Author Topic: Mother-in-law being taken by financial advisors  (Read 4627 times)

massmustache

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Mother-in-law being taken by financial advisors
« on: October 09, 2014, 01:12:29 PM »
My mother in law is a retired school teacher.  She is currently using a UBS financial advisors who is taking a substantial yearly fee.

She is concerned about the fees (Great!) but now wants to talk to this guy:

https://www.youtube.com/watch?v=RFK8qHw675Q

Some radio personality.  You have to watch that video... he takes a small window of the market and basically says the stock market is having a heart attack.  You have to watch it to fully appreciate.

I am comfortable at my age in steering our finances, but am not confident that the research I have done applies to her.  I am weighing out what the most constructive advice to give her is... besides run (which I have done).

I realize there is not much detail.  But this is an intentionally vague question.  How do you steer someone looking for help without diving head first into their personal finances?  Is that the only way to truly help?

And please... watch the video.
« Last Edit: October 09, 2014, 01:16:09 PM by massmustache »

MDM

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Re: Mother-in-law being taken by financial advisors
« Reply #1 on: October 09, 2014, 01:31:32 PM »
Oh, wow, where to start...?

I did watch the video - well, the first five minutes was all I could stomach.  Some observations:
1.  Video was made in 2012.  I didn't listen to the last 7 minutes, but did he recommend something that did better than the market since then?
2.  In the absence of gravity there would be no reason for water to move up and down in a sine wave.
3.  His sine wave went from -1 to +1 on the y-axis.  Saying that is an amplitude of "0.75 or 1.5" is just wrong.
4.  He said he is a Registered Investment Advisor (RIA).  That is about the weakest credential one can have (e.g. compare to a Certified Financial Planner).

Items 2 & 3 above don't apply specifically to investing, but if he can't be correct on his own physics and math examples....

Have you (or your spouse) asked your MIL if she would like you to look at her finances? 

massmustache

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Re: Mother-in-law being taken by financial advisors
« Reply #2 on: October 09, 2014, 01:43:40 PM »
She is widowed and not very savvy in managing paperwork/options.

I am confident she would be open to us helping, but I would need to understand her circumstance and options a lot better myself (but it is possible).  She expressed interest in moving from her current advisor due to the fees and not feeling like they explained what it was they were doing for her.

Ultimately it's not a terrible idea for her to have a person help in managing her affairs... but she has a high tendency for using trusting the least trustworthy people...

I am concerned that if I do help her manage her resources that any potential misstep (even if it is no fault of her or me) would result in negative feelings.

MDM

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Re: Mother-in-law being taken by financial advisors
« Reply #3 on: October 09, 2014, 02:09:58 PM »
She is widowed and not very savvy in managing paperwork/options.

I am confident she would be open to us helping, but I would need to understand her circumstance and options a lot better myself (but it is possible).  She expressed interest in moving from her current advisor due to the fees and not feeling like they explained what it was they were doing for her.

Ultimately it's not a terrible idea for her to have a person help in managing her affairs... but she has a high tendency for using trusting the least trustworthy people...

I am concerned that if I do help her manage her resources that any potential misstep (even if it is no fault of her or me) would result in negative feelings.

Those are all good points, including the concern about feelings if investments lose money.  Are there fee-based financial planners, preferably with CFP or better credentials (see http://www.forbes.com/sites/investor/2011/07/05/broker-credentials-what-all-those-letters-mean/), anywhere near her?  Or near you, if you aren't near her?  Note the Forbes article also includes this link: http://www.forbes.com/sites/investor/2011/07/05/how-to-check-out-your-stock-broker/


Frankies Girl

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Re: Mother-in-law being taken by financial advisors
« Reply #4 on: October 09, 2014, 02:19:40 PM »
I had an account with UBS. Couldn't get out of there fast enough after I started figuring stuff out on my own.
Definitely look into moving her out of there but they will hit you with closing and transfer fees so be aware (small price to pay really).

If you are still learning yourself and/or don't feel comfortable with handling her stuff (and especially if she would resent you if the market decided to screw around and other things beyond your control) I would try to find a fee-only adviser that is not affiliated with any specific fund group. But that would still mean paying someone to go through everything with her, advise what funds they think she should be in, and hope that they aren't going to have a vested interest in pointing her to one thing or another and all the while paying a few hundred each time you meet with them. Check out http://www.napfa.org/ for the fee-only adviser organization.

If she was a teacher, she should be trying to at least understand the basics herself - knowledge is power and she was a TEACHER for dog's sake! I'd try to get her to read a few things (like Jim Collins' excellent stock series) and then see if she would be interested in the very easy, streamlined index fund portfolios that he discusses (and are pretty much the lazy portfolios that are the Boglehead standards). That way, she can move everything over to Vanguard, get super low expense index funds and I believe can call them and discuss stuff any time (not sure how detailed they can get, but they'll help her as much as possible and they won't try to sell her on stuff she doesn't need either).

Vanguard is client-owned and it is operated at-cost, which means that they aren't trying to sell hugely inflated expensive funds to satisfy some board of directors and line their pockets - the investors themselves are the indirect owners of the company.

She can still discuss with you as long as she doesn't expect you to be her main "adviser" person... but I'd make sure and say exactly that "I'll help you as much as I can but you have to understand I'm not a professional money manager and don't get mad at me for things I have no control over." and make sure your spouse is there too as a back-up/mediator when discussing so feelings don't get hurt.

Some reading materials:

http://jlcollinsnh.com/stock-series/

http://jlcollinsnh.com/2012/03/09/you-too-can-be-conned/

http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Le Barbu

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Re: Mother-in-law being taken by financial advisors
« Reply #5 on: October 09, 2014, 02:22:07 PM »
Can't help but my MIL was widowed earlier this year and she follow most of my recomandations on insurances, tax sheltered accounts etc. When it came time to invest the remaining money, she just listened the bank's advisor* and take some 1.5%/1year CDs in taxable accounts. Hopefully, we can talk about this again in few months.

*I asked my MIL if she dare to ask for the advisor's net worth, she didn't

Kaspian

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Re: Mother-in-law being taken by financial advisors
« Reply #6 on: October 09, 2014, 02:29:14 PM »
I am concerned that if I do help her manage her resources that any potential misstep (even if it is no fault of her or me) would result in negative feelings.

Yeah, that's the doozy, isn't it?  You could do everything right for her--help set up a portfolio of low-cost, low risk, index funds but if the S&P suddenly sinks 30%, it'd be your fault.  I struggle with this myself when people ask about it.  If they're very interested I'll show them how my portfolio's setup and explain why.  If they're mildly interested I'll just refer them to some books and web sites.  If they don't bring it up, neither do I.

theonethatgotaway

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Re: Mother-in-law being taken by financial advisors
« Reply #7 on: October 10, 2014, 02:57:58 AM »
My father is an Estate and Retirement specialist.

It's important that whomever she chooses or you refer to her that the advisor has certain qualifications with FINRA. http://www.finra.org/
You can easily name search people on their regulatory site.

Registered financial professionals have access to products that can significantly help retirees, elderly, widows, and people aiming for a more conservative approach in their investments. What's key is visiting with a few and reviewing their qualifications and see how/why they propose reallocating her portfolio.

massmustache

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Re: Mother-in-law being taken by financial advisors
« Reply #8 on: October 10, 2014, 07:07:29 AM »
Appreciate all the advice.

I decided to send over some of the resources for finding a reputable CFP and offered to help interview candidates with her to ensure they are not scummy.

I think she is in good standing for retirement, but that makes her all that much more vulnerable to being taken advantage off.  She could probably be comfortable and still have someone syphoning off a fair amount of her hard earned retirement.

theonethatgotaway

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Re: Mother-in-law being taken by financial advisors
« Reply #9 on: October 12, 2014, 04:50:10 AM »
http://www.sec.gov/investor/pubs/invadvisers.htm

Good link with the questions you should have when interviewing.

Good luck! There are non-scummy advisors out there that DO improve portfolios :)

Mighty-Dollar

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Re: Mother-in-law being taken by financial advisors
« Reply #10 on: October 13, 2014, 03:29:01 AM »
Quote
he takes a small window of the market and basically says the stock market is having a heart attack.  You have to watch it to fully appreciate.

I am comfortable at my age in steering our finances, but am not confident that the research I have done applies to her.  I am weighing out what the most constructive advice to give her is... besides run (which I have done).
DO NOT try to "time the market". The academic research says that you will get it wrong more than you will get it right. Market timing requires not just a correct exit point but a correct re entry point. Even Vanguard's description of what an adviser does has NO mention of market timing. https://pressroom.vanguard.com/press_release/Vanguard_Research_Quantifies_the_Value_of_Advice_3.10.2014.html
Sounds like this guy with the video is ignoring diversification into bonds -- a common red herring that commission based "advisers" use to sell expensive annuities or sell their expensive market timing services. All you need to know is that when stocks fall, money runs to the safety of bonds. Stocks are aggressive; Bonds are conservative. So you pick a balance of the two that fits your appetite for risk.
The efficient market hypothesis also says that nobody can predict market movement or pick stocks.

She should instead decide how much risk is appropriate to take then invest in stock and bond indexes, and maintain that ratio (example: 50/50).  Nothing wrong with keeping it very simple... ticker symbols VOO and AGG.

If she chooses to work with an adviser then certifications are nice but say NOTHING about their fiduciary duty and/or whether there is conflict of interest. She should hire a fee-only fiduciary on on one-time or one-task basis. Don't work with an asset manager (who charges her to constantly "manage" her account) and definitely avoid commission-based "advisers" (AKA non-fiduciaries).

Having said all of this, doing it yourself is easy. Again, just buy, hold and rebalance 2 or 3 index funds.
« Last Edit: October 13, 2014, 03:32:07 AM by Mighty-Dollar »