Financial Advisor / Wealth Management

[youbet]

She is bulk equities, higher than I would expect at her age,

If you're really concerned about your mom's finances, you might want to take a breath, put your emotions about the FA aside, and think about whether she's undergoing a shark attack or serious malfeasance. First, consider her AA. You say she's higher in equities than you would expect at her age (and I assume given her other financial and life circumstances). That's serious. If the FA has you mom in an inappropriate AA for her age and circumstances, action needs to be taken. This could include reporting the FA to the appropriate gov't agencies.

there is no doubt in my mind that with her expenses coupled with her performance vs. S&P vs. my 85/15 "three-fund-ish" portfolio that she's getting, in my previous word, "fleeced".

It's obvious the situation has your adrenaline flowing. But there is a difference between the FA marginally missing benchmarks (if the ones you're picking are appropriate) and your mom swimming with the sharks or going to work for Enron. I'd first focus on making sure this FA is legit, appropriately licensed, that your mom's account is intact (it isn't half gone, etc.) that he delivers money whenever your mom requests it and he has no complaints on file.

If it turns out that your mom's AA is OK for her age and circumstances and there is no suspicious or criminal activity taking place, then I'd do a deep dive and determine the level of "fleecing" using an appropriate guage, say her performance vs. a blended index benchmark that reflects her AA.

I completely understand your frustration.

 

[nash031]

If you're really concerned about your mom's finances, you might want to take a breath, put your emotions about the FA aside, and think about whether she's undergoing a shark attack or serious malfeasance. First, consider her AA. You say she's higher in equities than you would expect at her age (and I assume given her other financial and life circumstances). That's serious. If the FA has you mom in an inappropriate AA for her age and circumstances, action needs to be taken. This could include reporting the FA to the appropriate gov't agencies. It's obvious the situation has your adrenaline flowing. But there is a difference between the FA marginally missing benchmarks (if the ones you're picking are appropriate) and your mom swimming with the sharks or going to work for Enron. I'd first focus on making sure this FA is legit, appropriately licensed, that your mom's account is intact (it isn't half gone, etc.) that he delivers money whenever your mom requests it and he has no complaints on file.

If it turns out that your mom's AA is OK for her age and circumstances and there is no suspicious or criminal activity taking place, then I'd do a deep dive and determine the level of "fleecing" using an appropriate guage, say her performance vs. a blended index benchmark that reflects her AA.

I completely understand your frustration.

No, I don't think her allocation is inappropriate, it just doesn't match the more conservative approaches many on here and other places use once they've won the game. I think it's OK given her assets.

I am not terribly concerned about her finances. She has money to live the lifestyle she wants until she's 99. She'll be fine. If it were otherwise, I would take action. She could probably have about $10K / year more to spend if she so desired, but the human capital of feeling comfortable with her situation is important. The FA apparently gives her that, so I let it be.

 

[papadad111]

Two thoughts

1. It's easier when things don't go well in investing and generally in life to just blame someone else, in this case, your financial advisor, for doing a lousy job. People like to pass the blame and pass the buck. It's human nature

2. It's comforting to have someone hold your hand when a situation gets tough. - be it mom when you skin your knee or a financial advisor when the market falls from 1575 to 666 - some people like to hear "it will be ok".

I contend the financial advisory industry is 80 percent psychology and behavioral science and just 20 percent math and tax laws and portfolio analysis and drawdown strategy - it's just not that complex - most investment advice can be written on a 3x5 note card, after all ..

 

[kcowan]

I use a portfolio manager for a small portion of our combined portfolio. This is insurance because DW has zero interest/aptitude for doing it. So if something happens to me, she has a guy she trusts with a known track record of performance.

(After I am gone, she will have another $500k from key man insurance to spend as she pleases.)

 

[mpeirce]

I contend the financial advisory industry is 80 percent psychology and behavioral science and just 20 percent math and tax laws and portfolio analysis and drawdown strategy - it's just not that complex - most investment advice can be written on a 3x5 note card, after all ..

+1

And 80 might be conservative.

We had a moderate family tussle over a FA for an older member of the family. The faction backing the FA won simply because the FA was a "friend" and the family member pushing the FA had so much (emotional) investment in that FA that getting her to change her mind would have cause a major rift in the family.

I quietly review the statements when I get the chance to make sure that there are no major ripoffs taking place. I don't approve of the investments the FA recommends, but they aren't criminal, so I keep my mouth shut.

 

[jwr62]

I got for free a financial plan from Swabb. So why pay anyone to do the same thing for free.

 

[unclemick]

+1

And 80 might be conservative.

We had a moderate family tussle over a FA for an older member of the family. The faction backing the FA won simply because the FA was a "friend" and the family member pushing the FA had so much (emotional) investment in that FA that getting her to change her mind would have cause a major rift in the family.

I quietly review the statements when I get the chance to make sure that there are no major ripoffs taking place. I don't approve of the investments the FA recommends, but they aren't criminal, so I keep my mouth shut.

I married a widow who avoided finance like the plague. After two years, she is coming around to the idea that paying her deceased husbands FA maybe is not worth 15k per year. Dropping the V word over time has helped.

heh heh heh - prying the funds loose and transferring to Vanguard is worse than pulling teeth - 5 places, name change, medallion signatures and a lot of whinning(discussion?) from the FA. Luckily I think her has ticked her off - not a good thing - for him.

 

[Danmar]

Yeah a three ETF portfolio is easy to manage, but now that I am over 2 countries (a US citizen who is a Canadian resident), things have become much more complicated. I just found out I shouldn't buy Canadian ETF's in my non-registered account (which is the only account I have) due to major US related tax complications (tax disadvantages), so my plan to hold Canadian bond ETF's just went out the door. (I already knew not to open a TFSA as a US citizen, but I didn't know about Canadian ETF's also.) I am not sure what I am going to do with the money I don't need for another year or two that I was planning to convert to CAD now (while CAD is still low) to invest in the Canadian market. Any suggestions? In a time like this, I wish I had so much money that I could afford an FA and a good tax advisor. My problem is more like "I am often wrong and always in doubt".

Not an expert in cross border tax issues. My basic strategy has always been keep it very simple. Being Canadian resident and citizen, I stay away from US investments.

But why wouldn't you start an RSP as it gets much better tax treatment in the US than a TFSA would. Why not convert the currency now and put into RSP as you get contribution room?

If I had cross border issues, I would definately hire an experience tax professional. But once I figured out the tax, the investing would still be simple?

 

[kcowan]

We had a moderate family tussle over a FA for an older member of the family. The faction backing the FA won simply because the FA was a "friend" and the family member pushing the FA had so much (emotional) investment in that FA that getting her to change her mind would have cause a major rift in the family.

MIL was getting charged 1% for rolling over bonds and bank certificates, plus custodial fees from the bank and tax preparation fees. DW eventually committed that I could do the same portfolio job for much less. Since retired I also had the time. Did it for 5 years and gave her an annual performance summary that she understood. Bank custodial fees also dropped to $25/yr (from $1350).

 

[tmm99]

Not an expert in cross border tax issues. My basic strategy has always been keep it very simple. Being Canadian resident and citizen, I stay away from US investments.

But why wouldn't you start an RSP as it gets much better tax treatment in the US than a TFSA would. Why not convert the currency now and put into RSP as you get contribution room?

If I had cross border issues, I would definately hire an experience tax professional. But once I figured out the tax, the investing would still be simple?

I am looking into moving some IRA to RRSP also, but since one cannot do a reverse later on, I am a bit hesitant in case we end up in the US in the distant future although that is not in our current plan. I have a cross-border tax accountant, so I may talk to her about some of the stuff. I hired someone (supposedly a cross-border financial planner/tax guy) for a couple of hours for consultation and got pretty much taken, so I will just see what I can educate myself more with some help from my tax accountant. Your advise is well taken.

 

[pb4uski]

I'm not a big fan of Suze Orman but I had her on in the background on a PBS channel I as I was surfing the internet and she said "You have to care about your money... if you want to find the best financial advisor in the world, look in the mirror". Spot on.

 

[medved]

I'm not a big fan of Suze Orman but I had her on in the background on a PBS channel I as I was surfing the internet and she said "You have to care about your money... if you want to find the best financial advisor in the world, look in the mirror". Spot on.

I am also not a big fan. But for what it's worth, I do not think she is opposed to hiring a financial advisor. Here's some of her advice on selecting one: Retirement Planning

 

[Sunset]

I am looking into moving some IRA to RRSP also, but since one cannot do a reverse later on, I am a bit hesitant in case we end up in the US in the distant future although that is not in our current plan. I have a cross-border tax accountant, so I may talk to her about some of the stuff. I hired someone (supposedly a cross-border financial planner/tax guy) for a couple of hours for consultation and got pretty much taken, so I will just see what I can educate myself more with some help from my tax accountant. Your advise is well taken.

interesting, never knew you could:
http://www.advisor.ca/images/other/ae/ae_1205_moveit.pdf

" Canada’s Income Tax Act (ITA) allows resident taxpayers in Canada to transfer benefits of some U.S. retirement arrange-ments (401K/403B plans) or individual retirement accounts (IRAs) to Canada on a tax deferred basis. "

Although it does really use up the contribution limit that could ordinarily be used, so it's not like an extra benefit.

 

[Sunset]

Yeah a three ETF portfolio is easy to manage, but now that I am over 2 countries (a US citizen who is a Canadian resident), things have become much more complicated. I just found out I shouldn't buy Canadian ETF's in my non-registered account (which is the only account I have) due to major US related tax complications (tax disadvantages), so my plan to hold Canadian bond ETF's just went out the door. (I already knew not to open a TFSA as a US citizen, but I didn't know about Canadian ETF's also.) I am not sure what I am going to do with the money I don't need for another year or two that I was planning to convert to CAD now (while CAD is still low) to invest in the Canadian market. Any suggestions? In a time like this, I wish I had so much money that I could afford an FA and a good tax advisor. My problem is more like "I am often wrong and always in doubt".

Why "I just found out I shouldn't buy Canadian ETF's in my non-registered account" ? I can see you will pay tax in Canada, then on your US return pay tax, but be able to claim foreign tax credit (which is not all that great). Is there something else I'm missing ?

Since you are a Canadian Resident why not have a TFSA ?
You won't pay taxes on the gains in Canada, but US will tax you world wide with lower rates, unless they recongize TFSA as a retirement account and will tax you on withdrawal.

Problem with Canadian mutual funds or ETF's is the very high MER rate compared to US funds/etf's. Commonly mutual funds charge 2.3%