The Perils Of Letting A Relative Manage Your Money

In journalism they say three makes a trend and regretfully my office has identified a disturbing one relating to investors who let a family member manage their money.  During the past few months we’ve been contacted by various individuals whose accounts were grossly mismanaged by a family member, including a father whose son put him into some investments that were patently unsuitable for his risk tolerance.  The father has a compelling case, but he’s torn about filing a case against his own flesh and blood.

In theory, choosing a relative to manage your money makes sense on the belief that a relative is more likely to act in one’s best interest.  Brokerage firms prey on this perception; when a broker enters the business he or she typically is instructed to contact family members to attract assets to the firm and build his or her book of business.  It’s tough saying no to young Johnny or Jane when they politely hit you up for some assets to manage at the outset of their careers.

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