Ask Terry Questions Elderly investment strategy

Elderly investment strategy

By Terry Savage on May 13, 2017 |

I am now overseeing my mother's finances since my father has passed on. She pays a wealth advisor quite a large sum for managing her portfolio. I am concerned that 60% of her portfolio is invested in ETFs. She has a home of approximate one million dollar value with approximately half that amount mortgaged. My mom is eighty years young and I have concerns as to how much she should have invested in the market at this stage of her life and whether or not she should sell her home and purchase a home with cash from the sale or liquidate some of her stocks to payoff her mortgage. I greatly value your advice; any suggestions would be of value. Thank you kindly.

Terry Says

Well, that all depends on her/your long-term goals. If this is money that is going to be passed on to children, and grandchildren -- and will not be needed for her care in the coming years -- then it is wise to invest in a diversified growth portfolio.  If a bear market comes along, then the estate will have a lower tax value (since stock investments are valued at the market value on the date of death), and the grandchildren will have years to grow the portfolio again. BUT -- if this money is going to be used for her care (and possibly for expensive long-term care at home) you might want more liquidity.  Surely she should have some "chicken money" set aside in a bank account for this type of need. WHAT WORRIES ME MOST about your question:  Once the portfolio is invested in ETFs there should only be a very small annual management fee from the "wealth advisor" -- or else you are making the advisor wealthy!    When I say small, most charge 1 percent (which I think is too much, and can likely be negotiated lower).  After all, the advisor earned a commission for each purchase and sale of an ETF within the account! And a passing thought or two.  First, why is there such a big mortgage on that house?  Isn't it time to sell and move to a more manageable living situation?  (Keep the cash from the sale in the bank account!) And, second, you say you are "managing her finances" -- but do you have the proper written designations -- as "successor trustee" to a revocable living trust in which her accounts are titled??  The most important thing you can do now is set up a visit with her estate planning attorney, to make sure everything is well documented.  Then trust your instincts.  If you think the "wealth advisor" is less than competent, set up a meeting.  Ask about fees, strategy.  If you are uncomfortable, and if you have the correct powers, you can always move the money (or convince your mother to move the money) to a more trusted advisor.  

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