Financial Planner Advice

[Redlegs23]

Not sure who to ask about this, so I figured that someone here might be able to help. I have some money that I plan to invest, and I will be adding to that account significantly over the next few years. My brother does some financial planning and sells some investments, working mainly off of commission. We have a good relationship and I would like to give him my business. My question is, would it create an akward situation having a family member handle your money? Would I be better off going through someone else and not letting him know? I guess I ask this because I'm a little concerned about the small chance that any tension could arise out of having family members involved with eachother's finances. Like I said we have a good relationship and I don't foresee any problems, I just kind of wondered if anyone else has encountered similar situations.

I edited to add this point...the investments I will be putting the money in will be liquid and very secure, so I'm not at all worried about tensions from him making bad investment decisions and losing a portion of my money. I will be putting the money in very low-risk investments as I will need this money about 4 years from now. I guess this leaves me with the only potential tension or akwardness coming from him knowing my financial position, and maybe even jealousy, which I don't foresee. Thoughts?

[Rojo]

I wouldn't recommend it in the best of circumstances. I'd really way against it now.

[Ltlabner]

I'd explain it to your brother. You trust his judgement and his financial expertiese but your value his brotherhood/friendship even more. Thus you'll be doing financial planning elsewhere. Treat him like a man and be upfront about it.

Obviously there are exceptions, but generally speaking doing business with family members rarely works out.

[RedsManRick]

If I were you I'd tease out the issue of wanting good advice and your relationship with your brother.

If you feel the obligation to help him out financially by giving him business, consider just righting him a check outright as a gift, asking for advice "pro-bono", and then technically managing your own assets.

You just don't want to be in a position where your personal relationship with your brother can have any bearing on decisions made with your money. God forbid you have some sort of falling out, you don't want to have a business relationship tied up at the same time.

Otherwise, I'd just go to a third party and explaining your logic to your brother so he doesn't feel slighted.

[Dom Heffner]

I do this for a living, and can tell you that I can count on my hands the number of clients who are my friends. Not so much because they don't trust my judgment, I'm sure, but because most people don't like others close to them to find out how much money they have (or don't have).

Now- that does not mean you shouldn't use your brother. In tough times like these, clients are hard to come by, and I'm sure he could use the commission/production credit.

And- by being a family member, he isn't going to steer you wrong, especially if you are putting money into highly secure places. This is important because some advisers might have you put your money in something that is not the best for you simply because they'll make more off the deal. I just can't see a family member taking advantage of you that way.

The biggest questions for me are these:

1) Do you mind your brother knowing how much money you have?
2) Is your brother qualified to help you decide where you want your investment?

If you answer no and yes, then why not?

If you are tuly putting money in a safe investment, and the market goes so bad that you lose money- I mean, the last place to put blame would be your brother, wouldn't it?

If the relationship goes sour, you can always move the money.

For me, good relations can go sour with anyone, not just family members, so if that is the hangup, keep that in mind.


I edited to add this point...the investments I will be putting the money in will be liquid and very secure, so I'm not at all worried about tensions from him making bad investment decisions and losing a portion of my money. I will be putting the money in very low-risk investments as I will need this money about 4 years from now. I guess this leaves me with the only potential tension or akwardness coming from him knowing my financial position, and maybe even jealousy, which I don't foresee. Thoughts?

Reading this again and knowing what is out there as far as investments go- I really don't see how he could mess things up for you. We can narrow the amount of highly liquid short term investments down to just a few things, none of which could put you in worse shape financially.

[Boston Red]

We can narrow the amount of highly liquid short term investments down to just a few things, none of which could put you in worse shape financially.

I hear auction rate securities are nice.

[Redlegs23]

Appreciate the advice everyone. If anyone else has some insight please share it. I don't plan on making any moves in the next week either way as I want to make sure I'm doing the right thing. Dom, it sounds like you're very knowledgeable in this area, and your advice is definitely appreciated.

[BuckeyeRed27]

I also do this for a living and I think Dom gives some very good advice.

My question has more to do with what you are planning on doing. If you are looking for secure investments that are more short term there are really only a handful of options and a big consideration is how much that is going to cost you because it is going to cut into your return. There are ways to do it where you won't be paying a commission that might better serve you.

[Redlegs23]

I also do this for a living and I think Dom gives some very good advice.

My question has more to do with what you are planning on doing. If you are looking for secure investments that are more short term there are really only a handful of options and a big consideration is how much that is going to cost you because it is going to cut into your return. There are ways to do it where you won't be paying a commission that might better serve you.

This is another issue I pondered. I'm no expert, but I know enough that I could put it in a money market account or something (which I believe is insured) and probably be just fine. It would probably be good for me to hear about my different options though. What are typical commission fees? If they're somewhat minimal on something like this I'd rather give him the business as he is still in his first year on the job and could probably use the business.

[bucksfan2]

This is another issue I pondered. I'm no expert, but I know enough that I could put it in a money market account or something (which I believe is insured) and probably be just fine. It would probably be good for me to hear about my different options though. What are typical commission fees? If they're somewhat minimal on something like this I'd rather give him the business as he is still in his first year on the job and could probably use the business.

Those money markets have come under fire since the Lehman Bros and AIG problems. They aren't as "safe" as a savings or cd.

Take all your cash and keep it under your mattress right now.

[TeamCasey]

I'm nervous right now. If you have money in CDs and savings/ checking. Is only $100K of that total insured under FDIC?

Should people really be spreading their cash among many banks right now?

[Patrick Bateman]

A friend of a friend had a terrible experience in a situation like this.

Two brothers, were basically best friends. One had a nice stock tip (Bob) and informed his brother, Joe. Joe gets into it on Bob's advice, and makes a bunch of money. But Bob becomes peeved that Joe isn't grateful enough because he never ever said "thank-you" for any of the help.

Sounds really stupid and small, but this led to a huge fight between the brothers and they are no longer on speaking terms. All because of a stupid little word. Had Joe thrown in the occassional little thank-you, there would have never been a problem.

I think in general, that there is so much stress when money gets brought into the situation that it can be detrimental to a relationship. All things equal, I'd probably try to use an external financial planner, but obviously, not all situations are going to turn out like the one above. I'd just hate to lose a relationship as important as this one.

[wolfboy]

I'm nervous right now. If you have money in CDs and savings/ checking. Is only $100K of that total insured under FDIC?

Should people really be spreading their cash among many banks right now?

http://www.fdic.gov/consumers/banking/facts/index.html

[George Foster]

I have my money in CD's and triple A rated bonds that are issued by the state of Kentucky. It pay's 5% tax free. The money is going to update the Western Kentucky Parkway. It's a 5 year bond.

I could not invest in the market right now. I would spend 18 hours a day watching CNBC.

5% is not much but it beats losing money right now.

I'd admit I'm too conservative, but I have to sleep.

I'd doubt your brother will make a lot of commission on bonds, and it does tie up your money for 5 years. However, if you need access to your money at the drop of a hat, long term investment is not for you and CD's and money markets are your best bet.

Most small town banks are secure, because they were not involved in the sub-prime mess. Spread your money among several banks, and don't be afraid to tell one bank that the other is paying you more on a CD or money market. They will match it.

Another perk in spreading out your money among several banks is your invited to play in several golf scrambles.:thumbup:

[Rojo]

Read somewhere that people are buying treasuries for more than they'll get when they mature. Sounds crazy but investors would rather take a small known loss. First time its happened