Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Parent brokerage holdings doesn't make sense
Old 02-25-2024, 09:30 AM   #1
Dryer sheet aficionado
 
Join Date: Jan 2024
Posts: 27
Parent brokerage holdings doesn't make sense

I (50s) recently checked my parent's brokerage for the first time to make sure everything is in order as we worry about dementia and noticed they have 85 stock holdings, 33 mutual funds and 3 etfs, which seems quite excessive. However they have used this broker since the 80s who is now with Wells Fargo.

Is this over diversification a concern to be addressed or just let sleeping dogs lie since they completely trust this broker.
yofi is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-25-2024, 09:35 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Oct 2019
Posts: 3,665
Quote:
Originally Posted by yofi View Post
I (50s) recently checked my parent's brokerage for the first time to make sure everything is in order as we worry about dementia and noticed they have 85 stock holdings, 33 mutual funds and 3 etfs, which seems quite excessive. However they have used this broker since the 80s who is now with Wells Fargo.

Is this over diversification a concern to be addressed or just let sleeping dogs lie since they completely trust this broker.

Seems quite excessive to me. I would also be concerned about churning going on in the account, i.e. the broker just buying and selling to generate commissions for the broker rather than profits for your parents. As to being with the broker since the 80s, why would the broker fire a profitable customer?
Time2 is online now   Reply With Quote
Old 02-25-2024, 09:59 AM   #3
Thinks s/he gets paid by the post
euro's Avatar
 
Join Date: Oct 2015
Posts: 2,315
Definitely excessive, but brokers/FA will often do this for a number of reasons. Generating commissions is one but making it confusing for the customer is another. Because of potential tax liabilities, it may be very difficult for anyone to unravel such a situation (job security for the FA). At this point, you may be best off just leaving it alone and then have all the assets benefit from step-up when the owner passes away. Or maybe selectively trim the worst (or smallest) positions.
euro is offline   Reply With Quote
Old 02-25-2024, 10:05 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 3,693
Is this a WF Advisors brokerage where they charge a percentage of assets under management? How many transactions is the broker doing on a yearly basis?

WFA has a centralized group of planners who set up portfolios for different risk tolerances and the advisors in the branches duplicate those portfolios for each client with some personalized tweaking. They also use a computerized planning tool called Envision to help with financial planning for various life events. We started working with them a few years before we retired for the planning service and still have a portion of our money in their Conservative Growth plan. They've done very well with it.

If my parent were in this type of account and they were happy with the broker and with the returns, I wouldn't worry about it. It's more concerning if the broker doesn't have any oversight or if the parent is paying transaction fees and he's churning the account.
cathy63 is offline   Reply With Quote
Old 02-25-2024, 10:18 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,062
OP - while you are at it, check on the fees being charged. Not just the fund fees, often some places are charging 1% or 2% of the account total in fees in addition.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 02-25-2024, 10:23 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,708
I would get involved to oversee, and document total fees. If ever asked, or I had to get involved, then go the next level.

If it is just one taxable account, then look at how appropriate the mutual funds are.

It sounds to me like an EJ advisor who went to WF. Crazy.

But if your parents are happy with this nice guy, there's not much you can say that won't alienate them.
target2019 is offline   Reply With Quote
Old 02-25-2024, 10:34 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,347
There is no benefit to the client from having this kind of portfolio. As others have said, I would look the account over very carefully including looking for churning. To do this you may have to get a Wells power of attorney over the account, which will probably alarm the rep. Their reaction will tell you something, too.

While you're at it, check out the rep at https://brokercheck.finra.org/, looking specifically for customer disputes and resolutions. Most brokers have none, but one time I checked one of those free-steak-dinner guys and found 21 disputes, most of which had been resolved in six figures in favor of the customers.

If you feel there has been malfeasance, including also inappropriate investments, call the rep's branch and set up a face-to-face meeting with their compliance officer. Consider taking an attorney.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 02-25-2024, 10:44 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,227
Quote:
Originally Posted by yofi View Post
I (50s) recently checked my parent's brokerage for the first time to make sure everything is in order as we worry about dementia and noticed they have 85 stock holdings, 33 mutual funds and 3 etfs, which seems quite excessive. However they have used this broker since the 80s who is now with Wells Fargo.

Is this over diversification a concern to be addressed or just let sleeping dogs lie since they completely trust this broker.

I started a thread about a Wells Fargo FA having my BIL buy an annuity inside his IRA...



It seems that it might be Wells Fargo is the problem.. my BIL has used the FA for 20+ years and recently moved to Wells Fargo and according to my sister has been bad since then...


I would suggest that you try and get them to move to a better firm..
Texas Proud is offline   Reply With Quote
Old 02-25-2024, 10:45 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,227
Quote:
Originally Posted by Sunset View Post
OP - while you are at it, check on the fees being charged. Not just the fund fees, often some places are charging 1% or 2% of the account total in fees in addition.

YES!!! I did mention to my BIL to check fees... I am sure they are excessive....
Texas Proud is offline   Reply With Quote
Old 02-25-2024, 10:51 AM   #10
Dryer sheet aficionado
 
Join Date: Jan 2024
Posts: 27
Quote:
Originally Posted by cathy63 View Post
Is this a WF Advisors brokerage where they charge a percentage of assets under management? How many transactions is the broker doing on a yearly basis?
They came to WF when their broker moved from Lehman Brothers years ago. They always took a percentage cut and I think it's 1% - 1.5% in WF (~2M).

I just checked transactions for the past 360 days, and excluding t-bills, see there were 22 BUY transactions split between individual stocks and mutual funds for ~$3k each, and 17 SELL transactions, all relatively small amounts like ~$3K. I guess that may be a normal rebalancing or tax harvesting?

I also manually added up the advisory fees for the last 360 days and it came to ~$18K.

I noticed that around 5 of the funds were 1 and 2 stars and ones with front load fees etc.
yofi is offline   Reply With Quote
Old 02-25-2024, 10:57 AM   #11
Dryer sheet aficionado
 
Join Date: Jan 2024
Posts: 27
Quote:
Originally Posted by Texas Proud View Post
I started a thread about a Wells Fargo FA having my BIL buy an annuity inside his IRA...

I would suggest that you try and get them to move to a better firm..
Thankfully I don't see any annuities. Mom is quite elderly and trusts their broker so much I doubt I could get her to move.

Interesting, they do have ~100K sitting in a JP Morgan brokerage that over the past 6 years has made a grand total of ~$5K. She asked what she should do about this and I'm tempted to tell her to open a Fidelity account and move everything to FSKAX since they don't need it anytime soon.

The only concern I have is that with the market this high, if it drops over the next year or so, she'll think I gave her bad advice.
yofi is offline   Reply With Quote
Old 02-25-2024, 11:19 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 17,227
Quote:
Originally Posted by yofi View Post
They came to WF when their broker moved from Lehman Brothers years ago. They always took a percentage cut and I think it's 1% - 1.5% in WF (~2M).

I just checked transactions for the past 360 days, and excluding t-bills, see there were 22 BUY transactions split between individual stocks and mutual funds for ~$3k each, and 17 SELL transactions, all relatively small amounts like ~$3K. I guess that may be a normal rebalancing or tax harvesting?

I also manually added up the advisory fees for the last 360 days and it came to ~$18K.

I noticed that around 5 of the funds were 1 and 2 stars and ones with front load fees etc.

Those are the fees you can see... there are many that you do not see...










Quote:
Originally Posted by yofi View Post
Thankfully I don't see any annuities. Mom is quite elderly and trusts their broker so much I doubt I could get her to move.

Interesting, they do have ~100K sitting in a JP Morgan brokerage that over the past 6 years has made a grand total of ~$5K. She asked what she should do about this and I'm tempted to tell her to open a Fidelity account and move everything to FSKAX since they don't need it anytime soon.

The only concern I have is that with the market this high, if it drops over the next year or so, she'll think I gave her bad advice.

I did this with my mom back in the 80s... she had never owned stock and we bought Exxon and Fidelity Magellan... at the end of the year Magellan gave off a big distribution but she was mad as the fund was less than what she paid...


I told her that it can happen but you need to look at the long term... she made a boatload of money off those two investments... and said so at different times...
Texas Proud is offline   Reply With Quote
Old 02-25-2024, 11:27 AM   #13
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,075
I had a smaller problem like this. When I married, DW had an account with UBS, who bought Paine Weber.
She had a number of mutual funds, and when I checked the expense ratios, they were ridiculous. I did not like dealing with UBS at all, so I moved her account to Fido, where I had my account.
I sold off most of her funds, and replaced them with similar Fido funds with much lower expense ratios.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
Souschef is offline   Reply With Quote
Old 02-25-2024, 11:32 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,347
Quote:
Originally Posted by yofi View Post
... I just checked transactions for the past 360 days, and excluding t-bills, see there were 22 BUY transactions split between individual stocks and mutual funds for ~$3k each, and 17 SELL transactions, all relatively small amounts like ~$3K. I guess that may be a normal rebalancing or tax harvesting? ...
No, not normal. Depending on the type of account, these transactions may be generating fees of about $25 each. (https://www.wellsfargo.com/investing...erage/pricing/)

Quote:
Originally Posted by yofi View Post
... I noticed that around 5 of the funds were 1 and 2 stars and ones with front load fees etc. ...
The killers are the load funds. Not just the loads, but the 12b-1 fees. (https://www.investopedia.com/terms/1/12b-1fees.asp) This broker is milking your parents account, assuming no one is watching. So you are extremely wise to start watching.

Quote:
Originally Posted by yofi View Post
... Mom is quite elderly and trusts their broker so much I doubt I could get her to move. ...
Yes. The path to fixing this is through the compliance officer. Wells does not need any more bad publicity and the compliance officer knows this. If you don't take your attorney to the meeting, at least make it very clear that you have talked to him. (Whether you have or not. It doesn't matter.) You are looking for a substantial refund on fees and to have the account reassigned to a broker with instructions to ditch all inappropriate investments (odds are there will be some) and to radically simplify the portfolio in a tax-efficient way.

Be relentless. Study this page: https://www.investor.gov/introductio...r-bulletins-48 but avoid making direct threats. The time to escalate may come but right now you want the situation dealt with. You do not want them running for cover.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 02-25-2024, 11:32 AM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,708
Quote:
Originally Posted by yofi View Post
Thankfully I don't see any annuities. Mom is quite elderly and trusts their broker so much I doubt I could get her to move.

Interesting, they do have ~100K sitting in a JP Morgan brokerage that over the past 6 years has made a grand total of ~$5K. She asked what she should do about this and I'm tempted to tell her to open a Fidelity account and move everything to FSKAX since they don't need it anytime soon.

The only concern I have is that with the market this high, if it drops over the next year or so, she'll think I gave her bad advice.
Do you know any of their tax situation? That should be considered before making moves!
target2019 is offline   Reply With Quote
Old 02-25-2024, 11:36 AM   #16
Dryer sheet aficionado
 
Join Date: Jan 2024
Posts: 27
Quote:
Originally Posted by Texas Proud View Post
Those are the fees you can see... there are many that you do not see...
Do you mean like fund expense ratios? I checked and most were ~0.5%. Compared to a ~0.05% I could get with a passive index, it's ridiculous thinking about the difference over the long term, but at this late stage, I feel like it wouldn't matter that much and would just cause her to be more confused since she wouldn't have her advisor telling her everything is ok.
yofi is offline   Reply With Quote
Old 02-25-2024, 11:45 AM   #17
Dryer sheet aficionado
 
Join Date: Jan 2024
Posts: 27
Quote:
Originally Posted by target2019 View Post
Do you know any of their tax situation? That should be considered before making moves!
Dad passed away recently, and she has a couple of pensions and SS that cover almost all expenses. She was surprised at the amount of taxes due to the RMDs. I see she has a Roth but most in a trad IRA.

I am concerned at tax implications which is why I'd rather just leave it be as long as she's not getting completely ripped off.
yofi is offline   Reply With Quote
Old 02-25-2024, 11:51 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,347
Quote:
Originally Posted by yofi View Post
... expense ratios ... most were ~0.5%. ...
Take a rough look on a dollar-weighted basis. If they are concentrated in a couple of high fee funds, those will dominate their costs despite their also having a lot of small positions in less expensive funds.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 02-25-2024, 12:01 PM   #19
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,681
Quote:
Originally Posted by yofi View Post
Dad passed away recently, and she has a couple of pensions and SS that cover almost all expenses. She was surprised at the amount of taxes due to the RMDs. I see she has a Roth but most in a trad IRA.

I am concerned at tax implications which is why I'd rather just leave it be as long as she's not getting completely ripped off.
If the accounts are taxable it often doesn’t make sense for older folk to sell and pay capital gains just to consolidate their portfolios and reduce the overall expense. If they are in a tax deferred account they can be sold and the proceeds reinvested in a way that reduces the holdings and the expense level without incurring any tax.

I would guess the large number of holdings is the result of some investment model, which is common with advisors.

One thing you can try is to have all the RMDs and taxable distributions sent to her bank. There you can help her invest to consolidate and reduce the overall expense level.
MichaelB is online now   Reply With Quote
Old 02-25-2024, 12:10 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 3,693
Quote:
Originally Posted by yofi View Post
They came to WF when their broker moved from Lehman Brothers years ago. They always took a percentage cut and I think it's 1% - 1.5% in WF (~2M).

I just checked transactions for the past 360 days, and excluding t-bills, see there were 22 BUY transactions split between individual stocks and mutual funds for ~$3k each, and 17 SELL transactions, all relatively small amounts like ~$3K. I guess that may be a normal rebalancing or tax harvesting?

I also manually added up the advisory fees for the last 360 days and it came to ~$18K.

I noticed that around 5 of the funds were 1 and 2 stars and ones with front load fees etc.
You can find the actual advisory fees in the 1099 detail pages. If it's $18K/$1.3M then that's 1.3%, which is high but probably not the highest anyone charges, and the advisor definitely should not be charging a per transaction fee in addition to that. I also don't think 22 buy and 17 sell transactions are particularly outrageous for the number of investments in the account, especially if there's no transaction fee.

Yes, it's an expensive way to have your investments managed, but it's really unlikely that there's a compliance issue here. Your parents presumably signed the management agreements after the fees were explained to them and nobody is forcing your Mom to keep her money there. If she wants to move to another brokerage, then WF will transfer the money. If it is giving her peace of mind and she has enough money to live out the rest of her life in comfort, then she's probably not going to want to move it.

I do think it's entirely reasonable to ask her if you can accompany her to her next meeting with the advisor, and you should ask your questions then. Maybe she should be in a more conservative portfolio at her age. He probably won't talk to you unless she's present because of confidentiality.
cathy63 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Doesn't make sense, 3rd & final question larrytbm FIRECalc support 19 07-20-2013 10:43 AM
Doesn't make sense larrytbm FIRECalc support 10 07-17-2013 09:37 PM
Doesn't make sense, 2nd question larrytbm FIRECalc support 4 07-17-2013 07:24 PM

» Quick Links

 
All times are GMT -6. The time now is 05:57 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.