# Can I help my mom understand investment risks?



## james4beach (Nov 15, 2012)

My parents have various investments (mostly with Mawer), but my dad is the person who's managed their money over all these years. Mom is starting to come up to speed with how investments work, but still has various gaps in understanding. They do consult with the planners and advisors, but really it's my dad who decides the investments and mom generally just agrees and goes along with it.

I think it would be better if mom actually understood the risks of the investments, so that she knows what she's getting into and can make an informed decision. I don't think she understands right now and I'd like to ask for suggestions on how to explain factors like risk and volatility.

I want mom to be informed about how her money is invested. Here's the reason I think she really isn't aware or informed about the risk. She says things like:

- "great, our account is up 5K from what we put in, I'll be happy as long as we are positive"
- "we're down 5K, argh!" ... and then yells a lot at my dad, blaming him for losing their money
- "I'll see how the account has done in a year and if it's doing badly, I'll pull the money out"
- "I'm going to very angry and yell if you lose large amounts of our savings"

I printed a chart showing a bad period when Mawer Balanced was down, about 25% draw down, and tried to explain that when (not if) this happens again you will see your balance reduce by 25%. She says "yeah I understand" but still says those above statements.

There's a disconnect here. Any suggestions?


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## james4beach (Nov 15, 2012)

By the way, if she's already yelling and getting upset about negative numbers even at _all time highs_ in the stock market -- barely a couple % decline -- can you imagine how she will react when markets are down 20% or 40% ?


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## Mookie (Feb 29, 2012)

Your mom sounds like 95% of all investors out there.


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## STech (Jun 7, 2016)

Mookie said:


> Your mom sounds like 95% of all investors out there.


I agree. 

James, your mom needs serious education on this. Get her a book or two. I'm sure there are others, but from my recent memory, I think The Four Pillars of Investing would be an excellent read for her.


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## james4beach (Nov 15, 2012)

STech said:


> I agree.
> 
> James, your mom needs serious education on this. Get her a book or two. I'm sure there are others, but from my recent memory, I think The Four Pillars of Investing would be an excellent read for her.


Thanks, yes I think she needs more background. A book would be good. Has anyone here read "The Bogleheads' Guide to Retirement Planning"? I wonder if it covers the basics well enough (asset allocation, risk/reward).

By the way, I think they've ended up in this situation because my dad has been so good at managing their money and she's never looked into it. He's been a steady 60/40 investor for about 30 years.


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## andrewf (Mar 1, 2010)

Maybe some 'know your client' materials/questionnaires. How would you feel about certain outcomes? It might be good conversation starters.


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## Beaver101 (Nov 14, 2011)

How does your dad feel about your mom's yelling at him when he's given the responsibility to manage the money? If it doesn't bother him, I would leave it since she did agree to go along with those investments (aka abdicating that responsibility). Maybe you should tell her to yell at the financial advisors for those ups and downs ... ie. not explaining to her the risks and volatility of those funds they sold to her/them. :tongue-new:


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Thanks, yes I think she needs more background. A book would be good ... By the way, I think they've ended up in this situation because my dad has been so good at managing their money and she's never looked into it ...


How confident are you that she is willing to learn?

Mom was better than Dad at wanting to know about investments etc. That didn't stop her from setting up a PCF savings and chequing account, putting all the $$ into the savings account that she could not use until tomorrow. Despite warnings as well as "do you really want to make all the $$ available next business day", she then tried to pay for something out of the empty chequing account and become frustrated.

Essentially the same process through ING Direct (now Tangerine) she could use correctly. ING Direct at that time did not offer chequing so somehow she was able to grasp the "not until the next business day" part when there were two banks involved.

Since she was good at other financial/investing concepts ... it puzzled my Dad and I that this seemingly simple restriction tripped her up.


If your mom is interested then by all means, education that suits her is a good way to go. If it doesn't, then other ideas may work better.

One of the ways I used with Mom was to find something that she regularly did that had a somewhat similar situation then use an analogy. For example, reminding her of people who expected their house would sell for $X but who sold for $X- or $X++. 

Cheers


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## james4beach (Nov 15, 2012)

Eclectic12 said:


> How confident are you that she is willing to learn?


She's more interested than she used to be, but it still goes pretty low in the priority list.

The illustration by analogy sounds like a good technique I may try. What I'm really trying to get a handle on is whether mom is comfortable with the level of risk in her current asset allocation.


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## Plugging Along (Jan 3, 2011)

This is a tricky one without understanding the family dynamics. Does your mom really want to know and learn? by educating her, what do you hope for her to accomplish? Do you see her taking more control over her investments or is it just so she stops yelling at your dad? Is your mom yelling more to do with venting, do you expect anything to change?

I ask this because I also know of parents where one person did all the investing (usually the male) then the female in the relationship 'learned' some information, but not enough to be better at it than the spouse, but enough to be dangerous. The end result was the s condo person mad a whole bunch of mistakes and then were in a worst position. 

beginning investors tend to not really understand what their tolerance is. They say one thing but do others.


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## james4beach (Nov 15, 2012)

These are all good questions, I appreciate the responses to this. I'm not sure how much she _really_ wants to learn.

I definitely don't want her to blame my dad for investment losses. I also don't want to get blamed myself, because I did endorse Mawer as well as a number of investments they hold in a brokerage account (BRK.B, XIU, ZDB, etc). She's been celebrating the gains in the last few years as if it's my doing. That suggests to me that when they decline, she will blame me for losing money.


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## Plugging Along (Jan 3, 2011)

It sounds like your objective is to make sure there are no ill feelings towards you if things go down. Maybe it's having tha conversation first. Start out with that you want the best for her, but by now means are you an expert and things can go down. Have that discussion first about expectations, then see how much she really wants to know.


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## humble_pie (Jun 7, 2009)

jas4 did your mom use to "yell" at your dad or is that a development of recent years

if recent, i'd be more concerned about the onset of the yelling than i would be about whether or not she understands Mawer


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## james4beach (Nov 15, 2012)

humble_pie said:


> jas4 did your mom use to "yell" at your dad or is that a development of recent years
> 
> if recent, i'd be more concerned about the onset of the yelling than i would be about whether or not she understands Mawer


Her behaviour isn't new, but the attention on investments is new. I think she's uncomfortable with some of the changes she's been seeing. They moved a whole bunch of money out of Investors Group and other high fee mutual funds, and into Mawer & a big bank discount brokerages. Both of these are good moves by any measure. I carefully watched and supported both changes.

But it's a change, and that seems to have made mom uncomfortable.

She would show a similar reaction if they suddenly moved to a house she wasn't 100% on board with and her behaviour has been very consistent over the decades.


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## james4beach (Nov 15, 2012)

I think I understand now what's happening more broadly. My dad generally controls things at home and gets his way, for example household and money decisions. My mom does not get the things she wants and they always end up doing whatever dad wants.

For example when my dad decides to move all their money to Mawer, my mom raises objections but in the end, lets him do what he wants. And then she complains loudly and continuously about what he's done. And threatens to yell more if the Mawer thing goes badly or if they lose money -- because it's entirely his decision and responsibility. He's the boss.

It's true that dad always gets his way, every time, and mom feels helpless. So I think that's the main thing going on.


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## nathan79 (Feb 21, 2011)

Maybe she's just very risk-averse. If she had to manage the money herself, would she even buy a mutual fund?

My mom is like that, she's afraid of any investment that might lose money. Besides her rental apartment ("that's different" - lol), she sticks to GIC's and saving accounts.


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## Beaver101 (Nov 14, 2011)

james4beach said:


> I think I understand now what's happening more broadly. My dad generally controls things at home and gets his way, for example household and money decisions. My mom does not get the things she wants and they always end up doing whatever dad wants.
> 
> For example when my dad decides to move all their money to Mawer, my mom raises objections but in the end, lets him do what he wants. And then she complains loudly and continuously about what he's done. And threatens to yell more if the Mawer thing goes badly or if they lose money -- because it's entirely his decision and responsibility. He's the boss.
> 
> *It's true that dad always gets his way, every time, and mom feels helpless. So I think that's the main thing going on*.


 ... I think you should talk to your dad to let your mom handle some of the investments - perhaps a small portion of their portfolio or at least her TFSA(!). He'll have to at some point in time unless he plans to outlive her.


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## fatcat (Nov 11, 2009)

james4beach said:


> I think I understand now what's happening more broadly. My dad generally controls things at home and gets his way, for example household and money decisions. My mom does not get the things she wants and they always end up doing whatever dad wants.
> 
> For example when my dad decides to move all their money to Mawer, my mom raises objections but in the end, lets him do what he wants. And then she complains loudly and continuously about what he's done. And threatens to yell more if the Mawer thing goes badly or if they lose money -- because it's entirely his decision and responsibility. He's the boss.
> 
> It's true that dad always gets his way, every time, and mom feels helpless. So I think that's the main thing going on.


consider that you may be wading into the middle of a relationship dynamic that they have evolved over the years and that works for them ... sounds like my parents exactly ... that's how they related ... they went 60 years with my dad impetuously doing things and my mum complaining about his impetuousness ... and in the meantime were pretty happy ... i would be cautious (actually i would keep silent myself and mostly did)


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## james4beach (Nov 15, 2012)

fatcat said:


> consider that you may be wading into the middle of a relationship dynamic that they have evolved over the years and that works for them ... sounds like my parents exactly ... that's how they related ... they went 60 years with my dad impetuously doing things and my mum complaining about his impetuousness ... and in the meantime were pretty happy ... i would be cautious (actually i would keep silent myself and mostly did)


VERY true fatcat, a wise observation, and I am going to be very cautious here. Thanks!

I do think it's more about the relationship than the actual investments.


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## fatcat (Nov 11, 2009)

james4beach said:


> VERY true fatcat, a wise observation, and I am going to be very cautious here. Thanks!
> 
> *I do think it's more about the relationship than the actual investments.*


it sure is


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