Financial Planner

[runwad]

Ok I don't have my own financial planner, handle what little I have on my own. But....my mom passed away in August and she had one. Us kids are meeting w/her planner to get everything split up into us kids names. The financial planner is going to charge us for this meeting. Is that typical? I guess I was kinda surprised because this lady was a friend of my mom but also charged her a 2% commission on her investements ( I know a lot!). I was taken aback because I don't know I just figured we'd go in and sign papers and get our checks in the mail. But when I asked if there was anything I was to bring to the meeting she told me the estate checkbook to pay for her time. I think she's mad none of us kids (5) are keeping the money with her in our names, we're all taking the money and putting it with our other investments. Anyway just wondered what others thought if we should be charged for this meeting. I have no clue how much; I know I should've asked but didn't. It's awkward when its a friend, but I am a little tiffed. And I won't bring the checkbook she can send a bill!! Thanks all

 

[LoveBWVVBR]

That doesn't make ANY sense to me. The only thing that you should have to pay for is probate if the estate requires it. Is the money in a trust? If it is, then it was set up to bypass probate in all likelyhood. Also, a lawyer charges for probating a will, not a "financial planner". Since her agreement was with your mother rather than with you children, then you owe her NOTHING IMHO.

Is she the executor by any chance, though? If so, she has the right to charge a fee for the execution of the will/estate. If not, then I'd have my lawyer send her a letter to disburse all funds immediately. That will scare her straight. I think that she's taking advantage here, as it sounds like she was used to doing while your mother was alive. 2%?!

 

[runwad]

Ok listen to this....my DH is the executor of the will. Only the house went thru probate. All monies were Transfer On Death to us 5 kids. She advised me that as executor we were liable for all estate bills so not to split up the money in case we needed it for something. So at first I believed her and she was a dear friend of my moms (I think she prays on elderly) even wants us to give her something of my moms when we finish cleaning out the house. She said she would help me with the whole probate process so we didn't have to pay an attorney. Well I've had bad vibes on this lady, she is nice and all but I don't know its just a gut feeling and usually I'm right when it comes to gut feelings. Ok skip forward 2 mos after my moms passing. I'm talking to the lawyer (I'm kinda afraid to talk to him, cause I work at a law firm where the attorney's charge the clients for emails and phone calls, hence using my mom's attorney for probate!ha)but he said NO we are not personally liable for any bills that would be more then the estate is worth, go ahead and distribute the money. So that's when I called the financial lady to get the ball rolling. Then I thought ya she wants to keep the money w/her as long as she can to collect her fee. And when she found out we wanted to take the money and do with as we wanted well she was all in arms. Told me she works with Vanguard too, she could open funds for me with them (that's where I have my stuff). I said no I can take care of it myself. Then I tipped off my siblings and they don't want her handling their share either.

She used to work at the bank and my dad dealt w/her. My dad died 11 years ago. My mom was the typical 50's housewife had no clue on anything financial or even how much $$ she and dad had. So financial lady took over everything when dad died. She left the bank and went to Edward Jones and took all my mom's stuff there. Then she left there and went to H&R Block and took my mom's stuff there. Then she left there after a while and opened up her own business and took mom's stuff there. I was ok w/her leaving the bank and going to Edward Jones, but when she left there for H & R BLock that just really set up warning signs for me. I mentioned my concerns to my mom and she admited this lady could be robbing her blind and she wouldn't even know it and unfortunetely the rest of us were in the midst of having our families wouldn't of known either. But charging us for her time to split up this money, I don't know somehow that seems to be part of the job with my moms account.

 

[runwad]

One more thing. The lawyer and the financial planner lady are friends. She referred my mom to this guy. He seems on the up and up and I made him draft up an engagement letter (stating his fees) before I started working w/him on the whole estate process. I know a thing or two about these things from working in a law firm. So I won't be obligated to pay him anymore then whats in our signed contract. But just thought that was another peice of the puzzle you needed to know w/the two being friends and referring clients to each other.

 

[ceecee]

Don't go to a financial planner for this. If you liquidate the estate prior to all bills being paid then the executor will be responsible for unpaid bills (each state has a limit for this, 6 mos in our state). Sounds like the planner wants to make an extra fee. I would run from that. The fact that your mom was so loyal to her and moved with her from place to place (not uncommon by the way) and then she charged her 2%???? Who's the executor?

 

[runwad]

Don't go to a financial planner for this. If you liquidate the estate prior to all bills being paid then the executor will be responsible for unpaid bills (each state has a limit for this, 6 mos in our state). Sounds like the planner wants to make an extra fee. I would run from that. The fact that your mom was so loyal to her and moved with her from place to place (not uncommon by the way) and then she charged her 2%???? Who's the executor?

My husband is the executor. All we are going to the FP for is to get my mom's money that she has. It is all Transfer on Death to us 5 kids but we need to sign some paperwork to get the actual checks cut. This is what she is charging us for!!

Oh the estate has NO bills. She owns her house and car no other loans or debts. We have money in the estate checking account to pay house taxes and bills for at least a year if we can't sell it till then. After that I will keep my cut of the investment money in a liquid acct and pay household expenses and get reimbursed from the sale of the house.

 

[tl_swift]

Does she have a Broker? If she does I would make some phone calls and inquire about this. My DH is an executor of his brothers estate currently. So far all what he has had to do is call the institutions where his brother had his investments. He found out who the beneficiaries were. Gave the institutions copy of the death certificate and then the institutions mailed out the checks. No fee's were charged. Now, there is a yacht that is in probate. For that he has to get it clean up and ready to sell. All costs for that come out of the estate. When the yacht is sold then profits will be distributed between the siblings (he was never married) minus any fee's incurred by the state or bills owed because of the yacht.

 

[runwad]

No no broker, the financial planner holds everything...although it is invested with different companies under her umbrella. I wouldn't have a clue who to call. The statement I get doesnt' even have a phone number on it except her's. I told her I'd like to go on the website so I can see up to the minute information and she told me I couldn't. UH? See another flag. I really see no way around going to her and getting our monies, i just didn't like being charged for her time. But maybe that is customary I don't know, hence my reason for the thread.

 

[LoveBWVVBR]

Nothing about this is "customary". She is bilking you IMHO, just like she bilked your mother. I'd get your lawyer (not the one she's friends with, but a really good lawyer) to write her a letter that she either disburses the funds immediately or she is going to be reported to the SEC. You are under NO OBLIGATION to use her services IMHO. She worked for your mother. Your mother is dead. She does not work for you. You did not hire her. You are not obligated to pay her 2%. This money needs to get probated by the lawyer and disbursed, period. I'd get my money and then report her anyways so she can't do it to anyone else.

 

[DVC Sadie]

Nothing about this is "customary". She is bilking you IMHO, just like she bilked your mother. I'd get your lawyer (not the one she's friends with, but a really good lawyer) to write her a letter that she either disburses the funds immediately or she is going to be reported to the SEC. You are under NO OBLIGATION to use her services IMHO. She worked for your mother. Your mother is dead. She does not work for you. You did not hire her. You are not obligated to pay her 2%. This money needs to get probated by the lawyer and disbursed, period. I'd get my money and then report her anyways so she can't do it to anyone else.

I disagree and I am not a CFP or a Broker.

We have had to settle several retirement accounts and depending on the agreement made by runwads mother and the fund account (certain accounts charge a % of everything in that account) it can be totally on the up and up.

A lot of times the fees are based on the total amount of the money held in those accounts. So if the account has 100,000 it could then be charged 1% but if it held 250,000 it could then be charged a higher % rate.

I do know that I had to pay a 5 % rate which was agreed upon by my mother prior to her death. By the way my mother also paid 5% while she was living which is standard or higher for most investment firms.

Our family CFP and estate lawyer not only know each other but thank goodness they know each other very well so I am sure that neither of them are underhanded.

 

[DVC Sadie]

OP, please call other financial institutions or estate attorneys in your area to find out the standard % rate to ease your mind. I think you will be very surprised to hear the answer. I do not see any red flags all I see is the agreement your mother had with the financial planner prior to her death which would carry over until her assets are divided upon her death per your mothers request.

I just don't see how you'll be able to get around without paying the fee.

 

[ceecee]

Yes, too many red flags there. Call an estate attorney and get some advice before you see her.

 

[LoveBWVVBR]

I do not believe that a deceased person can hold a valid contract with a financial planner. She could certainly hold one while living, but once dead her will/trust/estate plan should take over. I would DEFINITELY consult an estate attorney asap.

This has all made me really nervous. I really trust my parents' estate planning attorney. I do not, however, trust their "broker," who seems quite eager to "manage" all of their money. They can't seem to tell me how she gets paid. I'm suspicious that she's going to try to get a % on the back end like the financial planner in this post. I think it's high time my parents look into this before one or the other of them gets a nasty surprise from this broker someday.

 

[dishguy1977]

Ok...not sure if I should jump in here or not...

I am a Financial Planner...in Canada. I'm not sure if things work differently down in the US or not but I will let you know some basics and maybe this can help.

There are different ways that a FP/Broker/Investment Advisor get paid (in Canada).

1) Commission Basis - planner gets paid an up front commision and you are required to hold the mutual fund for a certain # of years or you have to pay a "back end load" to the mutual fund company. This, in my opinion, is one of the worst ways to do business. The advisor gets a big chunk of money at the beginning (usually 5%) and then you are somewhat "stuck" with the investments for 7 years. Some times they really don't care if you stay invested with them or not because they have already gotten paid!

2) Trailer fees - the advisor gets a percentage of the assets paid to them by the MUTUAL FUND company as long as you stay invested - up to 1% depending on the type of mutual fund. This is one of the better ways to do it because your interests are more inline with your planner. As long as they choose good investments and give you good service you stay invested with them and they keep getting paid.

3) Annual percentage fee based on assets - YOU pay them a fee directly to manage your money. The idea here is that they purchase lower cost versions of the mutual funds in option #2 and YOU pay them instead of the mutual fund company. This ends up saving you money as your overall fees are lower. Generally, the larger the account the smaller the percentage you pay. You have to be careful though...I have seen situations where unscrupulous advisors charge an annual fee and still buy the higher fee mutual funds (from option #2) and are in a sense "double dipping"!

4) Hourly/Per Plan/Fee for service - some planners don't handle the management of the funds and just charge a direct fee to you for creating a financial plan - this could be a flat fee or hourly for specific advice, etc.

There are also umpteen combinations of the above so it's not always cut and dry...

Your situation does seem a bit odd. I would simply ask her how she was paid by your mother and what exactly is the fee she is charging you now for.

Again, I work in Canada so things could be different in the US but I do believe the basics are the same.

Good luck!

 

[runwad]

Well thanks everyone for all your responses. My mom does have an IRA,and since she was 77 and in the pay down phase..we have to open up Beneficiary IRA's ourselves and then we can cash out and pay the taxes on the money if we so desire. This lady will handle all that for us so I'm hoping this fee she is talking about will include her doing some of the actual paperwork that needs to be done to transfer the money to the children and not just the intitial meeting to gather signitures and ss# and what not. We meet with her on Thurs so I'll have more info after the meeting. Thanks again.

 

[LoveBWVVBR]

Well thanks everyone for all your responses. My mom does have an IRA,and since she was 77 and in the pay down phase..we have to open up Beneficiary IRA's ourselves and then we can cash out and pay the taxes on the money if we so desire. This lady will handle all that for us so I'm hoping this fee she is talking about will include her doing some of the actual paperwork that needs to be done to transfer the money to the children and not just the intitial meeting to gather signitures and ss# and what not. We meet with her on Thurs so I'll have more info after the meeting. Thanks again.

Do you have your own knowledgable CPA? If not, find one asap. You can opt for something called a "stretch IRA" that will allow the money to grow for the lifespan of the beneficiary. Your mother may have already set her IRA up like this with the "financial planner" in question. I am sure that I'm not explaining that well, but Ed Slott (sp?) has written a few books on this. Someone in one of his books sued their financial planner/CPA for not doing a stretch IRA because it cost them so much more in the long run. Here is a link to some info about stretch IRAs http://retireplan.about.com/od/traditionaliras/ss/stretch_ira.htm .

If it were me, I'd call my CPA for tax advice and then call the Vanguard retirement center and let them walk me through the paperwork that I'd need to open said accounts. It's really not that complicated, and I'd be afraid that the financial planner would do something shady with the beneficiary accounts that would be in her own best interest. You don't want to find out that she placed your account in a mutual fund inside a variable annuity or something, KWIM? FWIW, this actually happened to my mother, and it took me 7 YEARS to get the money out w/o her having to pay a penalty. It stank, but she learned her lesson for sure.

 

[DVC Sadie]

Ok...not sure if I should jump in here or not...

I am a Financial Planner...in Canada. I'm not sure if things work differently down in the US or not but I will let you know some basics and maybe this can help.

There are different ways that a FP/Broker/Investment Advisor get paid (in Canada).

1) Commission Basis - planner gets paid an up front commision and you are required to hold the mutual fund for a certain # of years or you have to pay a "back end load" to the mutual fund company. This, in my opinion, is one of the worst ways to do business. The advisor gets a big chunk of money at the beginning (usually 5%) and then you are somewhat "stuck" with the investments for 7 years. Some times they really don't care if you stay invested with them or not because they have already gotten paid!

2) Trailer fees - the advisor gets a percentage of the assets paid to them by the MUTUAL FUND company as long as you stay invested - up to 1% depending on the type of mutual fund. This is one of the better ways to do it because your interests are more inline with your planner. As long as they choose good investments and give you good service you stay invested with them and they keep getting paid.

3) Annual percentage fee based on assets - YOU pay them a fee directly to manage your money. The idea here is that they purchase lower cost versions of the mutual funds in option #2 and YOU pay them instead of the mutual fund company. This ends up saving you money as your overall fees are lower. Generally, the larger the account the smaller the percentage you pay. You have to be careful though...I have seen situations where unscrupulous advisors charge an annual fee and still buy the higher fee mutual funds (from option #2) and are in a sense "double dipping"!

4) Hourly/Per Plan/Fee for service - some planners don't handle the management of the funds and just charge a direct fee to you for creating a financial plan - this could be a flat fee or hourly for specific advice, etc.

There are also umpteen combinations of the above so it's not always cut and dry...

Your situation does seem a bit odd. I would simply ask her how she was paid by your mother and what exactly is the fee she is charging you now for.

Again, I work in Canada so things could be different in the US but I do believe the basics are the same.

Good luck!

Great post! Thanks for being so eloquent in your description of how that works.

From what I have seen settling after settling different estates and reading so much about Financial Planning it appears that what you have described above (Canada) is the same here in the US.

 

[runwad]

Do you have your own knowledgable CPA? If not, find one asap. You can opt for something called a "stretch IRA" that will allow the money to grow for the lifespan of the beneficiary. Your mother may have already set her IRA up like this with the "financial planner" in question. I am sure that I'm not explaining that well, but Ed Slott (sp?) has written a few books on this. Someone in one of his books sued their financial planner/CPA for not doing a stretch IRA because it cost them so much more in the long run. Here is a link to some info about stretch IRAs http://retireplan.about.com/od/traditionaliras/ss/stretch_ira.htm .

If it were me, I'd call my CPA for tax advice and then call the Vanguard retirement center and let them walk me through the paperwork that I'd need to open said accounts. It's really not that complicated, and I'd be afraid that the financial planner would do something shady with the beneficiary accounts that would be in her own best interest. You don't want to find out that she placed your account in a mutual fund inside a variable annuity or something, KWIM? FWIW, this actually happened to my mother, and it took me 7 YEARS to get the money out w/o her having to pay a penalty. It stank, but she learned her lesson for sure.

I have called the Vanguard Retirement Center and talked to them. My cut of the IRA is 10k. They told me how I had to look up on this table my distribution I'd have to take every year based on my age. And it was a little amount like $150-200. I just don't want to mess with doing that every year. I'd rather take the 10k pay the tax(we don't have to pay a penalty) and put that chunk somewhere else to grow. The rest of the monies we'll get are in bonds and mutual funds and we also won't have to pay any taxes or penalties on that money because we are well below the allowable inherited limits. I don't have a CPA but I do have a lot of friends in the finance field that have said the same thing vanguard told me. The more I've thought about this, it is probably right that she charges us for her time. There are 5 of us and she has to do a lot of paperwork to get everyone their cut. It just took me off guard when she told me to bring the checkbook. But after reading the posts and thinking about it a little more I'm ok with it.

And the 2%, my mom was fine with paying that in exchange for someone handling her money and her not having to worry about it. I wouldn't but some people don't want to take the time to educate themselves and are fine turning it over to someone else.

 

[dishguy1977]

I have called the Vanguard Retirement Center and talked to them. My cut of the IRA is 10k. They told me how I had to look up on this table my distribution I'd have to take every year based on my age. And it was a little amount like $150-200. I just don't want to mess with doing that every year. I'd rather take the 10k pay the tax(we don't have to pay a penalty) and put that chunk somewhere else to grow. The rest of the monies we'll get are in bonds and mutual funds and we also won't have to pay any taxes or penalties on that money because we are well below the allowable inherited limits. I don't have a CPA but I do have a lot of friends in the finance field that have said the same thing vanguard told me. The more I've thought about this, it is probably right that she charges us for her time. There are 5 of us and she has to do a lot of paperwork to get everyone their cut. It just took me off guard when she told me to bring the checkbook. But after reading the posts and thinking about it a little more I'm ok with it.

And the 2%, my mom was fine with paying that in exchange for someone handling her money and her not having to worry about it. I wouldn't but some people don't want to take the time to educate themselves and are fine turning it over to someone else.

Again, as long as you are comfortable paying her fee than that is all that matters. However, I personally feel that if she was charging your mom 2% to manage her funds (which is rather high) than this paperwork should be included in what your mother already paid her. Did she get her 2% at the beginning of 2007 for managing your mother's accounts for the entire year?

 

[runwad]

Again, as long as you are comfortable paying her fee than that is all that matters. However, I personally feel that if she was charging your mom 2% to manage her funds (which is rather high) than this paperwork should be included in what your mother already paid her. Did she get her 2% at the beginning of 2007 for managing your mother's accounts for the entire year?

Honestly I don't know I'll have her send me a bill and we'll go from there. We do have the money in the estate checking account and she knows that. I can't see paying her more then $100 bucks, but I don't know we'll see what she says today, we have our meeting at 5. I just want all this business done and taking care of. It's alot, selling a condo, cleaning it out, taking care of paying all bills, yikes. I just don't think I have anymore fight in me. I just want to put it all behind me and MOVE on!! Thanks