2. Ask if s/he believes in a simple, low cost portfolio of the sort that is advocated by Warren Buffet and is exemplified by the Boglehead approach.
3. Ask her/him to show you what the expense ratio of each mutual fund is.
4. Go to www.bogleheads.org and read the Wiki. Educate yourself about how to figure out how much this "advisor", aka salesperson is costing dad each year. Ask what percentage of dad's AUM (assets under management) he charges each year.
Most advisors charge 1% or more IN ADDITION to the ER of each fund. This really eats into dad's nest egg, especially in a down market.
5. Find out what churning is. Find out if s/he's doing it.
As DPOA and executor of my parents' estate (we lost Dad and I'm Mom's DPOA), I looked into the investments involved in the remaining IRA. Because of my social justice conscience, I decided to simply cash out the IRA rather than remain invested in pipelines, fracking, and a host of other investments that represent what I, personally, stand against.
If dealing with a small portfolio, consider divesting and cashing out. If interested in the market, look toward investing those funds in the green economy. A good financial advisor should be able to guide you, if interested in ethical investment opportunities.
May I ask you a question? I am DPOA for my father and he has an IRA. He just got a VERY large bill that came out of the blue (insurance overpayment that the county is trying to claw back) and I am trying to figure out how best to pay it. He doesn’t even know he has an IRA anymore and hasn’t been drawing on it. I am thinking that cashing it out to pay this bill is something I may have to do. How difficult is this process for a DPOA? I am aware he will take a tax hit but I may have no choice on this.
As a Fiduciary and Financial Planning Professional. I have to comment on Luta65's reply.
The Financial Planner has to have the funds invested as the owner wishes, not as the POA wants. The POA's social consciousness is not part of the conversation. I woudl be off side with compliance (and they review all transactions), if I sold a portfolio and purchased a completely different one based on a POAs request.
Just as I cannot force a client to purchase green investments, I cannot force them to invest in any specific industry.
If the owner of the funds had been interested in ethical/green/carbon neutral investments, that is how they would be invested.
Also keep in mind when reviewing the information Barb B has shared. If you decide to move the funds from the current company, as the POA you cannot assign beneficiaries, only the owner of the funds can do this and only if they have the mental capacity to do so. The beneficiary of the funds would be the estate by default. This may cause significant estate planning issues, including greater probate and taxes owning.
Here is a link to a related question so you can see how a similar discussion might go. They can be a little sharp, but there are some really knowledgeable do-it-yourselfers there.
"Investing Father's Assets Who Is In Nursing Home (POA)" https://www.bogleheads.org/forum/viewtopic.php?t=288197
You can also post the information about how the portfolio is invested, amounts, with whom, etc. on Bogleheads. You will get some useful responses and questions from them. A site called Personal Capital (among others) tracks our investments and compares the results to market indices. It is excellent and free. They do ask plaintively to provide a free financial consultation every six months. Since their tracking suggests our current guys are doing quite well, I just take free advantage of the free service.
You can also post the information about how the portfolio is invested, amounts, with whom, etc. on Bogleheads. They will be able to help you figure out how you are doing in comparison. You will get some useful responses and questions from them. A site called Personal Capital (among others) tracks our investments and compares the results to market indices. It is excellent and free. They do ask plaintively to provide a free financial consultation every six months. Since their tracking suggests our current guys are doing quite well, I just take advantage of the free service.
You can also post the information about how the portfolio is invested, amounts, with whom, etc. on Bogleheads. They will be able to help you figure out how you are doing in comparison. You will get some useful responses and questions from them. A site called Personal Capital (among others) tracks our investments and compares the results to market indices. It is excellent and free. They do ask plaintively to provide a free financial consultation every six months. Since their tracking suggests our current guys are doing quite well, I just take advantage of the free service. I am not real dumb, but I am no financial expert. I would be very reluctant to start investing someone else's life savings after a personal study of the matter. I think anyone should be. There are respectable big brokerage firms that offer reasonably priced and straightforward investment strategies. Boglehead can certainly suggest some of them. There are also free financial calculators at these as well as Personal Capital that will give you an idea of how the portfolio is doing. It would be simpler, however, to hire an independent financial adviser(i.e. no sales, just analysis and advice) to evaluate it.
Willy, one thing that I want to address, only because a poster stated they changed their mom's investments to their personal choices and social conscience. As a POA you are a legal representative, governed by law. You are required by law to make decisions that the assignor would have made for themselves when they were of sound mind. Not doing that, could lead to serious legal issues for any POA.
Tothill's information is spot on.
This is a terrible time to be dealing with any investments, for anyone. Best of luck.
You should be receiving the monthly statements on your own. For my mom, I directed her financial advisor to sell $x.xx monthly compatable with her expenses for MC and incidentals. I basically wrote up a yearly budget. I directed the advisor, which fund to withdraw from until it ran out, then I sent the next instructions. I did not shift or resell stocks as they could trigger a tax or incur fees to buy or sell. Usually they are invested for the long run. As far as taxes, once she was in MC, there was a 42% tax deduction from her rent for the medical portion. Again this was itemized in the annual budget. Once she was in MC, you might be mindful for those who may inherit, that annuities may be taxable and so are IRAs depending on full distribution vs over 10 years. Bank accounts, stocks and houses are taxed less, if at all. Talk to her advisor to determine if these 2 types of funds, IRA or annuities should be withdrawn from first while he is alive
1. Ask if s/he is a fiduciary.
2. Ask if s/he believes in a simple, low cost portfolio of the sort that is advocated by Warren Buffet and is exemplified by the Boglehead approach.
3. Ask her/him to show you what the expense ratio of each mutual fund is.
4. Go to www.bogleheads.org and read the Wiki. Educate yourself about how to figure out how much this "advisor", aka salesperson is costing dad each year. Ask what percentage of dad's AUM (assets under management) he charges each year.
Most advisors charge 1% or more IN ADDITION to the ER of each fund. This really eats into dad's nest egg, especially in a down market.
5. Find out what churning is. Find out if s/he's doing it.
Join Bogleheads.org.
As DPOA and executor of my parents' estate (we lost Dad and I'm Mom's DPOA), I looked into the investments involved in the remaining IRA. Because of my social justice conscience, I decided to simply cash out the IRA rather than remain invested in pipelines, fracking, and a host of other investments that represent what I, personally, stand against.
If dealing with a small portfolio, consider divesting and cashing out. If interested in the market, look toward investing those funds in the green economy. A good financial advisor should be able to guide you, if interested in ethical investment opportunities.
The Financial Planner has to have the funds invested as the owner wishes, not as the POA wants. The POA's social consciousness is not part of the conversation. I woudl be off side with compliance (and they review all transactions), if I sold a portfolio and purchased a completely different one based on a POAs request.
Just as I cannot force a client to purchase green investments, I cannot force them to invest in any specific industry.
If the owner of the funds had been interested in ethical/green/carbon neutral investments, that is how they would be invested.
Also keep in mind when reviewing the information Barb B has shared. If you decide to move the funds from the current company, as the POA you cannot assign beneficiaries, only the owner of the funds can do this and only if they have the mental capacity to do so. The beneficiary of the funds would be the estate by default. This may cause significant estate planning issues, including greater probate and taxes owning.
Here is a link to a related question so you can see how a similar discussion might go. They can be a little sharp, but there are some really knowledgeable do-it-yourselfers there.
"Investing Father's Assets Who Is In Nursing Home (POA)"
https://www.bogleheads.org/forum/viewtopic.php?t=288197
Tothill's information is spot on.
This is a terrible time to be dealing with any investments, for anyone. Best of luck.
As far as taxes, once she was in MC, there was a 42% tax deduction from her rent for the medical portion. Again this was itemized in the annual budget. Once she was in MC, you might be mindful for those who may inherit, that annuities may be taxable and so are IRAs depending on full distribution vs over 10 years. Bank accounts, stocks and houses are taxed less, if at all. Talk to her advisor to determine if these 2 types of funds, IRA or annuities should be withdrawn from first while he is alive