Author Topic: help me convince in-laws that they need to dump their financial planner  (Read 1537 times)

kenmoremmm

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they use a guy through blackrock. supposedly he takes 1/2% off the top. i assume there are many other baked in fees hidden in the selected funds.

in-laws are convinced they're getting value from this service. i shake my head as we've had many talks on the subject.

what simple, eye-popping things can i show them to convince them to shake off the dead weight?

Andy R

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Give them the below link. You have led the horse to water, it is up to them then if they drink or not. https://www.youtube.com/watch?v=SwkjqGd8NC4

MustacheAndaHalf

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Salesmen are always friendly, nice people.  Can you at least get them to separate "this person is friendly" and "this person makes lots of money off them"?

Maybe I should suggest they take the same challenge I suggest to others when they want to go their own way: benchmark against the S&P 500.  Did their picks beat the S&P 500 over time?

kenmoremmm

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Maybe I should suggest they take the same challenge I suggest to others when they want to go their own way: benchmark against the S&P 500.  Did their picks beat the S&P 500 over time?

this kind of logic fails with them. i've tried. their stuff is too scattered to accurately assess anyway.

Linea_Norway

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FIL has also told ut that investing is a profession. FIL is good at calculating building costs. His bank is good at investing. So he let's them do the job.

I have mentioned that we invest in low cost index funds. He said that his bank is also investing his money in index funds, a complicated mix of different index funds in different market segments. So complicated that he couldn't have done it himself...

I have now twice mentioned how we do it and am not going to argue with him that he needs to do the same. It is his own money, not mine.
« Last Edit: January 31, 2019, 04:36:44 AM by Linda_Norway »

Malkynn

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Unless there is a risk that you will end up having to financially compensate for them in the future, then leave it alone.

It sounds like you have already given them info and resources to look into and they've chosen not to trust those resources over the professional that they've hired to handle the job for them.

Lots of people pay extraordinary amounts of money to questionably trained "professionals" for all sorts of things because they don't have the inclination to do the research it takes to feel confident doing it themselves. Just look at what people are willing to pay to have paint slapped sloppily on walls by summer students.

These are your in laws! Are these really the people whose very personal business you want to start sticking your nose into? Are you prepared for how much they might resent you if the markets drop and they blame you because they believe that "their guy" could have prevented it through his "brilliant diversification"???

Go ahead and share your interest in personal finance as well as your resources, but don't take it upon yourself to try and "fix" their very personal life choices. That doesn't seem to me like an appropriate role for you to take on, unless there's a caregiver dynamic between you and your in laws that you haven't shared. Assuming they are cognitively and financially independent adults, your efforts should be limited to friendly sharing of information and respect for their decisions.

Personally, I live by a very simple philosophy of not telling grown ups what to do unless they ask me/pay me to do so. Even then, I frame almost everything as information, not advice, and put the onus of informed decision making on the other person.

Even giving correct information can get you burned badly.

Being an expert bears an enormous burden of responsibility, so be cautious to whom you try to present yourself as an expert.

Make no mistake, by claiming you know better for them than the professional that they trust, that's exactly what you are attempting to do: claim you are the superior expert for their particular case. It may be true, but it's a dangerous claim to make.

I personally avoid the topic of finance with my in laws completely, especially BECAUSE they consider me a subject matter expert.

Tread carefully.

Ynari

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Yeah, I gave up. I have a degree in economics and worked in risk analysis. In laws respect that, but still like their financial advisor. To be fair, he's not the worst! As far as I can tell, they're getting what they pay for (a sort of personification of their money that makes them happy).  They're in a decent enough financial situation it's not going to affect their prospects.

I'm content to have educated SO.

Malkynn

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Yeah, I gave up. I have a degree in economics and worked in risk analysis. In laws respect that, but still like their financial advisor. To be fair, he's not the worst! As far as I can tell, they're getting what they pay for (a sort of personification of their money that makes them happy).  They're in a decent enough financial situation it's not going to affect their prospects.

I'm content to have educated SO.

Good call.

Although, I must say, I know many people with degrees in economics whom I would never ever trust for investment advice.

An economics education makes it easier for someone to understand investment concepts, but does not in any way shape or form make them a subject matter expert in investing.

I'm not saying that you don't know your stuff, I'm saying that your econ education is not evidence that you know more than their FA who might have only done an online course that can be completed over a few weekends.

I'm really not trying to criticize you, I just happen to be close friends with an econ PhD, whose investing advice would be worse than useless.

Think about it. I'm sure you can think of tons of your colleagues/former classmates from whom you would NEVER take investing advice.

I don't doubt that you know your stuff, it's just hard to prove that to anyone who doesn't also already know their stuff. That's kind of the catch 22 of non-accredited expertise- unless someone has the knowledge to assess your knowledge, it's hard to know what to trust.

If you want people to recognize your subject matter expertise, then go ahead and take a securities course. It literally takes a few hundred dollar and a weekend or two depending on how quickly you read and absorb information.

Or don't. It doesn't really matter unless you are hell bent on trying to convince people that you know what you are talking about.

Aggie1999

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One of the more funny videos from John Oliver about how bad active management is:

https://www.youtube.com/watch?v=gvZSpET11ZY

Have you in-laws watch it all or skip to the 9:30 mark where Oliver talks about how a cat beat a group of active managers.

The Guru

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FWIW 0.5% isn't that bad as financial advisory fees go. Granted they are undoubtedly paying other unnecessary costs (front-end loads, "management" fees of the funds themselves. Problem is, the lure of The Way We Always Did Things is strong, possibly immune to any "eye-popping things" you might come up with. I'd be inclined to settle for inserting tips as the opportunity presents itself (without being a PITA) and let it go at that.

Ynari

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Re: help me convince in-laws that they need to dump their financial planner
« Reply #10 on: February 01, 2019, 01:02:42 PM »
Yeah, I gave up. I have a degree in economics and worked in risk analysis. In laws respect that, but still like their financial advisor. To be fair, he's not the worst! As far as I can tell, they're getting what they pay for (a sort of personification of their money that makes them happy).  They're in a decent enough financial situation it's not going to affect their prospects.

I'm content to have educated SO.

Good call.

Although, I must say, I know many people with degrees in economics whom I would never ever trust for investment advice.

An economics education makes it easier for someone to understand investment concepts, but does not in any way shape or form make them a subject matter expert in investing.

I'm not saying that you don't know your stuff, I'm saying that your econ education is not evidence that you know more than their FA who might have only done an online course that can be completed over a few weekends.

I'm really not trying to criticize you, I just happen to be close friends with an econ PhD, whose investing advice would be worse than useless.

Think about it. I'm sure you can think of tons of your colleagues/former classmates from whom you would NEVER take investing advice.

I don't doubt that you know your stuff, it's just hard to prove that to anyone who doesn't also already know their stuff. That's kind of the catch 22 of non-accredited expertise- unless someone has the knowledge to assess your knowledge, it's hard to know what to trust.

If you want people to recognize your subject matter expertise, then go ahead and take a securities course. It literally takes a few hundred dollar and a weekend or two depending on how quickly you read and absorb information.

Or don't. It doesn't really matter unless you are hell bent on trying to convince people that you know what you are talking about.

TBH, I 100% agree with you. My econ degree means nothing about me (heck, it's only econ because I took the classes I wanted to, and econ was the closest match for a major), and I learned more about investing through forums, blogs, and wikis. But my whole point was that in trying to convince people, this fancy degree lends me more authority than, you know, actually saying logical things supported by evidence.

I don't think they'd listen to me even if I WAS a financial advisor of some renown. They like their guy! Consequences aren't big enough for me to care.

mrsfrugaln

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Re: help me convince in-laws that they need to dump their financial planner
« Reply #11 on: February 03, 2019, 05:08:14 AM »
It's best to let it be. My in-laws use a guy who charges 1% and puts them in American Funds with front loads. Also sold them an annuity when both have state teacher pensions. But I learned to be quiet because they're in a good financial spot and spouse is of the mindset that it's their money and we only need to worry about it when it impacts us personally. Father-in-law trusts this guy, says he's made them a lot of money over the years and has no problem paying his fees. They also live in a small rural town so breaking up with an advisor would probably have other unintended consequences too. My spouse knows if/when we need to take over their finances (spouse is an only child) I intend to move the money away from the advisor so we can make it last a bit longer for any long term care they may need.

The only thing I got vocal about was when they setup a 529 for each of our kids to gift college money for bdays, etc. since it impacted us directly. They setup the oldest ones with the advisor with a 4.75% load and high fees. Convinced them to setup accts with our awesome state 529 when the 2nd grandkid came around by showing them they'd get a state tax deduction and how the lower expense ratios and lack of load fees would mean more money for the kids college. Wasn't able to convert the existing 529 over to the state plan because the advisor was against that (of course!) But at least all new money they deposit is going into the better state 529 plan.

The Guru

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Re: help me convince in-laws that they need to dump their financial planner
« Reply #12 on: February 03, 2019, 08:15:57 AM »
It's best to let it be. My in-laws use a guy who charges 1% and puts them in American Funds with front loads. Also sold them an annuity when both have state teacher pensions. But I learned to be quiet because they're in a good financial spot and spouse is of the mindset that it's their money and we only need to worry about it when it impacts us personally. Father-in-law trusts this guy, says he's made them a lot of money over the years and has no problem paying his fees. They also live in a small rural town so breaking up with an advisor would probably have other unintended consequences too. My spouse knows if/when we need to take over their finances (spouse is an only child) I intend to move the money away from the advisor so we can make it last a bit longer for any long term care they may need.



This got me thinking about a possible strategy for the OP: I'm on a church board that manages a mid-size endowment. It's traditionally managed thru an advisory company, much to my chagrin. Assessment of the endowment's performance usually boils down to everyone staring at the statement for a few minutes then proclaiming "Well, it looks like we're doing pretty well"- such conclusion usually based on the number on the current report being larger than that on the previous one. Next order of business... IMO folks who farm out management of their finances don't seem to pay too much attention to comparing alternatives, especially since their managers make their statements pretty opaque.

So...you MAY get some headway by asking your in-laws "If I can prove you'd do better elsewhere, would you consider alternatives?" Of course they would need to provide you access to their account statements. IF you can figure out their average asset allocation (good luck with that- as i said, traditional FA's don't WANT to make that easy for you), then compare with, say, a Vanguard target date fund or balanced fund holding a comparable AA and see how they stack up. in other words, don't look at statistics or theoreticals- compare their actual results with actual alternatives.

no guarantee they'll accept your findings, but if you're determined that's how I'd approach it.


Car Jack

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Re: help me convince in-laws that they need to dump their financial planner
« Reply #13 on: February 04, 2019, 01:14:16 PM »
Percents mean nothing to most people.  The FA will talk nicely and tell them how they keep 99.5% of their investment and we only take half a percent plus the funds have their own small fees of half a percent.  Sounds very non threatening and nice and fair and hey... they keep most of their money, right?

Convert it into dollars.  If they have a million dollars invested, and we assume that the total of AUM and ERs is 1%, they're paying $10,000 for this clown.  $10,000!  Would they throw $10,000 in the street, because that's sort of what they're doing.  Every year!  Every freaking year.  So after 10 years, they're throwing away $100,000.  Now, you can't buy a new Lamborghini for $100k, but you could buy a pretty damn nice Subaru 3.6R Limited or 3.

They could put the money into Zero funds at Fidelity and pay.....well....zero.