Fin. Advisor sold without asking?

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Weathering
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Fin. Advisor sold without asking?

Post by Weathering »

This is a little of a rant, because I don’t think there is much I can do except change advisors.
I inherited an IRA due to a death in the family early in 2021. My father’s financial advisor created accounts for me, my brother (executor), and my sister. Then split the inherited IRA between the three accounts. We each knew we need to take a minimum distribution by the end of 2021 ($12k by each of us). Well, the financial advisor made the distribution (selling a small amount from over twenty funds - the number and quality of funds is a separate and equally egregious issue) and informed each of us after he did it. The only discussion that took place beforehand was me telling the advisor not to do anything with my account (because I will be transferring it to Fidelity but haven’t told him that yet). I’m guessing somewhere in the account paperwork (I didn’t complete any account paperwork because the account was created by the executor of my father’s estate / my brother) it probably says the financial advisor can make purchases and sales without contacting me. However, this will just serve to hasten my transfer of assets away from this advisor.
I always want to believe in the good of financial advisors but am repeatedly faced with evidence to the contrary.
prd1982
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Re: Fin. Advisor sold without asking?

Post by prd1982 »

Assuming there wasn’t a back-end sell fee, I don’t see how the advisor benefited from the work they did.

I’m guessing the RMD was taken from all the new accounts to ensure the RMD for the year was satisfied. I wouldn’t be surprised if this wasn’t requested by the executor.
Last edited by prd1982 on Wed Jun 09, 2021 10:39 am, edited 1 time in total.
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galawdawg
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Re: Fin. Advisor sold without asking?

Post by galawdawg »

Weathering wrote: Wed Jun 09, 2021 10:16 am This is a little of a rant, because I don’t think there is much I can do except change advisors.
I inherited an IRA due to a death in the family early in 2021. My father’s financial advisor created accounts for me, my brother (executor), and my sister. Then split the inherited IRA between the three accounts. We each knew we need to take a minimum distribution by the end of 2021 ($12k by each of us). Well, the financial advisor made the distribution (selling a small amount from over twenty funds - the number and quality of funds is a separate and equally egregious issue) and informed each of us after he did it. The only discussion that took place beforehand was me telling the advisor not to do anything with my account (because I will be transferring it to Fidelity but haven’t told him that yet). I’m guessing somewhere in the account paperwork (I didn’t complete any account paperwork because the account was created by the executor of my father’s estate / my brother) it probably says the financial advisor can make purchases and sales without contacting me. However, this will just serve to hasten my transfer of assets away from this advisor.
I always want to believe in the good of financial advisors but am repeatedly faced with evidence to the contrary.
Was that restriction on his authority to transact on the account in writing or did you confirm any such verbal discussion in writing?
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CABob
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Re: Fin. Advisor sold without asking?

Post by CABob »

Was this a carry over direction that your father had established prior to 2021? In any case it sounds as if the advisor was operating well well within reason wanting to get the RMD taken care of prior to splitting the account. Did the advisor talk to your brother (the executor) prior? I don't think the issue is worthy of making an issue of it.
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Re: Fin. Advisor sold without asking?

Post by dbr »

The advisor seems to have done what he thought he was being paid to do.

I think this is probably lack of communication on your part.
Katietsu
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Re: Fin. Advisor sold without asking?

Post by Katietsu »

I understand why you might be upset if you felt that you strongly expressed your desire that the financial advisor take no actions. But, the advisor’s action, IMO, was the action that you and your siblings should have requested, provided that you were not charged a transaction fee for each sale. As others have said, maybe your brother did make the request. Do not let your distaste for the financial advisor color your attitude about every action he made.
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RickBoglehead
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Re: Fin. Advisor sold without asking?

Post by RickBoglehead »

prd1982 wrote: Wed Jun 09, 2021 10:21 am Assuming there wasn’t a back-end sell fee, I don’t see how the advisor benefited from the work they did.
Depends on the company. Trading commissions incurred?

OP erred in not providing written instructions.
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nisiprius
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Re: Fin. Advisor sold without asking?

Post by nisiprius »

As I understand it, your only real gripe is that the advisor did something a) reasonable b) that you had told him not to do. Maybe he was inattentive. Maybe he didn't feel like treating three accounts in three different ways (three times the work for the same fee?) Maybe he has a strong bias for being sure that RMDs were made, and didn't want to take any risk of being in a situation where you might say later that he had neglected to take RMDs.

Since an RMD is usually a single-digit percentage of portfolio value, even if you don't like the specific sales choices he made, it probably can't matter much.

I'll bet that the situation of an advisor transitioning from client to decreased clients' children is often difficult. The advisor was chosen by the parent, mutual trust has been established... now children who may have different ideas from each other as well as their parents, are simply presented with an advisor they did not choose. My late brother and I were beneficiaries of an estate managed by an advisor. We never had disagreements, but we weren't in telepathic communication either. What drove me bananas was that whenever I would ask the advisor anything he would heave an irritated sigh and say "I already explained that to your brother..."

It sounds as if your gripe is that your advisor was inattentive to your communications and requests, and did not communicate well enough to you. That would be reasonable cause to leave the advisor, and you've already decided to do that. Having made that decision you might consider a) shrugging off your feelings of being badly threated, and b) at leisure, but well before the end of the year, review the RMD situation for yourself carefully to make sure it was done correctly.

Also, when transferring an account between financial firms always work with the firm that is receiving the assets, they are the ones motivated to help you. Do not tell the advisor to transfer your assets to Fidelity, tell Fidelity to arrange for the transfer.
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Housedoc
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Re: Fin. Advisor sold without asking?

Post by Housedoc »

In my 11months of using a FA, they sold some Janus funds that they could not do an in kind transfer. This caused me a big tax hit. I threatened FINRA as I specifically told them sell nothing without my approval. They paid me the hit I took on taxes and paid any LPL fees to transfer to Vanguard. I guess they felt FINRA would hammer them. Never again will I believe anyone watches my money better than I.
afan
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Re: Fin. Advisor sold without asking?

Post by afan »

Katietsu wrote: Wed Jun 09, 2021 11:41 am I understand why you might be upset if you felt that you strongly expressed your desire that the financial advisor take no actions. But, the advisor’s action, IMO, was the action that you and your siblings should have requested, provided that you were not charged a transaction fee for each sale. As others have said, maybe your brother did make the request. Do not let your distaste for the financial advisor color your attitude about every action he made.
I don't get the bolded part. Each beneficiary needs to take an RMD in 2021. But they need not do it now. They also did not need the advisor to pick which assets to distribute. An instruction not to do anything to the account seems pretty clear to me. If it were approaching the end of the year, I can see an advisor notifying a client that the distribution has to be done. But ignoring an instruction is a great reason to get out from under the advisor.
I don't know whether the OP has any chance of reversing the transactions or the distribution. I kind of doubt it.

On the bright side, the only effect is that estimated taxes would be due earlier than necessary, if the OP does not use withholding to make all tax payments during the year.

Just submit your forms to Fidelity and get your money out. That is time sensitive since the longer you leave it with the advisor, the more money they will collect.
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galawdawg
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Re: Fin. Advisor sold without asking?

Post by galawdawg »

afan wrote: Wed Jun 09, 2021 5:36 pm
Katietsu wrote: Wed Jun 09, 2021 11:41 am I understand why you might be upset if you felt that you strongly expressed your desire that the financial advisor take no actions. But, the advisor’s action, IMO, was the action that you and your siblings should have requested, provided that you were not charged a transaction fee for each sale. As others have said, maybe your brother did make the request. Do not let your distaste for the financial advisor color your attitude about every action he made.
I don't get the bolded part. Each beneficiary needs to take an RMD in 2021. But they need not do it now. They also did not need the advisor to pick which assets to distribute. An instruction not to do anything to the account seems pretty clear to me. If it were approaching the end of the year, I can see an advisor notifying a client that the distribution has to be done. But ignoring an instruction is a great reason to get out from under the advisor.
I don't know whether the OP has any chance of reversing the transactions or the distribution. I kind of doubt it.

On the bright side, the only effect is that estimated taxes would be due earlier than necessary, if the OP does not use withholding to make all tax payments during the year.

Just submit your forms to Fidelity and get your money out. That is time sensitive since the longer you leave it with the advisor, the more money they will collect.
Just to clarify, unless I am mistaken, for an inherited IRA the RMD for the year of the death if not taken by the decedent must be taken by one or more of the beneficiaries. So if either of OP's siblings took the full RMD, the OP would not be required to take a RMD for 2021.

I'm not suggesting that such is the case here, but the financial advisor deprived the OP and his siblings of that flexibility. For example, if one sibling had a need for funds equal to or greater than the full RMD that sibling may have offered to take the full RMD this year, eliminating the need for the others to take any RMD in 2021.

Whether the OP's instructions to the FA were communicated clearly and whether OP suffered any harm is unknown. IMO, those would be the primary issues for the OP to consider when deciding whether moving the account to Fidelity is an adequate resolution.
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celia
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Re: Fin. Advisor sold without asking?

Post by celia »

I'm pretty sure it is standard practice for the RMD to be removed before assets are transferred into Inherited IRAs, since the beneficiaries could then move the accounts right away to another custodian (like we did). The new custodian would have no idea if an RMD was already taken or how much it should have been. (This is part of how custodians share responsibilities when they don't have the information another custodian knows.)

I would be glad the advisor (or the custodian) knew the correct way to handle this. But I wouldn't have let the executor open the account for me. I would have wanted to fill out the forms so I had a chance to read everything and make sure the correct options were chosen (such as MY beneficiary) before I signed it. But you will get to do that at the next custodian.
:D

Since OP is not the executor, there are probably some decisions being made here that he/she is not aware of.
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afan
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Re: Fin. Advisor sold without asking?

Post by afan »

Yes, but. It seems the adviser made the distributions AFTER the individual beneficiary IRAs were set up. At that point the responsibility for RMDs would have landed on each of the beneficiaries, not on the estate.

The one estate I dealt with, the IRA assets were split and distributed to inherited IRAs for the beneficiaries. Each beneficiary then decided on their own how to deal with it.

The adviser should have honored the request to do nothing. At a bare minimum, they should have checked with the beneficiary who made the request before taking irreversible tax measures.

Even if the OP remains with the adviser, and I cannot think of a reason to do so, they should make sure that the adviser is limited to giving advice and has NO authority to buy, sell or otherwise touch the assets.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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