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Mom and Stepdad have asked for help.
Old 01-10-2007, 07:48 PM   #1
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Mom and Stepdad have asked for help.

Mom is 75 and my Stepdad is 80. Dad has congestive heart failure and his health has really declined in the last 12 month. Mom does pretty good, but has typical aches and pains...

They called last night to tell me they are going to see a finance guy. This is someone who a friend recommended. My parents live in a very nice condo, but I can see them moving to a retirement community within the next five year.

Their friend has recommended a FA at Smith Barney. I don't know much about their my parents finances except all of there income is comes from SS, two fixed annunities and one variable annunity. I think the fixed around 5%, the variable I'm not sure.

They were at a get together at the condo and my mom must have mentioned their rate of return -- and this friend piped up stating they needed to see this FA. They now have this idea that they can make more money by doing this.

They have a appointment scheduled next Thursday and I've told my Mom I would go with them. I don't know a whole lot about Smith Barney -- but checking on line, it seems most of their funds have high front loaded cost.

If mom and dad can make more money, that's great -- but, I'm not sure they appreciate the risk of going after a few more $$$.

So I'm asking for recommendations for them. What type/mix of funds would you put you parent's pot of gold in. I have no experience with Vangard, but they seem to be held in high regard in this forum.

I'm grateful they asked me, but I anxious on giving them bad advice.

Thanks in advance for your help.

dwk
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Re: Mom and Stepdad have asked for help.
Old 01-10-2007, 08:09 PM   #2
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Re: Mom and Stepdad have asked for help.

I'd be very careful - if not a respectable FA, he/she could simply transition them into new annuities - no real benefit to your folks but huge benefit to FA. I wonder how they ended up with annuities in the first place? Good luck.
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Re: Mom and Stepdad have asked for help.
Old 01-10-2007, 08:21 PM   #3
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Re: Mom and Stepdad have asked for help.

Tell them that they may be exposed to a hard sell, to regard this as an 'interview', to sign nothing, and that you absolutely want to go along. Let the FA make suggestions, or provide suggestions, but only in your presence.

This will be your opportunity to evaluate the state of their estate planning.

ID a local lawyer who does elder-law/wills & living trusts for them to talk to next if that is indicated. Frankly that should be their first priority.

Your role should be to protect the both of them financially. Plan coffee after the meeting. At that time ask them to share with you the current picture and ask that they give you time to explore options. NEVER, NEVER tell them that the have been sc*ewed.

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Re: Mom and Stepdad have asked for help.
Old 01-11-2007, 07:03 AM   #4
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Re: Mom and Stepdad have asked for help.

Good advice,thus far. The other thing i would suggest is that you find a couple more advisors for them to talk to, ones t hat you pick. These can be fee-only planners or someone you get a referral on, but they should not be commissioned salesmen like the Smith BArney guy. Sell it to them as "shopping around to get the best deal/outcome."
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Re: Mom and Stepdad have asked for help.
Old 01-11-2007, 10:03 AM   #5
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Re: Mom and Stepdad have asked for help.

Also stress to them that their goal is income and principal preservation, not long term capital gain.... this is one thing that is hard to get across to someone who is elderly... they still think they will live a LONG time and will need to make LOTS of money... I know what I speak... I have done this with my Mom..

BTW... also stress a good asset allocation. When the market dropped in 2000, my mom still made money. I was able to show her that those 'bad' investments were now 'good' investments.. diversification works even if you don't want it to...
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Re: Mom and Stepdad have asked for help.
Old 01-11-2007, 10:20 AM   #6
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Re: Mom and Stepdad have asked for help.

Maybe a Vanguard Lifestrategy Conservative Growth fund or Lifestrategy Income fund? 50% and 30% stock, respectively.

Conservative Growth is had returns of 10.62% in 2006, 6.61% per year over 5 years, and 7.55% per year over 10 years.

Lifestrategy Income had similar slightly lower returns.
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Re: Mom and Stepdad have asked for help.
Old 01-11-2007, 01:00 PM   #7
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Re: Mom and Stepdad have asked for help.

The other thing to try and work into the conversation is the notion that the returns they are getting might be enough to meet their needs. Is there anything they are giving up because they believe they cannot afford it?

What do they want done with any residual estate?

I manage MILs estate and DW has said I should get returns as high as we are getting. I say no I will just do what her comfort level and needs dictate.
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