Originally Posted by peter64
My wife and I have 120k combined in our ira's. Our financial advisor has not advised us in 8 years. We just keep putting in $500 per month. Our money is with American Funds. We pay a sales charge of 3.5% on each deposit. The fund has an expense ratio of .64.
Should we just tranfer to a Vanguard no load fund and drop the F.A.?
If we leave the exist. money with American Funds does the adviser make a % of our money even if we don't add any new funds?
Does the F.A. get paid a % of the sales charge or the expense ratio or both?
How does the fund take the expense charge. Is it taken out of the share price?
How much does the Financial Adviser make on our money?
Ha! Front loaded funds are becoming as obsolete as Gordon Geckos business shirts. You should NOT be paying a front load of 3.5% on your contributions. Before we had the high number of no-load mutual fund families that we now have, front and back end loaded funds were the norm. Today, there are multiple no load funds performing at similar or better performance. This is the first change I would make if I were you. Get into a no load fund family.
The FA likeley makes a portion of the load. They do not get the 12b1 fees or expense ratios on the mutual funds. These fees go to the portfolio managers and his team of analysts and also to produce, track, and mail statements to investors.
This is not to say that Amerian Funds are bad. They are one of the biggest fund families in the nation. In fact, they offer a wide variety of no load funds that you have access to without having to change firms.
With only 120k the advisor is making next to nothing off your investments since its not worth his time. You would be best off going with a self-directed brokerage account.