Is Prudential worth it?

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toot101
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Is Prudential worth it?

Post by toot101 »

Hello,

I have searched on this forum, but cannot find much to answer my questions...

Is it worth paying the expense ratios to invest with Prudential? I cannot get a straight answer from my financial advisor, (who of course works for Prudential) when asked about the ratio's he just tells me they are competitive and about average.

I am 38 years old. I live in PA Married, file jointly. I want to get as much out of my investments as I can, but also not risk losing everything. I admit, I have very limited knowledge on investing which is why I am here. I have been told by others to fire my advisor and roll everything into Vanguard funds since the expense ratios are a fraction of what I am currently paying.

My questions are:
Is there any reason at all to stay with Prudential and pay these fees?
If not, should I go with Vanguard or someone else?

My current investments within Prudential are as follows...

Rollover 401k from previous job into the below IRA funds: (wife is also invested in both these funds with the same amount of money)
SPQAX - Expense Ratio 1.15% - 17k
PRJAX - Expense Ratio 1.08% - 9k

The next two accounts are what I invested my extra cash in since 1 year ago this month.
PCCFX - Expense Ratio 1.70% - 25k
PABCX - Expense Ratio 1.77% - 32k (this one just replaced SDMCX as of yesterday since it did not seem to be doing well)
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retired@50
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Re: Is Prudential worth it?

Post by retired@50 »

toot101 wrote: Wed Apr 21, 2021 9:01 am My questions are:
Is there any reason at all to stay with Prudential and pay these fees?
If not, should I go with Vanguard or someone else?
Welcome to the forum. :happy

If you have the time and energy to manage a simple 3-fund portfolio, then leaving the adviser is probably best, assuming you can avoid behavioral pitfalls like "going to cash" in a market downturn.

Before making a decision, I'd suggest you do some reading on the Boglehead basics in the wiki.
https://www.bogleheads.org/wiki/Getting_started

Also, see SPIVA report link. Most actively managed mutual funds don't beat the indexes they track over the long term. At your age, consistent use of actively managed funds will probably not payoff in the long run.
https://www.spglobal.com/spdji/en/spiva ... /spiva-us/

Further, are you paying your adviser any assets under management fees?

Personally, I use Vanguard and am very happy I do.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Rex66
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Re: Is Prudential worth it?

Post by Rex66 »

The short answer is NO

They will also try to get you into insurance products as an investment over time.
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retiredjg
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Re: Is Prudential worth it?

Post by retiredjg »

Those fees are extremely high. You should not use those funds or that "advisor".

Chances are you can learn to do this yourself. It does not need to be difficult. You can start learning here.

https://www.bogleheads.org/wiki/Getting_started

If you cannot do it yourself, I suggest you move your money to Vanguard's Personal Advisor Service. They will put you in low cost funds and their fee is low. After some time, you may find you can manage it yourself and just discontinue their management.
edge
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Re: Is Prudential worth it?

Post by edge »

There is no reason to stay with Prudential assuming you have access to better options.
Dandy
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Re: Is Prudential worth it?

Post by Dandy »

You are paying very high fees -- "they are competitive" quote applies only to other similar firms with agents or brokers. Vanguard and other providers have individual or all in one funds with much, much lower expenses. You should get some suggestions from this forum.
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Nate79
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Re: Is Prudential worth it?

Post by Nate79 »

The long and comprehensive answer is, no they are horrendous.
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Re: Is Prudential worth it?

Post by Jack FFR1846 »

Those ERs were competitive in the early 80's. Today, I consider anything above 0.1% to be highway robbery. My overall average portfolio ER is about 0.02% for about $3.4MM. Yes, I pay attention to cost. And yes, I could reduce this cost further but I like some of the more expensive (say 0.03% to 0.04%) investment choices. One percent? come on. My response to an FA would be "Be serious".
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Stinky
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Re: Is Prudential worth it?

Post by Stinky »

Welcome to the Forum! Glad that you posted your question.

There's nothing special about "Prudential" mutual funds.

That's a marketing name that they use, and the mutual fund firm may be a subsidiary of Prudential Life Insurance Company. But the mutual funds are just like other mutual funds - they are not "guaranteed" by Prudential Life.

The expense fees are way higher than I would ever pay.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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arcticpineapplecorp.
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Re: Is Prudential worth it?

Post by arcticpineapplecorp. »

toot101 wrote: Wed Apr 21, 2021 9:01 am My current investments within Prudential are as follows...

Rollover 401k from previous job into the below IRA funds: (wife is also invested in both these funds with the same amount of money)
SPQAX - Expense Ratio 1.15% - 17k
PRJAX - Expense Ratio 1.08% - 9k

The next two accounts are what I invested my extra cash in since 1 year ago this month.
PCCFX - Expense Ratio 1.70% - 25k
PABCX - Expense Ratio 1.77% - 32k (this one just replaced SDMCX as of yesterday since it did not seem to be doing well)
No.

Couple things.

1. SPQAX and PRJAX are both class A. What is that?
You paid a front load when you bought the fund. (this is in addition to the expense ratio you listed, but is a one time only fee).
how much?

5.5%

So you invested $17,000 and paid a 5.5% load upon purchase. You lost $935 and didn't really invest $17,000. You only invested $16,065 because you paid $935 to the advisor. Nice work if you can get it. :moneybag

Same for PABCX. You really didn't invest $9000 in PABCX. You invested $8505 because the other $495 you paid to the advisor. Nice work if you can get it. :moneybag

I'll show you how this makes a difference. Take SPQAX vs a total stock market index fund (VTSAX). They're not exactly the same (spqax is a global equity) but let's say both funds earn the same amount over time, let's say 8% a year CAGR. Let's say you invest $17,000 in both for 40 years (25-65 years of age). The only difference is SPQAX costs you 5.5.% upfront AND 1.15% per year. We'll say the vanguard total stock market index fund costs 0.04% per year AND has NO LOAD (Vanguard is a NO LOAD mutual fund company). So you're investing $17,000 in vanguard's fund but only $16,065 in SPQAX. Because the net return is after fees the CAGR is 8% - 1.15% = 6.85% per year for SPQAX but 8% - 0.04% = 7.96% for vanguard. What would the difference in ending amount be?

SPQAX
=FV(.0685,40,0,-16065)

VTSAX
=FV(.0796,40,0,-17000)

Difference?

SPQAX $227,437.35
VTSAX $363,884.84

Prudential cost you $136,447.49 over 40 years vs. you having $136,447.49 MORE with Vanguard even though both funds earned 8% per year BEFORE COSTS. Costs matter, don't they?

2. the other two funds are class C. What is that?
Class C shares are a class of mutual fund share characterized by a level load that includes annual charges for fund marketing, distribution, and servicing, set at a fixed percentage. These fees amount to a commission for the firm or individual helping the investor decide on which fund to own.

source: https://www.google.com/search?q=what+do ... CA0&uact=5
That means while you "technically" didn't pay a load which is a commission (front known as A class or back end known as B class) you're still paying the prudential salesman a commission...in the form of higher fees.

here's the cumulative impact of fees on ending wealth:

Image

sec also issues a similar warning:
https://www.sec.gov/investor/alerts/ib_ ... penses.pdf

Was he dishonest about the fees being average? Technically no, they're average for crappy class A and C shares. By the way, the reason your prudential advisor won't answer you honestly about the expense is:
"It is difficult to get a man to understand something when his salary depends upon his not understanding it" --Upton Sinclair
welcome to the group.
Last edited by arcticpineapplecorp. on Wed Apr 21, 2021 2:14 pm, edited 2 times in total.
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Topic Author
toot101
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Re: Is Prudential worth it?

Post by toot101 »

Thank you all for the advice and suggestions. Once I understand what I am doing and can find "equivalent" lower cost funds , I am going to try and transfer my accounts into Vanguard.
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arcticpineapplecorp.
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Re: Is Prudential worth it?

Post by arcticpineapplecorp. »

toot101 wrote: Wed Apr 21, 2021 1:21 pm Thank you all for the advice and suggestions. Once I understand what I am doing and can find "equivalent" lower cost funds , I am going to try and transfer my accounts into Vanguard.
these are equivalent (or better) lower cost funds:

https://www.bogleheads.org/wiki/Three-fund_portfolio

fyi, prudential is an insurance company.

they may be fine for insurance, but like most insurance companies, not for investments.

as an example, while you can buy an S&P500 index fund for 0.04% with Vanguard or 0.03% with schwab and fidelity I believe look at the sec historical info on State Farm's (notice, they're an insurance company):

https://www.sec.gov/Archives/edgar/data ... 1d497k.htm

class B has back end load (deferred sales charge) 5% and expense ratio of 1.36% (including 12b-1 fees)
class A has front end 5% load and expense ratio of 0.66%

and so on.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
formerlybroke
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Re: Is Prudential worth it?

Post by formerlybroke »

toot101 wrote: Wed Apr 21, 2021 9:01 am
The next two accounts are what I invested my extra cash in since 1 year ago this month.
PCCFX - Expense Ratio 1.70% - 25k
PABCX - Expense Ratio 1.77% - 32k (this one just replaced SDMCX as of yesterday since it did not seem to be doing well)
The answer regarding your advisor competence and fund costs are all wrapped up in these facts.

As previously stated, C-shares layer on an additional 1.00% Service and Distribution Fee. The 'good news' is you are only subject to paying that 1% for 10 years per the PGIM Prospectus: https://prospectus-express.broadridge.c ... =74437E883 - so from a fee standpoint you are getting crushed.

Which leads to your advisor, who, while doing nothing illegal, certainly did you no favors.

C-shares were a mutual fund industry concept founded in the mid-1990's to combat A-share resistance. Many (most?) firms have moved away from offering C-shares as a load option.

If it were me, and knowing what you now know, I'd expedite my departure from this advisor and his investment selections.
ROIGuy
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Re: Is Prudential worth it?

Post by ROIGuy »

The fact that you cannot get a straight answer from your advisor should raise a whole bunch of red flags and you should be running far far away from this person.
Topic Author
toot101
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Re: Is Prudential worth it?

Post by toot101 »

One last question, when I am ready to transition. Should I put all my money in Vanguard? I have read that as far as IRA's go that Schwab may be a better choice. To add to this, is it as easy and signing up for a Vanguard account and doing to transfer online? Or should I go through my current advisor? Not sure if there is anything that needs taken care of on my part for Prudential, like signing papers or anything like that. I apologize for all the questions.
Last edited by toot101 on Wed Apr 21, 2021 3:23 pm, edited 2 times in total.
mikejuss
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Re: Is Prudential worth it?

Post by mikejuss »

Dear God no. Those ERs are abominable.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
finite_difference
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Re: Is Prudential worth it?

Post by finite_difference »

No, it’s not worth. In general ER should be closer to 0.1%. No loads. No advisor fees.
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retiredjg
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Re: Is Prudential worth it?

Post by retiredjg »

toot101 wrote: Wed Apr 21, 2021 3:17 pm One last question, when I am ready to transition. Should I put all my money in Vanguard? I have read that as far as IRA's go that Schwab may be a better choice.
Don't know what you read, but I can't imagine that this conclusion is valid. I think you may have misunderstood something...or what you read was just wrong.

Some people do prefer Schwab for better customer service. However, if you want advisor assistance, Vanguard is the only one I recommend because they are the only ones I know of who do not have an incentive to steer you wrong. I'm not sure that the same can be said for Schwab.


To add to this, is it as easy and signing up for a Vanguard account and doing to transfer online?
Transferring money is not usually done just online. There is usually a person on the phone that assists.
Or should I go through my current advisor? Not sure if there is anything that needs taken care of on my part for Prudential, like signing papers or anything like that. I apologize for all the questions.
Once your advisor hears you are leaving, you will not get any assistance from the advisor. You may get an email of phone call telling you that you are an idiot for moving your money.

When moving assets, it is usually best to have the new custodian handle the arrangements with the old custodian (corporate office, not your advisor).

Before choosing where you money is going, learn some more about investing and what kind of portfolio you might want. You will then know better if you want advisory assistance or not. Then you can choose where to send your money.
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arcticpineapplecorp.
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Re: Is Prudential worth it?

Post by arcticpineapplecorp. »

toot101 wrote: Wed Apr 21, 2021 3:17 pm One last question, when I am ready to transition. Should I put all my money in Vanguard? I have read that as far as IRA's go that Schwab may be a better choice. To add to this, is it as easy and signing up for a Vanguard account and doing to transfer online? Or should I go through my current advisor? Not sure if there is anything that needs taken care of on my part for Prudential, like signing papers or anything like that. I apologize for all the questions.
it's ok. it can be complicated. Vanguard, Schwab or Fidelity are all fine.

i would only deal with prudential to the extent that you understand all/any fees you might incur from leaving prudential. Sometimes there are surrender charges (or a deferred sales load if you have other funds), fees to close the acct, etc.

Hopefully these are all retirement accts. Transferring from one company to another would have no tax implications as long as the funds continue to stay in retirement accts. You don't want prudential to cash you out because then you have to get the money back in the retirement accts with your desired company within 60 days I believe. So you'll want to do a trustee to trustee transfer if able where funds transfer automatically from prudential to the company you want them to be.

If any funds are in a taxable acct with prudential, understand what the tax implications would be of selling any taxable investments that have gained in value.

Then once you understand the costs of leaving, deal with the company you want to transfer to rather than deal with prudential. The company you want to go to will help you transfer the funds and prudential will have to do what you request of the transferring company. if you go to prudential, they'll likely try to give you song and dance, and offer of "better products" and stall tactics to try to keep your money from moving.

Also, once the funds are liquidated in the prudential and put in the IRA in the receiving company, they'll just be sitting in a money market acct. You'll have to then buy the funds you want in the new company's IRA with the funds that came over after selling prudential funds.

some people think they invested because they funded their IRA. If they have an IRA in a brokerage acct the funds go to the money market settlement fund first and then you have to buy the investments with the funds from the settlement acct. I've known people with money sitting in a money market fund for years never realizing they had to actually choose the investments in their IRA. :confused
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
123
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Re: Is Prudential worth it?

Post by 123 »

You could do it yourself (or use PAS) with Vanguard and save quite a bit on the expense ratios.

If you like your Prudential Guy/Gail you can still gift him/her up to $15K a year, you're kind of doing that now.
The closest helping hand is at the end of your own arm.
Topic Author
toot101
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Re: Is Prudential worth it?

Post by toot101 »

Once again, I can't thank you all enough for the advice you have given me! I have much research to do and hopefully soon will get my accounts out of Prudential.
anil686
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Re: Is Prudential worth it?

Post by anil686 »

123 wrote: Wed Apr 21, 2021 4:01 pm You could do it yourself (or use PAS) with Vanguard and save quite a bit on the expense ratios.

If you like your Prudential Guy/Gail you can still gift him/her up to $15K a year, you're kind of doing that now.
+1 - if you want to do it now - I would recommend Vanguard and their PAS service. it is relatively cheap (much cheaper than what you are paying now and no fees for the fund purchases). They can help you understand your asset allocation and work with you to figure out how to invest with your risk tolerance. If you are going to wait until you understand more - then you can read some books listed on the wiki and then move the money yourself - but you will have to probably be honest with yourself about how engaged you are to learn in a quick way because if it is going to take you many months - it is probably best just to move it to VG and use their advisory service and then figure it out later... JMO though...

BTW - I was with a Nationwide Insurance advisor - felt like he was a good friend. In retrospect I bought that friendship. I did not realize I was on the wrong path until one of my friends gave me "The Little Book of Common Sense Investing" by Bogle. Changed my investing life....
formerlybroke
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Re: Is Prudential worth it?

Post by formerlybroke »

arcticpineapplecorp. wrote: Wed Apr 21, 2021 1:49 pm
toot101 wrote: Wed Apr 21, 2021 1:21 pm Thank you all for the advice and suggestions. Once I understand what I am doing and can find "equivalent" lower cost funds , I am going to try and transfer my accounts into Vanguard.
fyi, prudential is an insurance company.

they may be fine for insurance, but like most insurance companies, not for investments.
FWIW: this is fundamentally untrue. PGIM (which manages the funds in question):
  • manages $1.5 trillion
  • is one the 10 largest asset managers worldwide
source: https://www.pgim.com/overview

As is the case with most asset managers, they have some great funds at fair pricing and awful performance in overpriced funds.

In addition, these large asset managers are owned by insurance companies:
  • PIMCO
  • Allianz
as are a host of names on this list: https://mutualfunddirectory.org/latest- ... ing-here/
Topic Author
toot101
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Re: Is Prudential worth it?

Post by toot101 »

Just wanted to add, because I checked with my wife. My advisor works for a company (NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC) that is not technically WITH Prudential, but are licensed to sell Prudential products. We just happened to be invested with all Prudential funds. Sorry for the confusion.
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arcticpineapplecorp.
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Re: Is Prudential worth it?

Post by arcticpineapplecorp. »

formerlybroke wrote: Wed Apr 21, 2021 4:20 pm
arcticpineapplecorp. wrote: Wed Apr 21, 2021 1:49 pm
toot101 wrote: Wed Apr 21, 2021 1:21 pm Thank you all for the advice and suggestions. Once I understand what I am doing and can find "equivalent" lower cost funds , I am going to try and transfer my accounts into Vanguard.
fyi, prudential is an insurance company.

they may be fine for insurance, but like most insurance companies, not for investments.
FWIW: this is fundamentally untrue. PGIM (which manages the funds in question):
  • manages $1.5 trillion
  • is one the 10 largest asset managers worldwide
source: https://www.pgim.com/overview

As is the case with most asset managers, they have some great funds at fair pricing and awful performance in overpriced funds.

In addition, these large asset managers are owned by insurance companies:
  • PIMCO
  • Allianz
as are a host of names on this list: https://mutualfunddirectory.org/latest- ... ing-here/
please list some of the "great funds at fair pricing"

their 60/40 fund costs 0.40% (https://prospectus-express.broadridge.c ... ctype=pros)
vanguard's is 0.07% (https://investor.vanguard.com/mutual-fu ... file/VBIAX)

their pgim balanced fund costs either 0.65%, 0.78% or 1.0% (https://www.pgim.com/investments/getpid ... 7D005C295F)
vanguard's balanced fund costs 0.07%

can't find pibqx on morningstar but entered pibax, pabcx, and pabfx vs vanguard's balanced index fund (in blue below) back to earliest date of vanguard balanced index (11/9/1992):

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

all prudential's balanced fund mightily lost to vanguard's lower cost balanced index fund.

wonder why.

you don't work for prudential do you?

I don't work for vanguard.
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ruralavalon
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Re: Is Prudential worth it?

Post by ruralavalon »

toot101 wrote: Wed Apr 21, 2021 9:01 am Hello,

I have searched on this forum, but cannot find much to answer my questions...

Is it worth paying the expense ratios to invest with Prudential? I cannot get a straight answer from my financial advisor, (who of course works for Prudential) when asked about the ratio's he just tells me they are competitive and about average.

I am 38 years old. I live in PA Married, file jointly. I want to get as much out of my investments as I can, but also not risk losing everything. I admit, I have very limited knowledge on investing which is why I am here. I have been told by others to fire my advisor and roll everything into Vanguard funds since the expense ratios are a fraction of what I am currently paying.

My questions are:
Is there any reason at all to stay with Prudential and pay these fees?
If not, should I go with Vanguard or someone else?

My current investments within Prudential are as follows...

Rollover 401k from previous job into the below IRA funds: (wife is also invested in both these funds with the same amount of money)
SPQAX - Expense Ratio 1.15% - 17k
PRJAX - Expense Ratio 1.08% - 9k

The next two accounts are what I invested my extra cash in since 1 year ago this month.
PCCFX - Expense Ratio 1.70% - 25k
PABCX - Expense Ratio 1.77% - 32k (this one just replaced SDMCX as of yesterday since it did not seem to be doing well)

The advisor (salesperson) is well paid via expenses ultimately paid by you. For example in your rollover IRA:
1) PGIM Jennison Global Equity Income A (SPQAX) ER 1.15%, the expense ratio includes a 12b1 fee paid annually to the salesperson, and also has a front load of 5.50%; and
2) PGIM Jennison Global Opportunities A (PRJAX) ER 1.08%, the expense ratio includes a 12b1 fee paid annually to the salesperson and also has a front load of 5.50%.

Those are not low expense ratios expense ratios, they are pretty high in my opinion. Those are actively managed funds.

Low expense ratios are critical to long-term investing performance. Seemingly small annual fees can have a large cumulative impact over time. Here is a "Mutual fund fees calculator" you could use to estimate the impact of investing expenses.

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.

In general index funds have usually done better than actively managed funds. Please see:
Index Fund Advisors (10/7/2020), “SPIVA: 2020 Mid-Year Active vs. Passive Scorecard“, link.

You can call Vanguard and ask for their help in transfer of these accounts.

I suggest that you rollover your IRA to an IRA at Vanguard. You should ask a "trustee to trustee " rollover, so the money moved directly to Vanguard not through you.

I suggest that you transfer your other account (I assume It is a taxable brokerage account) to Vanguard, move the two mutual funds "in kind" to avoid creating unnecessary income tax liability in the transfer.
Last edited by ruralavalon on Wed Apr 21, 2021 4:57 pm, edited 2 times in total.
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arcticpineapplecorp.
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Re: Is Prudential worth it?

Post by arcticpineapplecorp. »

toot101 wrote: Wed Apr 21, 2021 4:38 pm Just wanted to add, because I checked with my wife. My advisor works for a company (NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC) that is not technically WITH Prudential, but are licensed to sell Prudential products. We just happened to be invested with all Prudential funds. Sorry for the confusion.
it's ok.

northwestern mutual also provides insurance (life, ltd, disability and annuities).

said it once. will say it again. Don't buy investments through companies that sell insurance. They generally overcharge for their investment products.

Would like to see anyone prove otherwise. I have yet to see a company that sells insurance sell mutual funds as cheap or cheaper than Vanguard, Fidelity or Schwab.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Nate79
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Re: Is Prudential worth it?

Post by Nate79 »

toot101 wrote: Wed Apr 21, 2021 4:38 pm Just wanted to add, because I checked with my wife. My advisor works for a company (NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC) that is not technically WITH Prudential, but are licensed to sell Prudential products. We just happened to be invested with all Prudential funds. Sorry for the confusion.
Ouch. Even worse.
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Re: Is Prudential worth it?

Post by Stinky »

toot101 wrote: Wed Apr 21, 2021 4:38 pm Just wanted to add, because I checked with my wife. My advisor works for a company (NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC) that is not technically WITH Prudential, but are licensed to sell Prudential products. We just happened to be invested with all Prudential funds. Sorry for the confusion.
That’s a two-fer. Both Prudential and Northwestern Mutual from one representative.

The only way it could be worse is if somehow Edward Jones got added to the mix..... :twisted:
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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