Dear Quentin
When my father passed away nine years ago, he left me a large inheritance for his two children, with me as his trustee. My children were adults at the time, so I suggested they let me invest the money to save on fees paid to an investment advisor. I’ve been managing my own investments for about 20 years and have done a pretty good job, especially considering I’m self-taught.
Most Read on MarketWatch
My daughter agreed to let me invest the entire inheritance, and my son said he wanted to split the money between me and a financial advisor (found through a friend of a friend) at a large investment management firm. He expressed concern about my lack of portfolio management training and experience navigating bull and bear markets. I understood his concerns and he agreed to split the funds into two separate accounts.
Nine years later, my son is looking to buy his first home. He wants to come up with a large down payment, and plans to finance it by splitting it evenly between two investment accounts. This sounds reasonable, but here’s the problem. The portfolios I manage have performed much better than portfolios managed by my brokerage firm. Over the past nine years, my portfolio has averaged an annualized return of 13.5%. The other is underperforming the S&P 500 SPX.
As his mother and trustee, I would suggest to him the following: all I would like him to withdraw the money from another account and invest it with me as his advisor instead, but if he doesn’t agree, I don’t know how strongly to press the issue. Is my ego getting in the way here, or is leaving the fund in a better performing portfolio the smarter move? After all, it’s his money, but as a trustee, how much should I insist?
trustee with problems
Dear you who are in trouble
I would ask your son a slightly different question.
Instead of asking, “Would you let me manage the remaining 50% of your investment portfolio on behalf of this investment firm?” ask, “My hand-picked portfolio is up 13.5%. Why did they underperform the S&P 500?” The second question is a fact that will help my son learn about different investment approaches, the value (or lack thereof) of diversification in his choices, and how much good old luck may have played a role (or not). This is an investigation mission. .
What are the terms, term, and mission of the trust? Your son is now an adult, and there will come a time when you will hand over responsibility to him. Plus, you won’t be around forever. As you probably know, trustees have a fiduciary responsibility to their beneficiaries to act in good faith, to exercise reasonable care, to act with prudence and integrity, to generally avoid risky investments, and to comply with the rules of the trust. We must act.
Have you invested in tech stocks like Amazon AMZN, Apple AAPL, Meta, Google’s parent company Alphabet, or Microsoft? Was there one stock that skewed your results? For example: Did you choose Nvidia by chance? NVDA has skyrocketed due to the rise and development of artificial intelligence. Or did you include other stocks that have outperformed the market over the past decade? Did you tap into the meme stock craze of 2021 and manage to get out before you lose your shirt? (I hope not) Masu.)
This may be a more enlightening discussion to have with your son, especially if you want him to ultimately make decisions about his investments. For example, if you invested in any of the following tech stocks over the past 10 years, you would be clearly well ahead of the S&P 500 by now: Advanced Micro Devices AMD, Super Micro Computers SMCI , Green Brick Partners GRBK.PRA, Broadcom AVGO, Fair Isaac Corp. FICO, and/or Monolithic Power Systems MPWR.
There is no guarantee that a recession will occur. geopolitical events From Ukraine and the Middle East to the US presidential election, it won’t hurt the portfolio you manage for your son, but will benefit the big broker’s portfolio (or vice versa).nevertheless Not a widely loved termeven the so-called Magnificent Seven (Apple, Microsoft MSFT, Alphabet GOOGL, Amazon, Nvidia, Meta META, Tesla TSLA). various destinies this year.
No one expects you to be the next successor. Katherine Wood or Abigail Johnson — You’re already doing a pretty great job — but if you talk about strategy instead of stock prices, you might be able to have a conversation with your son and learn from each other. On that note, how often does your son talk about investment amounts, tax implications, volatility, and investment performance with the financial advisor who manages the other half of his investments? must be done at least once.
I want to pull, not push. Two-time Pulitzer Prize-winning cartoonist Bill Mauldin wrote:brass ring” he wrote in his 1971 memoir. “If you’re a leader, you pull wet spaghetti, not push it. The U.S. military still has to learn that. The British got it. Patton got it. I always… I respected Patton. … I didn’t like his attitude, but I certainly respected his theories and the techniques he used to get his men out of the trenches.”
There’s a fine but important line between assertiveness and pushiness. Unless there is a reason not to trust the investment firm that controls the other half of my son’s assets, or unless there is a major flaw in its strategy, I don’t think my son has one long-term goal in mind. must be placed in That means handing over the keys to my son. He helps you plan your financial future and ultimately take control of your money if you need it.
If that is your goal, it is clear that your love takes precedence over your ego.
.
Previous columns by Quentin Fottrell:
