Ez, take a look at all of the assets together, rather than breaking out qualified and non-qualified monies, then plug the total into your allocation model.  Dependent upon the widow's income status, would it make more sense to put all of the fixed income instruments in the IRA?  Why take a stock portfolio with a 15% capital gains tax and turn it into a 27% taxible IRA distribution?

Just something to consider.......

It’s likeley she will never be in a high tax bracket. She is currently unemployed or makes very little. I don’t see her making more than 30-35,000/ yr.

I would complete a financial plan for her.  Item 1 would be to
make sure her estate plan is in order-taking care of her minor children
being a single parent.



A plan will provide you with the asset allocation that will provide the
highest probability of achieving all of the goals (probabalistic
planning, not deterministic).



Depending on how old the younger children are, I may take advantage of
529 plans.  Make sure she is taking advantage of the Hope credits
and the like with the tuition being paid. 



It all would come together with a good plan- start there.

Back to the money market scenario…if you have to keep that much in cash, try laddering CDs. That will get a better return and may make the client more comfortable with moving into some slightly more aggressive investments.

[quote=ezmoney]

I'm wanting to roll the 401k into an IRA using a balanced 50% stock funds/50% bond fund managed fund wrap program charging 1.35%.

[/quote]

yeech, bond funds, and with a wrap fee...

[quote=stanwbrown][quote=ezmoney]

I'm wanting to roll the 401k into an IRA using a balanced 50% stock funds/50% bond fund managed fund wrap program charging 1.35%.

[/quote]

yeech, bond funds, and with a wrap fee...

[/quote]

Agree! Wrap fees may seem reasonable for a bond portfolio, afterall, at about 75 beeps what's the harm? Well, at a 5% yield it's 15% of the return. That's a chunk considering bonds are an investment that don't need management. Just buy and hold. Same goes for MOST bond mutual funds. Another problem with managed bond portfolios regardless of ilk is that MOST are managed for total return. OK if the ONLY reason the fund is included in the portfolio is for asset allocation purposes, not OK for income buyers. And on the total return front, looking back at 1994, and 98/99 MOST of these managers did not do their clients/shareholders any favors. As long as clients have enough cash to buy individual bonds that's where they belong. A buy and hold strategy never loses money.

[quote=scrim67]

Let me add one more thing:

I'm still a newcomer to this field.   My goal right now is to collect assets and I feel this approach is best right now.

I'm collecting the assets; getting the client in a comfort mode to work with me going forward; letting them get a hands on feel for our program as they see how the statements, performance reports, rebalancing and newsletters look.

My clients can change their strategy at any time with no charges.   What I anticipate happening is as I meet with some of my "Preservation" clients I can see them transitioning part or all of their portfolios to our "conservative" model which is basically a 40/60 allocation of equites/bonds.    This allocation has proven over time to be the best combo of risk/return over the long term from the research I've done.   Net of expenses this model returns approx 7% annually.

That's my plan.  Will it work over the long term?  Obviously I think so.  But you know what they say about the best made plans.

Out of the 45 models i'm servicing right now about 10 our preservation.

[/quote]

Scrim, go thru the portfolios offered and take them apart. Instead of looking at the 3,5 and 10 year annualized returns look at the year by year returns. For the equity heavy portfolios look at the years 2000,01 and 02. On the bond side we're interested in 1994, 98 and 99. How'd they do? Did the porfolios act as they should have to protect client assets in those years? If not, why not? Any portfolios that had losing years? If so how much? For an equity portfolio a 10% loss may not seem like a big deal. That is until you realize that it will take an 11% gain just to get back to even. The greater the loss the harder it gets to get back to even. Down 20% takes a 25% gain to break even. Their are many equity investors 2000-02 that would be more than happy to settle for just getting their money back. This includes wrap acct clients. How about your plans? Any still net down from the market decline? Have the bond funds recovered their 94 losses? Many have not.  Are they trading at pre 98/99 levels?  Again, many are not. That's what happens when a manager puts his job security ahead of the shareholders best interest by putting near term performance ahead of long term performance.

Take the allocations apart, understand the pieces and how they fit together. Understand the managers style, how and why they invest as they do.

Lastly, only real performance counts. Do not accept any back tested models.

So I get a call from my client. She tells me her and her kids, all of whom know nothing about finances have decided they don't want to do what I'm recommending, they don't like the fees.

 I mean who's the expert here?. Her husband's last wish was for me to handle the money and now she tells me she is talking to her friends and maybe the best thing is to put the money into cd's. She says she's going to go down to the bank and talk to somebody. Hell I work for the bank. I have really had it for the short amount of time I've been dealing with her. I feel like telling her to go elsewhere. What should I do. She's really absent minded.

Tell her to go to the bank.  If she’s not going to take your advice then she’ll never be a good client.  PITAs are not worth your trouble.

I mean who's the expert here?. Her husband's last wish was for me to handle the money and now she tells me she is talking to her friends and maybe the best thing is to put the money into cd's. She says she's going to go down to the bank and talk to somebody.

ezmoney

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Don't write her off just yet. Based on the problems you're having, I'm guessing that most (if not all) of your meetings with the now deceased husband (concerning investing) excluded the wife. If true, that's a mistake you need to correct with your current and any future clients.

If you excluded the wife from any investment meetings involving her husband, you can be assured that you now have to start from square one with the widow, just as if she was a prospect. (That's why involving a spouse or significant other, in such meetings, can help you avoid these problems.)

As for the problem at hand, if there are no significant taxes or penalties involved, I would recommend you place all of her investments in a money market account, for now. This will get her to relax, 'cause I guarantee you she's watching CNBC and the market volatility is driving her nuts! She won't listen to you or anyone, until she can relax.

Now, you can start selling her on investing in the market. Present your case for investing, then let her decide. Granted, she may start with a much smaller amount than her husband previously invested, but it's a start. If you can't sell her on investing, let her go. It's not worth the risk having it blow-up your career because you hard-sold her on investing.

In fact, it's almost a cliche' in arbitration: "Greedy broker takes grieving widow's savings and loses it in the market". Not that you would have her in anything that risky, but losing even 25% of her savings would put your career at risk. It just isn't worth it.

Sounds like you need to call this woman and ask for an appointment with

her and all the decision makers (kids, postman, etc…).   Set them straight

in a calm, reasonable, and professional manner.



or,



you can tell her to go climb up a tall building and jump!

On the surface it looks like your mistake was in hitting her with your investment recommendations so soon.  Of course she's scatterbrained...her husband just died.  She's in grief, she's scared, she's faced with making all sorts of decisions by herself.  To come in so quickly with an investment proposal was very premature.  You may well have come across as someone who was more interested in quickly making some money off of her than someone who really cared.

As someone else posted you should have first done a financial plan of some nature.  You need to explore with her needs, goals, risk tolerance, etc.  She needs to be educated, to understand the reality of her financial situation, etc.  before she's in a position to say "yes" to anything you have to say.  She seems reasonably young (40's, early 50's ??) and her husband didn't leave her a lot.  At a minimum she needs a cash flow analysis to show the reality of meeting (or not meeting) her anticipated income needs during her lifetime.  She may have to go to work.  She may have to cut expenses.  She needs to have all this laid out for her first. 

After discussing such an analysis with her (during which you'll learn other things about her and her risk tolerance) you can then go back to her with an asset allocation strategy and demonstrate how these will specifically address her needs.  (Frankly, I don't know how you could have possibly come up with an asset allocation without having first done all this.) You've got to be a consultant to her first and foremost.  Once you've gained her trust and confidence at the planning stage, then and only then will she be in a position to have a positive frame of mind to listen to your investment recommendations.

As this is relevant to my initial post here is more info:

My bank partner's CD rates are:

24 month 2% apy

36 month 2.25%

48 month 2.49%

60 month 2.74%

120 month 3.99%

Wow those suck.

Here are some bank cds I can offer my clients.  These aren't even brokered cds.

No fees, no minimums and the security of FDIC insurance.

Sorry, excuse the cut and paste leaving in the coding. But I guess you can see the rates.

I'll second that...those rates bite big time.

Your bank could make a lot of $$$ selling customer lists if it weren't for that ^%!##!^ privact act!!!  Reminds me of the little bank around here that used to pay 0% on it's Christmas Club accounts AND they wouldn't let people withdraw the money early!!!

some additional pertinent info:

the banks plain money market rates are 1.00% for balances over $1,000 and 1.50% for over $25,000.

the money market fund in the wrap program is 2.80% currently

The bank I used to work for had a trust department that charged a fee
to hold C.D.'s.  At the same time, brokerage houses were getting n
trouble for tiny spreads on stocks.  Ridiculous.

so now this dim witted b@#$%! calls my assistant and tells her she thinks I took advantage of her because she could have sold her stock elsewhere for $8. She says she may write a letter. I only spent about 8 hrs of my time trying to help her. #1 advise was for her to sell about 400k of one stock in order for us to diversify down the road. I’m getting rid of her. Life’s too short. What do you think.

ezmoney: so now this dim witted b@#$%! calls my assistant and tells her she thinks I took advantage of her because she could have sold her stock elsewhere for $8. She says she may write a letter. I only spent about 8 hrs of my time trying to help her. #1 advise was for her to sell about 400k of one stock in order for us to diversify down the road. I'm getting rid of her. Life's too short. What do you think.

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Yep, time to dump her. When a client gets to the point of writing letters to complain, it can only lead to arbitration. Send HER a letter stating that you can no longer serve her financial needs and give her 30 days to find a new broker.

I guarantee she'll be down 30%+ within a year. Why? She's not going to transfer to a full service broker (since she's harping on the commission costs), so she'll end up at Schwab or some such, based on the recommendation of some of her friends. And you've already stated that her friends had some stock tips for her. Between her own ignorance of the business and her friends, her portfolio is headed for the dumper.

If you really want to get her goat (Southern expression), send her periodic updates on how well your previous recommendations have performed. For example, if you recommended XYZ mutual fund for her before she left, be sure and update her as to how well it has performed. Hopefully, she'll be looking at her Schwab statement in one hand and looking at your letter in the other. And for that moment, the value of your advice will crystalize. Heck, she may even come back to your firm.