What do I ask the money guy?

August 31, 2011 7:35 AM

I have learned that I will inherit, with my sibling, a good sized estate including a house and some investments and a few trusts. These assets also come, if I want, with a "money guy" who was my parent's money guy. I have met this man and he has helped me with some basic early estate stuff and has indicated he'd like to work with me. I have a meeting with him and my sibling next week and I'd like to make sure I'm prepared and know what to ask him and could use some help generating questions.

He's sent us the accounting from the trusts and investments, so I have a pretty good idea at what I am looking at. I know from reading past AskMe questions that a fee-based financial adviser is optimal. I have no idea if this guy is fee-based which is one of the questions I'll be asking. Others are about how to best invest for my goals and my sibling's goals. I'll also be asking about the wisest way for us to hold on to the house. Besides that, I'm a little at a loss.

My initial impressions of this guy have been favorable and I know my parent liked him. My sibling and I are in okay situations ourselves, so have no immediate need to deal with personal financial issues at the same time.

If you have used a financial manager, what were some early questions that you asked them? If you received an inheritance and went this route, what was helpful to you in working through this? I've never had more than a bank account and a small mortgage before, so this is a little out of my league and is sort of tough to talk about with my friends who are in very different financial boats from me. We also have a lawyer and the advice of a tax guy, so those bases are covered as far as inheritance/estate issues go. Thanks for any suggestions.

posted by anonymous to work & money (17 answers total)

You don't mention the size of the estate, but it may very well be worth it to hire a separate lawyer to answer some of these questions for you. The "money guy" isn't going to be the best resource for answering questions like "what's the wisest way to hold onto the house?"

This isn't to say he can't provide some kind of answer, but personally I'd want to ask this question of a lawyer well-versed in your state and local laws with no personal interest in the results.

You may also want a lawyer to look at the will and determine whether there are funds set aside specifically for paying people (lawyers, the money guy, maybe you personally) for doing the work of dissolving the estate.
posted by odinsdream at 7:54 AM on August 31, 2011 [1 favorite]

Do you want to manage these assets yourself, or do you want someone else to do it for you?

Either way, it probably makes sense to read up on some accounting and investment basics - plenty of good books out there.

If you don't want to manage your assets yourself, then your primary problem is ensuring that you trust your financial manager. Here's where some basic knowledge of what he is up to is useful, as well as a good sense of human nature.

If you do want to manage the assets yourself, you probably want to bone up with some classes. Maybe even an MBA from your local university. If you get even middle of the road GMAT scores, local schools are likely to offer you very generous financial aid packages (unless your local schools are Harvard and MIT. Then you might need better scores).
posted by b1tr0t at 7:54 AM on August 31, 2011 [1 favorite]

I guess I'd ask about 1) his credentials; 2) how many other clients he has and where you will be in his breakdown (it's probably good to be somewhere in the middle, and neither the biggest or smallest client by assets under management); 3) his investment outlook; 4) his outlook on the markets and on relevant local markets (i.e., to the extent the house is in the portfolio, what, if anything, does he know about the local housing market); 5) whether, or to what extent, he views his advisory mandate to be the preservation of corpus of the estate, income, or growth (this should be in harmony with your goals, but if all he "knows" is low-risk preservation of corpus, and you want growth, it won't be a good fit); 6) it might be helpful for him to explain the ways in which he helped your parents; 7) any particular experience with joint tenancies/joint beneficiaries of trusts (whose interests are not always aligned); 8) what expert advisors he might have on call (real estate appraisers, art appraisers, property management companies); 9) how he expects to work with you current tax, accounting, and legal advisors; and 10) his use of tech (if you want to reach him by email--or SMS, or fax, or whatever--will you be able to connect with him on your timetable?

There's probably more. Sorry for your loss; good luck with the advisor.
posted by Admiral Haddock at 8:02 AM on August 31, 2011 [1 favorite]

His interest in the meeting will be to solidify your trust to continue the advisory relationship. This may be in your interest, but at the conclusion of the meeting you will have met with only one prospective adviser. In this meeting you want him to talk about the services he provided for your parents.

Warning signs would be if he suggests things that you need to do soon with the money. Ideally you shouldn't need to move any assets or change the investment strategy for a while.

A good adviser will quarter back your questions by referring you to qualified people to answer questions out of their realm of expertise, such as how to hold onto the house. If the person has an answer for everything he probably isn't as smart as he thinks he is.
posted by dgran at 8:06 AM on August 31, 2011

If you do want to manage the assets yourself, you probably want to bone up with some classes. Maybe even an MBA from your local university.

An MBA is overkill in this instance. MBA's are for people who want to run businesses, which you don't have at this juncture. Read some personal finance books if you feel you need to know more about what your money guy is going to recommend.
posted by jasondbarr at 8:13 AM on August 31, 2011 [2 favorites]

One question you can probably already answer: Does he work by himself or is he part of a larger brokerage or company? If I were in your position I'd feel more comfortable working with someone who was part of a larger institution, simply because having colleagues is a bit of insurance. I'm sure the vast majority of individual financial advisors are fine, but if they have bosses and colleagues, there's a lower risk of incompetence or dishonesty.

Also, does he advocate active investment or does he focus on indexed investment? If active, I'd be wary: The simplest and safest approach is to index and not try to beat the market.
posted by Mr.Know-it-some at 8:42 AM on August 31, 2011

I would suggest educating yourself at the Bogleheads wiki and forum. If you ask questions there, you will get more specialized answers than from MeFi.

But specifically, one of the most important things I would ask this advisor is to clarify his/her fees and commissions. You need to use very specific language to distinguish between fee-only and fee-based advisors. You don't want to be using a "fee-based" advisor who gets commissions to sell you products (often not in your best interest).
posted by Durin's Bane at 8:53 AM on August 31, 2011 [1 favorite]

[This is a followup from the asker.]

Thanks for all your responses. I have a capable attorney and other people to talk to about other issues concerning the estate. I'm mostly concerned with how to manage this initial meeting with the money guy. Admiral Haddock's comment is sort of what I'm looking for. I will not be pursuing an MBA though if there are books people have found useful about working with a financial manager, I'd love to know about them.

posted by cortex at 9:29 AM on August 31, 2011

One of your most important questions should be how much the assets are yielding and how much the manager is charging to manage them. You should ask for this in both absolute dollars and as a percentage of income. Have the manager give you the income both before and after their fees so you can really determine how much they are charging.

In the long run, you would be best served by managing your assets yourself, if you have the interest and discipline. Most money managers will charge annually 1% or more of the assets under management. With bonds now yielding 2% or 3% at best, this means that the money manager may be skimming off one-half to one-third of your income. Depending on the size of the portfolio, it may be well worth your time to learn to do this yourself, saving thousands of dollars a year.
posted by JackFlash at 9:37 AM on August 31, 2011 [1 favorite]

If nothing else divvy up the assets amongst a few "money guys." Active portfolio managers will charge you 1% per year, regardless of performance. You can also park money in no load mutual funds, or loaded mutual funds (where you get the benefit of an advisor who makes their money through a sales commission.) Also, if you are "accredited", you can invest in hedge funds. These can be terrific or can go to zero quickly (also their fees are "two and twenty" -- 2% per year and 20% of the profits.) Be careful.

Things to be wary of (because the sales commissions are very high and you will probably run into some very aggressive sales pitches): annuities, non-publicly traded REITs, and other instruments designed to get esoteric tax credits. (yes I'm in the business and no, I'm not trying to pitch you, but there are a lot of sharks out there.)

If this is going to be a life changing event, think about seeing a therapist, at least briefly. Get your head around what you want the money to do and what your expectations are. My rule of thumb is that money makes you about 10% happier (I'm kind of joking, but the point is you won't really change internally.) It's not a panacea, but it doesn't usually hurt.

Also, I recommend blowing less than ten percent of the money on some ridiculous dream right away - a world trip, a Ferrari, whatever. Get it out of your system and then commit to living on about 3% of the corpus per year. You'd be amazed how fast you can blow through vast sums of money if you don't watch it.

Have fun!
posted by mrhappy at 9:40 AM on August 31, 2011

This article by Jason Zweig discusses what to look for and what questions to ask. It's based somewhat on Ben Graham's writings from the Intelligent Investor (which I recommend reading too, if you have time and the inclination).
posted by mullacc at 9:44 AM on August 31, 2011 [2 favorites]

I would ask about the liquidity of the accounts and the tax implications for each kind of investment. Also, you might find some useful information at the American Association of Individual Investors.
posted by mattbucher at 9:49 AM on August 31, 2011 [1 favorite]

I attended this meeting recently (though only as an interested spouse, not as a trustee). I basically kept my mouth shut as the money guy explained the trust's portfolio and outlook. Luckily, we were all given presentation books with lots of specifics giving us a full break-down of what the trust's outlook was, how the money was being invested, and what was being taken in. Pored over, that presentation book is gold.
A money guy who already knows your estate is a pretty valuable asset. Unless he seems to not know what he's doing or is losing you money, stick with the same guy.
posted by Gilbert at 10:17 AM on August 31, 2011

If this guy wants a percentage every year, go look someone who just charges a fee each year.
posted by Mr. Yuck at 1:17 PM on August 31, 2011

You may want to read through this. It's from a Canadian perspective, but there's a lot of good, simple information about what a financial planner should be doing for their client.

(Translations: RRSP=401k, TFSA=IRA, CPP/OAS=Social Security)
posted by blue_beetle at 1:56 PM on August 31, 2011

Admiral Haddock nails it, but I have an additional comment. Just as you’d interview at least three Realtors before listing your house for sale, to find out how they’re going to market your home and what resources they will bring to bear, you should also interview the same number of investment counselors before awarding your business to one of them.

In my experience, the existing financial consultant may lack basic qualifications, and/or he may be steering you toward investments that he/she will personally benefit from. Don’t be shy about asking about this. No matter who you end up with, always ask, “Will you get a commission if I make this investment?”

Be sure to tell your guy that you are getting presentations from others. It’s only fair, and it’ll make him work for his dime.
posted by Short Attention Sp at 5:18 PM on August 31, 2011

My advice would be to hold fast in the short term. You've got to develop a comfort level with the money guy, and if it's not there, it's not there. Sense the chemistry, including your gut feelings about honesty/forthcoming nature, etc.

If there has been a long history of trust and success with this guy from your parent, then there's a good chance he's a good choice.

I'd concentrate in an initial meeting on obtaining a clear picture of the current situation, including how much/where/since when issues on the portfolio, a summary of imminent situations that have to be addressed or concerns he recommends looking at that merit high priority. I'd want to know how he feels about working with you, too. I don't think anything is lost by being perfectly honest with him, particularly about issues related to trust. It's OK to say "I don't know you like Parent knew you, and we don't have any history. I'd like to know how you and your firm will address my uncertainties." Also, if the money guy belongs to a national firm, does it make sense to stay with his office or to go with one closer to your residence. If not a national firm, how will remote interactions proceed?

This kind of stuff takes a long time to settle. I generally think it's not that risky, since reputation is all people live on in that business. That's opinion, of course. I prefer managing my own financial affairs, but by comparison, they are pretty simple these days. I'm also familiar with the financial world somewhat and the terminology isn't foreign.

Faced with uncertainty about anything, my initial response is to gather as much info as possible, and sort through it until I run into roadblocks. More paper is good. You can organize it once you have it in hand. That's why they make yellow stickies! There's no rush to understand... you can take as long as you need to take. (That said, some delays and timing MIGHT cost you, but they might also make you money or avoid expenses... it's hard to tell without specifics. One thing that WILL kill you is making decisions without enough info. )
posted by FauxScot at 3:56 AM on September 1, 2011