- April 25, 2024
- Posted by: legaleseblogger
- Category: Related News
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# Situation Analysis and Financial Assistance for Parents
## Introduction
Hope this is ok on the Personal Finance Canada (PFC) platform. I am reaching out for advice on behalf of my parents who are currently in a stable financial situation but feel uncertain about their investment portfolio. My mother suggested checking with PFC as she is familiar with Reddit and believes in seeking professional opinions.
## Request for Portfolio Analysis
My parents, aged 86 and 79, are interested in a one-time analysis of their portfolio by a financial planner. They are hesitant to pay ongoing fees but value the guidance of a professional. I am wondering if PWL Capital offers this service or if there are other reputable options available.
## Their Financial Profile
– Age: 86 and 79, respectively
– Health Status: One spouse is in good health while the other is experiencing a gradual decline in independence, potentially requiring care within the next 1-2 years.
– Assets:
– Home, fully paid off: $1.5 million
– Cash, GICs, Bonds: $550,000
– AAPL Stock: $200,000
– Canadian Equities (ENB, TD, RY, MFC, CDZ): $230,000
– US Equities (HXS, JNJ, PG): $100,000
– Rest of World/Emerging Markets: $20,000
– Total Assets: Approximately $1.1 million
## Financial Concerns and Decision-Making
While my parents are financially stable, they are seeking advice on potential adjustments to their portfolio. They are conservative spenders, carefully considering even minor expenses. It is important for them to make informed decisions without compromising their financial security.
## Recommendation and Assistance from AI Legalese Decoder
The AI Legalese Decoder can assist in deciphering complex financial jargon and providing simplified explanations to help my parents understand their investment options. By utilizing this tool, my parents can make well-informed decisions about their portfolio with confidence and clarity.
So, what changes would you suggest for their investment portfolio?
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Their portfolio has a lot of uncompensated idiosyncratic risk. You (and they) should learn about modern portfolio construction. Here’s something you can start with: https://www.reddit.com/r/PersonalFinanceCanada/wiki/investing
Pay for a one time plan from a fee for service Financial planner they can help look at the whole picture without taking ownership of the investments.
PM me if you want a reference to one I have used
And yes they will provide estate planning and give advice on tax planning which look to be a concern
I would tell them to start spending. They have way too much
They should put more in fixed income to reduce risk at their ages
What are they saving it for?
First off I hope you have a lot more years with your parents OP….but my guy is 86 and concerned about the market with a million dollar portfolio. This is not a money issue its a psychological issue. At least get the poor guy to somewhat enjoy his money before he goes.
That’s a lot of exposure to AAPL imo. I’d be selling it all and putting it into a GIC at this point. Or at least a good chunk of it into GIC and a little bit into an index fund.
No business being in markets at that age.
Any financial planner would comment. They want to manage the money. Agreed with comments earlier that they need to spend. Real question; what’s their goals? What’s their estate plan? What’s their tax plan? That’s the value of working with a financial planner. Someone who will sit down, listen to their goals and stresses holistically and help them out. Portfolio isn’t perfect, but not the problem.
What’s wild is that 200K of Apple stock could have been a single $100 purchase in the 90s or 80s
Their basic portfolio structure is 50/50 fixed income to equity. You can then break down the equity structure for a clearer picture of risk. 200K AAPL/1.1M = 18.2% of the entire portfolio BUT it might only represent 200K/2.6M = 7.7% of their net worth. Since they only paid 40K and it’s now worth 200K, they are playing with house money and if it goes to zero (it won’t as another company would likely buy them out before that), it doesn’t threaten their retirement.
Focus on their goals for this money and then develop tax plans, estate plans, capital gains etc… Do they have TFSA? How do they unwind the RRIF/LIF? Do they want to gift some money in advance of their passing?
I wouldn’t touch the APPL but develop a plan to deal with the future large capital gains. The real risk might lie with such a large portion in fixed income as inflation eats away at buying power.
How much of this portfolio is currently needed to cover living expenses? What happens when one requires assisted living or one passes? Those are the critical questions that need answering before making changes to a strong portfolio like theirs. They hold some quality equity assets so what position is each asset in and what purpose does it serve? Do the Canadian equities portion generate dividend income that they need?
Although diversification is important, you have to look at each component to see the real picture. For example their home makes up 1.5M/2.6M = 58% of their net worth. How is that diversification when one single asset represents almost 60% of their net worth. Or consider the US equities portion (ignore AAPL). Of that 100K made up of HXS, JNJ, PG; what percentage is each component? If it’s 80% HXS, 10% JNJ and 10% PG, that means PG might represent 10K/1.1M = 0.9% of their portfolio or 10K/2.6M = 0.4% of their net worth. How is that risky?
This conclusion that old people must hold only risk free assets is ridiculous. You have to look at the entire picture.
I had a different comment here but I read some other comments and think your parents need a fee only planner to help them with a draw down or deaccumulation strategy.
The fact their stock picks don’t reflect their risk tolerance really isn’t as important as the fact they have to much cash with only 5-10yrs off runway left, and that they are now looking at a big tax bill.
When older people get sick, they tend not to recover and to die pretty quickly. That is the incredibly sad truth. Encourage your parents to spend and have fun while they can.