Breaking up with mom's broker

By Dan Kadlec, Money Magazine contributing writer


(Money Magazine) -- Our family thought that Dad had left his estate in great shape when he passed away more than two years ago. But his bank-dominated stock portfolio got whacked almost immediately, and now we're helping our mother fix it. One issue: Her full-service broker, who takes a hefty 1% commission on stock sales and another 1% on stock purchases.

She has spent thousands of dollars on these fees, and since she has many portfolio changes still to make, she's staring at thousands more. "No one should be paying like that anymore," says Marc Henn, a fee-only financial adviser in West Chester, Ohio.

dan_kadlec_new.03.jpg
Dan Kadlec

We'd like to see Mom in a less costly financial home. But our search has hit some stumbling blocks -- both practical and emotional -- that may trip you up too if you're helping one or both parents manage their affairs.

Before moving any assets, consider these questions.

Does your parent want to give you more control?

Unless your mother or father is financially sophisticated, getting rid of the full-service broker is likely to mean that you and your siblings will be making many more money decisions on his or her behalf. My mother is okay with our helping with the big stuff. But she worries that leaving her broker would mean losing an advocate inside the bank whom she can call if a dividend doesn't get posted, for example. And given that she has been a client her whole adult life, she's having separation anxiety. We're trying to convince her that it's unwarranted.

Can you function without an independent arbiter?

"It can be helpful for grown kids to have a professional to go to when they can't agree," says John Sweeney, executive vice president of planning and advisory services at Fidelity. We think our family would be fine without one, largely because Mom's investment strategy is now pretty well set and everyone is okay with it. All that remains is to execute.

How much hand-holding does your parent need?

If his or her finances require more day-to-day attention than you're able to provide, you can move the money to a managed account, in which a pro with a legal duty to act in your parent's interest handles it. But annual fees run about 1% of assets. That is likely to be more costly in the long run than leaving the money with a full-service broker.

Handholding not an issue? A discount brokerage is probably the answer. The savings are significant: Each trade will generally cost less than $20. While you can't rely on such firms for much advice, most will give an annual portfolio analysis, including an asset allocation review, free. More frequent reviews cost about $200 each. And if you run into trouble, you can always call in a financial planner for a consultation.

We're hoping to move the bulk of our mother's money to a discount brokerage but leave her checking and money-market accounts at her bank for familiarity. Once we settle on a new firm -- and if she buys in -- transferring her assets will be a breeze. We'll just have to fill out a form for each account; her new firm will fetch the assets and replicate what she has now.

That's nice to know. Because breaking up a long relationship is tough enough without Mom having to do it herself.  To top of page

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