Finding an adviser for lower-income immigrant couple?

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greenjb
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Joined: Thu Jun 22, 2017 9:16 pm

Finding an adviser for lower-income immigrant couple?

Post by greenjb » Sat Jul 07, 2018 1:50 pm

-An older couple at our church (Filipino, late 50s) asked me to help them find an honest investment adviser. They're incredibly hard-working housekeepers who've paid off their home and have $20K sitting in some awful high-fee checking account. They want to open a 529 for their grandkids and start saving for retirement. But they're computer illiterate, deeply intimidated by finance and want an in-person adviser to hold their hand.

-They're lovely people and I want to help -- but as a do-it-myself Boglehead, I have no idea how to find a good adviser for a lower-income couple (we live in Silver Spring, MD). Can anyone help?

-My first thought was to find a fee-only adviser. But since they have so little money to invest, wouldn't paying $1500 or $2000 to set up a plan cost them an unconscionably large chunk of their net worth? Would they be better with AUM adviser?

-What is a reasonable AUM fee for them? Does any national bank chain (BoA, Suntrust, Citibank, M&T, BB&T all have local branches) or financial services firm (Raymond James, etc) provide basic, honest, non-ripoff financial advice for a couple who, I fear, could easily be taken advantage of?

-Finally, I'm going to offer to come along to their initial meetings and look over their shoulder, if they prefer. Has anyone been in this position, and do you have any advice for me?

Thanks in advance for any help.

Ostentatious
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Re: Finding an adviser for lower-income immigrant couple?

Post by Ostentatious » Sat Jul 07, 2018 2:04 pm

Unless you don’t want to get involved in guiding them, I’d just guide them to open accounts at BG, Fidelity it Schwab and invest in some index funds a little at a time. I don’t think it is worth it to pay an advisor at this point.

Topic Author
greenjb
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Joined: Thu Jun 22, 2017 9:16 pm

Re: Finding an adviser for lower-income immigrant couple?

Post by greenjb » Sat Jul 07, 2018 2:54 pm

Ostentatious wrote:
Sat Jul 07, 2018 2:04 pm
Unless you don’t want to get involved in guiding them, I’d just guide them to open accounts at BG, Fidelity it Schwab and invest in some index funds a little at a time. I don’t think it is worth it to pay an advisor at this point.
The Schwab route might be the best idea, since there's a branch nearby. What index funds would be appropriate for a 60yo couple hoping to retire in 7 or 8 years? Like a target-date fund or a 60/40 stock/bond mix? They don't yet have an IRA, so I'll start them there. I'm happy to help them, but I'm frankly a little nervous about giving them investment advice, since I'm not a professional.

Northern Flicker
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Re: Finding an adviser for lower-income immigrant couple?

Post by Northern Flicker » Sat Jul 07, 2018 3:05 pm

If they are self-employed, they can open a SEP-IRA for both of them and make contributions. They can also open Roth IRAs. All of that may be done at Vanguard, and they can use a Target Retirement fund aligned with their retirement year, or the LifeStrategy Moderate Growth fund. 529 accounts also usually have age-based all-in-one investment funds.

Trying to find the right financial advisor will be challenging.
Risk is not a guarantor of return.

Fan23
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Re: Finding an adviser for lower-income immigrant couple?

Post by Fan23 » Sat Jul 07, 2018 3:09 pm

If they only have $20K to invest and haven't even set up retirement funds for themselves, I sure hope someone talks them out of 529s for their grandchildren, for crying out loud. Terrible idea.

student
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Re: Finding an adviser for lower-income immigrant couple?

Post by student » Sat Jul 07, 2018 3:30 pm

Fan23 wrote:
Sat Jul 07, 2018 3:09 pm
If they only have $20K to invest and haven't even set up retirement funds for themselves, I sure hope someone talks them out of 529s for their grandchildren, for crying out loud. Terrible idea.
+1. Housekeeping is probably a job that would be difficult for them as they get older.

Edit: Corrected a typo that completely reversed what I thought I had written.
Last edited by student on Sat Jul 07, 2018 4:05 pm, edited 3 times in total.

ColoRetiredGirl
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Location: Colorado

Re: Finding an adviser for lower-income immigrant couple?

Post by ColoRetiredGirl » Sat Jul 07, 2018 3:48 pm

Fan23 wrote:
Sat Jul 07, 2018 3:09 pm
If they only have $20K to invest and haven't even set up retirement funds for themselves, I sure hope someone talks them out of 529s for their grandchildren, for crying out loud. Terrible idea.
A very big +1 for agreement. They need to take care of themselves first and then kids if they can.

delamer
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Re: Finding an adviser for lower-income immigrant couple?

Post by delamer » Sat Jul 07, 2018 4:15 pm

With just $20K, I would help them find a better bank with no-fee checking and a decent savings account.

They don’t have enough to pay fees or take any risks.

inbox788
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Re: Finding an adviser for lower-income immigrant couple?

Post by inbox788 » Sat Jul 07, 2018 4:54 pm

Fan23 wrote:
Sat Jul 07, 2018 3:09 pm
If they only have $20K to invest and haven't even set up retirement funds for themselves, I sure hope someone talks them out of 529s for their grandchildren, for crying out loud. Terrible idea.
While I agree a 529 is probably not a great idea, it may be that terrible. If 20k is their life savings and they're getting such a late start in retirement savings, what's a realistic contribution they can make to retirement in the next 5-10 years? They're not in a typical situation, and it might be too little too late to make much of a difference. There's not a whole lot about living on SS and medicare alone, and they may be counting on their kids and grandkids to help out. It's putting many eggs in those small baskets, but the alternatives may not be much better. Some topics they may want to address is medicaid planning and protecting their home.

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Investingwise, they don't need an advisor or planner for the expected amounts. A low cost target date fund is fairly conservative, and the most risky aggressive move is a balanced index fund, but they must recognized there's real chance of significant losses. https://investor.vanguard.com/mutual-fu ... view/vbiax

Without a computer, walking into Fidelity or Schwab office is simplest options. Banking by phone and mail is available, but difficult and getting more so. There's constant pressure to move online. A dumbed down phone app may be the endpoint that works, but the brokerages haven't gotten there yet.

The "good" financial advisors will recognize they can't make much from this couple and not accept them as clients. The worst ones will sell them more products they don't need and can't afford, more than the typical new poster here. You can try to warn them, but overcoming their mindset and naive thinking about these predators is going to be challenging. Far too many "professionals" taking advantage of elderly, and sadly they appear to be helpless seeking out any help they can, not realizing they're better off not seeking help (from he wrong kind of "helper"). OP, just do all you can to reinforce that they've been doing the right thing and keep doing it. Now is not the time to blindly change course or take risk.

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dratkinson
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Re: Finding an adviser for lower-income immigrant couple?

Post by dratkinson » Sat Jul 07, 2018 5:55 pm

BH Finding an adviser for lower-income immigrant couple.



Agree. They should find a cheaper bank.

Might want to look into moving their banking to a credit union. Why? Lower cost.

My COOP-linked CU has a free zero-interest checking option, mails monthly statements, and has an 800# for phone access to human or telephone banking. (I like the telephone banking as it's faster than going online or waiting for a human.) Since it's also part of the CU COOP network, I can access my account from any COOP CU nationwide.

My CU is pscu.org. Maybe you can help them find something local that is similar.



Agree. Your friends should take care of themselves first. The grandkids can be taken care of by their parents or they can get an educational loan. Your friends can NOT get a retirement loan.



Agree. Believe any FA would abuse them seriously. Therefore your friends should manage their own investments by using a low cost brokerage and low cost funds.



Agree. They should take advantage of a self-employed retirement account option, an IRA option (probably a traditional account as I assume they will need the RMDs to live on), and a taxable option if they can swing it.

I recall the solo 401k can be setup to accept after-tax contributions, so would lean toward it for more tax-sheltered growth.
See: https://thefinancebuff.com/executing-me ... -401k.html

The combination of self-employed retirement plan + after-tax contributions + tIRA(s) should consume everything they can contribute each year. Can add a taxable account if they can contribute more.



Agree. You should guide your friends to the resources they need, but back away afterwards.

Can send them here* and the forum can offer more detailed suggestions. Then the solutions they implement, after considering all their options, will be their own. (* Okay, you can help them with that part.)

And you can help them setup and begin the implementation of their solution until they learn the ropes. Then you back away.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

mhalley
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Re: Finding an adviser for lower-income immigrant couple?

Post by mhalley » Sat Jul 07, 2018 6:23 pm

How about a financial plan for $96?
https://www.doughroller.net/financial-p ... ark-zoril/

Jack FFR1846
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Re: Finding an adviser for lower-income immigrant couple?

Post by Jack FFR1846 » Sat Jul 07, 2018 6:28 pm

Move from their rip off bank to a credit union. They'll find free checking and can put some of the $20k into a CD. I agree that a 529 is a horrible idea.


.....also not overly happy with "late 50's" being characterized as an "older couple".
Bogle: Smart Beta is stupid

TravelGeek
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Re: Finding an adviser for lower-income immigrant couple?

Post by TravelGeek » Sat Jul 07, 2018 7:58 pm

greenjb wrote:
Sat Jul 07, 2018 2:54 pm
The Schwab route might be the best idea, since there's a branch nearby. What index funds would be appropriate for a 60yo couple hoping to retire in 7 or 8 years? Like a target-date fund or a 60/40 stock/bond mix? They don't yet have an IRA, so I'll start them there. I'm happy to help them, but I'm frankly a little nervous about giving them investment advice, since I'm not a professional.
How much do you think they will be able to invest over the course of the 7-8 years? Seems to me with $20k now they likely will not end up with a significant nest egg to augment social security very much, but it would get them a safety net to handle with larger needs such as a new roof or a new (used reliable) vehicle in the future. Might even be important to keep at least some of the 20k in a 100% safe and accessible investment now if there is no emergency fund.

I would definitely consider a local Schwab office the best option for an investment account. Target date fund sounds like the most straightforward solution. That said, I totally understand the concern about offering concrete advice. I only tell friends/family what I do (if someone asks) and why, but offer advice.

Regarding AUM advisor, I doubt that you would be able to find one who is very motivated to do a lot of work for 1-2% of $20k.

Anyone know of an “If you can” style mini ebook for a more mature (nod to Jack’s post above me) audience in a situation like this?

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BL
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Re: Finding an adviser for lower-income immigrant couple?

Post by BL » Sat Jul 07, 2018 11:40 pm

Agree that if they insist on investing, walking into to a Schwab or Fidelity would be a reasonable choice. (Not sure if they have charges for low value accounts.) They need to know ahead of time what they want, and not deviate from it if an "advisor" suggests something else. A Target date fund seems reasonable. This could be the fund in a Roth or traditional IRA. They need to be aware that both stock funds and bonds can lose money. You could be blamed if the market crashes 50% and they have almost nothing left. This loss can be very painful for those who are not used to investing.

Another possibility for an IRA would be a Roth or traditional IRA in a bank or credit union. Again I would decide what is to be purchased, and not be led to the "investment" side of the bank or CU. A Savings account or CD (check out rates of 1/2, 1, 2, or X year CDs) with a decent rate might be available somewhere locally.

They can each put in 6500/year to an IRA if combined work income is at least 13,000. Not sure if they have enough left to invest to make it worth while to set up a work IRA also. They might even get a Saver's Credit to cancel some tax if they have low income, I think under 60,000. Using the deductible traditional IRA might help them get lower AGI income if they are close to the credit limits. It is not that easy to figure without using a tax program.

Extra savings could go into CDs, savings account, or money market without using IRAs.

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