Source
r/PersonalFinanceCanada•
SlowQueen

how to tell my mom that her friend is ripping her off?

Investing

I've read Value of Simple and my investments are in ETFs. My mom, on the other hand, has a friend who is a financial advisor and he handles all her investments. I don't know anything about mutual funds other than the fact that they are notorious for having high fees. When I look at the MER rates of the mutual funds in her list, unless I am mistaken, they are all over 2%.

SUN FIDELITY MONTHLY INCOME, ADVANT
SUN GRANITE BALANCED GROWTH, ADVANT
SUN MFS GLOBAL, TOTAL RETURN, ADVANT
MANULIFE GLOBAL STRATEGIC BALANCED YIELD

These are a few of the funds she has invested in.

I'm not an investment expert and I certainly don't feel comfortable doing my mom's investments for her. But I should probably tell her that she is getting ripped off by her friend, shouldn't I? What advice should I give her? Should I tell her to tell her advisor to put her money into ETFs? There is no way that my mom would ever handle her investments herself, so I need to tell her what to tell her advisor to do.

I have no clue how to tell whether a mutual fund is beating the market or not, but my reading has taught me that it's unlikely you'll do so after all the fees. But if her advisor has picked some of the few mutual funds that WILL beat the market, I sure as hell wouldn't know it.

Edit: seems like most people think I should leave it alone if my mom is comfortable with it, especially because she doesn't want to learn about other options herself. In fact, she's asked me to be the one to call her financial advisor for her, which doesn't seem like a good idea at all. Thanks for the feedback!

Posted Jan 21, 2020, 1:45 AM UTC · edited

022
angelus97•

She’s not necessarily getting ripped off. Maybe she trusts her friend and knowing that her investments are with someone she trusts is worth the 2%. Just because you don’t want to pay fees that high doesn’t mean her friend is some criminal taking advantage of her. Some people are okay paying more for certain things especially if it helps them sleep at night.

10
SlowQueenOP•

Sure but why should I let my mom pay 2% in fees unnecessarily if there's a better solution? Her money could still be with a friend she trusts if that friend put her money into something that isn't mutual funds.

-9
angelus97•

You can try to educate her on low cost funds. You could ask her to read the book you did and let her come to her own conclusions. But you need to be careful here. If she chooses you over her friend and it causes a rift between them, she might resent you. Or if she suddenly moves all her funds and the market takes a dip, she might blame you and think that would never happen with her advisor friend.

Do you monitor her mortgage rate? Do you make sure she clips coupons? Do you tell her to shop at superstore? I know this is a personal finance sub and everyone is obsessed with paying less but sometimes overpaying for something is not the end of the world.

10
SlowQueenOP•

She's quite thrifty on her own and has no debt which is nice. She seems uninterested in educating herself and would rather that I just do it for her, however, which I don't want to do. Judging by some of the other comments on this topic, I should probably just leave it alone.

-3
passenger84Ontario•

Maybe your mom is fine with it? We went through this with my grandparents. A few of us thought their financial advisor wasn't doing what's best for them and really just what's best for him. When it was brought up to my grandparents by one of their children they responded that they trusted the advisor, so that was it. What you think is best may not be what she is interested in. If she trusts her advisor, and the person isn't frauding her, don't push too hard. It's fine to mention other ideas, but be ready for her to not be interested.

5
SlowQueenOP•

In the past she has mentioned that she doesn't know anything and that she wanted me to talk to her advisor myself. So I suppose if I did that, it would be the same as me suggesting that she ask the advisor for changes. But in the end it's the same problem, I don't know what to suggest to the advisor. And obviously I know the advisor is making money off her, so I don't know if he'll be honest with me.

0
[deleted]•

you need to tread softly here, OP.

You cannot simply look at the MER of the fund. It depends what the advisor is doing for your mom for that fee.

You can't call yourself a professional simply because you've read a book. You CANNOT and SHOULD NOT tell you mom what to do with her investments - ESPECIALLY telling her what to do for her to tell her Advisor what to do. In the end, she is the one that needs to be comfortable. As a former Advisor and Compliance Officer for my career, I can tell you that A LOT of people simply do not like ETFs. They prefer mutual funds. There's a reason why Mutual Funds are still a $1.5 TRILLION dollar industry in Canada (yes, TRILLION)...people trust them and like them.

However, what you CAN do is educate your mom. Show her what is available. And she can then discuss that with her Advisor and make her own decision. - but do not...i reapeat..DO NOT tell her what to tell her Advisor what to do. That's my professional advice as a Compliance Officer, and i've seen a lot over my career.

​

I have no clue how to tell whether a mutual fund is beating the market or not, but my reading has taught me that it's unlikely you'll do so after all the fees.

That is a HUGE misstatement there, too. There are many funds out there that do very well and outperform their benchmark.

7
SlowQueenOP•

I quite clearly stated that I know I'm not a professional. I appreciate the input, however.

-5
[deleted]•

based on your post, it kind of sounds like it.

Example...

so I need to tell her what to tell her advisor to do.

​

But I should probably tell her that she is getting ripped off by her friend,

Again, HUGE assumption here. Do you know what her Advisor is doing for her?

6
SlowQueenOP•

I'm not an investment expert and I certainly don't feel comfortable doing my mom's investments for her.

You missed this statement :)

But I should probably tell her that she is getting ripped off by her friend, shouldn't I?

This quote changes quite a lot with the "shouldn't I" as well, which is what I originally wrote!

-3
joefarmer13•

I have a some of my retirement savings with an advisor ("wealth manager"). A lot of that is in mutual funds that have advertised MERs.

- Because of the amount I have invested, I get rebated about half of the MER every quarter. So my actual MER expense is half of what you would see online if you looked up my funds.

- My advisor gets paid a percentage of the MER as his income. That's money I'm not spending paying a fee-only advisor. So that reduces my expenses some more.

- I know I can call my advisor any time and make changes to my investments, or get some help with retirement contributions or transfers, or even assistance with tax issues. We meet several times a year and go over my financial picture in detail, and make changes if warranted.

- I'm happy with the performance and safety of my investments.

So, those are all services that have value to me. They may have value to your mom as well.

6
[deleted]•

very well said, u/joefarmer13 !

Always happy to hear when clients are happy with their Advisors.

1
SlowQueenOP•

Good to know, thanks!

0
PKanuck•

You're running off half cocked. If you don't understand how the fees in a mutual fund works then you're going to look foolish.

Mutual funds are actively managed so the MER is going to be higher than an ETF.

5
urbanp4d•

A vast majority of people have most of their investments with mutual fund... she is not getting ripped off... shes just not following what some people on a personal finance sub Reddit are recommending...which is really not the same thing

4
SlowQueenOP•

Well just because the vast majority of people are doing something, it doesn't mean that it's a good thing to do.

-3
[deleted]•

You need to conduct some further research instead of relying on what you've read in a book.

For example, I own a Mutual Fund that started in mid 2000...Almost 20 years ago...It's an all US equity fund, and the benchmark is the S&P500.

In the almost 20 years, the S&P500 annualized return with reinvested dividends is 6.06%.

In the almost 20 years, this mutual fund's annualized return with reinvested distributions is 13.6%. Want to know the kicker? the MER of the fund is hovering around 2.8%.

Now tell me, was I better off paying 0.2% for an index mutual fund to earn 6% annualized over 20 years, or paying a fund manager between 2.3-2.9% to earn 13.6% annualized over 20 years?

5
kkunjujiki•

Past performance does not guarantee future returns. Unless you or OP has a crystal ball your mutual fund doesn't guarantee any sort of return.

1
ExtrGuac•

For the average investor, paying the 2% fee and allowing an advisor’s suggestions is worth it my dude. If your mom tried to do it herself, she would probably lose more than 2%. If you are comfortable to do your own investing, then you are above average. Its best to let her continue what she’s been doing her whole life, if she wanted to do something differently she would have by now.

3
SlowQueenOP•

I do think there are many people out there who simply don't know that there are other options, so I'm not sure that the last statement is true. But I can agree with you that paying a fee can be worth it for some, so thanks for the reminder of that :)

1
qbuniverse•

OP, the MERS and all other fees your mom is paying have no correlation whatsoever to the quality, quantity or usefulness of the advice she might be receiving or her financial outcomes.

You can pay a lot and get terrible advice/outcomes, pay very little and get great advice/outcomes or anything in between. The only way to know if she is getting “ripped off” (in your words) is by doing an evaluation of the advice and outcomes she is receiving in exchange for the overhead she is paying on these investment products. You are, unfortunately, not qualified to do this evaluation despite your best intentions.

1
jchung513•

Offer to help her transfer her funds to a roboadvisor, eg wealthbar, where she will still get financial advise without the hefty management fees and MERs.

0