Receive an inheritance? Use your adviser to help clean up the mess
Over the last few weeks I have held numerous meetings with people who have received an inheritance. In each of the cases they inherited numerous accounts that happened to be spread out among many financial firms. They received bank accounts, brokerage accounts with multiple firms, annuities from other firms, and it was overwhelming for them to try and get control of the situation. It’s hard enough after the loss of a loved one to deal emotionally, but to try and clean up a financial mess with no knowledge of how to do it, especially if you live abroad, can be near impossible.
This is where a financial adviser can help. They employ teams that have vast experience in cleaning up these kinds of situations. In many cases, making order and explaining the paperwork can be liberating for the client. Understanding what questions to ask the firms to free up the money and coordinating with accountants to get a better understanding of tax implications can make this process much easier. Keep in mind that many of those who are inheriting were born and raised in Israel, their English may be subpar, and to try and take care of this vis-à-vis US financial firms is very complicated.
Who is in charge?
As I write this I just came out of a meeting where the couple who are inheriting already had a brokerage account at another firm that had been doing well. In fact, to sell out that account to move the money to me would have meant a huge capital-gains tax hit. As such, I recommended that they keep the money in that firm. They were also happy with another firm that was handling some of the money that they were inheriting.
What they really needed was – after the cleanup job was completed and they were going to have money with me and two other firms, not to mention their shekel-based investments – someone to sit on top and make sure that each account was doing what it was supposed to do for them to achieve their financial goals.
I actually think it’s not a terrible idea to have accounts with a few different firms. It’s basically a different style of diversification. Instead of one portfolio being diversified between various asset classes, you diversify with various advisers and their strategies. The problem is that each manager is doing their own thing and no one ends up speaking to client to see what the goals and needs of the client are and if they are going to be changing. Ultimately the client ends up with a portfolio that may have been suitable for him 10 years ago, but bears little relevance to his current financial situation.
Invest in a quarterback
The most effective solution to this problem is to have one adviser as the dedicated financial coordinator. When a client has multiple accounts, a financial coordinator will have a broader view of the situation in general. He will not just focus on one account but will assess everything, see how the entire financial situation fits his client’s goals and needs and make sure that each manager is doing what they are supposed to be doing.
Be prepared
Before meeting with your financial coordinator, define your goals and needs, and make a list of your assets. Then your adviser can assess all your different investment accounts, property and any other assets to see if you are invested in a way that you can accomplish what you set out to do. He can also determine if you need to make changes to get your investments in line with your goals.
There is nothing wrong with using multiple managers. Just make sure that you have a financial coordinator who will oversee all of your investments and help you become a successful investor.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.