Help with my mom's investments, please.

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Help with my mom's investments, please.

Post by GuinnessPhish » Mon Apr 16, 2018 9:57 am

Background:

My father died of ALS in February 2016. He was in charge of all finances, so my mom was essentially clueless to all things financial and investment related. My parents utilized the services of a fiancial adviser for about 15 years. This guy has made some recommendations to my mother which I find completely unneccessary, and I believe he is acting in his own interest of getting a paycheck.

Fortunately for my mother, my father had a pension. She receives three checks a month, one from the pension, one from VA benefits, and one from social security. These total about $5700 a month. Her expenses are about a third of that a month, on average, so she wound up having over $100,000 in her checking account. So, in June of 2016, while this adviser was recommending to my mother ANOTHER annuity, I told her that I didn't believe she needed any annuity, and that she should invest her money in Vanguard index funds.

I was able to convince my mother to open a Vanguard account. She invested $50,000 into the Wellington fund. A little over a year later, I convinced her to invest more, as her investment was appreciating nicely. She added $10,000 more to Wellington, and also invested $10,000 in VTSAX. So, $70,000 invested, and up until a couple of days ago, up about $11,000.

Well, my mom goes to her adviser to have her taxes done, and she winds up owning an additional $1500 to the fed. The adviser convinces her that this is because of her Vanguard investments, so he convinces her to close these accounts, even having his assistant make the phone call to Vanguard to do so for my mom. He convinced her that her money would be better placed in ANOTHER annuity, earning a cap of 4.5%.

More background:

My parents already have FOUR annuities, three with Athene, and one with American equity investment life insurance company. The athene annuities were started in 2011. One is a non qualified indexed annuity, intial investment of around $26,000, with a current accumulated value of $31,923.23. Another is a IRA-Traditional(408(b)) qualified indexed annuity, also with a 4.5% cap, intital investment of $35,333.36, current accumulated value of $46,722.73, from which she has received annual payments the last two years of $1883.11 gross. The third annuity from athene is another IRA-Traditional(408(b)) qualified indexed annuity witha 4.5% cap, intitial investment $10,618.27, current accumulated value $9776.19, from which she has received two annual payments of $412.46 gross. The fourth annuity with american equity was started just last July, and has about $20,000 in it.

So, I've convinced my mom that her adviser is only looking to secure a commission paycheck by selling these products, and is not doing her any favors, and that she absolutely should not have just gone along with his suggestion to close out the vanguard accounts, and she absolutely should not sign any contract for yet another annuity.

My questions:

My mom wants to get her money she just cashed out of Vanguard back into Vanguard, but both Wellington and VTSAX won't allow her to reinvest for a month. Should she just wait the month and then reinvest in these funds, or are there similar funds she could invest in today?

Any comments on this adviser's advice? Just in searching, I came across brokercheck, and here is disclosure information I found on her adviser (whom my mom is ready to stop going to, thankfully):

5/20/2002, Customer Dispute, Settled:
Allegations
THE CUSTOMER ALLEGES MISREPRESENTATION, UNSUITABILITY, AND UNAUTHORIZED TRADING IN THE HANDLING OF HIS ACCOUNT
Damage Amount Requested
$665,000.00
Settlement Amount
$350,000.00
Broker Comment
THE BROKER AND THE FIRM DENY THE ALLEGATIONS MADE BY MR. [CUSTOMER]. MR. [CUSTOMER]IS AN EXPERIENCED AND KNOWLEDGEABLE INVESTOR WHO UNDERSTOOD AND AUTHORIZED THE ACTIVITY IN HIS ACCOUNT. MR. [CUSTOMER]IS SEEKING TO SHIFT THE RESPONSIBILITY FOR HIS OWN INVESTMENT DECISIONS AND IS ATTEMPTING TO BLAME OTHERS FOR MARKET CONDITIONS BEYOND ANYONE'S CONTROL.

THE MATTER WAS SETTLED SO AS TO AVOID THE TIME AND EXPENSE OF LITIGATION AND NOT AS AN ADMISSION OF LIABILITY.

12/29/97, Regulatory, Final:
Initiated By
NYSE DIVISION OF ENFORCEMENT
Allegations
**DECMEBER 29, 1997** STIPULATION AND CONSENT
TO PENALTY FILED BY NYSE DIVISION OF ENFORCEMENT AND PENDING.
CONSENTED TO FINDINGS THAT HE: 1. ENGAGED IN CONDUCT
INCONSISTENT IN THAT HE RECOMMENDED AND EFFECTED TRADES IN THE
ACCOUNTS OF SEVEN CUSTOMERS WHICH WERE UNSUITABLE BASED UPON
THEIR INVESTMENT OBJECTIVES, EXPERIENCE AND FINANCIAL
RESOURCES; 2. VIOLATED EXCHANGE RULE 408(a) BY EXERCISING
DISCRETION IN FIVE CUSTOMER ACCOUNTS WITHOUT FIRST OBTAINING
THE WRITTEN AUTHORIZATION OF THE CUSTOMERS; 3. VIOLATED
EXCHANGE RULE 721 BY EFFECTING OPTIONS TRANSACTIONS IN ONE
CUSTOMER ACCOUNT NOT APPROVED FOR OPTIONS TRADING; AND 4.
VIOLATED EXCHANGE RULE 723 BY EFFECTING UNSUITABLE OPTIONS
TRANSACTIONS IN TWO CUSTOMER ACCOUNTS.
Resolution
Stipulation and Consent
Sanctions
Censure

Sanctions
Suspension

Sanction Details
**FEBRUARY 24, 1998** DECISION 98-23 ISSUED BY
NYSE HEARING PANEL - DECISION: XXXXXX CONSENTED TO FINDINGS
THAT HE: RECOMMENDED AND EFFECTED UNSUITABLE TRADES; VIOLATED
EXCHANGE RULE 408(a) BY EXERCISING DISCRETION WITHOUT PRIOR
WRITTEN AUTHORIZATION; VIOLATED EXCHANGE RULE 721 BY EFFECTING
OPTIONS TRANSACTIONS IN AN ACCOUNT NOT APPROVED FOR OPTION
TRADING; AND VIOLATED EXCHANGE RULE 723 BY EFFECTING UNSUITABLE
OPTIONS TRANSACTIONS. KREPPEL CONSENTED TO A CENSURE AND A NINE
MONTH SUSPENSION.


3/5/97, Customer Dispute, Settled:
Allegations
THE CLIENT ALLEGED THAT HER INVESTMENTS WERE
UNSUITABLE. ALLEGED DAMAGES- UNSPECIFIED BUT IN EXCESS OF
$10,000.
Settlement Amount
$12,000.00
Broker Comment
THE REPRESENTATIVE DID NOT CONTRIBUTE TOWARD THE
SETTLEMENT OF $12,000.
CLIENT HAD PRIOR EXPERIENCE BUYING STOCKS &
BONDS. I ADVISED CLIENT TO SECURITY WHEN PERFORMANCE BECAME
SUB-PAR. CLIENT OBJECTED AND DECIDED TO HOLD ONTO THE
SECURITY. I LEFT SMITH BARNEY AND BECAME EMPLOYED BY JANNEY,
CLIENT DID NOT WISH TO FOLLOW ME AND MAINTAIN OUR RELATIONSHIP.
CLIENT DECIDED TO STAY AT SMITH BARNEY WITH THE NEW
REPRESENTATIVE.


12/9/96, Customer Dispute, Settled:

Allegations
THE CLIENT ALLEGED MISREPRESENTATION.
ALLEGED DAMAGES UNSPECIFIED, BUT IN EXCESS OF $10,000.00
Settlement Amount
$30,000.00
Broker Comment
THE CLIAM WAS SETTLED FOR $30,000.
THE ALLEGAIONS THAT WERE MADE AGAINST ME ARE
COMPLETELY UNWARRANTED AND SIMPLY NOT TRUE. THE CLIENT WAS
THROUGHLY INFORMED OF THE RISKS AND REWARDS INVOLVED WITH THE
SECURITIES IN QUESTION. FURTHERMORE MY PRIOR FIRM HAD AN
OPINION ON THE COMPANY AS WELL AS AN ANALYST WHO FOLLOWED THE
COMPANY. THE CLIENT INCURRED PART OF HIS LOSS BY SELLING THE
SECOND SECURITY ON HIS OWN DOING, BECAUSE WHEN HE CHOSE TO SELL
THE SECURITY HE WAS NO LONGER MY CLIENT.

7/11/95, Customer Dispute, Settled:

Allegations
SUITABILITY, EXCESSIVE TRADING AND
MISREPRESENTATION. ALLEGED DAMAGES: $100,000.00
Damage Amount Requested
$200,000.00
Settlement Amount
$85,000.00
Broker Comment
THE CASE WAS SETTLED FOR $85,000.00. THE BROKER
WAS TERMINATED BECAUSE OF THIS AND OTHER CUSTOMER COMPLAINTS.
MR. XXXXXXX DID NOT CONTRIBUTE TO THE SETTLEMENT.
Not Provided


1/4/95, Customer Dispute, Settled:

Allegations
UNAUTHORIZED TRADING, UNSUITABILITY, FRAUD,
MISREPRESENTATION, BREACH OF CONTRACT, EXCESSIVE TRADING AND
BREACH OF FIDUCIARY DUTY. ALLEGED DAMAGES: $95,143.00
Damage Amount Requested
$95,143.00
Settlement Amount
$75,000.00
Broker Comment
PRIOR TO THE HEARING WITHOUT ADMITTING FAULT OR
LIABILITY, THIS MATTER WAS SETTLED FOR $75,000.00 TO BE PAID BY
THE FIRM. MR. XXXXX DID NOT CONTRIBUTE TO THE SETTLEMENT.
Not Provided

1/28/93, Employment Separation after allegations

Firm Name
PRUDENTIAL SECURITIES INCORPORATED
Termination Type
Permitted to Resign
Allegations
95-03283
SUITABILITY, EXCESSIVE TRADING AND
MISREPRESENTATION. ALLEGED DAMAGES: $100,000.00
Broker Comment
THE CASE WAS SETTLED FOR $85,000.00. THE BROKER
WAS TERMINATED BECAUSE OF THIS AND OTHER CUSTOMER COMPLAINTS.
MR. KREPPEL DID NOT CONTRIBUTE TO THE SETTLEMENT.
Not Provided

Thanks for any advice!
Last edited by GuinnessPhish on Mon Apr 16, 2018 4:46 pm, edited 1 time in total.

User avatar
LadyGeek
Site Admin
Posts: 49293
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Help with my mom's investments, please.

Post by LadyGeek » Mon Apr 16, 2018 3:27 pm

Welcome! While the FINRA BrokerCheck is an excellent way to vet a broker's background, I recommend you remove the link in your post.

- It identifies the broker, who may in turn figure out your Mom's identity.
- The broker may have some explanations on those complaints. The best course of action is to ask the broker about them and decide from there. (Although, it does look pretty bad to me.) If your Mom is going to leave this guy, there's no point rubbing salt into the wound.

You can edit your post by clicking on the "pencil" icon in the top-right corner of the post. If you need help with this, let me know.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
Pajamas
Posts: 6015
Joined: Sun Jun 03, 2012 6:32 pm

Re: Help with my mom's investments, please.

Post by Pajamas » Mon Apr 16, 2018 3:36 pm

According to the information you linked to, that individual is not currently registered as a broker or as an investment adviser and hasn't been for several years.

I would try to get the recent annuity purchase reversed or cancelled.

02nz
Posts: 583
Joined: Wed Feb 21, 2018 3:17 pm

Re: Help with my mom's investments, please.

Post by 02nz » Mon Apr 16, 2018 3:46 pm

If you don't want to wait a month to buy back into Wellington, an excellent alternative would be Vanguard Wellesley Income. It's also managed by Wellington and is about 37/63 stock/bond, so it's more conservative than Wellington but perhaps that's a good fit for your mother. It also has an Admiral class with a $50K minimum.

It does sound like she needs to stay away from that broker. Perhaps you can make an agreement with her, that for her sake she should have no contact - phone or in person - with that broker, or any other person in the financial industry who's not a fiduciary, without your presence.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Mon Apr 16, 2018 4:48 pm

Pajamas wrote:
Mon Apr 16, 2018 3:36 pm
According to the information you linked to, that individual is not currently registered as a broker or as an investment adviser and hasn't been for several years.

I would try to get the recent annuity purchase reversed or cancelled.
Yeah, I noticed that too, but he is licensed with the state to sell these products for these companies.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Mon Apr 16, 2018 4:54 pm

02nz wrote:
Mon Apr 16, 2018 3:46 pm
If you don't want to wait a month to buy back into Wellington, an excellent alternative would be Vanguard Wellesley Income. It's also managed by Wellington and is about 37/63 stock/bond, so it's more conservative than Wellington but perhaps that's a good fit for your mother. It also has an Admiral class with a $50K minimum.

It does sound like she needs to stay away from that broker. Perhaps you can make an agreement with her, that for her sake she should have no contact - phone or in person - with that broker, or any other person in the financial industry who's not a fiduciary, without your presence.

I suppose I should provide more information regarding my mother's intentions with the vanguard account. Being that she already has three annuities in the form of pension, SS, and VA benefits, totaling $5700 a month, she is (or WAS) investing this money with Vanguard with the intention of letting her money work as hard as possible for her with the intent of leaving an inheritance for her four children. That being the case, I convinced her initially to invest in Wellington, as it is a managed, more balanced fund. Once she saw how well that was performing, a little over a year later I convinced her to open a straight VTSAX account, more risk, more reward, but ultimately "safe" in the sense that she doesn't have any intention of touching this money herself, and neither would her children for quite a while, as we are all in our 40s, and plan on working for quite a few more years.

So, should I just wait the 27 or so days to get her back into VTSAX, or is there some other fund I should consider immediately?

User avatar
KlingKlang
Posts: 730
Joined: Wed Oct 16, 2013 3:26 pm

Re: Help with my mom's investments, please.

Post by KlingKlang » Mon Apr 16, 2018 5:05 pm

GuinnessPhish wrote:
Mon Apr 16, 2018 4:54 pm
So, should I just wait the 27 or so days to get her back into VTSAX, or is there some other fund I should consider immediately?
Lots of other choices, two that I would have no hesitation recommending:
VFIAX 500 Index Admiral (Large stock)
VTCLX Tax-Managed Capital Appreciation Admiral (Large and mid-sized stock)

Gnirk
Posts: 871
Joined: Sun Sep 09, 2012 3:11 am
Location: Western Washington

Re: Help with my mom's investments, please.

Post by Gnirk » Mon Apr 16, 2018 6:08 pm

That “advisor” is acting only in his own best interests, and is nothing but a very slick salesman who isn’t putting her into appropriate investments for her, in my opinion. Tell your mom to run away from him as fast as she can. Wellington and Wellesley are very good funds, but do throw off dividends and capital gains, so are more suitable for an IRA of some sort, rather than a taxable account in most cases. A three fund portfolio of index funds would be a good start.

02nz
Posts: 583
Joined: Wed Feb 21, 2018 3:17 pm

Re: Help with my mom's investments, please.

Post by 02nz » Mon Apr 16, 2018 6:23 pm

GuinnessPhish wrote:
Mon Apr 16, 2018 4:54 pm
So, should I just wait the 27 or so days to get her back into VTSAX, or is there some other fund I should consider immediately?
If you're concerned about time out of the market, I'd just go with the 500 fund (VFIAX for Admiral shares). That of course only has the S&P 500 rather than the entire stock market, but the real difference is very small. You could always exchange later into VTSAX if you wanted to (but that would be a taxable event).

Gnirk's advice about the three-fund portfolio is good; index funds' greater tax efficiency make them a good fit for this portfolio. For her purposes I might recommend something like 50% Total Stock Market (U.S.), 30% Total International, and 20% Total Bond, but there's no one right answer. Just be sure that she reeally does have the risk tolerance that you think she does - it's one thing to talk about risk when the market's going up, another when things really head south (and I don't mean what's happened since February). You don't want her freaking out when the market takes a 30-40% dip, and the advisor comes calling saying, "oh I have some much safer investments."

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Mon Apr 16, 2018 6:33 pm

Thanks for all the replies.

Again, just to reiterate, this investment is 100% intended for growth for eventual disbursement of assets to her four adult children. Her current monthly income of $5700 is and will continue to exceed her expenses, and she intends to keep funding the Vanguard account for the purpose of maximizing the inventual inheritance we will receive.

I'm thinking of just waiting the month until she can reinvest the $80k she cashed out entirely into VTSAX. She will likely invest even more, as her current checking account balance far exceeds any necessary cushion for bills.

I mentioned to her the notion that she should also consider gifting some money to us, as she said, she'd rather enjoy it now, as she is a relatively healthy and young 73 year old. I told her, that obviously it is her decision to do so, but it serves a logic in reducing the taxes we would face on any inheritance.

Any thoughts or advice on gifting money as a tax reduction strategy?

User avatar
Bruce
Posts: 331
Joined: Fri Mar 02, 2007 8:02 am
Location: Alaska

Re: Help with my mom's investments, please.

Post by Bruce » Mon Apr 16, 2018 6:35 pm

Your Mom could do a lot worse then using Vanguard Balanced Index fund shares as an immediate entry point if she is concerned about the waiting period. (VBIAX for admiral shares with a $10,000 minimum investment, VBINX for investor shares otherwise)

You also may want to contact your state licensing agency or attorney generals office to complain about the person offering this advice and the unsuitable investments offered to your Mom.

With enough pension like income already in place to meet her foreseeable needs, the only purpose of selling the annuities in this case is enriching this sales person, not your Mom.

That has to be very frustrating for you to have gotten her started on a low cost investing path, only to have it undone in a moment by a sales person interested mainly in churning a commission, and not the best interest of your Mom.

As Bill Bernstein writes, "You are engaged in a life and death struggle with the financial services industry. ....If you act on the assumption that every broker, insurance salesman, ... and financial advisor you encounter is a hardened criminal, you will do just fine."

Good luck with your efforts correcting this.

Regards,
Last edited by Bruce on Mon Apr 16, 2018 6:46 pm, edited 1 time in total.
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

User avatar
Bruce
Posts: 331
Joined: Fri Mar 02, 2007 8:02 am
Location: Alaska

Re: Help with my mom's investments, please.

Post by Bruce » Mon Apr 16, 2018 6:43 pm

Suggest instead of talking about "gifting" with your Mom, you ask her what travel or other experiences she may want to experience with the family, while healthy enough to enjoy it. Then make some plans and start ticking those items off her list with her. The time you are able to spend together on one of her long sought adventures, may be far more rewarding then any future inheritance or gift of cash.

Just last fall we were able to visit Yellowstone National Park with my siblings and 90 year old mother. She had gone there on her honeymoon, and our whole family had taken summer vacation trips there growing up. The time spent together revisiting those memories and experiences, was worth more then any inheritance would ever offer.

Regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

User avatar
BL
Posts: 8454
Joined: Sun Mar 01, 2009 2:28 pm

Re: Help with my mom's investments, please.

Post by BL » Mon Apr 16, 2018 6:51 pm

She could place it into the Prime Money Market fund, for example, while she decides what to do.

There is one tax-managed stock/bond fund which is close to 50/50 U.S. stock/bond:
Vanguard Tax-Managed Balanced Fund Admiral Shares VTMFX
if she has higher income and chooses to pay lower tax (muni bonds federal tax-free).
For lower income, a single fund might be Life Strategy Moderate (60/40) or a near-date Target date fund.

Vanguard 500 Index Fund Admiral Shares VFIAX would also be close to your total stock market and could be sold after the 31 days. The one mentioned in above thread sounds similar.

Bonds, including in Wellington fund, give off dividends which add to tax cost. Stock index funds and munis are more tax-friendly, so intermediate muni bond, total stock market, and perhaps total international funds would be tax-efficient.

If she signed the last annuity contract, I would contact the company to try to get it revoked, with copies to state agencies and FINRA, and more.

Agree to encouraging travel or other "bucket list" items while she is young enough and healthy enough to travel, etc. A family gathering at a great place might be fun.

User avatar
LadyGeek
Site Admin
Posts: 49293
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Help with my mom's investments, please.

Post by LadyGeek » Mon Apr 16, 2018 7:24 pm

GuinnessPhish wrote:
Mon Apr 16, 2018 6:33 pm
Any thoughts or advice on gifting money as a tax reduction strategy?
I don't have any personal experience dealing with these annuities, but I might offer a different perspective.

Do any of your Mom's accounts have beneficiaries? What I'm getting at is something called a "Transfer on Death" or "Pay on Death" form. Upon death, the accounts are transferred to the beneficiaries stated on the forms. They are removed from the estate and not subject to probate. So, no estate taxes to pay. *

The most common place you will find these forms are with your bank's checking, savings, and CD accounts. They are also used in IRAs and employer retirement plans.

Here's a detailed explanation: Estate planning must-dos , from Fidelity.

My thinking is that you can let your Mom spend as much as she wants from these accounts. Whatever is left goes to the beneficiaries. You don't have to worry about the complexities of gifting the money simply to avoid taxes.

All of this should be done under the guidance of an elder law attorney experienced in your state (estate planning laws go by state).

The first step is to be absolutely sure and check each account for these forms. Then, ensure they are filled out in accordance with your Mom's wishes.

* Update: The recipient may have to pay some taxes. It depends. See: Tax and Other Consequences of Inheriting a POD Account
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

WillRetire
Posts: 96
Joined: Mon Jun 05, 2017 10:01 am

Re: Help with my mom's investments, please.

Post by WillRetire » Mon Apr 16, 2018 7:29 pm

Much depends on your mother's financial plan and her objectives. Not all annuities are bad. A deferred annuity would incur no taxes until drawn from, could be used for long-term care, is safe from market downturns, and could be left to heirs.

You mentioned the goal for this particular investment is for growth because it is "100% intended for eventual disbursement of assets to her four adult children". This implies that the funds are not needed for anything, current or future. Not even long-term care? Or, as some others have mentioned, what about more joyful plans, like travel?

You are asking for investment advice for money that is not yours (yet), belongs to someone else now, and when disbursed will go to multiple people, not just you. If your mother is still capable of making decisions, maybe the best thing to do for her is find her a good financial planner.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Mon Apr 16, 2018 7:50 pm

Thanks again for all replies.

Regarding travel, yes, that is definitely an objective, and something that we do occasionally. My parents bought heavily into timeshares (bluegreen and wyndham, don't get me started), so we do have options as far as enjoying some vacationing in the future, although personality conflicts among siblings as well as between my siblings and my mom prohibit any likelihood of all of us going on the same vacation at the same time.

Regarding whether she signed anything in regard to the new annuity, she told me she hasn't yet, and that she will not, and will not be sending a check in for it.

In regard to the annuities she currently has, they do have us children listed as beneficiaries, and the insulation from downsides of the market were included as the "reasons" for getting them. The RMD for the two non qualified annuities started in 2015, and have amounted to around @$1800 each year for one, and @$500 each year for the other....so basically, totally useless amounts considering she has plenty of money every month coming in.

In regard to long term care, that is already paid for. My father, fortunately purchased long term care for the both of them years ago, and he certainly needed and used the benefit in his last years as he deteriorated from ALS, he was fortunately able to do so in the comfort of his own home with a health aide. Now that he has passed, my mother is still covered, but no longer pays any premium for it.


Another detail I should disclose....I set up my mother's online access to the three Athene annuities, and was able to find out her "Free withdrawl amount" for each. I've requested a check for all three of these free withdrawal amounts, totaling almost $10,000, so that my mom can at least get some more money away from this unnecessary annuity and back under her control.

User avatar
LadyGeek
Site Admin
Posts: 49293
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Help with my mom's investments, please.

Post by LadyGeek » Mon Apr 16, 2018 9:03 pm

Regarding account access, I understand you are doing this with her permission. Do you have anything more formal, such as a Power of Attorney? This gives you a legal standing to act on her behalf.

For me: First, I have a Power of Attorney that will kick-in if my Mom becomes disabled and unable to manage her affairs. This document was drawn up by an elder law attorney.

Next, I have a Power of Attorney for my Mom's bank accounts. This was a bank form she signed in the presence of a bank employee. I am on record with the bank to discuss details and manage her affairs (if needed). Her level of experience is to handle the checking account only. I take care of the rest of it. You can probably get one on-the-spot by asking a bank employee and having your mother present.

Finally, I have Power of Attorney (full agent authorization) for her Vanguard accounts. I'm managing these accounts for her.

If you don't have power(s) of attorney, I strongly recommend you get them.

Without these legal protection in place, you may be put in a very bad light if your siblings and relatives don't agree with your actions. It can get ugly, to say the least. You need to protect yourself. This is another area in which you should follow the advice of an elder law attorney.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

denovo
Posts: 4384
Joined: Sun Oct 13, 2013 1:04 pm

Re: Help with my mom's investments, please.

Post by denovo » Mon Apr 16, 2018 10:17 pm

Do you have a Durable POA?
"Don't trust everything you read on the Internet"- Abraham Lincoln

Nate79
Posts: 3736
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Help with my mom's investments, please.

Post by Nate79 » Tue Apr 17, 2018 12:52 am

Your mom has no need for additional income. That's the kicker right there. There is no need for additional income streams from annuities. The salesman should be reported if at all possible.

User avatar
BL
Posts: 8454
Joined: Sun Mar 01, 2009 2:28 pm

Re: Help with my mom's investments, please.

Post by BL » Tue Apr 17, 2018 12:57 am

I mentioned to her the notion that she should also consider gifting some money to us, as she said, she'd rather enjoy it now, as she is a relatively healthy and young 73 year old. I told her, that obviously it is her decision to do so, but it serves a logic in reducing the taxes we would face on any inheritance.
Unless her estate exceeds 10+ million, there shouldn't be taxes due on a lot of her estate (maybe state??). I know annuities, tIRA, and some similar items can be taxable if they were tax-deferred before.

However, there is a step-up for capital gains upon death, so no tax on inherited stocks and bonds if sold quickly. If sale is delayed, any gain has the better rate of long-term capital gains. Gains in annuities are taxable, or all if it is tax-deferred money to start with, and a tax-deferred IRA would be taxable. There might be taxable interest if CDs or I-Bonds are cashed.

Vanguard has low-cost management available if she would like that to help avoid disputes among siblings. The cost is 0.3%/year with very low-ER funds.

Grt2bOutdoors
Posts: 19524
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Help with my mom's investments, please.

Post by Grt2bOutdoors » Tue Apr 17, 2018 6:16 am

If your mother thinks $1,500 is a lot, wait until she gets the tax bill for cashing out the Vanguard account- send the tax bill to this unscrupulous adviser and dump him.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

RickBoglehead
Posts: 1258
Joined: Wed Feb 14, 2018 9:10 am

Re: Help with my mom's investments, please.

Post by RickBoglehead » Tue Apr 17, 2018 6:33 am

If your mother has stated she doesn't want to go back to this advisor, there are some steps you can take.

At a minimum, draft a letter from your mother, to the advisor, severing ties, and cc all the 4 children.

Better yet, get POA on your mother's accounts and move them away from the advisor.

psteinx
Posts: 2912
Joined: Tue Mar 13, 2007 2:24 pm

Re: Help with my mom's investments, please.

Post by psteinx » Tue Apr 17, 2018 11:08 am

OP, it appears your mother is, financially:

1) unsophisticated
2) easily persuaded

(I could be wrong, but...)

I think having her get her taxes done at a place that also sells investments (annuities) with a general reputation for high commissions is a recipe for bad outcomes. Strongly consider changing her tax prep arrangements - either you help her do the taxes yourself or have her work with a tax prep firm that doesn't also sell investments or something like that...

focusedonwhatmatters
Posts: 125
Joined: Wed Nov 29, 2017 11:49 am

Re: Help with my mom's investments, please.

Post by focusedonwhatmatters » Tue Apr 17, 2018 4:44 pm

No advice, just commiserating. My mother is equally taken advantage of, but she doesn't mind buying more and more annuities because her "advisor"/salesperson is a nice man. :annoyed

jpsc
Posts: 114
Joined: Sat Feb 10, 2018 11:05 pm

Re: Help with my mom's investments, please.

Post by jpsc » Tue Apr 17, 2018 5:00 pm

If I were you - I would look into Vanguard target income trust fund, or Vanguard Dividend Appreciation VIG, or simply buy I-bonds.

Dividends are tax free if you have 0 income - but since you have annuities and social security, I-bonds (tax deferred, compound interest, no fee) is probably the best. Last few months, it is too volatile for index like SP500, NASDAQ-100.

Plus the advantage of I-bonds - your mom could have you or other sibling as co-owner - no need for death tax and the bond keeps growing for 30 years.

User avatar
whodidntante
Posts: 4327
Joined: Thu Jan 21, 2016 11:11 pm

Re: Help with my mom's investments, please.

Post by whodidntante » Tue Apr 17, 2018 5:15 pm

Get power of attorney and take over management of her accounts, if she agrees.

Wellington is 65% stocks, 32% bonds, and 3% cash. You could easily buy the same composition using low cost passive funds at Vanguard or any other low cost provider. Then trade back to Wellington if you wish once the purchase block expires. But I would probably leave it in the passive funds since I haven't drank the Wellington kool-aid, don't own it, don't want to.

I think it's great that you are calling a spade a spade. It is thankless work to save people you love from getting fleeced.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Wed Apr 18, 2018 10:00 am

Thanks again to everyone who responded.

I've got to do some research on some of the things mentioned in this thread. Admittedly, I'm no expert. I just knew there was absolutely no reason for my mom to lock up money in annuities when she has plenty of money coming in, that is guaranteed to come in for as long as she lives.

With the logic being that this Vanguard account is entirely intended and wanted to be an account for her children's inheritance to grow as much as possible, from which it will not be touched for about 20 years, and with the hope of minimizing taxes, what is the best way to go?

NotWhoYouThink
Posts: 2099
Joined: Fri Dec 26, 2014 4:19 pm

Re: Help with my mom's investments, please.

Post by NotWhoYouThink » Wed Apr 18, 2018 10:53 am

Regarding travel, yes, that is definitely an objective, and something that we do occasionally. My parents bought heavily into timeshares (bluegreen and wyndham, don't get me started), so we do have options as far as enjoying some vacationing in the future, although personality conflicts among siblings as well as between my siblings and my mom prohibit any likelihood of all of us going on the same vacation at the same time.
Tread very carefully here. If siblings don't get along well enough to vacation together, how well are they going to agree on how Mom should invest?

Do you or any of your siblings have POA? Do you or any of your siblings have online visibility into any of her accounts? This is the time to over-communicate with siblings to absurd extremes to make sure no one feels you are taking advantage. If you give advice to invest her money in equities and the market drops, whose fault is the loss in value?

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Mon May 14, 2018 3:14 pm

Alright, so, here we are a month out from my original post. My mom's self interested "adviser" emailed her asking her to send the check for the additional unnecessary annuity. My mom replied by informing him that she doesn't want this annuity, as she has three sources of income from pension, social security and VA benefits, as well as the four or five useless annuities she already has with this guy.

I'm really proud of her for sending that email, as opposed to just ignoring him, which is her plan from here on out.

So, mom now has $228,000 in her checking account.

With the mindset of not touching this money at all and letting it grow for use by her children upon her death, I'm thinking of advising her to invest as much as she is comfortable with (probably about $150,000) in VTSAX.

Then, through vanguard, she can list her four children as beneficiaries.

Any thoughts?

Thanks again.

User avatar
BL
Posts: 8454
Joined: Sun Mar 01, 2009 2:28 pm

Re: Help with my mom's investments, please.

Post by BL » Mon May 14, 2018 10:58 pm

I suggest you buy a new or used book (or use library) by Jane Bryant Quinn written just for folks with retirement decisions. There is an Amazon link on this site if that is desired:
How to Make Your Money Last
It is full of easy to read, common sense, suggestions on what to do with your money in retirement. She has written recent articles for AARP magazine, and wrote for magazines as well as books over the years. It is great to have on hand as a reference when a topic comes up.

The Boglehead books are also good.

Your mom should be sure she has copies of her tax returns before dumping him.

Have you checked on the Capital Gains or Losses from selling? Long term or short term?

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Tue May 15, 2018 7:49 am

Thanks for the recommendation....I just put the book on hold at my library.

My mom does have copies of her tax returns.

Regarding the taxes that will be due on her selling her Welleseley and VTSAX: that's another ridiculous part of the story. So her adviser tells her the reason she owed an additional $1500 in taxes was due to her having those vanguard accounts....which may have been partially true. Then, a moment later, he suggests she cash out of those and buy into yet ANOTER annuity. Just prior to this suggestion, he had suggested she pre-pay her taxes quarterly, and had printed out the prepayment forms, in the quarterly amount of about $392. Then, after getting her to sell her vanguard funds, he hand wrote in a "2" in front of the $"394" amount printed to be prepaid quarterly.

So, "oh, you had to pay $1500 additional in taxes this year? Let me make that $3500 next year, and make sure I get a nice commission check!"

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Tue May 15, 2018 12:56 pm

Hmm...

also wondering if it would make sense for her to open a Roth IRA...

delamer
Posts: 6426
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help with my mom's investments, please.

Post by delamer » Tue May 15, 2018 1:30 pm

GuinnessPhish wrote:
Tue May 15, 2018 12:56 pm
Hmm...

also wondering if it would make sense for her to open a Roth IRA...
An IRA requires earned income, which I assume you mother does not have.

User avatar
BL
Posts: 8454
Joined: Sun Mar 01, 2009 2:28 pm

Re: Help with my mom's investments, please.

Post by BL » Tue May 15, 2018 1:51 pm

Here is another quick read for both of you to get some basics or review some basics.
https://www.etf.com/docs/IfYouCan.pdf
It is written by Boglehead-recommended author, Dr William Bernstein, for his young adult kids getting started in investing. I think it covers the basics really good for all of us, and it is free, short (16 pages), thorough, and covers a lot of things we need to think about. Just skip chapters of little interest. Chapter 5 (Hurdle # 5) really puts financial sales people in their place!

The Wiki and the Boglehead books really have the "expert" opinions. The forums have mostly ordinary folks who have learned from these and others in the forum as well as share their life experiences. Some are excellent, but it is not always obvious to a newcomer which opinions to count on. Usually if several folks agree, that is a good sign. Also you can click on name to find out how long they have been a member and how many comments they have made. Lots of folks have been on here ten years or more. I have learned a lot from many of them.

I would not write off simply using Vanguard PAS for managing. It would help in dealing with siblings (when stocks crash, for example, and 50% disappears almost overnight) and give your mom an expert to speak with on occasion, and would be perfect if something were to happen to you. Adding 0.3% to 0.04% total stock market, for example, would still make that a reasonable cost, 0.34%. You could speak to them and find out what they would do, then decide if it makes sense or not. They would get her into a balanced, low-cost, and tax-efficient portfolio. It would be a load off your shoulders and also a protective step in avoiding a repeat of her being talked into selling off funds for no good reason. Not suggesting you must use it, just to consider it.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Wed May 16, 2018 10:13 am

delamer wrote:
Tue May 15, 2018 1:30 pm
GuinnessPhish wrote:
Tue May 15, 2018 12:56 pm
Hmm...

also wondering if it would make sense for her to open a Roth IRA...
An IRA requires earned income, which I assume you mother does not have.
Right, duh...thanks.
BL wrote:
Tue May 15, 2018 1:51 pm
Here is another quick read for both of you to get some basics or review some basics.
https://www.etf.com/docs/IfYouCan.pdf
It is written by Boglehead-recommended author, Dr William Bernstein, for his young adult kids getting started in investing. I think it covers the basics really good for all of us, and it is free, short (16 pages), thorough, and covers a lot of things we need to think about. Just skip chapters of little interest. Chapter 5 (Hurdle # 5) really puts financial sales people in their place!

The Wiki and the Boglehead books really have the "expert" opinions. The forums have mostly ordinary folks who have learned from these and others in the forum as well as share their life experiences. Some are excellent, but it is not always obvious to a newcomer which opinions to count on. Usually if several folks agree, that is a good sign. Also you can click on name to find out how long they have been a member and how many comments they have made. Lots of folks have been on here ten years or more. I have learned a lot from many of them.

I would not write off simply using Vanguard PAS for managing. It would help in dealing with siblings (when stocks crash, for example, and 50% disappears almost overnight) and give your mom an expert to speak with on occasion, and would be perfect if something were to happen to you. Adding 0.3% to 0.04% total stock market, for example, would still make that a reasonable cost, 0.34%. You could speak to them and find out what they would do, then decide if it makes sense or not. They would get her into a balanced, low-cost, and tax-efficient portfolio. It would be a load off your shoulders and also a protective step in avoiding a repeat of her being talked into selling off funds for no good reason. Not suggesting you must use it, just to consider it.
Thanks for this post, reading the link above, and looking into Vanguard PAS.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Thu May 17, 2018 10:55 am

BL wrote:
Tue May 15, 2018 1:51 pm
Here is another quick read for both of you to get some basics or review some basics.
https://www.etf.com/docs/IfYouCan.pdf
It is written by Boglehead-recommended author, Dr William Bernstein, for his young adult kids getting started in investing. I think it covers the basics really good for all of us, and it is free, short (16 pages), thorough, and covers a lot of things we need to think about. Just skip chapters of little interest. Chapter 5 (Hurdle # 5) really puts financial sales people in their place!

The Wiki and the Boglehead books really have the "expert" opinions. The forums have mostly ordinary folks who have learned from these and others in the forum as well as share their life experiences. Some are excellent, but it is not always obvious to a newcomer which opinions to count on. Usually if several folks agree, that is a good sign. Also you can click on name to find out how long they have been a member and how many comments they have made. Lots of folks have been on here ten years or more. I have learned a lot from many of them.

I would not write off simply using Vanguard PAS for managing. It would help in dealing with siblings (when stocks crash, for example, and 50% disappears almost overnight) and give your mom an expert to speak with on occasion, and would be perfect if something were to happen to you. Adding 0.3% to 0.04% total stock market, for example, would still make that a reasonable cost, 0.34%. You could speak to them and find out what they would do, then decide if it makes sense or not. They would get her into a balanced, low-cost, and tax-efficient portfolio. It would be a load off your shoulders and also a protective step in avoiding a repeat of her being talked into selling off funds for no good reason. Not suggesting you must use it, just to consider it.
Based on that PDF above, and this article where Jack Bogle gives his asset allocation advice ( https://www.npr.org/2015/10/17/43699364 ... portfolios ), does anyone have any comments on this allocation for my mother's taxable account?

Using the recommendation to hold your age in bonds, and with the spead of ages of myself and my siblings being from 46 to 40:

hold 43% in VWIUX

Using the recommendation to invest in international and US stock index funds, split the remaining 57% amongst VTSAX and VTIAX.

Does that sound reasonable?

ExitStageLeft
Posts: 998
Joined: Sat Jan 20, 2018 4:02 pm

Re: Help with my mom's investments, please.

Post by ExitStageLeft » Thu May 17, 2018 11:35 am

For funds meant for heirs it seems perfectly reasonable. Without going back to read your first post, I'm wondering if there are other funds held in a lower risk instrument for long term care or a sustained medical crisis?

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Thu May 17, 2018 12:11 pm

ExitStageLeft wrote:
Thu May 17, 2018 11:35 am
For funds meant for heirs it seems perfectly reasonable. Without going back to read your first post, I'm wondering if there are other funds held in a lower risk instrument for long term care or a sustained medical crisis?
Long term care is taken care of.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Sun May 20, 2018 9:59 am

So, I went ahead and got my mom's money back in Vanguard.

She was willing to invest $125,000, so I put 43% in VWIUX, and split the remaining 57% evenly in VTIAX and VTSAX.

Looking at the asset mix tab on her vanguard account it shows:

YOUR PORTFOLIO
28.4%
Stocks

21.5%
Bonds

50.1%
Short-term reserves

Now I'm confused. Why is it showing only 21.5% in bonds and then 50.1% in short-term reserves?

Any comments or concerns, advice? Thanks!

User avatar
KlingKlang
Posts: 730
Joined: Wed Oct 16, 2013 3:26 pm

Re: Help with my mom's investments, please.

Post by KlingKlang » Sun May 20, 2018 11:00 am

GuinnessPhish wrote:
Sun May 20, 2018 9:59 am
Now I'm confused. Why is it showing only 21.5% in bonds and then 50.1% in short-term reserves?
Did she open up a brokerage account and leave half of the funds in the settlement fund (Vanguard Federal Money Market Fund)?

You can check the details of all of her holdings on the "Balances and holdings" page.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Sun May 20, 2018 12:27 pm

KlingKlang wrote:
Sun May 20, 2018 11:00 am
GuinnessPhish wrote:
Sun May 20, 2018 9:59 am
Now I'm confused. Why is it showing only 21.5% in bonds and then 50.1% in short-term reserves?
Did she open up a brokerage account and leave half of the funds in the settlement fund (Vanguard Federal Money Market Fund)?

You can check the details of all of her holdings on the "Balances and holdings" page.
Hmm...I just initiated this on Friday....perhaps it's just because the market was closed by the time it went through? Guess I'll see what it says tomorrow.

User avatar
LadyGeek
Site Admin
Posts: 49293
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Help with my mom's investments, please.

Post by LadyGeek » Sun May 20, 2018 1:19 pm

That sounds about right. You might have to wait until Tuesday, it's hard to say.

In the mean time, hunt around the site (like where it lists your fund holdings) to see if you can find a transaction status.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Tue May 22, 2018 11:02 am

Yep, that was it, the transaction had still not fully gone through.

Today:

57.1% stocks

42.9% bonds

User avatar
mhadden1
Posts: 419
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Help with my mom's investments, please.

Post by mhadden1 » Tue May 22, 2018 11:12 am

With investments now in place, I would do a rough estimate for 2018 taxes, just so there is full clarity, no surprises.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

GuinnessPhish
Posts: 21
Joined: Mon Apr 16, 2018 9:23 am

Re: Help with my mom's investments, please.

Post by GuinnessPhish » Tue May 22, 2018 11:36 am

mhadden1 wrote:
Tue May 22, 2018 11:12 am
With investments now in place, I would do a rough estimate for 2018 taxes, just so there is full clarity, no surprises.
Well,

She has a rough estimate from her now former "adviser". He used the figure of approximately $1500 that she owed to the Fed this year, and suggested that she pay quarterly. But then, he sold her vanguard fund at an about $11000 profit, so he estimated she will owe an additional $2,000 on top of that $1500.

Other than that, how would I estimate taxes on this account?

ExitStageLeft
Posts: 998
Joined: Sat Jan 20, 2018 4:02 pm

Re: Help with my mom's investments, please.

Post by ExitStageLeft » Tue May 22, 2018 11:40 am

I would do an estimate of the 2018 taxes based on all income sources. Check out her 2017 filing and compare her income and LTCG from last year with what you anticipate this year.

User avatar
mhadden1
Posts: 419
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Help with my mom's investments, please.

Post by mhadden1 » Tue May 22, 2018 12:25 pm

ExitStageLeft wrote:
Tue May 22, 2018 11:40 am
I would do an estimate of the 2018 taxes based on all income sources. Check out her 2017 filing and compare her income and LTCG from last year with what you anticipate this year.
That's what I meant, to lessen the chance of tax surprises.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

User avatar
LadyGeek
Site Admin
Posts: 49293
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Help with my mom's investments, please.

Post by LadyGeek » Tue May 22, 2018 4:17 pm

To clarify what ExitStageLeft said, tax software (like TurboTax, TaxAct, H&R Block, etc.) all have built-in tax planning for 2018.

Use the software's built-in tax planner to figure out what the taxes will be. If you have any questions, don't hesitate to ask.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Post Reply