My mom has a financial advisor that she’s been with for 10 years. He was recommended to her from a family friend. My concern is that her advisor (Lets call him John) is just looking out for himself. Her portfolio is ridden with fees and the returns aren’t that great given what she’s invested in.
Here’s some background about her: She’s 55, retired, and living off of her portfolio now. Her yearly spending is around 120,000 give or take a few thousand.
Her portfolio is about 3.3-3.4 million. She has 20% of her portfolio in a Private REIT (it has averaged about 5.5% a year)
She has 25% of her portfolio in a brokerage account invested in actively managed bond funds (all her expense ratios of like 1.5%+ with some having 4% front load fees lmao these funds have averaged like 2% a year at best probably) Some of the bond funds are ITACX, PONCX, TTRCX, etc.
She has 10% of her portfolio in cash.
Finally, she has 45% of her portfolio in a variable annuity inside of an IRA (it has averaged about 4% a year). The overall expense ratio of this annuity is around 2.1% (1.3% yearly administrative charge or something like that + an average ER of the underlying funds that is around 0.8%) My mom likes this variable annuity because it has a “guarantee” that says she cant have less than what she put into it. Her portfolio can’t go lower than the 1.1 million she put into it. However, that guarantee can’t kick in until 7 years after you start the annuity. I think this guarantee is personally garbage because even if her portfolio dropped to that 1.1 million again (It shouldn’t because she’s invested very conservatively), 1.1 million dollars in today’s dollars wasnt what it was 7+ years ago when she started the annuity.
I want my mom to pack up her stuff and contact vanguard or someone else that can manage her wealth without worrying that they’re steering her towards things that make them big commissions. I just don’t know where to start. I’ve been giving my mom lessons on financial terms like inflation and expense ratios. She gets overwhelmed by all of it and would rather not think about it. She thinks that if her portfolio doesn’t change on a year to year basis (between gains-withdrawals) that she’ll be just fine. I try to explain that on paper that’s true, inflation will erode your purchasing power. If things continue, she won’t last until 90. It’d be one thing if her portfolio was 30% stocks, 60% bonds, and 10% cash that performed well. I feel like all of her funds underperform.... especially with the higher fees. It sucks to watch this unfold because my dad worked his ass off to leave her this.
I don’t know who to talk to. Do I call vanguard and break down her situation to them and have them put together a mock portfolio or something? Do I find someone local? My mom doesn’t trust anyone else. She thinks that people can pull a bernie madoff and run away with her cash. I try to explain otherwise to no avail. What do I do? Whenever I give her advice, she’s like talk to my advisor about it! What is her advisor supposed to say like come on... Is her advisor going to say yea I haven’t been getting your mother into the right investments? of course not....
TLDR: I think my moms advisor is so adamant on actively managed funds/private reits/annuities because it makes him a lot of money. I want my mom to eliminate that conflict of interest by leaving him and taking her assets to vanguard or someone else who is a fiduciary that can advise her into the right assets.
Submitted March 10, 2021 at 10:21PM by Cfan33 https://ift.tt/3bCwz3f
