Relationships V Performance (suitability)
Hey guys,
I am new but I have a situation that might be unique, but I guess really might not be. I am a new FA in training but have been learning a lot latley and am not that new to investing anyways. I have talked with my gradma a lot over the years about her great relationship with her advisor "jane". My grandma has never had anything bad to say about "Jane" or her investments ever. Background: Now my Grandma is 91, not in the best health and in an assisted living home with not a lot of money. Since I am now working as an FA, my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) and she was clearly in extremely unsuitable equites (closed end growth fund I believe) and ofcourse her advisor tells her she needs to ride it out, it will bounce back, etc. In all reality it is too late to really try and fix anything now but part of me wants to call my grandma's advisor myself and let her know what a horrible advisor she is. God only knows if any churning or other high commission tactics have been used as well over the years. My specific problem is that I know it would break my grandma's heart if I told her the truth about the horrible job the her advisor has done over the years but this situation really raises the question for what to actually do when a relationship is so strong that the advisor can literaly rip off a client? It seems situations like this will come up where prospects will need to be helped immediately but trust their advisor so much they won't budge. Opinions?What if this closed end fund is kicking out 12% dividend yield and your grandma is using that income?
Then it wouldn't be the advisor that sucks, it would be you that is naive. Not saying this is the case, necessarily, I don't know what CEF it is. But if she is getting income, it is likely the value would be down.This is what differentiates advisors. There are those who decide making money is the whole point behind building a relationship. There are others who understand that through ethical business decisions with their investor’s money that money will find its way to them. Personally, I feel the advisor should maintain an ethical business while promoting strong relationships with clients. In your grandmothers case, I think she may have been taken advantage of. At her current point in life, I would not bring up how she was taken to the wash over many years. I would just use this as a learning experience. As an FA, you have the power to do exactly as her FA, or you can handle events differently. I hate to hear about things like this, which is why I want to become an FA. I am curious to see what others say on this topic since I’m not in the business yet.
[quote=buildingwealth]Hey guys,
I am new but I have a situation that might be unique, but I guess really might not be. I am a new FA in training but have been learning a lot latley and am not that new to investing anyways. I have talked with my gradma a lot over the years about her great relationship with her advisor "jane". My grandma has never had anything bad to say about "Jane" or her investments ever. Background: Now my Grandma is 91, not in the best health and in an assisted living home with not a lot of money. Since I am now working as an FA, my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) and she was clearly in extremely unsuitable equites (closed end growth fund I believe) and ofcourse her advisor tells her she needs to ride it out, it will bounce back, etc. In all reality it is too late to really try and fix anything now but part of me wants to call my grandma's advisor myself and let her know what a horrible advisor she is. God only knows if any churning or other high commission tactics have been used as well over the years. My specific problem is that I know it would break my grandma's heart if I told her the truth about the horrible job the her advisor has done over the years but this situation really raises the question for what to actually do when a relationship is so strong that the advisor can literaly rip off a client? It seems situations like this will come up where prospects will need to be helped immediately but trust their advisor so much they won't budge. Opinions? [/quote] So let me see if I have this straight. You aren't even sure what type of investment it is, but the fact it has gone down makes it unsuitable and probably means the advisor is also churning granny. Did I read that right? Have her show her statement to a real financial advisor quick. I can't tell you if granny is invested correctly, but it appears you don't know either. Find someone who does.I woudl sign grandma’s name to your transfer out paperwork and mover her to all American funds…sprinkle a little BAC or CITI in there…pat yourself on the back and talk to your other grandparents about what you’ve done for nellie. Caution…make it look like grandma’s signature…
Obviously, you know a tremendous amount more than her longtime advisor...SO GET ON WITH IT...Quick, close your mouth spears, your IQ is starting to show.
Did I steal your thoughts there spiff…you can change it to…I don’t know…maybe Franklin Templeton…
Maybe I didn’t make it clear enough.
She is in a small cap growth fund and it is has been extremely volitile (very high beta). I guess some don't care about suitability for a 90 year old as long as their might be some dividend payments.See posts on conducting business with friends and family. You are dealing at an emotional level from some of your comments. Understandable but…!!!
You don’t know that the investment is unsuitable because you don’t know what it is. Do you know what your Grandmother’s net worth, risk tolerance etc is? Probably not. Most family members are closed mouthed about their own finances. You have no idea what the conversations between your Grandmother and Jane(advisor) went like. I have some elderly clients who STILL want to be players and insist on buying riskier things. (Of course, we do the required disclosures, where I have them sign that they bought this despite my advice not to do so.)
Since you are still new and not really knowlegable about investments OR your Grandmother, I would suggest you consult with a more experienced broker review the account and speak with your Grandmother in the presence of another family member or twoI doubt your grandma is in a small cap growth fund…especially with compliance the way it is. …and not sure when small cap growth funds started paying high dividends… do you mean aggressive income…but if your dead set on moving your grand mamas acct so you can help her…follow Ferris’s advice and be a hero…
You think she was taken advantage of? Are you serious? From what this neophyte said, you're able to infer all that? What if grandma was in a municipal bond fund and the fund is down? She is still getting income. Preferreds, closed end funds, bonds, these are how many old folks live...from the income of these investments. And just about ALL of them are down, some down a lot this year. Don't come on here and give advice until you know what you're doing. You're not even an FA. Unbelievable.This is what differentiates advisors. There are those who decide making money is the whole point behind building a relationship. There are others who understand that through ethical business decisions with their investor’s money that money will find its way to them. Personally, I feel the advisor should maintain an ethical business while promoting strong relationships with clients. In your grandmothers case, I think she may have been taken advantage of. At her current point in life, I would not bring up how she was taken to the wash over many years. I would just use this as a learning experience. As an FA, you have the power to do exactly as her FA, or you can handle events differently. I hate to hear about things like this, which is why I want to become an FA. I am curious to see what others say on this topic since I’m not in the business yet.
[quote=babbling looney]You don’t know that the investment is unsuitable because you don’t know what it is. Do you know what your Grandmother’s net worth, risk tolerance etc is? Probably not. Most family members are closed mouthed about their own finances. You have no idea what the conversations between your Grandmother and Jane(advisor) went like. I have some elderly clients who STILL want to be players and insist on buying riskier things. (Of course, we do the required disclosures, where I have them sign that they bought this despite my advice not to do so.)
Since you are still new and not really knowlegable about investments OR your Grandmother, I would suggest you consult with a more experienced broker review the account and speak with your Grandmother in the presence of another family member or two [/quote] This is exactly what I tried to ask. Since I am new, I wanted to know that since people like my grandma trust their advisor but are obviously not in suitable investments what is the advisor actually helping them with? To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent. So yes, even as a newbie, I would believe she is in too risky of an investment.First you weren’t sure what the CEF was, now it is a small cap growth CEF? With a high beta? That was quick. How about posting which CEF you are talking about.
BOYS …BOYS , you are now going to really confuse Buildingwealth. Sorry Babbling ( includes ladies too ) . No experience , seek the assistance of an independent advisor. You are emotionally attached and are not well versed in the business matters that apply to your Grandmother.
I second this. Post what she's got.Better yet, how about all of the insurance products & securities on her statement(s)…post the whole thing.
To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent
Ahem....have you taken a look at the markets in the last couple of quarters???? Try to find a mutual fund that has a positive YTD performance . Take a gander at the 1 year performance charts. With the exception of some sector funds like commodities, gold, a few global bond funds the majority of funds are in the tank. This has nothing to do with being inappropriate or agressive. Even the most conservative funds and fund families are under water. So, when you are a big grown up actual advisor what are you going to say to your clients who have lost 20% of their portfolio because of overall market volitility and they come in blaming YOU YOU YOU for their losses. Remember back to your studies about systematic risk. Just because your Grandmother has lost 20% of her investment, like a lot of other people have, doesn't automatically mean that her investments are inappropriate. In addition while she may be down 20% today she may still be up 20% from her initial investment. How long has she been investing? When did she invest this money? You don't know. do you? I have clients who are down in their portfolios from last year, and I need to remind them that even though their accounts have declined they still are positive in their overall investment portfolio. You are jumping to a big conclusion based on emotion and illogical thinking. In other words you are acting just like your clients (and ours) will be if you were their advisor. Your job is to steer people through tough times like these, not panic and jump of the deep end with them.[quote=babbling looney]To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent
Ahem....have you taken a look at the markets in the last couple of quarters???? Try to find a mutual fund that has a positive YTD performance . Take a gander at the 1 year performance charts. With the exception of some sector funds like commodities, gold, a few global bond funds the majority of funds are in the tank. This has nothing to do with being inappropriate or agressive. Even the most conservative funds and fund families are under water. So, when you are a big grown up actual advisor what are you going to say to your clients who have lost 20% of their portfolio because of overall market volitility and they come in blaming YOU YOU YOU for their losses. Remember back to your studies about systematic risk. Just because your Grandmother has lost 20% of her investment, like a lot of other people have, doesn't automatically mean that her investments are inappropriate. In addition while she may be down 20% today she may still be up 20% from her initial investment. How long has she been investing? When did she invest this money? You don't know. do you? I have clients who are down in their portfolios from last year, and I need to remind them that even though their accounts have declined they still are positive in their overall investment portfolio. You are jumping to a big conclusion based on emotion and illogical thinking. In other words you are acting just like your clients (and ours) will be if you were their advisor. Your job is to steer people through tough times like these, not panic and jump of the deep end with them. [/quote] I think we are on a totally different page and it is definitely my fault. I 100% agree that everything investment is down, not to get emotionally involved, or to jump to any conclusions. My concern was specifically that my grandma is 91, in poor health, and when she asked about her extremely risky investment her advisor said to ride it out. That is my only concern. I am 100% for small cap equties but just felt this was a fairly obvious case where it wasnt suitable. Sorry if I am still not clear about my thinking.my grandma recently showed me her statements after telling me she lost over $7k in one of her accounts in the last month (prob over 20% ytd) then you said she was down 20% in the last month or two (is it one or two?) and down $7k recently (please define recently)
The last statement your grandmother has is from June. Please post the CEF although I doubt you will as this will blow your entire "problem" out of the water. Best case scenario, you do not know how to read a statement. Worst case, you keep amending your story searching for someone to agree with you to justify going after grandma's account. Either way you are a danger to her. Like babs said, find an experienced advisor to help you with this and stop ASSUMING because your grandmother has an investment that went down that she has been hosed for years.Someone please get a hold of this guy’s parents before he does something to lose them more of their inheritance.
Emoticons are sooo gay, but that's a different thread.Someone please get a hold of this guy’s parents before he does something to lose them more of their inheritance.
Buildingwealth: you are not listening. You don’t know and we can’t know if your Grandmother’s investments are inappropriate because we don’t have enough information and neither do you.
1. What is her entire investment portfolio...not just the stuff on this statement. Does she have CDs Annuities, Bank Accounts, Real Estate. 2. What is her overall net worth? Compared to the amount invested in this portfolio. 3. When did she invest and what was her initial investment in this investment. 10 years ago. Last week. 4. What sources of income does she have? Is she relying on income from this portfolio? 5. What was the source of her initial investment? 6. What percentage of her ENTIRE portfolio does this inappropriate investment represent. 7. What is the overall gain/loss in her entire portfolio and not just in this investment. Maybe she is down in this current moment from her account highs but still might be in positive territory. Maybe not. We don't know and neither do you. 8. Can she take advantage of a capital loss against capital gains. Maybe she should cut her losses and take a tax break. Does she need a tax break 9. You mentioned she is in long term care. Does she have a LTC policy. How is she paying for her care? There is a lot to be considered.....not just OMG!!!! Small Cap Fund Old PERSON !!!!! It may well be that it is inappropriate, but if you are going to be an advisor looking after OPM (other people's money) you need to be clear headed and analytical. This is why we don't recommend that you handle your own family as clients. It is too difficult to keep a clear head when you are involved on a personal level.Really, just trying to be helpful
Gay emoticons[quote=babbling looney]Really, just trying to be helpful
Gay emoticons [/quote] I know you've already been asked to have someone else's baby, but can we just practice?[quote=Primo][quote=babbling looney]Really, just trying to be helpful
Gay emoticons [/quote] I know you've already been asked to have someone else's baby, but can we just practice? [/quote] Hell, yeah! That's way better than actually having a baby. Of course I will need to get permission from my husband. I sorta think he will say nope.Not if you tell him that you are just practicing so you can make him happier!!! That will convince him.
[quote=babbling looney]To be more specific my grandma has lost over 20% of her net worth just this last month or two, the 7K was just very recent
Ahem....have you taken a look at the markets in the last couple of quarters???? [/quote] Babs, with all due respect, and i mean that, your posts are always constructive and relevant so no disespect meant - As Ice said, there is a lot of info we dont have, that we would need to make the right decisions if this where our client. But if a client is down 20% this past month or two, (if thats really the case), then it means the client in all likelyhood has pretty much 100% exposure to equities or equity like stuff. And it doesnt really seem appropriate for a 91 year old to be in that position. Unless of course, this is money that she knows sshe will never ever have to touch and wants it to grow for her heirs. JMHOWell, practice does make perfect. Pratoman: I we don't know if she is down 20% all together or just 20% in that particular "inappropriate fund". Pretty much, I take all of the information given from my actual clients at 60 to 70% on the truthfullness scale. On the internet, a whole lot less. So if our original poster was telling us the complete unvarnished truth ...I'd be damned surprised. The point is that our newbie broker is trying to second guess a long term advisor based on a statement presented by his 91 yr old Grandmother. Is our newbie just the teensiest bit involved and emotional? Ummmm ...yeah. Should he get a second opinion considering that he still has egg shells on top of his newly hatched head. F*ck yes.Not if you tell him that you are just practicing so you can make him happier!!! That will convince him.
But if a client is down 20% this past month or two, (if thats really the case), then it means the client in all likelyhood has pretty much 100% exposure to equities or equity like stuff. And it doesnt really seem appropriate for a 91 year old to be in that position.
You might be correct, but I wouldn't make that assumption that it isn't appropriate without way more facts. We're talking about an unhealthy 91 year old. This isn't a portfolio that has to survive 30 years. Her life expectancy is probably closer to 2-3 years. Losing money isn't a big issue. Running out of money is a big issue. I find that most old people have two financial goals. 1) Live comfortably for the rest of their life. 2) Leave as much money behind as possible at death. Goal #1 comes first. Are these her goals? If so, will the portfolio allow her to do this? Also keep in mind that even if it isn't the best portfolio, and this is non-qualified money, making changes may not make sense if it will create taxes. She may have big unrealized gains. By selling now, she'll bear the cost of these taxes. If the fund(s) aren't sold, they'll get a step-up in basis at death thus possibly saving significantly on taxes.Source URL:https://www.wealthmanagement.com/forums/rookies-trainees/relationships-v-performance-suitability