I found the predatory FA... and it's my Mom

[ERD50]

Quote:

Originally Posted by growerVon ... Flash forward to today, I bring this up directly; hadn't before. ... "But, Mom, Front End Loads... those are really bad, right?" "No, they're pretty common."

Quote:

Originally Posted by MRG Mom's right, FE funds are real common LAST CENTURY. The industry is full of folks that still believe that.

Reminds me of a bit of sage wisdom (paraphrasing, don't know the exact quote or attribution * see below): "It is near impossible to convince a person of a truth, if acknowledging that truth interferes with their livelihood".


See the sales training in action? No actual answer to bad/good - just that they are 'pretty common'. Hah, that wasn't the question! Traffic deaths are pretty common too - so I guess they are 'good'?

Quote:

Originally Posted by redduck OP: You might want to consider looking around for a different mom.

How's that one go, "You can pick your friends, and you can pick your nose, but you can't pick your relatives!"?

Some of this reminds me of some recent posts about the difference between the more common 'suitability' standard, and the 'fiduciary' standard. Suitability is weak and subjective, and says it's fine to put a client in a FE loaded fund even if an identical fund is available w/o the load - as long as neither is 'unsuitable'. But a 'fiduciary' must act in the clients best interest - why would you knowingly deal with anyone but a fiduciary? And of course the answer is most people don't know.

edit/add - OK found it:

Quote:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” ― Upton Sinclair, I, Candidate for Governor: And How I Got Licked

-ERD50

[rodi]

Echoing karluk's comment about *state taxes*... some states allow contributions to in-state 529 plans to be tax preferred - like a 401k. Other's don't. California (my state) doesn't. So there was zero reason to stay with the state plan. Like REwahoo - I selected Utah because it was the lowest fees and Vanguard funds.

Even still - fees on 529's are slightly higher than directly purchasing vanguard funds outside the 529. But the tax advantage on the growth (like a Roth - the growth is untaxed, if it's used for educational purposes.)

Another question: Your kids are the beneficiaries... but who "owns" the account. Your mom started it - is it in her name, or your name? If it's in her name - you can't do anything about it - can't roll it to another 529 plan. If it's in your name, you can roll it out if you choose... trustee to trustee - just like an IRA.

If you don't want bad blood with your mom - perhaps you establish NEW 529's for new contributions. Let the old 529's sit there... but don't contribute to them. I'm pretty sure you're allowed to have more than 529 in a beneficiary's name. Or you could put it in your own beneficiary name - and then transfer it to your child's beneficiary name later. (The money is semi-fungible... can be transferred between beneficiaries... which is good if a 1 kid gets a full ride scholarship and the other kid doesn't.)

[Mulligan]

Quote:

Originally Posted by redduck OP: You might want to consider looking around for a different mom.

And worse yet.... A FA that is also your mother that provides this kind of service will not help the cause around here for the FA when the occasional thread pops up about "Should I hire a Financial Advisor". Someone is going to remember this.


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[ERD50]

Quote:

Originally Posted by Mulligan And worse yet.... A FA that is also your mother that provides this kind of service will not help the cause around here for the FA when the occasional thread pops up about "Should I hire a Financial Advisor". Someone is going to remember this. ...

In homage to BB King (RIP)...

Quote:

Nobody loves me, but my mother... And she could be jivin' too

https://www.youtube.com/watch?v=OIW4ARVbhrw

-ERD50

[bssc]

Wow, that's all I can say.

[travelover]

OP, you get to choose her nursing home.

[Fermion]

Quote:

Originally Posted by travelover OP, you get to choose her nursing home.

Make sure they have 5.77% fewer Jello cups

[Brat]

I agree with others, don't add $ to those funds.

Do your own research and pick low cost investments that are appropriate for your goals. Don't discuss this with your Mom, nothing to be gained by pointing out how inappropriate her advise has been.

I suspect your Mother works for the ilk of Ameriprize and is required to generate fees. Hard to know if she really knows how bad their products are.

If you moved your investments doubtless Mom would be told to try preventing that action. Here is your choice, keep it there until she leaves the business or move the money and chance her dismay. Ameriprize has a high turnover, their average pay is under $40t according to my salary data resources.

[gcgang]

Quote:

Originally Posted by ERD50 How's that one go, "You can pick your friends, and you can pick your nose, but you can't pick your relatives!"? -ERD50

I thought it was, you can pick your friends, and you can pick your nose, but you can't pick your friends' nose.

Well, mom took care of OP when young. Payback time.


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[JoeWras]

My general rule:

Do not use friends or family for the following services:
- lawyers
- doctors
- financial professionals
- real estate

It just makes life better.

To the OP, sorry to hear about your situation. As other say, just move in from here with new money.

[athena53]

If your mother owns the account, is there any way you can move the $$ into another fund in the same family with better returns? I own some American Funds (so sue me, I've had them for years, they're only part of my portfolio and I'm happy with their performance). If the money is in a bond fund there may be other funds with better returns, and no additional charges for moving from one fund to another. That's how American Funds work.

If the money has been in the funds for 8 years, I'd just figure that spread over 8 years the impact isn't all that awful. I'd be more concerned about the overall low return. Still, I'd stop adding new money to it, especially if you anticipate withdrawals in the next few years.

[G8tr]

To the OP. Are you sure she isn't buying the funds at NAV, since the fee reads 0.00? So perhaps no one is paying the fee.


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[growerVon]

Quote:

Originally Posted by MichaelB Just to clarify, are you saying your mother is a professional FA, or just giving you financial advice when this account was opened?

Mom's the FA. Fortunately, the only thing we have with her and her parent company are these two 529 acct.

[clifp]

Quote:

Originally Posted by travelover OP, you get to choose her nursing home.

In her defense its entirely possibly that she didn't know how bad the products she was selling are because of company propaganda. At least that is what I'd be telling myself.

Da Nile ain't just a river in Egypt it's a powerful coping mechanism.

[growerVon]

Quote:

Originally Posted by Texas Proud I will assume the answer to Michael B's questions is she is a FA.... This is what she has been taught... she is just part of the machine who thinks they know better than the people they help and that they deserve to be paid very handsomely for that knowledge..... I would suggest just moving the funds to a low cost provider and leave it alone... at least you put money away and that is good... you did not say how well the funds did.... did they do OK Also, did your mom push you to invest IOW, one of my sisters was put into high cost funds early on in her career... she was OK with that since she said she would not have put anything aside without the guy coming by all the time trying to sell her on it... so he got paid for what he did and when sis learned more later she moved the money.... a win-win in her opinion....

It was more like, "Gosh, we know we should be saving for newly born DD's future college, but we have no idea what to do. Mom?" About eight years ago...

Texas, it was the poor performance that I've noticed since tracking our investments that got me digging in. The prospectus talks about still undisclosed plan costs, so I think there is more shrinkage happening... its not just the cool water!

You mention sisters... Mom is a go to FA for my sisters and cousins. Ugh, but now that I know, I can't stay quiet. Captain Save-a-Fee.

[growerVon]

Thanks for all the replies, suggestions and jokes! I knew I was signing up for some well deserved ribbing, and who actually likes reporting bad stuff wrt their mom and then listening to others add-on?

All that said, it's important to stand-up for my kids' stake in this and find out what Mom has my sisters and cousin(s) in. Yeah, the plot may be thickening. Getting your input helps a lot, and I thought you'd see both the magnitude of problem - and the humor of it, being one's MOM is the villain

Several posts pointed out the "institutionalized" nature of "of course these loads are common," and I think you're right wrt Dear Mom and her FA job. I use the term "predatory" loosely and moreso to refer to the funds available to her and less to her nature. The parent company responsible for these vampiric fees, however... Is it kosher to name names?

Current plan is to move the 40k among the two 529s to Vanguard's 529. The current 529s are in DW's name, so we're technically free. There will be a familial extraction cost, but it seems some dry rot has gotten in and needs to be addressed.

[growerVon]

Quote:

Originally Posted by G8tr To the OP. Are you sure she isn't buying the funds at NAV, since the fee reads 0.00? So perhaps no one is paying the fee. Sent from my iPad using Early Retirement Forum

G8tr, I keep going back to this issue, too. I dug into the company's literature and there is a clause that family can qualify to avoid the front-end load. So it is possible the load isn't being applied and Mom didn't answer correctly because she either didn't know or remember... would be great, for me, if the load weren't being applied. I will be following up with DM this week and will report back.

Another finding in the plan literature was reference to undisclosed plan fees above the 1.0 and 1.2 ERs and a statement that there could be a conflict of interest because the FA may be paid to recommend these funds... it's like finding more anti-gold the digger I deep

[growerVon]

Quote:

Originally Posted by rodi Echoing karluk's comment about *state taxes*... some states allow contributions to in-state 529 plans to be tax preferred - like a 401k. Other's don't. California (my state) doesn't. So there was zero reason to stay with the state plan. Like REwahoo - I selected Utah because it was the lowest fees and Vanguard funds. Even still - fees on 529's are slightly higher than directly purchasing vanguard funds outside the 529. But the tax advantage on the growth (like a Roth - the growth is untaxed, if it's used for educational purposes.) Another question: Your kids are the beneficiaries... but who "owns" the account. Your mom started it - is it in her name, or your name? If it's in her name - you can't do anything about it - can't roll it to another 529 plan. If it's in your name, you can roll it out if you choose... trustee to trustee - just like an IRA. If you don't want bad blood with your mom - perhaps you establish NEW 529's for new contributions. Let the old 529's sit there... but don't contribute to them. I'm pretty sure you're allowed to have more than 529 in a beneficiary's name. Or you could put it in your own beneficiary name - and then transfer it to your child's beneficiary name later. (The money is semi-fungible... can be transferred between beneficiaries... which is good if a 1 kid gets a full ride scholarship and the other kid doesn't.)

Quote:

Originally Posted by Brat I agree with others, don't add $ to those funds. Do your own research and pick low cost investments that are appropriate for your goals. Don't discuss this with your Mom, nothing to be gained by pointing out how inappropriate her advise has been. I suspect your Mother works for the ilk of Ameriprize and is required to generate fees. Hard to know if she really knows how bad their products are. If you moved your investments doubtless Mom would be told to try preventing that action. Here is your choice, keep it there until she leaves the business or move the money and chance her dismay. Ameriprize has a high turnover, their average pay is under $40t according to my salary data resources.

Quote:

Originally Posted by JoeWras My general rule: Do not use friends or family for the following services: - lawyers - doctors - financial professionals - real estate It just makes life better. To the OP, sorry to hear about your situation. As other say, just move in from here with new money.

Quote:

Originally Posted by athena53 If your mother owns the account, is there any way you can move the $$ into another fund in the same family with better returns? I own some American Funds (so sue me, I've had them for years, they're only part of my portfolio and I'm happy with their performance). If the money is in a bond fund there may be other funds with better returns, and no additional charges for moving from one fund to another. That's how American Funds work. If the money has been in the funds for 8 years, I'd just figure that spread over 8 years the impact isn't all that awful. I'd be more concerned about the overall low return. Still, I'd stop adding new money to it, especially if you anticipate withdrawals in the next few years.

I appreciate these suggestions that balance the relationship collateral damage with min/maxing the overall 529 returns. This variation in the plan is net-new funds only through Vanguard's plan, leave the existing bulk as-is. One detractor is I'll have to wait until bonus season (Sept/Oct) to execute as the VG age based funds within their 529 plan have $3k minimums, x2, but otherwise it fits smoothly into our existing investment plans and minimizes boat rocking.

[Davis65]

I don't know your Mom, but I agree with Texas Proud that she may actually believe what she's been taught by her company - that the management of the funds is so good that it is worth paying through the nose for it. That doesn't mean you have to follow her advice, but you may want to give her the benefit of the doubt.

When talking to my 80-year-old mother's FA, by brother, who works for a life insurance company, was advocating segregated funds for part of her portfolio. He did stand to make any money, since he isn't her FA, and I know that he has her best interests at heart, but he has drunk the industry Kool-aid on this, and genuinely believes that paying 2.5 - 3% on MERs (in Canada) makes sense. To buy insurance for and 80-year-old woman. Really. This is what his industry teaches though.

[retire2020]

Quote:

Originally Posted by REWahoo Agreed. That's why I did some serious research before opening a 529 for my grandchildren and went with the plans offered by the state of Utah - even though I live in Texas. Utah has one of the best plans around, offering low fees and Vanguard funds: http://www.uesp.org/pdfs/Investment-...ure_Table.aspx

+1. Mine was with Schwab with Kansas state and was ripping me off. I went with 2nd best two years ago..NY state(can't recall why I did not choose Utah). All low cost Vanguard funds.