Just sold my business need help with investments

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Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Just sold my business need help with investments

Post by tunataxi »

Hi I'm new to Bogleheads and would love some advice on my situation. I'm 45 yrs old and just sold my business of 19 years for 25mil. After taxes I have around 15 left over which I invested with a small wealth management company who's owner I've know professionally for a long time. The timing was terrible and I'm down over a million ytd. The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.

I had to sign a decade long non compete and am planning to retire early and will need to live on the investment income. Current expenses are around $700k/year.

I have around 20 years of investment experience and have a few personal accounts outside of the wealth management company that I manage with a mix of robo advisors, index funds, and a little bit of stock picking.

I pay my WM company quarterly so I'd love to make a change this month. I'm torn on going with someone like Vanguard that will charge my .10-.20% (still waiting on confirmation from our call yesterday) or just doing it myself.

I have a good accountant and already have basic estate planning setup. I'm leaning towards doing it myself but would love some advice. I'd likely pick a simple portfolio of Vanguard index funds mostly made up of VTWIX and live off the dividends and LT cap gains.
smitcat
Posts: 13300
Joined: Mon Nov 07, 2016 9:51 am

Re: Just sold my business need help with investments

Post by smitcat »

tunataxi wrote: Sat May 07, 2022 8:02 am Hi I'm new to Bogleheads and would love some advice on my situation. I'm 45 yrs old and just sold my business of 19 years for 25mil. After taxes I have around 15 left over which I invested with a small wealth management company who's owner I've know professionally for a long time. The timing was terrible and I'm down over a million ytd. The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.

I had to sign a decade long non compete and am planning to retire early and will need to live on the investment income. Current expenses are around $700k/year.

I have around 20 years of investment experience and have a few personal accounts outside of the wealth management company that I manage with a mix of robo advisors, index funds, and a little bit of stock picking.

I pay my WM company quarterly so I'd love to make a change this month. I'm torn on going with someone like Vanguard that will charge my .10-.20% (still waiting on confirmation from our call yesterday) or just doing it myself.

I have a good accountant and already have basic estate planning setup. I'm leaning towards doing it myself but would love some advice. I'd likely pick a simple portfolio of Vanguard index funds mostly made up of VTWIX and live off the dividends and LT cap gains.
Based upon what little you have posted so far here are my thoughts...
- I would bet that your fees at the small wealth company are not limited to the ones you have posted
- I would go with Vanguard until you are completely comfortable with going it alone
- your 15 million will not likely support a $700K draw from age 45 forward
- it would be best if you could collect current detailed expenses from which you could make a future plan
- no matter where you are invested your portfolio will likely fall and rise by more than your most recent loss (1 out of 15)
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retiredjg
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Re: Just sold my business need help with investments

Post by retiredjg »

Welcome to the forum. :happy

You've done well and I think it is good to consider moving your money.I don't think you can actually afford to keep your wealth management company. Your $15 million is a nice sum, but is not enough to sustain $700k expenses each year. And if you are paying .7% to them, you will have even less to spend. So reducing your investment expenses should be high on your list of priorities.

If you plan to use anyone, I suggest Vanguard. Their expenses are much lower and the portfolio should be very portable (if you don't use their new actively managed funds) when/if you decide to do it yourself.

You might want to list your holdings for suggestions if you are considering doing this yourself. In fact, I suggest you post your information in the format we use to answer portfolio questions when/if you are ready. See the link at the bottom of this message for how to do that.

Some things to consider. If your $700k annual expense number does not include taxes, you need to include them. Unless your other accounts are large, you don't have enough money to sustain $700k expenses each year at your age. You certainly have plenty of money, but at first look, you may be planning to spend more than you can actually afford.
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8foot7
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Re: Just sold my business need help with investments

Post by 8foot7 »

The 700k jumps out at me. You’d need 17.5million at 4%, and 4% is aggressive at 45. 3% is probably fine but that makes your kitty short and means you need to take more risk. Giving up 1 point regardless to your wealth manager is a steep headwind. Any levers you can pull on the expenses side, at least for a decade or so, so your 15 can outlast this pullback and grow a bit?
mega317
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Re: Just sold my business need help with investments

Post by mega317 »

700k has to be a typo right?

Ignore the million you just lost, that is a red herring. Your investment timing was good in terms of investing when you had the money. It will recover.

15 funds??? What is the benefit there?

You don’t need to pay anyone an AUM fee. Go find a fee-only advisor which should cost maybe high 4 figures for a first consult and low 4 figures or less for yearly updates.
quietseas
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Re: Just sold my business need help with investments

Post by quietseas »

While I'd recommend Vanguard index funds (ETFs in taxable), I'm not sure I'd recommend Vanguard as a brokerage or advisor. I don't think Vanguard PAS is equipped to handle high net worth investors with taxable accounts especially during drawdown. They are not going to give you a customized solution that you need. Don't lump funds, brokerage, and advisor into one company. They are three different services that do not need to come from the same company. Vanguard is good at one (operating mutual and exchange traded funds), average at another (brokerage), and not a good choice if you need a custom financial plan in taxable accounts (advisor).

I'd recommend a fee only advisor to help set up the taxable accounts for you, and then you can either keep the fee only advisor on for a few years to assist with drawdown or you can take it over yourself at the brokerage of your choosing. One I follow on Twitter is Cody Garrett (Measure Twice Financial). That's a name not a recommendation (I've never talked to him let alone hired him) but he does interact on Twitter with Rick Ferri for what that's worth and seems to have a Boglehead / FIRE mindset.

There is reason to move relatively quickly since some of your holdings probably have capital losses.

Agree $700K/year on $15M for 40-50 years is a little close to comfort for me. Perhaps you can earn some income consulting or in another industry outside the scope of your non-compete.
Topic Author
tunataxi
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Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

Thanks for the quick replies. I'm including some more details below.

Emergency funds: Yes, 6 months in savings account.

Debt: Our only debt is 1.5 mil on mortgage @2.6% (+3 mil equity). Everything else is paid off, and credit cards are paid off monthly.

Tax Filing Status: (Married Filing,Head of Household)

Tax Rate: 35% Federal, 12% State Aprox

State of Residence: NY

Age: 45

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Please provide an approximate size of your total portfolio: 18 mil

Current retirement assets

$15 mil: with wealth manager
$2 mil: with Robo advisor (self managed)
$700k: Was company 401K, just transferred to Robo advised IRA
$400k: Stock account
$550k: Kids 529 college savings
Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

quietseas wrote: Sat May 07, 2022 8:58 am While I'd recommend Vanguard index funds (ETFs in taxable), I'm not sure I'd recommend Vanguard as a brokerage or advisor. I don't think Vanguard PAS is equipped to handle high net worth investors with taxable accounts especially during drawdown. They are not going to give you a customized solution that you need. Don't lump funds, brokerage, and advisor into one company. They are three different services that do not need to come from the same company. Vanguard is good at one (operating mutual and exchange traded funds), average at another (brokerage), and not a good choice if you need a custom financial plan in taxable accounts (advisor).

I'd recommend a fee only advisor to help set up the taxable accounts for you, and then you can either keep the fee only advisor on for a few years to assist with drawdown or you can take it over yourself at the brokerage of your choosing. One I follow on Twitter is Cody Garrett (Measure Twice Financial). That's a name not a recommendation (I've never talked to him let alone hired him) but he does interact on Twitter with Rick Ferri for what that's worth and seems to have a Boglehead / FIRE mindset.

There is reason to move relatively quickly since some of your holdings probably have capital losses.

Agree $700K/year on $15M for 40-50 years is a little close to comfort for me. Perhaps you can earn some income consulting or in another industry outside the scope of your non-compete.
Good stuff thank you I'll look up Cody Garrett. I also saw Rick Ferri and Allan Roth's name come up a few times
quietseas
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Re: Just sold my business need help with investments

Post by quietseas »

tunataxi wrote: Sat May 07, 2022 9:13 am
quietseas wrote: Sat May 07, 2022 8:58 am While I'd recommend Vanguard index funds (ETFs in taxable), I'm not sure I'd recommend Vanguard as a brokerage or advisor. I don't think Vanguard PAS is equipped to handle high net worth investors with taxable accounts especially during drawdown. They are not going to give you a customized solution that you need. Don't lump funds, brokerage, and advisor into one company. They are three different services that do not need to come from the same company. Vanguard is good at one (operating mutual and exchange traded funds), average at another (brokerage), and not a good choice if you need a custom financial plan in taxable accounts (advisor).

I'd recommend a fee only advisor to help set up the taxable accounts for you, and then you can either keep the fee only advisor on for a few years to assist with drawdown or you can take it over yourself at the brokerage of your choosing. One I follow on Twitter is Cody Garrett (Measure Twice Financial). That's a name not a recommendation (I've never talked to him let alone hired him) but he does interact on Twitter with Rick Ferri for what that's worth and seems to have a Boglehead / FIRE mindset.

There is reason to move relatively quickly since some of your holdings probably have capital losses.

Agree $700K/year on $15M for 40-50 years is a little close to comfort for me. Perhaps you can earn some income consulting or in another industry outside the scope of your non-compete.
Good stuff thank you I'll look up Cody Garrett. I also saw Rick Ferri and Allan Roth's name come up a few times
You could contact him and ask, but I don't think Rick Ferri does the detailed type of personalized analysis you would want to have taking taxes and draw down into account. He offers a "second opinion" service so he would review your advisors' current plan and tell you that you can do better with index funds (which you already know). Also Rick has told us he is booked up months in advance. You'll need to pay in the range of high four figures to get a good plan. Then less if you want the the plan updated for you every year.
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TomatoTomahto
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Re: Just sold my business need help with investments

Post by TomatoTomahto »

I think you can do this yourself if you bring down your (imo) excessive annual spend. A 3 fund portfolio can cover your needs and I don’t know why you need a fancy plan.

Fancy plans are (maybe) for 9 digit portfolios. 8 digit portfolios are fine in a 3 fund.

Out of curiosity, what do you spend $700k on? That’s a lot. We live very well on less, although we haven’t traveled much during COVID.
I get the FI part but not the RE part of FIRE.
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retiredjg
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Re: Just sold my business need help with investments

Post by retiredjg »

Here is an earlier thread about non-AUM advisors, if you should decide to look for an "advice only" service.

viewtopic.php?t=360823

Thanks for the added information. Nothing there changes my comments. However, you appear to have money here and money there and that adds levels of complexity that are unneeded and distracting. Strive to simplify. :happy
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retired@50
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Re: Just sold my business need help with investments

Post by retired@50 »

Does the $700k annual expense amount include the $105k you're paying to the wealth manager?

$15,000,000 * 0.007 = $105,000

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
cableguy
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Re: Just sold my business need help with investments

Post by cableguy »

Congrats on your financial success. Some of my thoughts:

* Have consult with a guy like Ferri. I did. Well worth it. He has no agenda and doesn't want your money other than a small fee for his time.
* You could have a portfolio like this: 45% stocks (VOO or VTI would suffice), 20% CD ladder, 20% bond fund, 15% alternate investments (metals, RE, crypto, businesses, etc.).
* Think about no mortgage on your primary home
* Think about having all kid's tuition in the bank - looks like you have that pretty much done in the 529's
* Try to get your annual expenses down a bit more.
* Make sure you have proper insurance.
* Understand what your donations will be. Giving $10k to a struggling family member is a donation.

I understand your situation. You'll want the big house, some nice stuff, maybe a country club, etc. Just be careful that it doesn't get out of control. The more people know about your wealth, the more of a target you'll be.

And above all....try to be healthy. May you live long and enjoy it all.
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Watty
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Re: Just sold my business need help with investments

Post by Watty »

tunataxi wrote: Sat May 07, 2022 8:02 am The company is charging me .70% to manage my funds....
For a $15 million account that is way too high.
tunataxi wrote: Sat May 07, 2022 8:02 am Current expenses are around $700k/year.
Be sure to include taxes and your advisors fees in that.

There are a lot of people like rock stars, professional athletes, lotter winners, etc that had a lot more money than you but ended up broke.

If that includes a mortgage payment then take that out of the equation and consider it separately since you could pay that off at any time.

There all sorts of opinions and endless threads about if you should pay off a mortgage or not and there is no consensus but you should at least consider it. To me it always boils down to the question, "If you had a paid off house then would you take out a new mortgage just so you could invest the money?" Most people would not.

If you as your financial advisor if you should pay off the mortgage then keep in mind that they have a conflict of interest since if you use a million dollars to pay off the mortgage then that will reduce their income by $7,000 a year.

Even if you have a low mortgage rate investing the money and earning a higher return is harder than it sounds since you have a sequence of returns risk. Here is a very simplistic example. You might look at your money that way.
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also pay a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To pay off the mortgage at the end of the second year you would need about $96.5K so you would need to gain back $12.5K and another $6,000 for the next years mortgage payments which combined is $18.5K. That would take a 22% return on the remaining $84K to get back to the point where you could pay off the mortgage.

In the past portfolios have declined in roughly one of four or five years depending on the asset allocation. (20 to 25 percent of the time)

https://investor.vanguard.com/investing ... allocation

The sequence of returns risk can also go the other way and you could get lucky and have the first couple of years get good returns that would put you on the path for large gains over the years. There will sometimes be very optimistic projections on just how much better not paying off the mortgage could be but one limiting factor that needs to be considered is that few people actually keep a 30 year mortgage for the full 30 years. It is difficult to put a number on it but many people who own a home will sell it in less than 10 years.
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Taylor Larimore
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Re: Just sold my business need help with investments

Post by Taylor Larimore »

tunataxi wrote: The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.
tunataxi:

Welcome to the Bogleheads Forum!

On page 37 of "The Bogleheads Guide to The Three-Fund Portfolio" it says:
"To give you an idea of the impact of cost, consider this: If stocks gain an average of 6% annually during the next 30 years, someone who invested $25,000 with a 1% yearly fee will forego more than $35,500 in gains because of the fee--more than the original investment!"
Take a look at the many benefits of the low-cost Three-Fund Portfolio. Also read my "Simplicity" link below (15 funds are rediculous).

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
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Sandtrap
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Re: Just sold my business need help with investments

Post by Sandtrap »

tunataxi wrote: Sat May 07, 2022 8:02 am Hi I'm new to Bogleheads and would love some advice on my situation. I'm 45 yrs old and just sold my business of 19 years for 25mil. After taxes I have around 15 left over which I invested with a small wealth management company who's owner I've know professionally for a long time. The timing was terrible and I'm down over a million ytd. The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.

I had to sign a decade long non compete and am planning to retire early and will need to live on the investment income. Current expenses are around $700k/year.

I have around 20 years of investment experience and have a few personal accounts outside of the wealth management company that I manage with a mix of robo advisors, index funds, and a little bit of stock picking.

I pay my WM company quarterly so I'd love to make a change this month. I'm torn on going with someone like Vanguard that will charge my .10-.20% (still waiting on confirmation from our call yesterday) or just doing it myself.

I have a good accountant and already have basic estate planning setup. I'm leaning towards doing it myself but would love some advice. I'd likely pick a simple portfolio of Vanguard index funds mostly made up of VTWIX and live off the dividends and LT cap gains.
Notes:
1. Seek legal counsel (your own), highly qualified.
2. Seek (your own) CPA counsel.
3. Remove yourself from this costly situation with "advisor and manager "salespeople" "commissioned salespeople", "expert salespeople friends", "expert wealth management company sales people sales company". . . asap.

4. Set up brokerage accounts at either or all or some of each; Vanguard, Fidelity, Schwab (in this order or priority to some).

5. Contact the above brokerage representative (asap) at Vanguard, Fidelity, and have them transfer everything you have over to them.
a) Do this just as a straight apples for apples where possible, otherwise into your sweep account.
b) Contact Vanguard VPAS services to also do the above and have them do an initial setup for you, fees are low, you can cancel after that and just DIY the simple low cost setup they do for you.

6. Note: you are losing money from poor management, skim, commisions, etc, every day. So, do that above asap.

Read:
MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

**To OP:
The above is a "very first step". . . .just get out of your situation.

The second step: "what do do with the money" is easy for many to opine. . . for now. . .just do the lst step.

There are many ways to "invest" per se. . . . . your windfall, that. . comprehensively. . . can include "portfolio based index funds". Realize that bigger picture as well.

To OP:
I hope this is helpful for you.
PM me as you wish.

j :D

dis laimer: zillions of options and opionizations by zillions of people based on zero to some to personal experience with the above at these valuations. This is only one from personal experience selling a business at these valuations.
Wiki Bogleheads Wiki: Everything You Need to Know
nyclon
Posts: 664
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Re: Just sold my business need help with investments

Post by nyclon »

tunataxi wrote: Sat May 07, 2022 8:02 am Hi I'm new to Bogleheads and would love some advice on my situation. I'm 45 yrs old and just sold my business of 19 years for 25mil. After taxes I have around 15 left over which I invested with a small wealth management company who's owner I've know professionally for a long time. The timing was terrible and I'm down over a million ytd. The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.

I had to sign a decade long non compete and am planning to retire early and will need to live on the investment income. Current expenses are around $700k/year.

I have around 20 years of investment experience and have a few personal accounts outside of the wealth management company that I manage with a mix of robo advisors, index funds, and a little bit of stock picking.

I pay my WM company quarterly so I'd love to make a change this month. I'm torn on going with someone like Vanguard that will charge my .10-.20% (still waiting on confirmation from our call yesterday) or just doing it myself.

I have a good accountant and already have basic estate planning setup. I'm leaning towards doing it myself but would love some advice. I'd likely pick a simple portfolio of Vanguard index funds mostly made up of VTWIX and live off the dividends and LT cap gains.
Congrats on the liquidity event!

I agree with other posts that $700k of annual spend is too high given your portfolio size. You’d want something closer to $22mm for that range. You can comfortably spend about $450-500k with $15mm. You can use firecalc and portfolio visualizer to run scenarios which would support these levels - and remember to account for taxes as an expense - which makes your annual withdrawals required higher.

DIY is fine given your skill set in investing. You’ll just have to deal with a little extra tax / operational paperwork which you would have had to review regardless. As an earlier post mentioned, the advisory fee needs to be taken into consideration in your annual spend.

I would suggest speaking to vanguard if you want advisor support. You’d pay about $30-35k/yr for it, or you can do it yourself and save that $. Also, their private equity program run by harbourvest is impressive and you would qualify.
Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

cableguy wrote: Sat May 07, 2022 10:08 am Congrats on your financial success. Some of my thoughts:

* Have consult with a guy like Ferri. I did. Well worth it. He has no agenda and doesn't want your money other than a small fee for his time.
* You could have a portfolio like this: 45% stocks (VOO or VTI would suffice), 20% CD ladder, 20% bond fund, 15% alternate investments (metals, RE, crypto, businesses, etc.).
* Think about no mortgage on your primary home
* Think about having all kid's tuition in the bank - looks like you have that pretty much done in the 529's
* Try to get your annual expenses down a bit more.
* Make sure you have proper insurance.
* Understand what your donations will be. Giving $10k to a struggling family member is a donation.

I understand your situation. You'll want the big house, some nice stuff, maybe a country club, etc. Just be careful that it doesn't get out of control. The more people know about your wealth, the more of a target you'll be.

And above all....try to be healthy. May you live long and enjoy it all.
Thank you, I'll def reach out to Ferri.

I'm on the fence about the home mortgage I paid for the 2+mil construction in cash and have such a low rate, and can use the tax deduction so will keep for now.

Agree on the expenses, it's embarrassing how it's gotten out of hand. Cost of living in NYC,kids private school, expensive wife :P , etc. It just kinda crept up year after year and now it's become the new normal. we should be able to get it closer to 500, then lower when the kids are out of school.

I kept my 10 mil life insurance policy from the biz and made my wife the beneficiary. I also kept the disability policy and we have a good bit of estate planning done too.
Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

retired@50 wrote: Sat May 07, 2022 9:45 am Does the $700k annual expense amount include the $105k you're paying to the wealth manager?

$15,000,000 * 0.007 = $105,000

Regards,
Yes it does
Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

Sandtrap wrote: Sun May 08, 2022 8:27 am
tunataxi wrote: Sat May 07, 2022 8:02 am Hi I'm new to Bogleheads and would love some advice on my situation. I'm 45 yrs old and just sold my business of 19 years for 25mil. After taxes I have around 15 left over which I invested with a small wealth management company who's owner I've know professionally for a long time. The timing was terrible and I'm down over a million ytd. The company is charging me .70% to manage my funds and are a using a mix of around 15 Black Rock funds with average out to another .35 points.

I had to sign a decade long non compete and am planning to retire early and will need to live on the investment income. Current expenses are around $700k/year.

I have around 20 years of investment experience and have a few personal accounts outside of the wealth management company that I manage with a mix of robo advisors, index funds, and a little bit of stock picking.

I pay my WM company quarterly so I'd love to make a change this month. I'm torn on going with someone like Vanguard that will charge my .10-.20% (still waiting on confirmation from our call yesterday) or just doing it myself.

I have a good accountant and already have basic estate planning setup. I'm leaning towards doing it myself but would love some advice. I'd likely pick a simple portfolio of Vanguard index funds mostly made up of VTWIX and live off the dividends and LT cap gains.
Notes:
1. Seek legal counsel (your own), highly qualified.
2. Seek (your own) CPA counsel.
3. Remove yourself from this costly situation with "advisor and manager "salespeople" "commissioned salespeople", "expert salespeople friends", "expert wealth management company sales people sales company". . . asap.

4. Set up brokerage accounts at either or all or some of each; Vanguard, Fidelity, Schwab (in this order or priority to some).

5. Contact the above brokerage representative (asap) at Vanguard, Fidelity, and have them transfer everything you have over to them.
a) Do this just as a straight apples for apples where possible, otherwise into your sweep account.
b) Contact Vanguard VPAS services to also do the above and have them do an initial setup for you, fees are low, you can cancel after that and just DIY the simple low cost setup they do for you.

6. Note: you are losing money from poor management, skim, commisions, etc, every day. So, do that above asap.

Read:
MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

**To OP:
The above is a "very first step". . . .just get out of your situation.

The second step: "what do do with the money" is easy for many to opine. . . for now. . .just do the lst step.

There are many ways to "invest" per se. . . . . your windfall, that. . comprehensively. . . can include "portfolio based index funds". Realize that bigger picture as well.

To OP:
I hope this is helpful for you.
PM me as you wish.

j :D

dis laimer: zillions of options and opionizations by zillions of people based on zero to some to personal experience with the above at these valuations. This is only one from personal experience selling a business at these valuations.
Good stuff, thank you
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retired@50
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Re: Just sold my business need help with investments

Post by retired@50 »

tunataxi wrote: Sun May 08, 2022 9:17 pm
retired@50 wrote: Sat May 07, 2022 9:45 am Does the $700k annual expense amount include the $105k you're paying to the wealth manager?

$15,000,000 * 0.007 = $105,000

Regards,
Yes it does
It sounds as if you're considering trimming expenses. The fee to the wealth manager may be one to put on the list.

I suspect that if you put your mind to it, you can settle on a relatively straightforward (i.e. simple) portfolio that won't take you all that much time to manage. Stick around this forum and you'll be able to continue to ask questions and learn from some pretty bright people.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
tunataxi
Posts: 7
Joined: Sat May 07, 2022 7:46 am

Re: Just sold my business need help with investments

Post by tunataxi »

Just wanted to update the thread. I had a great call with Jon Luskin and we went through all my holdings. I quit the Wealth Manager and am moving their portfolio to my brokerage account and investing in a simple 3 fund portfolio.
He had a lot of other good advice and I'll continue to use him on an hourly basis as needed.
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ClevrChico
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Re: Just sold my business need help with investments

Post by ClevrChico »

tunataxi wrote: Mon May 16, 2022 10:01 am I quit the Wealth Manager and am moving their portfolio to my brokerage account and investing in a simple 3 fund portfolio.
Excellent decision!
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TomatoTomahto
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Re: Just sold my business need help with investments

Post by TomatoTomahto »

tunataxi wrote: Mon May 16, 2022 10:01 am Just wanted to update the thread. I had a great call with Jon Luskin and we went through all my holdings. I quit the Wealth Manager and am moving their portfolio to my brokerage account and investing in a simple 3 fund portfolio.
He had a lot of other good advice and I'll continue to use him on an hourly basis as needed.
Great decision! Now to look at annual spend 😁
I get the FI part but not the RE part of FIRE.
wolf359
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Re: Just sold my business need help with investments

Post by wolf359 »

retiredjg wrote: Sat May 07, 2022 8:46 am Welcome to the forum. :happy

You've done well and I think it is good to consider moving your money.I don't think you can actually afford to keep your wealth management company. Your $15 million is a nice sum, but is not enough to sustain $700k expenses each year. And if you are paying .7% to them, you will have even less to spend. So reducing your investment expenses should be high on your list of priorities.

If you plan to use anyone, I suggest Vanguard. Their expenses are much lower and the portfolio should be very portable (if you don't use their new actively managed funds) when/if you decide to do it yourself.

You might want to list your holdings for suggestions if you are considering doing this yourself. In fact, I suggest you post your information in the format we use to answer portfolio questions when/if you are ready. See the link at the bottom of this message for how to do that.

Some things to consider. If your $700k annual expense number does not include taxes, you need to include them. Unless your other accounts are large, you don't have enough money to sustain $700k expenses each year at your age. You certainly have plenty of money, but at first look, you may be planning to spend more than you can actually afford.
+1

I agree with all your advice.

Based on his new figures, he actually has greater than $18 million, which is enough to sustain that $700k expenses each year. This is especially true if his expenses get trimmed by $100K by dropping his wealth management firm.

There probably are some places that he can cut back in a budget of that size. But at this point he merely has to identify them and be ready to adjust his spending should the market fall in the future.

I really wanted to say "Spending $700K on a $15 million portfolio? You can't afford to retire!" :) But obviously he can.

Congratulations to OP on building such a success!
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retiredjg
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Re: Just sold my business need help with investments

Post by retiredjg »

tunataxi wrote: Mon May 16, 2022 10:01 am Just wanted to update the thread. I had a great call with Jon Luskin and we went through all my holdings. I quit the Wealth Manager and am moving their portfolio to my brokerage account and investing in a simple 3 fund portfolio.
He had a lot of other good advice and I'll continue to use him on an hourly basis as needed.
Thanks for the update. Good decisions. :happy
smitcat
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Re: Just sold my business need help with investments

Post by smitcat »

wolf359 wrote: Mon May 16, 2022 10:43 am
retiredjg wrote: Sat May 07, 2022 8:46 am Welcome to the forum. :happy

You've done well and I think it is good to consider moving your money.I don't think you can actually afford to keep your wealth management company. Your $15 million is a nice sum, but is not enough to sustain $700k expenses each year. And if you are paying .7% to them, you will have even less to spend. So reducing your investment expenses should be high on your list of priorities.

If you plan to use anyone, I suggest Vanguard. Their expenses are much lower and the portfolio should be very portable (if you don't use their new actively managed funds) when/if you decide to do it yourself.

You might want to list your holdings for suggestions if you are considering doing this yourself. In fact, I suggest you post your information in the format we use to answer portfolio questions when/if you are ready. See the link at the bottom of this message for how to do that.

Some things to consider. If your $700k annual expense number does not include taxes, you need to include them. Unless your other accounts are large, you don't have enough money to sustain $700k expenses each year at your age. You certainly have plenty of money, but at first look, you may be planning to spend more than you can actually afford.
+1

I agree with all your advice.

Based on his new figures, he actually has greater than $18 million, which is enough to sustain that $700k expenses each year. This is especially true if his expenses get trimmed by $100K by dropping his wealth management firm.

There probably are some places that he can cut back in a budget of that size. But at this point he merely has to identify them and be ready to adjust his spending should the market fall in the future.

I really wanted to say "Spending $700K on a $15 million portfolio? You can't afford to retire!" :) But obviously he can.

Congratulations to OP on building such a success!

"Based on his new figures, he actually has greater than $18 million, which is enough to sustain that $700k expenses each year."
I do not understand the math...he is 45, has kids, a large mortgage, and will have taxes on the draw.
How does this math work?
wolf359
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Re: Just sold my business need help with investments

Post by wolf359 »

smitcat wrote: Mon May 16, 2022 11:15 am

"Based on his new figures, he actually has greater than $18 million, which is enough to sustain that $700k expenses each year."
I do not understand the math...he is 45, has kids, a large mortgage, and will have taxes on the draw.
How does this math work?
Using the 4% rule, $18 million will support a $700K withdrawal rate for at least 30 years. I'm assuming his spend won't stay $700K for 30 years, let alone the rest of his life.

For example:
1) His kids will leave the house and already have half a million in 529 plans to cover college. The expenses will drop when the kids leave home.
2) His mortgage is optional. He didn't provide figures, but his P&I is probably about 6K/mo. If he pays off the mortgage outright, his invested net worth drops by $1.5M, but his expenses drop by $72K. I'm not including real estate taxes and insurance in that estimate, because they will remain part of his expenses whether he pays off the mortgage or not.
3) He's already dropped $100K/yr just by dropping his wealth manager.
4) People are forgetting that 4% is a rule of thumb. It's not a suicide pact. If you start running into a adverse sequence of returns risk that would result in running out of money 15 years from now unless you adjust your spending, most people would... ...adjust their spending. And with an initial budget of $700K, there is room to adjust. If you have $1M and you're trying to survive on $40K/year at age 45, yes, that's risky and you need a lower SWR. But $18M with an initial budget of $700K? On a budget of $40K/year, it's hard to make big cutbacks. With $700K, maybe you fly first class instead of using NetJets? Or instead of going to Europe for vacation 5 times this year, you only go twice?

At this wealth level, 4% is reasonable. The point of the rule is to estimate if he's in the ballpark and has enough to retire. He does. The rest is details.

And if he manages to reduce spending to $500K (like he stated), then his SWR is at 2.7%. And even lower when the kids get out of school.

An annual spend of $500K/year won't be barebones, either.
smitcat
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Re: Just sold my business need help with investments

Post by smitcat »

wolf359 wrote: Mon May 16, 2022 1:57 pm
smitcat wrote: Mon May 16, 2022 11:15 am

"Based on his new figures, he actually has greater than $18 million, which is enough to sustain that $700k expenses each year."
I do not understand the math...he is 45, has kids, a large mortgage, and will have taxes on the draw.
How does this math work?
Using the 4% rule, $18 million will support a $700K withdrawal rate for at least 30 years. I'm assuming his spend won't stay $700K for 30 years, let alone the rest of his life.

For example:
1) His kids will leave the house and already have half a million in 529 plans to cover college. The expenses will drop when the kids leave home.
2) His mortgage is optional. He didn't provide figures, but his P&I is probably about 6K/mo. If he pays off the mortgage outright, his invested net worth drops by $1.5M, but his expenses drop by $72K. I'm not including real estate taxes and insurance in that estimate, because they will remain part of his expenses whether he pays off the mortgage or not.
3) He's already dropped $100K/yr just by dropping his wealth manager.
4) People are forgetting that 4% is a rule of thumb. It's not a suicide pact. If you start running into a adverse sequence of returns risk that would result in running out of money 15 years from now unless you adjust your spending, most people would... ...adjust their spending. And with an initial budget of $700K, there is room to adjust. If you have $1M and you're trying to survive on $40K/year at age 45, yes, that's risky and you need a lower SWR. But $18M with an initial budget of $700K? On a budget of $40K/year, it's hard to make big cutbacks. With $700K, maybe you fly first class instead of using NetJets? Or instead of going to Europe for vacation 5 times this year, you only go twice?

At this wealth level, 4% is reasonable. The point of the rule is to estimate if he's in the ballpark and has enough to retire. He does. The rest is details.

And if he manages to reduce spending to $500K (like he stated), then his SWR is at 2.7%. And even lower when the kids get out of school.

An annual spend of $500K/year won't be barebones, either.
So with these modifications then....
- 4% is not typically safe for anything near 45 years
- 4% would need to include taxes which will be more than 20%
- we are assuming his expenses will go down in this example
- we assume that he will cut expenses as necessary if things don't work out

$500K per year might be closer than we think on a $700K draw after taxes.
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HMSVictory
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Re: Just sold my business need help with investments

Post by HMSVictory »

Its really hard to make it today on 18M investments but alas we have to struggle on.... :D

On a serious note congrats to you - you clearly are brilliant at building and managing businesses. Why don't you invest in yourself and do it again (Elon Musk seems to hit home run after home run with very few strike outs). Your personal ROI is going to be 50-100X what you can earn in mutual funds (or it could go to zero). Anyway since you have hit a home run here is what I would do:

1) Pay off your 1.5M mortgage today - I don't care what the interest rate is - be debt free. Get rid of that negative bond.
2) Come up with a realistic budget - I think you can almost do $700k a year but I'd be more comfortable with around $500k.
3) Develop a IPS which will list your preferred AA - I think you got it right on with 80/20
4) Move all the funds from the wealth manager immediately before you have tax gains (or losses - a good thing) that will make moving difficult later
5) Vanguard will give you a free financial plan as a Flagship select investor ($5M plus)
6) I would do a big trip or make a purchase to commemorate this achievement - mark the moment!

You will need a lot of discipline to not monitor the markets daily and not obsess about intra-year movements. Make sure you put in your IPS a day of the year for re balancing or making adjustments and do nothing all the other 364 days (nothing). Good luck.
Stay the course!
Parkinglotracer
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Re: Just sold my business need help with investments

Post by Parkinglotracer »

Congrats. Can you tell us what kind of business you sold? That is exciting. What will you do to stay busy? I retired last year for a second time at age 60 and played my first game of pickle ball at the Y today in upstate ny. Trying not to stay too busy. Lol.
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HMSVictory
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Re: Just sold my business need help with investments

Post by HMSVictory »

wolf359 wrote: Mon May 16, 2022 1:57 pm 4) People are forgetting that 4% is a rule of thumb. It's not a suicide pact. If you start running into a adverse sequence of returns risk that would result in running out of money 15 years from now unless you adjust your spending, most people would... ...adjust their spending.
This is 100% true as you are going along on your retirement journey if the storm clouds roll in you don't just blindly keep withdrawing 4% plus inflation every year and you have to tighten the belt.

At some point you may have to go to rice and beans and only live on like $500-600k a year! The horror! Good for him! :sharebeer
Stay the course!
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