Financial adviser seeks percentage payout

Dear Bruce: My financial adviser wants to change from paying a commission to charging a percentage that equals several thousand dollars a year. I have not sold any stock in several years, and I have only bought a few hundred shares in the last four years. The majority of the money is from a 401(k) with my former employer. Since I seldom buy and plan on gradually selling, should I be paying for something I don’t need? The only problem I have would be when and what to sell. – J.J., via e-mail

Dear J.J.: If there is no action, why would you want to pay a percentage to anyone? If it’s just going to sit there for a good many years and you are comfortable with that, there’s no reason to pay anyone to manage your account. A big problem here is, you don’t know what and when to sell, and that’s what you are paying the manager for – when to buy, hold or sell. If you are uncomfortable making those decisions, then the percentage they want to charge can certainly be justified. In the event you are able to make those decisions yourself, why pay a commission? You can sell stock through a discount broker, most likely for less than what your broker would charge to manage your account.

Before-tax money taxed at withdrawal

Dear Bruce: I have both a 401(k) from a previous employer and an individual retirement account. The monies in these funds are pre-tax dollars. Upon retirement, when I begin making withdrawals, we will be taxed on capital gains made through the years. What about the principal? – Samantha, via e-mail

Dear Samantha: Bad news. All of the money in your accounts will be taxed, given the fact that they are before-tax dollars. This is unlike the Roth IRA, where post-tax dollars are invested and no taxes are collected on any gains.

Seek professional analysis of investments

Dear Bruce: We are considering retirement but question if we are secure enough financially. We have $13,000 invested in a certificate of deposit. We also have $10,000 in savings and $35,000 in an individual retirement account. We need suggestions. We have some income property and are considering selling it, but we’re not sure. Maybe we should hang onto it for now. What are your thoughts? – Reader, via e-mail

Dear Reader: You didn’t indicate what your Social Security benefits will be once you retire, or if you had any other pensions, so it’s a little difficult to tell you which way to jump. One thing is clear, though: You are very conservative in your investing. The problem is, you are barely receiving a rate of return above the inflation rate. I would urge you to consider some other forms of investment. I suggest you have a professional analyze whether you are truly earning enough from your income property. If it were converted to cash and appropriately invested, the net result would be more cash in your pocket with less effort.

Many probate ‘horrors’ fabricated

Dear Bruce: My wife and I have been discussing the need for a trust to eliminate probate at our demise. Presently, everything is in joint tenancy with rights of survivorship. We have no children, and we are both in our 70s. I feel that a trust in our case is overkill, but friends say we need to protect ourselves from lawsuits that might destroy us financially if we were sued. Seminars we’ve attended recommend committing assets to a trust and choosing a company as administrator of this arrangement. Maybe I am just too cautious, but I’d hate to be taken in by smooth talkers at these seminars. – R.S. Kerrville, Texas

Dear R.S.: First of all, let’s call these “seminars” what they really are: sales pitches. They are designed to encourage you to spend money to establish a trust, and that is perfectly legitimate. In your case, I see no reason for a trust. And why probate is a problem, I don’t understand as well. You didn’t indicate who would eventually be the beneficiaries of your estate. If you’re thinking of leaving your assets to charity, contact the charities now. They will, at no cost to you, provide whatever legal assistance is necessary to protect your interest while you live, and their interests after you pass on. This is not a complicated affair, and there is so much scuttlebutt about the horrors of probate, much of which is total fabrication.

Bad-debt business not for amateurs

Dear Bruce: There are companies that buy charged-off debts from credit card companies. How much do these companies pay for these bad debts? – T.D., via e-mail

Dear T.D.: There is no hard and fast number. The older – and, in the view of professionals, less collectable – debts are sold for as little as 8 cents to 15 cents on the dollar. Those that would be more current and deemed more collectable are not as severely discounted.

This is not a business for amateurs, though. The people who buy these know their business. You could purchase a lot of bad debt and never collect a dime. On the other hand, if you know what you’re doing, it can be very profitable.

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.[[In-content Ad]]