Parent brokerage holdings doesn't make sense

[yofi]

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.

Ah, good point. I took a look at some high ones and saw front loaded fees up to 4.25%, deferred fees @ 1% for others, and probably close to .8% expense ratios. The more I look into this, the more disappointed I'm getting.

I did a back of the envelope comparison of my Vanguard IRA accounts compared to their IRAs (mostly stocks/mutual funds) for the past 10 years, and I doubled my account while they didn't even come close to that.

 

[yofi]

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.

That's a great idea!

 

[yofi]

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.

Absolutely, this is exactly it, thank you.

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.

They are currently at ~50% equities, the rest in fixed income. Considering their expenses are almost all covered by pensions and SS, I'm curious why they'd need a more conservative portfolio?

 

[ivinsfan]

How much in total assets are you talking about here?

 

[MichaelB]

How much in total assets are you talking about here?

See post 10 https://www.early-retirement.org/fo...ngs-doesnt-make-sense-121089.html#post3056410

 

[GrayHare]

Ok, that makes sense, and that is most definitely what happened, but 85% of their holdings are in IRAs, wouldn't that mean that cap gains are irrelevant?

That is correct, cap gains inside a tIRA unfortunately become ordinary income.

 

[Wile E. Coyote]

Before you confront anyone I would just casually ask your mom where all the historic copies of the statements are. Then, if she does not have them I would have her put in a request to obtain them even if there is a fee. ...Reason is that it needs to be kept for tax purposes... ...but, you have alternate reasons...

Then, I would go through them and make notes of dates, funds and amounts bought and sold.

Not until I did that would I sit down with anyone to talk about any of it.

Even then, I think you need to be very careful to be forceful with your parents about their money (or anything really). I think you need to not be appearing to be intrusive at all.

 

[tulak]

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.

Buy T-Bills then or split with 5 year CDs. That'll guarantee 5k/year with no loss of principal.

 

[cathy63]

...They are currently at ~50% equities, the rest in fixed income. Considering their expenses are almost all covered by pensions and SS, I'm curious why they'd need a more conservative portfolio?

It's not that she necessarily needs a more conservative portfolio if she's got enough other income to meet her expenses, but lots of people do go more conservative as they age in order to avoid large losses in down markets.

 

[Time2]

Ok, that makes sense, and that is most definitely what happened, but 85% of their holdings are in IRAs, wouldn't that mean that cap gains are irrelevant?

Even though that 85% in IRAs is causing large RMDs, it is helpful that 85% is in IRAs, if you want to whittle down 85 stocks, 33 funds, and 3 ETFs,
down to 3 ETFs without being subject to LTCGs. I think it a mess! I wonder how many of the individual stocks are also owned in the funds.


yofi, I do feel for you though, anything you do, you will get the blame when the market drops.
I was ask to help my sister in law move her funds after she left her job. I declined and enlisted her son, my nephew. Last I knew, over a half a million was still setting in a high yield Money market fund. I ask the nephew if he thought his mother would ever spend the money, (she lives very frugally) he said he didn't think she would. So I suggested he is investing it for his future. (he is an only child)

 

[Texas Proud]

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.

Yes, and possible low interest on idle money like Schwab has... and they do make some money on each trade..


As mentioned, look for 12(b)1 fees as that is just pure robbery IMO...

 

[Texas Proud]

BTW, you can get a free advisor at FIDO.... I also have one at Schwab but they do not do trades for you but will recommend different things...

 

[Chuckanut]

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.

GASP! CHOKE! WRETCH! I am getting ill just reading the above.

This is terrible, IMO. Get them to either a fee only planner. Or maybe Schwab or Fidelity and get things simplified.

 

[yofi]

GASP! CHOKE! WRETCH! I am getting ill just reading the above.

This is terrible, IMO. Get them to either a fee only planner. Or maybe Schwab or Fidelity and get things simplified.

It gets even crazier. I just got off the phone with my mom and she said back in the 80's they used to have a Vanguard account but transferred everything to their original broker at Lehman.

I explained everything to her and she agreed that she'll open a Fidelity account (office is located near her) in which to move the Morgan Stanley funds.

I was at a loss at what to do with WF because she's elderly and it's essentially too late, but I did say to not move any more money over to WF which she agrees with.

 

[yofi]

Even though that 85% in IRAs is causing large RMDs, it is helpful that 85% is in IRAs, if you want to whittle down 85 stocks, 33 funds, and 3 ETFs,
down to 3 ETFs without being subject to LTCGs. I think it a mess! I wonder how many of the individual stocks are also owned in the funds.

That's exactly what I told her on the phone just now. How much overlap is there between funds and stocks. I felt bad for bringing this up because she insisted she, "made money", and I agreed that she did which was good. (But it would have been better had she just left it in their Vanguard account in the 80s before deciding to transfer everything over to their broker at Lehman.

 

[yofi]

As mentioned, look for 12(b)1 fees as that is just pure robbery IMO...

I did more digging and saw plenty of 12-1 fees which is why the expense ratios were like .8%. Not to mentioned the front load fees of up to 4.25%, and a couple of ones that were deferred.

I felt bad because she felt bad, and at this stage of her life it's essentially too late, but she did make money, just not as much had she left it alone in her Vanguard account from the 80s (that they moved to Lehman from their broker's request).

 

[yofi]

BTW, you can get a free advisor at FIDO.... I also have one at Schwab but they do not do trades for you but will recommend different things...

Great, the next time I visit, I'm going to go over to a Fidelity branch to get an account opened. Thanks!

 

[Wile E. Coyote]

I did more digging and saw plenty of 12-1 fees which is why the expense ratios were like .8%. Not to mentioned the front load fees of up to 4.25%, and a couple of ones that were deferred.

I felt bad because she felt bad, and at this stage of her life it's essentially too late, but she did make money, just not as much had she left it alone in her Vanguard account from the 80s (that they moved to Lehman from their broker's request).

Well, everyone could have always made more money if they had known more.

 

[target2019]

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.

I don't know how vulnerable your mother is right now, but I would become more involved, as I mentioned, just to look over reports and help her with decision making.

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

 

[target2019]

That's exactly what I told her on the phone just now. How much overlap is there between funds and stocks. I felt bad for bringing this up because she insisted she, "made money", and I agreed that she did which was good. (But it would have been better had she just left it in their Vanguard account in the 80s before deciding to transfer everything over to their broker at Lehman.

Yeah, hindsight being what it is, I don't think this accomplishes much, but makes her feel bad.

The advisor is gonna step up his game. That is a WAG from me. So make her feel comfortable coming to you when he does. It shouldn't be a who's right and wrong thing. Just be concerned, and help her with due dilligence.

I looked at all of your posts again. You're getting good advice, and taking it all in. She'll be ok.

It's great that you'll move some money, and help her with that.

I helped my in-laws with two strategic changes. 1) Changed the managed accounts from 20% to 35-40% equity. All of their expenses we're covered. 2) Redirected all dividend payouts to a non-advisor account for their benefit.

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.

 

[jldavid47]

More likely, considering the apparent AUM fee, the broker can be held to a fiduciary standard. IMO such a standard would preclude large quantities of tiny trades (and load funds in the portfolio) and begs the question of whether the broker was somehow getting extra compensation by making the trades. Best case all of this is innocent as you are implying. I am less sanguine, probably because of decades of elder financial abuse stories DW brought home from work.

Given the track record of Wells Fargo, they do not get the benefit of the doubt. The portfolio construction seems ridiculous and if there is a commission on a per trade basis in addition to the management fee then the number of small trades being made seems excessive.

After my dad died in 1990, mom put her assets under management in the investment arm of her bank. Her assets mostly consisted of stock in my dad's company (which she refused to sell for sentimental reasons), a couple of bonds and CDs. The bank charged her a 2% management fee per annum and all the guy did was collect interest and dividends and ladder CDs. Any idiot can do that (well, almost any idiot). But she really liked the guy who managed her account so she refused to move. For almost 15 YEARS. Then they gave her account to someone she didn't like. Hurray! We went to a lawyer, set up a living trust, opened a trust account at Schwab, moved the money there and gave me power of attorney over her account. Voila! No fees for doing pretty much the same thing as the bank was doing. I then managed her assets until she died 2 years ago.

Elderly people get taken advantage of by the financial industry all the time. The sad part is the majority of it is perfectly legal and usually happens because the broker develops a personal relationship with the client which makes the client hesitant to move even if they can figure out that what is happening is not necessarily in their best interest. There will never be a complete solution to this as long as there are people who do not want to be bothered with their financial matters.

 

[OldShooter]

I did more digging and saw plenty of 12-1 fees which is why the expense ratios were like .8%. Not to mentioned the front load fees of up to 4.25%, and a couple of ones that were deferred. ...

@yofi, I'd encourage you to not give up so easily. If Wells is collecting a wrap/AUM fee you and an aggressive attorney ought to be able to force disgorgement of trading fees generated by churning small lots and on loads paid. Possibly even the 12b-1 fees.

It is almost certain that this broker is a bad actor and is hurting other clients as well, so it is not just about your mother. Calling Wells on it will potentially help many others as well. If you don't want to get in this deep, at a minimum you should document your examination and have your mother file a complaint with the SEC.

 

[pb4uski]

Great, the next time I visit, I'm going to go over to a Fidelity branch to get an account opened. Thanks!

I managed Mom's finances, managed a commercial rental that she owned, paid her bills (mostly autopay) and did her tax return since she was 75 until she died at 93. In fact I did their tax return since the late 1970s.

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 what I did and after a short while they were short conversations as Mom was uninterested and would say... if yout think its a good idea then go ahead.

 

[livingalmostlarge]

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

 

[Backpacker]

My DM was with Edelman and fees were high and lots unnecessary trades. She was convinced he was salt of the earth and had done her a favor letting her join his firm as he only takes clients with higher dollar accounts. It was a multi step process to get her to change her mind. I got her to open a vanguard account with some other money and a year or two later was able to show her the difference in approach.
Good luck, it's hard to be respectful of your parents yet push for change that is needed