Managed results...your Fired?

[Luck_Club]

I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?

 

[RobbieB]

The owner likes oil and bonds?

My broker hates oil & bonds.

The results speak for a bag of oil & bonds.

 

[ERD50]

What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')?

I can understand the "granted..." for the bond component, we don't want to compare that to say, 100% S&P 500. But "granted..." for being heavy in oil? Why would an 82 YO be heavy in any specific sector? Or anyone, for that matter?

-ERD50

 

[Senator]

What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')?

I can understand the "granted..." for the bond component, we don't want to compare that to say, 100% S&P 500. But "granted..." for being heavy in oil? Why would an 82 YO be heavy in any specific sector? Or anyone, for that matter?

-ERD50

Maybe it is the dividends the stocks provide?

 

[Rustward]

How did the portfolio perform in 2007 and 2008?

A lot depends on the size of the portfolio, life expectancy of the owner, and any outstanding obligations the owner may have.

 

[Rustward]

Maybe it is the dividends the stocks provide?

This is a good point. There is just not enough information to say whether this is good or bad, or just OK.

 

[pb4uski]

I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?

Seems like your relative can easily get better results with less risk by investing in Wellington or Wellesley.

 

[Blue Collar Guy]

I'm monitoring the results of a relatives portfolio, and the 2014, 2015 & 2016 net results are as follows: 3.33%, -1.82%, and 4.29% respectively. Granted the portfolio has an oil and bond heavy weighting. But with discretionary accounts, and me saying their is a concentration of risk shouldn't they have changed it?
This is a managed account, so the results are net of fees.
The owner is presently 82.

Thoughts?

He beat inflation, whats his goal?

 

[ERD50]

Maybe it is the dividends the stocks provide?

OK, I see your point. But I'm a total return kinda guy. Money is fungible, so it doesn't matter if it's divs or NAV. Take it in divs, take in selling stock, or a combo, it's all the same (other than tax details).

But that's another discussion that's gone round and round here before. As other's have said, we need more details to really say much else.

-ERD50

 

[Jerry1]

Maybe it is the dividends the stocks provide?

OK, I see your point. But I'm a total return kinda guy. Money is fungible, so it doesn't matter if it's divs or NAV. Take it in divs, take in selling stock, or a combo, it's all the same (other than tax details).

But that's another discussion that's gone round and round here before. As other's have said, we need more details to really say much else.

-ERD50

So the originally quoted returns include dividends? Then, rather than saying heavy in bonds and oil, I'd like to know a more specific percentage. However, oil and to a lesser extent, bonds, have taken a hit these past few years. So 1/3rd in bonds and oil?

Don't fully agree that money is fungible in this case. One could hold oil stocks and bonds and live off the dividends even as the price goes down. Bonds will eventually mature and oil stocks have always been volatile. Chevron and Exxon-Mobil are both Dividend Aristocrats so while not as secure as bonds, their dividends are very reliable.

 

[DrRoy]

He would have done better to index the equities and pay no fee.

 

[Luck_Club]

Yes it is mainly dividend yield. The one negative year the loss in value was about 15% more than the dividends produced when you add in the fees it came out to be almost 50% more than the dividends produced.

 

[Synergy]

The owner likes oil and bonds?

My broker hates oil & bonds.

The results speak for a bag of oil & bonds.

What does your broker recommend (instead of bonds) for fixed-income investment?

 

[ERD50]

So the originally quoted returns include dividends? ...

It should. "Net Results" means just that. Dividends are part of your results.

... Don't fully agree that money is fungible in this case. ...

Sorry, but I guess I'm just getting too old and too aware that life is too short to argue facts with anyone. Money is fungible, that is a fact. Look it up. It isn't conditional.

... One could hold oil stocks and bonds and live off the dividends even as the price goes down. ...

Yes. So?

One could sell off a few percent of a rising (or falling - but likely more stable than oil, as seen in this example) broad-based stock index fund (that's kicking off ~ 2% divs).

There's no free lunch, if a group of stocks pays higher divs, you are giving up some appreciation, accepting more risk/volatility, or something. Else everyone would buy those stocks, driving up the price and eliminating the alpha!

-ERD50

 

[Jerry1]

True enough that money is fungible, however, stocks and returns on stocks are not money. Stocks and their returns are highly volatile, but if the dividend stream is all he's after, the return is less relevant. I agree there may be better ways to do it, but if dividend income was the objective, then the plan may be working as desired.

My concern mentioned in this thread is the mention of fees. Volatility is one thing, but the fee burden is not volatile, it just sucks money off the top.

 

[OldShooter]

I'm monitoring ... me saying their is a concentration of risk shouldn't they have changed it? ...

As usual I agree with most of what ERD50 has been saying. But what is your status with respect to the account? Are you an owner, do you have a power of attorney? If neither, then you are just background noise and the advisor will have little or no interest in your opinions.

If you do have authority, use it to either pull the account (which would be my preference if it were me) or to direct the AA to something that you think is more appropriate. You are the customer.

What's the AA? What are the fees? How dependent is the owner on the portfolio (maybe they get by on pension and SS, and this is just 'gravy')? ...

This is really important. Without this information it's basically impossible to advise any particular action. IOW, what problem are you trying to solve?

 

[OldShooter]

Yes it is mainly dividend yield. The one negative year the loss in value was about 15% more than the dividends produced when you add in the fees it came out to be almost 50% more than the dividends produced.

I just caught this. If the fees moved the loss from 15% of the dividend income to 50% of the dividend income, my third-grade math tells me that the fees were 35% of dividend income. Right? Offhand, it sounds like your friend is getting raped. Is this one of the storefront bandits like Eddie Jones?

 

[Luck_Club]

I just caught this. If the fees moved the loss from 15% of the dividend income to 50% of the dividend income, my third-grade math tells me that the fees were 35% of dividend income. Right? Offhand, it sounds like your friend is getting raped. Is this one of the storefront bandits like Eddie Jones?

It is Raymond James, and the fee is around 1.2% of end of year portfolio value. That is kind of what I'm coming to the conclusion of as well.

I don't hold POA, but the broker is working with me while my relative is incapacitated without a proper POA. This is because the broker knew my relative was working on assigning the role to me prior to becoming incapacitated.

Div yield pre fee is about 3.4%-3.6%. so the fee is taking 30% of the div yield.

 

[RobbieB]

What does your broker recommend (instead of bonds) for fixed-income investment?

He doesn't. He knows I have muni's with other firms.

 

[OldShooter]

It is Raymond James, and the fee is around 1.2% of end of year portfolio value. That is kind of what I'm coming to the conclusion of as well.

I don't hold POA, but the broker is working with me while my relative is incapacitated without a proper POA. This is because the broker knew my relative was working on assigning the role to me prior to becoming incapacitated.

Div yield pre fee is about 3.4%-3.6%. so the fee is taking 30% of the div yield.

Sticky. Does your relative have an attorney? (a) the broker should not be taking direction from you; it exposes him to legal liability if other heirs sue him for breach of fiduciary duty. (b) you, too, are in a bad spot if you are not the sole heir and someone wants to sue.

If your relative is physically incapacitated but mentally OK, you should get a POA signed in the presence of his/her lawyer, who can subsequently confirm mental competence and no undue influence if the POA is ever questioned. If not mentally competent, maybe the lawyer can help you somehow to get a court order.

Re Raymond James, probably they will not win any popularity contests on this forum. But until you have legal authority you are basically stuck with them.

Re 1.2% In my experience that would be a high wrap fee on any account $1M or larger.

 

[pb4uski]

Agree with OldShooter. I'm also very surprised that the broker is cooperating with you. In our state, becoming a guardian for an elderly relative who is mentally incapacitated is a relatively easy but time consuming process.... I've been through the process twice.

 

[Luck_Club]

Sticky. Does your relative have an attorney? (a) the broker should not be taking direction from you; it exposes him to legal liability if other heirs sue him for breach of fiduciary duty. (b) you, too, are in a bad spot if you are not the sole heir and someone wants to sue.

Re Raymond James, probably they will not win any popularity contests on this forum. But until you have legal authority you are basically stuck with them.

Re 1.2% In my experience that would be a high wrap fee on any account $1M or larger.

Yes I do believe I'm kind of stuck until my relative passes. He is mentally incompetent so we can't sign anything.

I'll talk with the broker about the fee's, but I think he realizes we are stuck between a rock and a hard place until the relative passes.

 

[OldShooter]

Yes I do believe I'm kind of stuck until my relative passes. He is mentally incompetent so we can't sign anything.

Unless you are the only heir, I'd encourage you to pursue a guardianship. Just to keep things clean and also to give you legal standing with respect to the account.

I'll talk with the broker about the fee's, but I think he realizes we are stuck between a rock and a hard place until the relative passes.

In thinking about this thread I remembered reading that some of the storefront brokers sell investments that are unique to them, probably private placements or something similar. Not liquid, not transferrable to another brokerage house, etc. So I googled "raymond james gas and oil investments." Hard to tell for sure, but there seems to be smoke if not fire regarding Raymond James and various oil and gas deals. I'd suggest at least running a brokercheck (https://brokercheck.finra.org/) on your guy and on his branch manager, then also googling the names of the investments that your relative is in.

our broker may like oil and gas because of the money he and his firm make rather than because that sector concentration is a good thing for your relative. That would also explain why he resists you when you object to the concentration.

FWIW here is an article I ran across a couple of weeks ago that details firms employing larger numbers of brokers who have had compliance or other problems: https://advisorhub.com/study-slams-...ss-protecting-investors-names-30-worst-firms/

 

[Luck_Club]

Unless you are the only heir, I'd encourage you to pursue a guardianship. Just to keep things clean and also to give you legal standing with respect to the account.

So I googled "raymond james gas and oil investments." Hard to tell for sure, but there seems to be smoke if not fire regarding Raymond James and various oil and gas deals. I'd suggest at least running a brokercheck (https://brokercheck.finra.org/) on your guy and on his branch manager, then also googling the names of the investments that your relative is in.

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I checked the broker he is clean. The oil and gas industry was where this relative worked, so I'm sure he had some input.

Upon more reflection the fee probably includes federal with holding, so I think the actual fee is closer to 0.6%, and the remainder is taxes, which is probably quite a bit better.

On guardianship. No thank you. Very expensive and time consuming especially for a back of the envelope type guy like myself. I know that I'm not stealing, and will make it very easy for anyone to audit the books when the time comes.

I'm doing a triple blind study on managing the money.
1) another managed account
2) A computer managed account (taxable account)
3) my management of dividend stock picking and ETF's

Vs the current broker

 

[pb4uski]

Yes I do believe I'm kind of stuck until my relative passes. He is mentally incompetent so we can't sign anything.

I'll talk with the broker about the fee's, but I think he realizes we are stuck between a rock and a hard place until the relative passes.

If he is mentally incompetent then you should petition the court to be appointed as his guardian unless it is more appropriate that some other relative be appointed guardian. He needs a guardian to oversee his finances and to make financial and non-financial decisions for him.

The process it relatively easy. You petition the court and they appoint counsel for him. The petition is also provided to other interested parties (other blood relatives). His counsel interviews him and medical professionals caring for him make affidavits as to his mental state. A court appointed mental health professial also interviews him and reports to the court. Then you appear before a judge, he asks you a few questions, reviews the evidence and appoints you as guardian and you can use to court appointment take control on his behalf.

Been through it twice... easy peasy.