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

April 23, 2013 — 4:26 AM UTC by Brooke Southall


Brooke’s Note: When I was talking to Jane for this article there came a point when she asked that I stop for a second and put myself in her shoes. Here’s a young woman suddenly in charge of millions of dollars for the first time in her life when she has, in essence, never been responsible for any wealth to speak of whatsoever. Not only that but she spent decades getting a high-level degree in a fairly arcane subject that left her with no translatable skills to the job market. Nor is she inclined to work much soon, because she has young children. In other words, this money she possesses may have to last her the rest of her life. She doesn’t feel qualified to manage the money but she is also just as uncertain about whom to trust or how to find a trusted advisor. See: What is the value proposition of a financial advisor — and how is a budding RIA culture upping the ante?. The one thing she trusts are her honed research skills and tenacity. Here is the tale of how all of this plays out and how an RIA with no renown got the nod over advisors tagged as stars in the Bay Area.

The first time I talked with Jane Smith (not her real name) in July 2011, she had called me in the wake of her husband’s death six weeks earlier. The Bay Area widow with two elementary-school-aged kids had been looking for a good financial advisor. I’m editor of a publication that reaches thousands of them. Did I know one? I wrote about this conversation in this article: See: Three telling conversations about where the RIA business is headed.

When Jane called me, she was at wit’s end not only because she was fresh off a personal tragedy and was dealing with the sudden responsibility of inheriting her husband’s significant assets and life insurance policy proceeds. She had also, at this stressful time, really put herself out to find an advisor — meeting with quite a few and finding thorns in roses or underwhelming opportunities.

Jane got an overwhelming sense of vanilla from the advisors’ worn-out talking points about risk management this and allocation that. See: Forget their reputation; rich women are more fearless investors than supposed.

“Here’s your net worth; here’s your life expectancy and here’s why everything’s going to be hunky-dory,” is how she summed up those meetings. See: One Santa Fe woman’s female-centric approach to advice is attracting clients to her iconoclastic RIA.

So on a recent Monday morning, when I spent an hour talking with her in a follow-up interview, my question was: Whatever happened?

I got my answer — and it was, if anything, maybe more interesting — and affirming of RIAs — than I might have expected.

Odds-on favorites strike out

What I hadn’t known until our most recent talk was the degree to which Morgan Stanley and Bernstein Global Wealth Management (the advisory unit of AllianceBernstein) had the inside track on winning Jane’s multimillion-dollar account. Before Jane’s husband died, he had taken a number of prudent steps to ensure that her finances would be expertly handled upon his death.

The highest recommendation from friends he received was to seek out advisors at Bernstein Global and an elite Bay Area office of Morgan Stanley advisors. He and Jane jointly interviewed the Morgan Stanley advisor. Though that advisor came across as intelligent, there was a clear drawback to his approach.

“He didn’t really even look at me, she says. “This guy didn’t want to slow down and explain stuff. As highly recommended as he was, he didn’t seem like a good fit.”

With that experience in mind, Jane later returned to the more personable and patient Bernstein advisor almost by default. She came away feeling uncomfortably neutral about him.

“Just as I was on the verge of signing, I said: 'Why am I rushing into this?’ [My] funds [held in a Schwab retail account] are fine sitting here and I didn’t like the funds all being in-house like AllianceBernstein.” See: A Harvard lawyer, a Columbia MBA and an engineer break away from AllianceBernstein private client unit to form an RIA.

'The empathetic thing’

Having accepted defeat in her first, friend-referred foray, Jane describes what happened in coming weeks and months this way: “Then I went a little bananas,” she says. “What else can a woman with a Ph.D. do but fall back on her research skills?”

So began the odyssey of not only browsing but actually meeting with advisors — including one from LPL. Jane ended up really liking this man, who she called a much better, respectful person with whom she exchanged lots of personalized follow-up e-mails. “He was extremely intelligent and well-spoken. I liked him the best by far, yet he was the most highly priced.”

In my original conversation with Jane, I ran the names of a number of prominent RIAs in San Francisco and Marin County by her — albeit with big disclaimers that i knew them only as sources. She had already met with a number of them, and accepted my ideas and interviewed others. A number of these firms I chose because I knew they had women on staff with experience in dealing with women in turmoil after divorce or loss of a spouse.

But Jane didn’t find that female advisors were necessarily better for her. “Do women listen differently? I think the two women [in one RIA office] had the empathetic thing, but I also got that from the guy at a second wirehouse. I think there’s more of a personality range than a gender difference [that drives how advisors interact with female clients.]” See: She’s the boss: Keeping assets means keeping the power of the family matriarch fully in focus.

The reasons advisors didn’t fit the bill varied. In one case, the firm had a $10-million minimum that Jane fell below. A couple of others tried to put Jane with a more junior advisor than the one she had originally reached out to. One RIA associated with a roll-up she found to be simply too expensive considering its bland approach to investing.

The Morgan Stanley advisor had what she believed was the least value-added investing plan of all. “The proposal they sent contained a whole bunch of ETFs. I said: why would I pay you to invest in ETFs?” See: Schwab’s purchase of Windhaven made its asset growth soar — and RIA assets may be the afterburners.

All or nothing = nothing

Having gone through so much research and come away with so little conviction about any of the advisor choices, Jane confesses to feeling a sense of “what now?”

“I was really flummoxed,” she says.

In that humbled state, she actually returned to the Morgan Stanley broker with whom she and her husband had originally met .This was a decision she rapidly regretted.

“I found them to be the most annoying. They really pissed me off. They didn’t want me unless I brought all my assets.”

Jane adds that annoyance turned to anger when the brokerage office sent her a proposal in a PDF format but when she looked at it, part of it had another client’s information — something she pointed out.

An office employee had a matter-of-fact suggestion, according to Jane.

“They said: disregard that second sheet.”

'I just want to be helpful’

With all options exhausted — “I had been bending everyone’s ear and I was no closer to a decision” — Jane let a couple of months pass and focused on her children.

One day she was at an all-day school event and found herself standing next to a neighbor and the father of one of her children’s schoolmates. “Everyone knows I’m the one whose husband died.”

Jane asked the father what he did for a living and he assured her that she wouldn’t be interested and that it was related to bonds. After they talked for a while, Jane told him that she’d be interested in a proposal from him.

“He demurred and said: 'I just want to be helpful.’”

Eventually, after some convincing, she met with the schoolmate’s father and his partner at the small RIA that specializes in bonds, and they agreed that they would do some investing on her behalf.

“His non-salesiness was really right for me. I don’t like being sold to.” See: How to market to women: Don’t.

Conservative approach

What Jane also liked about the advisory practice was that it was a small enough that her assets were important to its existence and that the partners came at it from a bonds-first perspective. This jibed with her intrinsically conservative investing instincts.

“My husband was diagnosed in 2008 and I have zero work history. I don’t have to work. My profile is that I’m a retired person, just with a much longer life span.”

She also liked that the small RIA keeps its assets with Schwab Advisor Services so she didn’t have to move them to another company. The RIA charges fees that are on the low end of the spectrum and invests directly in bonds.

Jane’s firm has placed her in 70% bond investments and 30% equities, and she has received stock advice from the RIA including, for instance, counsel to lighten up on a concentrated position of Amazon shares. She has been with the small RIA for a year and is satisfied with the service. She sees her advisor frequently around the neighborhood and has visited his office three times.

So has she referred her new advisor to anyone?

“I mentioned him to my parents” (an affluent couple who have been engaged in their own fruitless search for an advisor), she says. “Nobody’s asked me. But I would.”

For another article about a consumer navigating the odyssey of finding an advisory firm, see: Why I moved my account from Schwab’s RIA and what Chuck could do to improve Schwab Private Client.

No people referenced

Share your thoughts and opinions with the author or other readers.


Elmer Rich III said:

April 23, 2013 — 7:01 PM UTC

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 said:

April 23, 2013 — 8:02 PM UTC

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 said:

April 23, 2013 — 8:05 PM UTC

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

“Caveat emptor” seems a bit heartless.


DavidM said:

April 23, 2013 — 8:22 PM UTC

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 said:

April 23, 2013 — 8:48 PM UTC

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 said:

April 23, 2013 — 8:55 PM UTC

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


Sean Kernan said:

April 23, 2013 — 8:55 PM UTC

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


David Middleton said:

April 23, 2013 — 9:07 PM UTC

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 said:

April 23, 2013 — 11:13 PM UTC

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 said:

April 23, 2013 — 11:20 PM UTC

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 said:

April 24, 2013 — 12:57 AM UTC

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 said:

April 24, 2013 — 1:15 AM UTC

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 said:

April 24, 2013 — 2:20 AM UTC

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 said:

July 2, 2013 — 7:14 PM UTC

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 said:

July 2, 2013 — 7:34 PM UTC

Oh oh, was she mainly put into bonds?


Michael Gray said:

July 2, 2013 — 7:37 PM UTC

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


Elmer Rich III said:

July 2, 2013 — 8:57 PM UTC

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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