Passing on a DIY portfolio after death

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
ronjoh
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Passing on a DIY portfolio after death

Post by ronjoh »

I recall this being discussed here years ago but I can't find the threads. My wife is computer illiterate and has no interest (at this point) in how I've been managing our DIY investment portfolio. It's great that she has a lot of confidence in my investment choices and I must admit, I enjoy the challenge of managing our investment portfolio.

Now that we are into our golden years, if I passed away before her I don't think she would know where to start with our finances. We both know she should sit down and go over everything but I really don't think that's going to happen.

I'm sure that there are forum members here that have encountered the same problem and I'm hoping some of you will share your solutions. I realize at some point I will possibly need to turn over control to an advisor.
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

There are threads on this subject but a key point (flag) I note in your post is your spouse not being 'computer literate'. If you mean that literally, i.e. not even online banking, that poses a major issue. I think it might help to better define what you mean by that....because it is an online world for everything.
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Re: Passing on a DIY portfolio after death

Post by 2 yen »

As Alta says, this has been discussed in other threads. And, if I recall correctly, no really satisfactory solution was determined other than simplifying things as much as possible and having a child take over or coughing up the potentially sizable fee for professional management. The issue of handing things over to an advisor is frought with potential fraud issues and this is why I have recently been paying a little closer attention to the world of annuities. Maybe what we need to do on this forum is generally open this discussion again, but drill down on how one can actually hand over a portfolio AND still sleep at night. That said, maybe it's as simple as admitting that at this stage of life, paying a fee (i.e. 1-2%) of assets to a major firm is just part of the aging process and that one needs to plan their affairs to include this fee.

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Re: Passing on a DIY portfolio after death

Post by kcowan »

2 yen wrote: 06 Nov 2017 06:30...That said, maybe it's as simple as admitting that at this stage of life, paying a fee (i.e. 1-2%) of assets to a major firm is just part of the aging process and that one needs to plan their affairs to include this fee.
Agreed. What we are doing is relying on a substantial life insurance policy on me to more than cover the return-reducing fees that she will rely on by using an advisor. We have an advisor that manages a small portion of our portfolio that she will probably use.

The other issue is that we are all electronic and do that for our 6 months in Mexico. DW is computer literate but has little interest. Part of the succession plan is that she will convert monthly bill payments to be paid automatically. Then the only monthly task is to transfer enough money into the bank account. The annual payments are a little more difficult.
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Re: Passing on a DIY portfolio after death

Post by scomac »

I am already paying fees on a portion of our funds. I view this as a cost of doing business when I am gone and having this set up in advance is the best case scenario for a smooth transition. The performance is acceptable as in our goals/needs are being met so I don't particularly see the downside beyond loss of bragging rites. I will continue to explore cheaper alternatives as they become available -- Wealthsimple for example.

Annuitization is an interesting option, but quite expensive when looking at joint beneficiaries versus a single beneficiary. A guarantee might prove to be a more cost effective choice in that case.

Insurance is often used for succession planning but I have to wonder about the cost of that as well. It often struck me as more than a bit counterproductive to be drawing an income from investments and then turning around and giving it right back in insurance premiums. Perhaps the most egregious cases being an annuity whose capital is protected with a term life policy.
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Re: Passing on a DIY portfolio after death

Post by deaddog »

I am trying to find someone suitable to manage our portfolio if I was to die. So far we have put some money with a Financial Advisor(mutual fund salesperson) and a full service broker (Managed account at 1%)

I have told both that if they manage to beat my performance we would increase the money they are managing. So far I'm still looking after the majority of the portfolio.

My main problem is that I can't find anyone who manages risk the way I do.

I guess I'll never find a manager who is willing to forego his fee when they don't perform. :) :)

FWIW; the full service broker has almost doubled the performance of the Financial advisor.
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

To add to the conversation for the OP, I have first hand experience with this, not as a result of death, but as a result of a post-retirement divorce in 2008, and the 50% splitting of assets, including pensions. As bright as my ex was/is, it has taken 8 years to get her to sufficient knowledge and confidence to 'somewhat manage' her DIY investment management affairs, and it is only because we have taken that amount of time to migrate her DIY discount brokerage stock and ETF portfolios (non-reg, RRSP and TFSA) to strictly a broad index based ETF portfolio with all income being channeled to annual cash flow needs, and to consolidate everything with one major bank institution. Everything financial (investments, banking, credit card) is now available on one online banking screen, and all bills are on auto debit.

Those 8 years were spent converting the portfolio to manage capital gains taxes in conversion from stocks to ETFs. It could have been done faster, but with higher marginal tax rates. 2017 will be the last tax year with substantial cap gains taxes as a result of that conversion. She knows how to buy and sell investments and to renew GICs in her 5 year GIC ladder, but she still asks for validation on what she is about to do on brokerage buys and sells and probably will for years to come. Some times I have suggested to her that she talk to her 'assigned' Relationship Manager at Scotia ITrade about how to do something and they at least give her the information about execution of a buy/sell. That at least is a bit of a lifeline for her. Her portfolio is now set up that very little intervention and proactive decisions needing to be made going forward.

It is very clear to me the KISS principle is way more important for the investment portfolio in her 'withdrawal' stage of investing than anything else, including investment returns and I cannot stress that enough.

It is also likely important for her to maintain a relationship with her discount broker, and to Scomac's poiint, I think she should consider giving part of her portfolio to a financial advisor to manage and develop a relationship. I have written a simple 'white paper' on the different financial advisor models and she does know to stay away from the likes of Scotia McLeod, and Dominion Securities. She also knows the risk of giving the advisor 'trading rights'. I have mentioned about 'fee for service' advisors, and percentage of AUM advisors including the likes of Mawer and Leith Wheeler, but I have not really addressed the Tangerine option, or robo-advisors like WealthSimple.

More work needs to be done in this area, including for my own POA for when I no longer have the ability to manage my own portfolio. I could have a debilitating stroke before I finish this post. At least I have no complicated products in my own portfolio. Simply ETFs for ex-Canada and stocks for my Cdn equity component. All my financial affairs are consolidated at two institutions plus one online bank HISA and all bills are auto debited that can be auto debited.
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Re: Passing on a DIY portfolio after death

Post by zeno »

For the portfolio management tasks, I think this is a perfect job for a robo-advisor. If you're a DIY investor, it's because you've figured out you can get better returns than an adviser after fees. That adviser who manages just the way you do doesn't exist and won't suddenly exist when you cease to. The best is to revert to the least worst alternative, a robo managed indexed portfolio.

If your significant other is really computer averse, then it's the details of money movement, rather than portfolio management that would worry me. Paying the regular bills and moving the money between accounts to support those payments is all going to be online. Here too you are going to want to simplify and automate. Reduce the number of accounts and the number of user actions. This might mean losing some marginal gains. For example, if you keep only the minimum in your chequing account and transfer from a High Interest Savings account as needed, you might want to cut out that as needed transfer and keep higher balances and buffers.
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

zeno wrote: 06 Nov 2017 13:06 If your significant other is really computer averse, then it's the details of money movement, rather than portfolio management that would worry me. Paying the regular bills and moving the money between accounts to support those payments is all going to be online. Here too you are going to want to simplify and automate. Reduce the number of accounts and the number of user actions. This might mean losing some marginal gains. For example, if you keep only the minimum in your chequing account and transfer from a High Interest Savings account as needed, you might want to cut out that as needed transfer and keep higher balances and buffers.
I agree. I'd set it up such that all investment income from any brokerage account is automatically swept into the individual's chequing account at the institution of choice. Forget intermediary accounts EXCEPT in some big bank institutions, it should be possible to set it up such that all investment income from a brokerage account (whoever it is with) is swept into the preferred insitution's e-savings account (e.g. currently 0.8+%, and the savings account automatically feeds the chequing account in some way. But point taken that interest at whatever interest rate it is, is simply background noise to efficient and effective pushing of funds into chequing.
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Re: Passing on a DIY portfolio after death

Post by RBull »

Like others I have a SO that does not have any interest and very little knowledge with our investments or finances. I have always managed all of this on our behalf. However I have ever so slowly made progress when she used to ask me "how much do we have?" maybe every year or two. We recently got her set up with trading authority so that she has online access to and is able to view all accounts at one institution, other than 2 HISA accounts held elsewhere (she has full knowledge on this). I have managed lately to get her doing a few online bank inquiries, and simple transactions but nothing to do with investments so there is progress. She also on her recently read Gail vaz Oxlades book - CEO of everything which is written for people who suddenly find themselves single and unprepared re finances. (no she does not intend on leaving me or finishing me off-I hope) - again some more progress. I was impressed she did this.

Our situation is reasonably straightforward - 6 accounts @ 1 institution, plus 2 HISA institutions. Dividends & pension sent to chequing, all bills on auto from there. Investments ex Canada equity etfs, bond fund, GICs & corp bonds/strips, CDN equity is stocks. She would be fine for a long time with doing nothing which she knows.

What we have decided to do in the event I am no longer around or able to handle our finances is for her to screen for a suitable robo advisor. In our ISP I have detailed instructions on criteria to use etc for this and have also counselled her verbally, as well as on what not to do. She seems to get it. She could manage the remainder of all day to day banking etc. I continue to engage her in little bits so her knowledge base/interest moves positively in the right direction.

As time goes on we'll have to re evaluate this periodically to make sure it is still a suitable option, as we would particularly when reaching the age where it might make some more sense to have someone else more capable take over for both of us.
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Re: Passing on a DIY portfolio after death

Post by BRIAN5000 »

If you use multiple institutions for GIC investments all CDIC insured you lose 2/3 of your possible coverage upon one spouse's death!

Anyone make any allowances for this?
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

We would never have enough in GICs to create that issue in the first place. Additionally, there are so many institutions to pick from, albeit not many with competitive rates, that it should be not too difficult to avoid it. Even if suddenly his, hers and joint.....suddenly became 'one' due to death of one spouse, that would be temporary exposure until the GICs matured over a 5 year period.

IOW, it seems to me to be pretty low on the list of things to plan for, both in likelihood and risk.
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Re: Passing on a DIY portfolio after death

Post by 2 yen »

How about the all dividend portfolio that requires a look once a year? Is this the one that an offspring could handle for the elderly parent thus saving the 1-2% fee?

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Re: Passing on a DIY portfolio after death

Post by kcowan »

I think CDIC coverage is one of those casualties of death. Take the risk, keeping things in a good institution at a lesser rate.

Being the oldest contributor here and having had a heart attack three years ago, I am probably rightly more concerned than the rest of you. I am thinking that DW should remarry for money! But just in case, I will make arrangements and I strongly believe that having an advisor is the answer for her.

A look once a year assumes lots of expertise which is lacking...
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Re: Passing on a DIY portfolio after death

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2 yen wrote: 06 Nov 2017 17:08 How about the all dividend portfolio that requires a look once a year? Is this the one that an offspring could handle for the elderly parent thus saving the 1-2% fee?

2 yen
Not if there is no offspring, or a competent offspring with a DIY (and especially stock assessment) skillset. IMO, no one should be in stocks that does not have their hand, to some degree, on the tiller on a regular basis. Hence one key reason why my ex is now exclusively in ETFs (except her GIC ladder). The burden should not be on my sons (as an example) to annually review her portfolio.

You gotta know when to take your hands off the steering wheel and let someone else do the driving.
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Re: Passing on a DIY portfolio after death

Post by gaspr »

I would like to see one or more of the robo advisors focus on making retirement spending more a priority. I think there is a growth opportunity here for them if they can address the issues of helping retirees spend down their nest egg in a tax efficient and cost efficient way. Maybe they already offer this service but we just don't know it?
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

I suggest the OP read this FWF thread, especially the more recent posts and also this 2016 MoneySense article. The area of robo-advisors is moving so fast such articles can become dated quickly. But from the chart, I like the WealthSimple one perhaps the best.
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Re: Passing on a DIY portfolio after death

Post by kcowan »

AltaRed wrote: 06 Nov 2017 17:37...But from the chart, I like the WealthSimple one perhaps the best.
If you were doing the ex-wife's plan now, would you use it?
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Re: Passing on a DIY portfolio after death

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ronjoh wrote:My wife is computer illiterate and has no interest (at this point) in how I've been managing our DIY investment portfolio. ...snip... We both know she should sit down and go over everything but I really don't think that's going to happen.
(a) Annuity
(b) Low cost balanced fund with trusted advisor and clear withdrawal plan

Maybe work up a couple of financial scenarios/plans like selling the house, anticipated health care expenses/changes etc
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

kcowan wrote: 07 Nov 2017 09:12
AltaRed wrote: 06 Nov 2017 17:37...But from the chart, I like the WealthSimple one perhaps the best.
If you were doing the ex-wife's plan now, would you use it?
Not sure I understand. She could go to WealthSimple today and I suspect her portfolio might almost match one of their 10 portfolios (of Vanguard, iShares and BMO ETFs) with minimal change (RRSP GIC ladder notwithstanding). All of her ETFs are from those 3 families of ETFs albeit not likely the same ones and that is something to be researched..... i.e. would they adopt the ETFs being used rather than triggering a huge amount of cap gains making swaps? A major question I have not seen addressed anywhere.

For myself, if my portfolio was similar to my ex-wife's current portfolio, I would not go to WealthSimple today because I'd want to save the small fee, but I'd have notes in my POA file to suggest that is where to go. With PWF having an investment in WealthSimple and CIBC potentially appearing to make an investment in WealthSimple, it seems this particular robo-advisor has strong backing (but might also mean meddling).

Added later: One big obstacle in all of our discussion on the subject of robo-advisors would be the degree of capital gains taxes triggered if a portfolio was turned over to a robo-advisor. It is my understanding that accounts transferred 'in kind' to a robo-advisor would need to conform to their suite of ETFs. Imagine the consequences of, for example, half a million in crystallized capital gains thrown into one's MTR for that tax year by selling of existing assets to conform to the robo-advisors models. It may be better to stay with a traditional % of AUM advisor after all.
Last edited by AltaRed on 07 Nov 2017 15:28, edited 1 time in total.
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Re: Passing on a DIY portfolio after death

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AltaRed wrote: 06 Nov 2017 17:18
2 yen wrote: 06 Nov 2017 17:08 How about the all dividend portfolio that requires a look once a year? Is this the one that an offspring could handle for the elderly parent thus saving the 1-2% fee?
2 yen
Not if there is no offspring, or a competent offspring with a DIY (and especially stock assessment) skillset. IMO, no one should be in stocks that does not have their hand, to some degree, on the tiller on a regular basis. Hence one key reason why my ex is now exclusively in ETFs (except her GIC ladder). The burden should not be on my sons (as an example) to annually review her portfolio. You gotta know when to take your hands off the steering wheel and let someone else do the driving.
Ronjoh doesn't mention who their executor is or if they have trusted children/relatives who might help.

I'm in the process of simplifying our accounts over time, particularly unreg trading. We also sold a cople of properties this year which simplifies things.
Right or wrong, my expectation is that my son, who is also alternate executor after my wife, would assist her if I were gone. He has indicated his willingness to do so. I do have an 'investment & retirement income plan' document with our legal papers that describes our investments, gifitng intentions, and changing sources of income now and post-RRIF. It has been reviewed with my wife but I'm certain she would turn to my son for help.
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Re: Passing on a DIY portfolio after death

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AltaRed wrote: 06 Nov 2017 00:20 There are threads on this subject but a key point (flag) I note in your post is your spouse not being 'computer literate'. If you mean that literally, i.e. not even online banking, that poses a major issue. I think it might help to better define what you mean by that....because it is an online world for everything.
No she does not do online banking. Just basic Google searches
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Re: Passing on a DIY portfolio after death

Post by AltaRed »

ronjoh wrote: 07 Nov 2017 14:18
AltaRed wrote: 06 Nov 2017 00:20 There are threads on this subject but a key point (flag) I note in your post is your spouse not being 'computer literate'. If you mean that literally, i.e. not even online banking, that poses a major issue. I think it might help to better define what you mean by that....because it is an online world for everything.
No she does not do online banking. Just basic Google searches
That would make doing anything other than working with a traditional '% of AUM' advisor, or relying on a trusted* family member/friend problematic. Plan B's post above becomes a serious consideration, i.e. buy an annuity with the majority of funds and a bank (or Mawer type) balanced fund for the rest.

Indeed, one of the bank's Managed Portfoio structures may be the best for everything.....with all bill payment stuff automated from banking with the same institution. RBC, for example, has http://funds.rbcgam.com/investment-solu ... olios.html and also http://funds.rbcgam.com/investment-solu ... tions.html ...the former being the better answer (lower MER) I think for larger portfolios.

* I might also suggest this be done under a very specific POA written for this purpose, especially if the spouse gives that trusted family member/friend trading rights. At least under a POA, the Attorney legally has defined rights and obligations, including 'what is in the best interet of the grantor' of the POA.
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Re: Passing on a DIY portfolio after death

Post by OnlyMyOpinion »

OnlyMyOpinion wrote: 07 Nov 2017 13:13... Ronjoh doesn't mention who their executor is or if they have trusted children/relatives who might help.
AltaRed wrote: 07 Nov 2017 15:39... That would make doing anything other than working with a traditional '% of AUM' advisor, or relying on a trusted* family member/friend problematic....
* I might also suggest this be done under a very specific POA written for this purpose, especially if the spouse gives that trusted family member/friend trading rights. At least under a POA, the Attorney legally has defined rights and obligations, including 'what is in the best interet of the grantor' of the POA.
Yes, my comments were poorly considered. Simply suggesting "trusted" children/relative is not wise. Better to have asked whether his wife has a POA established and whether they could fill this role to assist her if he were to die.

I currently act as POA for my parents. One is lacking mental capacity, but the other is capable, he just has no interest whatsoever in their accounts anymore. As long as he has some money in his wallet for incidentals he is happy.
But given that there other (eventual) estate beneficiaries, it would not be prudent for either of us to be trusting me to look after his financial affairs informally, outside of a POA.
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Re: Passing on a DIY portfolio after death

Post by ronjoh »

AltaRed wrote: 06 Nov 2017 13:30
zeno wrote: 06 Nov 2017 13:06 If your significant other is really computer averse, then it's the details of money movement, rather than portfolio management that would worry me. Paying the regular bills and moving the money between accounts to support those payments is all going to be online. Here too you are going to want to simplify and automate. Reduce the number of accounts and the number of user actions. This might mean losing some marginal gains. For example, if you keep only the minimum in your chequing account and transfer from a High Interest Savings account as needed, you might want to cut out that as needed transfer and keep higher balances and buffers.
I agree. I'd set it up such that all investment income from any brokerage account is automatically swept into the individual's chequing account at the institution of choice. Forget intermediary accounts EXCEPT in some big bank institutions, it should be possible to set it up such that all investment income from a brokerage account (whoever it is with) is swept into the preferred insitution's e-savings account (e.g. currently 0.8+%, and the savings account automatically feeds the chequing account in some way. But point taken that interest at whatever interest rate it is, is simply background noise to efficient and effective pushing of funds into chequing.
I didn't know this was an option. This would solve a lot of the problems as all our accounts are with one institution. I can see from all the responses that basic online banking would be a huge solution to most of the problem. I think we can work on this. Right now all our bills are paid automatically, either through credit card or direct withdrawal from our HELOC. If investment income from all of the institutions investment accounts can be automatically swept into a single account I can see this as a solution. I would be happy to leave our investments as long term holdings and using the dividends to supplement our income. Assuming that income from TFSA accounts could also be automatically moved into a saving/chequing this would leave a problem of contribution limits in the following year.
Appreciate all the input from the folks here.
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