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BofA Investments: Worth the 1.5%?

About a year ago my wife and I rolled all our money into the BofA investment group with a financial planner that came highly recommended. Before that all of my money was just plunked in the big Vanguard index (VFINX) and my wife's was scattered among various old 401k accounts.

We're in the BofA "Appreciation" portfolio, which is a kind of set it and forget it plan where BofA buys and sells to hit a target return without needing approval from us. Based on the amount of our assets under management, we're paying a 1.5% commission (currently amouts to about $3,500/year but of course will go up as we add more). This isn't a horror story: BofA has done fine for us, and the personal service is nice.

But my question is, are we paying too much for what amounts to a conservative return target and a lot of warm-fuzzies for being premier banking clients? As I've learned a little more, I've found programs like Vanguard's Target Retirement and LifeStrategy funds that seem to do the same thing BofA is doing (diversify, shift assets appropriate to age) for WAY less than 1.5%.

It's important to note that, while we're willing to put work in up front to find the right plan, we're not interested in becoming active investors. We just want to put our money with a source we can trust and not spend an unreasonable amount in fees. Do a yearly review, that kind of thing.

Anyone else have experience with BofA in particular, or with plans similar to the Vanguard plans mentioned above?

Thanks very much,

Marv

Reply to
marvster
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The Vanguard you suggest shows a .20% cost. Over 10 years, that difference will be over 13%, 20 years, 25%.

To look at it a different way, the withdrawal rate at retirement to be sure you won't outlive your money is 4%, give or take. A 1.5% cut seems huge compared to that withdrawal rate. It's possible, but hardly likely that one product will consistently beat the other by enough to justify that extra expense. My two cents. JOE

Reply to
joetaxpayer

Working backwards off the fee paid, I see the original poster has about $233K under management.

In today's day and age that's chump change to asset managers and despite the resassuring customer service from Bank of America it's almost a certain he's getting a canned asset allocation and canned portfolio, regardless of his individual needs. IMHO that's just not worth 1.5 percent. As others have posted, in today's world of single-digit returns on your typical balanced portfolio paying 1.5 percent in fees in a VERY sginficant haircut.

Now if he had $233 MILLION it would be worth paying 1.5 percent to a real pro to run his money. But with $233K he's better off paying 0.20 percent to Vanguard for one of their target retirement date funds. He'd get the same "set it and forget it" approach for a fee that's 86 percent lower than Bank of America charges.

Finally, I second Joe Taxpayer's advice that this investor would not be well-served by trying to read Graham's book. He doesn't want to become a bottom up stock picker. He just wants investment pros to watch over his modest nest egg. Graham's book is not what he's looking for.

Reply to
Paul Michael Brown

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