[Advice needed for mother's inheritance/finances.]

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ndara2017
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[Advice needed for mother's inheritance/finances.]

Post by ndara2017 » Mon Apr 17, 2017 6:22 pm

[Title was "Too much inheritance to handle. Advice needed". Post updated on Page 2 here--admin LadyGeek]

Hello everyone,

My father passed away a few month ago and my mom and I were left over 1m+ in assets.

Right now we have three accounts with a financial advisor who is a close friend of my fathers. He has set up 3 accounts for my mom:

Inherited IRA: 400k
Brokerage account: 400k
Mom's IRA: 200k

Both my mom and I had 0 knowledge on finance and investing after my father passed away. My father had an IRA account with this financial advisor and was in the process of moving his 401k to him so we believed this guy would use our money with his best intentions. Now, that doesn't mean his intentions are the best decisions. That's why I am here. I have been doing my research and trying to soak in as much knowledge as I can and I am starting to doubt the investments that our financial advisor has made with our brokerage account.

He has already invested 150k in American funds growth portfolio class C -
He plans to invest 200k in AXA structured capital strategies on a 5 year contract
He plans to invest 50k in Griffin real estate fund




What does everyone think about his choice of investments? I feel horrible going behind his back for second opinions, but recently as I am learning more, I am starting to question if our financial advisor is doing this with our best interest in mind. If this helps, he charges a 1.25 % advisor fee.

I would appreciate any advice or recommendations on what to do from here.

clast
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Re: Too much inheritance to handle. Advice needed

Post by clast » Mon Apr 17, 2017 7:14 pm

First, you should absolutely not feel horrible for researching this "behind his back".

Second, if you get any sense of being rushed, that is a warning sign. Do not let anyone rush you while you research.

radiowave
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Re: Too much inheritance to handle. Advice needed

Post by radiowave » Mon Apr 17, 2017 7:26 pm

Third, I would strongly recommend you not go forward with the planned investments until you have a better idea of the implications. You can park cash into a high yield savings account or CD for now until you have a plan to move forward.

rob65
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Re: Too much inheritance to handle. Advice needed

Post by rob65 » Mon Apr 17, 2017 7:28 pm

clast wrote:First, you should absolutely not feel horrible for researching this "behind his back".

Second, if you get any sense of being rushed, that is a warning sign. Do not let anyone rush you while you research.


+1 It's your money. He's charging you. Don't let his being a friend of your father influence your decisions. Take your time. The wiki in the upper right hand corner has great information and is very readable.

Theoretical
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Re: Too much inheritance to handle. Advice needed

Post by Theoretical » Mon Apr 17, 2017 7:29 pm

Run from this guy. Seriously, put the money in a bank account (4 to be exact - FDIC limits) and learn. You are being taken for a big ride, sad to say.

I don't even care who he is but his initial work is very self-serving and not in your best interests at all.

He has already invested 150k in American funds growth portfolio class C

That's downright scummy. He's getting a 1% per YEAR kickback for investing you in a class C when there's NO reason to do this. It's the most expensive share class and he put $150K in for C shares?!

He plans to invest 200k in AXA structured capital strategies on a 5 year contract

This is terrible, no matter what he may say. You and your mom have no business being put in something with the words structured, contract and 5 year all together. Moreover, it'll likely be illiquid and tied to him.

He plans to invest 50k in Griffin real estate fund.

Given his other choices, this will almost certainly provide a big kickback and be illiquid.
Last edited by Theoretical on Mon Apr 17, 2017 7:35 pm, edited 1 time in total.

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KlingKlang
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Re: Too much inheritance to handle. Advice needed

Post by KlingKlang » Mon Apr 17, 2017 7:30 pm

clast wrote:First, you should absolutely not feel horrible for researching this "behind his back".


There is no reason to feel disloyal for considering multiple opinions and options when evaluating someone who will be providing you with professional services. Would you feel badly about getting multiple quotes from insurance agents or car dealers?

clast wrote:Second, if you get any sense of being rushed, that is a warning sign. Do not let anyone rush you while you research.


+1000

Many advisors suggest that you wait for a full year after the death of a loved one before starting to make financial decisions. That money isn't running away anywhere and there are no investment options available now that won't still be there in the future.

P.S. Personally I'm not thrilled with your advisor's investment choices especially for a 1.25% fee.

delamer
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Re: Too much inheritance to handle. Advice needed

Post by delamer » Mon Apr 17, 2017 7:36 pm

I would inform the advisor IN WRITING that you don't want him to make any changes in investments until further notice from you or your mother. I would also put a halt to moving the 401(k) money if it hasn't happened yet.

You have something of a learning curve ahead of you, so you don't want the advisor to do anything until you are comfortable -- especially committing to somethimg like a 5-year contract.

This guy very likely makes money not just by charging you 1.25% of assests, but also by commissions that he receives by putting you in certain investments. So he has an incentive to put you in investments that benefit him, but are not necessarily the best options for you and your mother.

The investments you mentioned need to be evaluated in context of all the investments in the portfolio, not just the brokerage account. If you can provide a list of all the investments, we can give you better advice.

While this 16-page pamphlet is geared toward young people who are just starting to invest for retirement, it has a lot of basic information for people like yourself who admit to knowing nothing about investing:

http://www.etf.com/docs/IfYouCan.pdf

Most people here are going to advise you to ditch the 1.25% advisor, and use a service like Vanguard Personal Advisory Service or Schwab's Intelligent Portfolio. And that is good advice. But it is best to freeze everything in place for now, and make changes after you have educated yourself.

Good luck.

rgs92
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Re: Too much inheritance to handle. Advice needed

Post by rgs92 » Mon Apr 17, 2017 7:44 pm

This advisor sounds awful. You will be paying 1.25% + probably the same in fund expenses (and maybe for very subpar returns vs. indexing).

So thats $25,000 a year just for expenses and performance will probably lag a vanilla portfolio in a fund like VBIAX, Vanguard Balanced Index Admiral class, where you could happily put all your money and set-and-forget it with trivial expenses. That's $25K a year that buys you nothing.

Like everyone says here, avoid this advisor like the plague. Get away immediately without any doubt. Contact Vanguard right away and ask them to help you move all the money to them.
Last edited by rgs92 on Mon Apr 17, 2017 7:52 pm, edited 1 time in total.

AdamFist
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Re: Too much inheritance to handle. Advice needed

Post by AdamFist » Mon Apr 17, 2017 7:46 pm

ndara2017 wrote:Hello everyone,

My father passed away a few month ago and my mom and I were left over 1m+ in assets.

Right now we have three accounts with a financial advisor who is a close friend of my fathers. He has set up 3 accounts for my mom:

Inherited IRA: 400k
Brokerage account: 400k
Mom's IRA: 200k

Both my mom and I had 0 knowledge on finance and investing after my father passed away. My father had an IRA account with this financial advisor and was in the process of moving his 401k to him so we believed this guy would use our money with his best intentions. Now, that doesn't mean his intentions are the best decisions. That's why I am here. I have been doing my research and trying to soak in as much knowledge as I can and I am starting to doubt the investments that our financial advisor has made with our brokerage account.

He has already invested 150k in American funds growth portfolio class C -
He plans to invest 200k in AXA structured capital strategies on a 5 year contract
He plans to invest 50k in Griffin real estate fund




What does everyone think about his choice of investments? I feel horrible going behind his back for second opinions, but recently as I am learning more, I am starting to question if our financial advisor is doing this with our best interest in mind. If this helps, he charges a 1.25 % advisor fee.

I would appreciate any advice or recommendations on what to do from here.


This story hits home for me.

When my mother passed away over a decade ago, my father was with a FA who put a good portion of his portfolio into an investment that had a "guarantee". Not knowing any better, my father committed to this investment and only after some research did I learn what an expensive Variable Annuity product looked like. Unfortunately, we couldn't exit the product until 8 years later when the markets recovered and the surrender fees disappeared. We rolled it over to Vanguard and have been happy ever since.

The lesson I share is that when you are grieving, you are also most vulnerable and may not be of sound mind to make decisions. If I knew then what I know now, I would have advised my father not to opt into these Variable Annuity "investments".

If you or your mom are still grieving, at minimum I would advise you to stop until you are ready. It's OK to sit it out in cash or something that you're comfortable with. I would not be comfortable with the 1.25% advisor fee and would roll all the funds over to Vanguard if I were in your shoes.

FWIW, the AXA investment sounds like a VA to me.

My condolences for your loss,
Adam

MotoTrojan
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Re: Too much inheritance to handle. Advice needed

Post by MotoTrojan » Mon Apr 17, 2017 7:52 pm

delamer wrote:I would inform the advisor IN WRITING that you don't want him to make any changes in investments until further notice from you or your mother. I would also put a halt to moving the 401(k) money if it hasn't happened yet.

You have something of a learning curve ahead of you, so you don't want the advisor to do anything until you are comfortable -- especially committing to somethimg like a 5-year contract.

This guy very likely makes money not just by charging you 1.25% of assests, but also by commissions that he receives by putting you in certain investments. So he has an incentive to put you in investments that benefit him, but are not necessarily the best options for you and your mother.

The investments you mentioned need to be evaluated in context of all the investments in the portfolio, not just the brokerage account. If you can provide a list of all the investments, we can give you better advice.

While this 16-page pamphlet is geared toward young people who are just starting to invest for retirement, it has a lot of basic information for people like yourself who admit to knowing nothing about investing:

http://www.etf.com/docs/IfYouCan.pdf

Most people here are going to advise you to ditch the 1.25% advisor, and use a service like Vanguard Personal Advisory Service or Schwab's Intelligent Portfolio. And that is good advice. But it is best to freeze everything in place for now, and make changes after you have educated yourself.

Good luck.


Everyone has explained that these fees are high, but not really put it into context. Don't think of it as a 1-2% drop in total assets, but think about it as a percentage of growth. You can expect to get on average 7% real (after inflation) growth from stocks, but many would say the current climate points towards even lower returns. That 1-2% fee he is getting is a whopping 1/4 of your total gains. And if the market goes down 30% this year? He still gets most of his cut.

Research a 3-fund portfolio. Make an asset allocation for your total portfolio, not each account (IRA vs. Taxable) separately, and then read the Wiki on tax-efficient fund placement, and you will be up to speed in no time (and hopefully have some fun with it).

Sorry about your fathers passing, but don't let his past decision/friendship sway your next move. I assume you are fairly young and have a long investing horizon ahead. Run a few portfolio simulators with a 1-2% difference, and see just how much money you could be paying this adviser over your lifetime.

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CAsage
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Re: Too much inheritance to handle. Advice needed

Post by CAsage » Mon Apr 17, 2017 8:01 pm

Freeze everything. Instruct him in writing to make no investments or changes without specific permission (and don't give it). Read the Wiki on Windfalls and everything you can on asset allocation. It will not hurt you and your Mom to take several months, parking the money in low risk stable accounts (either savings or ???). You don't say what it's in at the moment....

Note that a 1.25% cut will give him about 1/4 of your total wealth in 20+ years (very rough numbers, but think about it as a percentage of the growth, not the principal). Plus fees and loads and who knows what in expenses. Take your time, read a little... If you cannot manage that (and some people are not comfortable) look into a balanced or Target date fund - you could do much worse!
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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Will do good
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Re: Too much inheritance to handle. Advice needed

Post by Will do good » Mon Apr 17, 2017 8:09 pm

1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D

ndara2017
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Re: Too much inheritance to handle. Advice needed

Post by ndara2017 » Mon Apr 17, 2017 8:27 pm

Thanks for all the replies. It seems like I was right with my minimal research. My mom emailed him already to halt all future investments and to void the Griffin and AXA investment immediately. Im very worried about the AXA investment. My mom already signed the documents last week, but I don't see the account yet on my portfolio with this financial advisor.

I really hope the AXA investment did not go through yet, because then there will be a 5% fee to withdraw....

Is there a withdrawal fee for the American Funds investment? I've already spoken to my mom and she is on board to take all the money out of the brokerage account to our personal savings account.

Thanks again to everyone replying. I'm so disappointed in myself for making these decisions and also extremely mad with this financial advisor. I feel taken advantaged honestly.

ndara2017
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Re: Too much inheritance to handle. Advice needed

Post by ndara2017 » Mon Apr 17, 2017 8:43 pm

Will do good wrote:1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D



Sorry, I feel embarrassed asking this, but is an email okay? Or does it have to be in writing. We already emailed him stating to halt all future investments and freeze everything currently going on.

MotoTrojan
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Re: Too much inheritance to handle. Advice needed

Post by MotoTrojan » Mon Apr 17, 2017 8:48 pm

ndara2017 wrote:
Will do good wrote:1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D



Sorry, I feel embarrassed asking this, but is an email okay? Or does it have to be in writing. We already emailed him stating to halt all future investments and freeze everything currently going on.


I am no legal expert, but I'd wager e-mail is great, since it has a time-stamp.

Dottie57
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Re: Too much inheritance to handle. Advice needed

Post by Dottie57 » Mon Apr 17, 2017 8:54 pm

ndara2017 wrote:
Will do good wrote:1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D



Sorry, I feel embarrassed asking this, but is an email okay? Or does it have to be in writing. We already emailed him stating to halt all future investments and freeze everything currently going on.


Print it out and also mail it to him via certified mail. Do it so someone has to sign for it.

delamer
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Re: Too much inheritance to handle. Advice needed

Post by delamer » Mon Apr 17, 2017 8:56 pm

With the brokerage account, you will have tax consequences if you sell existing assets. So don't rush into selling until you understand the taxes you will owe. Better to leave things as they were before your father died.

You could consult a CPA if needed. If there was an attorney who helped settle your father's estate, s/he might be able to recommend a CPA.

Also, if you have any doubts about whether the advisor will follow your e-mail instructions then you could spend a couple hundred dollars to have the attorney send a formal letter to the advisor with your instructions. Those tend to get people's attention and the advisor will know that it is not just you and your mother looking over his shoulder.

And if there is a branch manager or some other senior person who supervises the advisor, you should e-mail him or her.

Give yourself some credit, you are trying to go from zero to 60 very quickly in the investment area and you've forestalled some damage already.

Theoretical
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Re: Too much inheritance to handle. Advice needed

Post by Theoretical » Mon Apr 17, 2017 8:57 pm

Agreed on the in-writing, certified mail.

Also, I don't know you at all, but I am very proud of you for taking the risk to investigate more thoroughly, even when you struggled with feeling "disloyal." That takes guts.

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Sandtrap
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Re: Too much inheritance to handle. Advice needed

Post by Sandtrap » Mon Apr 17, 2017 8:59 pm

Read "Boglheads" wiki "Managing a Windfall".
Use search box upper right corner.
Not a financial expert - just a retired businessman hacking out of a sand trap -- again.

aristotelian
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Re: Too much inheritance to handle. Advice needed

Post by aristotelian » Mon Apr 17, 2017 9:06 pm

I agree with everyone who is saying to be very cautious. It is possible that the advisor is sincerely acting on what he thinks are your best interests, but that does not mean you have to agree. In his mind he may be "helping" you because he has been trained in the industry to believe that the work they do is worth the fees that they charge. Most of the research does not support that. You should take some time to decide for yourself if you need their "help".

Email should be good, but it can't hurt to follow up with a piece of paper sent by registered mail.

Where is the money right now? Sitting in cash?

Is the American Funds account in an IRA? Was there a "load" fee charged? (This is an up front fee that some providers charge for the "privilege" of investing in their fund. With the advent of no load, low cost index funds, these are less common but American Funds appears to be one of the biggest in the industry that still uses this model).

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Noobvestor
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Re: Too much inheritance to handle. Advice needed

Post by Noobvestor » Mon Apr 17, 2017 9:10 pm

delamer wrote:With the brokerage account, you will have tax consequences if you sell existing assets. So don't rush into selling until you understand the taxes you will owe. Better to leave things as they were before your father died.

You could consult a CPA if needed. If there was an attorney who helped settle your father's estate, s/he might be able to recommend a CPA


I would think that except for short versus long-term cap gains the best strategy is to sell as soon as possible (as in: either sell now or sell in one year after short-term gains become long-term ones). Otherwise the expenses are going to erode returns longer-term.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

tibbitts
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Re: Too much inheritance to handle. Advice needed

Post by tibbitts » Mon Apr 17, 2017 9:13 pm

It seems like you've already taken steps to minimize the damage and that's great. Very few people in your position would have done that under the circumstances. There is no harm to keeping money in short-term investments for a year or more until you've learned more. Unfortunately as you've found out you can't trust many advisers to act in your best interest.

delamer
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Re: Too much inheritance to handle. Advice needed

Post by delamer » Mon Apr 17, 2017 9:19 pm

Noobvestor wrote:
delamer wrote:With the brokerage account, you will have tax consequences if you sell existing assets. So don't rush into selling until you understand the taxes you will owe. Better to leave things as they were before your father died.

You could consult a CPA if needed. If there was an attorney who helped settle your father's estate, s/he might be able to recommend a CPA


I would think that except for short versus long-term cap gains the best strategy is to sell as soon as possible (as in: either sell now or sell in one year after short-term gains become long-term ones). Otherwise the expenses are going to erode returns longer-term.


You don't want to take, for example, a 10% tax hit to avoid a 1.25% fee for a year The general advice is for the OP to become educated and then make changes, not to stay with the advisor longer term.

The OP needs to find out what the cost basis is for the various investments in the brokerage account to make good sell decisions.

ndara2017
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Re: Too much inheritance to handle. Advice needed

Post by ndara2017 » Mon Apr 17, 2017 9:20 pm

aristotelian wrote:I agree with everyone who is saying to be very cautious. It is possible that the advisor is sincerely acting on what he thinks are your best interests, but that does not mean you have to agree. In his mind he may be "helping" you because he has been trained in the industry to believe that the work they do is worth the fees that they charge. Most of the research does not support that. You should take some time to decide for yourself if you need their "help".

Email should be good, but it can't hurt to follow up with a piece of paper sent by registered mail.

Where is the money right now? Sitting in cash?

Is the American Funds account in an IRA? Was there a "load" fee charged? (This is an up front fee that some providers charge for the "privilege" of investing in their fund. With the advent of no load, low cost index funds, these are less common but American Funds appears to be one of the biggest in the industry that still uses this model).


http://imgur.com/a/vYZ5w

This is how it looks in my mom's portfolio. American Funds is in a brokerage account. There was no front load fee charge. I'm still trying to figure out where 1.2k went from the initial 150k investment as you can see in the image.

pintail07
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Re: Too much inheritance to handle. Advice needed

Post by pintail07 » Mon Apr 17, 2017 9:23 pm

If the investment you are waiting on is an annuity, you will have a period time called a free look. I f you don't want it they must refund the entire amount without penalty. Ask the advisor if it is an annuity, if it is cancel. Follow up with a certified letter and email, readnotify.com.

aristotelian
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Re: Too much inheritance to handle. Advice needed

Post by aristotelian » Mon Apr 17, 2017 9:39 pm

ndara2017 wrote:
http://imgur.com/a/vYZ5w

This is how it looks in my mom's portfolio. American Funds is in a brokerage account. There was no front load fee charge. I'm still trying to figure out where 1.2k went from the initial 150k investment as you can see in the image.


Nice. You should be able to get out of the American Funds account with little damage done. The other 250k is sitting in cash, so no harm done there. The $1.2K may have just been market fluctuation (the market went down on Thursday). Then again, it is possible that it was a load fee that you don't know about from the fine print. Anyway, you may well get it all back today when the mutual funds calculates its daily net asset value (NAV) after the market went up today.

If your mom decides that she is willing to let you help her, the next step would be to post the contents of all three accounts and we can help both of you develop a strategy without the cost of a financial advisor charging an annual fee. If she decides to stick with the advisor, I would strongly suggest to communicate in writing that she wishes to have him implement a strategy low cost Vanguard, Schwab, or Fidelity index funds.

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Noobvestor
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Re: Too much inheritance to handle. Advice needed

Post by Noobvestor » Mon Apr 17, 2017 9:53 pm

delamer wrote:
Noobvestor wrote:
delamer wrote:With the brokerage account, you will have tax consequences if you sell existing assets. So don't rush into selling until you understand the taxes you will owe. Better to leave things as they were before your father died.

You could consult a CPA if needed. If there was an attorney who helped settle your father's estate, s/he might be able to recommend a CPA


I would think that except for short versus long-term cap gains the best strategy is to sell as soon as possible (as in: either sell now or sell in one year after short-term gains become long-term ones). Otherwise the expenses are going to erode returns longer-term.


You don't want to take, for example, a 10% tax hit to avoid a 1.25% fee for a year The general advice is for the OP to become educated and then make changes, not to stay with the advisor longer term.

The OP needs to find out what the cost basis is for the various investments in the brokerage account to make good sell decisions.


I definitely agree in theory (become educated before changes), but in practice if I'm understanding the situation right his advisor *just* made these buys recently, in which case the gains should be minimal and he might as well get out now -or- per your point about extra taxes: he might wait one year for them to become long-term. I can't think of a situation where waiting longer than a year would help. If anything, waiting longer than one year simply ups the odds that he will have more taxable gains since the market tends to go up.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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celia
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Re: Too much inheritance to handle. Advice needed

Post by celia » Mon Apr 17, 2017 9:57 pm

Do you and your mom both want to LEARN together? That is a great bonding experience for both of you to share WHAT you learned and WHERE you learned it and what you think of it.

May I suggest you go to the library and check out some of the books from our reading list:
https://www.bogleheads.org/wiki/Books:_ ... nd_reviews

The reason I suggest that you start with several books is that you can each take half of them and start by critiquing them. Is this understandable or over-your-head or something you already know? Do you recommend the other person read it or not? Start out with the notion that you likely know something about money (household budgeting, checking accounts, companies that have been in the news). You don't have to read an entire book or even anything in some of the books. You are looking to figure out what you know and don't know. Another source of books is to use the link on the upper right corner that says "Amazon.com". That link goes to a list of commonly read books on Amazon that we think are good. Purchase of these will credit us with a donation from Amazon, but you can likely also find them in the library.

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BL
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Re: Too much inheritance to handle. Advice needed

Post by BL » Mon Apr 17, 2017 10:31 pm

This is how it looks in my mom's portfolio. American Funds is in a brokerage account. There was no front load fee charge. I'm still trying to figure out where 1.2k went from the initial 150k investment as you can see in the image.

It is about 1/4 (a quarter of a year's 1.25% AUM) of the fee on the entire account, including the money market. I am just guessing, but that is a possibility.

That C fund has a deferred load charge of 1 % if sold within a year and an ER of 1.56%/year. So if you keep it for a year to avoid deferred load, you pay an ER of 1.56%. Stuck either way. I would have Vanguard pull the entire account from advisor to get it away from him.

Also have them pull everything else from him. You can leave it in a money market at V for a while, but while you have it at the advisor, you risk being charged AUM.

Agree to be sure he has directions in writing to not make any moves and to cancel any activity he may have started, such as annuities or other purchases, and to retract anything you may have signed. It might be worth getting your lawyer to send his a letter about this. Stop any transfer from 401k if possible.

I would trust the Vanguard PAS advisor to put you into low-ER Vanguard funds (under ~ 0.20%) at an AUM rate of 0.3%, to give you a total of under 0.5% cost, maybe way under, since total stock market is 0.05%.
If you decide to do it on your own in a year or 5, you will still be in low-ER funds you can keep.

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Dale_G
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Re: Too much inheritance to handle. Advice needed

Post by Dale_G » Mon Apr 17, 2017 11:45 pm

pintail07 spoke of this up-thread, but I want to emphasize that if the AXA investment is an annuity, there is a "free look" period during which you can cancel the contract. The free look period may be as short as 10 days depending on your state law. The free look period usually starts on the assumed day of delivery of the contract (often 3 days after it has been mailed).

Hopefully the contract is coming to mom's home and not sitting on the advisor's desk, but I would not wait to take action.

In any case, if this is a variable annuity, you should put a stop to it immediately - and I would call AXA directly. If after examining the contract (probably more than 100 pages of fine print legalese that no one can understand) you decide it is appropriate, you can always start anew.

Dale
Last edited by Dale_G on Tue Apr 18, 2017 12:15 am, edited 1 time in total.
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randomizer
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Re: Too much inheritance to handle. Advice needed

Post by randomizer » Tue Apr 18, 2017 12:12 am

I get saddened reading such scumbaggery.

mikefixac
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Re: Too much inheritance to handle. Advice needed

Post by mikefixac » Tue Apr 18, 2017 12:40 am

That's why I love the Bogleheads. So many smart people offering the best advice.

A friend's mom recently passed and he also will inherit a chunk of money. A close family friend of his wants to invest the money for him. Family friend wants to put him in a variable annuity.

I'm not as smart as many posters here, but I did know to tell him "no" and sent him good info, of course including links to here. In fact, I think I'll be sending him this thread.

ndara2017
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Re: Too much inheritance to handle. Advice needed

Post by ndara2017 » Tue Apr 18, 2017 12:45 am

randomizer wrote:I get saddened reading such scumbaggery.


What makes you think that this is without a doubt, scumbaggery?

I don't know nearly as much as most of you do, but everyone is saying get out. What are the red flags that you see and everyone else is seeing?

THe read red flag that I saw was the fees attached to the American FUnds investment and the 5 year contract, which made me think he wants to make sure he can make 1.25% of 200k over 5 years. Is there other red flags?

Could there be a chance that this guy did have good intentions, but isn't a good investor? Or are these 3 investments to obvious to give him the benefit of the doubt?

ndara2017
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Re: Too much inheritance to handle. Advice needed

Post by ndara2017 » Tue Apr 18, 2017 12:48 am

mikefixac wrote:That's why I love the Bogleheads. So many smart people offering the best advice.

A friend's mom recently passed and he also will inherit a chunk of money. A close family friend of his wants to invest the money for him. Family friend wants to put him in a variable annuity.

I'm not as smart as many posters here, but I did know to tell him "no" and sent him good info, of course including links to here. In fact, I think I'll be sending him this thread.


WIsh I had a friend like you.

CurlyDave
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Re: Too much inheritance to handle. Advice needed

Post by CurlyDave » Tue Apr 18, 2017 1:20 am

ndara2017 wrote:
randomizer wrote:I get saddened reading such scumbaggery.


What makes you think that this is without a doubt, scumbaggery?...

Could there be a chance that this guy did have good intentions, but isn't a good investor? Or are these 3 investments to obvious to give him the benefit of the doubt?


There is certainly a chance of that, but the problem is that his charges for what he does are very high, too expensive to afford.

If I can give an analogy. Wolves are part of a balanced ecosystem, and certainly have a place in the world. OTOH, if I were eaten by a wolf I would probably feel this was a bad outcome. High fee advisors are like wolves, they exist and probably have a right to exist, but they should be avoided.

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kelway
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Re: Too much inheritance to handle. Advice needed

Post by kelway » Tue Apr 18, 2017 5:28 am

mikefixac wrote:That's why I love the Bogleheads. So many smart people offering the best advice.


It's actually choking me up a bit reading this thread. I went through a similar experience when I settled my grandmother's estate with meeting evil face to face, and to the OP: no way you should feel embarrassed or disappointed in yourself. Look what you prevented.

lhl12
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Re: Too much inheritance to handle. Advice needed

Post by lhl12 » Tue Apr 18, 2017 5:31 am

ndara2017 wrote:
randomizer wrote:I get saddened reading such scumbaggery.


What makes you think that this is without a doubt, scumbaggery?

I don't know nearly as much as most of you do, but everyone is saying get out. What are the red flags that you see and everyone else is seeing?

THe read red flag that I saw was the fees attached to the American FUnds investment and the 5 year contract, which made me think he wants to make sure he can make 1.25% of 200k over 5 years. Is there other red flags?

Could there be a chance that this guy did have good intentions, but isn't a good investor? Or are these 3 investments to obvious to give him the benefit of the doubt?


The general Boglehead view is that high fee financial advisors (like your father's friend) and the products they push are a form of legalized theft. The advisor might actually have drunk their firm's Kool-Aid and believe in the products they are selling, but that doesn't matter. The "legalized scumbaggery" referred to is a comment on the general approach being pushed here rather than the advisor himself. Whether the advisor is an absolutely loyal and honest friend or your family or the next Bernie Madoff (or anything in between) doesn't matter. The point is that they are part of a system that takes advantage of vulnerable, uninformed, trusting individuals like yourself and your Mom. Whether the advisor is doing this knowingly or not is irrelevant. Either way the board's advice is to withdraw yourself from the system and take a different path.

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Re: Too much inheritance to handle. Advice needed

Post by Mr.BB » Tue Apr 18, 2017 5:39 am

Never feel bad about getting a second or third opinion.
Remember he works for you, (he is an employee of yours) that is why you are paying him.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Re: Too much inheritance to handle. Advice needed

Post by Mr.BB » Tue Apr 18, 2017 5:45 am

rgs92 wrote:This advisor sounds awful. You will be paying 1.25% + probably the same in fund expenses (and maybe for very subpar returns vs. indexing).

So thats $25,000 a year just for expenses and performance will probably lag a vanilla portfolio in a fund like VBIAX, Vanguard Balanced Index Admiral class, where you could happily put all your money and set-and-forget it with trivial expenses. That's $25K a year that buys you nothing.

Like everyone says here, avoid this advisor like the plague. Get away immediately without any doubt. Contact Vanguard right away and ask them to help you move all the money to them.


I will promise you if you tell this guy you are moving this money for 6 months or a year to a neutral position (money market,etc) and you don't want him to do anything with the money he will tell you "but you will be possible losing out on this bull market or making money if you do this".
You could also tell him that may be true but you will also not be risking losing any money in the market (or to him and his fees).
Sometimes doing nothing for a short time is the best thing you can do in the long run.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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CyclingDuo
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Re: Too much inheritance to handle. Advice needed

Post by CyclingDuo » Tue Apr 18, 2017 6:20 am

ndara2017 wrote:
randomizer wrote:I get saddened reading such scumbaggery.


What makes you think that this is without a doubt, scumbaggery?

I don't know nearly as much as most of you do, but everyone is saying get out. What are the red flags that you see and everyone else is seeing?

THe read red flag that I saw was the fees attached to the American FUnds investment and the 5 year contract, which made me think he wants to make sure he can make 1.25% of 200k over 5 years. Is there other red flags?

Could there be a chance that this guy did have good intentions, but isn't a good investor? Or are these 3 investments to obvious to give him the benefit of the doubt?


The financial industry for decades and decades has been built on overcharging for what you get.

There are mutual funds available to you that provide the same thing, if not better performance, for a lower cost. The Boglehead way is to self-instruct so that you don't have to pay 1.25% of your assets to a money manager. Most of us have learned, or are learning, or come to this site to learn that valuable lesson.

Example/Analogy: If you could buy 4 bags of Scott lawn fertilizer/weed treatment, apply it yourself (takes about 30 minutes to an hour of your time) that treated your grass with an application early in the year (March) for crabgrass, one two months later (Memorial Day) for dandelions, another one in mid-Summer, and the final application in the Fall for the cost of $200 (about $45-50 a bag) - why would you hire TruGreen to do the same thing for you at a cost of $400 - 600+?

Both will make your lawn grow, but you are paying much more for TruGreen to do what you could easily do yourself. Multiply that year after year, and your lawn could be healthy, weed free and grow year after year with either method (DIY or from the hired firm such as TruGreen). However, the expense of one will far surpass the expense of the other - even though the lawn looks the same.

So to is it with investing. TruGreen, like your father's Advisor, is not a scumbag as the poster implied. He is in the business to make money. He pushes financial products that provide him commissions, and kickbacks, and that is what being in sales is all about (just like a TruGreen salesman). Everyone here is suggesting that rather than pay somebody else to have your lawn grow (investments) with expensive products, you can do it on your own (DIY - do it yourself) with even better products that cost even less.

There is a reason that low cost mutual funds and ETF's (exchange traded funds) that track an index are growing and changing the industry. Read about Vanguard here:

https://www.nytimes.com/2017/04/14/busi ... l?emc=eta1

It's not the only place to get your low cost funds and ETF's, or even annuity products. Fidelity, and Schwab are two other fine examples. If you are going to DIY for you and your mother, start reading all you can here at this site.

This is always a good read:

https://www.bogleheads.org/wiki/Three-fund_portfolio

We would echo some of the other posters suggestions that you take your time. In addition, having your entire portfolio transferred in kind to a brokerage account at Fidelity, Vanguard, or Schwab would be a wise move. If moved "in kind", there will not be any taxable consequences. All it takes is a phone call to Fidelity, or Vanguard, etc... to get it going and they will do most of the work for you.

Condolences on your loss, but welcome to the beginning of an education of how to keep your lawn green, healthy, and growing by doing it yourself and saving a lot of money in the process over the years.

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Re: Too much inheritance to handle. Advice needed

Post by Mr.BB » Tue Apr 18, 2017 6:31 am

ndara2017 wrote:
Will do good wrote:1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D



Sorry, I feel embarrassed asking this, but is an email okay? Or does it have to be in writing. We already emailed him stating to halt all future investments and freeze everything currently going on.


Get verification that he received it!
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

Mr.BB
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Re: Too much inheritance to handle. Advice needed

Post by Mr.BB » Tue Apr 18, 2017 6:32 am

ndara2017 wrote:
Will do good wrote:1. Write a letter to this advisor and tell him to make no move on ANY of the portfolio.
2. Take your time and learn to invest, take a year if you have to. Don't less this advisor rush you, he's rushing you to lock in bad investments and get his high fees. He's NOT a friend of you or your family.
3. Don't make too many move regarding the portfolio you don't want to over paid in fees and short term capital gains.
4. In investing, time and knowledge is your friend.
5. Come back to Boglehaeds again and again to ask all your questions, folks here are super knowledgeable and there's no conflict of interest :D



Sorry, I feel embarrassed asking this, but is an email okay? Or does it have to be in writing. We already emailed him stating to halt all future investments and freeze everything currently going on.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Re: Too much inheritance to handle. Advice needed

Post by ddurrett896 » Tue Apr 18, 2017 7:00 am

ndara2017 wrote:I am starting to question if our financial advisor is doing this with our best interest in mind. If this helps, he charges a 1.25 % advisor fee.


Is his feelings worth $12,500 a year - not including what I'm assuming are higher ER than like funds outside of what he has selected? It's pretty simple and I went thru the same situation. A simple "I appreciate your guidance, but I will be moving my money to XXX. Between the 1.25% fee and higher than average ER, I feel it's in my best interest to make the move."

At the end of the day it's you and your mothers money. It's obvious moving the money is the best choice. If he responds with anything other than "Thanks for the heads up and best wishes", he was obviously only concerned about himself.

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Will do good
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Re: Too much inheritance to handle. Advice needed

Post by Will do good » Tue Apr 18, 2017 9:35 am

Mr.BB wrote:
rgs92 wrote:This advisor sounds awful. You will be paying 1.25% + probably the same in fund expenses (and maybe for very subpar returns vs. indexing).

So thats $25,000 a year just for expenses and performance will probably lag a vanilla portfolio in a fund like VBIAX, Vanguard Balanced Index Admiral class, where you could happily put all your money and set-and-forget it with trivial expenses. That's $25K a year that buys you nothing.

Like everyone says here, avoid this advisor like the plague. Get away immediately without any doubt. Contact Vanguard right away and ask them to help you move all the money to them.


I will promise you if you tell this guy you are moving this money for 6 months or a year to a neutral position (money market,etc) and you don't want him to do anything with the money he will tell you "but you will be possible losing out on this bull market or making money if you do this".
You could also tell him that may be true but you will also not be risking losing any money in the market (or to him and his fees).
Sometimes doing nothing for a short time is the best thing you can do in the long run.


+1 Sometimes doing nothing for a short time is the best thing you can do in the long run

deltaneutral83
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Re: Too much inheritance to handle. Advice needed

Post by deltaneutral83 » Tue Apr 18, 2017 10:08 am

I didn't know "C" class shares had a 1.58x ER at American Funds, or any other "C" class funds with any company. Adviser is probably getting a 1% AUM on top of it while getting a portion of the 1.58 kicked back from AF. Yikes.

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BL
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Re: Too much inheritance to handle. Advice needed

Post by BL » Tue Apr 18, 2017 10:14 am

Dale_G wrote:pintail07 spoke of this up-thread, but I want to emphasize that if the AXA investment is an annuity, there is a "free look" period during which you can cancel the contract. The free look period may be as short as 10 days depending on your state law. The free look period usually starts on the assumed day of delivery of the contract (often 3 days after it has been mailed).

Hopefully the contract is coming to mom's home and not sitting on the advisor's desk, but I would not wait to take action.

In any case, if this is a variable annuity, you should put a stop to it immediately - and I would call AXA directly. If after examining the contract (probably more than 100 pages of fine print legalese that no one can understand) you decide it is appropriate, you can always start anew.

Dale

+1
deltaneutral83:I didn't know "C" class shares had a 1.58x ER at American Funds, or any other "C" class funds with any company. Adviser is probably getting a 1% AUM on top of it while getting a portion of the 1.58 kicked back from AF. Yikes.

You can look them up on Morningstar and click on the Expense tab to find loads, ERs and 12b-1 charges. Yes, C class are the worst if you hold them more than a few years because they continue with the high ERs. I understand you can get American funds at Fidelity with no loads and lower ERs (haven't checked it out).

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oldzey
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Re: Too much inheritance to handle. Advice needed

Post by oldzey » Tue Apr 18, 2017 10:31 am

Sandtrap wrote:Read "Boglheads" wiki "Managing a Windfall".
Use search box upper right corner.


+1

https://www.bogleheads.org/wiki/Managing_a_windfall
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ā€• Randy Thurman

Boglegrappler
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Re: Too much inheritance to handle. Advice needed

Post by Boglegrappler » Tue Apr 18, 2017 10:33 am

Could there be a chance that this guy did have good intentions, but isn't a good investor? Or are these 3 investments to obvious to give him the benefit of the doubt?


Not every retail broker is an evil scumbag. There are actually people who benefit or take comfort from having someone look after their investments. The issue is that, if you are personally motivated enough to find this website, and personally bold enough to venture some questions here, it means that you are quite likely in the group that doesn't need to pay someone else to make your investment selections. Its not unlike being able to fix your own minor car problems, or small appliance repairs, or assist your kid with his college selections. Why spend money that's not necessary.

One of the greatest things about the internet is that information is more widely available than ever before. It is transforming many businesses. Investing is only one of them.

Most of the advice given here is on point. You can likely manage your own portfolio as well or better than the vast majority of investment consultants. Follow what others have said, and keep coming back for answers to questions.

MarvinK
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Re: Too much inheritance to handle. Advice needed

Post by MarvinK » Tue Apr 18, 2017 10:40 am

You and your Mom are paying the equivalent of a small car each year in fees as proposed. :moneybag

That's my way of saying, you and your Mom are being scammed by this salesman.

1.25% plus fund fees (built in) of near 1.00% is very high in today's market.

Vanguard currently charges 0.30% for an advisor plus the fund (as low as 0.05%)

I have been there too.

Capsu78
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Re: Too much inheritance to handle. Advice needed

Post by Capsu78 » Tue Apr 18, 2017 11:17 am

"Email should be good, but it can't hurt to follow up with a piece of paper sent by registered mail."

Not "registered"- that USPS level of service is what you use if something can't be replaced (watch, stock certificate etc) It tracks chain of custody through the USPS. What you want to use is "Certified Mail- Return Receipt Requested", which wont get delivered unless it is "wet ink" signed for on a green reply card that you address back to yourself. It is how most bad news is delivered and recognized by many courts at all levels, even where FedEx or UPS overnight is not.

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