Not only have you inherited your parents’ portfolio, you’ve also inherited their long-time adviser. Now you’ll have to decide if you should move the money elsewhere or even manage it yourself.
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But, since the portfolio has strong returns, why mess with it if it ain’t broke? This can be a difficult decision, rife with guilt and obligation, especially if your parents have worked with this adviser for decades
Understanding your options
Since this is a sizable portfolio, a financial adviser could help with portfolio management, investment management and performance reporting, as well as aligning asset allocation with risk tolerance. The adviser could also help by creating a custom strategy to help you reach your retirement goals and ongoing financial management to adjust the portfolio as necessary.
But professional advice isn’t free. The fee may be the percentage of your assets under management (AUM), and this typically ranges anywhere from 0.5% to 2%. While the average advisory fee is around 1% per a 2019 survey of over 1,350 registered investment adviser (“RIA”) firms, 1.75% isn’t out of line with a full-service wealth management firm. However, it does mean that your $680,000 portfolio is costing $11,900 per year — though that should be compared against the returns on the portfolio.
With assets under management, the fee serves as an incentive to maximize returns. In other words, growing your assets is in your adviser’s best interests. So, if the returns are exceptional, then the higher rate may be worth it.
Robo-advisors charge lower fees, but you (obviously) won’t get the human touch. There’s also other drawbacks, like a narrow range of investment options and limits on how personalized the advice is. Of course, there’s also the possibility of managing the money yourself, but you should be financially literate and feel comfortable enough to invest according to your financial goals.
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Otherwise, you may want to consider another arrangement like an annual retainer or flat fee for various services. A retainer could cost anywhere from $6,000 to $11,000, according to a 2023 report by Advisory HQ. You could also consider working with a financial adviser who charges a fee on a per-hour or project basis, if you’re interested in doing some of the money management yourself. An hourly fee ranges from $120 to $300 an hour, according to Advisory HQ.
Finding the right fit
Before making a decision, it would be a good idea for you to sit down with your parents’ adviser, whether on a video chat or in person. First off, this will give you a sense of whether you’ll “click” and this person and/or firm is a good fit for you (or not). If you’ll don’t click, or you don’t feel like your needs are being met, then that may be reason enough to shop around.
If you do decide to consider your options, you should look for an adviser — whether a certified financial planner, chartered financial adviser, registered investment advisers or other designation — who is also a fiduciary. Being a fiduciary means that they must, by law, put their clients’ interests ahead of their own (so, for example, the adviser wouldn’t be compensated through commissions). There are plenty of directories to help you find a qualified adviser, such as NAPFA, Wealthramp and Nectarine.
If you decide to forgo an adviser and manage the portfolio yourself, you’ll want to have an understanding of how to select and manage a diversified portfolio that will meet your goals. You’ll want to adjust the asset allocation as you age and rebalance at regular intervals. This is also a situation where you could opt to pay for hourly or project-based advice when you need it.
No matter what you decide, it doesn’t have to be forever. You can see how things go and then reassess, make adjustments or make big changes. And, if you’re dealing with the recent death of loved ones, it’s a good idea to take your time and consider your options.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
