• sessionScope.account::
  • userSignedIn::false
  • adminAccount::false
  • moderatorAccount::false

Discussion Posts

    • New Client -wrong asset mix

      • Posted by Bean Counter
      • on July 2, 2008 12:18 PM EDT
      I have a new client who is not wealthy and not very finanically savvy.  The couple has most of their money tied up in a pathetic annuity and the rest is all in ONE American fund.  They are in their 80's and need to be invested much more heavily in bonds and other safer investments.

      My question is: Would you rebalance their portfolio now, with the market so low? Or would you hope for a rebound and take it out then? I'm thinking of diversifying half now, half later.

      Thanks


       
    • Re: New Client -wrong asset mix
      • Posted by John L. Olsen, CLU,ChFC, AEP
      • on July 2, 2008 2:05 PM EDT
      • Edited on July 2, 2008 2:06 PM EDT
      Why is the annuity "pathetic"?  Is it fixed?  Variable?  If variable, what subaccounts are being used?  What other subaccounts (including bond accounts) are available?  Do surrender charges apply if they surrender now? 

      Which American Fund?

      How much money are we talking about?

      What are the clients' goals with respect to this money?  Do they require it to produce income?  If so, how much and when?

      How can anyone here advise you as to the appropriateness of reallocating those client dollars when we have no idea of how they're currently invested, how well those investments are doing, and what cash flows are required to be funded with those investments?

      John Olsen 

       
    • Re: New Client -wrong asset mix
      • Posted by RIA, CPA, CFP
      • on July 3, 2008 3:08 PM EDT
      They are 80. For this reason I recomend that you show them the pros and cons of what they currently have and compare/contrast them to the pros/cons of what you recomend.  Cash flow needs must be fully evaluated.

      Then explain that "IF" the markets were to rebound they might fare better.... but if it went down more they they could suffer more. Then ask," among the options which do you feel would meet your needs and objectives?"

      It must be their call - not yours.

      DOCUMENT!!!! They are 80!!! 
       
    • Re: New Client -wrong asset mix
      • Posted by Tom
      • on July 7, 2008 4:13 PM EDT
      I agree with the second comment. As their financial planner/investment advisor you're there to consider their ages, goals, objectives, income needs, tax situation, risk tolerance and many other quantitative and qualitative ingredients. I suggest you compare how they've done with how they're invested today with how they would have done in one or more alternative portfolios you would have designed for them.

      Then explain the consequences of all the alternatives open to them and let them make the ultimate decision. After all, it is their money. As suggested earlier, carefully document the process you're following beginning with an Engagement Letter between you and your clients.

      Best and good luck,
      Tom  CFP, RIA