Parent's Financial Advisor

[OldAgOrtho]

I am a new grad from residency just beginning my journey but eyes beginning to open becoming financially literate. I know you (and I) probably need more information but my parents got connected with a financial advisor. I don't know all of the details, but to my understanding he is taking a 1% AUM fee and providing a general plan for my parents as they have transitioned into retirement. I started asking them questions and they have no knowledge of special planning or strategizing as they went from working years to retirement from tax gain harvesting to roth conversions, SS planning or planning prior to Medicare kicking in. Sorry if some of this doesn't make sense but trying to learn as well.

It seems like red flags not to know about preparing during this important time to optimize their taxes and planning.

Portfolio consists of Cash, BND, and VOO along with some legacy holdings with essentially zero basis. Wondering or looking for advice on some questions to ask my parents or their advisor to get a better understanding of the value or plan he is providing? I do like the simplicity of the portfolio but seems like an extreme premium to pay for essentially a 2 fund portfolio that doesn't seem to have strategized for them during an important time in their lives.

Is my general distrust clouding my judgement? Unsure how to approach the topic with my parents who have little interest in managing their own finances but also looking out for their best interests and future.

[CordMcNally]

They could almost certainly get cheaper (and likely better advice) from a fee only advisor. As for your parents, you can lead a horse to water...

[nephron]

Do your parents want any of your input? Unless they asked for your input, I wouldn't volunteer it. A 1% AUM fee may seem ridiculous to manage a 2 fund portfolio to you or I but he is helping your parents do required minimum distributions, re-balance as they are drawing down their assets, and your parents do not have that much in assets(<1 million), it may not be an unreasonable fee for people not interested in managing their own finances. This is particularly true if you consider the alternative of paying someone to mis-manage your assets. Everyone has some degree of cognitive decline as they get older and it maybe worth a premium if you have found someone to manage your finances that is not ripping you off.

[jfoxcpacfp]

Keep in mind that the readers here are all (mostly) biased against AUM but that it is by far the most common fee structure. The key is the service you get, along with whether the portfolio is crap or decent. There is a wide gulf between the “good” AUM advisors and those who are simply churning. If they are comfortable with their advisor, I would suggest you ask permission to go to or have a meeting with him and ask some questions to see if you are comfortable, too. Don’t let the “AUM” blind you to the possibility that they may be getting good other advice (besides simply constructing a portfolio and rebalancing periodically) until you’ve talked to the guy.

[OldAgOrtho]

Thank you to all. I do like the idea meeting with him. He is a friend of my brother's who used to be in finance but went a different path. I also got concerned when my brother was telling me how he's not doing bad right now because he is all in cash, giving me market timing vibes because my brother said it is "absolutely possible" to time the market if smart enough.

Thanks for the advice.

[Kamban]

Thank you to all. I do like the idea meeting with him. He is a friend of my brother's who used to be in finance but went a different path. I also got concerned when my brother was telling me how he's not doing bad right now because he is all in cash, giving me market timing vibes because my brother said it is "absolutely possible" to time the market if smart enough.

Thanks for the advice.

I am glad you brother got out of finance because he would make a terrible FA.

In fact I would recommend that he pay a 1% AUM advisor and have his cash invested in a reasonable portfolio. People like your brother are the ones who would benefit from AUM FA.

[OldAgOrtho]

I am glad you brother got out of finance because he would make a terrible FA.

In fact I would recommend that he pay a 1% AUM advisor and have his cash invested in a reasonable portfolio. People like your brother are the ones who would benefit from AUM FA.

Haha I think you are right.

[deanyar]

I am a new grad from residency just beginning my journey but eyes beginning to open becoming financially literate. I know you (and I) probably need more information but my parents got connected with a financial advisor. I don't know all of the details, but to my understanding he is taking a 1% AUM fee and providing a general plan for my parents as they have transitioned into retirement. I started asking them questions and they have no knowledge of special planning or strategizing as they went from working years to retirement from tax gain harvesting to roth conversions, SS planning or planning prior to Medicare kicking in. Sorry if some of this doesn't make sense but trying to learn as well.

It seems like red flags not to know about preparing during this important time to optimize their taxes and planning.

Portfolio consists of Cash, BND, and VOO along with some legacy holdings with essentially zero basis. Wondering or looking for advice on some questions to ask my parents or their advisor to get a better understanding of the value or plan he is providing? I do like the simplicity of the portfolio but seems like an extreme premium to pay for essentially a 2 fund portfolio that doesn't seem to have strategized for them during an important time in their lives.

Is my general distrust clouding my judgement? Unsure how to approach the topic with my parents who have little interest in managing their own finances but also looking out for their best interests and future.

I am actually quite impressed that their FA has created such a simplistic portfolio. The vast majority of advisors dont have the cahunas to do this - they tend to make portfolios unnecessarily complex out of fear that clients would say "well hot diggity (I changed the word because apparently this site does not take kind to what I thought was a pretty benal word...) , I can do this!" - so this is quite refreshing!

Is 1% AUM high? It is pretty typical as far as AUM fees go. Honestly depends on how much in assets are being managed. It is a drag on growth for sure, but if your parents are happy with them and they are not scamming your parents into buying crappy insurance products or investing in actively managed funds or individual stocks, then it probably is not worth stressing them out about this, and just let it ride...

[GasFIRE]

Thank you to all. I do like the idea meeting with him. He is a friend of my brother's who used to be in finance but went a different path. I also got concerned when my brother was telling me how he's not doing bad right now because he is all in cash, giving me market timing vibes because my brother said it is "absolutely possible" to time the market if smart enough.

Thanks for the advice.

Is your brother going to be involved in any of this evaluation? Contradictory inputs may confuse both your parents and the FA.

[Tim]

Portfolio size? Simple enough.
Social security? https://opensocialsecurity.com/
Taxes? This really depends on whether roth conversions are needed to smooth out RMD's.

https://www.fiphysician.com/

David Graham is $250/hr

My thought is someone needs to handle RMD's and rebalancing. David can give whatever you have a second look but will not be managing the portfolio. He is familiar with some things that might be missed.