Trying to make "cents" of my mother's finances (Canada)
April 30, 2018 9:40 PM   Subscribe

I'd like to get my senior mother's finances sorted out, but I have no idea where to begin. By sorted out, I mean managed. I don't do any investing myself and my finances are pretty simple, so I feel out of my depth.

Without getting into all of it, my mother isn't really able to manage her money on her own. When I ask her questions about her finances, she generally doesn't "know" what is going on in the big picture and, frankly, neither do I when it comes to her finances. I want to get all of her finances sorted out and properly invested (ideally, I guess), to ensure that she has enough to "comfortably" live on. I know that I shouldn't get "too" involved in this, but I want to get something set up for her. Aside from CPP/OAS she has no money "coming in," so investing her money would help out a lot.

I have no idea where to begin, beyond calling up one of those "financial adviser" people at her bank and having them sit down with the both of us to explain. All the advice online seems to be "nooo, don't go to them!!!" but I am just so damn confused. There seems to be ONE fee-only financial adviser in my city, and charges like $400 for an initial meeting and over $3000 for a plan. I'm not sure if this is the best option either, because even if he suggests recommendations I probably wouldn't know HOW to go forward with his suggestions.

Here is the situation, my mother has money sitting in (1) a chequing account, (2) several RRIFs and (3) a high interest savings account. She has around ~340K in total. This money needs to be organized somehow, but I have no clue what to do. She's getting no interest on anything, except for a little bit in her savings account. Obviously, this money needs to be invested somehow, so what should we be looking into? Otherwise, my mother has no debts and owns her house.

The only "advice" I've gotten so far is from my uncle, who suggested somehow placing her RRIFs into "very, very" safe GICs with her bank that have various mature dates. He said that this is something one of the bank's financial advisors can do easily as long as we know my mother's monthly budget. Can we also do this with he money sitting in her high interest savings account? Can they do this? This does sound reasonable to me, but is it reasonable? If this is indeed the best route... how we do this? Can we just go to the bank and tell them this is what to do? How do we ask for it? How would I know what type of GIC to ask for? Is it "okay" to just go to the bank to do this?

Are there any other types of investments someone in her situation should be looking into? Any other people I can ask for advice? (I know there are various subreddits that deal with money, but reddit in general makes me uncomfortable).
posted by modesty.blaise to Work & Money (9 answers total) 1 user marked this as a favorite
If your mom is retired then you want her savings in low risk vehicles. GICs fit that model very well and offer better interest than plain old savings. Staggering the maturity rate means a steady stream of income as they come to term with the unused portions being reinvested to keep the cycle going. Even before interest $300k at $1000 a month would give you 25 years of income, as an example.
posted by furtive at 9:58 PM on April 30, 2018 [2 favorites]

I should mention the downside to GICs are that they aren’t very liquid, so you want to keep a certain emergency fund in a more liquid form like a high interest savings account or TFSA if she hasn’t exhausted her limit.
posted by furtive at 10:00 PM on April 30, 2018 [1 favorite]

If you want to take this investment route, you'd probably get routed through a relationship manager aka financial adviser anyway. What reasons does the internet give for not going to the bank's financial adviser? In my (limited) understanding, they're obviously going to steer you towards a certain philosophy of investing and financial instruments, but they also are bound by due diligence because of broader banking regulations e.g. Citibank financial advisers cannot sell Citibank bonds/ mutual funds. A biased financial adviser still has an interest in you keeping and growing your money.
posted by ahundredjarsofsky at 10:44 PM on April 30, 2018

I can't advise you as to the technical details of Canadian retirement investing, but I think you've picked the wrong end to start with. First, you need to work out your mother's budget. How much does she need to spend per year to maintain her current lifestyle, and how little could she get away with spending and still be comfortable? Then figure out how much she has coming in from CPP/OAS and any other sources besides her investments. The difference between her income and the "minimal spending" figure is the amount that has to be made up from investments, and the difference between her income and the "maintaining lifestyle" figure is the amount you'd hope to be able to. That will determine what she should be invested in, to some degree. If she only needs a very modest additional amount of money, and is older, then going for what I understand to be the very conservative route of a series of GICs may be adequate--you can do the numbers, roughly, yourself. But if she needs more money, and/or is on the young and healthy side, she may need to maintain some investment in the stock market, to ensure that she doesn't run out of cash. I'd say that if you find that there's a significant gap between what's coming in and what needs to go out, and you don't feel comfortable learning about all this yourself (sounds like you may not be...), spending the money on the fee-only financial planner would be a worthwhile investment. But the closer income and outgo come to matching, the less urgent it is (because you can more safely go for very conservative choices).

What reasons does the internet give for not going to the bank's financial adviser? In my (limited) understanding, they're obviously going to steer you towards a certain philosophy of investing and financial instruments, but they also are bound by due diligence because of broader banking regulations e.g. Citibank financial advisers cannot sell Citibank bonds/ mutual funds.

Because they are salesmen, not advisors, no matter what they call themselves. My understanding is that in Canada, financial advisors do not have a fiduciary duty to customers, any more than they do in the U.S. That means they are allowed to sell you products that benefit them at your expense. And so they do. I could go into detail about how many of the scams work, but, really, this requires no advanced knowledge of finance to get your mind around. They are salesmen. Who is simple enough to trust a salesman?

OP, I've been through this very process with my mom recently. It's an emotional puzzle as much as it is an intellectual one. If you can get your mom to trust you and rely on you, that's half the battle. Good luck!
posted by praemunire at 11:33 PM on April 30, 2018 [3 favorites]

The estimated costs for an initial consult and a plan look to be about $3400, yes? That's roughly 1% of your mum's assets. If the financial planner can use their skills to earn 1% more income than you can over the course of a year, their fee will more than pay for itself.

I'm not saying the bank isn't trustworthy, but they will absolutely guide you towards investments that they will earn money on - that's in their best interest, and there's always going to be an inherent conflict between their needs and your mum's needs. A fee-only planner doesn't care about anybody else's best interest BUT your mum's.
posted by Mary Ellen Carter at 5:30 AM on May 1, 2018

Not to make this more complicated, but two more options to consider:

Your financial adviser doesn't have to be local; you can do it online. $3400 doesn't strike me as outrageous, but her situation sounds pretty straightforward, so you should be able to find a less expensive fee-only adviser.

Consider a robo-advisor, an institution that manages the assets in an mostly automated way. They charge ongoing fees, but they are very low. Once you set it up, you won't have to worry about it again. I don't know how complicated the process of transferring the assets are, but the new company will be very motivated to help you with that. Also, ask about any tax consequences of making transfers.
posted by Mr.Know-it-some at 5:57 AM on May 1, 2018

I would poke around on this site and possibly post your questions in the forum there. I got the site address from Bogleheads, which is a US-based site that specializes in good and inexpensive financial planning - mainly in the mold of John Bogle, who founded the Vanguard company. If you were in the US, I would say check out Bogleheads and Vanguard, so hopefully this is the Canadian equivalent.
posted by Mid at 7:09 AM on May 1, 2018

I would talk to a tax accountant. They deal with this stuff all the time. Many seniors have no clue what they can spend, or how to get more for their money, or even how to leave their estate so that the government doesn't get it all when they die. There is no harm in talking to bankers. If you get an uncomfortable feeling, you leave. Find a credit union, talk to someone there. Get a few points of view. There may even be a seniors centre that provides advice. Don't panic. Even if she doesn't earn interest on her savings, she has lots to keep her happy for the rest of her life.
posted by Enid Lareg at 10:08 AM on May 1, 2018

In addition to thinking about her current monthly budget you should consider

- maintenance for the house including larger one off items like a new roof. Have you had somebody look at the house to tell you what short and medium term maintenance jobs they can identify and how much they are likely to be

- if I remember correctly your mother had various health and other concerns. How long is she likely to be able to live in the house before she needs regular support from a carer or can no longer live alone?

These things should also factor into the budget and investment decisions.
posted by koahiatamadl at 11:02 AM on May 1, 2018 [1 favorite]

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