“My financial advisor asked me who I want him to call if there’s ‘a problem.’ He wanted me to give him contact information and sign a paper saying it’s ok to talk to this person.
I’m a very private person and I’m not sure I’m comfortable with him telling one of my friends about my investments.
Your advice please.”
Your financial advisor is giving you good advice.
All quality financial advisors recommend their clients name a ‘trusted contact.’ A trusted contact is a person designated by the client (you). In the event the advisor is unable to reach you on an important matter or is concerned for your health and/or welfare, he has someone to contact for assistance.
Typically, your trusted contact is a family member or close friend – perhaps even your Power of Attorney. Conversations with your contact will likely be quite rare. However, if your advisor is reaching out to your contact, it is because he believes your best interests are at risk.
We recently had one of our most senior clients report a problem with her bank. We attempted to guide her to a successful resolution, but she was unable to communicate effectively with her bank. We reached her trusted contact (her nephew) who was able to drive his aunt to her bank and resolve the critical issue in short order.
Please work with your advisor to identify your trusted contact.
“I will be 58 in July. My term insurance will expire in a couple years. I am not going to continue term insurance. Would I be better off buying a one-payment life insurance policy? It would be $7,800 for a $15,000 policy. Is it better to prepay a funeral? Or should I invest the $7,800 and leave that for funeral expenses when I die?”
All the options you’ve outlined are reasonable. Which one is best? It depends.
You are very young. This is good for both securing a life insurance policy and for investing your $7,800 for many years to come. It is not so good for pre-paying a funeral.
Obtaining a life insurance policy guarantees your funds ($15,000) will be available. It also guarantees you a low rate of return and a limited upside.
Investing your $7,800 carries risk. It also carries opportunity. Over the next 30 years (or longer, we hope) you could lose money on long-term growth investments, but the probability of that happening is quite low. You also might do very well. Should your investments average a net return of 5% per year (certainly not guaranteed, but certainly not out of the question either), your $7,800 will be something over $30,000 in 30 years. Those are funds you might choose to use for your own benefit at age 88 rather than targeting funeral expenses.
You must determine your priorities and let those guide you to the option that gives you the best probability of reaching your objective.
“We currently have a financial advisor who we are losing faith with.
Both of us are retired and we have investments of approximately $250,000. We have lost quite a bit of money; my husband figured around $70,000 over the past 3 years. We are invested with (financial advisor’s name withheld by me – the name isn’t important – the lessons to be learned are) right now.
I listened to your radio station and you made the comment that even though last year was not a good year, it wasn’t bad as far as investments. Well, we only made less than 1% and we are frustrated.
We spoke with our advisor in January, voiced our concerns and he moved some of our money to a different and more aggressive investment.
Out of frustration, because every month we are still losing money, we spoke to an advisor at our local bank. He suggested we invest in PIMCO Income Fund.
What is your opinion on this fund? We were told that there would be a 3.5% fee one time and then no fees thereafter. We are looking for around 4.5% return to keep up on the RMD that my husband has to take out each year. Any suggestions would be appreciated. Thank you.”
I am very sorry you’ve had such a bad experience with advisors. Please be assured there are many, many quality advisors who are better equipped to assist you than the ones you’ve encountered up to this point.
If your current advisor has produced losses of $70,000 over the past three years and less than 1% return in 2020, he/she is not working in your best interests. The only defense such an advisor would have is that you instructed him to be recklessly aggressive with your investments. Since you are both retired and your husband is taking RMDs we can assume this is not the case. Even if you had given him such instructions, he should have advised you against such an approach. In either event, you are not well served.
I’m not even sure what to say about the advisor you met at your bank. PIMCO Income is not a bad fund, but suggesting you put your $250,000 into any single mutual fund exposes you to the risk that as interest rates rise, your principal value could very well drop. It also earns him a significant commission (over $8,700 at 3.5%). Additionally, you are “putting all your eggs in one basket” – almost never a good idea. Certainly not a good idea in retirement.
Please interview additional financial advisors until you find one whom you can trust and who provides you with sound advice. This takes time and effort, but your long-term financial needs will be best served if you invest time and effort now to secure an advisor you can rely on for 20 years or more.
“My husband and I have been married for 22 years and have four children. He has a 66-year-old brother who never married and currently lives in the home they both inherited 50/50 when my mother-in-law passed four years ago.
My husband and I have made our wills and advance directives, etc. If I die first, everything we own goes to him and then to our kids, and vice versa. His brother has never made out a will.
However, he asked my husband to amend his will to say that if he predeceases me, I should waive any inheritance rights to the half of the house that belongs to my husband. Do you think I should agree?”
No, but it really isn’t your decision to make.
Unless you can assure me that you or your children will be unable to put food on the table without the value of half of your husband’s family home, you should decline to insert yourself in this conversation. This is your husband’s decision to make.
We are tempted to read between the lines of your email. We are tempted to assign some negative intent to your brother-in-law’s request. However, we are also tempted to feel compassion for a man who has lived his life alone and now finds himself in the unenviable position of going “hat in hand” to his brother for help. I would recommend – whatever the realities of the situation – you choose compassion. And perhaps also choose gratitude for your husband, your children, and how wonderful your life is in comparison.
Want your own copy of our newsletter? Email: Megan@AskMtM.com