The passing of one’s parents is always a difficult time. Beyond the grieving, there are usually dozens of difficult decisions that need to be made—especially when there’s a sizable inheritance involved. Your inheritance may include a home, which means that you may want to sell it and invest the money or rent it out to generate income. You’ll also need to decide how long to work, when to start claiming Social Security, and how to best balance your income and your needs.
A financial advisor will be able to guide you through this complicated maze of options. And if your parents were able to leave you an inheritance, they were probably already working with a financial advisor. So, one other decision you’ll need to make is whether to keep their advisor on your professional team.
The Familiarity Factor
One of the main benefits of keeping your parents’ financial advisor is that they will already be familiar with their investment philosophy. This means they will be able to help you navigate the transition and make informed decisions about your inheritance. Sticking with their advisor can provide continuity and stability during a difficult time. They can explain what’s in your parents’ portfolio—and why—and other aspects of their plans. This will help you understand the reasoning behind their investment decisions and how they planned for their retirement and went about their estate planning.
So, even if your investment goals and philosophy differ from your parents’, it’s still sometimes better than starting from scratch with a different advisor. The advisor will already have a good understanding of your parents’ financial situation and can help you make the most of your new financial situation, post-inheritance.
If you’re inheriting a large sum of money—especially if this will change your financial situation significantly—your parents’ financial advisor can coach you on how to handle it. They can help you avoid common mistakes and make the most of your inheritance. One way to think about this is inheriting your parents’ ability to manage large sums of money with the help of their advisor. A likely first topic the advisor will bring up is planning ahead for your own retirement.
Focusing on Your Retirement
One of your main goals after receiving an inheritance should be securing financial stability for your own retirement. While it may be tempting to spend significant money immediately to pay off a mortgage, for example, this may hamper pursuing other financial goals. It is vital to make sure your retirement is your number one priority. Your parents’ advisor may have helpful insights gained from working with them, likely for many years.
Not All or Nothing
Many younger investors grew up with trading tools and a level of financial engagement totally different from that of their parents. Your parents may also have had another difference, a lower tolerance for risk, which makes sense for people already in retirement. So it’s natural that your investment philosophy might differ substantially from your parents’ approach.
If your parents had a long-term investment strategy, keeping at least a percentage of your inheritance with their advisor might help offset your investment style, especially if it happens to be more on the aggressive side. This might help you avoid the common mistake of spending your inheritance too quickly. In other words, their portfolio (and advisor) could add some balance. This might suggest that you consider keeping your parents’ accounts at their advisory firm, even if you already have another firm you’re already working with. Think of it as a portfolio within a portfolio.
Evaluating Your Parents’ Advisor
It’s likely that your parents worked with the same financial advisor for several years, or even decades, but that’s not always the case. If their advisor doesn’t seem familiar enough with your parents, they might not make much of an effort to get to know you and your needs, either. But good advisors don’t just work hard to get to know their clients, they actually enjoy it! You need to be the judge.
Of course your parents’ financial advisor would like to keep their accounts, and they may even try a bit too hard to keep them in house. If the advisor seems to be putting the hard sell on you, or worse—suggesting that your parents would want you to continue with them—start planning your exit immediately.1
Same Firm, Different Advisor
What if you don’t feel there’s a match between you and the specific advisor your parents worked with? Unless it’s a one-person firm, chances are you could still find a different advisor at the same firm who’s a better fit for your style. Perhaps you’d rather work with someone who is a different age or gender. This way, you can still benefit from the firm’s expertise and experience with your parents’ finances, but work with someone you feel more comfortable with.
A good advisor will be able to help you identify your goals and translate them into a custom-made financial strategy tailored to fit your needs—which might naturally differ somewhat from those of your parents. Inheriting your parents’ financial advisor can be a good thing, but it’s important to make sure they are the right fit for you. Discuss your goals, evaluate their credentials, and make an informed decision about whether or not to continue working with them.
Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at jlbainbridge.com and https://adviserinfo.sec.gov/firm/summary/108058.