Playing Financial Adviser
Jan 21st, 2008 by Nut
You hear it everywhere that the thing couples fight about the most is money. Well, in the case of M and I, we don’t really fight about money decisions, although it is hard when you want to do things or buy things that don’t fit into the larger financial plan.
But that’s something we all have to face and I don’t think has anything to do with being a couple.
But anyway, M had an old IRA from a job she once had around four years ago. I had been pushing her and pushing her to start the paperwork to get that money transferred into an active IRA account (her current job offers a pension, so she can’t roll it over to her job’s account).
When that didn’t work, I offered to come with her to her bank and ask what the options were there. It’s not what I would’ve done, but I was trying to help without butting in too much. This wasn’t my money and I didn’t want to act like it was. Deep down I wanted to do with it what I would’ve done with it (put it in Vanguard’s index funds), but I knew that what was best for her and for me isn’t always the same thing.
That didn’t work well either, so as more and more time passed I realized we needed to get that money working ASAP for her own benefit.
So I took control and did what I would’ve done as if it were my own money.
I opened an account with Vanguard for her and filled out the paperwork necessary to roll over her account. Before I could do that I had to actually pick out which investments would be in M’s account.
M is not into investing, she just wants to “set it and forget it.” While it’s not what I do in my own Roth IRA, I knew that the right choice for her was a life-cycle fund that adjusts its asset allocation automatically as retirement gets closer and closer.
But it was weird taking control over someone else’s money. I felt like a financial adviser (which was actually pretty cool—it’s what made me look into becoming a CFP), but it felt like I was barging in on someone else’s business.
Then it hit me: if I don’t push and take control, her money is losing out on the opportunity to grow, so I did what was best for her.
Now I’m dreading the first statement she’ll get from Vanguard, especially in the environment the market is in right now. If she has lost money, she may look at me and wonder what the hell I did. And I’ll explain it to her the best I can without boring her or having her hate me.
I don’t think it’ll start a fight, because I know I did the right thing in terms of expenses and asset allocation, but it’s still very weird to have handled her money like this and made some pretty big decisions on her behalf.
Have you ever had to handle someone else’s money like this? Wasn’t it weird but also fun?
Open an ING account and get a $25 bonus!
The Wire, Season 4
My dad set up a Roth IRA for me when I was in high school and then made me contribute to it out of my earnings at various part-time jobs. At the time this seemed amazingly uncool and meddlesome on his part, though of course now I am immensely appreciative. I started managing it when I was done with school, but since I was so uninterested at first, he steered the investment until then. Dad set me up with a mix of bund funds that kept pace with inflation and no more. He explained to me when I took over managing it that although he probably could have invested in more equities and gotten much better returns (this was the mid-90s through the mid-00s, so some volatility but overall good returns), he played it safer than he did with his own accounts because it wasn’t his money to lose. Since he was just a steward he would have felt very badly if he’d lost everything I’d saved out of my crappy paychecks. When I took over management of the account, I took on a lot more risk, but that was my choice for myself, not his for me. And yeah, he could have made me more money, but I think his position was really respectful. It was more important to him that I not lose out on my ability to invest for those years than that he maximize returns. On balance, I think that’s the best choice, given all the tricky considerations.
Especially when I compare that to an uncle who invested a spousal IRA for his wife, a lifelong stay-at-home mom, and weighted her down with upwards of 95% metals and commodity futures–all of the riskiest elements for their combined portfolio, all held by the party with little wage earning capacity. They’re still happily married and all’s well that ends well, but that seems like the WORST way to manage someone else’s money.