Thursday, August 22, 2013

Trust Stuff....part 2

Thank you for your comments about the pictures.  Now that we are almost 8 years later, he is really doing well.  He is able to use his hand and arm at almost full function.  He does have a decreased strength in that arm, but for everyday isn't noticeable.  The only way to truly know is to put him through invasive testing, and we won't do it. 

So the money is in the cash account, and we met with the Financial Advisor (FA) early this week.  She proposed a balanced portfolio to show us.  Keep part in cash, incase we need faster access to it.  The rest are in bonds, mutual funds, and something called an "absolute return" fund by Wells Fargo.

This is how the conversation went, as I heard it:

This is the Blah Blah account.  As you can see it thingy thingy blah blah.  In 2005 it did bippity boppity boo.  This is important because zippity doo. 

After listening to her explain 3 bonds or something....I just looked at her.  I flat out said...I have NO idea what you just said.  She asked what I didn't, all of it!!! She kind of just looked at me, and said "you know the difference between a stock and bond, right?"   Um, nope. I asked if she had an Investing for Dummies book I could borrow.

She didn't laugh.

I never took economics, business classes, or anything remotely related to those.  I am great at numbers, but the vocabulary she used.....way beyond my comprehension.  She tried to explain some things....I think I started to glaze over.  Then we got to a bar graph.  Yay!!  I am good at graphs!!!  But I didn't like this one.

It showed the rate of return and it was in the high teens at the start of the chart.  It steadily went down until 2008 where it tanked when the stock market bottomed out.  Then it spiked back to where it started, and dropped again and just kept going down.

Now wait a on Earth is this GOOD?  The rate of return just kept going down?  Why would we want our money in something that each year gives us less than it did the year before? 

Because she showed us another line graph that showed how the money (a fictional 10K to start) gained almost 150% over 10 years (it was just under 25k at the end).  But I just could see it all tanking.

I don't have the stomach for this.  I don't think I could EVER work on Wall Street or be a Day Trader.  No worries about any of that.

She asked if I was going to follow all of this once the money was invested....will I be flipping out every time the market dips.  Nope....because I have no idea about this, and I will probably open the statement and then follow it.  I just look at the end number, and if it went up or down.  She said, then what are you getting upset about????

We talked about A class vs C class (paying fees upfront, or as we go) and decided to go with C class.  We liked the flexibility that C class allowed, vs being wedded to a fund family. 

In the end, the money would be conservatively invested in a mixture of vehicles, at an average of about 7% rate of return.  Then I wanted to know about these PEOPLE.  Huh?  She said they hire analysts that decide to........blah blah.   NO!

I wanted to make sure these people weren't investing in places that sold small children, or participated in creating nuclear devices, or supported sex trafficking.  She just looked at me and said even if they did, they wouldn't advertise it. C'mon....I am not going to put money somewhere I don't think is good.  She said if this fund is good enough for Harvard, it should be good enough for us.

I said that Harvard doesn't have an emotional obligation to the people they answer to.  We do.


This is why I do what I do.....and why she does what she does.  She sees the numbers.  I see the people.  I see our son.  And I don't want to screw him over.

She kindly sent us a few more pieces of information regarding the funds she presented that more matched what I needed to know. And thanked me for my candor and emotional investment in our kids. I probably just need to read it more carefully.....and then I will be fine.

So this weekend I will read about the Blah Blah and the Thingy Bits.  And then move ahead.

The unfortunate backlash to all of now I am freaking out about retirement, pensions, what will happen in 20 years, and all sorts of other stuff.  Perfect!!!


  1. If you do not fully understand where your money is going DO NOT give it to them. Be wary of banks that have 'financial advisers.' They are sales people, not advisers.

    Check out an Endorsed Local Provider from I met with one two years ago to transfer a retirement account from an old job. He sat with me in a room with a desk and pad of paper. Answered every single question I had and a bunch of questions I didn't even know I had. There was no computer, no phone, and no one interrupted us. Probably one of the most informative financial experiences I've ever had.

    Yes, he made a commission off of what I transferred, about 4-5%, but since then I've seen about a 10% return. There was also no pressure whatsoever for me to put my money in one place or the other. He truly had the heart of a teacher.

  2. Its good that you were honest about your lack of experience. Personally I would never buy something I didn't understand. Stocks are shares of companies. They go up and down with the market and the performance of that particular company. You can buy index funds that are shares of many companies. They also go up and down with the market but are a bit safer since thet aren't tied to the performance of any one company. Bonds are different. A bond is a loan to a company. They are much safer because as long as the company is mot in dire straits they will have to pay you the agreed-upon interest. Mutual funds are more like cash in that they have low risk but low return. Stocks have the highest risk and highest return. This money should be in sonething that is easily-accessible, like cash or mutual funds. If you don't have a big emergency fund, you could need this money quickly. Hope that helps.

  3. The fact that this advisor is pushing you into investments with loads is a huge red flag. (C class funds have costs you pay after you cash out the investment. They may go away after you've held the investment for a year, but not necessarily. They also tend to have higher expense ratios than other investments, which is money that's going out of your investment into someone's pocket.) There are a ton of no-load investments with low expense ratios like the Vanguard family of funds that are cheaper and perform at least as well as or better than loaded funds over time.

    Since none of this makes sense to you at the moment, I suggest that you not make any investments at this time. I think you would be better off sitting on your money for six to twelve months and using that time to learn the basics of investing and how to select a fee-based, independent financial planner. If you invest now, with this person who is trying to funnel you into what sound like sub-optimal investment choices, I think you are at great risk of being taken advantage of. That's not meant to be nasty in any way; I just see great reason for concern in your post.

  4. As David said, these people are sales people, not advisors. Especially when fees are involved (that's the whole point of the managing of funds), the results/gains are only secondary to the promised amount of fees for your money. I assume they're from Wells Fargo, which is why they're going with a WF fund. The options they provide are rarely the best or more profitable to the people investing, just whatever will give their company more stability, and give them more commission. If going with affiliations, I too would go with Vanguard funds, which have lower expense ratios and very reasonable returns.

    I couldn't advise you on what to do, since I myself only have very basic info on investing. But enough to know there is NO guaranteed return, ever, at all, unless the bank is willing to back your investment through the FDIC. That would've been enough to make me look elsewhere. Yes, the market does normally move upwards, but it's during those odd times when it tanks and tanks hard, that one should be worried.

    Do try to find an independent agent or someone local that may provide more input. I know libraries normally have retired accountants and advisers provide for people for little gains. At least the library where I used to live did. Cant hurt to ask.

  5. Wow! That is a lot to take in. I would echo what everyone else said...lots of financial advisors are just sales people. I hope the fee structure is clear and easy to understand. Is there any chance you can get a one-off lawyer's or accountant's consultation to check it all over?

    Re: investment rates of return. I know our "Super" (retirement) Fund here in Australia has fluctuated insanely over the past few years with the GFC. Some years recently we even had negative returns. But this year, we had a whopping 21% net return. The *average* return over 10 years though (across all funds in Australia) is apparently 4% per annum. So I think your 7% return sounds reasonable...not so high as to be 'shonky' but a reasonable expectation. But I don't know anything about the terminology either, it scares me!

  6. Do not go with A,B,C class if you can help it. Those are called "loaded" funds. There's a company called Vanguard that has "no-load" funds, which means you pay waaaay less for the funds, and get to keep more of your money, which means it grows to more money. I don't know if Vanguard is an option for a trust, but I highly suggest you check out immediately and perhaps call the 800 number to speak with an advisor. It is a company that is owned by its shareholders, meaning fees are low and they are not trying to make a profit for the company. Obviously employees still need to be paid, so there are fees, but Vanguard is DEFINITELY the way to go if the trust will allow it.

  7. BTW, I do not work for Vanguard, but I have read every personal finance site out there, especially those for investing, and have considered getting my "Certified Financial Planner" certification, but it's too much work (I'm a pharmacist, so I have none of the pre-reqs). When I started my first Roth IRA when I was 24, I knew nothing about finance either, so I was also sucked into a loaded fund, I think I bought Class A shares. FWIW, the combo of funds I selected didn't do that much differently than a normal Retirement 2040/45 fund (no load) during the 2008 meltdown and following "recovery." Sorry, I didn't mean to scare you with my above comment. It's just that I've been reading a lot about this and have considered offering free classes to my IRL friends about how to invest and why it's important (and how easy it is for Roth IRAs, 401k, etc). I have no idea about a trust so I can't help you there. But, if you email me, I will share what I know with you and can answer your questions honestly and for free. I've been reading your blog for a couple years, I just rarely comment. I just hate to see the sharks of the financial world take advantage of unsuspecting people.