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  • Need help firing a close friend/financial advisor

    I'm a current medical student and have been helping my parents with their finances over the past year. I have a taxable brokerage account and Roth IRA and have a few ETFs that I like investing with and really enjoy handling my own finances and even handling my parents' portfolio.

    A close friend of mine is a financial advisor and I set my parents up with him because we needed some services like doing a 1035 exchange from whole life insurance to a variable annuity, getting my sisters term life insurance, setting up a 401(k) for their business, etc. When we started meeting with my friend/financial advisor I wanted to pay a flat fee but he (and his CEO who was on the call) insisted their firm only does AUM based fees (1% and scales down with more assets). 6 months after working with him, I mentioned that we won't be clients forever because I like working with my parents' finances and he got a little upset.

    Another aspect of this is that a 1035 exchange, 529 plan for my niece, and an HSA were all my ideas to start and not initially recommended by the advisors. Also, with my parents' portfolio I put some of their money in ETFs I use and some mutual funds that the financial advisors recommended. The funds I've chosen have lower fees and are performing much better.

    So my issue now is that honestly I feel like I can manage their portfolio with better returns, lower fees, and less headache (the extra paperwork and verbal back and forth with them is annoying). I understand my parents' goals and risk tolerance much better and have educated myself on the best ways to withdraw their money once they choose to retire. I want to fire these financial advisors but the main one working with us is a close friend. Anyone have advice on handling this situation in a kind and humble way? I don't want to say "hey I'm doing this better and your extra paperwork is annoying and you don't deserve our money" but it's kind of how my parents and I feel. I also handle the phone calls with my friend on behalf of my parents and guarantee that I'm the most annoying client he has, it's probably not great for our friendship but firing him can't be the best thing either.

    I appreciate any advice! Thanks!

  • #2
    #1: Be careful with your parents finances. That will be a very fragile relationship.

    #2: You don't owe any explanation to your friend. If he's a true friend then he'll continue to be a friend. If he gets upset then find a new friend.

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    • #3
      I think it's one thing to manage your finances but another to do it for family members. Personally I'd untangle myself from both the friend and your parents. . .

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      • #4
        There’s no painless way to do this. You could just say that this was getting in the way of your friendship and you want to go back to just being friends. Which isn’t exactly untrue.
        “Work” is a four letter word for good reason.

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        • #5
          I had a similar situation years ago when I was using my college roommate who is an FA. I won’t detail the many reasons I needed to get out of this arrangement, but suffice it to say that it wasn’t an easy conversation to have. But how could it be? I decided not to take the bait when he tried to get me to engage with “I hear that you’re disappointed.” Instead I stuck firmly with “I want to manage my investments myself.” Which was true. There was really nothing to say to that. Has it affected our friendship? Yes, we are not as close. I hold myself partly responsible for that by entering into the arrange in the first place. On the other hand, the experience left me resentful, and it was really his behavior that soured me. That and the fees. I’d estimate I have kept ~$200,000 since terminating the relationship, and I don’t believe his results would have been more successful than my index fund approach. You just have to bite the bullet and tell him clearly and firmly. You can be appreciative of whatever it is you appreciate of his help. But to expect him to like this or agree with it is unrealistic. You are going in another direction. Good luck!
          My Youtube channel: https://www.youtube.com/channel/UCFF...MwBiAAKd5N8qPg

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          • #6

            I might actually ask the advisor.
            “Hey, need your input as a friend. I really want to handle my parents and my stuff and save some fees. How can I fire my FA in a kind and humble way? Should I call or send an email? Crap, this is like the breakup thing, We can be just friends.
            Any ideas? Hey, got to go. Think about it. Let’s talk tomorrow.”
            CLICK

            Make sure to call. So what do you think old buddy old pal old friend? Crap, I’d let him unload. That’s what friends do. Tons better than FB or twitter: “Your Fired”. Opting out.

            Short version:
            Bottom line, AUM isn’t acceptable.
            .
            I would do the short version. Avoids any personal, skills or performance comments that can trigger defense or resentment.

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            • #7
              Of course you want to keep this person as a friend, but it probably won't happen. Move on. It's your money.

              When we decided to manage our own finances instead of our advisor/friend, we opened a Vanguard account and just had them pull the money. It was quick and painless. As a courtesy, I did call and let him know to expect this from Vanguard. My explanation was the cost. It was a polite call to just inform him what I had done, not ask or tell him what I was planning to do. It was a done deal and I was just calling as an FYI.

              I would say we are no longer friends, but it is cordial. It was the best move we have ever done. We never looked back.

              I just wish we had found Bogleheads and WCI about twenty years ago.

              Tell your parents what you are doing and why. When the advisor asks about their accounts, simply say that more will follow in the new year.



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              • #8
                You require a flat non-AUM fee.

                They only accept an AUM fee.

                Just tell them their fee structure is unacceptable and leave it at that. You already had the CEO of the firm say it's non-negotiable. This won't be the first or last time they hear this from current or prospective clients.

                Whether you should manage other family member's finances depends on if you have the time to do it and your family. I would have no qualms with my family because we are not going to sue each other if something goes wrong. I just don't have the time or energy on top of my regular job.

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                • #9
                  Originally posted by zlandar View Post
                  You require a flat non-AUM fee.

                  They only accept an AUM fee.

                  Just tell them their fee structure is unacceptable and leave it at that. You already had the CEO of the firm say it's non-negotiable. This won't be the first or last time they hear this from current or prospective clients.

                  Whether you should manage other family member's finances depends on if you have the time to do it and your family. I would have no qualms with my family because we are not going to sue each other if something goes wrong. I just don't have the time or energy on top of my regular job.
                  this is how i would play it, mostly.

                  call him up, this has to be done over the phone, and just say that you like working with him but that you have decided that you aren't going to do an AUM structure and that you are going to move to a firm that doesn't work that way. refer to the policies of his firm rather than him as a person.

                  your back-up play is something like "look dude, you're an important person to me but i don't want to keep paying you to manage my parent's money, can i ask you to respect that decision? if not we might have more things than AUM to discuss."

                  as with all things in life where there is conflict, when you are communicating more than the other person you are usually losing. you don't owe him 2 hours agonizing about this on the phone. at some point you may have to play a card like, "i'm going to insist that you respect my decision on this and i don't want to discuss it further."

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                  • #10
                    On the friendship side, it will have an impact.
                    Your friendly give and take will make any conversation about his business a little uncomfortable. Friends typically share a little about successes, failures, hopes and dreams. Even with no hard feelings, it’s going to be difficult to erase that the service he provides wasn’t worth the money to you. Which is actually true, but not really.
                    The only come back is you did value the scope of services. But he did a great job on a lot of goals. The needs changed, so the price hasn’t.
                    Praise the past successes. Only chance.
                    You used him for “complex issues”. Done.

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                    • #11
                      Im all for minimizing unnecessary costs that you can control

                      I would agree w others that managing your parents money is a recipe for conflict. How do your siblings feel about this? How about when the stock market goes down 50%? Are you investing your siblings’ future inheritance?

                      and there’s a business 401k that has been set up?

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                      • #12
                        Managing your parents' financial lives could easily go wrong. How much time do you have as a med student? How much experience doing this for anyone other than yourself? Do you know your legal obligations? Are you knowledgeable about things that will not be issues for you for decades but are important to your parents now?

                        If your parents really need someone to do this for them, find an hourly or low cost flat fee adviser. Better still, they should do it themselves.

                        Another good reason to stop using your friend: just as you should be cautious managing your parents' finances, you should avoid having your friend do it. Keep the money management separate from friends and family.

                        You should find someone else if parents cannot do it themselves, then stop paying your friend for the service. You don't have to "fire" them. Just have parents go it alone, or hire someone else.

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                        • #13
                          Really great responses, thank you all! Feel free to keep commenting as well

                          I do think I have been minimizing and ignoring the fact that if we want to fire my close friend, then perhaps in the future my parents might want to fire me which could prove to be even more tricky. Both my mom and dad have shown a great interest in learning more about managing their investments, planning for several financial goals, and making sure they can do this for themselves in retirement. It seems like right now we want to move away from the financial advisors and I can spend more time teaching them solid ways to handle their finances. The financial advisors haven't been doing much education for them and I have been searching for YouTube videos or similar platforms to get them on board with investing, retirement planning, and estate planning. They do have an estate planning lawyer who does a great job educating them on important aspects of estate planning but sometimes doesn't offer enough of a broader scope if it doesn't relate to their exact decisions. My parents own their own business buying and selling electronics, very similar to the stock market as they buy low and sell high. I suspect they'll enjoy these parallels and enjoy learning and managing their investments.

                          A couple of you have mentioned my siblings and it's a fair point, my siblings know I'm managing their finances and support that I've learned enough to add value when their previous financial advisor was ripping them off (terrible annuities, a ton of whole life insurance, and large fees).

                          I like that a few of you have mentioned being polite but firm. Not asking for his permission or blessing to continue forward but saying this is how it is and I really appreciate his help with the complex matters.

                          Working with my parents on their finances and goals has also been an experience that has brought me closer to them and it sort of fuels this hobby of mine so it might be worth mentioning that I'm excited to continue doing this as a hobby and hope to continue growing closer to my parents.

                          Also, yes a business 401(k) has been set up, the participants eligible are my mom, my dad, and 1 other employee. One small consideration was taking the advisors off of my parents' personal accounts and letting them manage the 401(k) and then firing them entirely a little later but honestly it seems cleaner to just rip the bandaid off entirely. It's honestly a little disrespectful to only give them one piece of their portfolio, pay a fraction of the fee their used to, and essentially expect the same service. The amount we'd be paying might be the amount we'd pay to a flat fee advisor but it just feels odd.



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                          • #14
                            The is a big difference between helping your parents learn to be independent and taking over the responsibility.
                            A simple three fund portfolio suggestion may be perfectly fine. They have a business, let them do it. Your role is to assist getting them to be independent. Who does their taxes? They can accept your recommendations, but there needs to be checks and balances.

                            I will say this politely. You do not have the credentials and training to perform the functions you are attempting. Be an advisor, make suggestions. They make the decisions. Doing the decision making is not sharing your wisdom.
                            That in no way means to keep their advisor.
                            Let your parents handle their on business. If you weren’t their child, you would be practicing without a license.

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                            • #15
                              dude, does your buddy work at a big firm? My former FA and high school buddy of mine worked at Northwestern Mutual, and despite being ripped off from my buddy these insurance companies and firms have to follow what you want, even if you don't talk directly to your advisor. There are somethings that you need your buddy for, and just tell them what you want and they are required to do it. Here is how I painlessly "fired" my buddy without actually having the painful discussion of firing him and getting out of the products.

                              1. for disability insurance and term life, I used Bob Bhayani and Ravitz pearson, and once I got appropriate insurance in place, then I called NWM directly to cancel my disability and term 80 convertible insurance policies, and asked for in-force illustrations for my whole life policies and placed my premium payments on hold. Then I 1035 exchanged the cash value by calling Fidelity to "pull" the money out into a low cost VA

                              2. my buddy had put a VA within an IRA for me , so I did tell him to liquidate the VA citing poor returns. Then again I had Fidelity pull the IRA money out into my Fidelity solo 401k. if you don't have solo 401k you could ask your current employer 401k to pull the money out

                              3. I asked him to sell my stuff in the NWM taxable account, was only a few thousand bucks in there, citing I was in credit card debt and needed the cash

                              4. he had put me in virginia advisor led 529 plan- I called Virginia 529 to put me in the self directed plan- went from 150 basis points to 9 basis points!

                              Now I am fully disassociated from my buddy without having ever formally having any uncomfortable conversation about firing. I did have credit card debt throughout this time, which was also a good excuse for saying that my buddy was doing a piss poor job and I could no longer keep paying for his products. Maybe you can make up a similar situation for yourself for your buddy.

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