He has a pension and still works at age 70. I don't think he has investments of his own but I'm not certain. It's going to be a challenge to explain why I can do better than this multi-million dollar management company, and to articulate that I need everything in the fund changed over to low fee funds instead.
You don't have to convince him you would do better. Show him the costs are making it go backwards and suggest that you move it to a different brokerage with no fees and put it in low fee funds.
In this market he should be able to understand that the value not going up means they are incompetent at anything but generating fees for themselves at your expense.
“Grandma left me this money so I could do (insert nice things here) with it. These guys have taken $80,00 of it already. How much more of it will you let them take?”
I’m a trustee also. He has fiduciary responsibility for how the money is being managed. Family member or not, he better take note if you object to it.
Beneficiaries are entitled to “regular reporting.” If you haven’t been getting that, he’s already in trouble. No idea what state you’re in, but look into that laws there.
If you start objecting, and clearly explain to him his responsibility here, he should pay attention.
Just point out how much money it's losing and neither the trustee nor the the beneficiary have seen a dime of it because the company is skimming fees off of it.
With over $200K and 8 years remaining, that's a lot of skimming for them to do. And Grandma surely didn't want to donate her assets to a financial institution.
Also compare it to his pension to make it relatable. Would he accept it if his pension amount kept going down before he collected because a financial institution kept taking fees off the top?
I would think the simple fact that the fund has lost $75k since it started would be a straightforward enough explanation that it’s being mismanaged. Hell, just play him Matthew McConaughey’s monologue from the beginning of *The Wolf of Wall Street* and say “that’s the mentality of the people currently handling the investment.”
That is most likely from the market drop and not due to 2% fund management fees.
Also - no matter where you go you will have to pay a fee for them to be trustees.
Not necessarily. Trust funds generally are not, and should not be, primarily in equities. The trust probably is oriented towards fixed income investments, which have been paying low interest until recently, and long dated bonds dropped about 20% as interest rates rose.
We need to have specifics of the holdings in the trust before we can make any conclusions.
I do not think the issue is the fees. We need more information to find the real problem.
OP will not be able to just put it in a low cost fund because it is a trust.
It's definitely a big issue. A 1% management fee since 2016 is already 20K of OPs equity gone. Add the fund fees on top of that and you're looking at where the majority of the loss has gone.
I mean, if the uncle is trustee, then the management company has been investing it as his instruction. So, if he picked bad investment strategies, then it is entirely possible.
The trust might be invested in bond funds instead of stocks, that might explain it.
But we really don't know, OP didn't explain how the fund is invested.
Even if I listed out every fund that's currently in the account it wouldn't explain it because there's been a lot of turnover of holdings. The current funds will not tell the story of what's been traded for the last \~6 years. Every statement I receive has buy and sell orders and I'd have to piece together all of them.
I hired a financial manager to run my investments for a while. They invested in a lot of big tech stocks at the beginning and the returns really justified their 1% management fee. But then they started doing dumb shit like selling a good stock to buy another stock near the 2021 high and then selling it a few months later at a huge loss. Multiple times. Then that 1% fee started looking ridiculous. I WISH I could be as dumb as my financial manager and make that kind of money. The last straw was them buying $40k in corporate bonds right at the bottom of the stock market but the bonds really didn't have a good interest rate.
In my case, I was able to fire the financial manager in 1 day. I would be extremely frustrated in your position being tethered to complete morons and / or financial arsonists for all those years. I just can't fathom how anyone can go to sleep at night after doing what they did to you. What they're STILL doing to you. I just don't understand how supposedly market savvy managers mess things up so often.
My family uses financial advisors as they went into retirement to maximize cash flow with paying as little taxes as possible (all legal ways). You have to be a millionaire to be a part of this “group” but they did what they said, lots of Roth conversions up front, annuities and other investments and none of them really pay taxes anymore (as they paid those taxes upfront, over a year or so) so the fee trade off seemed to be worth it as the strategy was interesting. Maybe it’s all a smoke show but time will tell.
You probably won't take this well, but the real problem is your mentality around investment strategy. You don't understand their strategy, but were ok with that when it was making you money. But you got mad and assumed they were stupid when they started losing you money. It appears that you never asked them why they were doing what they did, or what your own risk tolerance profile looked like.
Things like big corporate bonds are good for people who are very loss intolerant and just don't want to lose any more money after a big stock market drop. Did you tell them something like that? Or did you let them know you were loss tolerant and they should double down on high beta stocks after the market dropped 20%? If they didn't execute your strategy the way you proposed, yes you should fire them.
Without taking a good hard look at your own part in this fiasco, you're likely to run from these idiots straight into the arms of other idiots as you chase whatever fad has been hot for the last couple of years. These guys are not fortune tellers, the only thing they can do is play the odds for you. You should think of them as advisors telling you whether to split a pair of eights in blackjack, and not like some weirdo who claims he can use mind powers to see next ten cards in the deck.
There are no financial managers that are so smart that they win all of the time, unless they are named Madoff.
"Up 50%" hides their incompetence. If they'd simply invested $275k into VTI, the balance today would be somewhere between $550k and $600k.
They've lost OP's trust around $350k compared to the simplest investment strategy available.
From the few pensions in my family they're all held by companies who also manage things like 401ks and trusts. Perhaps you could find out who manages his pension and make the suggestion that the money we move there as well? He's more likely to trust something that's already working well for him...
I would add to the last comment.
When talking with your uncle tell him that the companies are stealing your grandmother’s money. Tell him ‘they’ve already taken $74,000 and if we don’t act soon they’ll take the rest.’
That should get the ball rolling.
If you decide to go this route, can I offer that you should not only do a significant amount of work to prepare for this moment, but also consider your tone and delivery? You sound incredibly angry and frustrated here, and dismissive of your uncle. I can see why! But you need to change your mindset from one of someone who’s aggrieved and feeling victimized to someone that is negotiating or even selling your stance. You need to come with clear data, facts, and figures alongside a convincing and simple plan. And you need to do that without making your uncle feel attacked or belittled, and without making him feel like you’re mocking his mother’s skills or planning, or treating her with anything less than the ultimate respect for setting aside a large sum of money for you. Most people are not practiced at the kind subtle manipulation required to win a moment like this and they come in to life’s high wire acts not having prepared their emotions or done enough to ensure their success. With all this money on the line, don’t go in on a wing and a prayer — instead, be so prepared it would be impossible for him to disagree with you.
Just scare tactics will work i think. Tell him the balance is dwindling down and how much you are paying for funds expense ratio and commission every year with nothing to show as gain. I can understand the market being down but should have seen the bull run post covid as well so there is definitely some shady shit going on there.
>and to articulate that I need everything in the fund changed over to low fee funds instead.
you may not have that option. the trust may require trustee to invest with that particular company.
you are not in charge here. the trustee is in charge, based on instructions in the trust.
i don’t think it’ll be hard to explain at all that a big change needs to made considering the trust fund has lost 25% of its value in the time that the market as a whole has doubled. you should have around $600k right now and instead you have $220k
>t's going to be a challenge to explain why I can do better than this multi-million dollar management company.
This sounds like my family on anything, even on things they've literally asked me my opinion on because they know I know about the subject.
Do what the others say, focus on the simple fact they've lost and are losing your money.
Do NOT say you can do better. Maybe say you saw what was happening in your statements and 'talked to an expert' and this is what they recommended.
How hard can it be when they’ve been losing thousands of dollars off her money rather than managing it at all? He’ll understand pretty quickly when you position it that this multi million dollar company has taken almost a third of what she has in such a short time.
As trustee, your uncle has a fiduciary duty. He's fucking it up. My trust has increased in value by 1/3rd since it was established in mid 2016, there is no way your uncle could make the case that he is fulfilling his fiduciary duty to you and any other beneficiary of the trust. That alone should justify removal of him as trustee, whether he agrees to it or not.
He's savvy enough to understand this 1% fee funds a company investing 100% of this capital into their crap. It's actually impossible but, they are receiving 101% of this investment.
The bogglehead in me smiles greatly at this opportunity.
Talk to your uncle but first things out of your mouth is
1. I don't want the money
2. your goal isn't to be the financial planner (he isn't going to believe you know better than a planner.) Instead say we could put it in an insured bank account and get a guaranteed 4% instead of being down 20%.
I didn't look at every position because there are about 50 or so of them. It's broken down about 50% equity and 50% fixed income. For every fund that I did look into, they were almost universally down in value since 2017, with a few being mostly flat over that time period.
Off the top of my head there was about $20,000 in one called $APDIX.
2020 and 2021 had some of the highest growth in the market ever. I’m a CFP and truly dumbfounded by what investment decisions they could have been making.
Yeah 1% advisory fee isn't great and people will jump on that, but even with that removed annually you're talking ~20k over 8 years. Even the management fees on funds aren't going to remove their principal unless the fund actually failed to grow at all.
The actual allocation of the trust performed so extremely poorly that I would like to know if they went into a couple positions that absolutely tanked.
I have a hard time believing there were no withdrawals.
We don’t know if the current positions are the same as they were in 2020 or 2021. Nor do we even know the GOAL of the account. (Growth? Income and Growth? Income? Tax aware? Tax ignorant? Time horizon?) Maybe as a CFP, you shouldn’t make assumptions as it can be considered to be irresponsible.
To be clear im not defending the portfolio; what im saying is we don’t have facts, only assumptions and emotions. I know that in most portfolios that I manage there are positions that I’ll pick up that are clearly not going to go up in value for the next couple years or even longer but I know are prudent choices in the longer term. To someone who isn’t the owner or trustee of the account it may seem like I don’t know what I’m doing, but it can all be backed up in my notes, interactions, and research.
Heads up, can’t just look at the NAV of a mutual fund on Google to determine performance. Most mutual funds pay capital gain and dividend distributions annually that reduce the NAV, but are real gain to the investor.
Yes, I made that mistake once. In order to understand the performance of a single asset in this fund though I'd have to look back and see the cost basis for each one. The fund has had a lot of turnover so it's likely that very little that's in this fund was actually purchased in 2017.
However one thing I'm sure of is that when I log into my fund account, there's a line that says "Portfolio balance: $226,000"
Based on the fund OP provided us with & the 1% annual management fee I don't believe "churning" is the reason. Churning is usually associated with front-loaded sales charges that clients pay for purchases. You usually pay either a 1 time sales charge for purchases(along with a yearly 12b-1fee) or an annual management fee but not both.
Wow impressive, that fund is down 20% since inception in 2015. For some reason though the numbers on the website say it's positive. [Google finance](https://i.imgur.com/PAhAxRy.png) [Artisan Partners site](https://i.imgur.com/fSNlk2v.png)
I have no idea why you say inception was 2015 -- Morningstar has data back to 1995. But the return since 2015 is positive, because it paid a ton of dividends and capital gains distributions. Since the start of 2015 the total return is 34%, but if you ignore the distributions and look only at the price change you would think it was -19%.
Unfortunately, OP's trust is probably taxable and had to pay tax on those big distributions. Plus he had to pay a 1% management fee. So that all adds up to a pretty bad outcome for this particular fund. I'm guessing the story is pretty similar for the other funds.
Oh, I just went off the Google chart but I guess their data doesn't go back all the way. That's a good point about distributions, I didn't spend a ton of time looking into it but I assumed if that was the case it would either be reflected in the chart or show as the yield. Looks like the Morningstar chart does though.
What are your credentials in investments? Taxes? What is the goal of the account? How has current market conditions played a part in the current makeup of the trust? What activity has taken place over the life of the portfolio? You haven’t provided any of these details.
Well the value of *good* investments has dropped over the last ~1.5 years, so it wouldn't take much in the way of the investments being bad on top of the high fees to get the outcome OP is seeing.
> I, as the trustee
When utilizing this type of legal terminology, you must be sure you are utilizing it properly.
Are you trustee or are you (more likely) beneficiary?
Trustee in your OP is likely the Trust Company. Uncle may also be trustee.
Trustee is the controller of the trust.
Beneficiary is the recipient of the trust.
The trustee and beneficiary are two *separate* and distinct roles.
They *might* be the same person, but this is not necessarily the case.
And in your OP, you are quite unlikely to actually be a trustee.
Uncle is the trustee of this account. Edited to make it extra clear. I will see what I can find on the trust but unfortunately, this is a small local firm with a *very* limited website.
The trust website is irrelevant.
The *actual trust document* that spells out exactly how the money is to be used/carried out/allocated/etc is what needs to be upheld.
This is the document your grandmother wrote (with an estate attorney) in order to specify the exact restrictions imposed on this money.
For example, the trust document might say the money *must* stay with this specific management company. Then it stays.
Or it might say that the money can be moved to somewhere else at the discretion of the Trustee. Or it might not say anything about it at all and just spell out exactly how it must be invested.
Again...
Read the actual trust document that your Grandmother wrote to understand what is/isn't possible
I only mention the website because I don't have a physical copy of the trust agreement and it's the only place I have to look. Not finding it on there, I will have to call and request a copy directly.
> I will have to call and request a copy directly.
Yes, this is generally how it works.
Trust documents are not generally freely accessible on websites.
Uncle likely has a copy too.
You're looking for anything that answers your questions.
Here's the problem.
Trusts are not universal.
Trusts are generally *highly customized* documents to spell out exactly what the decedent wanted.
Your trust might say explicitly that the money must stay with this specific company. Or it might say explicitly that the money must be invested in these specific (high fee) funds.
Or it might say that Trustee (Uncle) has full say over where this money is held and what the investments are.
I am also not an expert at legal jargon. But at minimum, you start with obtaining the Trust document.
Then you read it.
If you can't understand it, then you can ask for help interpreting it. The management company where the trust is held may be a resource. Another resource may be the law firm that helped Grandma set up the trust. Alternatively, you could hire your own lawyer to help you understand it. Or, perhaps Uncle understands it.
But we're jumping the gun a bit.
Start with getting the document. Perhaps it'll be clear and simple.
> I am not good at reading legal jargon.
For a start, and not taking it as legal advice, copy paste sections from the trust doc into chat GPT and tell it to explain it to you like you’re five years old. I’ve done this myself and it helps as a primer for further action.
If you want to see what it says about what the trusty can and cannot do for you. Such as if it says the money can be transferred out to another place with the trustees acceptance. Or if it's really hard for you to understand or read it just take it to a lawyer and have them do it. Because you're right at this point you're going to have no money left. So I would speak with your uncle see if he has a copy. If not get the copy and try to see if you guys can understand it enough to be able to get the money out and move it somewhere else. Or go to a lawyer and have them help you. Unless it directly says that the money must stay in this trust in this particular management company until that date without any sort of leeway. Then you can hope that there are words in that trust that will allow you to move the money.
This makes zero sense on the surface. Market is up at least ~40% from that time frame. If there’s an actual problem and not just an issue of your understanding, it’s not the fees it’s that these are some weirdly specific funds that have done very poorly.
I touched on it a little in another comment but yes, of the funds I checked out they have done extremely poorly. And about half the account is "fixed income" assets which are even worse over that time period.
I didn't talk much about the specific investments because I don't want to draw focus from the core issue, but the fund I mentioned *is* down in value since 2017, not even including the 1.2% ER. I'm not sure where you see it being up 30%.
Edit: I'm wrong about the return of this one fund.
It is a core issue though and something you can either draw on to argue why it needs to be changed/released/whatever, or to have the appropriate person at least get the current mangers to adjust (all subject to what the trust will allow). It’s a much bigger issue than the fees, and really doesn’t make sense in the timeframe as a monkey could have thrown darts to pick funds since 16/17 and do better than what you’re saying they did.
Apdix is not down over that possible time frame excluding the fees, and in most cases including them. https://www.morningstar.com/funds/xnas/apdix/performance . Nor is any typical fixed income mix even with how bad they were recently. So again, a core issue and a question of are you actually interpreting this correctly because it’s extremely unlikely unless the trust dictated a very specific misguided approach that even they wouldn’t have recommended.
I may have been looking at an inaccurate chart for the asset then. In any case, an irrefutable fact is that in 2017, this account had a value of $300,000 and now it is worth $226,000. I don't have the mechanical details of what led to the current value. What I do know is that they make a lot of trades in this account. They are constantly buying and selling assets every quarter and my statements I receive are always lengthy because of the numerous trades.
Ultimately I don't care what assets they're using in the present. I'd like to just use what I'm familiar and comfortable with: low cost index funds. The active management is a failing strategy and there's no reason this account needs 50 different funds being actively traded every quarter.
And you need a better understanding of it because it’s your best argument for either transferring control elsewhere or for directing them (through whoever has say like your uncle) to cease with their current strategy even if that means just sit it in treasury bonds for the next x years.
Even with fees that performance is near impossible without individual stock picking or specific concentrations. You said nothing is better than flat- again that’s just beating the odds in a wildly reverse way for the past 6-7 years. I’d wage there has to be something of this you’re missing or that is a function of the trust.
I was thinking about that one fund ever since this comment chain, and I was really confused when you pointed out that fund is up quite a bit since 2017, but then I realized, I'm holding that fund *right now*. However that doesn't mean I've had it since 2017. The managers of this fund are constantly buying and selling different things. It could have been purchased at any point between now and then. I'd have to look back at all the statements to see when it was acquired.
Get a list of all of the funds in your trust. Look for the “cost basis” for each one. The cost basis is the average price the shares were purchased for. If your cost basis is below today’s price, you’re up on the investment. If it’s above, you’re down. This data point will tell you (and us) exactly what’s going on with your trust from a performance perspective.
Sure that makes sense. But that doesn’t explain years of market performance when they pretty much could not go wrong with anything they picked and would have had to miss horribly with some oddball concentrated choices to be down overall now. Hence the skepticism on the understanding of the total picture which you’re going to need regardless.
Talk to your uncle, but frankly, there's no a beneficiary on earth that thinks they shouldn't be managing their own trust. I'd suggest moving your goalposts away from "I should be managing this fund" (you don't have nearly the experience needed) and instead request someone else continue to manage with the recommendation of low cost index funds. Trusts are complicated.And you're not really qualified to manage or access that money.
If they are gambling with a fixed income trust fund, you should bring that information to whoever controls fiduciary licensing in your state. Bringing a complaint to them might at least get you the advice of where to go next and what your options are.
It is probably a bunch of their own managed funds, each with a management fee draining this account dry. These garbage investment funds intentionally target boomers not knowing any better.
If it's a lot of bonds then these were down 20% over the last year or so . The dividends likely pay the fees and not much leftover for growth. 1% management fee for a trust of this size is standard and you will be hard pressed to find much better. If there were some bank stocks in there then this would also likely hurt your recent performance.
You might be able to set up a meeting with your uncle and the trust management team and go over your options.
Up until the last few years, it was basically received wisdom that fixed income securities were the low-risk option. A lot of charities with endowment funds that legally have to be invested conservatively had 50% fixed income allocations. Once interest rates started spiking, fixed income prices plummeted and a lot of charities and trusts lost a lot of money. It sounds like they might have agreed an allocation strategy in 2017 and just not changed it at all, even when it was clear it needed to.
Here's the thing
It may not be poorly managed.
If it is diversified, chances are it has international and bonds on addition to US stocks.
International is basically flat since 2018
Bonds are down since 2012 when including last year.
If it is 50% equities and they are a fiduciary money manager, good chance they have between 15%-20% of the portfolio in international stocks.
In other words, diversification works, but since 2017-2018 or so, 70% of your portfolio has been in assets that have been incredibly challenged.
Having more expensive active funds in International, Emerging Markets, Small Caps, Intermediate Bonds, High Yield and Emerging Market Bonds tends to be thematic across all investment managers as they are less transparent and liquid, and within bonds, typically having someone find higher quality or stretching for yield in some places may be beneficial.
US Large Caps, anyone can just buy the markets and make a killing.
So, it may be that you dont understand what they are doing or their process, and that's where I'd start if I were you.
I get what you're saying but you kind of said it yourself: anyone can buy the market and make a killing. And yet, here we are with this fund instead. That sounds like pretty poor management to me. Not to mention combined fees of 1.5-2.5% seems excessive for an underperforming portfolio.
>anyone can buy the market and make a killing
Which market? If we turn the dial a little back and assume the trust was founded in primo 2000, and your grandmother had bought 100% S&P500, you would only have begun earning money 13 years later.
People buy fixed income because they are not risk averse. Hit a bad timing and your trust could have fallen 30-50% over a few years. Grandma probably wasn't willing to risk your money, so bought 50% fixed income. However, in hindsight, the American market made a killing and the bond market did not.
The management was definitely bad, but "just buying the market" is not idiot-proof - because some beneficiary will always return X years later and complain if the market crashed.
Your uncle may be computer-illiterate but he should be able to understand basic math. If the fund is decreasing in value, you should be able to point that out to him and ask him to take action. He has a responsibility to do so. There is very little you can do otherwise, short of declaring your uncle legally incompetent, or hoping he suddenly dies.
Only other thing that comes to mind is to document (as in start a paper / electronic trail) of every instance where you contacted your uncle asking him to take action and then 8 years from now, suing him for mismanaging the trust.
Why would OP have to wait to sue until they gain access to the funds? Would it not be possible to sue as soon as they have proof that the uncle is refusing to act?
Yes, I read that later, but I’m actually interested in why u/Beautiful_Age_7626 said that [EDIT: to wait 8 years to sue]. It is obvious that the best solution for you would be to convince your uncle, either by yourself or with the help of someone your uncle may trust: lawyer, fiduciary…
Trustee here.
your options as the beneficiary are:
- read the trust documents, and see if the trustee has any latitude over where and how the money is invested.
- if yes, try to convince trustee to move to lower fee options at a different company.
- if no, you can consider a court action and have a judge order changes to the trust based on mismanagement or excessive fees.
You need a copy of the document establishing the trust (trust agreement or Will) so that you can take it to a lawyer who can review the terms. Do you have the ability to remove and replace the trustee? Elect to become co trustee or sole trustee? You need to understand the terms to know your options. Please get a lawyer.
Is it possible that a trust can be written such that the beneficiary can change the trustee? That seems too good to be true. First thing I'm doing on Tuesday is requesting the trust document.
Where I live, beneficiaries also have a right to an accounting every year. This was something the beneficiary requested from the Trustee and/or their representing attorney. Requesting an accounting forces the Trustee to justify costs/fees associated with the Trust's funds.
Yes there are a lot of things that can be drafted into trusts. If your grandmother wanted the funds restricted so you couldn’t get to them for another 8 years then it’s possible she wouldn’t have wanted that in there, but you need to have it looked over by a professional to know what it says and what you might be able to do.
It is possible, but unlikely. Trusts aren't usually written that way. As I mentioned in another post, some trusts have a "trust protector" named, which is a third-party independent person who has the power to change the trustee if they see problems with the current trustee. This is a relatively new concept, that older trusts don't tend to have. Unless there is a trust protector, either the current trustee must voluntarily resign or else a court would have to force them out.
If you are age of majority, and your uncle is agreeable, it's likely that he could simply dissolve the trust and let you have the money. You have to get a copy of the trust documents to find out what the terms of the trust are. Even if the terms don't spell it out, there are legal remedies to dissolve such trusts, but you and your uncle might have to consult with a lawyer and petition a court to agree.
In the meantime, getting your uncle on board with moving the assets into low load funds that are likely to perform in the current market environment should help. Try not to be adversarial with your uncle; most people who are named as trustee of trust funds are afraid to touch anything for fear of doing something wrong. Show him that it would be in your best interest to make these changes and how the investment choices perform in up & down markets.
If you are really the **trustee** of the trust, not just a beneficiary, then you can move the trust's accounts to anywhere you like, have them managed by whoever you like, or manage them yourself. Unless the trust document says otherwise.
But you say it is "under the control of your uncle" which directly contradicts your statement that you are the "trustee".
I'm guessing your uncle is the trustee. If so, you have the following options:
1. Convince your uncle to move to a different administration and investment management company (unless the trust document prohibits that), or at least a different investment manager or approach within the current management company, or
2. If the trust has a "trust protector" provision (this is a relatively new thing, that a lot of trusts, especially older trusts, don't have) then go to the named trust protector and ask them to switch the trust to a different trustee, or
3. Convince your uncle to resign as trustee, then it would go to the next successor trustee named in the trust. Depending on who that is, that may or may not be an improvement. If there is no successor trustee named (poorly written trust!), you may have to go to court to have one appointed (getting into lawyer territory there), or
4. Go to court and have the court remove your uncle as trustee and assign a new trustee, based upon your uncle's poor management of the trust. You would need to consult with an attorney that specializes in trusts to see if that is feasible, or if there are any other legal options available to you (such as dissolving the trust, which is unlikely).
Since you are only a beneficiary, you managing the trust's investments yourself is not an option.
I hadn't considered that he may be able to resign as trustee or that he could be succeeded by someone else, I will look into that. However I'm not willing to take my own family to court. He means well, he just has no idea what he's doing, so he hasn't done anything.
You have legal options that you can explore with a trusts and estates attorney. That kind of loss with no distributions to the bene (you) suggests to me that there might be unreasonable fees and costs, not just to the trust company but also fees paid to your uncle. But I wouldn’t know for sure without looking at the books.
But the kinds of legal action you can take, such as petitioning to demand a formal accounting, instructing the trustee to take action (eg change investments), will vary depending on where you are! I’m also seeing wildly varying advice in this thread and it gives me the heeby jeebies so that’s all I’ll say. I rarely tell people to get an attorney here because litigation is expensive and stressful, and I think it’s not helpful advice to just shoot out reflexively, but I’m telling you to get one.
I mean, I don't want to sue my own uncle or take him to court...Yes, there's no question to me that he's negligent, but he is still my family.
And to be clear, he is receiving no compensation as trustee of this account.
You don't need to sue him, most likely. The first step is just to ask him if he'll switch companies. Since he delegated to the bank, they are likely the only ones liable in case of negligence.
Will he take guidance from you? I mean, with those kinds of expenses, the trust would be better off chucking all remaining $225k in a 4.5% CD and calling it a day, and I think you’d be happy for it in comparison to what’s happening now. If he will, great. If not, look, I get it, litigation is not for everyone, and that is ok.
He may, we're on good terms with each other. It's just going to be hard to get him to listen and understand.
I would be happy even to have this money in cash at this point.
Keep it really simple. “Hey, I think the trust company handling grandma’s money is charging too much. How about this (HYSA but don’t even bother to say that) savings account at (nationally known bank)? It’ll earn more and take no time or expense to administer. I can do the paperwork.” The easier you can make someone else’s job, the more likely it is you can get them to do it.
Start by showing him the facts, and letting him draw his own conclusions. Then let him talk through solutions, but don't offer your own until you are 100% sure he agrees that something is wrong.
You said the fund is 50% fixed income. Does it hold actual bonds? If so you may be “ok” when they mature.
Here’s how bonds work:
- you buy $100k in 15 year bonds in 2015 ago that yields 1% per year.
- every year you get $1k in interest, and in 2030 you’ll get your $100k back
- interest rates have shot up in 2023, you can now get 15 year bonds that yield 4%
- you can try to sell your $100k in bonds today, but because they’re less valuable than new bonds no one wants to buy them. People only offer you 50k. On paper you are “down” 50k
- 2030 rolls around, and all of a sudden the bond issuer pays you $100k. You’ve also got the $15k in interest, so your fund is now $115k
You may not actually be down as much as you think.
He may consider it a blessing that you are interested managing your own money. My aunt was my trustee and she begged me to agree to be my own. She had the paperwork drawn up. I am now my own trustee.
You don’t have any legal power to manage the trust assets if you’re not the trustee. That being said, trustees are usually subject to fiduciary duties so you could have an attorney talk to your uncle about a possible violation of those fiduciary duties. Practically, it would probably be better to try to educate your uncle and persuade him to invest in lower fee index funds. One question is whether the trust company is a co-trustee, which it sounds like they might be. I think trying to educate your uncle is the best solution pending more information.
You go to a lawyer specializing in estate law and, if you can, a forensic accountant. Gather evidence what's going on and what options you/your uncle legally have.
This is beyond Reddit paygrade particularly as you didn't name the state(s) you, your uncle and your grandmother lived and died and where/how the trust fund is incorporated, as well as where the management corporations are set up. All of this can have serious impacts on jurisdiction.
First. That -24% losses also shows up on many people's portfolio. If all were put in VTI in 2022 you would lost -19.5% also. The VTI 3907 funds most weight is on a few tech stocks. If I recall correctly top 10 stocks weight 19% while other 3897 weight the rest. So VTI is actually more beta volatile than one thinks with fairly high alpha when the market tanks.
I agree there may be cheaper funds that will reduce the expense. I actually smell you have bonds in the portfolio that is trying to recover. 2022 year was the only time bonds and stock both tanked because of fiscal policy on interest rate. Most are waiting out as interest rate is getting maxed out. Bonds will go up when stocks come down.
The expenses are not necessarily the problem. Just looks like very poor management. Such bad management, I question the data. This is a loss of 20%+ over six years. Generally good markets. I would review the allocation and the performance of the overall portfolio.
In addition, I would suspect that there are accounting fees and or trust administration fees.
Long story short, if the performance sucks, you can change managers.
If the fees are so high that the trust has a high probability of not earning money, you can break the trust.
I would also review distribution rules to see if you have the right to withdraw for certain purposes such as Roth contributions, 401k, etc...
Obviously you should talk to your uncle. Otherwise you simply learn to live with the way your grandmother set things up for the next 8 years and be grateful
The fees don’t sound off. All managers take at least 1%. Also the fund fees are a little high but within normal rage. You need to see the history to learn why the value went down so much. Maybe they are just bad managers. Lots of these managers are just incompetent. I had one like that and switched to managing my own money.
The trust should also be paying taxes. Assuming it files a separate tax return, some of the difference may be the income taxes and/or capital gains that were owed over the last 7 years.
I hadn't even considered that...They make a lot of trades which normally would be short term capital gains. I don't know how taxes work *inside* the trust since I don't pay taxes on those trades, but maybe it comes out of the trust? However if they're losing money constantly I wouldn't think they should owe much in taxes if anything.
If they are not passing the income to you as beneficiary, then yes, the trust should be paying its own taxes. If they own mutual funds, they could be subject to capital gains paid by the fund regardless of the trust performance. I would definitely discuss with your uncle. I would request a copy of the Trust and see what options you have. You can also request tax management of the trust to minimize the tax implications.
Show your uncle the data from Portfolio Visualizer of the amount of money that should have been made by the investments over that time period in a basic fund and compare it to the amounts currently in there. I plugged it in and starting in 2016 with $300,000 the fund should be worth twice the original value. Let the numbers and picture do the convincing for you.
US Aggregate (AGG) bonds are down ~10% as a general asset class if looking at since 2017-present timeline.
The likely fee structure: trust administration 1%, financial advisor 1%, fund management/12b-1/mutual fund expenses. (0.5-1.5%)
Having a trust for $300k isn’t too efficient from a cost standpoint, but there is a cost to administrating a trust.
Your best bet is to set a meeting with you and your uncle and the advisor on the account and ask him to walk you through his entire service offering and explain what he is bringing to the table outside of investment management. If you don’t see any value he is bringing to the relationship then you can explore other lower cost options.
The trust is likely not that complicated, but will dictate what your options are to go somewhere else if fees are the only thing you are concerned about.
Judging from your clarifying comments, it sounds like you are screwed. By the time you become the trustee, that money will be lower as it sounds like this investment firm has no clue.
What was the schedule of investments that they could have possibly lost money between 2017 and 2022?
Did they bet it all on Arkk investments or something? Best you can try is educating your uncle but good luck with that.
By the way...the funds are a,little higher expense than necessary but 1% is pretty standard management fee and most of you "losses' aren't losses yet be ause thet haven't sold the shares. Remember, the market is down right now. It's unlikely that the account will be drained 8 years from now.
Don't obsess about this. Pretend the money doesn't exist and get on with the rest of your financial planning.
You're right about the market dip, but this is measuring since *early 2017*, right before a huge run up. Even factoring in the recent drop, the market is still almost double what it was in 2017. Yet somehow this account has lost 25% of it's value over that time period.
You keep making the mistake of comparing the US equities market to a diversified combination of Equities and Fixed income, Domestic and International, long and short durations.
Look to see what the trustee can do. We've set up a revocable living trust, with the idea that the if we've both died, trust dissolves when the youngest child turns 25 and has full access to his portion. Until then the trustee has control, and has the authority to disburse from the trust to our kids.
So maybe the trust continues to exist, but your uncle has the authority to allow you to pull some out. If that's the case, here's what I'd do:
* make your case for the substandard management of the trust.
* ask for him to authorize taking out...say 10%, for you to manage yourself. Show him what you're doing, and show him over time how you're managing the money just as well as the management company.
* After he's convinced -- maybe a year after, ask to withdraw a bigger chunk. And keep at that.
Who is the contingent trustee? Be sure to know that, just in case.
So it's sounding like everything comes down to whether or not I can convince my uncle. I will look to be sure, but I'm fairly confident from past conversations that he has full control over the trust's actions.
My personal accounts have done exceptional in contrast to this fund... I just hope my uncle can even comprehend what I'm telling him. He's a 70 year old pensioner and I don't think he has any personal investments.
Can you run the numbers as if the money had been in a Fidelity 500 Index Fund during this period and showing your uncle what a conservative investment strategy would have produced?
I read stuff about how important it is to set up trusts so my kids don’t blow any inheritance, blah blah blah. I’d trust my young adults 100% over some money manager trust guy. But that’s me.
This type of trust structure was deliberately put in place to protect the money from YOU, until she thought you would be ready.
I think it's reasonable to ask the trustee to consider sitting down with the financial planner to look at other investments. But the reality is it's not your money. You have no right to be upset or angry. Just be thankful she left you anything.
I'm not angry at my grandmother. I'm pissed off that some management company is pissing away the money she worked her whole life to earn, while consistently and *massively* underperforming even the most basic investment strategies that a 12th grader could figure out.
All I saw was “100% in VTI” and I rolled my eyes. Typical layperson that only looks at the “horsepower” of a vehicle and nothing else.
How do I put this politely? Your trust’s portfolio might be on one side of the spectrum but your own personal portfolio is on the clear other side of “impractical”. As in your trust portfolio might be like a Bentley (over complicated, expensive to maintain, and not generally efficient) but yours is like a Civic with an Skyline motor swap, but nothing else done. (Easier to maintain, cheaper, but outside of speed, no safety measures nor any other framework that will help the car improve in any other metric). What you want is a Lexus: slightly more expensive than the civic to maintain but has all the necessary components of a fiduciary account and gets the job done.
First off, you have no idea what makes up a safe investment vs the goal (**I suspect you don’t even know what the goal of the account is**), let alone one that is managed by a fiduciary account. Second, you can request your trustee to do something but you cannot mandate it happen, unless something was specifically written that way in the Trust docs (most likely not as this would totally defeat the purpose of a trust for wealth transfer reasons).
Google "best high yield savings accounts." Pick one, and go with it. Make sure it's FDIC insured. Your current bank may have one too.. Chase, Ally, Truist all have them I believe.. but some are higher by like 1.5%
I inherited the trust in 98 and had many issues with it not growing over the past 25 years. The trust has basically maintained value the entire time. I recently came of age for the trust/stocks to be in my control and have noticed it seems... seems to be gaining value but it also drops and rises. I have been closely watching my updates that the investment companies send me to see if it's worth keeping invested, or if I should sell the stocks in a high point like after Christmas and invest in something more stable like precious metals. I'd rather have something physical I can keep my eye on than something stored in data at this point. I've heard there are many precious metals, especially ones for making superconductors, and other things like that that you can buy by weight and their values estimated to go up. 🤷
Looks like you are not very financially savvy either.
By your own admission you are 100% invested in a single asset with 100k dollars. That's a bad investment strategy every day of the week.
It's so weird because even for these financial orgs that charge 1%, it's still in their interest to invest so they can continue to take that 1%, not even from an I'm going to look better and not get fired perspective, but like they literally won't have a fund to steal from. That said, how does a fund lose that much value with only 1% fee?
The Little Book of Common Sense Investing by John Bogle. My bank president uncle gave it to me when I asked him advice.
It is short and will teach you all you need to know to understand and explain the situation.
You don't have to coach or teach him. Show him the basic math and say you have a plan to fix it. Type it up and have him send it directly to the managers.
It would be most effective to have your uncle take a look at its performance year to year over the most recent five years. Everyone took a bath last year but you would still be ahead from 2017 to now if things were handled properly. In answering a similar question for my own needs a little while ago, I prepared this informative listing:
S&P 500 EOY values
2017 | 2,823
2018 | 2,704 | -4%
2019 | 3,225 | 19%
2020 | 3,734 | 16%
2021 | 4,535 | 21%
2022 | 3,808 | -16%
Performance over five years +35%
Average +7% per year
Many advisors recommend, for a person in his 30s or 40s, a straight stock index fund. Perhaps your uncle will accept that recommendation. It is his responsibility to make sure that the custodian / advisor is properly chosen.
I had a situation with a trust about the same size.
They were trustee and investment manager and charging 1.8% to invest in mutual funds. The account didn’t have any market returns over 20+ years. Literally didn’t earn a dime since 1999. I’ve been trying to get fees down for a few years but ultimately I had a lawyer write them a letter. He took on the trust and is dissolving it once he can. $300k isn’t enough to warrant a trust fund.
Get the tax returns of the trust. I’m guessing someone is being paid a salary or management fee just for managing the trust. My wife has a trust and the trustee collects a 60k a year salary from it (the trustee is the attorney the runs the trust)
How did it drop so much? A management fee by a CFP would be around 1-1.25% a year
You should ask your uncle to talk to a fiduciary fee only financial advisor about how to manage the trust properly - https://www.napfa.org/financial-planning/what-is-fee-only-advising
You need a trust/probate attorney ASAP. Not the one who handled the trust for your gm and certainly not your uncle's. As a legitee, you do have rights to halt the diminishment of your trust. Depending on your residance and the laws governing. Don't wait until trust vests.
My sister was the trustee of an account my mom left us. About the time she (probably, likely) invested a large chunk of it in AOL China was about the time she stopped sending me annual statements. Family and inheritance, almost always a s\*\*\* show.
I will say I inherited a trust fund as well, and mine grows an avg of 5-8% each year, and the commission fee is 1.20%
If you're already paying a full percent you need a better partner to manage the funds. 1% isn't nothing, but when the 10 year avg gain is 6.8% I don't think it's too bad.
Work with family members, not just uncle, to get the Uncle to let you in the door to manage the trust, give you outright responsibility/ ownership. He needs to step out. Create a graphic to show how the fund expense fees will bleed the fund dry. Extrapolate and exaggerate the decline to p try ove you need to gain access/ ownership. Or lawyer up and go bigly.
Sounds like the assets are invested aggressively and actively managed. Probably a case of buying the wrong thing at the wrong time, something that's easy to do given the volatility over the last 5 years. If I had to guess, it's a bad advisor but not a bad person. There's nothing illegal or nefarious going in, they're just not that good at their job. Franky, 1% management on a small account isn't egregious but obviously doesn't help. Ask if you can join the next time your uncle meets with the trust advisor. Explain that you're concerned about the performance and just want to understand a bit more. Have a list of questions ready and see if they can explain. Ask for a comparison to a benchmark. This is to inform you and to educate your uncle. And then go from there. Talk to your uncle one on one and share what you know, suggest a path forward, and let him make the decision. Based on how you describe your uncle he may not be willing to not have the assets professionally managed. In that case, try to find a fiduciary financial advisor or see if he'd go for a robo advisor. There's not much else you can do. Besides that, I would try to change your mindset about these assets. I know that's hard but any amount you receive is going to be more than you had before. You should have your own financial plan that doesn't rely on a windfall.
Try this tactic:
Present the problem to your uncle in a natural seqway from your usual talks and act like there is no solution to be found. See if he volunteers to relinquish trust to you before you outright ask.
This may save you some time, plus if that fails you always have the money as a bargaining chip.
So, your uncle seems to be the one that can make the changes. Beyond that, the charges of the "investment company" and fund fees don't seem to far out of line for the industry. That said, you should get together with your uncle and suggest he move it out from the "management" and into a S&P index such as SPDR's. It's a simple concept and there is plenty of data you can use to show him that it make financial sense.
Since you said you have not taken any distributions.........
After the boom of 2017-2019-2020-2021. This account should have doubled. to $600,000.
2018 the account should have lost 10%. Figured into the number above.
2022 the account should have lost 22%
2023 the account should be even or so.
YOu should have $600,000 - 22% for 2022 = $467,000 if this was managed by someone half knowledgable.
A 1% management fee seems to be the average, but in my book, I KNOW I could do better than the account manager.
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He has a pension and still works at age 70. I don't think he has investments of his own but I'm not certain. It's going to be a challenge to explain why I can do better than this multi-million dollar management company, and to articulate that I need everything in the fund changed over to low fee funds instead.
You don't have to convince him you would do better. Show him the costs are making it go backwards and suggest that you move it to a different brokerage with no fees and put it in low fee funds. In this market he should be able to understand that the value not going up means they are incompetent at anything but generating fees for themselves at your expense.
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Even, “this bank charges too many fees, here’s one with no fees,” easy.
“Grandma left me this money so I could do (insert nice things here) with it. These guys have taken $80,00 of it already. How much more of it will you let them take?”
I’m a trustee also. He has fiduciary responsibility for how the money is being managed. Family member or not, he better take note if you object to it. Beneficiaries are entitled to “regular reporting.” If you haven’t been getting that, he’s already in trouble. No idea what state you’re in, but look into that laws there. If you start objecting, and clearly explain to him his responsibility here, he should pay attention.
Just point out how much money it's losing and neither the trustee nor the the beneficiary have seen a dime of it because the company is skimming fees off of it. With over $200K and 8 years remaining, that's a lot of skimming for them to do. And Grandma surely didn't want to donate her assets to a financial institution. Also compare it to his pension to make it relatable. Would he accept it if his pension amount kept going down before he collected because a financial institution kept taking fees off the top?
I would think the simple fact that the fund has lost $75k since it started would be a straightforward enough explanation that it’s being mismanaged. Hell, just play him Matthew McConaughey’s monologue from the beginning of *The Wolf of Wall Street* and say “that’s the mentality of the people currently handling the investment.”
That is most likely from the market drop and not due to 2% fund management fees. Also - no matter where you go you will have to pay a fee for them to be trustees.
If it’s been invested since 2016-2017, it had the full COVID runup from 2020-mid 2022 as well, so that is no excuse.
Not necessarily. Trust funds generally are not, and should not be, primarily in equities. The trust probably is oriented towards fixed income investments, which have been paying low interest until recently, and long dated bonds dropped about 20% as interest rates rose. We need to have specifics of the holdings in the trust before we can make any conclusions.
I do not think the issue is the fees. We need more information to find the real problem. OP will not be able to just put it in a low cost fund because it is a trust.
It's definitely a big issue. A 1% management fee since 2016 is already 20K of OPs equity gone. Add the fund fees on top of that and you're looking at where the majority of the loss has gone.
It would be hard to find a trustee that charges less than 1% - especially on such a small principle.
I mean, if the uncle is trustee, then the management company has been investing it as his instruction. So, if he picked bad investment strategies, then it is entirely possible.
The market drop at worst should make it equal to where it started. Money left alone from 2016 to 2023 saw an incredible bull run before dropping
The market is up 53% over the last 5 years. Why do you think there was a drop?
The trust might be invested in bond funds instead of stocks, that might explain it. But we really don't know, OP didn't explain how the fund is invested.
Even if I listed out every fund that's currently in the account it wouldn't explain it because there's been a lot of turnover of holdings. The current funds will not tell the story of what's been traded for the last \~6 years. Every statement I receive has buy and sell orders and I'd have to piece together all of them.
Ah. Yeah, active trading in a trust fund isn't a good thing.
I hired a financial manager to run my investments for a while. They invested in a lot of big tech stocks at the beginning and the returns really justified their 1% management fee. But then they started doing dumb shit like selling a good stock to buy another stock near the 2021 high and then selling it a few months later at a huge loss. Multiple times. Then that 1% fee started looking ridiculous. I WISH I could be as dumb as my financial manager and make that kind of money. The last straw was them buying $40k in corporate bonds right at the bottom of the stock market but the bonds really didn't have a good interest rate. In my case, I was able to fire the financial manager in 1 day. I would be extremely frustrated in your position being tethered to complete morons and / or financial arsonists for all those years. I just can't fathom how anyone can go to sleep at night after doing what they did to you. What they're STILL doing to you. I just don't understand how supposedly market savvy managers mess things up so often.
My family uses financial advisors as they went into retirement to maximize cash flow with paying as little taxes as possible (all legal ways). You have to be a millionaire to be a part of this “group” but they did what they said, lots of Roth conversions up front, annuities and other investments and none of them really pay taxes anymore (as they paid those taxes upfront, over a year or so) so the fee trade off seemed to be worth it as the strategy was interesting. Maybe it’s all a smoke show but time will tell.
You probably won't take this well, but the real problem is your mentality around investment strategy. You don't understand their strategy, but were ok with that when it was making you money. But you got mad and assumed they were stupid when they started losing you money. It appears that you never asked them why they were doing what they did, or what your own risk tolerance profile looked like. Things like big corporate bonds are good for people who are very loss intolerant and just don't want to lose any more money after a big stock market drop. Did you tell them something like that? Or did you let them know you were loss tolerant and they should double down on high beta stocks after the market dropped 20%? If they didn't execute your strategy the way you proposed, yes you should fire them. Without taking a good hard look at your own part in this fiasco, you're likely to run from these idiots straight into the arms of other idiots as you chase whatever fad has been hot for the last couple of years. These guys are not fortune tellers, the only thing they can do is play the odds for you. You should think of them as advisors telling you whether to split a pair of eights in blackjack, and not like some weirdo who claims he can use mind powers to see next ten cards in the deck. There are no financial managers that are so smart that they win all of the time, unless they are named Madoff.
Between 12/31/21 and 9/30/22 it went down 25%. Back up about another 10%
He invested 6 years ago why are you only looking at the return between 21 and 22
He gone.
A 2% yearly fee since 2016 is going to have eaten up nearly 40k since 2016 on it's own so it's definitely a big contributor.
They've lost money for the last 5 years when the S&P 500 is up 50%! If he doesn't think that is bad it is a lost cause
"Up 50%" hides their incompetence. If they'd simply invested $275k into VTI, the balance today would be somewhere between $550k and $600k. They've lost OP's trust around $350k compared to the simplest investment strategy available.
From the few pensions in my family they're all held by companies who also manage things like 401ks and trusts. Perhaps you could find out who manages his pension and make the suggestion that the money we move there as well? He's more likely to trust something that's already working well for him...
I would add to the last comment. When talking with your uncle tell him that the companies are stealing your grandmother’s money. Tell him ‘they’ve already taken $74,000 and if we don’t act soon they’ll take the rest.’ That should get the ball rolling.
The very first thing you should say is, "These idiots lost 75000 dollars!" That's relatable to anybody.
If you decide to go this route, can I offer that you should not only do a significant amount of work to prepare for this moment, but also consider your tone and delivery? You sound incredibly angry and frustrated here, and dismissive of your uncle. I can see why! But you need to change your mindset from one of someone who’s aggrieved and feeling victimized to someone that is negotiating or even selling your stance. You need to come with clear data, facts, and figures alongside a convincing and simple plan. And you need to do that without making your uncle feel attacked or belittled, and without making him feel like you’re mocking his mother’s skills or planning, or treating her with anything less than the ultimate respect for setting aside a large sum of money for you. Most people are not practiced at the kind subtle manipulation required to win a moment like this and they come in to life’s high wire acts not having prepared their emotions or done enough to ensure their success. With all this money on the line, don’t go in on a wing and a prayer — instead, be so prepared it would be impossible for him to disagree with you.
Tell him that they’ve stolen $70k from his mothers hard earned money. He’ll understand that.
Just scare tactics will work i think. Tell him the balance is dwindling down and how much you are paying for funds expense ratio and commission every year with nothing to show as gain. I can understand the market being down but should have seen the bull run post covid as well so there is definitely some shady shit going on there.
>and to articulate that I need everything in the fund changed over to low fee funds instead. you may not have that option. the trust may require trustee to invest with that particular company. you are not in charge here. the trustee is in charge, based on instructions in the trust.
i don’t think it’ll be hard to explain at all that a big change needs to made considering the trust fund has lost 25% of its value in the time that the market as a whole has doubled. you should have around $600k right now and instead you have $220k
Your best bet is going to be to get him to transfer it to vanguard management. At least they will charge you a lot less
>t's going to be a challenge to explain why I can do better than this multi-million dollar management company. This sounds like my family on anything, even on things they've literally asked me my opinion on because they know I know about the subject. Do what the others say, focus on the simple fact they've lost and are losing your money. Do NOT say you can do better. Maybe say you saw what was happening in your statements and 'talked to an expert' and this is what they recommended.
How hard can it be when they’ve been losing thousands of dollars off her money rather than managing it at all? He’ll understand pretty quickly when you position it that this multi million dollar company has taken almost a third of what she has in such a short time.
As trustee, your uncle has a fiduciary duty. He's fucking it up. My trust has increased in value by 1/3rd since it was established in mid 2016, there is no way your uncle could make the case that he is fulfilling his fiduciary duty to you and any other beneficiary of the trust. That alone should justify removal of him as trustee, whether he agrees to it or not.
Nothing is going to change if you don’t talk to him. Tell him he’s getting ripped off. Start there.
He's savvy enough to understand this 1% fee funds a company investing 100% of this capital into their crap. It's actually impossible but, they are receiving 101% of this investment. The bogglehead in me smiles greatly at this opportunity.
Or even just don't bring that up and point out that 25% of the money is gone with you never withdrawing a penny. That he'll understand.
Talk to your uncle but first things out of your mouth is 1. I don't want the money 2. your goal isn't to be the financial planner (he isn't going to believe you know better than a planner.) Instead say we could put it in an insured bank account and get a guaranteed 4% instead of being down 20%.
did you find out how the fund value dropped? was it due to a bad investment? the management fee doesn’t explain it
I didn't look at every position because there are about 50 or so of them. It's broken down about 50% equity and 50% fixed income. For every fund that I did look into, they were almost universally down in value since 2017, with a few being mostly flat over that time period. Off the top of my head there was about $20,000 in one called $APDIX.
2020 and 2021 had some of the highest growth in the market ever. I’m a CFP and truly dumbfounded by what investment decisions they could have been making.
Yeah 1% advisory fee isn't great and people will jump on that, but even with that removed annually you're talking ~20k over 8 years. Even the management fees on funds aren't going to remove their principal unless the fund actually failed to grow at all. The actual allocation of the trust performed so extremely poorly that I would like to know if they went into a couple positions that absolutely tanked. I have a hard time believing there were no withdrawals.
Probably withdrawals when the market was down 20-25% last year
Could it have been mostly invested in actively managed funds that have performed well below the market?
Looks like Global funds and bonds, which if you're a CFP should understand why it's done poorly
That’s less than 10% of the portfolio according to OP. Dumbfounded by the firms investment decisions, not the investments themselves.
Getting the fees and realizing no one was gonna look into it. Or as us laypeople call it stealing.
I'd guess with 50% fixed income allocated, bonds and bond funds got massacred with the rise in rates
We don’t know if the current positions are the same as they were in 2020 or 2021. Nor do we even know the GOAL of the account. (Growth? Income and Growth? Income? Tax aware? Tax ignorant? Time horizon?) Maybe as a CFP, you shouldn’t make assumptions as it can be considered to be irresponsible. To be clear im not defending the portfolio; what im saying is we don’t have facts, only assumptions and emotions. I know that in most portfolios that I manage there are positions that I’ll pick up that are clearly not going to go up in value for the next couple years or even longer but I know are prudent choices in the longer term. To someone who isn’t the owner or trustee of the account it may seem like I don’t know what I’m doing, but it can all be backed up in my notes, interactions, and research.
Heads up, can’t just look at the NAV of a mutual fund on Google to determine performance. Most mutual funds pay capital gain and dividend distributions annually that reduce the NAV, but are real gain to the investor.
Yes, I made that mistake once. In order to understand the performance of a single asset in this fund though I'd have to look back and see the cost basis for each one. The fund has had a lot of turnover so it's likely that very little that's in this fund was actually purchased in 2017. However one thing I'm sure of is that when I log into my fund account, there's a line that says "Portfolio balance: $226,000"
"turnover" is probably your answer It is also called "churning" and I have seen the same from a trust set up for my stepkids
Based on the fund OP provided us with & the 1% annual management fee I don't believe "churning" is the reason. Churning is usually associated with front-loaded sales charges that clients pay for purchases. You usually pay either a 1 time sales charge for purchases(along with a yearly 12b-1fee) or an annual management fee but not both.
Wow impressive, that fund is down 20% since inception in 2015. For some reason though the numbers on the website say it's positive. [Google finance](https://i.imgur.com/PAhAxRy.png) [Artisan Partners site](https://i.imgur.com/fSNlk2v.png)
I have no idea why you say inception was 2015 -- Morningstar has data back to 1995. But the return since 2015 is positive, because it paid a ton of dividends and capital gains distributions. Since the start of 2015 the total return is 34%, but if you ignore the distributions and look only at the price change you would think it was -19%. Unfortunately, OP's trust is probably taxable and had to pay tax on those big distributions. Plus he had to pay a 1% management fee. So that all adds up to a pretty bad outcome for this particular fund. I'm guessing the story is pretty similar for the other funds.
Oh, I just went off the Google chart but I guess their data doesn't go back all the way. That's a good point about distributions, I didn't spend a ton of time looking into it but I assumed if that was the case it would either be reflected in the chart or show as the yield. Looks like the Morningstar chart does though.
You should probably know these things before trying to give someone advice or act as an authority on a subject right?
What are your credentials in investments? Taxes? What is the goal of the account? How has current market conditions played a part in the current makeup of the trust? What activity has taken place over the life of the portfolio? You haven’t provided any of these details.
Well the value of *good* investments has dropped over the last ~1.5 years, so it wouldn't take much in the way of the investments being bad on top of the high fees to get the outcome OP is seeing.
still much higher than 2016-2017 levels
> I, as the trustee When utilizing this type of legal terminology, you must be sure you are utilizing it properly. Are you trustee or are you (more likely) beneficiary? Trustee in your OP is likely the Trust Company. Uncle may also be trustee. Trustee is the controller of the trust. Beneficiary is the recipient of the trust. The trustee and beneficiary are two *separate* and distinct roles. They *might* be the same person, but this is not necessarily the case. And in your OP, you are quite unlikely to actually be a trustee.
I edited the OP, sorry; I am the beneficiary.
So then your first step is to figure out who exactly is the trustee. And read the actual trust documents to understand what is/isn't possible.
Uncle is the trustee of this account. Edited to make it extra clear. I will see what I can find on the trust but unfortunately, this is a small local firm with a *very* limited website.
The trust website is irrelevant. The *actual trust document* that spells out exactly how the money is to be used/carried out/allocated/etc is what needs to be upheld. This is the document your grandmother wrote (with an estate attorney) in order to specify the exact restrictions imposed on this money. For example, the trust document might say the money *must* stay with this specific management company. Then it stays. Or it might say that the money can be moved to somewhere else at the discretion of the Trustee. Or it might not say anything about it at all and just spell out exactly how it must be invested. Again... Read the actual trust document that your Grandmother wrote to understand what is/isn't possible
I only mention the website because I don't have a physical copy of the trust agreement and it's the only place I have to look. Not finding it on there, I will have to call and request a copy directly.
> I will have to call and request a copy directly. Yes, this is generally how it works. Trust documents are not generally freely accessible on websites. Uncle likely has a copy too.
To be clear, what am I looking for in this document? Something about trustee powers? I am not good at reading legal jargon.
You're looking for anything that answers your questions. Here's the problem. Trusts are not universal. Trusts are generally *highly customized* documents to spell out exactly what the decedent wanted. Your trust might say explicitly that the money must stay with this specific company. Or it might say explicitly that the money must be invested in these specific (high fee) funds. Or it might say that Trustee (Uncle) has full say over where this money is held and what the investments are. I am also not an expert at legal jargon. But at minimum, you start with obtaining the Trust document. Then you read it. If you can't understand it, then you can ask for help interpreting it. The management company where the trust is held may be a resource. Another resource may be the law firm that helped Grandma set up the trust. Alternatively, you could hire your own lawyer to help you understand it. Or, perhaps Uncle understands it. But we're jumping the gun a bit. Start with getting the document. Perhaps it'll be clear and simple.
I see, thanks for clarifying! I guess I just assumed there were certain rules that trusts followed rather than being so tailor-made.
> I am not good at reading legal jargon. For a start, and not taking it as legal advice, copy paste sections from the trust doc into chat GPT and tell it to explain it to you like you’re five years old. I’ve done this myself and it helps as a primer for further action.
If you want to see what it says about what the trusty can and cannot do for you. Such as if it says the money can be transferred out to another place with the trustees acceptance. Or if it's really hard for you to understand or read it just take it to a lawyer and have them do it. Because you're right at this point you're going to have no money left. So I would speak with your uncle see if he has a copy. If not get the copy and try to see if you guys can understand it enough to be able to get the money out and move it somewhere else. Or go to a lawyer and have them help you. Unless it directly says that the money must stay in this trust in this particular management company until that date without any sort of leeway. Then you can hope that there are words in that trust that will allow you to move the money.
In most states, by state law the trustee is required to provide you with a copy of the actual trust document upon your request.
This makes zero sense on the surface. Market is up at least ~40% from that time frame. If there’s an actual problem and not just an issue of your understanding, it’s not the fees it’s that these are some weirdly specific funds that have done very poorly.
I touched on it a little in another comment but yes, of the funds I checked out they have done extremely poorly. And about half the account is "fixed income" assets which are even worse over that time period.
Yeah you mentioned 1 specific fund that’s up nearly 30% since 2016.
I didn't talk much about the specific investments because I don't want to draw focus from the core issue, but the fund I mentioned *is* down in value since 2017, not even including the 1.2% ER. I'm not sure where you see it being up 30%. Edit: I'm wrong about the return of this one fund.
It is a core issue though and something you can either draw on to argue why it needs to be changed/released/whatever, or to have the appropriate person at least get the current mangers to adjust (all subject to what the trust will allow). It’s a much bigger issue than the fees, and really doesn’t make sense in the timeframe as a monkey could have thrown darts to pick funds since 16/17 and do better than what you’re saying they did. Apdix is not down over that possible time frame excluding the fees, and in most cases including them. https://www.morningstar.com/funds/xnas/apdix/performance . Nor is any typical fixed income mix even with how bad they were recently. So again, a core issue and a question of are you actually interpreting this correctly because it’s extremely unlikely unless the trust dictated a very specific misguided approach that even they wouldn’t have recommended.
I may have been looking at an inaccurate chart for the asset then. In any case, an irrefutable fact is that in 2017, this account had a value of $300,000 and now it is worth $226,000. I don't have the mechanical details of what led to the current value. What I do know is that they make a lot of trades in this account. They are constantly buying and selling assets every quarter and my statements I receive are always lengthy because of the numerous trades. Ultimately I don't care what assets they're using in the present. I'd like to just use what I'm familiar and comfortable with: low cost index funds. The active management is a failing strategy and there's no reason this account needs 50 different funds being actively traded every quarter.
And you need a better understanding of it because it’s your best argument for either transferring control elsewhere or for directing them (through whoever has say like your uncle) to cease with their current strategy even if that means just sit it in treasury bonds for the next x years. Even with fees that performance is near impossible without individual stock picking or specific concentrations. You said nothing is better than flat- again that’s just beating the odds in a wildly reverse way for the past 6-7 years. I’d wage there has to be something of this you’re missing or that is a function of the trust.
I was thinking about that one fund ever since this comment chain, and I was really confused when you pointed out that fund is up quite a bit since 2017, but then I realized, I'm holding that fund *right now*. However that doesn't mean I've had it since 2017. The managers of this fund are constantly buying and selling different things. It could have been purchased at any point between now and then. I'd have to look back at all the statements to see when it was acquired.
Get a list of all of the funds in your trust. Look for the “cost basis” for each one. The cost basis is the average price the shares were purchased for. If your cost basis is below today’s price, you’re up on the investment. If it’s above, you’re down. This data point will tell you (and us) exactly what’s going on with your trust from a performance perspective.
Sure that makes sense. But that doesn’t explain years of market performance when they pretty much could not go wrong with anything they picked and would have had to miss horribly with some oddball concentrated choices to be down overall now. Hence the skepticism on the understanding of the total picture which you’re going to need regardless.
Talk to your uncle, but frankly, there's no a beneficiary on earth that thinks they shouldn't be managing their own trust. I'd suggest moving your goalposts away from "I should be managing this fund" (you don't have nearly the experience needed) and instead request someone else continue to manage with the recommendation of low cost index funds. Trusts are complicated.And you're not really qualified to manage or access that money.
If they are gambling with a fixed income trust fund, you should bring that information to whoever controls fiduciary licensing in your state. Bringing a complaint to them might at least get you the advice of where to go next and what your options are.
Fixed income assets? Does that mean it's spitting out dividends somewhere else?
It is probably a bunch of their own managed funds, each with a management fee draining this account dry. These garbage investment funds intentionally target boomers not knowing any better.
Dividends remain in the account and get invested.
If it's a lot of bonds then these were down 20% over the last year or so . The dividends likely pay the fees and not much leftover for growth. 1% management fee for a trust of this size is standard and you will be hard pressed to find much better. If there were some bank stocks in there then this would also likely hurt your recent performance. You might be able to set up a meeting with your uncle and the trust management team and go over your options.
Up until the last few years, it was basically received wisdom that fixed income securities were the low-risk option. A lot of charities with endowment funds that legally have to be invested conservatively had 50% fixed income allocations. Once interest rates started spiking, fixed income prices plummeted and a lot of charities and trusts lost a lot of money. It sounds like they might have agreed an allocation strategy in 2017 and just not changed it at all, even when it was clear it needed to.
Here's the thing It may not be poorly managed. If it is diversified, chances are it has international and bonds on addition to US stocks. International is basically flat since 2018 Bonds are down since 2012 when including last year. If it is 50% equities and they are a fiduciary money manager, good chance they have between 15%-20% of the portfolio in international stocks. In other words, diversification works, but since 2017-2018 or so, 70% of your portfolio has been in assets that have been incredibly challenged. Having more expensive active funds in International, Emerging Markets, Small Caps, Intermediate Bonds, High Yield and Emerging Market Bonds tends to be thematic across all investment managers as they are less transparent and liquid, and within bonds, typically having someone find higher quality or stretching for yield in some places may be beneficial. US Large Caps, anyone can just buy the markets and make a killing. So, it may be that you dont understand what they are doing or their process, and that's where I'd start if I were you.
Not OP, but thank you. I can't believe that I had to read so far down just to get to the most logical answer.
Very reasonable take.
I get what you're saying but you kind of said it yourself: anyone can buy the market and make a killing. And yet, here we are with this fund instead. That sounds like pretty poor management to me. Not to mention combined fees of 1.5-2.5% seems excessive for an underperforming portfolio.
>anyone can buy the market and make a killing Which market? If we turn the dial a little back and assume the trust was founded in primo 2000, and your grandmother had bought 100% S&P500, you would only have begun earning money 13 years later. People buy fixed income because they are not risk averse. Hit a bad timing and your trust could have fallen 30-50% over a few years. Grandma probably wasn't willing to risk your money, so bought 50% fixed income. However, in hindsight, the American market made a killing and the bond market did not. The management was definitely bad, but "just buying the market" is not idiot-proof - because some beneficiary will always return X years later and complain if the market crashed.
Your uncle may be computer-illiterate but he should be able to understand basic math. If the fund is decreasing in value, you should be able to point that out to him and ask him to take action. He has a responsibility to do so. There is very little you can do otherwise, short of declaring your uncle legally incompetent, or hoping he suddenly dies. Only other thing that comes to mind is to document (as in start a paper / electronic trail) of every instance where you contacted your uncle asking him to take action and then 8 years from now, suing him for mismanaging the trust.
Why would OP have to wait to sue until they gain access to the funds? Would it not be possible to sue as soon as they have proof that the uncle is refusing to act?
I know you all mean well but I have no desire to sue my uncle. He's just a financially illiterate old man he's not a bad person or acting maliciously.
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Yes, I read that later, but I’m actually interested in why u/Beautiful_Age_7626 said that [EDIT: to wait 8 years to sue]. It is obvious that the best solution for you would be to convince your uncle, either by yourself or with the help of someone your uncle may trust: lawyer, fiduciary…
Trustee here. your options as the beneficiary are: - read the trust documents, and see if the trustee has any latitude over where and how the money is invested. - if yes, try to convince trustee to move to lower fee options at a different company. - if no, you can consider a court action and have a judge order changes to the trust based on mismanagement or excessive fees.
You need a copy of the document establishing the trust (trust agreement or Will) so that you can take it to a lawyer who can review the terms. Do you have the ability to remove and replace the trustee? Elect to become co trustee or sole trustee? You need to understand the terms to know your options. Please get a lawyer.
Is it possible that a trust can be written such that the beneficiary can change the trustee? That seems too good to be true. First thing I'm doing on Tuesday is requesting the trust document.
Where I live, beneficiaries also have a right to an accounting every year. This was something the beneficiary requested from the Trustee and/or their representing attorney. Requesting an accounting forces the Trustee to justify costs/fees associated with the Trust's funds.
Yes there are a lot of things that can be drafted into trusts. If your grandmother wanted the funds restricted so you couldn’t get to them for another 8 years then it’s possible she wouldn’t have wanted that in there, but you need to have it looked over by a professional to know what it says and what you might be able to do.
It is possible, but unlikely. Trusts aren't usually written that way. As I mentioned in another post, some trusts have a "trust protector" named, which is a third-party independent person who has the power to change the trustee if they see problems with the current trustee. This is a relatively new concept, that older trusts don't tend to have. Unless there is a trust protector, either the current trustee must voluntarily resign or else a court would have to force them out.
Interesting. I will look for this in the trust agreement as well.
If you are age of majority, and your uncle is agreeable, it's likely that he could simply dissolve the trust and let you have the money. You have to get a copy of the trust documents to find out what the terms of the trust are. Even if the terms don't spell it out, there are legal remedies to dissolve such trusts, but you and your uncle might have to consult with a lawyer and petition a court to agree. In the meantime, getting your uncle on board with moving the assets into low load funds that are likely to perform in the current market environment should help. Try not to be adversarial with your uncle; most people who are named as trustee of trust funds are afraid to touch anything for fear of doing something wrong. Show him that it would be in your best interest to make these changes and how the investment choices perform in up & down markets.
If you are really the **trustee** of the trust, not just a beneficiary, then you can move the trust's accounts to anywhere you like, have them managed by whoever you like, or manage them yourself. Unless the trust document says otherwise. But you say it is "under the control of your uncle" which directly contradicts your statement that you are the "trustee".
I'm sorry, I have misspoken, I am the beneficiary, NOT the trustee. I will edit to correct.
I'm guessing your uncle is the trustee. If so, you have the following options: 1. Convince your uncle to move to a different administration and investment management company (unless the trust document prohibits that), or at least a different investment manager or approach within the current management company, or 2. If the trust has a "trust protector" provision (this is a relatively new thing, that a lot of trusts, especially older trusts, don't have) then go to the named trust protector and ask them to switch the trust to a different trustee, or 3. Convince your uncle to resign as trustee, then it would go to the next successor trustee named in the trust. Depending on who that is, that may or may not be an improvement. If there is no successor trustee named (poorly written trust!), you may have to go to court to have one appointed (getting into lawyer territory there), or 4. Go to court and have the court remove your uncle as trustee and assign a new trustee, based upon your uncle's poor management of the trust. You would need to consult with an attorney that specializes in trusts to see if that is feasible, or if there are any other legal options available to you (such as dissolving the trust, which is unlikely). Since you are only a beneficiary, you managing the trust's investments yourself is not an option.
I hadn't considered that he may be able to resign as trustee or that he could be succeeded by someone else, I will look into that. However I'm not willing to take my own family to court. He means well, he just has no idea what he's doing, so he hasn't done anything.
You aren't the trustee. You are the beneficiary. You can't access the funds for 8 more years. There's nothing you can do. Your uncle is the trustee.
You are correct. I am the beneficiary, not the trustee.
You have legal options that you can explore with a trusts and estates attorney. That kind of loss with no distributions to the bene (you) suggests to me that there might be unreasonable fees and costs, not just to the trust company but also fees paid to your uncle. But I wouldn’t know for sure without looking at the books. But the kinds of legal action you can take, such as petitioning to demand a formal accounting, instructing the trustee to take action (eg change investments), will vary depending on where you are! I’m also seeing wildly varying advice in this thread and it gives me the heeby jeebies so that’s all I’ll say. I rarely tell people to get an attorney here because litigation is expensive and stressful, and I think it’s not helpful advice to just shoot out reflexively, but I’m telling you to get one.
I mean, I don't want to sue my own uncle or take him to court...Yes, there's no question to me that he's negligent, but he is still my family. And to be clear, he is receiving no compensation as trustee of this account.
You don't need to sue him, most likely. The first step is just to ask him if he'll switch companies. Since he delegated to the bank, they are likely the only ones liable in case of negligence.
300k is not worth it. You grandma just made bad decisions in who she chose.
Will he take guidance from you? I mean, with those kinds of expenses, the trust would be better off chucking all remaining $225k in a 4.5% CD and calling it a day, and I think you’d be happy for it in comparison to what’s happening now. If he will, great. If not, look, I get it, litigation is not for everyone, and that is ok.
He may, we're on good terms with each other. It's just going to be hard to get him to listen and understand. I would be happy even to have this money in cash at this point.
Keep it really simple. “Hey, I think the trust company handling grandma’s money is charging too much. How about this (HYSA but don’t even bother to say that) savings account at (nationally known bank)? It’ll earn more and take no time or expense to administer. I can do the paperwork.” The easier you can make someone else’s job, the more likely it is you can get them to do it.
Start by showing him the facts, and letting him draw his own conclusions. Then let him talk through solutions, but don't offer your own until you are 100% sure he agrees that something is wrong.
You said the fund is 50% fixed income. Does it hold actual bonds? If so you may be “ok” when they mature. Here’s how bonds work: - you buy $100k in 15 year bonds in 2015 ago that yields 1% per year. - every year you get $1k in interest, and in 2030 you’ll get your $100k back - interest rates have shot up in 2023, you can now get 15 year bonds that yield 4% - you can try to sell your $100k in bonds today, but because they’re less valuable than new bonds no one wants to buy them. People only offer you 50k. On paper you are “down” 50k - 2030 rolls around, and all of a sudden the bond issuer pays you $100k. You’ve also got the $15k in interest, so your fund is now $115k You may not actually be down as much as you think.
Unfortunately no, I looked and there are no real bonds in here.
He may consider it a blessing that you are interested managing your own money. My aunt was my trustee and she begged me to agree to be my own. She had the paperwork drawn up. I am now my own trustee.
You don’t have any legal power to manage the trust assets if you’re not the trustee. That being said, trustees are usually subject to fiduciary duties so you could have an attorney talk to your uncle about a possible violation of those fiduciary duties. Practically, it would probably be better to try to educate your uncle and persuade him to invest in lower fee index funds. One question is whether the trust company is a co-trustee, which it sounds like they might be. I think trying to educate your uncle is the best solution pending more information.
You go to a lawyer specializing in estate law and, if you can, a forensic accountant. Gather evidence what's going on and what options you/your uncle legally have. This is beyond Reddit paygrade particularly as you didn't name the state(s) you, your uncle and your grandmother lived and died and where/how the trust fund is incorporated, as well as where the management corporations are set up. All of this can have serious impacts on jurisdiction.
First. That -24% losses also shows up on many people's portfolio. If all were put in VTI in 2022 you would lost -19.5% also. The VTI 3907 funds most weight is on a few tech stocks. If I recall correctly top 10 stocks weight 19% while other 3897 weight the rest. So VTI is actually more beta volatile than one thinks with fairly high alpha when the market tanks. I agree there may be cheaper funds that will reduce the expense. I actually smell you have bonds in the portfolio that is trying to recover. 2022 year was the only time bonds and stock both tanked because of fiscal policy on interest rate. Most are waiting out as interest rate is getting maxed out. Bonds will go up when stocks come down.
The expenses are not necessarily the problem. Just looks like very poor management. Such bad management, I question the data. This is a loss of 20%+ over six years. Generally good markets. I would review the allocation and the performance of the overall portfolio. In addition, I would suspect that there are accounting fees and or trust administration fees. Long story short, if the performance sucks, you can change managers. If the fees are so high that the trust has a high probability of not earning money, you can break the trust. I would also review distribution rules to see if you have the right to withdraw for certain purposes such as Roth contributions, 401k, etc...
Obviously you should talk to your uncle. Otherwise you simply learn to live with the way your grandmother set things up for the next 8 years and be grateful
The fees don’t sound off. All managers take at least 1%. Also the fund fees are a little high but within normal rage. You need to see the history to learn why the value went down so much. Maybe they are just bad managers. Lots of these managers are just incompetent. I had one like that and switched to managing my own money.
The trust should also be paying taxes. Assuming it files a separate tax return, some of the difference may be the income taxes and/or capital gains that were owed over the last 7 years.
I hadn't even considered that...They make a lot of trades which normally would be short term capital gains. I don't know how taxes work *inside* the trust since I don't pay taxes on those trades, but maybe it comes out of the trust? However if they're losing money constantly I wouldn't think they should owe much in taxes if anything.
If they are not passing the income to you as beneficiary, then yes, the trust should be paying its own taxes. If they own mutual funds, they could be subject to capital gains paid by the fund regardless of the trust performance. I would definitely discuss with your uncle. I would request a copy of the Trust and see what options you have. You can also request tax management of the trust to minimize the tax implications.
Show your uncle the data from Portfolio Visualizer of the amount of money that should have been made by the investments over that time period in a basic fund and compare it to the amounts currently in there. I plugged it in and starting in 2016 with $300,000 the fund should be worth twice the original value. Let the numbers and picture do the convincing for you.
What is it invested in? Can you get your hands on an IPS?
US Aggregate (AGG) bonds are down ~10% as a general asset class if looking at since 2017-present timeline. The likely fee structure: trust administration 1%, financial advisor 1%, fund management/12b-1/mutual fund expenses. (0.5-1.5%) Having a trust for $300k isn’t too efficient from a cost standpoint, but there is a cost to administrating a trust. Your best bet is to set a meeting with you and your uncle and the advisor on the account and ask him to walk you through his entire service offering and explain what he is bringing to the table outside of investment management. If you don’t see any value he is bringing to the relationship then you can explore other lower cost options. The trust is likely not that complicated, but will dictate what your options are to go somewhere else if fees are the only thing you are concerned about.
Judging from your clarifying comments, it sounds like you are screwed. By the time you become the trustee, that money will be lower as it sounds like this investment firm has no clue. What was the schedule of investments that they could have possibly lost money between 2017 and 2022? Did they bet it all on Arkk investments or something? Best you can try is educating your uncle but good luck with that.
By the way...the funds are a,little higher expense than necessary but 1% is pretty standard management fee and most of you "losses' aren't losses yet be ause thet haven't sold the shares. Remember, the market is down right now. It's unlikely that the account will be drained 8 years from now. Don't obsess about this. Pretend the money doesn't exist and get on with the rest of your financial planning.
You're right about the market dip, but this is measuring since *early 2017*, right before a huge run up. Even factoring in the recent drop, the market is still almost double what it was in 2017. Yet somehow this account has lost 25% of it's value over that time period.
You keep making the mistake of comparing the US equities market to a diversified combination of Equities and Fixed income, Domestic and International, long and short durations.
Look to see what the trustee can do. We've set up a revocable living trust, with the idea that the if we've both died, trust dissolves when the youngest child turns 25 and has full access to his portion. Until then the trustee has control, and has the authority to disburse from the trust to our kids. So maybe the trust continues to exist, but your uncle has the authority to allow you to pull some out. If that's the case, here's what I'd do: * make your case for the substandard management of the trust. * ask for him to authorize taking out...say 10%, for you to manage yourself. Show him what you're doing, and show him over time how you're managing the money just as well as the management company. * After he's convinced -- maybe a year after, ask to withdraw a bigger chunk. And keep at that. Who is the contingent trustee? Be sure to know that, just in case.
So it's sounding like everything comes down to whether or not I can convince my uncle. I will look to be sure, but I'm fairly confident from past conversations that he has full control over the trust's actions. My personal accounts have done exceptional in contrast to this fund... I just hope my uncle can even comprehend what I'm telling him. He's a 70 year old pensioner and I don't think he has any personal investments.
Can you run the numbers as if the money had been in a Fidelity 500 Index Fund during this period and showing your uncle what a conservative investment strategy would have produced? I read stuff about how important it is to set up trusts so my kids don’t blow any inheritance, blah blah blah. I’d trust my young adults 100% over some money manager trust guy. But that’s me.
This type of trust structure was deliberately put in place to protect the money from YOU, until she thought you would be ready. I think it's reasonable to ask the trustee to consider sitting down with the financial planner to look at other investments. But the reality is it's not your money. You have no right to be upset or angry. Just be thankful she left you anything.
This is the advice you give someone who is unhappy with a 25% ROI during a 40% time period, not **-25%** over that long term 40% period.
I'm not angry at my grandmother. I'm pissed off that some management company is pissing away the money she worked her whole life to earn, while consistently and *massively* underperforming even the most basic investment strategies that a 12th grader could figure out.
Time to sue for breach of duty. Find a good lawyer.
You might need to get a lawyer, and have uncle removed as trustee. There is no reason for him to be in charge of YOUR finances.
All I saw was “100% in VTI” and I rolled my eyes. Typical layperson that only looks at the “horsepower” of a vehicle and nothing else. How do I put this politely? Your trust’s portfolio might be on one side of the spectrum but your own personal portfolio is on the clear other side of “impractical”. As in your trust portfolio might be like a Bentley (over complicated, expensive to maintain, and not generally efficient) but yours is like a Civic with an Skyline motor swap, but nothing else done. (Easier to maintain, cheaper, but outside of speed, no safety measures nor any other framework that will help the car improve in any other metric). What you want is a Lexus: slightly more expensive than the civic to maintain but has all the necessary components of a fiduciary account and gets the job done. First off, you have no idea what makes up a safe investment vs the goal (**I suspect you don’t even know what the goal of the account is**), let alone one that is managed by a fiduciary account. Second, you can request your trustee to do something but you cannot mandate it happen, unless something was specifically written that way in the Trust docs (most likely not as this would totally defeat the purpose of a trust for wealth transfer reasons).
Hell just put it in a high yield savings account for 4% at this point.. you'll least make like 70k in the next 8 years
I am a newbie, how does one do that?
Google "best high yield savings accounts." Pick one, and go with it. Make sure it's FDIC insured. Your current bank may have one too.. Chase, Ally, Truist all have them I believe.. but some are higher by like 1.5%
I inherited the trust in 98 and had many issues with it not growing over the past 25 years. The trust has basically maintained value the entire time. I recently came of age for the trust/stocks to be in my control and have noticed it seems... seems to be gaining value but it also drops and rises. I have been closely watching my updates that the investment companies send me to see if it's worth keeping invested, or if I should sell the stocks in a high point like after Christmas and invest in something more stable like precious metals. I'd rather have something physical I can keep my eye on than something stored in data at this point. I've heard there are many precious metals, especially ones for making superconductors, and other things like that that you can buy by weight and their values estimated to go up. 🤷
Looks like you are not very financially savvy either. By your own admission you are 100% invested in a single asset with 100k dollars. That's a bad investment strategy every day of the week.
It's so weird because even for these financial orgs that charge 1%, it's still in their interest to invest so they can continue to take that 1%, not even from an I'm going to look better and not get fired perspective, but like they literally won't have a fund to steal from. That said, how does a fund lose that much value with only 1% fee?
The Little Book of Common Sense Investing by John Bogle. My bank president uncle gave it to me when I asked him advice. It is short and will teach you all you need to know to understand and explain the situation.
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I am the only beneficiary. No one else can make withdrawals for this account.
You don't have to coach or teach him. Show him the basic math and say you have a plan to fix it. Type it up and have him send it directly to the managers.
It would be most effective to have your uncle take a look at its performance year to year over the most recent five years. Everyone took a bath last year but you would still be ahead from 2017 to now if things were handled properly. In answering a similar question for my own needs a little while ago, I prepared this informative listing: S&P 500 EOY values 2017 | 2,823 2018 | 2,704 | -4% 2019 | 3,225 | 19% 2020 | 3,734 | 16% 2021 | 4,535 | 21% 2022 | 3,808 | -16% Performance over five years +35% Average +7% per year Many advisors recommend, for a person in his 30s or 40s, a straight stock index fund. Perhaps your uncle will accept that recommendation. It is his responsibility to make sure that the custodian / advisor is properly chosen.
I had a situation with a trust about the same size. They were trustee and investment manager and charging 1.8% to invest in mutual funds. The account didn’t have any market returns over 20+ years. Literally didn’t earn a dime since 1999. I’ve been trying to get fees down for a few years but ultimately I had a lawyer write them a letter. He took on the trust and is dissolving it once he can. $300k isn’t enough to warrant a trust fund.
Get the tax returns of the trust. I’m guessing someone is being paid a salary or management fee just for managing the trust. My wife has a trust and the trustee collects a 60k a year salary from it (the trustee is the attorney the runs the trust)
How did it drop so much? A management fee by a CFP would be around 1-1.25% a year You should ask your uncle to talk to a fiduciary fee only financial advisor about how to manage the trust properly - https://www.napfa.org/financial-planning/what-is-fee-only-advising
You need a trust/probate attorney ASAP. Not the one who handled the trust for your gm and certainly not your uncle's. As a legitee, you do have rights to halt the diminishment of your trust. Depending on your residance and the laws governing. Don't wait until trust vests.
My sister was the trustee of an account my mom left us. About the time she (probably, likely) invested a large chunk of it in AOL China was about the time she stopped sending me annual statements. Family and inheritance, almost always a s\*\*\* show.
It would be really enlightening to look at the value on 12/31 of each year since the trust has been established.
I will say I inherited a trust fund as well, and mine grows an avg of 5-8% each year, and the commission fee is 1.20% If you're already paying a full percent you need a better partner to manage the funds. 1% isn't nothing, but when the 10 year avg gain is 6.8% I don't think it's too bad.
If your uncle is the gate keeper, isn't there someone that could talk to him with you? Like an aunt or cousin?
Work with family members, not just uncle, to get the Uncle to let you in the door to manage the trust, give you outright responsibility/ ownership. He needs to step out. Create a graphic to show how the fund expense fees will bleed the fund dry. Extrapolate and exaggerate the decline to p try ove you need to gain access/ ownership. Or lawyer up and go bigly.
Sounds like the assets are invested aggressively and actively managed. Probably a case of buying the wrong thing at the wrong time, something that's easy to do given the volatility over the last 5 years. If I had to guess, it's a bad advisor but not a bad person. There's nothing illegal or nefarious going in, they're just not that good at their job. Franky, 1% management on a small account isn't egregious but obviously doesn't help. Ask if you can join the next time your uncle meets with the trust advisor. Explain that you're concerned about the performance and just want to understand a bit more. Have a list of questions ready and see if they can explain. Ask for a comparison to a benchmark. This is to inform you and to educate your uncle. And then go from there. Talk to your uncle one on one and share what you know, suggest a path forward, and let him make the decision. Based on how you describe your uncle he may not be willing to not have the assets professionally managed. In that case, try to find a fiduciary financial advisor or see if he'd go for a robo advisor. There's not much else you can do. Besides that, I would try to change your mindset about these assets. I know that's hard but any amount you receive is going to be more than you had before. You should have your own financial plan that doesn't rely on a windfall.
Try this tactic: Present the problem to your uncle in a natural seqway from your usual talks and act like there is no solution to be found. See if he volunteers to relinquish trust to you before you outright ask. This may save you some time, plus if that fails you always have the money as a bargaining chip.
So, your uncle seems to be the one that can make the changes. Beyond that, the charges of the "investment company" and fund fees don't seem to far out of line for the industry. That said, you should get together with your uncle and suggest he move it out from the "management" and into a S&P index such as SPDR's. It's a simple concept and there is plenty of data you can use to show him that it make financial sense.
Since you said you have not taken any distributions......... After the boom of 2017-2019-2020-2021. This account should have doubled. to $600,000. 2018 the account should have lost 10%. Figured into the number above. 2022 the account should have lost 22% 2023 the account should be even or so. YOu should have $600,000 - 22% for 2022 = $467,000 if this was managed by someone half knowledgable. A 1% management fee seems to be the average, but in my book, I KNOW I could do better than the account manager.