Question I should have figured out by now

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Aug 8, 2007 12:05 pm

When you have a prospect in your office and they agree to move $$ over to you, how do you decide what goes in what account?


Example, I have a new client with a Roth and traditional IRA, wife has a Roth and traditional IRA, and they have a joint account.  They are moving it all to me, and I showed them a hypo with 25% fund x, 20% fund y, etc.


Do you just do every account 25% fund x, 20% fund y, etc?  I was trying to simplify and put fund x in the Roth, Y in the traditional, etc. and did a fair amount of brain damage figuring out how to squeeze $17,000 of fund x and $31,000 of fund y, etc. into the accounts without having fund x in 2 accounts, fund y in 3 accounts, etc.


Bottom line, it seems like I am trying to simplify by not having the same 5 holdings in 5 different accounts, but I'm not sure if I am simplifying or just creating more confusion.


What do all of you do?

Aug 8, 2007 12:12 pm

You are making it way tougher than it has to be.  Are the client's objectives the same for all of their accounts?  Maybe they have different risk tolerances on the retirement accounts as the joint account.  Obviously I would tend to put less tax efficient investments in the retirement accounts assuming it was appropriate.  I would not put the same allocation of the same investments in each account, nor would I put y into the roth and x into the joint, etc. 


Have you never worked with multiple accounts from the same household before?


Also, that's part of the problem with selling that hypo.  You want them to buy into your strategies and ideas, not a specific hypo, for the long term.

Aug 8, 2007 12:19 pm
snaggletooth:

You are making it way tougher than it has to be.  Are the client's objectives the same for all of their accounts?  Maybe they have different risk tolerances on the retirement accounts as the joint account.  Obviously I would tend to put less tax efficient investments in the retirement accounts assuming it was appropriate.  I would not put the same allocation of the same investments in each account, nor would I put y into the roth and x into the joint, etc. 


Have you never worked with multiple accounts from the same household before?


Also, that's part of the problem with selling that hypo.  You want them to buy into your strategies and ideas, not a specific hypo, for the long term.



What specific experience and/or qualifications do you have to be offering that advice?

Aug 8, 2007 12:20 pm

I wouldn't worry myself too much about it (they didn't really buy the hypo, they bought you) But, OTOH, if they bought to the hypo, then the worst you should do is buy the hypo for each and then the hypo for the joint.


Let's say there are 4 funds, each with 25% weighting


Let's say that Jane's TAA(tax advantaged accounts) are worth a total of 100,000 (50 and 50), buy two fund in the ira and two in the roth.


Same is true for Dick's TAA. but lets say his are worth 70M (IRA) and 30M (Roth). You buy two in the IRA at $25M each and the third at 20M. In the roth 5M plus 25M.


This way they both have the same performance.


The joint is it's own deal with a straight allocation.


You MAY want to have had the talk about tax considerations where you'll say that you want the funds that pay out the biggest dividends and cap gains inside the TAAs and the ones that pay less (or even taxfree) in the joint. But then you would have had to have had the talk about the whole household being treated as a single portfolio and so on and so forth.

Aug 8, 2007 12:25 pm
Devil'sAdvocate:
snaggletooth:

You are making it way tougher than it has to be.  Are the client's objectives the same for all of their accounts?  Maybe they have different risk tolerances on the retirement accounts as the joint account.  Obviously I would tend to put less tax efficient investments in the retirement accounts assuming it was appropriate.  I would not put the same allocation of the same investments in each account, nor would I put y into the roth and x into the joint, etc. 


Have you never worked with multiple accounts from the same household before?


Also, that's part of the problem with selling that hypo.  You want them to buy into your strategies and ideas, not a specific hypo, for the long term.



What specific experience and/or qualifications do you have to be offering that advice?



Ask your daughter...I mean granddaughter.

Aug 8, 2007 12:56 pm
EDJ4now:

When you have a prospect in your office and they agree to move $$ over to you, how do you decide what goes in what account?


Example, I have a new client with a Roth and traditional IRA, wife has a Roth and traditional IRA, and they have a joint account.  They are moving it all to me, and I showed them a hypo with 25% fund x, 20% fund y, etc.


Do you just do every account 25% fund x, 20% fund y, etc?  I was trying to simplify and put fund x in the Roth, Y in the traditional, etc. and did a fair amount of brain damage figuring out how to squeeze $17,000 of fund x and $31,000 of fund y, etc. into the accounts without having fund x in 2 accounts, fund y in 3 accounts, etc.


Bottom line, it seems like I am trying to simplify by not having the same 5 holdings in 5 different accounts, but I'm not sure if I am simplifying or just creating more confusion.


What do all of you do?



You can do it either way.  Same allocation in all accounts (watch breakpoints/roa on this) or put the fund with higher turnover (less tax efficient) in the qualified accounts.


Or make it real simple and use a balanced fund.

Aug 8, 2007 1:30 pm
EDJ4now:

When you have a prospect in your office and they

agree to move $$ over to you, how do you decide what goes in what

account?



Example, I have a new client with a Roth and traditional IRA, wife has a

Roth and traditional IRA, and they have a joint account. They are moving

it all to me, and I showed them a hypo with 25% fund x, 20% fund y, etc.[/

P]

Do you just do every account 25% fund x, 20% fund y, etc? I was trying

to simplify and put fund x in the Roth, Y in the traditional, etc. and did a

fair amount of brain damage figuring out how to squeeze $17,000 of

fund x and $31,000 of fund y, etc. into the accounts without having fund

x in 2 accounts, fund y in 3 accounts, etc.



Bottom line, it seems like I am trying to simplify by not having the

same 5 holdings in 5 different accounts, but I'm not sure if I am

simplifying or just creating more confusion.



What do all of you do?





Unless they have significan taxable holdings and a tax issue, it's not a big

deal. Often I have clients with large IRA rollovers, and small taxable

accounts. I will often use just one allocation fund or balanced fund in

their taxable account, and leave the detailed allocations in their IRA's.

However, in most of my taxable accounts that are significant, I am using

individuals stocks or ETF's for tax efficiency (usually people with large

taxable accounts have other money and tax issues - the large IRA's are

usually the result of long-term employee 401k's).

Aug 8, 2007 2:15 pm

I did talk to them about running the whole thing as one household, and they get that.  As far at tax efficiency, sometimes I will take that into consideration, but in this case there aren't any losses to carry forward and the portfolio had minimal fixed income, so it wasn't really a big concern.


I actually have been using mostly asset allocation funds, which is why I haven't dealt with this in a while.  In this case the fund company I wanted to use doesn't have a good asset allocation fund.