jaiko wrote:
Your parents would be a prime target for any bank's investment management services. Whether they would be BEST SERVED by a non-independent IMS, is another matter.
It isn't easy finding a good independent CFP. So it is very tempting to take the easy way out and use a recognizable institutional name. The problem is that you are actually 'small potatoes' to them, and the FinInsts know very well that such customers as your parents (and you, by default) are usually the less demanding, most timid, least knowledgeable about the extra services that should accompany the paying of high management fees.
First of all, there is NO rush to move the money around. None! Don't let any advisors pressure you into the whole "This is the best time to get into the market" bullsh$t. You want advisors that take the long view; not the short, commission-heavy churning attitude.
If the family attorney has not had experience dealing with large estates, it could be a good time to find a new one. No matter what happens, your parents are likely to incur estate taxes. They need advice, BUT….
They need to set some goals FIRST. Only they can do that, although a neutral advisor can help. But you'll have to pay that advisor, and honestly, you and they can do that groundwork yourselves. Use the advisor to "vet" those goals and assist in prioritizing them.
An advisor can help determine longer-term issues: How much flexibility do they need in terms of future potential family crises (taking into account current assets and income)? What are the various ways to move excess cash out of the estate to avoid estate taxes? Which ones will work better within the framework of achieving those goals?
What a good advisor does is think of all the bad things that could happen, not just to your parents but to you, any siblings, your current or future children. Then you prioritize those issues, and find out what the risk mitigation will cost for each one. Some will be affordable, others may fall into the "we'll accept that risk" category. But you ALWAYS want to be prepared. Money gives you the options of what to do, but it's the mindset that's important. Feeling prepared is, as the Boy Scouts believe, 75% of the battle.
It isn't uncommon for a couple to have strong differences of opinion on how extra money should be handled. Sometimes a neutral third party can help avoid a lot of hurt feelings and "whose side are you taking, anyway?" disagreements.
Do they want some 'mad money' on a regular basis? What kind of family issues do they want to address that they couldn't do before? How good is their own health? Do they want to set up a trust for current and future generations, or let the future generation fend for themselves (sometimes a good idea, LOL)?
And what people who have never used an advisor don't understand, is that a good fiduciary advisor takes the long view of building wealth. They are always there not only for advice but as a sounding board for anything that affects your financial health, which is a whole lot more than just investments.
Marriage counselor, psychologist, therapist – a successful advisor with fiduciary responsibility has many of those qualities. It's a service-oriented business. Most people with "new" money have no idea how much service you can buy for $15M. Believe me, that's a whole new world of service available, but most FinInsts don't go out of their way to let you know about those details, because that would mean spending time to earn the money they charge you.
If you (or your parents) don't enjoy investment research and freak when markets go down, then use a professional advisor. But with the inheritance of such a substantial sum, I would strongly suggest that you will learn far more from a good independent CFP who is willing to spend time helping your parents prioritize their goals, advise on the best methods of preserving the estate to achieve those goals, and be an active part of the team of professional advisors (financial, legal, and tax) that will help safeguard their wealth.
In summary, I am saying that a good fiduciary advisor wants input from the client, in order to help with their holistic financial well-being. A lazy advisor assures you that "they will take care of everything." Which they will…but their goals might not be aligned with yours, especially if they have no idea what your goals are, nor will they offer any opinion about them (which a non-fiduciary advisor would be careful about, because they are NOT allowed to do financial planning by the SEC).
The CFP.net website has an excellent list of questions you should ask any advisor. This website also has a search function for finding a CFP, and they are more geared towards asset-based mgmt CFPs. I would advise going to the Garrett Planning Network ONLY for their downloads on financial checklists and their own version of "what to ask an advisor?". GPN is an international network of fee-only financial advisors and planners and although very good, they are not 'in the game' in the investable portfolio size your parents have.
Good luck, and as I said, don't let anyone push your parents into making any quick decisions. It takes a long time to interview advisors and check references, something they absolutely MUST do. A good advisor takes time on this, because they have to determine which of their clients is in a similar situation as your parents asset-wise, get permission to be contacted, as well as giving the prospective client copies of the types of reports they will be receiving (which sometimes have to be redacted, if they are copies of real client reports).
Once they find someone who is comfortable with the 'hard questions' and has the right personality and qualifications your parents want, I think they will find all the effort is worth it. A fiduciary advisor who can be trusted and relied upon to actively work with you is worth their weight in gold, because there's very few of them.
I would just note that in terms of market timing, don't forget that there is a ton of uncertainty about the looming "financial cliff", specifically its impact on cap gains. There are a TON of deals happening right now because of this, and nobody wants to get caught 6 months from now with cap gains at 20%+. I can't imagine that it would go up for long, if at all, but there's no point in taking a chance on it.
You're right generally though, of course. I think you do a lot better planning your tax exposure or mitigating risk than trying to work the market.
