Need help informing my father he is making a mistake

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clayr361
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Need help informing my father he is making a mistake

Post by clayr361 » Mon Jan 12, 2015 10:40 am

My father knows the basics about the markets and how they work etc.. He has recently invested some money with a local Merrill Lynch rep in my hometown. I am unsure of the amount he invested but it is probably close to $100K although the amount does not really matter for the problem at hand here. The ML rep talked him into investing in (i forget what name they give it) a group of 20 or so stocks. It is not a fund but the rep just buys and sells on his behalf. They have some sort of metrics that companies must meet etc. etc. and "someone is always looking at these companies to make sure they meet certain criteria which makes them exceptional stocks to invest in". He was told and showed a chart of how they have beat the market over the last "X" years which they may have (before fees and taxes) but we all know that spiel. He also invested some in bonds with the same guy and I believe he was at either 70% stocks 30% bonds or 80/20. He is 63 years old and recently retired.

The problems I see here. The allocation is too high for his age and situation. He should be at 60% stock 40% bonds or somewhere close to that in my opinion. The advisor has also recently told him that with interest rates supposedly rising later this year it will drive bond rates lower so he should get rid of his bonds and go strictly stocks. This is just crazy to think an advisor would tell him to go 100% stocks in his situation. Also the group of stocks that he is in probably not very diverse, I will try and get the list of stocks and update this post with that information later. The buying and selling is not very tax efficient, I am not sure on how long they hold individual stocks but I am sure most are triggering short term gains. On top of all that he pays the advisor 1% a year for his services. There are obviously more problems than I have listed here.

He is coming to my house this weekend and I want to talk to him about this situation. While I am no market expert, I follow the markets daily and have read many books including the latest Boggleheads guide to investing book. I want to talk him into switching the money over to a low cost vanguard mixed asset fund. I have been looking at VBIAX or VSMGX but would also like some other suggestions. I also need some advice on how to approach the situation and talk to him about this. We are not a family that talks about finances and investments or money all too much. He also probably does not think I know what I am talking about since I have no formal education in investing nor is that my current line of work. I am 28, an independent contractor and responsible for investing my own money and was screwed over by a ML rep in the past so I taught myself how and what to invest in. He has a lot of money sitting in cash, investing with this guy was kind of a test as he called it and if he makes money he may invest more. I am not worried about him going broke with this guy if the market were to crash/ pull back but he could definitely lose a good deal of money.

Any advice would be greatly appreciated here.

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Re: Need help informing my father he is making a mistake

Post by fposte » Mon Jan 12, 2015 10:54 am

In my experience, "You're making a mistake" is not an opening that inspires people, especially people who raised you who are still competent adults in their own right, to listen. And to play devil's advocate a little, if he's got so much money elsewhere you're not worried about the loss of this money, his portfolio isn't 100% stocks or anywhere near.

What I might do is open the conversation about investing, since you've gotten interested and he is too. I would bring up the issue of fees and commissions, since it's quite possible that's going to be a big issue with an account like the one you describe, and share what you're learning about their importance; I'd also talk about what you're thinking about risk and asset allocation and see how he's thinking about his own.

And I wouldn't necessarily consider the goal of the conversation to be for him to move from ML, unless he seems open to that possibility; just for the discussion to happen and for it maybe to influence some of his future decisions.

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Re: Need help informing my father he is making a mistake

Post by barnaclebob » Mon Jan 12, 2015 11:04 am

Your best bet may be to have a conversation about if he is satisfied with taking what the market gives. If he just says that he would be fine with that then you can bring up the costs of trying to beat the market with added downside risk. I think a lot of people just assume that high fees are part of the cost of doing business.

If he has money sitting in cash then 100% stocks may be appropriate given his entire situation. However, the reason the adviser gives for 100% stocks is terrible.

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Re: Need help informing my father he is making a mistake

Post by NoVa Lurker » Mon Jan 12, 2015 11:07 am

Yeah, I'd go even further than fposte.

You are almost certainly correct that your father is making a mistake (and probably a few mistakes, all at once). But why take a conversation with your father in a negative direction, unless there is an urgent need? This is not really your business - people waste money in all kinds of different ways. In the past, I made a few mistakes in offering unsolicited advice to older family members, and they have definitely made a point of avoiding all financial talk with me, ever since. Having learned from the experience, that is fine with me.

If your father asks for your advice, by all means, try to tactfully encourage him to pull his money out of what seems to be a 'higher-than-necessary-fees' investment. I would suggest giving him two other specific suggestions, one where the risk-return trade-off is approximately equal, but the fees are lower, and a second option where the risk allocation is more what you think is appropriate for his age (i.e., more bond heavy).

But in the grand scheme of things, as fposte suggested, if the loss of this money won't leave him destitute, then you don't need to be pushing unsolicited advice on him.

Instead, focus on discussing things you can both enjoy talking about.

mptfan
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Re: Need help informing my father he is making a mistake

Post by mptfan » Mon Jan 12, 2015 11:09 am

The first question is, did your father ask for your advice? If the answer is no, then stop. Do not do anything. It is not your money or your business. If he did ask for your advice, then give it and let him make his decision. It's not more complicated than that.
I eat risk for breakfast. :)

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cheese_breath
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Re: Need help informing my father he is making a mistake

Post by cheese_breath » Mon Jan 12, 2015 11:57 am

It's hard to convince someone who "does not think I know what I am talking about" that you know more than he does, and it's certainly not going to happen in a day or two. And making statements inferring his adviser wants him 100% in stocks when he has a lot of cash on the sidelines doesn't help.

So since he doesn't think you know anything, why not play on that? Ask him how his investments are doing and how they work (so you can learn). Be prepared to answer his responses with more questions (displaying your ignorance). And share your own ML experience with him and ask him what went wrong.
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clayr361
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Re: Need help informing my father he is making a mistake

Post by clayr361 » Mon Jan 12, 2015 12:15 pm

All good replies. I was not planning on confronting him and telling him straight up your making a mistake. I was planning more to invoke conversation to point out the problems or issues I saw and suggest alternatives. Correct with him having cash elsewhere he is not 100% stocks but with this advisor(his only advisor) he is/will be, and he is using this experience to shape future investment. He has not asked for my advice but does inform me when he is meeting with the advisor and what the advisor tells him. I hadn't really thought about just not doing or saying anything about the situation. I guess its just hard knowing the situation and knowing mistakes are being made and letting them happen. Also me being in a similar situation previously and not liking the outcome and how angry it made me, I do not want him to go through the same thing. Asking him how his investments are doing would be a good idea but he doesn't know. I have asked him and he told me he hasn't gotten a statement yet and he is not one to use the internet to go and look it up. But then again suggesting a lower stock % and him acting upon it and missing out on some potential gains if he had stayed with the advisor would backfire on me.

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Re: Need help informing my father he is making a mistake

Post by mptfan » Mon Jan 12, 2015 12:19 pm

clayr361 wrote:I hadn't really thought about just not doing or saying anything about the situation.

You should.
I eat risk for breakfast. :)

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Re: Need help informing my father he is making a mistake

Post by investor » Mon Jan 12, 2015 12:19 pm

mptfan wrote:The first question is, did your father ask for your advice? If the answer is no, then stop. Do not do anything. It is not your money or your business. If he did ask for your advice, then give it and let him make his decision. It's not more complicated than that.



+1

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Re: Need help informing my father he is making a mistake

Post by InvestorNewb » Mon Jan 12, 2015 12:23 pm

investor wrote:
mptfan wrote:The first question is, did your father ask for your advice? If the answer is no, then stop. Do not do anything. It is not your money or your business. If he did ask for your advice, then give it and let him make his decision. It's not more complicated than that.



+1

investor

I'm not sure that I agree with this. Did you ask for advice every time it was given to you? My guess is not...

We can still act on good advice even though we did not ask for it.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: Need help informing my father he is making a mistake

Post by derosa » Mon Jan 12, 2015 12:40 pm

1. It certainly doesn't appear that advise was asked for on the part of the father.
2. His whole portfolio is not known so we have no idea where this amount fits in the larger scheme of things.
3. He has done something right to be able to retire at his age AND he is not asking you for money or to move in with you from what you have written,

Now if you want to talk about investing go right ahead. But all you should talk about is what you are doing. And how that has worked for you.

But to be 28 and a know at all telling your father what to do and why? Gee I am not sure that is a good thing going forward. His response could easily be - well if you are so smart why aren't you rich? - and there you are.

So sit around and chat for 10 minutes about markets and investing and whatever while having a beer. And if he doesn't want to talk about it - time to move on to "how about those replays?"

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Re: Need help informing my father he is making a mistake

Post by staythecourse » Mon Jan 12, 2015 12:50 pm

The funny thing about life is the right answer is not always the decision to be done.

You may be completely right with your advice, but that doesn't mean you should pursue it. Folks, I am sure you included, do not like being told they are making a mistake unless they are asking for advice (even then folks usually just ask because they want you to agree with them and not to actually give real advice). It is human nature that it will not be well received. Even less when you are much younger then the other person and even less when you are their child. Many parents like to treat their kids as if they are still playing in the sandbox no matter how successful they are.

So taking all that into account the chances of this conversation going well is little to none. I agree with casually talking about the markets or investing and see where it goes. If he doesn't bite then leave it alone.

Good luck.
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Re: Need help informing my father he is making a mistake

Post by a » Mon Jan 12, 2015 12:51 pm

clayr361 wrote:Also me being in a similar situation previously and not liking the outcome and how angry it made me, I do not want him to go through the same thing.
I don't see what's wrong with saying this.

It's perfectly honest to say you're concerned
about his Merrill Lynch investments and then to
tell your story as the reason why. I would then
let him have the last word no matter how much
it raises your bristles and then change topics.
The point is to plant the seed in his mind.

Perhaps the best approach would be to preface
with:

"I know you have done uncountably many things
for me in the past (raising me), and I am only
able to reason things and be free to work and
make decisions because of the life you gave me.
I can't help but feel concerned about.."

livesoft
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Re: Need help informing my father he is making a mistake

Post by livesoft » Mon Jan 12, 2015 12:56 pm

Try this tactic instead:

Ask your father for advice. Tell him you have heard about an outfit called Vanguard and that you are investing your money with them into index funds. Ask him if he thinks there is a better way for you to invest. He may or may not suggest something. If he does suggest something, then say something like, "Thanks, I'll have to do some research on that. Would you like to help me do the research?"
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Re: Need help informing my father he is making a mistake

Post by Fallible » Mon Jan 12, 2015 1:09 pm

derosa wrote:1. It certainly doesn't appear that advise was asked for on the part of the father.
2. His whole portfolio is not known so we have no idea where this amount fits in the larger scheme of things.
3. He has done something right to be able to retire at his age AND he is not asking you for money or to move in with you from what you have written,
...


Good points, especially No. 2 (for those of us trying to properly advise with limited information).

OP, if you do raise the subject, focus on how you invest and keep costs low to keep more of your return. I suspect your father, having known you all his life, will understand what you're really trying to do. After that, it's up to him to end the conversation, change the subject, whatever.
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investor1
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Re: Need help informing my father he is making a mistake

Post by investor1 » Mon Jan 12, 2015 1:11 pm

Give him your copy of The Boglehead's Guide To Investing. Have follow up conversations with him later.

By all means, try to educate him, but realize that it is his money and his decision to make. Not yours. Provide him with education and encouragement, show him what you are doing, but let him make his own decisions.

auggiedoggies
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Re: Need help informing my father he is making a mistake

Post by auggiedoggies » Mon Jan 12, 2015 1:28 pm

To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction? Just because he's older than you and is able to retire doesn't necessarily mean that he has any idea about investing.

Obviously, I think the conversation needs to be approached in a tactful and careful way, but to simply say that he should just leave it alone seems shortsighted to me. Maybe it's because I'm younger, and have been thinking about having a similar conversation with my mother, perhaps that skews my thinking...

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Re: Need help informing my father he is making a mistake

Post by FelixTheCat » Mon Jan 12, 2015 1:36 pm

I only listen to people that walk-the-walk. So I would show him your Boglehead portfolio. Tell him about your low costs, asset allocation and your returns.
Last edited by FelixTheCat on Mon Jan 12, 2015 1:44 pm, edited 1 time in total.
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Re: Need help informing my father he is making a mistake

Post by gwrvmd » Mon Jan 12, 2015 1:37 pm

Clayr361....I think you are right about what you are trying to do but you have age against you:

"No one will take financial advise from someone whose bottom they have powdered"....Dave Ramsey
Disciple of John Neff

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Re: Need help informing my father he is making a mistake

Post by Fallible » Mon Jan 12, 2015 1:49 pm

auggiedoggies wrote:To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction? Just because he's older than you and is able to retire doesn't necessarily mean that he has any idea about investing.

Obviously, I think the conversation needs to be approached in a tactful and careful way, but to simply say that he should just leave it alone seems shortsighted to me. Maybe it's because I'm younger, and have been thinking about having a similar conversation with my mother, perhaps that skews my thinking...


The thing is, money is an enormously emotional matter. As WSJ columnist, author, and Boglehead Jason Zweig has written, "When you win, lose, or risk money, you stir up some of the most profound emotions a human being can ever feel." Add to that the deep, emotional ties of parents and children and other family relationships and, well, you get the picture.

I've had those talks with my parents and to no avail and so went my own way. Now, as a retiree, even when friends or relatives ask for advice, I say only that I mainly index to keep costs low and keep more of my returns.
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Re: Need help informing my father he is making a mistake

Post by mptfan » Mon Jan 12, 2015 1:50 pm

InvestorNewb wrote:
investor wrote:
mptfan wrote:The first question is, did your father ask for your advice? If the answer is no, then stop. Do not do anything. It is not your money or your business. If he did ask for your advice, then give it and let him make his decision. It's not more complicated than that.

+1
investor

I'm not sure that I agree with this. Did you ask for advice every time it was given to you? My guess is not...

We can still act on good advice even though we did not ask for it.

Money is a very sensitive subject for most people. In polite society, it is considered rude to even broach the subject. So, in my opinion, telling someone that they are making a mistake with their own money, without being asked, is a mistake in itself. I also think that it is unlikely that a father will take money advice from a son.
I eat risk for breakfast. :)

clayr361
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Re: Need help informing my father he is making a mistake

Post by clayr361 » Mon Jan 12, 2015 2:26 pm

auggiedoggies wrote:To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction? Just because he's older than you and is able to retire doesn't necessarily mean that he has any idea about investing.

Obviously, I think the conversation needs to be approached in a tactful and careful way, but to simply say that he should just leave it alone seems shortsighted to me. Maybe it's because I'm younger, and have been thinking about having a similar conversation with my mother, perhaps that skews my thinking...


My thoughts exactly. I don't know if it is different now than it used to be or if I am just different but I do not care where/ who advice comes from or what it is about. If there is a different or better way of doing things I want to know about it. That is why I read books, articles, the news... The family part aside how do I know one of the books I am reading and taking advice from was not written by someone 10 years younger than me? There are many younger people out there who are very successful, does age make them less knowledgeable? Or is it the amount of money and success someone has that adds credence to their advice?

I understand the family argument some are making and somewhat agree, somewhat disagree. I also think it depends on your relationship with said family member whether or not they will take the advice or even want to talk about it. The age argument is flawed in my opinion.

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Re: Need help informing my father he is making a mistake

Post by barnaclebob » Mon Jan 12, 2015 2:35 pm

I think most of the "don't say anything" camp says to keep quiet because people take money decisions and mistakes personally (as they should) and people don't like admitting they have made a mistake and will attack the messenger to avoid doing so. Couple this with the fact that many beliefs that a professional has to be worth something and that investing is complicated and you have the recipe for a fight.

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Re: Need help informing my father he is making a mistake

Post by Wellfleet » Mon Jan 12, 2015 2:55 pm

I had a good middle ground conversation with my father last week talking finance because I have no idea what his situation is. He is a self employed builder so no employer IRA. Fortunately he appears to have been advised by two closet bogleheads over the years.

I started talking about my tax situation which changed in 2014 due to our baby and how confusing the child care tax breaks work...the deduction versus the credit. I then segued to IRA contributions etc...which led to how my portfolio is constructed. I talked about index funds, where I invest etc. then said what about you?

No clear picture but it sounds like he has invested something in a Vanguard domestic mid cap index. I talked about Mr. Bogle versus the boglehead debate about American versus world allocation and said there was no consensus.

That was it for the night but I thought it was a good start.

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Re: Need help informing my father he is making a mistake

Post by roymeo » Mon Jan 12, 2015 3:07 pm

Different families have different ways of dealing with money....while it's appropriate to point that out so people are examining whether this is an 'open' topic in their family, there's such a variance between different families that the absolutists of any opinion tend to overdo it.
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Re: Need help informing my father he is making a mistake

Post by auggiedoggies » Mon Jan 12, 2015 3:11 pm

Fallible wrote:
auggiedoggies wrote:To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction? Just because he's older than you and is able to retire doesn't necessarily mean that he has any idea about investing.

Obviously, I think the conversation needs to be approached in a tactful and careful way, but to simply say that he should just leave it alone seems shortsighted to me. Maybe it's because I'm younger, and have been thinking about having a similar conversation with my mother, perhaps that skews my thinking...


The thing is, money is an enormously emotional matter. As WSJ columnist, author, and Boglehead Jason Zweig has written, "When you win, lose, or risk money, you stir up some of the most profound emotions a human being can ever feel." Add to that the deep, emotional ties of parents and children and other family relationships and, well, you get the picture.

I've had those talks with my parents and to no avail and so went my own way. Now, as a retiree, even when friends or relatives ask for advice, I say only that I mainly index to keep costs low and keep more of my returns.


Totally get your point, and I'm not necessarily disagreeing. Money talks can be extremely sensitive and emotional. My point is, shouldn't you feel some sort of responsibility to at least try? If you bring it up once, and you get shot down, that's fine. At least you can say you tried.

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Re: Need help informing my father he is making a mistake

Post by fposte » Mon Jan 12, 2015 3:26 pm

auggiedoggies wrote:To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction?


That could also justify every tedious lecture I've ever heard about why somebody should buy X car, be on X diet, or do X about pregnancy and child-rearing, though, and not only are people starting those conversations social menaces but they're tuned out completely by their audience.

I think it's fine for the OP to explore a conversation with his dad about investing--might be a nice way to start a long-term practice that's valuable to them both, since it's quite likely the OP could learn a thing or two from his old man as well and as Dad ages the OP might have more information about what kind of support or clarification Dad might be needing. But I think telling somebody who didn't ask you for advice what he's doing wrong on a matter he's already historically not comfortable about discussing isn't helpful because it's not going to effect the change you're looking for, and it's probably not going to help the relationship much either.

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Re: Need help informing my father he is making a mistake

Post by bigcmagor » Mon Jan 12, 2015 4:18 pm

" I also need some advice on how to approach the situation and talk to him about this. We are not a family that talks about finances and investments or money all too much."

Based on my experience, broaching the subject directly isn't going to improve this family dynamic. He's bought a basket of stocks, not a Ferrari. If I were you, I would focus the discussion entirely on the low-cost fund approach you prefer and let him ponder that on his own. If he feels that you don't trust him with his own investments, you probably won't be having more of these discussions.

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Re: Need help informing my father he is making a mistake

Post by nedsaid » Mon Jan 12, 2015 4:19 pm

This is why in recent years I have become more coy with family members about my personal finances. I used to be a lot more open about what I was doing personally. The reason being is there are always disagreements about what is best. I also don't want hard feelings over advice that doesn't pan out.

I remember posting on this forum that I infrequently rebalanced and had a rather relaxed and casual attitude about rebalancing. You rebalance when needed. I got pretty well beaten up with foam rubber hammers by those who follow this discipline more religiously. Another example are the "reefer madness" warnings that I got from other posters about owning individual stocks, which are about 15% of my retirement portfolio. So if I get a bit of flack on the forum from anonymous people, imagine what I could potentially get from family members. This isn't to say that I am doing it right and those who disagree are doing it wrong, I am just raising the point that openness about financial matters can create another source of conflict within a family. You will be disclosing to your father about what you are doing in your own finances.

It sounds like you have a good relationship with your father and that you can talk with him openly about personal finances. But remember, this is HIS money and ultimately if he is competent to make his own decisions, there isn't a lot you can do. From what you have said, I think you and your dad will have a fruitful discussion.

If it were me, I err on the side of openness. There will come a time when "my" money won't be mine anyway. At some point, I will go on to my reward. Openness within a family about financial issues is a very good thing, I just recognize that sometimes it is not possible.
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Re: Need help informing my father he is making a mistake

Post by Aptenodytes » Mon Jan 12, 2015 4:25 pm

livesoft wrote:Try this tactic instead:

Ask your father for advice. Tell him you have heard about an outfit called Vanguard and that you are investing your money with them into index funds. Ask him if he thinks there is a better way for you to invest. He may or may not suggest something. If he does suggest something, then say something like, "Thanks, I'll have to do some research on that. Would you like to help me do the research?"

I like it, but in my experience hardly anyone actually wants to research the answers to questions. And of those that do, most are exceptionally prone to confirmation bias.

In practice, people are extremely selective in deciding where to do legitimate research to figure things out.

It is a wonder that anyone does anything right.

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Re: Need help informing my father he is making a mistake

Post by Fallible » Mon Jan 12, 2015 4:39 pm

auggiedoggies wrote:
Fallible wrote:
auggiedoggies wrote:To the people saying "if he didn't ask for your advice, don't give it to him", I must admit that line of thinking confuses me. If you have evidence and proof that there is a better option out there for someone whom you love and are close to (aka your father), then aren't you doing him a disservice by not offering up some advice, or trying to point him in the right direction? Just because he's older than you and is able to retire doesn't necessarily mean that he has any idea about investing.

Obviously, I think the conversation needs to be approached in a tactful and careful way, but to simply say that he should just leave it alone seems shortsighted to me. Maybe it's because I'm younger, and have been thinking about having a similar conversation with my mother, perhaps that skews my thinking...


The thing is, money is an enormously emotional matter. As WSJ columnist, author, and Boglehead Jason Zweig has written, "When you win, lose, or risk money, you stir up some of the most profound emotions a human being can ever feel." Add to that the deep, emotional ties of parents and children and other family relationships and, well, you get the picture.

I've had those talks with my parents and to no avail and so went my own way. Now, as a retiree, even when friends or relatives ask for advice, I say only that I mainly index to keep costs low and keep more of my returns.


Totally get your point, and I'm not necessarily disagreeing. Money talks can be extremely sensitive and emotional. My point is, shouldn't you feel some sort of responsibility to at least try? If you bring it up once, and you get shot down, that's fine. At least you can say you tried.


Yes, the OP certainly can try and I was not saying he shouldn't. In an earlier post, I said this:
"OP, if you do raise the subject, focus on how you invest and keep costs low to keep more of your return. I suspect your father, having known you all his life, will understand what you're really trying to do. After that, it's up to him to end the conversation, change the subject, whatever."

BTW, I saw your comment in a later post that made me chuckle because I think it could describe life in general, or at least certainly my life: "It is a wonder that anyone does anything right."
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CABob
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Re: Need help informing my father he is making a mistake

Post by CABob » Mon Jan 12, 2015 4:43 pm

The ML rep talked him into investing in (i forget what name they give it) a group of 20 or so stocks. It is not a fund but the rep just buys and sells on his behalf.

This sounds like a managed account and perhaps goes under other names also. The associated bad news is that the advisor is probably charging a percentage of assets under management (AUM). The good news it that the AUM fee probably covers all transaction costs.
There was another conversation on this forum from someone who wanted to close an account of this type and convert it to a Vanguard mutual fund account. The problem was with the bits and pieces of 20 or more individual stocks and the transaction costs and capital gains tax associated with selling the stocks.
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Rob5TCP
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Re: Need help informing my father he is making a mistake

Post by Rob5TCP » Mon Jan 12, 2015 4:50 pm

What about breaching the idea of a test:
maybe 1/2 his money with ML; and the other 1/2 with Van
and annually look at the differences in balance.
At the very least - setup a benchmark to compare what he real life
returns in the next year are to that benchmark
and maybe have that test show before/after expenses return.

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Re: Need help informing my father he is making a mistake

Post by bdpb » Mon Jan 12, 2015 7:15 pm

I'm with you 100%. Do whatever you can to turn him into a Boglehead.

I'm guessing you are college educated and certainly Boglehead educated. It's likely the ML guy is not college educated and certainly not Boglehead educated. He likely has only enough education to pass a certificate test. One that most Bogleheads could pass with minor help. He is a salesman and doesn't have your father's best interest at heart, like you clearly do. Of course, you already know this.

Start with, "Dad, you did a great job at educating me on things I didn't know about when raising me. Now let me educate you on things I am more knowledgeable about than you (and your ML 'professional')".

Good luck.

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Re: Need help informing my father he is making a mistake

Post by clayr361 » Mon Jan 12, 2015 7:29 pm

bdpb wrote:I'm with you 100%. Do whatever you can to turn him into a Boglehead.

I'm guessing you are college educated and certainly Boglehead educated. It's likely the ML guy is not college educated and certainly not Boglehead educated. He likely has only enough education to pass a certificate test. One that most Bogleheads could pass with minor help. He is a salesman and doesn't have your father's best interest at heart, like you clearly do. Of course, you already know this.

Start with, "Dad, you did a great job at educating me on things I didn't know about when raising me. Now let me educate you on things I am more knowledgeable about than you (and your ML 'professional')".

Good luck.


This is honestly what I thought most of the replies would have been to my original question. Thanks for the input. The ML advisor most likely cares about getting more accounts as quickly as possible than actually taking time to invest their money well. If I wasn't an honest Boglehead and got 1% annually for every dollar I managed that would be my goal. For all the comments with the age argument to it, the guy is only about 8 years older than me. He just has that ML name backing him up.

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Re: Need help informing my father he is making a mistake

Post by JLJL » Mon Jan 12, 2015 7:46 pm

With a bit of liquid courage I've said things to friends/family in the past, and maybe shouldn't have but it never went badly. Just don't be a jerk about it and make sure it is appropriate for your situation with your dad. For me with friends it has been them saying "I have a guy who is a friend of the family" and "has me in some target date stuff plus some emerging market stuff" and "really, you do it yourself?" at which point I say yes, I'm able to select my own target date fund for less than 0.2%, this kind of thing. I've encouraged my dad to take a different approach to purchasing a vehicle (some great adivice on these threads) rather than going in and paying sticker but it went nowhere - or so I thought. Then mom sent a note and told me dad had bought a car using that website I sent him. He bought it through emails getting dealers to bid against one another. A friend told me he finally looked into how much his "guy" was charging, and it was some kind of whopping 3 or 4% including front-end loads, etc. He didn't exactly say "thanks" - but he affirmed that he didn't hate me for speaking my mind about how I manage my personal finance. But I rarely bring up or push the issue.

I'm much more likely to have these converstions at happy hour. The end of happy hour actually.

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Re: Need help informing my father he is making a mistake

Post by rtw318 » Mon Jan 12, 2015 8:02 pm

Are you sure that all of these are indeed "errors" in the way your father is doing things, and not just your own feelings of "Well, I wouldn't do it that way, so it's wrong" ?? In my own family, this is a very important distinction to be made when "discussions" about finance/child rearing/cooking/whatever come up.

Like this statement (bolded emphasis mine): "The problems I see here. The allocation is too high for his age and situation. He should be at 60% stock 40% bonds or somewhere close to that in my opinion."

Asset allocation is an extremely personal issue that is something each person needs to figure out on their own. What he "should be" allocated to is, frankly, not for you to decide. Honestly, 70/30 could be just fine for his situation depending on his risk appetite. Besides, asset allocation is a nuanced topic that it might be better to table until you have a "first talk" about investing and retirement.

And when it comes to fees...For some folks, they are willing to pay for the convenience of being hands-off with managing their finances, maybe that describes your father? Paying someone for a service they want isn't an "error"....Be careful here since attacking "the Merrill Lynch rep" could easily be confused with attacking "your father's decision to invest in Merrill Lynch", which would quickly sour the discussion.

I'm not discouraging OP to avoid conversation...just spread it out over little bits here and there.

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Re: Need help informing my father he is making a mistake

Post by Wildebeest » Mon Jan 12, 2015 8:32 pm

livesoft wrote:Try this tactic instead:

Ask your father for advice. Tell him you have heard about an outfit called Vanguard and that you are investing your money with them into index funds. Ask him if he thinks there is a better way for you to invest. He may or may not suggest something. If he does suggest something, then say something like, "Thanks, I'll have to do some research on that. Would you like to help me do the research?"


This is a great strategy and I think Livesoft is humble by calling it a tactic.

Do not ever inform any body they have made a mistake, unless it will cost you or if you are their boss and even then be politcally correct about it and document and document or it will cost you.

If it is your father and your father is an idiot, only point out that he made a mistake if you are ready for him to disown you.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: Need help informing my father he is making a mistake

Post by davegreen10 » Mon Jan 12, 2015 8:46 pm

Hmm, perhaps ask him to join you for an hour consult on your own portfolio with a CFA who is hourly compensated. Plan ahead with the CFA that there will be ample leftover time on this prepaid hour to discuss your Dad's. This may give you the third party credibility you need.

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Re: Need help informing my father he is making a mistake

Post by caaaad » Mon Jan 12, 2015 9:02 pm

You should offer an opinion to him. It is your business and shows you care. Your post is poorly written and doesn't clearly reflect your concerns. if you just sit back and he jumps off a bridge you would feel worse. At least you tried.

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Re: Need help informing my father he is making a mistake

Post by tibbitts » Mon Jan 12, 2015 9:26 pm

The premise is wrong. You have no idea if investing with this allocation and with this adviser is a mistake for your father. It might be wrong for you, but might not be for your father. Your father isn't doing what you would choose to do. There have probably been a few times when you didn't do what your father wanted you to do, either.

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Re: Need help informing my father he is making a mistake

Post by leonard » Mon Jan 12, 2015 9:28 pm

It's interesting how most assume the father has raised a son he wouldn't trust for financial advice.

That said - I think livesoft's approach has the highest chance of achieving your goal.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Re: Need help informing my father he is making a mistake

Post by tibbitts » Mon Jan 12, 2015 9:35 pm

caaaad wrote:You should offer an opinion to him. It is your business and shows you care. Your post is poorly written and doesn't clearly reflect your concerns. if you just sit back and he jumps off a bridge you would feel worse. At least you tried.

Why is it the OP's business? People have been investing with ML forever, and if there were a correlation to jumping off bridges, I think we would have heard about it by now. Some of us may feel your father is taking a non-optimal approach, but it's a spectrum. ML might not be VG, but it isn't Madoff either.

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Re: Need help informing my father he is making a mistake

Post by leonard » Mon Jan 12, 2015 9:40 pm

tibbitts wrote:
caaaad wrote:You should offer an opinion to him. It is your business and shows you care. Your post is poorly written and doesn't clearly reflect your concerns. if you just sit back and he jumps off a bridge you would feel worse. At least you tried.

Why is it the OP's business? People have been investing with ML forever, and if there were a correlation to jumping off bridges, I think we would have heard about it by now. Some of us may feel your father is taking a non-optimal approach, but it's a spectrum. ML might not be VG, but it isn't Madoff either.


Was at ML for a while. It is pretty horrible. An intervention would have been welcome.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Re: Need help informing my father he is making a mistake

Post by tibbitts » Mon Jan 12, 2015 9:45 pm

leonard wrote:It's interesting how most assume the father has raised a son he wouldn't trust for financial advice.

That said - I think livesoft's approach has the highest chance of achieving your goal.

Why would the father take the son's financial advice, any more than than the son should take the father's advice? Neither, as far as we know, is a financial professional? What justification would either one have for trusting the other for financial advice?

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Re: Need help informing my father he is making a mistake

Post by bluejello » Mon Jan 12, 2015 9:49 pm

clayr361 wrote:
bdpb wrote:I'm with you 100%. Do whatever you can to turn him into a Boglehead.

I'm guessing you are college educated and certainly Boglehead educated. It's likely the ML guy is not college educated and certainly not Boglehead educated. He likely has only enough education to pass a certificate test. One that most Bogleheads could pass with minor help. He is a salesman and doesn't have your father's best interest at heart, like you clearly do. Of course, you already know this.

Start with, "Dad, you did a great job at educating me on things I didn't know about when raising me. Now let me educate you on things I am more knowledgeable about than you (and your ML 'professional')".

Good luck.


This is honestly what I thought most of the replies would have been to my original question. Thanks for the input. The ML advisor most likely cares about getting more accounts as quickly as possible than actually taking time to invest their money well. If I wasn't an honest Boglehead and got 1% annually for every dollar I managed that would be my goal. For all the comments with the age argument to it, the guy is only about 8 years older than me. He just has that ML name backing him up.


OP, everyone on this board is with you that low-cost index funds at Vanguard are better than ML. That's why we're all here. And it's wonderful that you care about your father and want the best for him. But there is often a gap between the message that one person expresses and the message that another person receives, ESPECIALLY when that message is unsolicited advice. You might be saying "Dad, please don't do X, because I think it's a bad decision and I love you and want the best for you." And what your dad might be hearing is "Old man, I know better than you do what's good for you, you're getting stupid and senile."

It is exceedingly rare for unsolicited advice to have the effect that the giver intended, no matter how well-intentioned and how accurate the advice may be. That's just human nature. If you open the discussion with "let me educate you on things I am more knowledgeable about than you", I think there's about a 0% probability of that conversation going well.

But what you can do is share instead of advise. Say something like "I've read this great book on investing lately called the Bogleheads Guide to Investing, and I'm really excited about all this stuff I've learned. I'm starting to manage my own investments using low-cost index funds."

You're not telling him he's made a mistake, nor are you telling him what to do. You're just sharing your enthusiasm about this topic, what you've learned, and what you're doing with your own money. I've done this with many family and friends, and oftentimes it results in people coming back a few months later to tell me they opened their own Vanguard accounts. :D

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Re: Need help informing my father he is making a mistake

Post by cherijoh » Mon Jan 12, 2015 9:57 pm

clayr361 wrote:All good replies. I was not planning on confronting him and telling him straight up your making a mistake. I was planning more to invoke conversation to point out the problems or issues I saw and suggest alternatives. Correct with him having cash elsewhere he is not 100% stocks but with this advisor(his only advisor) he is/will be, and he is using this experience to shape future investment. He has not asked for my advice but does inform me when he is meeting with the advisor and what the advisor tells him. I hadn't really thought about just not doing or saying anything about the situation. I guess its just hard knowing the situation and knowing mistakes are being made and letting them happen. Also me being in a similar situation previously and not liking the outcome and how angry it made me, I do not want him to go through the same thing. Asking him how his investments are doing would be a good idea but he doesn't know. I have asked him and he told me he hasn't gotten a statement yet and he is not one to use the internet to go and look it up. But then again suggesting a lower stock % and him acting upon it and missing out on some potential gains if he had stayed with the advisor would backfire on me.


How about opening with "I've been reading this really interesting book on investing - they have studies that show..." and bring up the points that expenses really matter and that very few advisors can beat a simple 3- or 4-fund portfolio of index funds after expenses and taxes on a consistent basis. If he still wants to work with the advisor, maybe you could get him to set up a parallel couch potato portfolio or you could do some back testing once he starts getting statements. Since Vanguard has lowered the minimums for Admiral shares on Index funds to $10K, it makes a pretty eye-popping contrast to a 1% AUM charge.

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Re: Need help informing my father he is making a mistake

Post by tibbitts » Mon Jan 12, 2015 10:13 pm

leonard wrote:
tibbitts wrote:
caaaad wrote:You should offer an opinion to him. It is your business and shows you care. Your post is poorly written and doesn't clearly reflect your concerns. if you just sit back and he jumps off a bridge you would feel worse. At least you tried.

Why is it the OP's business? People have been investing with ML forever, and if there were a correlation to jumping off bridges, I think we would have heard about it by now. Some of us may feel your father is taking a non-optimal approach, but it's a spectrum. ML might not be VG, but it isn't Madoff either.


Was at ML for a while. It is pretty horrible. An intervention would have been welcome.

I'm familiar with similar firms. In one example I know of, you're looking at a difference of less than 3% annually IF a customer had behaved perfectly on his/her own. But "perfectly" also means not succumbing to this forum's preferred theories of the day: "<=50% equities", "100% equities", "to international or not to international", significant allocations to commodity funds, etc. So I think the reality may be closer to 2% for a typical person. Is that a lot over a 25yr-ish investing lifetime? Yes, absolutely. Enough to make someone jump off a bridge? Probably not.

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Re: Need help informing my father he is making a mistake

Post by leonard » Mon Jan 12, 2015 10:17 pm

tibbitts wrote:
leonard wrote:It's interesting how most assume the father has raised a son he wouldn't trust for financial advice.

That said - I think livesoft's approach has the highest chance of achieving your goal.

Why would the father take the son's financial advice, any more than than the son should take the father's advice? Neither, as far as we know, is a financial professional? What justification would either one have for trusting the other for financial advice?


Really? Appeal to authority on this forum saying that neither is a "financial professional"?

Well, hopefully, the father did a good job raising the son and would be open to the opinions of the fine, upstanding citizen he himself has raised.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Re: Need help informing my father he is making a mistake

Post by leonard » Mon Jan 12, 2015 10:18 pm

tibbitts wrote:
leonard wrote:
tibbitts wrote:
caaaad wrote:You should offer an opinion to him. It is your business and shows you care. Your post is poorly written and doesn't clearly reflect your concerns. if you just sit back and he jumps off a bridge you would feel worse. At least you tried.

Why is it the OP's business? People have been investing with ML forever, and if there were a correlation to jumping off bridges, I think we would have heard about it by now. Some of us may feel your father is taking a non-optimal approach, but it's a spectrum. ML might not be VG, but it isn't Madoff either.


Was at ML for a while. It is pretty horrible. An intervention would have been welcome.

I'm familiar with similar firms. In one example I know of, you're looking at a difference of less than 3% annually IF a customer had behaved perfectly on his/her own. But "perfectly" also means not succumbing to this forum's preferred theories of the day: "<=50% equities", "100% equities", "to international or not to international", significant allocations to commodity funds, etc. So I think the reality may be closer to 2% for a typical person. Is that a lot over a 25yr-ish investing lifetime? Yes, absolutely. Enough to make someone jump off a bridge? Probably not.


Calculate the terminal value of a portfolio in 30 years - with that 2% handicap. That will leave some looking for a ledge.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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