Wyatt,
There are plusses and minuses to what your grandfather has done. First of all, by using Scott Trade, he has probably saved himself, over the years, several thousand dollars in brokerage trading fees. Their flat rate per trade, no matter how many shares you buy or sell, is much better than paying a percentage of the trade's value each time, particularly in the long run and more particularly when making relatively large trades. Of course, the opposite is true if he has been buying and selling onesy-twosy and very actively trading on a near-daily basis.
As far as the IRAs go, that is another story. I am presuming, by his age, that these are all "traditional" IRAs, rather than the Roth variety. This means he must be taking (at age 78) RMDs (Required Minimum Distributions) from each one of them. Granted, this is probably a great source of income each month and, if he is properly diversified, is relatively secure. However, he could be equally well diversified (and possibly more easily) if all of his money were in one or two accounts. The maintenance fees he is most likely paying on that many accounts are eating a pretty big cumulative hole in his retirement, above and beyond what taxes are taking. He would still have the same income stream from one or two accounts that he now enjoys from 10+, but possibly with lower fees, leaving more for him. It may even be possible to roll the Ing, Janus, and Schwab holdings into a single account, although perhaps not a Scott Trade account.
Often, when two or more accounts are opened, the client wants to diversify more than they believe they can in a single account. If they buy mutual funds portfolios for those accounts, they may not realize that the different mutual funds could very easily be invested in the same, or at least overlapping, groups of stocks, thus
lowering their diversification, rather than enhancing it.
In addition, being traditional IRAs, I don't believe (check on this, I've been out of the industry for a few years) he can contribute to them any more. And when he could, he was still limited by the $2,000 ($4,000 for a married couple) maximum aggregate per year. What that means is that none of his many IRAs were funded enough to see significant growth over the time he's had them. The power of compounding interest was probably nullified, either by having too little to work from or by regular trading of stocks within the IRA(s).
At this point (again, seek professional help from someone who is currently licensed) it might be best to cut some of his management costs by rolling several of the IRA accounts into a single account (it can be one of the existing accounts or a new one) using a 1035 tax-free exchange process. This preserves the value and does not create a taxable event, as would a simple withdrawal to move the funds. If you combined them into one of the Scott Trade accounts, he could more easily control his diversification and still benefit from the low trading expense.
It is another matter entirely if he is "managing" IRAs for several of your other family members - those accounts cannot be combined. The question that is begged in that case is, "How adept at
making a profit (not just trading) is your grandfather?" Are all of the family members reasonably pleased with his results, or is he leaving himself open to be the receiving end of a significant family vendetta?
As for seeking help, remember first that ALL of the registered representatives earn their living by establishing and/or trading in accounts for their clients. It's part of the game. Find out up front what the fees are for each product they recommend - they are required by law to disclose those fees and charges - but make them explain them to your satisfaction and understanding. Be very willing to ask questions. Sit down with and interview two or three agents in different brokerages. Find someone you are comfortable with, who is patient enough to explain things carefully, considerate of your grandfather's age-related challenges (if any), and knowledgeable about the options. Ask people you think are relatively wealthy
who they use and who they might recommend - local folk in your area, rather than a general query to an international web-based forum. (No dis to the fine folks here at Head-Fi - you just need a local-to-you rep). You need to find someone with a portfolio large enough that they, too, have sought professional help, and are not just using a Scott Trade type of account.
Lastly, consider the option of withdrawing all of the moneis from the traditional IRAs, paying the taxes, and re-investing into one or two Roth IRA(s). You could take that in small bites and do one account at a time, spreading the tax burden over several years, if you wanted. The remaining money, after taxes, will continue to grow, not just tax-deferred, but tax free, and he can continue to fund it from other sources if he has that available. I don't think there are as strict a set of contribution limits to Roths, but even if there are, he can contribute to them still, where he cannot in the traditional versions. He can also take out only what he needs, if that is less than the RMD amount, because Roths have no RMD requirement. Anything he takes out of the Roth is
TAX FREE (!!!) thus increasing his income stream by the percentage of his marginal tax rate!
I hope this
very general discussion is of help to you and your grandfather. Again, I cannot emphasize enough the need for local, licensed, professional help. Good luck!
