Guidance required on separately managed accounts


A

anandsekar

Hi All,

I am new to investing and my financial advisor suggested Curian a
separately managed account may benefit me more than mutual funds. Any
advise, guidance and insight about separately managed accounts would be
very
helpful.

Thanks
anand
 
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J

joetaxpayer

Hi All,

I am new to investing and my financial advisor suggested Curian a
separately managed account may benefit me more than mutual funds. Any
advise, guidance and insight about separately managed accounts would be
very
helpful.

Thanks
anand
I smell high fees. A high expense product you will pay someone
handsomely to sell you. A Google of Curian led me to their web page, and
it says that they are a division of Jackson National Life Insurance.
Spend more time with this advisor and I'm thinking you're going to walk
away with a variable annuity.

Read the books - http://www.joetaxpayer.com/book.html

Learn about asset allocation -
http://home.earthlink.net/~elle_navorski/id8.html

And understand that excess fees over the long term are a growth killer.
JOE
 
W

wyu

I went to Curian's website and looked through their literature. The
idea looks to be in exchange for higher fees (typical +2%), you might
sleep better at night knowing professionals are managing your money. My
personal opinion: the products/services offered aren't that unique --
they sound like target funds except your money is kept separate from
other shareholders.
 
W

Will Trice

joetaxpayer said:
(e-mail address removed) wrote:
I smell high fees. A high expense product you will pay someone
handsomely to sell you. A Google of Curian led me to their web page, and
it says that they are a division of Jackson National Life Insurance.
Spend more time with this advisor and I'm thinking you're going to walk
away with a variable annuity.
Non-insurance-selling financial advisors also pitch Curian. In fact,
just such a pitch was the impetus for me to participate in this newsgroup.

I received a full workup from an FP suggesting Curian. After filling
out all the survey material, I was classed as a "Very Aggressive"
investor with a risk tolerance score of 95 out of 100. So far so good.

The main selling point of their plan was that I would get a better
return net of expenses, despite the fact that the wrap fee they wanted
to charge me was 2.4%, because of their great team of investment
managers. Their fee was supposedly inclusive of all costs including
trading costs and such that are not reported by mutual funds within
their expense ratio. So they worked up the costs of the mutual funds I
was holding at the time to show me what I was really paying. 2 out of
my three funds were still less expensive than Curian's wrap rate. Hmm...

I also received a target asset allocation plan that was optimized for my
risk tolerance. Their allocation plan, not surprisingly, was radically
different than the allocation I had at the time (and probably now as
well, I don't allocate intentionally). But if you took most of the
blend allocation of the S&P 500 (when looking at a 9-cell asset
allocation matrix a la Morningstar), divided it evenly, and plopped one
half into the growth cells and one half into the value cells, while
maintaining the allocations based on company size, you got my
recommended asset allocation. That is, pretty durn near the S&P 500,
except with very little of the blend category. This made me a bit
nervous - paying 2.4% to get a closet S&P 500 index fund.

But maybe my account would fare better than the mutual funds I held at
the time, net of expenses. After all, I did have one fund that had
higher expenses, right? Well, Curian projected my future returns using
their allocation and managers, before expenses, at 9%. They projected
the expected return of my existing mutual fund portfolio at 12%. After
expenses, even my high expense mutual fund was projected to stomp their
account. Why would I use them? I didn't.

That was only two years ago and I don't know how their exact allocation
performed, but my portfolio has stomped the S&P 500 since I received
their pitch. And I measure the performance of my portfolio *after
expenses*.

YMMV,
-Will
 
J

joetaxpayer

Will said:
The main selling point of their plan was that I would get a better
return net of expenses, despite the fact that the wrap fee they wanted
to charge me was 2.4%, because of their great team of investment
managers.
-Will
So my instinct was right? I don't begrudge the 1% planners their fees.
But it seems to me that given the fact that fewer than half of any
manager can beat the average (50% should, but after trading expenses, it
would have to be less) that a 2.4% drag would shift the chances of
matching market returns to something less than 45%, and over time, less
than that.
JOE
 
T

TB

I am new to investing and my financial advisor suggested Curian a
separately managed account may benefit me more than mutual funds. Any
advise, guidance and insight about separately managed accounts would be
very
helpful
Anand, I'm reposting something I wrote about a year ago...

I had a client come in with a small Curian account, close to the
minimums. To me there was really no point...it didn't look any different
than a mutual fund divvied up with software.

And it had really high trading activity with large numbers of stocks, in
tiny trade sizes (a couple shares each - for example, buy 1.044 IBM,
sell 2.344 INTC, etc).

The 1099-B was, get this, 55 pages long. No kidding. I've never seen one
that long even on accounts 50X the size. If your clients get their taxes
done they should ask their accountant if they bill by transaction on
Schedule D, some charge say 5 bucks. So a dinky Curian account could
turn into a $2000 tax return.

But my main issue with them is that it really looked like a mutual
fund's portfolio. With all those trades the acccount basically did what
a comparable mutual fund would do, performance wise. Given the
relatively high fees I just don't see the point. Mutual funds do the
same thing and are so much easier to deal with.

That's my basic issue with the smaller SMAs, there's not much separate
about them, in terms of actual holdings and management.

(end snip)

I haven't looked at them since then but this has been my general
criticism of these "packaged" SMAs - they really just look like a mutual
fund divvied up using software, perhaps with some simple screens applied
for your specific account (eg "don't buy any tobacco stocks"). And with
the visibility of an SMA you see how much trading activity goes on. I'd
never seen a 1099-B that big before, and haven't since (1099-B is the
tax report showing all the "proceeds of brokerage transactions" for the
year. You report every transaction on Schedule D of your tax return and
the IRS computer matches your return with the 1099-B. When you own a
mutual fund this trading activity is internal to the fund.)

In the interest of disclosure: I'm an investment advisor so one might
argue that Curian is a competitor and my opinion isn't worth beans.

-Tad
 
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A

anandsekar

While searching the internet, I also came across this excellent article
which seems to summarize the contents of this thread.

http://money.cnn.com/magazines/moneymag/moneymag_archive/2004/03/01/362306/index.htm

thanks
anand
Anand, I'm reposting something I wrote about a year ago...

I had a client come in with a small Curian account, close to the
minimums. To me there was really no point...it didn't look any different
than a mutual fund divvied up with software.

And it had really high trading activity with large numbers of stocks, in
tiny trade sizes (a couple shares each - for example, buy 1.044 IBM,
sell 2.344 INTC, etc).

The 1099-B was, get this, 55 pages long. No kidding. I've never seen one
that long even on accounts 50X the size. If your clients get their taxes
done they should ask their accountant if they bill by transaction on
Schedule D, some charge say 5 bucks. So a dinky Curian account could
turn into a $2000 tax return.

But my main issue with them is that it really looked like a mutual
fund's portfolio. With all those trades the acccount basically did what
a comparable mutual fund would do, performance wise. Given the
relatively high fees I just don't see the point. Mutual funds do the
same thing and are so much easier to deal with.

That's my basic issue with the smaller SMAs, there's not much separate
about them, in terms of actual holdings and management.

(end snip)

I haven't looked at them since then but this has been my general
criticism of these "packaged" SMAs - they really just look like a mutual
fund divvied up using software, perhaps with some simple screens applied
for your specific account (eg "don't buy any tobacco stocks"). And with
the visibility of an SMA you see how much trading activity goes on. I'd
never seen a 1099-B that big before, and haven't since (1099-B is the
tax report showing all the "proceeds of brokerage transactions" for the
year. You report every transaction on Schedule D of your tax return and
the IRS computer matches your return with the 1099-B. When you own a
mutual fund this trading activity is internal to the fund.)

In the interest of disclosure: I'm an investment advisor so one might
argue that Curian is a competitor and my opinion isn't worth beans.

-Tad

======================================= MODERATOR'S COMMENT:
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