The Journey: Simplifying Investment Portfolio Is Key To Financial Stability

The Journey: Simplifying Investment Portfolio Is Key To Financial Stability

By Janet Kidd Stewart, Chicago Tribune (TNS)

Q: We are 80 years old, retired, with assets of $1.5 million. I was an accountant and a practicing lawyer and handle all our investments. Despite spending what we want, our portfolio has grown every year. We are fully invested, mostly in equities but about 25 percent in bond funds. I have life insurance of $250,000. What should I guide my wife to do if I predecease her? I want her to be protected.

Financial planners want a percentage of our assets, but I’m happy with the income we’re earning now on these investments and don’t want her to pay a percentage of the assets for advice. Should I look for a planner who charges by the hour who could look at these investments to determine what changes she should make?

A: It’s hard to argue with success, but I’ll try.

Managing to live only on portfolio income in such a low-interest rate environment has been difficult in recent years, to put it mildly. The investment risk you are likely taking is quite high, however, and as you age the potential for your own mental decline and the increased risk that you’ll leave your wife a portfolio that’s extremely difficult to manage grows substantially.

Finding a planner who charges by the hour is relatively simple, and the Garrett Planning Network is a good place to start, but that’s not to say your task is easy.

That’s because what you really seem to want is an investment manager to perpetuate the complex portfolio you’ve amassed, without her ever having to make a decision. From the many financial advisers I’ve interviewed over the years, I can tell you the likelihood of that plan turning out well is low. Most widows who weren’t involved in financial discussions with their spouses or advisers when the spouses were alive will end up finding someone else to manage the money, for better or worse.

Rather than trying to manage a portfolio from the grave, you might consider working with your wife to gradually streamline your investments into something that can be managed relatively easily if one or both of you has a health issue or begins to decline mentally. If you want to retain control rather than pay an adviser for ongoing management, consider consolidating your stocks and mutual funds at a firm that has access to low-cost, index mutual funds. Over time, you could migrate the money to fewer funds that offer broad access to the market sectors best for you.

The financial services industry has trotted out a smorgasbord of ways to manage money in recent years, with varying degrees of human interaction and automated services, and costs for all of it have been trending down.

“The complexity of his holdings could be a real problem, even with his background,” said Rick Mayes, principal adviser with Mayes Financial Planning in Carlsbad, Calif. “I think even if he’s going to continue to manage it primarily himself, they both will benefit by streamlining the portfolio.”

If you do go that route, an hourly planner could help you project your wife’s future income needs once she’s living on one Social Security check plus the investments. That might illuminate a need to lower the risk profile of the portfolio now, particularly if her health is good and she could live another 20 years.

Such a planner could also help simplify your holdings and make sure you have an income buffer in ultra-safe investments — Mayes likes three years’ worth of expenses — so that if something happens to you, your wife wouldn’t have to begin selling off investments immediately. If you both develop a good relationship with the planner, it might be something your wife sticks with after you’re gone.

“I would simplify now rather than wait,” he said. “I’ve had a number of clients come to me with inherited accounts that haven’t been touched in years. It kind of puts the survivor on a tough path if she’s not comfortable managing it the same way.”

Janet Kidd Stewart writes The Journey for the Chicago Tribune. Share your journey to or through retirement or pose a question at

©2015 Chicago Tribune. Distributed by Tribune Content Agency, LLC.

Photo: PRO401(K) 2012 via Flickr

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