Financial Adviser Minimum Portfolio

I am just reviewing a portfolio for an elderly relative who has seen a lot of upheavals in her advisor since the GFC. The portfolio is relatively small (<$100k) and declining due to monthly drawdowns.

One query that would affect my comments on it is whether there is a minimum level (e.g. $20k?) at which an advisor will normally no longer want to manage a portfolio and will insist on paying out the funds? Or do they generally tend to hang in there, despite getting only minimal fee compensation as the value of the portfolio dwindles?

You may need to direct that question to a few AFA's Liz. Common sense, (well at least mine) would suggest that like most things in life what you get out of a product or service usually is a function of what you put in so the time or effort an AFA is likely to devote to a client will work on the same principle. The cut-off level will also depend on the tier/level of AFA's experience/reputation. Martin Hawes has a fee of 4700 according to his website which includes a personal visit anywhere in country and a personalized plan plus regular maintenance. A goodly sum but for the right advice and guidance could be seen as very reasonable. Up to the individual but at some point you would think a responsible AFA would suggest to a client that the return/cost ratio might lead to switching into a term deposit. An irresponsible AFA could of course keep "milking" the cash cow but I'd like to think no share-milkers around (terrible pun....humble apologies).

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Originally Posted by Lizard

I am just reviewing a portfolio for an elderly relative who has seen a lot of upheavals in her advisor since the GFC. The portfolio is relatively small (<$100k) and declining due to monthly drawdowns.

One query that would affect my comments on it is whether there is a minimum level (e.g. $20k?) at which an advisor will normally no longer want to manage a portfolio and will insist on paying out the funds? Or do they generally tend to hang in there, despite getting only minimal fee compensation as the value of the portfolio dwindles?

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Given their age and drawdown level, most of their money should be in TD, bonds etc.

Put them in a good cash pie and be done with it

Thanks for the comments. I'm still interested in the original question - i.e. most FA's have a minimum amount to start a managed portfolio, but, in the declining years, will they choose to terminate it at some minimum $ value?

The story behind this question is worth relating though, as it is a reminder of how fragile our retirement funds can be and raises the question each one of us will likely have to face one day - what will you do when you no longer wish to or feel capable of managing your own funds?

The amount sounds small now. It started off much larger due to the financial skills of her younger sister who had managed her savings for her over several decades. That sister decided she no longer wanted to manage the portfolio at age 69 and went off to devote the remaining 10 years of her life to her many other charitable activities. Before doing so, she did her due diligence on a number of local Financial Advisors, transferred both her own and her sister's funds into management and stepped back to meeting with the FA on a six-monthly basis. Over the following 4-5 years, the financial advisor firm she had placed her funds with was taken over, not once but twice. Coming back from overseas to one meeting, she discovered that much of the money had been transferred into related-entity investments that she was not happy with in terms of risk and diversification... but before the situation could be rectified, many of the related-entity investments failed, followed by the advisor firm itself. Clients were transferred through a further two financial advisors before ending up where they are today.

From what evidence I have seen, her funds declined by 65 - 70% over this period, despite very modest drawdowns. The younger sister has recently passed away, so the elder can no longer "piggy-back" on her meetings with the advisor and does not have the confidence to make any changes. She will likely have enough to see her out, but, as her house is quite modest, a retirement village is no longer a possibility.

Most of us here are reasonably dedicated to growing our wealth. We probably all like to think we can afford to retire one day - and perhaps some of us will want to retire from having to scrutinise the accounts of every investment we make and just see a regular/reliable sum turn up every week in our bank account... seems the vultures soon start to circle when we do this.

CJ's advice makes good sense - my current focus is on minimising any further stress for this relative rather than the best financial outcome though. In this sense, a regular sum going into the bank account each month is still hard to beat (and less simply achieved with other means). The difficulty is to ensure it isn't offset by the stress of a further rapid decline in capital or buying power.

If you cannot manage it yourself, or are unable to control/oversee someone else managing it...term deposit has to be the answer. Lack of oversight is just telling the advisor you cant or don't care and that's dangerous.

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Originally Posted by Lizard

Thanks for the comments. I'm still interested in the original question - i.e. most FA's have a minimum amount to start a managed portfolio, but, in the declining years, will they choose to terminate it at some minimum $ value?

The story behind this question is worth relating though, as it is a reminder of how fragile our retirement funds can be and raises the question each one of us will likely have to face one day - what will you do when you no longer wish to or feel capable of managing your own funds?

The amount sounds small now. It started off much larger due to the financial skills of her younger sister who had managed her savings for her over several decades. That sister decided she no longer wanted to manage the portfolio at age 69 and went off to devote the remaining 10 years of her life to her many other charitable activities. Before doing so, she did her due diligence on a number of local Financial Advisors, transferred both her own and her sister's funds into management and stepped back to meeting with the FA on a six-monthly basis. Over the following 4-5 years, the financial advisor firm she had placed her funds with was taken over, not once but twice. Coming back from overseas to one meeting, she discovered that much of the money had been transferred into related-entity investments that she was not happy with in terms of risk and diversification... but before the situation could be rectified, many of the related-entity investments failed, followed by the advisor firm itself. Clients were transferred through a further two financial advisors before ending up where they are today.

From what evidence I have seen, her funds declined by 65 - 70% over this period, despite very modest drawdowns. The younger sister has recently passed away, so the elder can no longer "piggy-back" on her meetings with the advisor and does not have the confidence to make any changes. She will likely have enough to see her out, but, as her house is quite modest, a retirement village is no longer a possibility.

Most of us here are reasonably dedicated to growing our wealth. We probably all like to think we can afford to retire one day - and perhaps some of us will want to retire from having to scrutinise the accounts of every investment we make and just see a regular/reliable sum turn up every week in our bank account... seems the vultures soon start to circle when we do this.

CJ's advice makes good sense - my current focus is on minimising any further stress for this relative rather than the best financial outcome though. In this sense, a regular sum going into the bank account each month is still hard to beat (and less simply achieved with other means). The difficulty is to ensure it isn't offset by the stress of a further rapid decline in capital or buying power.

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