Help a Reader: Inheriting a Financial Adviser

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This week’s Help a Reader strikes me as a sticky issue that happens a lot. What happens when a loved one passes away and your inheritance includes a financial adviser you may or may not need (or want)? This situation happened to reader Cindy when her father passed away and she’s not sure if she should keep the adviser or not.

Here’s her dilemma in her words:

My dad passed away last year, and as a result, I have inherited some of his investments. I now have my own account at the same investment business and I have apparently inherited my dad’s investment manager, also. I’ll call him Jack. The thing is, I have no clue what to do now. I’m not crazy about paying for Jack and the big-time services of a business like Morgan Stanley, but I’m most definitely not qualified to jump into this on my own. My dad trusted this guy completely and Jack has also helped me a lot since my father got sick a couple years ago and I stepped in as PoA. But at the same time, my father used to be very active about buying, selling, researching, etc. All things I’m not really into.

So I now have these investments that were tuned to my dad’s age (85) and retirement goals, meaning a lot of municipal bonds, just a few stocks, and a few index funds. What the heck do I do next? Just let this guy keep doing whatever it is he does that results in a pretty big chunk of money being deducted each year (and maybe more, he may get commissions, too)? Do I try to find a new “guy” of my own? I’m really stumped.

— Cindy

The email was descriptive but I had questions for Cindy about her relationship with Jack because the first paragraph made it seem like they worked together a lot and the second seemed like they hardly knew each other. I asked her for some clarification and then whether she’d looked at advisers in the past.

Her response:

Thank you! I have never had an adviser in the past – I never felt I needed one. My inheritance has basically thrust me into a whole new arena at a rather late stage in life (I’m 53). I’ve done a tiny bit of stock purchasing on my own in the past, and I stick with index funds and mutual funds in my company’s 401K plan. This guy Jack is a very nice person, but I have absolutely no feel for what he’s like as a financial adviser, and now that I’ve inherited him along with my dad’s investments, I don’t know whether to keep him or not. He talks a lot and I frequently end up pretty exasperated. He spent 15 minutes once using lots of words and drawings to explain the concept of the core investments being used to generate income. I’m not an idiot, but I’m also not my father (chairman of the math dept at Pitt Univ). I just get uncomfortable when I think of this guy doing whatever it is he does with what’s now my inheritance – I often see a lot of action in the portfolio but I don’t necessarily see any growth. It all makes me nervous and I wonder if I’d feel better with someone I actually pick for myself.

Bottom line of all of this — I just wonder how people go about picking an adviser. I never needed one before, now suddenly I do and I’m clueless.

“So, if this were me…”

This email comes at a coincidental time because I just went through the process of vetting a financial adviser that we’ll be working with. The reality is that the adviser should always be speaking to you on your level. It doesn’t matter how “smart” you think you are, how math inclined you are because financial advice is simple. It’s only made complicated by people who want you to think that you need them to succeed. You don’t. You can read some basic personal finance books and manage your own finances if you really wanted to.

I’d also talk to Jack again and explain that you need things explained more simply, not how they were explained to your father, because you aren’t your father. If he wants to stay on as your adviser, he better talk to you to your satisfaction.

That said, do you want a financial adviser? If so, look around at your options and don’t necessarily stick with someone your dad went with. I’d see if the fees he charges and the performance he’s able to deliver are in line with what you can get elsewhere. Performance is always a tricky thing but fees are not. Find out if you’re paying more or less than what you’re supposed to.

What do you all think of how I’d handle this situation? What else would you suggest? Or did I miss the mark on something?

{ 8 comments, please add your thoughts now! }

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8 Responses to “Help a Reader: Inheriting a Financial Adviser”

  1. JoeTaxpayer says:

    I’d ask to have the account’s track record clearly spelled out for the years he’s been handling the account. Cindy and he should talk about the goals for this money and Jack needs to explain how he’d achieve a management style to fit those goals.

    Looking at track record is a tough thing. If, after fees, he’s lagging the S&P by 2%, one might ask what value he’s added. Simply using a sub .06% index fund would do it. But if he manages this return with a mix of stocks and fixed income, he may very well be managing the portfolio to have less than half the S&P risk, with much of the return.

    We PF bloggers tend to jump to the “do it yourself,” but there are many people who simply need to be educated to have a decent understanding of their Money Man. If he wants to keep her business, he’ll adapt his style to suit her needs.

  2. Joannie says:

    It sounds like Cindy needs to find a “comfortable” place. I agree that she needs to havea discussion with the advisor about how he presents her portfolio information to her.
    And, of course, researching fees and other aspects are Cindys responsibility if she wants to protect her assets.
    However, I have seen some of my clients children, I’m an Accountant, make disasterous choices when making such changes.
    My advice is to do the vetting herself. But, do it slowly. It doesn’t sound like the assets are disappearing, but the return is probably smaller due to the fees. If the fees are not causinga decrease in the asset balance take your time.

    Take some weeks or months to read, interview and research. NEVER take a person’s word as to their performance. Demand examples and proof. Mostly, get educated. Choosing the wrong advisor can be more disasterous than having an expensive one.

    Long story short, it’s not going to be like turning on a light switch. People who blindly let other people, advisors, make their decisions are in risk of becoming a victim. Whether it’s a Financial Advisor, Loan Officer or the produce manager at the grocery store. We are responsible for our decisions and obtaining the education to make the correct decisions.

    Patience, time, education, research.

  3. I say if you feel overwhelmed and don’t think you can manage it yourself you need an adviser. That said, it should be an adviser you are comfortable with. I would interview a few advisers and interview Jack as well and see who you are most comfortable with. Don’t feel like you owe Jack anything because he has been getting paid for his work every year the investments have been with him. If you find a better match elsewhere that you can trust I would move the money and investments.

  4. Cathryn says:

    Dealing with your father’s death and then
    your father’s investments is quite a lot
    on the plate.

    However, one small thing I would suggest
    to start with is to ask your father’s
    advisor to give you in writing what
    the Investment Policy is that your
    father had engaged him for.
    This states what the purpose of each
    investment is, the level of various types
    of risk involved, and the expected rate of
    return and how that return is to be generated.
    And then the investments themselves are
    compared to this Statement to see how
    things are working out so far and do
    any questions and concerns arise.

    Also, what is your style of learning –
    and how do you need things presented.
    This makes a big difference.

    Many advisors like to explain things and
    teach you and are willing and able to do that
    educating process very well.

    However, for myself I have a strong need to
    see things written down. And my financial
    team were very accomodating and helpful
    and understanding of what I needed.
    (It took me a while to understand some things,
    and reading them over helped turn the light
    bulb on).

    All the best.

  5. admiral58 says:

    I would give them a shot. If they mess up, move to someone else, unless you already trust another person.

  6. James says:

    We had a similar situation last year when my father in law passed away. He had an advisor where he had investments under management that we inherited. The fees were reasonable and I seemed to get on fine with him, although my wife didn’t. We were going to stay with him until he made some mistakes with billing that made us feel uncomfortable. So we interviewed other advisors, a number of them… We finally found one that worked for us and that we felt that we could trust. It helped that they were willing to work with us on our terms.

    Trust is a big part of successfully working with an advisor and you are the only person who can say if it feels right or not.

  7. admiral58 says:

    Or you could just manage by yourself, and use ETFs like iShares to create your own portfolio. Save on taxes.

  8. Charles L. says:

    I agree with James its about trust and I trust no one but it puts you in a position of micromanaging which can be overwhelming.

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