GO WITH VANGUARD. DO NOT WRITE THAT JACK ASS A $6,000 CHECK. NEVER LET
THAT SALESMAN IN YOUR HOME AGAIN.

HW \"Skip\" Weldon wrote:
- quote -

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:KfP_b.86128$hR.1739872[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

That depends. Personally, I think the OP was trolling. My larger concern are
the ill-informed knee-jerk responses by those who have no idea what they are
talking about, and that attacks on First Command and their brokers is
uncalled for.

The plans are sold by face amount, which is the total of planned
investments. If memory serves, the largest plan face amounts are $1,800,000,
and can be larger if one extends the plan out to 25 years. The MOP assuming
the 9% sales and creation charge (heaped, at upwards of 50% first year) is
discounted for larger plans, just like an A Share.

The aggregate sales charge on $300 per month in a Fidelity Destiny I (O
share) contractual plan is less than A shares in The Investment Company of
America (3.3% vs. 5.75%, with a breakpoint at $25,000 lowering the A share
to 5%, and in the last year, lowered to 4.5% when the investments totaled
over $50,000). Here's the math: 50% of $300 times 12 = $1,800 divided by
$54,000 plan face amount = 3.33%.

NOBODY can successfully argue that these people are getting ripped off.

The Father of Financial Planning, Loren Dunton, was in favor of these plans,
as starter investments for both new investors AND new brokers (read: 21 year
olds, entering the work force). He lamented that the lack of sales skills in
the financial planning community was the reason it hadn't taken off faster,
and the primary reason why so many FAIL in the craft. It takes years to make
a successful salesperson, and it takes a lot of effort to get young people
to save. These two needs create a vaccuum that a contractual plan fills
nicely. Good salespeople can buy all the planning talent they ever need for
a song (lots of unemployed CFPs these days, and their numbers are growing),
but the corollary doesn't exist -- good planners who can't sell can't afford
to hire good salespeople.

I have suggested to home office executives that if they want to recruit 22
year old recent college graduates, and groom them for long term success in
financial services, then teach them how to better serve their natural market
(which is ignored). A contractual plan would be the a good step on the right
direction. New investers at those ages predominantly need to be SOLD on the
idea that they need to start saving today, and salespeople can't make a
living selling $50 per month A Shares, but they earn a decent living selling
contractual plans. Considering the time and effort required to persuade
young people to start saving, and the long term societal benefits of
fostering and nuturing this habit, the heaped commission structure would be
a godsend for both parties. Fee-only is NON-existent in this market (this
isn't likely to change much), and fee-based is currently impractical, and A
shares have limited profitability. In these markets, contractual plans make
sense.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Brent D. Gardner, ChFC" <bgardner20[at]cox.net> wrote in message
news:OVN_b.112$Bz3.8[at]okepread05...
- quote -

The OP was planning to invest $1000 per month. Is this the kind of newbie
investor that makes this kind of plan worthwhile?

Elizabeth Richardson

"Sandra Loosemore" <sandra[at]frogsonice.com> wrote in message
news:m3brnsd27l.fsf[at]dartfrog.localdomain...
- quote -

You did not qualify your opinion with how you compared the funds, so I'm
going to give you a quick lesson here: Because of the nature of contractual
plans, the ONLY valid comparison is an actual historical hypo using the ONLY
method of purchase -- dollar cost averaging over time periods of 10, 15 and
25 years.

- quote -

Incorrect. As Mark pointed out, this information is public, and accessible.

- quote -

Fee-based = commissions + fees. 99% of advisors who accept fees ALSO accept
commissions (this fact is verifiable).

Fee-only = no commissions

There are only about 1,000 or so members of NAPFA, and NONE of them are
calling on enlisted personell at military installations worldwide. Most of
them limit their practice to an absurdly small number of clients, mostly
with a lot more than the minimum mentioned below.

If one needs help, and they rule out commissions, they are going to need
$100,000 or more just to open an account, at the low end. The larger
fee-only firms require $5,000,000+ in liquid investments before they will
consider an engagement.

For the beginning investor who doesn't know item one about investments, and
who has neither the time or the desire to learn what is necessary to do a
mediocre job on their own, that leaves mostly commission based advisors
(including those that are fee-based, which is just about everybody). They
could opt for an hourly planner, but with the typical planner charging in
the neighborhood of $100 an hour, anyone who can do math can quickly
determine that the best value isn't always going to be fees over
commissions.

For example:

Hourly planner [at] $100 per hour. Initial engagement, including minimum fact
finding, suitabilty determintion (risk profile, risk capacity), and written
recommendations is going to take at least two, possible three, hours. I'll
leave it at $200. Annual reviews, at an hour a pop, are another $100.

On the other hand, the client who only has $50 per month to invest isn't
likely to shell out the first four months to the advisor, and the hourly
advisor isn't likely to accept payment plans for hourly work already
completed. This alone rules out fees for the entry level and modest means
investor. Round figures, fees and commissions at this level are comparable
the first year, but in years two and later, the commissioned based product
is going to do better, because the hourly planner is simply too expensive
for annual reviews for someone saving $600 per year. An hourly planner in
this market is like paying a 16% load, level for life, and that's almost
DOUBLE what the contractual plan charges.

Out of $50 sent to Fidelity Destiny I, the broker/dealer is going to receive
~$22, for the first twelve months (Fido keeps some of those sales and
creation charges). The registered rep (RR), at a 50% payout, is going to get
$11 per month, for the next 12 months. The time required for the RR to
complete the sale, from start to finish, isn't likely to be much different
than the hourly planner. While time varies from client to client, on
average, a typical first sale of a systematic accumulation plan into a
mutual fund is going to take anywhere from one to three hours, taking place
in one, or several, meetings - and not everyone buys.

If one looks at the actual costs of doing business and the profitability of
the neophyte investor or modest means investor, the economics of fee-only
investing to not work out. There is a reason why fee-based advisors exist --
PRIMARILY because mutual funds do not pay any sales charges at $1 million+
in asset levels, either in lump sums, or under rights of accumulation, due
to break points. If one examines the largest, most well established fee-only
firms (i.e., First Northern, Bessemer), one finds the average fee on their
entire book is 65-75 basis points. On the other hand, a commission ONLY
broker is going to average 25 basis points on the same assets, if held in
mutual funds. One cannot compete with one-third the revenue, so the
commissioned broker adds fees to his matrix, and now the field is more
competitive.

At the entry level, there just aren't any fee-only planners making sales
calls, and they aren't targeting the military -- specifically, E-1s through
E-4s who are grossing a grand a month, with very modest means to invest.
Commissions allow for the financing of advice. Contractual plans allow an
advisor to profitably serve the needs of people in this market better than
the broker from a major wirehouse who is selling A shares.

The fact that First Command serves this niche, and few others bother, shows
that the free hand of the markeplace has performed its magic by matching
buyers with sellers, creating the mutually beneficial relationship necessary
for capitalism to function. This fact cannot be refuted.

I've worked this entry level enlisted market myself, and there aren't very
many people targeting that market, and only one that has successfully served
them for half a century. If one spends a few months visiting with off duty
soldiers in barracks around the world, they will notice two things quickly:

1. One company has a regular presence, and is effectively serving this
market very well.
2. The company is NOT Vanguard (or, substitute any other direct marketed
investment in their place), and there are NO fee-only planners spending
hours with an E-4 about how to set up an IRA in a company recreation hall.

The bottom line: If one wants to serve this market for FREE, I say, go right
ahead. I've said this for years, and I have yet to hear of anybody taking
the first step in that direction. Clearly, the company in question has
established their bonafides with the local commanders, as well as those in
Mecca, and they have performed their services better than others, because
they are virtually a lone player in their market.

But my challenge stands: If one thinks they can do a better job, for a
lower cost, the numbers to base commanders all over the world are in the
phone book. Start dialing!

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Sandra Loosemore" <sandra[at]frogsonice.com> wrote in message
news:m3brnsd27l.fsf[at]dartfrog.localdomain...
- quote -

http://quicktake.morningstar.com/Fun...A&Symbol=FDETX
- quote -

Not at all. Fidelity partitions its web site into funds that are sold
directly, and funds that are sold through advisors. On its home page,
http://www.fidelity.com, you'll find a link for advisors, that takes you to
https://advisor.fidelity.com/cgi-bin/client.

Here you will find information on the Fidelity Advisor Funds, and on the
Fidelity Destiny Funds. This includes prospectuses, annual reports,
pricing, performance information.

Fidelity is great with the amount of information it provides on its web
sites, about all its funds.
--
Mark Freeland
nBeOwXs[at]pacbell.net

They are not planners, they are salesmen. When they talk about return to
you, do they do it on an after expenses basis? I doubt it.

Also ask them for their ADV, part 2. Because you probably haven't been given
it yet.

"Doug" <anothername[at]access4less.net> wrote in message
news:1b3f4ae6.0402201926.621432b[at]posting.google.com...
- quote -

gindie[at]hotmail.com (gindie) writes:

- quote -

Thanks for the reference. After checking out the details, I can't
imagine anyone would really want to invest in this kind of plan.
Besides the huge front-end load, it basically locks you in to a single
fund which isn't even all that remarkable as a fund, for 25 years!

Here's some info about the two Fidelity Destiny funds being hawked by
First Command:

http://quicktake.morningstar.com/Fun...A&Symbol=FDESX
http://quicktake.morningstar.com/Fun...A&Symbol=FDETX

Interestingly, Fidelity is too embarassed to publish any information
about these funds on their own web site! That should tell you
something is fishy right away.

My advice to the OP: pick a balanced portfolio of a few good no-load,
low-fee funds and set up your own monthly investment plan (you can
authorize an automatic direct transfer to the fund company from your
bank account). You don't have to be a rocket scientist to do this,
but if you really feel incapable of choosing a good fund or two,
consult a fee-based financial planner instead of someone who works on
commission.

-Sandra the cynic

After a few years, and under a different "advisor", they will switch
you to a "better" plan. Stick with Vanguard.

"John A. Weeks III" <john[at]johnweeks.com> wrote in message news:<200220041436442883%john[at]johnweeks.com> ...
- quote -

For a recent, informative article on First Command, go to
www.kiplinger.com and enter "First Command" in their Search window.
The name of the article is "All Loaded Up"

In article <t92c30dk1f0mmopmubshjjc9lj0s9efig7[at]4ax.com> , HW \"Skip\"
Weldon <skip5700removethis[at]hotmail.com> wrote:

- quote -

$6,000!?!?!?!? Just as a general rule, I am not going to pay any
financial company $6000 for anything, not unless it involves call
girls, and even then, they are going to have to have some pretty
significant assets. Even if you bought full front load funds that
cost 5% up front, you would have to put in $120,000 just to break
even here, which is 10 years. And it doesn't sound like you would
do something as silly as that anyway (buying loaded funds). Run!

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<t92c30dk1f0mmopmubshjjc9lj0s9efig7[at]4ax.com> ...
- quote -

a third alternative would be invest using netstock, whose fees are $4
per trade.

Each month you could buy $996 worth of stock and $4. Dividends would
be invested for free. Each month buy a different stock and after
about 12-18 months you'll have a portfolio which moves with the market
to some correllation
and more control of the investments at a lower cost.

a fourth alternative would be realize that it's OK to pay $80,000 in
fees if you have investments that worth something are much higher...

sounds like the $6000 is like closing cosats on a hoiuse, the longer
you own the house, the cheapoer the costs appear. If you ever need
this money in the next 3-5 years, the $6000 up front fee will be real
expensive. "Life happens".

In article <t92c30dk1f0mmopmubshjjc9lj0s9efig7[at]4ax.com> , "HW \"Skip\"
Weldon" <skip5700removethis[at]hotmail.com> wrote:

I would suggest that you get someone to check all the math here.

First, you need some reasonable assumption about the rate of return for
either investment form. It is not likely that you would accumulate 3.5
million dollars as that would require a 12% return on investment for the
entire 30 years. By my calculation the Vanguard investment would be
slightly ahead given the 12% return on investment.

It is more likely that a 5% return on investment would be achieved. It
makes sense to think about how much the return would exceed inflation
and 5% may be optimistic. Also, taxes need to be subtracted to achieve
a net gain.

Your example of the cost of the 0.23% fund fees on 3.5 million has a
decimal error. It is $8,050 instead of $80,500.

My calculation of the accumulated value after 30 years at 5% return is
$811,198 for the First Command Program. At 5% the First command is
slightly ahead of Vanguard after 30 years. The two programs are nearly
equal after 25 years. Higher returns rates favor Vanguard. Vanguard is
clearly ahead for anything less than 25 years.

I'm not a professional at this but a spread sheet model of the return is
close to correct. I did the calculations on a yearly basis and not a
monthly basis.

Dick


- quote -

- quote -

Is First Command the old USPA / IRA outfit?

The fund sounds like a contractual plan, perhaps Fidelity Destiny. Unless
they've changed something drastically, there are fund management fees every
year. The sales and creation charges in a contractual plan are heaped on the
front end, and over time, are often lower than the typical A Share,
especially with larger plan face amounts, but the fund manager still needs
to get paid every year.

There have been periods of time where contractual plans have beaten the
unmanaged index, by virtue of their design -- everyone dollar cost
averaging, long term commitments by investors. Once people pay the heaped
sales and creation charges, they tend to stick with the plan for the 10, 15,
or 25 years they committed to, often with superior results. There have been
periods where they trailed the DJIA or S&P 500, but the interesting thing is
that they keep trading places, back and forth, despite the maximum sales
charge allowed under the '40 Act. The real show stopper is when one runs a
long term historical hypo comparing the plan to an unmanaged index. I
haven't run one in several years, because I don't sell these anymore, but
the first time I ran one, I was shocked to see that an investor would have
more money in a contractual plan over 15 to 25 years, than if they had
invested the same dollars in the DJIA or S&P 500, despite the maximum sales
charge.

A typical fund manager has to manage two things -- the portfolio itself, and
cash flow. A contractual plan manager often keeps more invested, and less
in cash, because their cash flows are much more predictable.

While often poo poo'd by people who haven't spent any time helping people
switch from a consumption lifestyle to one of accumulation, contractual
plans have a niche, and it is one they have served very well. One of the
two most successful stock brokers in my home town was selling contractual
plans in the 1960s and 1970s, and he has a huge book of business now. He
has many affluent investors that first started out saving $100 or $300 per
month in a contractual plan over three decades ago. The founder of a large
broker/dealer that I know started selling contractual plans in the late
1940s, and he experienced the same results -- building a huge client base
that enjoyed an above average increase in net worth over time. Essentially,
these often forgotten plans tend to prove the axiom that the success or
failure of a savings plan isn't the return (or the fees), but the systematic
methodology of putting the money in.

I cannot speak to the suitability of a contractual plan on this forum,
because I don't know you. Generally speaking, these are for people who have
not developed the habit of saving to save, because they are a very poor
short term investment (virtually guaranteed to lose in the first year, with
a break even point several years into the future). The pain of a short-term
change is what often keeps people invested for the long term, instead of
saving to spend.

There's an article on the net written by the founding father of financial
planning, Loren Dunton, where he said that the most important skill a
financial planner can have is the ability to SELL a client -- persuading
them to take action TODAY -- be it investing today, or purchasing protection
products, or whatever change is required. His first personal experience
with a mutual fund salesperson was disappointing, because the salesperson
didn't know how to sell very well, and Mr. Dunton decided to keep spending
his income, even though he admitted he could have easily afforded the $100
per month investment proposed by the mutual fund salesperson. Many years
later, he pointed out that the $100 per month would be worth more than
$1,000,000 at the time he wrote the article. Mr. Dunton was disppointed
because if the mutual fund salesperson had been better at his job, he'd have
another million saved up.

The mutual fund he was offered? A contractual plan.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

The following post was returned to the sender because it was
cross-posted. Since it is on-topic, and we had the time, it is posted
below with appropriate headers changed. -Moderator

------------------------------------------------


Subject: Financial planner trying to sell me a systematic approach.
Vs. doing it myself with Vanguard 500 index fund with dollar cost
averaging.
From: saylo1234[at]aol.com (LovingPerson)


Dear all:

My wife and I are in a good situation. Our monthly income vs.
expense gives us a $3000 excess monthly (because we live frugally on a
$4500/month income and we have free housing with U.S. Air Force). We
met with a company call First Command. They do a lot of business with
military families. Their system is something interesting: You invest
a set amount (say, $1000, in our case) each month. Because the U.S.
market goes up and down, dollar cost averaging works well because
during low markets, your $1000 buys more shares. It simply takes a
disciplined approach to always put in $1000 no matter if the market is
up or down.

Now the real interesting part: Fee Structure. The service fees
for maintaining a fund with First Command is all paid up-front. So,
on a $1000/mon ($12,000 invested/year) plan, $6000 would be paid in
the first year in service fees. After the first year, however, NO
service fees will EVER be paid again. This means if the asset grows
to $3.5 million in 30 years, I would pay $0 in service fees. The guy
called it "expensive up front, cheap later."

I have a question about this: I currently have the NO_LOAD
Vanguard s+p 500 fund. It charges 0.23% annual fee and I think there
is no 12B-1 fee. I am thinking about doing the vanguard 500 on my own
and just put in $1000 a month for 30 years. The only problem I see
with this is that: it would be "cheap now, expensive later." ie, when
my account grows to 3.5 million in the 30th year, I would pay an
annual service fee of 0.23% which means $80,500 just for that year
(not to mention about $77,000 in the 29th year and 28th and 27th and
so on up the line). So, when put this way, doesn't it make the First
Command's $6000 service fee up front look like a god-send? [I am so
confused.]! My gut tells me there is more to the story, but the
numbers crunch out so much in favor of paying all the service charges
up-front. Even if you consider the opportunity cost of $6000 over 30
years, it is only $105,000 (based on 10% compounded annually). That
is still better than year after year of 0.23% on 3+ million dollars,
isn't it??? I AM SO LOST!!!

So, the question is: based on a disciplined 30 year plan, is it
really as the salesperson says: "No loads are cheap now, pay later;
Systematic approach is expensive now, cheap later?" Is it smarter for
me to go with the systemic approach? I have to admit that on paper,
it certainly looks enticing to not have to pay any service fees for
the rest of my life (ie because I pay the $6000 up front in the first
year).

Please help. I really need some advice and EDUCATION!. and
Second Opinion!


end copy----------------




-HW "Skip" Weldon
Columbia, SC