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

[travelover]

OP, you get to choose her nursing home.

 

[Fermion]

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]

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]

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]

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]

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]

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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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]

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.)

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.

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.

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]

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-Info/Asset_Fee_Structure_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.

 

[athena53]

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'm bringing up American Funds again because I'm familiar with them, but you can get a lower fee if you have lot of money invested with them (total of all the funds in the American Funds family). The 5.75% front-end fee applies if you have less than $25K invested. It reduces gradually; for example if you have between $100K and $250K invested, you pay 3.5%. That's true whether you reach that bracket by investing new money or appreciation on what you have in there already. At $1 million and over there's no front-end load.

My parents asked me about this because my nephew and his wife wanted to open an account for their twin girls and the FA told them they could get that break based on what family members had in American Funds. They asked me about it. It turned out the 529 would have to have been in my name. I don't think they liked that idea (I would have been free to decide that my granddaughter was cuter and smarter than both of their kids put together and spend it on her college instead) because I never heard about it again.

Is it possible our mother has $1 million of her own in American Funds? If so, maybe you were able to invest with zero front-end fees. I'd still focus on the overall return, though. Who cares if you're paying zero front-end load but annual returns are bad?

 

[Texas Proud]

You can go back and look at the record of the investment to see if a load was taken out... if $10K was put in and your opening balance was $9500... then a fee was removed (not exact math)... or you might see the $10K with a $500 deduction...


I would move the money... I would also tell mom that the performance of the funds you were in were not up to your standards and you now know enough to invest it yourself.... you do not have to bring up the past.... that will only make things go bad...


I would also not get involved with cousins, sisters etc..... you might say something along the lines that you have decided to move your money to better options and leave it at that... but dissing your mom to your whole family only will lead to you being the bad guy.... they might be perfectly happy with the situation as it is.... there are plenty of people who invest in Ameriprise that think they are doing just fine... trying to tell them they are not is a waste of both of your times....

 

[growerVon]

Update! Since last we left our merry band...

Mom got us the paperwork to switch into a class of the age based funds that don't have the front-end load, so we took that. However the ER's are still %1+ so since May I've been saving aside the 529 contributions. DW and I just got done with megacorp's bonus season so between the squirreled nuts and a chunk from bonus we have new 529s for both kids at Vanguard under my ownership. We will keep the previous 529 money at Mom's company until she retires and no longer worries about annual assets under management amounts - then move them to VanG also, though into DW's ownership.

Mom still has some moxie over this matter; several weeks back Sis and I were over at Mom's and she jestfully suggested I could resume investing in the 529s with her, "now that we have you in the funds without the load." Ha-ha. She isn't the only one with both a sense of humor and nose for confrontation. "Sorry, Mom, we're going with Vanguard. I can't justify those high expense ratios! It's my kids' funding we're talking about... Your only grandkids!"

Fortunately Mom and I remain on great terms and understand each other clearly.

 

[Olbidness]

Thanksgiving dinner might be a bit awkward this year.

 

[Al in Ohio]

Wow. I invest in Ohio's state run 529. It has no load and I chose Vanguard Wellington fund. I get a tax break, had a nice 5 year average rate of return and pay less than half a percent expenses. No FA. I just go online and setup monthly auto deposits. Simple.


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