Manage portfolios for aging family members

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Topic Author
SMEC2493
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Joined: Tue Dec 28, 2021 4:49 pm

Manage portfolios for aging family members

Post by SMEC2493 »

[See update below. --admin LadyGeek]

Hi all-
I've received some great feedback from this group that has put my wife and me on a path to self-managing our money and dumping the crazy high fees our advisor charged. Thank you to everyone that has helped.

The challenge I am faced with now is that I have aging family members that are still with the Advisor that we used. One group is my In-Laws and the other is my Dad. Unfortunately, their level of financial literacy is not the best. They are all in their mid-seventies.

When I told my in-laws how much they were paying in fees they said there is "No way we are paying that much". Sorry to be the bearer of bad news, but you are.

My father is shopping around- Fisher Investments is one place he's looking. They are trash if you ask me. When he first called them they told him "If we had had your portfolio instead of your current advisor it would have been worth XX more" than it is now. Such BS. They want to move him from Mutual Funds and ETF's into individual stocks which is madness to me. When I told him if he's going to change his assets that will create a capital gain when he liquidates to buy other assets. He said it's not a capital gain until he withdraws the money from the account. I tried to tell him it's a capital gain as soon as you sell for a gain but he said I was wrong. Oof.

I want to try to help.


My situation is pretty simple. I just put money in and leave it.

Their situation is the opposite. They are not contributing and just taking money out. They have the Required Minimum Distribution to deal with as well.

Is this possible? Can I do it for them? Their accounts are held with TD Ameritrade just like mine was so I know the process to remove the current Advisor from the account. The bigger question is how would I do RMD's for them? What if they want to take money out? How do you decide what assets to sell? Anything else I need to be mindful of?

Not even sure they would be open to this but if I propose to them and have answers to any concerns they bring up maybe I can make this happen.

Any feedback would be greatly appreciated.

Thank you
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retired@50
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Re: Manage portfolios for aging family members

Post by retired@50 »

SMEC2493 wrote: Tue Jan 25, 2022 1:50 pm ...
When I told him if he's going to change his assets that will create a capital gain when he liquidates to buy other assets. He said it's not a capital gain until he withdraws the money from the account. I tried to tell him it's a capital gain as soon as you sell for a gain but he said I was wrong. Oof.
...
Anything else I need to be mindful of?
...
Thank you
About the first passage above, it depends on the account type. If a taxable account, then yes, selling will create a capital gain or loss which will flow to the tax return. ** IF ** the buying/selling is done inside an IRA or other tax sheltered account, then no tax consequences. You mention RMDs, so there are at least some dollars in an IRA, which could be part of the misunderstanding. When a withdrawal is made from an IRA, it's taxable in the year of the transaction.

About the second phrase above, be mindful that you're walking into a potential minefield of hurt feelings and dashed expectations. You'll get blamed for every market downturn or correction from now until death. Are you prepared for that?

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
SMEC2493
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Joined: Tue Dec 28, 2021 4:49 pm

Re: Manage portfolios for aging family members

Post by SMEC2493 »

Thanks for the feedback.
I'm perfectly ok with hurt feelings and dashed expectations knowing that I will be doing right by them.

OK, both of these accounts are not IRA's. So maybe I'm mistaken that there is an RMD on the account? If it's a taxable brokerage account with a Financial Advisor is there no RMD?
HomeStretch
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Re: Manage portfolios for aging family members

Post by HomeStretch »

There are no RMDs for a Taxable brokerage account.

Whether your parent/in-laws should use an advisor or not depends on their comfort level with managing their own investments. Plus there is always a chance they may become temporarily or, as they age, permanently incapacitated and need help with managing not only their investments but things their advisor likely will not do - bill pay, taxes, SS matters, Medicare/healthcare matters, etc.

It’s good to check whether they have their estate documents in place and up-to-date. A durable power-of-attorney (POA) and healthcare representative/directives and provider HIPAA forms are critical if they need help, now or in the future, in managing financial and/or healthcare matters. It’s worthwhile to note that SSA, Medicare and the IRS have their own POA/agent requirements/forms.

For their investments, if they decide to stay with an advisor, can they afford to pay 2%+ in fees/ERs for the service? If not, a good choice could be Vanguard’s advisory service that starts with a 0.3% AUM fee and uses low-ER Vanguard funds.
Topic Author
SMEC2493
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Re: Manage portfolios for aging family members

Post by SMEC2493 »

Great feedback. Thank you.
I love the Vanguard idea, but the only issue is they will be forced to liquidate the assets that can't be moved (Mutual Funds I believe) which would likely create a capital gain situation for them.
I'll definitely share that option.
Thank you
mptfan
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Re: Manage portfolios for aging family members

Post by mptfan »

It sounds like you and your aging family members have different views on how to handle their investments, and I would not want to get involved under those circumstances, no matter how good your intentions are. Even though you may be doing the right thing for them you will be blamed when things don't go as planned, or when their expectations are not met. Or you might give them bad advice about something, such as RMDs.

There are no RMDs for regular investment accounts that are not tax deferred. Period.

The road to certain places is paved with good intentions.
Last edited by mptfan on Tue Jan 25, 2022 3:29 pm, edited 1 time in total.
psteinx
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Re: Manage portfolios for aging family members

Post by psteinx »

SMEC2493 wrote: Tue Jan 25, 2022 1:50 pmWhen I told him if he's going to change his assets that will create a capital gain when he liquidates to buy other assets. He said it's not a capital gain until he withdraws the money from the account. I tried to tell him it's a capital gain as soon as you sell for a gain but he said I was wrong. Oof.
Is his money primarily in an IRA or similar tax deferred wrapper? (as opposed to straight-up taxable...)

If so, then he's correct and you're not. The fact that you didn't specify on this important point in your OP makes me wonder if you really know...
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retired@50
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Re: Manage portfolios for aging family members

Post by retired@50 »

SMEC2493 wrote: Tue Jan 25, 2022 3:04 pm Great feedback. Thank you.
I love the Vanguard idea, but the only issue is they will be forced to liquidate the assets that can't be moved (Mutual Funds I believe) which would likely create a capital gain situation for them.
I'll definitely share that option.
Thank you
You could consider transferring the assets in-kind, which wouldn't require a sale / capital gain.

It depends on if the new custodian can hold the fund or ETF. Check with the new custodian, usually having the ticker symbol(s) for the fund should be enough information.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
savvyplanner
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Re: Manage portfolios for aging family members

Post by savvyplanner »

Looks like you're trying to help without having the resources or the information to do so based on your questions/comments. You'd basically be their financial advisor and take on the responsibility for their well-being, that requires a lot of time and being on top of A LOT of details. The fee is one thing but are they getting value and how do you evaluate that value?
Topic Author
SMEC2493
Posts: 20
Joined: Tue Dec 28, 2021 4:49 pm

IRA Rollover options

Post by SMEC2493 »

[Post merged into here --admin LadyGeek]

Hi all-
I posted yesterday incorrectly regarding a question about my aging family members. Here is the correct question....

I have aging family members (my father and my wife's parents) that have a Rollover IRA with a fee-based Advisor. It's the same Advisor for both of them and I believe the fee they pay is around 1.5%. (Crazy) They do get guidance on their Required Minimum Distribution and help with that, but beyond that, there is little to nothing they do to help. I'd like to help them if I can and save them the fee they are paying either by directing them somewhere else or just doing it for them.

I recently started self-managing my taxable brokerage account, but theirs is different. They have an IRA so there would be a Required Minimum Distribution required each year. If I was going to do it for them I would need to figure that piece out.

Moving it somewhere else is tricky because I believe they would need to liquidate most if not all of the assets and that would create a capital gain situation which is something they want to avoid.

It pains me to see the fees they are paying and getting little to nothing in return. I'd like to try to help if I can.

Would appreciate any feedback or guidance on this situation.

Thank you
SouthernInvestor
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Re: Manage portfolios for aging family members

Post by SouthernInvestor »

I would stay way away from this. Help them get a decent advisor and stay out of it......

You're setting yourself up to be the greedy bad guy, and THAT is not worth avoiding fees for.
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LadyGeek
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Re: Manage portfolios for aging family members

Post by LadyGeek »

SMEC2493 - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. For this correction, just edit the first post (the "pencil" icon in the top-right corner of the post) to let readers know that you have an update later in thread. (I edited the first post to help.)

(Thanks to the member who reported the post and provided a link to this thread.)
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Sandtrap
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Re: Manage portfolios for aging family members

Post by Sandtrap »

You can help others if they sincerely want and ask for help and more importantly empower you to do so and step aside.

Otherwise…….move on.

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retired@50
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Re: IRA Rollover options

Post by retired@50 »

SMEC2493 wrote: Wed Jan 26, 2022 9:36 am [Post merged into here --admin LadyGeek]
I recently started self-managing my taxable brokerage account, but theirs is different. They have an IRA so there would be a Required Minimum Distribution required each year. If I was going to do it for them I would need to figure that piece out.

Moving it somewhere else is tricky because I believe they would need to liquidate most if not all of the assets and that would create a capital gain situation which is something they want to avoid.

Thank you
The RMD issue is discussed in this Boglehead wiki page: https://www.bogleheads.org/wiki/Require ... stribution
Generally speaking, it's a once a year calculation based on a table published by the IRS.

The capital gain issue isn't really an issue if the money is inside the Rollover IRA. It sounds as if you need to get familiar with how IRAs are taxed (or not taxed). Selling one fund inside an IRA and buying another isn't a taxable event. The only time IRA money is taxed is when it's withdrawn.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
mptfan
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Re: IRA Rollover options

Post by mptfan »

SMEC2493 wrote: Wed Jan 26, 2022 9:36 am I have aging family members (my father and my wife's parents) that have a Rollover IRA with a fee-based Advisor.
...
Moving it somewhere else is tricky because I believe they would need to liquidate most if not all of the assets and that would create a capital gain situation which is something they want to avoid.
There are no capital gains taxes for funds invested inside a Rollover IRA.
SMEC2493 wrote: When I told him if he's going to change his assets that will create a capital gain when he liquidates to buy other assets. He said it's not a capital gain until he withdraws the money from the account. I tried to tell him it's a capital gain as soon as you sell for a gain but he said I was wrong. Oof.
Your father was right and you were wrong, no tax is owed until funds are withdrawn from an IRA account. You don't understand enough to be giving financial advice.
psteinx
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Re: Manage portfolios for aging family members

Post by psteinx »

SMEC, you just started managing your own money, have decided your parents are doing it wrong, and got into a dispute with your father on one key issue on which he was right and you were wrong.

Perhaps you need to dial it back a little. You don't know everything. This stuff isn't always as easy as some folks think. There are worse things than paying an advisor for assistance, especially when your own abilities are thin.

I think a little humility is in order.

Also, you want to do this for BOTH your father and your in-laws. Telling your father he's doing it wrong is one thing, telling your in-laws they're doing it wrong is another. Tread carefully (and slowly).
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