# If I have a large IRA inheritance **URL:** \ **Category:** Factual Questions\ **Created:** [September 2, 2017, 3:47am UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299 "2017-09-02T03:47:51Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [September 10, 2017, 3:11pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/61 "2017-09-10T15:11:12Z")
**Bill Door** and **riemann** nailed it but the importance of the following is critical. > [@Riemann](#): > > What we are advocating is passive low-cost indexed investing over _any_ kind of active trading. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 3:51pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/62 "2017-09-10T15:51:50Z")
> [@edwardcoast](#): > > > [@Dewey\_Finn](#): > > > > Except that the advisers who cost nothing usually work on commission. The best, least biased advice might come from an adviser whom you actually pay for the advice (i.e., a “fee only financial planner”. > > They have a fiduciary responsibility and above and beyond that, if they didn’t make money for their clients they wouldn’t be able to stay in business. It’s interesting that you use the word fiduciary. Does your broker or financial adviser at your brokerage firm act as a fiduciary, particularly for your non-retirement accounts? Have you ever asked? If they say yes, have they said so in writing? ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [September 10, 2017, 4:06pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/63 "2017-09-10T16:06:01Z")
> [@Dewey\_Finn](#): > > It’s interesting that you use the word fiduciary. Does your broker or financial adviser at your brokerage firm act as a fiduciary, particularly for your non-retirement accounts? Have you ever asked? If they say yes, have they said so in writing? As of this past July, they all do. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 4:09pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/64 "2017-09-10T16:09:10Z")
Even when they’re advising on your non-retirement account? ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 10, 2017, 4:31pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/65 "2017-09-10T16:31:28Z")
> [@Munch](#): > > As of this past July, they all do. Exactly right. The new regulations mean I am a fiduciary on all retirement plans that I manage. I can personally be on the hook for my behavior. This is causing some consternation as you can imagine. Look, I am a financial advisor. But a great deal of my time is spent NOT picking stocks. At least half my time is spent being a life coach to my clients. At least half the 401ks I run into have been emptied to some extent by people who ‘just need a little’ or ‘are in a tight spot’. “Why do you need that RV?” “Is that the best use of your money?” “I know someone who can put together a will. You need one.” That sort of thing. It was a surprise, actually, how much of the job is just people needing reassurance and encouragement to move in the right direction. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [September 10, 2017, 4:32pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/66 "2017-09-10T16:32:52Z")
> [@Dewey\_Finn](#): > > Even when they’re advising on your non-retirement account? If by “non-retirement account” you mean any non-IRA or 401(k), then no - unless the purpose of that account is for retirement, even though it’s not given any beneficial tax treatment. That’s a pretty small subset of accounts out there, at least on an individual basis (as opposed to say, a corporate account). And if you have an advisor working for you on a non-retirement account, it’s pretty hard to do that in a vacuum without your retirement accounts being at least part of an overall assessment - at which point they’re back to being a fiduciary. But yes - your IAR should have documentation regarding their status, and their broker-dealer will very likely already have such language available. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [September 10, 2017, 5:49pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/67 "2017-09-10T17:49:32Z")
> [@edwardcoast](#): > > Investing is about having a goal. That’s the point of it. Worrying about how well you beat an index this week or month doesn’t mean anything. This ignores the risk tolerance for people too. Indexes aren’t a genius move, they don’t just go up, they go down and they go down hard too. A smart investment avoids those hard downturns. Not to pile on but specifically address the sort of new aspect you’ve brought up. The axiom that all invested dollars put together get the same return as the index applies equally to trading in and out of the index as it does to buying just parts of the index. For every dollar of increased return made by ‘wisely stepping back from the market to avoid the hard downturns’ somebody else has to lose a dollar of return being more heavily in the market during downturns, or less invested during up turns. The axiom holds…that’s why we can call it an axiom. 🙂 If one retail stock adviser (and/or typically a much smarter professional market trader or hedge fund manager) is giving the right calls to increase/decrease stock allocation to boost return, another one has to be giving calls which reduce return, relative to that the index investor gets, before fees, and active client pays more fees. So it comes back to the question how you pick the retail stock adviser who is better than average, probably needs to be significantly better than average. Obvious answer being you can’t and are likely on average to pick an average market timing adviser, hence get worse net returns than an index investor, because you’re paying more. The expected outcome is to pay something more for, _on average_, nothing more. The two caveats being: a) like I and others said, a professional adviser can add value for naive investors in areas such as set up, tax efficiency, and understanding how to choose a risk allocation _according to personal circumstances_, not according to what you or they think the market is going to do. b) there are anomalies in the market relative to the conventional modern financial theory of the relation of risk and return. But as a general rule those things will only work for you if you can understand them yourself and implement them yourself using financial instruments retail investors can easily access. And generally on the basis of ‘worked in the past, might or might not in the future’. Whereas if you have to pay somebody else to understand it and do it for you, as a rule: forget it. The downside of just ignoring techniques you don’t fully understand and can do yourself is negligible. Whereas the downside of going ahead but it turns out you don’t really understand and blow yourself up, is very non-negligible for most people. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 5:49pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/68 "2017-09-10T17:49:33Z")
Yes, brokers are required to act as fiduciaries, for retirement accounts only, under the fiduciary rule introduced by the Obama administration but which didn’t take effect until this summer. This would seem to be obviously a good thing. So why did the financial industry fight this rule so fiercely? And why was the Trump administration so hostile to the rule? The answer is that, unlike what **edwardcoast** is arguing, many brokers and investment advisers don’t put the client’s interests first. (I am obviously excepting **Jonathan Chance** here, as I trust that he, and a few of his colleagues, acted in their clients’ best interests, without needing to be required to do so.) ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 10, 2017, 5:58pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/69 "2017-09-10T17:58:07Z")
You’re exactly right about that. I work for a very large firm and our compliance is a bear to deal with. As they should be. I’ve never been afraid of being a fiduciary because the secret to success - long term - is to do the best possible job for my clients. When I do that they bring me more clients. I’d take issue with the ‘Trump hates the fiduciary rule’ argument, though. He had the ability to suspend or amend it early on and failed to do so. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 6:03pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/70 "2017-09-10T18:03:54Z")
So do you have any comment on what **edwardcoast** said upthread? ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [September 10, 2017, 6:27pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/71 "2017-09-10T18:27:29Z")
> [@Dewey\_Finn](#): > > (I am obviously excepting **Jonathan Chance** here, as I trust that he, and a few of his colleagues, acted in their clients’ best interests, without needing to be required to do so.) Interesting that you use the term “best interest”. Do you know what standard advisors were held to prior to the most recent DOL rule? ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 6:30pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/72 "2017-09-10T18:30:21Z")
No idea. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 10, 2017, 7:37pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/73 "2017-09-10T19:37:50Z")
He’s baiting you. The old standard was called ‘best interest’. It’s a standard so amorphous that almost any justification would serve. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 10, 2017, 7:44pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/74 "2017-09-10T19:44:24Z")
> [@Dewey\_Finn](#): > > So do you have any comment on what **edwardcoast** said upthread? I do believe that, for the right client, I add value. It’s not necessarily return but financial health overall. Defining the plan, executing it and periodic meetings to ensure its flexibility is important. The focus on return is both useful and weak. As I said, a lot of my job is coaching. Encouraging people to save, advising the on college planning and life insurance needs. I also spend some time running 401k plans for small to medium sized companies. Can people do it themselves? Certainly. I encourage them to do so. But people can do their own taxes, too. But some people simply want the help and I can provide it. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [September 10, 2017, 7:57pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/75 "2017-09-10T19:57:13Z")
Thanks. I’ve heard stories of stockbrokers “churning” their client’s account, or promoting variable annuities (with very large commissions) or other complex securities to unsophisticated investors. Or just promoting funds with high fees. So I’m happier with my Vanguard index funds. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 10, 2017, 8:06pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/76 "2017-09-10T20:06:53Z")
My firm has specific controls against such things. Churning will get your ass fired in a hurry. Selling an investment - other than recommended circumstances such as a firm going under - will result in a refund of any fees from the original sale. We do sell annuities but not in retirement accounts. I don’t much like them. That’s actually one of my hallmarks for a dodgy advisor. Annuities pay VERY well. A lot of the independent advisors go with them as their first recommendation because of the money to be made. But I think that’s a large, ugly red flag to watch for. While they can be right for a client it’s a very small percentage. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [September 10, 2017, 8:17pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/77 "2017-09-10T20:17:30Z")
> [@Dewey\_Finn](#): > > Thanks. I’ve heard stories of stockbrokers “churning” their client’s account, or promoting variable annuities (with very large commissions) or other complex securities to unsophisticated investors. Or just promoting funds with high fees. So I’m happier with my Vanguard index funds. Something like this happened to my parents and I wish I had butted in (they never asked). An uncle left them a few hundred thousand. The invested it with one of the smaller, well known advisors - recommended by someone at church. He put them in a diverse set of munis and a variable annuity that paid him a 7% commission. He then switched firms several times, each time he had them sell funds and buy the new ones “recommended by the new firm”. Lots of commissions for him, little benefit for them. ---
**Author:** ![drad\_dog](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@drad\_dog](https://boards.straightdope.com/u/drad_dog)\ **Post date:** [September 10, 2017, 10:33pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/78 "2017-09-10T22:33:59Z")
> [@Dewey\_Finn](#): > > Thanks. I’ve heard stories of stockbrokers “churning” their client’s account, or promoting variable annuities (with very large commissions) or other complex securities to unsophisticated investors. Or just promoting funds with high fees. So I’m happier with my Vanguard index funds. Why would anyone let someone trade in their account without knowing what they were doing? Maybe for a quarter but then you look at the list of things…I never understood this. ---
**Author:** ![drad\_dog](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@drad\_dog](https://boards.straightdope.com/u/drad_dog)\ **Post date:** [September 10, 2017, 10:50pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/79 "2017-09-10T22:50:45Z")
I’m going to split my retirement between Fidelity and Vanguard and compare them. My mom actually left a perfect bouquet of vanguard funds. She must’ve been reading a little bogle. And I can go in to Fidelity in town for face time. I can divide the smaller companies to reflect a 50-50 split in portfolios. I’ll see which I like better. Any tips as I go along with these two companies? What fees to watch. I don’t think I would want to have a half million of my funds under management anyway. Most will not be I assume. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [September 10, 2017, 11:38pm UTC](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299/80 "2017-09-10T23:38:16Z")
Watch the fees (ER/Expense Ratio) on the funds you buy. Keep them low (IMHO ~0.5% as an upper limit, ideally under 0.2%). Watch out for funds that pay 12-b fees - those “marketing and distribution costs” are commissions, plain and simple. [Previous page](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299.md?page=3) [Next page](https://boards.straightdope.com/t/if-i-have-a-large-ira-inheritance/795299.md?page=5)