If it's the last week of the month, then it's time for David Gardner to give his listeners what they want -- literally -- by answering their questions.
In this segment of Rule Breaker Investing mailbag episode, he brings in a guest -- Ross Anderson of Motley Fool Wealth Management -- to help him address the concerns of Daphne, who at 94 is worried both about oscillations in the economy and issues involving her health and mental acuity. They discuss the specific needs of the "old-old" in terms of conservatism with investments, longer-term moves, and having a plan in place that will kick in if your ability to make good, informed choices on your own behalf diminishes.
A full transcript follows the video.
This video was recorded on April 25, 2018.
David Gardner: Mailbag Item No. 2: And now for something completely different. I'm delighted to be joined by Ross Anderson from our Motley Fool Wealth Management team. Ross, how are you doing?
Ross Anderson: I'm doing great! Thanks for having me!
Gardner: Excellent. Thank you! So, I'm going to present a portion of a letter from a much older person who can't probably ride out market waves in quite the same way, and this one touched me because this comes from a personal friend, somebody I will just call Daphne.
Daphne is somebody who I got to know from years ago and dropped me this letter recently. And I thought, "You know, I could take a crack at this, or I could have Ross Anderson in, who has experience speaking to people from all walks of life as they think about how best to steer their little boat, steer [let's mix some metaphors, here, Ross], their nest egg. I want to read a portion of this, Ross, and then I'd love to hear your thoughts.
So, she begins. "I am 94 years old and have memory loss without being totally senile." And because I know this person is a brilliant thinker and actor over the course of her life, I can recognize that she probably does have some memory loss, but she's definitely not senile. This is a beautifully handwritten letter and very thoughtful.
She says, "I'm worried about losing my money. I have about," and I will not include the amount, here. Ross, you and I have looked over this number. It's a very comfortable number, especially for somebody who is 94 years old. "I have such and such amount, and two-thirds of it are with Wells Fargo Advisors, and one-third of it is in the North Carolina State Employees' Credit Union, which pays small interest.
Because of gyrations in the world and national markets, I have gotten very fearful. I contemplate taking all the money in the cash account of Wells Fargo" [which I think is a much smaller amount, but the sort of thing that would be about, let's say, a year's worth of expenses], "take that out from Wells Fargo and put it back with the NC State Employees' Credit Union.
You cannot advise me. I don't want to put that responsibility on you, but I'd love a reaction from you in terms of my age. I have joint pain, I'm losing physical strength [like muscles and eyesight]. My best to you. My love always to you. I'll keep checking in. Thanks, Daphne."
OK, Ross. That is the letter that I received [that's a portion of the letter]. What are your thoughts as I share that?
Anderson: First of all, I appreciate you bringing me on to talk about this, because I think there's a lot of important things in what she asks. And the first thing that really stuck out to me was the very top of her letter, which is a little bit of a legal concern. That if she's starting to have memory loss, to me that really is a legal and an estate planning sort of question.
Having a durable power of attorney -- somebody that can take care of your financial matters if you're no longer able to make those decisions day-to-day -- is, I think, so important to have. So, whether that is a trusted friend, a relative, or even a corporate trustee that can take those instructions as you've written them and execute them on your behalf is, I think, important to have.
Gardner: So, Wells Fargo, for her. Can Wells Fargo fulfill that function as her wealth manager, or do you want somebody separate?
Anderson: As the investment advisor, Wells Fargo probably has corporate trustee services as part of the bank. They're a very large organization, but that's not necessarily the person who's managing the money. This would really be a separate function of making sure that her wishes are being carried out as she would have them.
Gardner: And because I know this person, I know that she doesn't have kids. She doesn't have kids, so there isn't an obvious person to appoint as overseeing and making sure that the money's being well-managed. I'm not even quite sure where the money would go, although it's a generous amount and I know she's a lovely person. How do you think about that, Ross?
Anderson: I think that really is the biggest second part of the question, which is what would she like to see happen? When we're talking about retirement planning considerations, it's really about how much of the money do you need and when do you need it. In this case, if one-third of that money is in a bank account or a credit union and basically risk-free, she can probably live off of that amount.
And the rest -- she has a choice. And the industry, traditionally, has been in a position of constantly de-risking people as they age. So, the glide path on a target-date mutual fund, or anything like that, constantly gets more conservative and, in many cases, I think that can be a mistake, because she's now in a position where two-thirds of her portfolio could have a lot of impact somewhere else. Whether that's a charitable concern or [something else], whatever she wants to see that money do it probably can.
If that means, "Put it on the sidelines. I don't need to take any risk, so why would I," that's fine. But the other side of that could be, "Well, if I've protected my risks, why don't I see what I could do and how big of an impact I could have with those dollars."
Gardner: So, when I think about the amount of money that you and I are aware of from the letter, it's clearly enough to live on for the rest of her life. We hope that she can get to triple digits and keep going, and she would be able to do that. What about the fear part of the question? Ross, the calls that you take through Motley Fool Wealth Management; do you hear this kind of a thing? I just, obviously, spent Mailbag Item No. 1 [arguably I talked too long] about not being fearful about market volatility, but we're all in different situations. How do you speak to the fear?
Anderson: I think the fear is the toughest piece to overcome, and again, it comes back to what do you want to see this money do for you? Because if it's not for your needs in the next one, three, five years, then the volatility doesn't have that much of an impact. I think coming back to what your goals are -- and saying we could see a 10-20% market drop -- if that doesn't change your day-to-day life, and the upside is much greater; I think that's where we have to come back to and focus on what it actually means to you to see some market volatility and if it really is a problem.
Gardner: I hope, my friend, "Daphne," that what Ross has said is helpful and, of course, anytime we're answering something on mailbag, we're not just speaking to you, whoever has written us. We're speaking to all of you. And that idea, Ross, that it's not about the amount, so much. It's about the context. Where we are in life. How much we could afford to lose or not. We're all coming from different places and going different places, so we're trying to be as helpful and relevant as we can.
Ross, before I let you go, could you just tell me briefly the story of where you came from before you came to Motley Fool Wealth Management?
Anderson: I came from more of a traditional investment management platform and financial planning platform. I started my career with Ameriprise Financial. Joined up with a team, there. And then that team transitioned to Morgan Stanley. I've spent a decent amount of time in the big brokerage houses and I was very fortunate to get the opportunity to come to Fool Wealth almost four years ago, really as it was getting started. I was financial planner No. 3, here. I'm super thrilled to be in a place where I'm not working for commissions and really feel like I can embrace our purpose.
Gardner: So, not every Rule Breaker investor probably has wealth management needs at this stage, but for those who are listening who do, if I wanted to reach out to Ross Anderson and the talented team that surrounds him, how do I get in touch with Motley Fool Wealth Management?
Anderson: As a sister company we do have our own website. FoolWealth.com is the website that we live on. [email protected] is the email address that comes right into our team of financial planners, and we can certainly help anybody that's got questions about what we do.
Gardner: Great job, Ross. Thanks!
Anderson: Thank you!