To Liz, please:The usage of proprietary funds by financial advisors is one topic I haven’t seen you discuss.
My in-laws’ money was invested in a well-balanced portfolio by their advisor, but it was all part of a proprietary fund group. We have taken over their affairs. Because only specific agents are able to manage those assets, we are essentially forced to stay with their advisor. Additionally, significant capital gains would need to be paid in order to withdraw the funds.
As my adult children make their investing decisions, I advise them to follow our lead and stick with money that might be transferred to other consultants or handled directly to avoid a similar circumstance. Any ideas?
Answer: Before investing in proprietary mutual funds, investors should thoroughly investigate their potential drawbacks.
To compete with name-brand or third-party funds managed by outside firms, brokers and other financial institutions develop their own proprietary or house brand funds. However, a proprietary fund is usually exactly that—proprietary to the company that produced it—and cannot be transferred, whereas a name-brand fund can be transferred to another brokerage. You would have to sell the proprietary fund and incur all associated taxes in order to withdraw your money.
Proprietary funds, according to brokers, enable them to personalize investments for their customers. That may be the case, but there is a conflict of interest because proprietary funds also enable them to profit more.
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To Liz, please:You just wrote about home equity loans and home equity lines of credit. You may have noted that in some cases, these are tax deductible.
Yes, but these situations are becoming more and more uncommon.
In theory, you can deduct interest paid on a home equity loan or line of credit if you utilize the funds to make improvements to your house. To benefit from this write-off, you must be able to itemize your deductions. Less than 10% of taxpayers itemize because of increases in the basic deduction.
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