I have said this in at least one other thread: It is important to try to be involved in your parents financial situation as they get older. The subject may be taboo, and they may be reluctant to discuss that info with you, because they have lived, saved, invested, and just know more than you will ever know about anything. But, there is a high likelihood that one day you will be controlling their finances at some point, or at least another family member will. Just because their broker or advisor works for a big firm, doesn't mean they are not a dumb a$$. Trust me, you will be so much happier being able to move them into the full time care home with plenty of staff in Irvine, rather than the home you see advertised off the 5 freeway in Santa Ana with 1/4th the staff because that is what you can afford with what they left you with. Had you stepped up and had the conversation that you were concerned about the housing and stock market in 2006, then in 2007 they might have taken you more seriously, and by early 2008 they would have been asking what you thought about the continuing unemployment insurance claims chart on Calculated Risk. Don't believe me? Just try to be more involved, and try to show them the light. You might be surprised how seriously they will take you once you have proven to them you know what you are talking about. If they don't come around, then it sucks for you, because you could be burdened with their debts if something should happen to them. If you have other family members who haven't made some of the best financial decisions, then you could be the one entirely responsible for your parents debt.
Now, here is why I find the 70% loss hard to believe.
1. Having some knowledge of the securities industry, I know that most large firms make a potential client fill out a risk tolerance level form. I would think Wells Fargo has such a form, and it would be required to be in their file. One of the questions asked is age, or how close to retirement you are. Depending on the age, this question alone would bump someone up from a high risk tolerance to low risk tolerance. That would put someone in funds that would be impossible to be down 70%. In fact, my mom received a letter from a large firm like Wells, that because of her now older age bumped her into a lower risk category for her current investments.
2. There is a difference between a broker and an advisor. A broker can churn and burn someone for commissions, but an advisor gets paid a fee for assets under management. An advisor at Wells Fargo was mentioned, making me believe he/she would have no incentive to be trading just to earn a commission, because the advisor can trade all he/she wants with zero commissions made, but if the assets drop 70% then they get paid 70% less.
So if they are a broker who is moving money from fund to fund just to earn a commission, then it is hard to believe they could be down 70%, unless they are putting them into funds that are 2X up or down at the worst time. If they are an advisor, then they must have been putting them into Lehman, Bear Stearns, subprime or ALT-A mortgage securities, or they listen to Cramer and put them in Crocs. I mean, they could have taken all of the crazy investment ideas from Panda here, and they wouldn't be down 70%. Being down 70% is really hard to do, even in this market.
I just find it hard to believe that someone who is older could be down 70% from a firm like Wells, when probably most at Wells are down about 20%-30% as a worst case scenario when point #1 is taken into effect. Either the 70% is an exaggeration, or someone is doing something in which an attorney should be involved with finding out why risk tolerance levels have potentially been violated.
If you don't take the time to educate yourself on what you are investing in, or get educated on what your parents are investing in, then you will have no one to blame but yourself when those investments go bad.
