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How a suddenly wealthy, young Bay Area widow found her RIA after months of fruitless efforts

With a big life insurance settlement augmenting a considerable estate, this young mother had literally dozens of sit-down meetings and a hard-fought happy ending

Tuesday, April 23, 2013 – 4:26 AM by Brooke Southall
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When you're young with big assets and not much earning power, you're really a retired person with a long horizon.


Elmer Rich III

Elmer Rich III

April 23, 2013 — 7:01 PM

This is a good experience to think about in detail. How can it be changed or optimized? What problems need to be identified and analyzed?

Brooke Southall

Brooke Southall

April 23, 2013 — 8:02 PM

I agree Elmer.

I’m thinking of writing my analysis of just what happened here. You could argue that there’s a random element but ultimately, I think there are real lessons here. Once Jane found a reasonably low-cost, local RIA that she felt she could trust, then it became a pretty easy decision.

Elmer Rich III

Elmer Rich III

April 23, 2013 — 8:05 PM

Look forward to it. There could be some sort of utility for currently bereaved investors.

“Caveat emptor” seems a bit heartless.

DavidM

DavidM

April 23, 2013 — 8:22 PM

Great article and very telling. There was one follow up question glaringly missing- “Why don’t you refer anyone to your advisor?” It was stated that no one asked her for referrals (I’m not sure if she meant the advisor didn’t ask or people she knows don’t ask). I wonder why she hasn’t referred anyone to her advisor. My guess is that because many people are reluctant to discuss their financial affairs with others, even their family, she has not had many conversations about investments that may have lead to a referral. The other thing that was interesting was she stated she did not like being “sold to”. When I think of all the countless sales training courses I’ve been subjected to in my career, I chuckle at the thought that none of them would have helped me win her business. Just listening and being myself would have been enough. Try convincing your sales manager of that! : )

Linda Lubitz Boone

Linda Lubitz Boone

April 23, 2013 — 8:48 PM

Too bad she didn’t meet with a financial planning firm that focuses on working with people in transition, and who also manage money. I’ll bet that kind of advisor would have resonated with her. Of course, I would recommend my husband’s firm, Mosaic Financial Partners.

Sean Kernan

Sean Kernan

April 23, 2013 — 8:55 PM

Brooke—I think the last sentenance of your comment above is spot on.

Sean Kernan

Sean Kernan

April 23, 2013 — 8:55 PM

Brooke—I think the last sentence of your comment above is spot on.

David Middleton

David Middleton

April 23, 2013 — 9:07 PM

I wish her the best, but her final decision is a little disconcerting. The fact is that her time horizon is more than 40 years and she has already started to rely on the portfolio as her sole source of income. 30% equity is nowhere near the normal allocation for this scenario. Also, it sounds like she is taking unnecessary risk by choosing a few individual stocks instead of using ETFs. Regardless of how “vanilla” the other advisors seemed, their methods were in line with basic industry practices.

Elmer Rich III

Elmer Rich III

April 23, 2013 — 11:13 PM

These comments suggest a crowdsourcing problem-identification process, which is interesting. The research is strong that from 5-8 diverse sets of opinions lead to optimal groups decisions. Many heads are always better.

Someone in personal distress and emotional turmoil, still mourning no doubt, would seem at risk for any decision and mainly be vulnerable. Stress of this type seriously reduces thinking, decision making and planning abilities.

There is problem-identification/analysis/solving and product/service-selling. Two very different processes.

Is personal style, “non-salesiness,” a valid criteria for making the technical decision of investing? Should emotional needs for a style fit be a priority over the facts and technical analysis?

Has this woman and her children been well served by our profession?

Brooke Southall

Brooke Southall

April 23, 2013 — 11:20 PM

It’s pretty well documented that advisors tend to get chosen around “events” like divorces, deaths, IPOs etc.

In other words, an “emotional” state is not an outlier, right?

The “right” choice on paper and the right choice in the emotionally-charged reality might be two different things.

Sean Kernan

Sean Kernan

April 24, 2013 — 12:57 AM

Brooke—-YES, exactly!

We don’t get to make other people’s choices. All we know is that she has less than $10 million…as long as she has “reasonable” expenses and more than a few million in assets, there should be no reason she can’t make the money last the rest of her life. It didn’t appear she had any other hard and fast criteria.

I think she was very well served by being patient. Even in a rising rate environment, I’m guessing someone who knows bonds can explain why laddering will help, why any loss in market value shouldn’t be cause for panic, etc.

If everyone used “logic,” no one with a net worth under $5 million would live in San Francisco; it is not “optimal”....they’d move to Dallas/Fort Worth where the cost of living is cheaper and there is no state income tax but still a strong job market. Behavioral finance has some wonderful explanations for things that don’t “make sense” to people trying to apply physics or engineering to people.

Sean Kernan

Sean Kernan

April 24, 2013 — 1:15 AM

PS I wrote this as I finished giving my two kiddos a bath (ages 6 and 1)...and picturing my (non-PhD) wife in an analogous situation—with a lot more money to worry about than she does today, but without me around. I suspect she would be far, far more worried about how to adapt to not having me to help with things (from kids’ baths to teaching them to how overcome adversity). Her portfolio’s alpha, beta, or anything would be meaningless. I would be OK if she ended up like Jane—I might add…“maybe shoot for a 50/50 allocation, but trust your intuition about the people you hire to help you.” Uh oh, bath time has gone on too long…

Elmer Rich III

Elmer Rich III

April 24, 2013 — 2:20 AM

We could check the psychological literature but sudden/early death and surviving children is a rare event and probably high risk psychologically. Making important decisions while under that kind of stress, mourning may not be advised. Professional medical care is probably wise. These events do effects the brains physiology – for the worse — and therefore capacity.

Is the psychological health of a new widow an appropriate/necessary topic for a financial advisor?

Michael Gray

Michael Gray

July 2, 2013 — 7:14 PM

And how is she doing given the recent drop in the bond market? It seems to me that there’s no substitute for an asset allocation that is aimed for more growth, given her young age and long time horizon for the portfolio.

Elmer Rich III

Elmer Rich III

July 2, 2013 — 7:34 PM

Oh oh, was she mainly put into bonds?

Michael Gray

Michael Gray

July 2, 2013 — 7:37 PM

70% in bonds, as stated in the article. That will be an interesting conversation with her advisor.

Elmer Rich III

Elmer Rich III

July 2, 2013 — 8:57 PM

Oops. Apparently the diversification discussion was not included! Good example of how what the client “wants” or the statements and behavior used to reduce emotional discomfort short-term, may cause it — longer term.

Now, how is the implemented advice of the advisor to be judged professionally?

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