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Author: angelman1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 267363  
Subject: waddell reed & managed application portfolio Date: 12/8/2012 11:39 PM
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I have so many questions right now it's hard to know where to start but here goes for now.
I used to be a foolish follower of the fool a long time ago but got overwhelmed by the options and paralysed by doubt and thus managed to miss the tech boom, the tech bust, and everything since.
In a moment of desperation I went to a financial planner recommended by a friend. This planner turned out to be a waddell and reed rep/broker/salesperson/planner.
They were very pleasant and soothing. I paid my upfront fee and they helped draw up a basic plan for dealing with my complete lack of retirement planning.
They drew up a plan using their "MAP" managed application portfolio product. Ostensibly this seems to be a portfolio of funds that cover the entire spectrum. SO rather than investing in a specific fund or two you can invest in all funds. Ultimately I guess you end up sort of investing in all types of stocks and bonds.
They showed lots of impressive graphs and rates of return.
On my return home some sort of sense must have been knocked into me because I rushed to the computer and started doing some research. All the old knowledge I had learned from the fool a long time ago started to come back. Warning bells sounded and now I am reconsidering using a service such as waddell and reed.
I did quite like their idea of the MAP fund in that it covers all areas, however I imagine that since this is a kind of third tier of investment, a plan that invests in a spread of mutual funds that themselves invest in a group of different kind of stocks it would be the most unwise of all things to invest in as most money would get lost in fees.
Can people confirm that this "MAP" thing is a load of baloney and my hunch is correct? If so how do they get all those graphs that show great performance over the last 20 or so years? They showed a comparison against an index fund and of course it showed better performance.
I am minded to take her basic outline for types of fund to invest in but instead of using managed ones just use index funds of a similar type instead. How does this sound?
I have a lump sum of around $200000 that I wish to start a retirement fund. I would probably save $70k for short term investment or saving possibly as a downpayment for a property.
How can I avoid procrastinating for another 10 years and just getting down and doing something without being paralysed by fear of doing the wrong thing.
I am doing my best to read as much as I can here on the fool but its get so complex so quick it makes my brain hurt!
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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259836 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/9/2012 12:46 AM
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I suggest the Bogleheads; http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lari... and http://www.amazon.com/The-Bogleheads-Guide-Retirement-Planni...

Also online at http://www.bogleheads.org/forum/index.php and http://www.bogleheads.org/wiki/Main_Page

culcha

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Author: angelman1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259854 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/10/2012 1:56 AM
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Thanks for the link.
My impression is that the bogleheads are sort of trying to replicate the same very basic concept as this MAP plan thing but rather than a sort of all in one thing it's just a manually setup thing, primarily using index tracker funds and presumably with lower expenses.
I am still trying to understand how best to compare this MAP fund thing with other strategies. I can see that I could compare the morningstar report for each individual plan under the MAP portfolio with some comparative index funds to see how they compare.
I cannot quite understand their graphs. What is the catch in their pitch. Of course graphs can be made to show anything you want, so what are they showing that shows such big gains compared to both the S&P500 and index funds?
What questions should I ask to "catch out" these Waddell and Reed characters?
Ideally if I could come back to them and say something like "look if you compare your fund with index fund b and take into consideration all these costs, tax implications, turnover then we can clearly see that your performance graph is a load of nonsense.. what do you recommend I do?

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Author: angelman1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259855 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/10/2012 1:58 AM
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This is another aspect of this Waddell & Reed company that seems strange to me and I am not a fan of. Many postings about the company around the interwebs seem more to be about working for them as some sort of quasi pyramid scheme than their actual products.
I am always extremely wary of companies that seem more interested in recruiting new salespeople than actually selling a product eg. bogus products like "Kangen Water".
What is the deal with that? I really don't care about the compensation to the advisors, (how competitive it is etc.) but I am concerned that so many people seem to be more interested in their compensation than the details of the products.
I understand this company has been around for a very long time as have their funds. Am I being unjust to them or rightly suspicious despite their longevity?

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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259872 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/10/2012 10:01 PM
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My impression is that the bogleheads are sort of trying to replicate the same very basic concept as this MAP plan thing but rather than a sort of all in one thing it's just a manually setup thing, primarily using index tracker funds and presumably with lower expenses.

Maybe, in some sense. Except that, as you say, it has lower expenses. For example, I just went to the Waddell and Reed site for the first time and saw that they wanted to sell mutual funds WITH LOADS (or sales charges). That alone would rule it out for me. I buy Vanguard funds directly from Vanguard. No commission. No loads. And I buy some Fidelity funds straight form Fidelity. Same deal.

Likewise, the bogleheads are setting out an investment plan that you can follow -- but they're not charging you any fees for it. Turns out it's much cheaper. If you lay down $1000 for W & R's funds, with a 3.75 sales charge or "front end load", that puts $375 dollars in THEIR pocket and $625 in your investment fund. So, you start out from behind. Then what are the expense ratios for their funds? They're certainly lower than index funds. And, on top of all that, you're locked into the W & R investments for 3 years! If you send the money to Vanguard, they put ALL of it to work in your account -- no sales charges -- and use less money for the expenses. And if you want to make some changes during the 3-year period -- no problem. The money is yours and you can do with it what you want.

Some other stuff I found:
http://www.ripoffreport.com/financial-services/waddell-and-r...
http://www.scam.com/showthread.php?t=18186
http://answers.yahoo.com/question/index?qid=20100810231354AA...

Lots of red flags here. It's MLM for financial products that are associated with life insurance and variable annuities. Not good.

If, however, you insist on having other people manage your investments for you, Vanguard can do that too. They'll charge a fee, but it will be reasonable. And they won't try to make you into a worker for their organization. No red flags.

culcha

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Author: angelman1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259873 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/11/2012 12:03 AM
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These are my thoughts also, lots of red flags and yet they appear to be a very long running company of some considerable size (yet I had never heard of them before).
The MLM aspect is a huge red flag for me.
Nevertheless I have paid up front a rep to "help me out". More than anything just to humour her I have asked her to detail exactly how much better her funds are compared to something I could create from vanguard funds. She insists that her managed funds will outperform any index funds net of all fees etc. I am of course extremely sceptical (though I have read that their funds have actually done quite well).
The problem I have is trying to find a way of reasonably comparing performance.
I thought I could find 12 funds as similar in asset/balance/risk etc. to the funds they have in their "MAP" setup but utilising no fee no load index trackers. I should then be able to make a more realistic comparison.
I have asked her to do something like this for me and will be interested to see what she returns. No doubt she will be able to create some graphs that look positive for her setup but I would like to understand how.
I am fully against fees or excessive fees but it has to be said that if their fund did outperform index funds consistently INCLUDING all their fees then it might be worth considering.
One point to note is that if you utilise their "MAP" programme then the fee is 1% with no loading. The very high loading is if you select the fund individually outside of MAP. I still suspect there must be some hidden stuff in there somewhere to make up the difference though.

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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 259874 of 267363
Subject: Re: waddell reed & managed application portfolio Date: 12/11/2012 8:51 AM
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These are my thoughts also, lots of red flags and yet they appear to be a very long running company of some considerable size (yet I had never heard of them before).
The MLM aspect is a huge red flag for me.
Nevertheless I have paid up front a rep to "help me out". More than anything just to humour her I have asked her to detail exactly how much better her funds are compared to something I could create from vanguard funds. She insists that her managed funds will outperform any index funds net of all fees etc. I am of course extremely sceptical (though I have read that their funds have actually done quite well).
The problem I have is trying to find a way of reasonably comparing performance.


If it were me, I wouldn't have anything more to do with these people. They are prospecting for gold --- yours -- and I would just run dry. I wouldn't return their phone calls. From their point of view, I would have disappeared off the face of the earth.

I don't know what you paid this person for. To make her best sales pitch? (The company doesn't pay her? She can only get money from people like you?) In fact, one very good question for this person might be how it is that she makes money. Does the company pay her and give her a W-2? Or, is she self-employed and only makes money by selling to people like you?

I don't think you're humoring her. I think what's happening is that you're on the hook and she's trying to land you.

It's not your task to do anything about their funds. There's a task, but the task is theirs and it is one of selling the funds to you. If you're allowing (or rather, paying) her to make her best sales pitch, so you can compare, why load the dice in her favor? Why not call a reputable outfit like Vanguard (and/or Fidelity) and have them explain what they can do for you and why it is superior to anything that W&R can do?

culcha

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