Help with In-Laws Request to Review their Portfolio from LPL Advisor

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LongtermInvestor1
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Joined: Thu Dec 29, 2011 11:05 pm

Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by LongtermInvestor1 » Thu Oct 05, 2017 7:04 am

Hi, Bogleheads,

I am a long-time lurker, and this great site helped me immensely choose the low-cost DIY Diehards investing via Vanguard many years ago - so thank you.

I recently had my MIL approach me to review her and FIL's retirement portfolio. I assure you I am not trying to become my in-law's financial advisor, but based on their current situation (FIL has had some recent health issues) would like to provide some recommendations to them. Also, my wife and I are financially sound (thanks again Bogleheads) so no vested interested here except looking out for them, as they have worked hard for their nest egg.

My in-laws are 70+ and retired, and their local Credit Union steered them some time ago to an LPL Financial Advisor - (yes I searched on here and saw the past comments on LPL and their sales practices).

LPL Advisor currently has their 700k nest egg invested in:

Cougar Global MAR 10 - 14%
Transamerica Short-Term Bond 2%
Transamerica Dynamic Income 1%
AXS SCS Annuity 5% (FIL purchased in 2012)
Allianz Variable Annuity - in IRA (FIL purchased in 2011) 29%
Allianz Variable Annuity -in IRA (MIL purchased in 2012) 14%
Island Income REIT 4%
Carey Watermark REIT 5%
Transamerica MLP Energy 5%
Eaton Stock 21% (note this is from FIL's company stock so he would let the advisor sell it).

A few items were apparent to me:

Pulling out the Eaton Stock out of their portfolio (I know a lot of money tied to one stock, but a different discussion perhaps someday as it's the FIL old company stock and not in his IRA) their advisor has 54% of their portfolio in Variable Annuities. They have no idea of what their costs are, but I assume they pay an annual amount on top of whatever front-end loads it cost them for these various investments.

My goal is to provide some input and options, but I have no investing experience with Annuities, etc. Can Vanguard Advisory Services help with options including (if they choose) moving this to Vanguard including the Variable annuity part?

Any other advice here is welcomed, as always thanks.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by retiredjg » Thu Oct 05, 2017 7:18 am

LongtermInvestor1 wrote:
Thu Oct 05, 2017 7:04 am
Can Vanguard Advisory Services help with options including (if they choose) moving this to Vanguard including the Variable annuity part?
If they are willing, I think Vanguard's PAS is a good choice.

Their portfolio appears to be largely stocks unless there are some bonds in the Variable Annuities. It may be too aggressive for their situation.

You should also ask about the fees they are paying to LPL. It is likely to be 1% or higher. Vanguard would be .3%. That is a difference of $4,900 a year just in AUM costs (assets under management). The difference in fund expenses (expense ratios) should also be significant.

I wish you luck with this.

Uniballer
Posts: 67
Joined: Thu Apr 20, 2017 9:55 am

Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by Uniballer » Thu Oct 05, 2017 7:34 am

My parents used to have a taxable account (only) at LPL. They were invested all in load funds and with no concept of tax efficiency. There were no AUM fees on that account as a whole (I think $40 per trade or $30/yr if you didn't make any trades), but the funds they were sold sucked (front loads, high ERs with 12b-1 fees, etc) and so they weren't making much. The paper statements from LPL for this account made it impossible to tell how much they were paying in fees.

They had IRAs at another brokerage, and a variable annuity they didn't need at Jackson. We had a long talk about investing fees and commissions, and I gave my Dad a copy of Bernstein's The Investor's Manifesto to read. They moved all of their various accounts to Vanguard this year, with my encouragement and assistance as needed. They seem happy about it.
Last edited by Uniballer on Thu Oct 05, 2017 7:54 am, edited 1 time in total.

student
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Joined: Fri Apr 03, 2015 6:58 am

Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by student » Thu Oct 05, 2017 7:40 am

It is quite disappointing that a supposedly consumer friendly credit union steered them towards LPL. I agree with others that they should move. Vanguard, Fidelity and Schwab are good choices.

goingup
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Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by goingup » Thu Oct 05, 2017 11:02 am

In the plus column, it looks like the advisor doesn't have them in 140 different funds, as we have seen in some portfolios.

This portfolio is set up to provide income, through the annuities and REITs. Is this sufficient to meet their needs? Are the annuities set up to continue when one person passes?

The $$ amount in Eaton Stock is a pretty high portion of the portfolio so that would be my big concern. If my folks (long gone) had their modest portfolio set up like this and it was meeting their income needs I'd be fine with it. What I hate to see in a portfolio is churning of tiny little positions which are meaningless. I wouldn't suggest they buy any more annuities because that ties the money up forever.

Doom&Gloom
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Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by Doom&Gloom » Thu Oct 05, 2017 11:43 am

Several years ago DW asked me to look at MIL's financial accounts. Most of her investments were with LPL. I nearly just threw up my hands.

One of my happiest days in recent years was when her LPL account was closed--and they weren't even my investments! DW hasn't even needed to ask me to glance at MIL's financial affairs recently.

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David Jay
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Location: Michigan

Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by David Jay » Thu Oct 05, 2017 11:59 am

V.A. costs (policy fees+ fund fees) are typically more than 2% per year. That is a lot of drag on performance...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

NotWhoYouThink
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Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by NotWhoYouThink » Thu Oct 05, 2017 12:21 pm

They probably want you to tell them that everything is alright. Just fine, no need to worry.

Unless they are ready to move everything to Vanguard PAS, for example, on your recommendation, you should probably keep most of your aggravation with the fees to yourself.

Is all of this after-tax? Do they have IRA, 401k, pension, social security? Is there a survivor benefit to their pension? Are they living in a place that is conducive to aging in place? These are the questions I would be concerned about for now, not their AA in their LPL account. Some of them they may not want to share yet.

LongtermInvestor1
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Joined: Thu Dec 29, 2011 11:05 pm

Re: Help with In-Laws Request to Review their Portfolio from LPL Advisor

Post by LongtermInvestor1 » Fri Oct 06, 2017 9:13 pm

GoingUp - great question on annuities set up if one person passes (answer - no idea). Also, agree on the Eaton stock, but it is a tough one as I think it they have a low cost to them and a personal attachment. I also agree on suggesting no more annuities.

NWYThink - the larger variable annuities are in IRA's. Great questions on the survivor benefit to the pension and aging in place -

Student - my thoughts exactly.

Doom&Gloom - I appreciate the experience with LPL. Nice to be helpful to DW and her MIL.

Uniballer - you are correct - in the 20 nicely color pages of their personalized LPL report, there is no mention at all of any fees. nada..

Retiredjg - thank you. I appreciate you spelling it with some numbers.

David Jay - thanks for the % and comment

Again many thanks to everyone - to clarify this request came to me via the MIL or I would never have put my nose in it. I will gently broach the idea of the Vanguard PAS and see what happens. Also, my thoughts are not to discuss how much it cost them in the past, but more so, on the savings going forward. Regards to the questions if this the full financial picture, no and fortunately, they are currently living off a pension and SS. Also they have proceeds from their recent house sale which this advisor has not seen yet. Otherwise, I am afraid they would be in a brand new variable annuity. One of them has started to have major health problems, thus the request to review this for them.

A couple of additional questions, does anyone have experience getting out a Variable Annuity and is it costly? Assuming it is not to cost prohibited, can Vanguard PAS assist with it?

Thanks again!

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