stevep001 wrote:1. Most of the profit in the bond business is in the pricing, not in the commission.
2. Hard to be properly diversified with individual bonds in a $200k portfolio.
3. Bond historical data is tougher to get than stock historical data.
phdbound2010 wrote: My real question is what should I do at this point. If the broker has much of the money in some variable annuity, is there much benefit in switching to a fee only planner? Anyone found themselves in a similar situation and had success getting the house cleaned up for a parent?
JW Nearly Retired wrote:phdbound2010 wrote: My real question is what should I do at this point. If the broker has much of the money in some variable annuity, is there much benefit in switching to a fee only planner? Anyone found themselves in a similar situation and had success getting the house cleaned up for a parent?
IMO, the real question is what can you do. Still working and adding to her $200k it would certainly benefit her to clean it up. If your Mom will get fully on board with cleaning it up then anything is doable. Her buy-in is the big hurdle. "Really liking" the advisor isn't a positive sign.
What does she have to say when she reads this thread?
Kevin M wrote:Maybe tell her this story. My Dad was sold some individual bonds at Schwab. My brothers and I inherited them. One was a GM bond, and when GM went through their bankruptcy (or whatever it was), I think I got about 30 cents or less on the dollar when I sold the bond, so about $3,000 for a bond my Dad paid $10,000 for. This is one big danger with individual bonds. It only takes one going bad to really hurt your returns.
She might also ask the broker how much she could get (net of fees) if she sold the bonds today. The answer might help her understand that she's been fleeced.
Ditto re: the annuities; after the broker tells her how much it's going to cost her to get out of them, perhaps she'll understand that there are some very negative aspects to these investments. The broker will have a great pitch about the tax benefits of the annuities, but perhaps you can help her understand that the tax benefits are unlikely to overcome the extra costs. Also help her understand the danger of investing in something that's almost impossible for most of us to understand.
Like others have said, this is a very bad place for your Mom to have her investments, and I would do everything feasible to get her to move everything to somewhere like Vanguard and maybe a bank or credit union (for CDs), and just invest in low-cost index funds and non-brokered CDs.
Bond funds are better than individual bonds for most retail investors, but non-brokered CDs can be even better in terms of risk and expected return.
Getting out of the annuities may be problematical; you will need to check the terms. You may be able to get out without surrender penalties after a period of time, like 10 years, but there still may be taxes and tax penalties. This is a sad thing about annuities--once they hook you, it's hard to get unhooked. You will have to calculate the tradeoff between paying the penalties/taxes and the lower long-term costs of the alternatives (like index funds).
denismurf wrote:Getting rid of the bonds now necessarily means selling them on the secondary market, where retail sellers really, really get the shaft. It could be that the shaft is so severe that your mom is better off just hanging on to the bonds until they mature.
Actually computing that comparison between selling now and holding on is beyond my pay grade, but I hope you get the idea.
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