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I'm visiting my elderly mother and took a look at her investment statement up through 12/31/2016. In 3 years she only made 1.47% net growth on her investments. The investment fee is 1% (or maybe slightly more).
I'm upset because she's throwing money away.
She wants me to make a list of questions for her investment guy (who I know and have spoken to when she was first meeting with him). The thing is, I don't have questions as much as I think he/his firm should be fired ASAP. That amount of growth is unacceptable, IMO. For goodness sakes, a 3 to 5 year CD would have earned more for her over the same period of time.
Mom is convinced she must have an investment person and she doesn't trust me (even though my own portfolio of index and mutual funds has grown over 10% in that same period of time).
<deep breaths>
What is she invested it? You've posted about this before iirc and stated your mother has her faculties and doesn't trust you so with that legal options are not really yours to take. Again do you know what she is invested in and what she is being charged? Not what you think she is being charged
What is she invested it? You've posted about this before iirc and stated your mother has her faculties and doesn't trust you so with that legal options are not really yours to take. Again do you know what she is invested in and what she is being charged? Not what you think she is being charged
also does she have a tax person she does trust. Does she own a home, have income if the market does a crash. Only she knows her risk and how well she will sleep.
I did this when it came out so had years so if it was down we buy low but let her decide and have the person she does trust explain why her return is low. It is safe-
When we had vanguard for an ira most did the safe I did Windsor why I was 28 and had years. we got a cash out but I called Vanguard here is my check to stay as it is.
Many took the check and paid bills but at that time the Windsor fund had the best return.
Last edited by maggiekate; 02-12-2017 at 06:53 PM..
She has her faculties, but she's like a 17 yr old mentally/emotionally. My dad took care of everything financial during their 59 yr marriage and she has no interest or ability to absorb much (of anything, not just financial stuff). She is going to pay the management fee no matter what, because she's convinced she cannot do anything for herself and won't allow me to do it for her. She's stubborn and that's not going to change.
I'm going to go through the actual investments over the next day or so to see what she's in. Her investment guy just moved to a new firm and she (and her sister) went with him so she's invested in all sorts of different things, which I will dive into during this visit.
Maybe it will be okay. I feel bad knowing she could be getting at least a 4% rate of return, which I consider conservative, and she's not even getting the rate of a 5 yr CD (or at least what it was when I purchased one at 2.37% return a couple years ago).
Well you can tell her that it is a FACT that paying an asset manager 1% per year is expensive! She is being fleeced. If she needs someone to hold her hand while she invests then she should move over to Vanguard. I believe they charge 0.3% per year in management fees.
Next ask her what is she trying to get out of having as asset manager in the first place? Does she believe that an asset manager's job is to "time the market"? For example does she believe that an asset manager will help to move her money to safety in advance of the next stock market crash? Because this is not what ANY advisor should ever do!
Here's my favorite quote from WhitecoatInvestor "“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!”
Once you decide on a bond/stock allocation ratio, then all you do is calendar rebalance, which any 3rd grader can do.
What is she invested in anyway?
She needs to understand that the actual investing part is not complicated. It's painfully simple. Only the financial services industry (asset managers, product salesmen, etc) wants consumers to THINK that it's complicated. She should be invested in as little as 2 index funds -- a total bond market index fund and a total stock market index fund (or S&P 500 index fund). Over that past 15 years (including the great recession) she would have done better than 4% per year if she was invested in the lowest risk allocation ratio of 28/72. Stock / Bond Diversification
This excessive easy monetary policy has really been the most damaging to senior investors that do not have enough excess capital to be "in the market" & are relying on conservative investments for return/ yield.
Because you have done well in picking funds etc. remember that your mother is elderly and does not have the time to recoup so she may be moving in with you if poor decisions are made. Questions for your FA- my question is who does this person work for- that tell's a lot of what to expect as for recommendations to be expected. How is the FA paid is another question I would have.
Without knowing quite a bit more personal info about the entire situation- it would be hard to know which questions would be appropriate to ask the FA. Obviously you are going to ask about the perceived low returns and the FA is going to say given the suitability of your mother's age & risk tolerance would be the reason for the ultra conservative portfolio even if in all reality they are just crappy investment vehicles.
Is she elderly, if so in some states it might be considered taking advantage of the elderly, you might wish to contact the manager and if he does not have a very good reason, then contact the DA's office to find out if there is anything they could do.
You can not be serious....
Contact the DA's office??? Because his mom MADE money with investments?
This excessive easy monetary policy has really been the most damaging to senior investors that do not have enough excess capital to be "in the market" & are relying on conservative investments for return/ yield.
Because you have done well in picking funds etc. remember that your mother is elderly and does not have the time to recoup so she may be moving in with you if poor decisions are made. Questions for your FA- my question is who does this person work for- that tell's a lot of what to expect as for recommendations to be expected. How is the FA paid is another question I would have.
Without knowing quite a bit more personal info about the entire situation- it would be hard to know which questions would be appropriate to ask the FA. Obviously you are going to ask about the perceived low returns and the FA is going to say given the suitability of your mother's age & risk tolerance would be the reason for the ultra conservative portfolio even if in all reality they are just crappy investment vehicles.
We think that seniors got burned because rates are low now but the reality is that cash instrument returns are all relative to inflation.
Fully 1/3 of the time the last 45 years a 1 yr cd resulted in a negative real return and if you figure taxes and inflation it jumps to 40% .
The rest of the time you averaged about 1-2% real return regardless of what rates were. So negative returns and low returns on cash are nothing new , they just felt higher.
A 1-2% average return with spending down in negative real return years can equal a loss in real return over a retirement time frame regardless.
When spending down just a nominal return means nothing. It is only real returns that count and sequnces of those returns.
Cash instruments have negative real return years all through out retirement time frames and always did
Last edited by mathjak107; 02-13-2017 at 04:56 AM..
I did keep VZ, dis, txn and t outside a 401k and just allow the dividend to be there if needed.
I now am also at the point I need to do the RMD so did the first and the pain was not as bad as I thought.
Bonds I only did savings bond from work and cashed them out for stocks to buy.
Vanguard does have funds for people who don't wish risk as Fidelity-
It comes down to how will I sleep at night and do I need the money soon.
Except the three I posted above are all 50-70% bonds. Won't bond funds get hammered when interest rates rise? With a bond fund you don't have the option to hold to maturity.
She isn't going to stop paying someone to "manage" her investments. She doesn't care if she's paying 1% or more of her portfolio to a firm. She looks at the total of her investments maybe once a quarter, maybe twice a year, and as long as it doesn't decrease much or stays the same she doesn't question it. She earned 3.94% last quarter, but that's before the management fee.
Instead of paying attention to her investments she obsesses about stupid things like how I should arrange my bedroom furniture in her condo bedroom after she's gone and what nail polish color she should have her manicurist put on in 2 weeks. Emotionally she's about 17 (always has been, that's not new).
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