newguy wrote: DanH wrote:
I've heard this so much in the last few years that I wrote a short article
for advisors on this very issue.
But what should young DIY'ers do today? You make it sound like the prospective client calls you every few years just to make sure you're
still alive. He has to vet the advisors in advance.
What's harder, learn a couch potato portfolio or learn how to find a trustworthy advisor?
I think both are tough. I think the specific course of action for you and other DIYs depends on your spouse's interests, skills/education and professionals in your network of contacts.
One option is to draft a detailed (but user-friendly) Investment Policy Statement outlining everything - quantification of goals; list of constraints; amount of acceptable risk; liquidity needs; tax issue; legal & other issues - in addition to the specific list of products to be used. But then you have to outline how to execute. So this option involves more than a traditional IPS but really more of a user's how-to guide to your family portfolio. This needs to be written in such a way that your spouse (and/or a close friend/relative) can pick up this document, follow everything and execute as you wish. That's the option to pass along your DIY instructions to keep your family a DIY household.
The other option is simply to start interviewing advisors and line up a few that your spouse can go to in the event of your death. Since DIYs are likely most capable of vetting advisors (vs. having spouse or family member doing it) best to do it while you're still among the living. And I'd suggest lining up three advisors and prioritizing them. But yes, you'll have to do periodic checks to make sure that your chosen advisors are still around; haven't gotten into trouble; or to ensure they haven't pre-deceased you.
In the case of "Doug" that I mentioned in my article, he wasn't calling me so much for this purpose. His son is an investment banker. He's a prominent member of his industry and is extremely bright and a disciplined investor. So I suspect he was struggling a bit between wanting to keep control of his portfolio and engaging my services (because he liked what he saw/heard from me). The exchange I describe in the article happened in 2008 as part of a longer email exchange whereby I asked him for a favour (unrelated to investment matters) and he wanted me to speak with a friend of his who is 100% equities and was a bit concerned. (This friend eventually came to me asking to be a client.)
I favour the option of lining up some advisors/firms. I had an elderly couple who visited me because they were in a bank fee based account split between two balanced portfolios (McLean Budden & Seamark). It was 2007 and performance was lacklustre and the portfolio was a bit equity-heavy. There were a bunch of tiny equity positions (most were under $2,000 apiece in a $700k total portfolio).
As it was 2007, I was still in the business of giving pure advice, charging a flat fees. The couple had a son who was comfortable trading stocks online so we had the account transferred to a discount brokerage (I set them up with a branch I knew that would both cover their account closing fees but also fill out paperwork for them.)
Everything was perfect. I got them to be more conservative and reduced their fees by almost $11k annually. Then the guy from the discount brokerage office moved to the full service side. He then offered to administer the account for these folks, which as time went on these people kind of liked (because I didn't handle accounts at that time) and they found trading increasingly difficult. Then it took a turn. The broker, I later discovered, moved some of the Beutel Goodman bond fund I'd recommended for them into a Russell bond fund at twice the cost. And then when given a choice to follow me to HighView (which I offered several former DHA clients) they chose the broker.
While this isn't quite the same situation - i.e. estate planning for spouses - the point being that even if you set your spouse up to be a DIY with specific instructions, there's always a good risk that they connect with an advisor who quickly changes the plan you so carefully laid out. So, I think better to choose three advisors now so that you at least know what kind of advice your loved one will receive.