I had the rare opportunity to go back to my hometown of Syracuse, NY this past weekend to see my folks and some long-time friends. That, in and of itself, would have been worth the trip. But I also finally got my parents to sit down and review all of their finances -- income, insurance, and investment accounts. They took care of their estate plan a few years ago (as many of you know, my younger brother is an estate planning attorney in Providence, RI), but they were way overdue for an investment overhaul.
The horrific amalgamation I encountered included several savings accounts, CDs, fixed annuities, variable annuities, annuities inside of IRAs (you know, for the "double" tax deferral), and mutual funds. I think they've been sold an investment product by every commission-based banker, broker, and insurance agent in town. When I asked my parents how much money they had, they were 50% off (too low). They didn't even know what they didn't know. Honestly, with everything sold to them, it was damn hard to figure out.
As for the plan I created, if you are a Servo client, I hope this will come as no surprise -- it looks pretty much like yours. From that mess, I designed a well-balanced stock and bond portfolio (60/40) that is globally diversified, includes a moderate "tilt" to smaller and more value-oriented stocks, and features short and intermediate-term, investment grade bonds (plus a modest savings account) to help cover for unexpected and unplanned withdrawals. It is significantly more tax efficient and much, much lower cost than their current situation. It makes the best of those bad annuities that have too much imbedded tax to completely eliminate. It now works hand and glove with their estate plan. Of course, their asset allocation will be implemented using the same mutual funds (DFA) that I own and that you own as well. And I'll be managing it, which means the odds they make a mistake or sell in a panic is remote...as long as they listen to their son!
I share this story with you for two reasons. First, if you're a Servo client, I hope you appreciate that your investment plan represents my firm's very best work -- not something created to generate a management fee. It's similar to mine and one that now looks very much like my parents. Second, you may not fully appreciate how many of your friends and family members have a financial situation that is badly in need of a fix. They, like my parents, have probably been sold a bunch of garbage over the years, have floundered with do-it-yourself investing, and still don't know who to turn to for an honest opinion about the best way forward. You can be a tremendous resource to them in this regard, and we stand open and willing to given them a second opinion on their overall financial situation if you would like to make an introduction. As you now know, our advice is a family affair.