Monday, January 30, 2017

Talking to Your Parents (or Kids) About Money

I got a great question the other day.   A client asked how to talk to her parents about their money.  I’m writing this as an answer for her but the message applies to both generations.

Some parents readily share their financial and succession planning.  Some don’t – either because they keep it to themselves or because they don’t have a plan.  

That puts you in a bind.  What your parents want but don’t say, they probably don’t get.  You could be asked for significant personal time and financial commitments.  Resentments arise from guessing on short notice when you could have had facts years before.

I recommend you ask forcefully enough to get their attention – maybe something like, “Mom, have you thought about what you might need from us down the road?”  Be tactful but let him/her/they know this isn’t idle chat.

Responses vary widely.  Sometimes, parents open-up and the family gets closer. Other times, dad just won’t talk.  Keep working at it.

This isn’t just about helping them.  It’s about protecting yourself.  Together, we crafted a plan for you to retire, educate your kids and meet your commitments.  It didn’t include ending your career to rummage through your parents’ basement for old tax records.  It’s hard on siblings too.  Usually the closest and/or best-heeled bear most of the load and they will resent it if nobody asked first.

These are sensitive conversations but you have to have them.  A botched succession can wipe-out years of careful investing and do irreparable damage to your family.  I’ve seen it more times than I’ve liked.

Let me help.  I can act as a facilitator with your family since I know a lot of the things you need to discuss.  I can also introduce you and your parents to legal and tax advisors when you decide who does what.  

Just call if you need me.  Skip 

PS  Ask me about a “Family Love Letter”.  sh   

Bonus blog:

Family succession is a business.  There are things of value.  There are things you need to keep going.  Personnel skills are not uniform.  Neither are expectations.  Some of the kids might benefit from remedial training before they inherit a multiple of their current net worth.  There may also be ambitious third husbands to manage.

You won’t get all of the answers in a day but start the process.  sh

As always, the opinions expressed here are mine and don’t necessarily represent the views of LPL Financial or anyone else. 

Wednesday, January 4, 2017

What To Do About Bonds

On December 9th bonds fell out of the top half of my research groups for the first time in 11 years.  Prices started dropping in the summer and accelerated with inflationary concerns about the incoming administration.

Wall Street has been waiting for this shoe to drop for three years.  But for all the institutional noise, individual investors have limited choices.  I’d like to spend a few minutes talking about why and what they can do about it.

The current bond bull market is 34-years old.[1] For my entire career, bonds have been the safe haven when other assets were too risky.  Entire industries – 401(k)s, wrap-accounts, variable annuities and many others – were created with virtually no contingency plans for when the bull would end.  Thousands of these products must own at least a certain percentage of bonds – for older investors, mostly bonds.  

This is good news.  Profits we booked over the last 34 years were prepaid interest we won’t get later.  We’ve squeezed about as much as we can out of this magnificent bull.  If those gains turn to losses, maintaining fixed percentages of bonds will be expensive for those of us with more than a few gray hairs. 

The next battle happens between the ears. 

Expect business, marketing and even regulatory pressure to maintain those percentages as-is.  They have their reasons.  You have yours.  

The investments you use to replace your bonds need disciplines of their own.  Decide which of them can keep you moving towards your goals and build the support system to use them well.  sh 


This chart shows the current rate on 10-year US Treasury Notes going back to 1953.  From then until 1982, bonds endured a difficult bear market.  From then on, bonds have enjoyed an unprecedented bull market.  Where it started looks a lot like where we are now.

Please remember; bond yields and prices work inversely.  Yields rise because bond prices fall.  The old owner’s loss is the new buyer’s gain.  Yields fall when bond prices rise because the new owner has to pay more for the same future cash-flows. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.

Bonds are subject to market and interest rate risk if sold prior to maturity.