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Subject:  My Meeting with the AmEx guy Date:  2/24/2004  10:13 PM
Author:  batdoe Number:  39406 of 88764

(cross posted)

So, here's the update on my meeting with the AmEx guy.

First we went through his preliminary financial plan for us, but there were problems. He had college start dates for each of my children of 2007. The oldest of my kids will be 11 in 2007, so we couldn't get to all the bottom line stuff. That was annoying, but in his defense he had to rush his wife to the ER on Friday and one of his daughters has a broken leg. Things are not going well at his house and it's taking up much more of his attention than usual. I can understand this, but I would have preferred he took the time to proofread his work, even if he had to postpone our meeting.

So, we have to fit $1545 into $1000 - that is, we want to allocate $1545 to various objectives but we only have $1000 a month to save and/or invest. We have 13 savings objectives (4 kids in college, 4 bar/bat mitzvahs, one car, one vacation, retirement funding, dh's life insurance and finishing up funding our efund) - he says 13 is a record for him. It seems most of his clients are not so interested in providing for college or other things for their kids and just focus on their retirement. His preliminary advice is to put less into our retirement savings (currently we save 16k per year for retirement - max dh's 401(k) and my Roth) and put more into our other objectives. Even though our retirement looks like it will be more than fully funded at 60 (we run out of money at about age 150) I am uncomfortable with that advice. His next advice is to plan to spend less money on the bar/bat mitzvahs. That is a good plan. We'll make that be the lowest priority for the money and just spend whatever there is when we get there.

Next, life insurance. Thankfully he only brought us quotes for term life and didn't try to sell us anything we didn't want. He brought us quotes for 20 years, but I said I thought we only needed 15. In 15 years I'll only have one kid at home, college funds will be mostly funded and if I run out of the work based life insurance money I can dip into one of the retirement accounts using the substantially equal payment distributions. His suggestion was to buy the 20 year term and stop paying the premiums in 15 years. I told him that was no good because we would wind up spending more money that way. Why pay the premiums for a 20 year term ($1330 a year)for 15 years when we could pay the 15 year term premiums for 15 years ($935 a year).

We talked about rolling over one of dh's 401(k) plans into AmEx funds and he asked if we had any questions. Little did he know...

I said "I have some concerns about these funds you are putting my husband's money in." He was surprised and a bit flustered. I went on to say "This one, well, it's just a dog." He said "Well, well, uh, what do you mean?" I said "Well, for instance, this fund has a Morningstar rating of two stars and has low return and above average risk. Why would you want to put his money into there?"

We talked about the next one that I didn't like and he got more flustered, started mangling a paperclip and was basically not prepared for my questions. One of the funds is a small company index that tracks the S&P SmallCap 600. It does a good job of it, but its expense ratio is .98%, whereas the ETF for the S&P SmallCap 600 that I looked into has an expense ratio of .20%. I asked him why we should pay 5 times the fees just to be in an AmEx fund. He said if we wanted to buy the ETF we could set up a brokerage account with him, but he wasn't very enthusiastic about it. I asked him if there were other expenses that were not reflected in the expense ratio that we should account for, hoping he could justify the AmEx fund in some way, but he just said there were other fees but didn't get into any specifics. I suspect it is because he didn't know. I had to ask him twice what fees a brokerage account would charge - $19.95 for an online transaction and about $50 to call him and have him do a trade for us. He said that of the $50 charge, he makes $2 so it's not the way he wants to go with his clients.

Another problem I have is that he is buying Class B shares to avoid the 5.75% front load. They convert to A shares in 6 years. Class B shares earn about 1% less than the class A shares. Only because we asked did he tell us that's because there are more fees involved in the class B shares. This had me do a doubletake. I am certain he did not mention this on our first meeting. We either pay more fees every year for 6 years or a front load. It seems to me that either way we loose.

So, all in all, I am tremendously underwhelmed with the quality of advice so far. I'm not a trained financial professional, and without knocking myself (because I am quite bright and all) I am just a housewife but I made my financial guy flustered by asking what I thought were obvious questions.

And the best news yet - dh is impressed with me. He says that perhaps I should manage our money instead. Now, he's impressed with me in general but he sees that I am right on the ball here with the whole financial thing, suggesting less expensive options, asking good questions and basically knowing my stuff. I told him the only thing is that I don't have any proven track record. He's going to get some specific numbers from the yahoo who recommended this guy to us. If the AmEx guy made dh's friend a boatload of money (not sure exactly what % to say is a boatload, but I'll work that out tonight)then maybe I'll reconsider. If not, then I'll start making plans to take over our finances.

All in all, a productive meeting, just not so good for the AmEx guy.

Thaks to everyone who encouraged me and gave me good advice!

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