My dad is 71 years old and my mom is 62 years old. They would like to retire within the next 5-10 years, but with their current savings that is probably not possible with their current savings only around $50,000. My mom is getting about $200,000 later this month as inheritance money from her mother passing away and they have been exploring different options (mainly asking me to look into it for them) on what to do with inheritance money to prepare them for retirement.
My dad has known somebody from a church group for about 3 years (let's call him Jon) who's been a financial adviser for 30 years and this is what he is saying to my parents:
- He wants to help them for free so he can be a "blessing" to my dad
- He is recommending that half of the $200,000 gets put into an annuity, the IncomeShield 10 Fixed Index Annuity and has not recommended anything else for the other half of the money
- He has NOT asked my parents about the rest of their financial picture(sources of income, retirement needs, expenses, etc.)
My parents have had preliminary conversation with him but it doesn't sound like anything serious outside of his recommendation for that annuity. For some background, one of my majors in college (I'm currently 23 and graduated 1.5 years ago) was Finance and I'm currently working in the financial services industry, but on the IT/System Admin side of things. Because of this, they have been looking to me for a lot of guidance and advice. As a next step, they would like me to talk with Jon and these are the questions I am preparing to ask him:
- WHY ARE YOU RECOMMENDING ANY TYPE OF PRODUCT/INSURANCE/INVESTMENT TO MY PARENTS WITHOUT KNOWING OR EVEN ASKING ABOUT THEIR COMPLETE FINANCIAL PICTURE? (This is pretty much the only thing I care about because this seems shady AF).
- My experience in financial services so far has included working with some annuity products and looking at their returns and how they perform when mixed in to a larger portfolio. The annuity only seemed to make sense in very specific situations and the portfolio without the annuity seemed to outperform the portfolio with the annuity most of the time. Why are you recommending an annuity now?
- What are the returns, cap rate, participation rate, floor, annual fees, and administration fees? I feel like I have a good understanding of their surrender fees and withdrawal limits from their provided information.
- For the index strategy options, do you get to choose between monthly, annual, or 2 year point-to-point? Or are some of them only available in certain scenarios?
- What are your recommendations for the other $100,000? Are you going to charge any sort of advisory fee in the future? Or are you just going to be charging my parents the expense ratio of whatever ETF/MF/SMA that the money is invested in?
As an alternative to working with Jon, I am able to open investment accounts with no fees through work (which extends to immediate family as well). I don't know what to put the money in, but I feel like Jon's recommendation doesn't make sense and what I'm currently recommending to my parents is that they open an account with my company and they'll be able to invest it in whatever they want and won't have to pay any sort of advisory fee. My hesitation on recommending them a different financial adviser is that they are already quite old and need to save as much money as possible, and I don't want them to have to pay 75-150 basis points to an adviser (although in the grand scheme of things it might be worth it). I need to confirm this with my employer, but I believe they have an advisory option where they will work with my parents and do full goal planning and portfolio selection for 25 basis points.
Am I asking the right questions and moving down the right path for them?
Submitted August 02, 2019 at 08:09PM by BlazinAsian03 https://ift.tt/2ZtaXxx
