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Need advice helping parent move funds from Financial Advisor (American Funds)

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  • Avatar ajm184 
    Participant
    Status: Other Professional
    Posts: 637
    Joined: 07/14/2017
    They recently both completed wills and both have named me as durable P o A and executor.

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    I would be concerned about being name executor of the estate.  I get the complexity and dollar amounts are not multiple millions of dollars, but settling an estate has specific rules and timings that as executor you will be responsible for completing.  Even if it on your own dime before your parents pass, I would consult a lawyer to get an idea of what you are getting yourself into.

    #241759 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3079
    Joined: 09/18/2018

    One school of thought is that altering AA due age is a form of timing.
    Same market and risk profile. The percentages are with you, unless ……

    #241762 Reply
    Avatar Yowza 
    Participant
    Status: Physician
    Posts: 25
    Joined: 08/25/2019

    I’m currently reading Mary Randolph’s “The Executor’s Guide…”, 8th edition which I picked up from the library after they told me I would be named executor. I haven’t read anything yet that has scared me off of the responsibility. I’ll hire a lawyer if needed. The entirety of my spouse’s side of the family are lawyers, so I have access to info and advice if needed.

    #241766 Reply
    Liked by Tim, ajm184
    Avatar Yowza 
    Participant
    Status: Physician
    Posts: 25
    Joined: 08/25/2019

    One school of thought is that altering AA due age is a form of timing.
    Same market and risk profile. The percentages are with you, unless ……

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    I’m sure you’re telling me something here, but I don’t follow.

    Timing the market? I’m certainly not trying to do that.

    #241768 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3079
    Joined: 09/18/2018

    Why is 50/50 suitable based on age?
    The numbers on passive index investing returns are age neutral and primarily based only on risk profile.
    Not meant as an argument, simply that changing AA because of one’s age is not supported by statistics on market returns. The only variable is the expectation of additional human capital being added. That is not age, that is retirement. Changes risk profile.
    The rule of thumb, 100-age = stock % can lead to a portfolio that falls behind intentionally.

    #241793 Reply
    Liked by Yowza
    Avatar Yowza 
    Participant
    Status: Physician
    Posts: 25
    Joined: 08/25/2019

    Ok, thanks, that makes sense to me. I’m relatively new to this and learning as quickly as I can, but was not aware of age being considered neutral wrt risk profile and passive index investing.

    #241801 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3079
    Joined: 09/18/2018

    “I haven’t read anything yet that has scared me off of the responsibility. I’ll hire a lawyer if needed.”

    What did one of you wife’s relatives say when one of them read the will? Problems are a lot easier to fix when some is still alive. Sure hope one of them practices estate law. It would be a quick skim for any good attorney. Must be nice. An physician and a doctor in the family.

    #241851 Reply
    Avatar Larry Ragman 
    Participant
    Status: Other Professional
    Posts: 617
    Joined: 08/30/2018

    OP, no real advice here on persuading the folks. Good luck with that. But I’m just coming off settling an estate with my wife, who is the actual executor, for her Mom. My take is that there is no real reason to be concerned about probate, especially if you are not in a hurry. It can take a while (9 months minimum in my state) but your registrar of wills likely has a website with the timelines and the right forms. Good news that you have lawyers in the family, but if you are going to rely on them please make sure they are estate attorneys. (My sister does maritime law and just laughed when I asked her opinion about an estate issue.)

    I would like to emphasize the comments about beneficiaries made by faithful steward. The IRA beneficiary designation, or POD/TOD provisions on other accounts trump any will. (Weird things happen- hers could still her first husband if she never changed it, or her husband,  etc.)

     

    #241873 Reply
    Liked by Yowza
    Avatar PedsCCM 
    Participant
    Status: Physician
    Posts: 3
    Joined: 07/30/2019

    Why is 50/50 suitable based on age?
    The numbers on passive index investing returns are age neutral and primarily based only on risk profile.
    Not meant as an argument, simply that changing AA because of one’s age is not supported by statistics on market returns. The only variable is the expectation of additional human capital being added. That is not age, that is retirement. Changes risk profile.
    The rule of thumb, 100-age = stock % can lead to a portfolio that falls behind intentionally.

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    I have looked at this (maybe erroneously) as a blend of low-rate, fixed income and higher-risk, higher-reward income. While we work, our earnings give us a large fixed income and an appropriate balance requires a relatively high proportion of our investments to be higher risk/reward. Once retired, you lose the large fixed income and an AA shift towards bonds simply reestablishes an appropriate ratio. Maybe I’m misunderstanding the principle?

    #241899 Reply
    Liked by Yowza
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3079
    Joined: 09/18/2018

    @pedsccm,
    I like your idea conceptually intriguing. Just chewing on the math though. A couple has gross income-taxes-retirement savings = spending. But that spending in retirement is tough. Things like housing and healthcare and kids and college are substantially different in retirement because life is different. Kind of like apples and oranges. I’m not sure that calling earnings “fixed” actually changes the risk capacity and risk tolerance for AA. It’s a great point though.
    But then with so many boomers shifting to bonds, the higher demand kicks in, lower yields than we have seen. Mathematically, I don’t think I can tie it together using stock/bond AA. Simply considered adding a cash component as a safety net, the riding out a stock/bond AA. No right answer, but I am sure a lot of the AA theory will turn out different than planned. What could go wrong? For sure everything could. I like the thought equating earnings to fixed income, hope it works for you.

    #241920 Reply
    Avatar SteffanW 
    Participant
    Status: Advanced Practice Provider
    Posts: 88
    Joined: 01/24/2019

    I don’t think you’re going to accomplish a lot here and I mean that respectfully. I realize this style of advisor is not the flavor of the day on this forum, but this is what 90%+ (a guess) of that generation is used to. In this situation, you’re not talking about a lot of money – how much would they really benefit out of the shift to Vanguard? Is emotion about the front-loaded funds paying a bigger role than it should?

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    My mother is in a similar situation. However, she is 75 and has approximately $4.5 MM in stocks and bonds. She has multiple mutual funds and bond fund with ERs averaging around 0.73. Her  financial advisor charged 0.5%. A friend assisted me in completing a spread sheet for my mother. We determined that she will have wasted about $1MM in fees and lost growth potential on those fees by the age of 95 when compared to investing in Vanguard bonds / mutual funds without a financial advisor.

    Ironically, my plan was to refer her to you for a fee-for-service assessment to help her see why this is necessary and easily accomplished. Am I barking up the wrong tree or does the larger asset valuation make a difference in your opinion?

    #244944 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4447
    Joined: 01/08/2016

    You could refer to Vanguard and save 0.2%.

    #244947 Reply
    Avatar SteffanW 
    Participant
    Status: Advanced Practice Provider
    Posts: 88
    Joined: 01/24/2019

    You could refer to Vanguard and save 0.2%.

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    I considered the option of a Vanguard advisor myself but it is still a waste of 0.3%. There is nothing a Vanguard advisor can help her with that I can’t do myself. What I need is my mother’s comprehension of her situation from a professional who is a fiduciary in the truest sense. My mother feels there is no reason to take my word for it as I’m not a “professional” in finance. Vanguard does not do fee for service to my knowledge and they would appear to have a conflict of interest to her.

    #244951 Reply
    Avatar SteffanW 
    Participant
    Status: Advanced Practice Provider
    Posts: 88
    Joined: 01/24/2019

    There sure would be a huge market for a financial advisor who would educate the older generation about ERs and “bad” financial advisors charging a portfolio % while having inherent conflicts of interests due to fund manager kick backs, yet maintaining the guise of a fiduciary. The older generation is blind to the facts. How is it that we are so content allowing them to be stuck in their ways? I’m seeing my loved ones robbed blind by a financial structure out to do them harm. I’m not sure what all this complacency is about letting sleeping dogs lie. Why not help these people? It isn’t worth the conflict? I can’t see that.

    #244952 Reply
    Liked by Yowza
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    There sure would be a huge market for a financial advisor who would educate the older generation about ERs and “bad” financial advisors charging a portfolio % while having inherent conflicts of interests due to fund manager kick backs, yet maintaining the guise of a fiduciary. The older generation is blind to the facts. How is it that we are so content allowing them to be stuck in their ways? I’m seeing my loved ones robbed blind by a financial structure out to do them harm. I’m not sure what all this complacency is about letting sleeping dogs lie. Why not help these people? It isn’t worth the conflict? I can’t see that.

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    They exist, same as for younger clients. I don’t think the older generation is necessarily blind to what you’re saying (although I do think your description is rather biased – it’s not quite that black and white). But, as people age, they tend to stick with what they’re comfortable with and don’t want to rock the boat. Have you ever heard of being “set in your ways”? It applies to all ages but you’ll find that, as you age, you’re more comfortable with the familiar that, for all you know,  “ain’t broke”.

    You are not “allowing them to be stuck in their ways”, btw, unless they are incapable of making rational decisions and you are their caretaker. Your opinion may not be theirs, necessarily. We all get to choose our own preacher. As you age, it takes a whole heck of a lot to change religions. The perception is that, if one makes a mistake, one has less time to recover. And I think that’s a healthy mindset for the “older generation” in many ways, quite frankly.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #244978 Reply
    Liked by SteffanW

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