Parent brokerage holdings doesn't make sense

[Closet_Gamer]

I can’t imagine any possible rationale for that portfolio. I stepped in on my Mom’s account several years ago and discovered 20+ positions plus an annuity. And at age 87 he was trying to sell her another annuity with a seven year surrender period. The advisor fought, tried to scare my Mom and then sent me a nasty CYA letter when I took the account away from him.

Given what you found I would presume bad intent and make him work his way up to incompetent as a justification.

I understand and agree with all of the advice about tax management in trying to sort this out a bit.

Perhaps a good starting point is simply to freeze the account from new trading. With all those positions one would think there is very solid diversification that would preclude the need for any urgent trading.

Hiring a one-time fee FA to do an independent review of the account might be a good way to pull some neutral facts into the conversation.

I think OldShooter’s points and ideas are very valid. In retrospect, I wish I had done that. (He suggested it when I was dealing with my Mom but I just pulled the account away from the FA rather than seek proactive help from the firm.)

One more example of why I hate the financial services industry.

Good luck.

 

[Badger]

Churning but there often is nothing you can do. My parents were ripped off by Merrill lynch then Raymond James to the tune of about 1.8%. Not only that they made nothing during the 2010 bull market.

How do I know they were churned? Single shares of Home Depot, target, ups.

I could not get my parent away from them since 2015 until 6/2023 because my parents thought they were good people. Small town mentality. Only thing that saved us finally was their investment advisor retired!!!! Yay only way I managed to get them to stop paying. More money than they were making

I had a similar experience when my wife started her 403b. Merrill Lynch and about 20 insurance annuity companies were her only choices. ML rep wanted her to let him handle the investments and make all the choices of stocks and MFs. When questioned he wanted to invest in some front load and back load funds that he would sell and buy throughout the year. I immediately thought of churning and had the money placed in a MM account that we would handle. He lied and said we couldn't move the money to another investment firm. For the next 12 years I would have a major portion of the money wired to Vanguard every 6 months. Even after filling out all the paperwork and notifying Vanguard for each request it would sometimes take as much as 1 to 3 months for it to be sent.

 

[yofi]

I had a similar experience when my wife started her 403b.

I'm amazed so many people have had similar experiences! I always knew in the back of my mind that something was off, but these stories reinforce the shenanigans going on. Thanks for sharing.

 

[yofi]

Perhaps a good starting point is simply to freeze the account from new trading. With all those positions one would think there is very solid diversification that would preclude the need for any urgent trading.

Hiring a one-time fee FA to do an independent review of the account might be a good way to pull some neutral facts into the conversation.

I did ponder asking her to freeze the account, but I didn't want to be responsible had it actually been necessary making a change and getting caught flat-footed. I'm probably over thinking this.

An independent review from a fee only FA is a great idea, thanks.

 

[yofi]

She was convinced he was salt of the earth

Right, exactly what I'm encountering! These guys are good at that!

 

[yofi]

Only thing that saved us finally was their investment advisor retired!!!! Yay only way I managed to get them to stop paying. More money than they were making

I wish when their original broker retired that that would have happened, but she followed the partner over unfortunately. One thing she pointed out why she did was that she was getting 8.5% in a guaranteed annuity or something, and he told her that he couldn't beat that so that's why she trusts him.

 

[yofi]

Perhaps you can offer to take charge of her investments and bill paying which will take some burden off her and you have more aptitude for such things. Just stress that its still her money and she's still in charge but you'll explain any bog moves that you plan to make with her before you do them to be sure she is ok with it.

That's a great idea and well put. One thing I'm concerned about is how to handle RMDs and estimated tax payments. I've never done that before so feel a bit out of depth and wouldn't want to screw anything up. Maybe an accountant can help on that end?

 

[yofi]

Who does her taxes? That person might be very helpful for general advise in the future.

One additional thing I did each quarter was to measure all of the investments for an AA profile. The AUM managers did not want to track anything other than what they were paid for.

That's a good idea, maybe they can help with RMDs and estimated tax payments. I'm not sure if the FA is doing the RMD withdrawals, that's what I thought.

Because her pensions/ss covers her monthly expenses for the most part, she only uses a bit more for insurance etc.

Her main worry now is eventual nursing home payments but she does have LTC insurance and owns an apartment she'd sell. Given that, I don't know if ~50% is a good AA. I suppose that does make sense.

 

[athena53]

One thing I'm concerned about is how to handle RMDs and estimated tax payments. I've never done that before so feel a bit out of depth and wouldn't want to screw anything up. Maybe an accountant can help on that end?

No, you don't need an accountant. There are plenty of RMD tables on the Internet- basically a % of the balance based on age. Here's an example.
https://smartasset.com/retirement/rmd-table

You still need to decide what assets to withdraw; if she has multiple IRAs the total can be taken from one or all accounts as long as the withdrawals add up to the minimum. That would be one way to get rid of the smaller, underperforming holdings.

 

[target2019]

That's a good idea, maybe they can help with RMDs and estimated tax payments. I'm not sure if the FA is doing the RMD withdrawals, that's what I thought.

Because her pensions/ss covers her monthly expenses for the most part, she only uses a bit more for insurance etc.

Her main worry now is eventual nursing home payments but she does have LTC insurance and owns an apartment she'd sell. Given that, I don't know if ~50% is a good AA. I suppose that does make sense.

You need a tax person (CPA?) and an independent CFA to look at the entire picture.

The current FA has set himself up pretty good. If the situation is like others I've seen, her taxes are being prepared by someone in the FA's firm, or is friendly to the tactics. That's not optimum for your parent.

 

[SecondCor521]

I'm amazed so many people have had similar experiences! I always knew in the back of my mind that something was off, but these stories reinforce the shenanigans going on. Thanks for sharing.

I do volunteer tax preparation. Every year, I do many tax returns with 1099-Bs. Probably 80-90% of those have an advisor, and of those, all of them are either churned or needlessly weird and complicated allocations. Most of the taxpayers in that situation are unaware. Those that become aware usually also become upset; I don't say anything other than talk about the tax effects of their decisions. I would bet dollars to donuts that @cathy63 sees the same thing.

Just yesterday I turned a lady away because her advisor was doing options trades on GLD, SLV, and the VIX in her account, losing her $3K in the process. Middle aged with a cashier job or something; I think it was an inheritance.

Every year there's one guy who comes in. He is day / swing trading what I suppose is a solid mid-six figures inheritance. Every year he comes in with a 40 page 1099-B. Every year he loses $40K to $50K. I don't know when he'll wake up.

Since both those examples are inheritances, I wonder how often it happens where people inherit something and aren't prepared to handle it, so the nice compassionate stock broker comes in and "helps out".

 

[Global Wizzo]

The first thing I would do is confirm everything has beneficiaries and TOD in place.

The broker may have things not under a single umbrella for transfer on death.

My mom had multiple individual stock holdings. Even getting TOD paperwork in place Computershare and others were a PITA. Multiple filings, lost or misplaced stuff on their side, etc.

Good luck.

 

[imnontrad]

You may have a difficult time getting them to leave that broker. And whether it makes sense at this stage in life to sell/buy to simplify things depends on what type of account the holdings are in and their current tax bracket.
The only thing I can think of is to do research and identify any hidden fees on the mutual funds and show for the other equities what their performance is compared to a low cost index fund. THen present the information to your parents - but do not expect a change.