86 year old mother wants to break away from financial adviser..

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cashmoney
Posts: 150
Joined: Thu Jun 29, 2017 11:15 pm

86 year old mother wants to break away from financial adviser..

Post by cashmoney » Fri Jan 05, 2018 12:57 am

MY 86 yr mother wants me to help her get her portfolio away from Raymond James mainly because because she feels she hasn't participated in the bull market as much as other people she talks to have - yes she likes her some stock market! I want to get her away from Raymond James to lower her exposure to equity,lower her cost and simplify to a 1 to 3 fund portfolio.I am a little concerned about being blamed for her portfolio value going down in value by changing the AA or if there is a market correction soon after she changes..And then there is the issue of what to do if anything with her individual stocks like XOM that she has owned way before she got to Raymond James that have huge LT capital gains.Mom is one of those who is overly concerned about the tax hit if she sells anything while she is also concerned about about leaving a legacy for her children.I try to explain to her that one we don't need the money and if we did inherit the stocks we would have to pay the tax on the capital gains anyway.Her financial adviser has her come in his office about every couple of years or so to recommend a new fund which I dont like but to his credit he is only charging her the 1.25% AUM on her IRA account with the $176,880.95 balance but not on her $ 289,777.00 taxable account.(?)Before I call the adviser I had a couple of questions.Do you see and rhyme or reason for the funds the adviser recommended? Any we should keep ? Any tax strategies to be considered ?If we end up keeping most of the individual stocks how would you build a suitable AA around that for an 86 year old woman?I will probably use Fidelity because I use them for my portfolio and they have a local office which is comforting to my mother


Stats:

86 year old widowed in good health other than failing eyesight
Has a 3 yr/200 day LTC with simple inflation protection ,return of premium ( CNA premiums has never increased in 22 years!)
sister shares house with mom and helps her as well



2018 tax bracket 22%
Fl resident -no state taxes
no mortgage
total monthly expenses 4500.00 ( includes aprox 500.00 monthly to different charities)

income
ss and pensions 3,123.00
annuity ( ends age 91) 1055.00
RMD 1,200.00

total monthly income $5,378 $ 64,536 annual

Home paid off Value $ 175,000.00
emergency fund $ 10,000.00
IRA $176,880.95
Taxable $ 289,777.00






Taxable account:

US Equities $ 194,763.71 67.23%
Non-US Equities $ 6,492.49 2.24%
Fixed Income $ 44,532.63 15.36%
Cash & Cash Alternatives* $ 43,267.06 14.93%

Total $ 289,777.00


LT Cap. Gains
RJ Cash sweep account ( 0.15% ) $ 41,440.00
ALTRIA GROUP INCORPORATED MO $28,009.89 $27,902.20
DUKE ENERGY CORPORATION NEW COM NEW DUK $8,232.00 $1,987.41
EXXON MOBIL CORPORATION XOM $50,184.00 $49,409.01
KRAFT HEINZ COMPANY KHC $7,167.72 $7,153.92
PHILIP MORRIS INTERNATIONAL INCORPORATED PM $41,284.59 $40,809.03
UNITED PARCEL SERVICE INCORPORATED CLASS B UPS $50,892.00 $ 25,635.20

AMERICAN FUNDS TAX ADVANTAGED GR AND INC PORT CLASS C M/F TAICX ER .78 $33,527.80 $10,577.07
AMERICAN HIGH INCOME MUNICIPAL BOND FD CLS C - AMERICAN M/F AHICX .67 $16,154.69 $2,154.63
EUROPACIFIC GROWTH FUND CLASS F1 - AMERICAN FUNDS N/L .87 $1,752.79 $1,752.79
NUVEEN QUALITY MUNCP INCOME FD NAD 1.9 $11,917.00 $23.63



IRA Account:

US Equities $ 59,095.16 33.44%
Non-US Equities $ 52,987.86 29.95%
Fixed Income $ 34,790.35 19.66%
Cash & Cash Alternatives* $ 24,457.52 13.82%

Total $176,880.95

Raymond James Bank Deposit Program Cash $2,383.68
CAPITAL INCOME BUILDER FUND CLASS F1 - AMERICAN FUNDS N/L ER .68 $6,258.94
EUROPACIFIC GROWTH FUND CLASS F1 - AMERICAN FUNDS N/L AEGFX .87 $20,419.24
FIRST EAGLE GLOBAL FUND CLASS I N/L SGIIX .84 $34,899.1
INCOME FUND OF AMERICA CLASS F1 - AMERICAN FUNDS N/L IFAFX .65 $19,964.22
JANUS HENDERSON GLOBAL EQUITY INCOME FUND CLASS I N/L HFQIX .83 $15,096.94
LORD ABBETT FLOATING RATE FUND CLASS F N/L LFRFX .80 $10,680.74
TEMPLETON GLOBAL BOND FUND ADVISOR CLASS N/L TGBAX .74 $31,190.80
WASHINGTON MUTUAL INVESTORS FUND CLASS F1 - AMERICAN N/L WSHFX

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CAsage
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Re: 86 year old mother wants to break away from financial adviser..

Post by CAsage » Fri Jan 05, 2018 6:10 am

One important thought: You will not pay capital gains on any inherited assets .... so I would sell/consolidate anything with very low capital gains, and let the massively appreciated things in taxable accounts alone! You can much more easily move the IRA, and consolidate that to a Target 2015 (?) or your choice account, or a simpler index portfolio.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

German Expat
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Joined: Fri Oct 16, 2009 10:49 pm

Re: 86 year old mother wants to break away from financial adviser..

Post by German Expat » Fri Jan 05, 2018 8:23 am

I would be very reluctant to get involved. It looks like she likes her stock market and looks at data and information. What if you would have recommended her a 50/50 portfolio 5 years ago and then she compared her results to the last 5 years stock market returns? Would she blame you then instead of your current adviser?

You already stated you don't need to inherit the money and personally I would not take responsibility for her investments. While I am sure she is paying too much in fees and is also concentrated in single stocks it is not like she fell for somebody cheating her out of her money. Personally I only get involved with somebody else's money if I am asked for it or if I see fraud.

I just drove recently with a friend / colleague for a longer distan I ce and he was raving about his great adviser and how much money the guy made him. I only told him 'good for you'. When another friend asked me what I do I sent him some links about efficient market theory and a link to this forum but I let them draw their own conclusions.

exigent
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Re: 86 year old mother wants to break away from financial adviser..

Post by exigent » Fri Jan 05, 2018 8:40 am

She wants to have participated more fully in the bull market, while you want (among other things) to reduce her equity exposure. These two things are at odds with each other...

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Watty
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Re: 86 year old mother wants to break away from financial adviser..

Post by Watty » Fri Jan 05, 2018 8:43 am

cashmoney wrote:
Fri Jan 05, 2018 12:57 am
I try to explain to her that one we don't need the money and if we did inherit the stocks we would have to pay the tax on the capital gains anyway.
That is not correct.

https://www.bogleheads.org/wiki/Step-up_in_basis

That said she has a lot of money in some of those individual stocks so selling anything that is more than 5% of her portfolio could make sense just for diversification even if she has to pay capital gains taxes.

mega317
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Re: 86 year old mother wants to break away from financial adviser..

Post by mega317 » Fri Jan 05, 2018 9:59 am

She wants to get away from RJ and you agree. Help her with that. (You don't need to talk to the advisor at all, just have the new custodian pull the assets.) But your help should stop there. You have different ideas on how to invest, and she seems to know what she wants. She seems to have plenty of money and income streams to cover her expenses, so it probably doesn't matter at all what she does.

LarryAllen
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Location: State of Confusion

Re: 86 year old mother wants to break away from financial adviser..

Post by LarryAllen » Fri Jan 05, 2018 10:26 am

Good advice so far. Not much to add except re-read all of the above and consider listening to it.

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Pajamas
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Re: 86 year old mother wants to break away from financial adviser..

Post by Pajamas » Fri Jan 05, 2018 10:30 am

I'm not arguing against moving away from the financial advisor, but maybe your mother is moving for the wrong reason. It seems like the primary reason her portfolio has underperformed is that it is very conservative, basically traditional blue chips, bonds, and similar.

delamer
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Re: 86 year old mother wants to break away from financial adviser..

Post by delamer » Fri Jan 05, 2018 12:36 pm

Watty wrote:
Fri Jan 05, 2018 8:43 am
cashmoney wrote:
Fri Jan 05, 2018 12:57 am
I try to explain to her that one we don't need the money and if we did inherit the stocks we would have to pay the tax on the capital gains anyway.
That is not correct.

https://www.bogleheads.org/wiki/Step-up_in_basis

That said she has a lot of money in some of those individual stocks so selling anything that is more than 5% of her portfolio could make sense just for diversification even if she has to pay capital gains taxes.

It does not sound like the case for your mother, but if her taxable money is in certain kinds of trusts (credit shelter, for instance), then there will not be a step-up in the cost bases when she dies.

But that should easy to verify. Absent the trust then you will get a step up.

If she wants more equity and you want less for her, then you are in an untenable position.

Consider helping you move the assets and putting her in touch with the Vanguard Personal Advisor Services. They will charge her 0.3% of assets to advise her, and you won’t get blamed (or less so) if she is unhappy.

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