfolio and beat the market. My returns fell below the major benchmarks and I was paying 1.5% per year! That is when I fired him and moved to Rebalance360.com - one of the best decisions I’ve made.
Greetings and congratulations on your good fortune. While working for BUSD I was approached by a financial consultant, daughter of a CHP officer, who was attempting to help teachers with their retirement investments. Her name is Nicole Badovinac and is teamed up with partner Joseph Corner and the two of them are brilliant. They work for Cetera Investors in Walnut Creek and I highly recommend them and most importantly TRUST them! Frankly, all things investment make me nervous since my brain just doesn't prioritize or know how to manage all that. But what I can tell you is that when the market was going nuts, my investments made money. I requested sustainable, non-petrol investments and I'm very happy with Nicole and Joe's incredible work ethic and sensitivity managing their clients funds. Those two are a class act.
Nicole.badovinac [at] ceterainvestors.com
760-920-8251
My parents have exactly the same question as you do. Currently they just park them in bank but interest is pretty low. I think it depends on what you are looking for and what are the risk you can take for the return you desire, also depends on the retirement plan for monthly expenses. For example, if you park the funds in some foreign country bank, the interest rate could be fixed to around 4-5%, however the inflation rate is getting 7%. Even you can get descent monthly interest, it still cannot beat up the inflation. For wealth managment side, we have been looking around but no luck, also the plans from our HSBC jade manager does not fit our needs that well. Again, it really depends on what your lifestyle could be in retirement stage and if you could find a good wealth manger or come out with solution plans, really appreciate if you could share with us!
First, congratulations on your good fortune. May it continue in good health.
Relative to asset management, I'd recommend keeping it as simple and as low-cost as possible. Vanguard is a fine choice. Given that your housing and education goals are set, the assets are essentially all long term, which simplifies things. The main considerations are diversification, tax efficiency, all-in costs, and suitable liquidity. Avoid the siren song of expensive hedging, complex investments, and the promise of superior return generation. Consider the well publicized $1 million wager between Warren Buffet and Tom Seides.
If you have a little time and the inclination, I'd suggest reading a little to round out your perspective. Suggestions include Unconventional Success by David Swensen (Yale Endowment) and A Random Walk Down Wall Street by Burton Malkiel are great places to start.
We've been happy with Vanguard for many years, doing an index fund. Our feeling is that no human is smarter than an algorithm over the long term for investing. To give you an idea of the scale, we are satisfied enough that, already having about $3M parked there, just added a new inheritance of $1.5M.
This doesn’t necessarily answer your question…but real estate investments are a great way to diversify your portfolio as recommended by my husband’s business CPA. We have a friend who owns a company that invests with real estate syndications. For each deal, you invest $50-100K with others on multi unit complexes out of state (Texas, North Carolina). Overall rate of return is ~7%. You earn money from rental income and get your initial investment back when the property sells in 5-7 years. The friend vets these companies and personally invests as well. Something to reconsider.
We have invested in Vanguard index funds for many years and recently signed up for the Vangurad Personal Advisor Services (which costs 0.30% for the first 5 million). While this service costs a bit more than a pure robo-advisor, you get a dedicated advisor who will answer most financial and estate planning questions (such as what is the most tax efficient way to liquidate funds for an upcoming purchase). And we have been impressed with the quality of the advice that we have received. As others had mentioned, it doesn't seem like you get that much more value from a wealth manager charging much more than .30%.
We also had tried Vanguard's Digital Advisor services for a couple of months, and decided we would rather pay the extra costs to have a dedicated person and more flexiblity to slight tweak the rebalancing.
OP here. Thank you so much for the honest responses. One of the commentators asked what we decided. We also currently have HSBC, and it's because we basically never hear from them or get useful advice that I began looking elsewhere. However, we will keep just enough there to qualify for HSBC Premier to use for daily expenses. (We've used them for over a decade, from when we lived in Asia and needed true global banking.) We are going to go with Vanguard Personal Advisor Services, which is what I had been thinking for months, as I'm happy with the representative we spoke with, and it's not that much more in fees than if we used a lower, less-personalized tier of service. He listened and understood our objectives, whereas the First Republic person I spoke with talked the entire time and didn't seem to listen or care about our objectives. It is because we have been in some ways remiss in investing, and not today wary of the current volatile market, that I need a sounding board, and am willing to pay for it. An analogy is that I'm not a doctor and fortunately in good health, but sometimes get a doctor's opinion for issues that arise. I also built a rough spreadsheet about diversification of all net worth, not just current liquidity, including primary home - what % is invested where, and what makes sense for our stage of life and goals? Our NW is not as great or as complex as many here in the bay area, though we're fortunate to have built a very solid base over the past decade+, but it feels good to finally take head-on responsibility, rather than passively let our situation develop as we work, while feeling fearful of an overvalued market that declines. As I originally mentioned, I went down the rabbit hole of looking for investable real estate, but perhaps the wisest thing to do is to begin by building and renting out an ADU right here in the inner east bay; still deciding on whether we want to have tenants next to the main house, but financially it's a no-brainer in terms of diversification. Best wishes for 2022.