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HI RYAN, DON’T FREAK out because I’ve written an actual letter rather than an email. No big news here, no emergency, we’re fine. I just have something that’s been percolating and I want to share it with you.
Ry, it’s become clear learning about investing is not where you’re at right now. I’ve tried to think of what I might have done to turn you off. We know I was depressed and withdrawn for much of your childhood, and you must have felt neglected or even ignored. I was overly concerned about how well you handled money and was impatient with a kid’s normal mishaps, like losing an allowance or spending it irresponsibly. A couple of times, I blew up at you. Or maybe you just recoiled from hearing so much about the harrowing gyrations of stock investing and the obligations that come with owning rental property. Am I in the ballpark?
Remember when we opened a joint brokerage account maybe five years ago? We were going to buy a stock, a mutual fund and an exchange-traded fund, so you could get an idea of how they worked. You would let me know when you felt comfortable going ahead with the plan after acquainting yourself with Morningstar. I was as excited as a little kid. But you never mentioned the account again until two years ago, when I told you I’d closed it. I could tell by your silence you were hurt, as I suspected you would be. Apparently, your wounded father was not above a bout of infantile retaliation.
I’m having trouble understanding your reluctance to pick up on managing money. You’re ambitious, you’ve got some cash and you’re a math jock. You’ll someday soon need to manage our family’s mutual funds, exchange-traded funds and real estate. And you were brought up in a home that places a premium on putting some money away in the event of, say, a health crisis or a business reversal. Acquiring some expertise in investing would seem to be only fitting.
Let’s face it, Ry, I’m almost age 78, with a stent, immunotherapy and a stroke warning. Mom will soon turn 70. For about 25 years, I’ve tried to honor Grandma and Grandpa’s sacrifices, and to protect their financial gift to us. As you and Mom know, we’ve overcome financial setbacks and avoided debacles. Along the way, I’ve accumulated a treasure trove of knowledge about the machinations of the stock market and the responsibilities of owning real estate. I’d love to pass some of that knowledge on to you.
Ryan, you’re not a kid anymore, you’re 35 and embarking on your own financial voyage. But as we’ve discussed, sports betting as a primary source of income is a risky venture that can invite personal and financial upheaval. Of course, you want to go your own way and make it on your own. We respect that and tried to encourage it. That’s why we’ve agreed to support your experiment emotionally and financially, and allow you to test the viability of living out your passion.
Your friends thought it was unwise to leave a dependable teaching job and try to turn a sideline into professional sports betting. Our friends think we’re foolish, if not outright enablers. What could make more sense than knowing how to supplement an unsteady income stream with dividends and rents? I’m baffled by your reluctance to grab the ring.
Most likely, Mom will outlive me and have the responsibility of managing our investments. Ever since she began co-managing the properties, Mom has become more confident about overseeing their operation. She knows locations, the need for periodic upgrading and the features that renters like. You can trust her judgment.
But I don’t think she’s completely at ease with the numbers part, like the monthly reports, income statements and balance sheets, and more complex return-on-investment calculations. And I know she feels overwhelmed by the prospect of mastering mutual funds, exchange-traded funds and bonds. Your math facility, not to mention brainpower, make you a natural partner. Your mother, who has devoted so much of her life to you, will need you.
Our resilient bond survived the hurt feelings of the joint account and other episodes, and we’ve become very close. We talk almost daily about our hopes, our disappointments and our fears. We exchange good-natured barbs, and spend hours analyzing your betting strategies and results. I so look forward to Wednesday nights, when we FaceTime our basketball game of the week on TV and carry on like fraternity brothers.
Maybe I have it all backward. Why should you be the fall guy? Perhaps my harping on the benefits of investing was the original sin. Parents often revisit their childhood traumas when raising their own kids. I only began to emulate Grandpa through my investments when he was weakened by illness and his powerful image could no longer terrify me.
Could our impasse say less about a son resisting his father’s guidance than about his father’s unresolved need to seek his own father’s approval? I don’t want to repeat the tragedy of the relentless father who alienates his son. But the day will come when you’ll need to take over our family’s finances—and I’m anxious to make sure you’re prepared.
Love you, Ry,
Dad
Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve’s earlier articles.
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Steve, thanks for sharing this. Parenting is the most challening thing for many of us. I have a 11 and 8 years old.
Just in case you may find this helpful, I recently listend to this Podcast “Bringing out the good in kids—and parents—with Becky Kennedy | Re:Thinking with Adam Grant” by two psychologists. Here is the link for the Youtube version (I just found out the show even had one): https://www.youtube.com/watch?v=Wk12ko0FDQk
It is more applicable to younger kids, however I believe parenting is never done even when our kids turn 18.
Some thoughts; some of these suggestions may have already been considered or implemented:
1) To simplify, it seems like there are three stages at play here – the first is managing the author’s family finances now, the second is managing them if his wife outlives him, and the third is when the estate passes to the heir(s).
2) The author has made another attempt to reach out to his son and I can understand his frustration. I respect the author’s sense of responsibility, good intentions and desire to help his son going forward. It also appears that there is some tension in the relationship. It might be time to accept that for whatever reasons, the son is not interested in being involved at this time or maybe ever. If it were me, would put an alternative plan in place and leave detailed instructions – a plan that can run fairly autonomously with the help of another trusted person. Is there another family member who could be brought in in this capacity to manage the entire portfolio? Perhaps a daughter or the author’s wife? Perhaps with the help of a competent financial advisor and an accountant? Perhaps have a third party go over the financial aspects of the portfolio with the wife without the author being present?
3) Rental property management can be challenging (been there, done that). However, if the author’s wife enjoys managing the properties, why not keep that going, with a contingency plan should there come a time when she changes her mind or simply cannot do this. With regard to selling the properties there could be tax implications. If the rental receipts and P&L support it, and this is not already being done, could property management responsibilities be assumed by a property management firm?
4) (Stating the obvious, hope there is a trust and pour-over will already in place, with a trusted executor.)
5) Some people are uncomfortable facing the potential death of their parents, and avoid it as long as possible, but step up when they have to (i.e. the parent passes away).
6) May be too late for this, and reading between the lines, perhaps unfairly and I apologize for that – there’s a difference between waiting for someone to rise to the occasion, vs. simply saying “your mom and I need your help” (with one area – not the whole megillah). Also, “catch” someone being successful at something (without patronizing – a difficult balance) and let them know you’re proud of them – that can be powerful, vs. expressing what may be interpreted as disappointment even if it wasn’t meant that way. Again, sorry if I’m overstepping here. The situation is challenging.
You can do this. Just my thoughts.
Thanks for sharing your letter to your son.
About two feet from my keyboard is the last letter from my dad that he wrote me on February 5, 1990 that is a prized possession to me. Dad died over 20 years ago. I expect that at some point after I am gone one or more of my kids will find the letter and read it. I hope their take away is the never ending love of a father for a child.
I encourage Ryan to keep your letter.
Best, Bill
Caring father, caring son. I can already see you writing that letter to your son. Then he will post both of them. I can only wish for the same.
Steve – thanks for the honest and emotional message. I assume you told Ryan you were posting this, and I hope he understands what you’re trying to accomplish – both for him and your readers. In my case I’ve had to address how I “leave things” for my kids, and have decided to apportion some specifically for my grandkids.
As mentioned earlier, I also wonder about gaming addiction, and hope that’s not an issue here.
Hi Jeff
Thanks for the reference. Half the time I succumb to a trade, I think about what he wrote about the “loser’s game.” Unfortunately, gambling is always an issue. Ryan clearly is on the spectrum (as am I, the “retired” options trader), but I feel if he’s happy and isn’t hurting anyone, it’s fine with me. Remarkably, he is doing quite well although I doubt he can ultimately support himself (in LA!) exclusively with the betting. But that’s OK, I just hope whichever way he chooses to go will be meaningful to him.
I am very fortunate that my kids, in their early 20s, appear on the right path with respect to how they should be investing and growing wealth. They understand the benefits of a long runway. The difference between getting the hang of all this in your early 20s vs 35 is ginormous.
Hi Guest
You are very fortunate to have cultivated so much financial responsibility in your kids. They are also fortunate to have a parent who early on recognized how important that is in our society. “Runway” is a great metaphor and unfortunately when you’re young it looks like a strait away without the twists and turns life can take.
Part of your last sentence above struck me, “when you’re young, life looks like a long strait away”. So true!
As I read this great letter, it reminded me of Charles Ellis’ letter to his grandchildren titled “My Investment Letter: Words of Advice For My Grandchildren.” It was featured in AAII, October 2013.
Hi Olin
Thanks for writing back. As you probably know, his book was “Winning the Loser’s Game.” I played and still play that game despite my awareness that my trading is almost certainly not going to “win the stock market game.” My index funds will grind away with the market’s 9 or 10% and bail me out with far less time and trouble. Even Burton Malkiel, a father of the efficient market hypothesis, admits in a recent interview in the Feb. 9:issue of Barron’s that he trades stocks in a tiny corner of his portfolio because it’s challenging and fun. Me too. And Olin, don’t so admire options traders, they take risks they are usually not fully aware of. They lose the winner’s game of capitalizing on the sometimes harrowing but inexorable march of the stock market.
Hi Olin
Thanks for your kind words and the reference. Half the time I succumb to a trade, I am haunted by what he wrote about “the loser’s game.” Good that you mentioned AAII. A wonderful resource that often doesn’t get the respect it deserves.
Is there a short answer to what he wrote that “haunted” you? Perhaps there was something Charles said that didn’t sink in with me?
Investing is a life learning experience for me. Those who can trade options are better gifted in risk taking.
I always look forward to reading your articles!
I understand your son is a professional and applies statistical models and mathematical skills to inform his bets. In this sense, it may be less an issue of gambling, but I still worry about the issue of addiction.
This reminds me of day traders who’ve quit their jobs to become full-time investors. They may have access to advanced software and think they’re different from a “typical trader.” They may love what they do. But I suspect many are blinded by addiction and don’t give proper consideration to their performance, and if they’re consistently able to provide enough income to support their lifestyles and contribute savings for their retirement.
I wish your son luck and hope that regardless of his career choice, he does eventually learn more about investing for your family’s sake. Sports betting and investing don’t have to be mutually exclusive.
Hi Brent
What a thoughtful and concerned note.I resonate to your last line.about holding on to a passion as you branch out to related but more reliable work. I feel I was lucky to have parents who hung in there with my interest in psychology—what makes people tick—as they waited for me to come around and also benefit from all their patience and devotion. They didn’t understand why I preferred what they considered the unreliability of stocks to real estate, but they allowed me to pursue it. I think for most of us a meaningful retirement includes at least a semblance of our work and leisure passions. So many people have had to abandon the dreams of their youth to get by financially. You are clearly see the possibility and I sincerely hope you won’t need to scuttle your own passion.
Steve
Good letter, but if I were in line to inherit rental properties I’d be looking into how to find a good realtor, not how to run them. Not everyone is cut out to be a landlord.
For sure. Even I came to realize that, for my health and my family’s quality of life. Most people can handle a property or two, but after that the responsibilities become tiresome. Truthfully, I wasn’t made out to be a landlord either, but I saw the benefits of hanging on while I pursued my passions of helping people cope with the vicissitudes of their lives and their investments. As you say, taking over a job that doesn’t suit you—without a supplementary passion. So many get trapped. I think one of the reasons hard-working folks so look forward to retirement is to finally get a chance to actualize their true self, whether to travel or pursue any number of things including deepening their spirituality.
Then why pass the problem on? Sell the properties, invest the proceeds in low-cost index funds – maybe the Bogleheads three-fund portfolio – and everyone can relax.
Hi again!
A lot of wisdom and logic in what you say. Maybe I’m just an old doomsayer, but I would be concerned about (very) black swan events in the world of finance like an investor’s asset manager going under (remember Lehman Bros.?) or like a natural or war-related catastrophe in Boston that takes out Fidelity. Maybe it’s just unfounded anxiety, but I’m a true believer in diversifying liquid investments with real estate, especially when we’re older and thinking about how to maximize safety for our heirs.
Real estate is not immune to risk – fire, flood, termites, recalcitrant tenants – although you can insure against the first three, if the property is some areas the insurance is going to become expensive with climate change. There is also the hassle and increasing expense of maintenance. How can it maximize safety for your heir to leave him property that demands management if he has no interest in or aptitude for managing it?
If you insist on diversifying into real estate there are REITs, or, even better, REIT funds. A small percentage of my portfolio is in VGSLX, although it also did badly last year. I have found no reason to employ an asset manager and I have no idea what you mean by “taking out Fidelity”. Destroying its buildings would not affect your investments.
If Ryan is indeed a professional sports better, maybe he can answer something that has always confused me as a non-better: How do the gambling companies offer “free $1000 in bets” or other similar promotions for new users? Every year around the Super Bowl I see them and think “why don’t I just conform to the requirements and get free money?”
I’m sure there is some requirement that you have to bet all the money first or something, but with an efficient (or at least semi-efficient) market on bets, presumably one would be recouping something like 95% of the money wagered on average and could just withdraw whatever was left as free money, correct? Or is it more complicated than that? Sorry, it just always bugs me when I can’t figure out why a company is giving away free money and it doesn’t lead to their collapse.
Hi Nate
That “free money” you wonder about comes with a catch. They are making their own bet—that you will be hooked and eventually succumb to the odds. Those odds are in their favor Nate and they have learned it’s the bettor that’s giving away his own “free money!”
Steve, thanks for an honest and interesting article. In my experience finances often create a myriad of unique and sometimes challenging family dynamics, often across multiple generations.
You bet. Sometimes those dynamics can get pretty ugly, like after the passing of a financially successful family member. Recently for me the dynamic has been about questions left unanswered. How did my grandfather, a poor Polish immigrant, ever get the money to buy an apartment building? And why would he ever buy it in Brooklyn when he lived all his life in the Bronx and couldn’t drive!
I’m taking Philly -1.
Hey, The Drake
Ha, ha. What a great line to wake up to! But I won’t take that wager. Just because I’m a Californian doesn’t mean I’m hopelessly out of touch. Have fun watching the game.
Sooooo….this is either a real letter or we are supposed to see something of ourselves in Ryan, correct?
Sorry, asking the question probably breaks the 4th wall or something, but I am way too literal and can never understand allegory or metaphor or analogy or whatever.
Not a metaphor. Ryan is indeed Steve’s son, and Steve is indeed trying to get him more involved in the family’s investments and real estate holdings.
Oh wow. Thanks for the clarification!