Saturday, April 29, 2023

I Hope Your Heirs Want to Manage Your Dividend Portfolio


If you have been following what's going on in the financial blogosphere, I had the pleasure of rebutting every single point except one that was made in Investment Moats on the Dividend income approach. I strongly suggest that you go read that article if you wish to appreciate this post. 

You can follow this link.

I left the final point for a full-blown blog article because it is a good point that simply cannot be refuted by a well-written Python program or a stream of data downloaded using APIs. 

Points like this are what make personal finance personal. Readers are free to see whether the point resonates with their personal experience.

Logically, the ninth point of the original article does not really make a real point. 

When an investor dies, the beneficiaries of his will get control of their assets and will deploy their assets in any way that they please because it is now their money. As it is now their money, they will find a way to manage it using whatever means that they already have. This can mean putting it with an investment expert, or financial advisor or punting it in the cryptocurrency markets.

The real point Investment Moats is driving at is that a stock-based dividends portfolio has many parts and idiosyncracies, so it is more likely that the heirs will not be able to manage it in its current form.

If we take this as a real point, then I think Kyith successfully touched on one of the fears of a real-life dividends investor. In such a case, I don't even need to talk about my kids, I'm pretty sure my wife and my mum will struggle with this if anything happens to me.

This is what I think a dividends investor reader can do if this point really scares you:

a) Don't Die

The first point is obvious, if you don't die, you don't have this problem. 

But your days being alive need to be put to good use. The moment your kids turn 18, you open a CDP account with them and train them on dividend investing. If they want to shift strategies then they should educate themselves first. For me, as early as any family can get a CDP account, they need to know how dividends work.

( IMHO, Dividends are not the best way to pass things down, I think a residential property is better. But I don't want property ownership to prevent my kids from getting an EC next time they start a family! )

b) CDP is quite good if you know how it works.

Your heirs should know your CDP number and allow themselves to be guided by lawyers on how to transfer the stocks out of your account if you do die. When my dad passed, I moved all his stocks to a joint CDP with my mum. The transfer fee was $10.80 per counter and we had 50+ counters. I remember it was really smooth and the counter staff said I was one of the smoothest clients they had ever seen.

I think this technical detail from probate to CDP stock transfer is very smooth and elegant, but I am open-minded to understanding how funds managed by an FA can be moved in a similar way.

c) Nothing wrong if your dividends counters get sold by your heirs.

Every generation works differently when it comes to managing money. I was the one who shifted my dad from real estate to dividend stocks. My kids will have a different way to look at wealth. 

Just because you like dividends does not mean that it's the best for their generation. 

Similarly, your heirs should be free to sell any property to deal with more immediate lifestyle needs.

My wife should sell the house to educate my kids.

d) If there is anything to pass down, prioritise financial education first

I'm not trying to sway readers to send their heirs to attend my training, but there is definitely room to pursue a financial education in a tertiary institution if they are expecting to inherit wealth. But they need to know that they will eventually inherit wealth.

I was an only child who lived on landed property most of my life, my priority after my first degree was the CFA. My secondary priority was to get as much overtime as I can in my first job so I use my CFA knowledge.

To me, there was a lot I had to manage and I can't just outsource it to an FA. This DIY mindset is what I consider the most challenging value to pass down. My kids need to know that a 1% annual fee is the real thing that will really hurt your safe rate of withdrawal.

Lastly, I like to address the point Investment Moats made about CreateWealth8888. In the financial blogging circles, there are murmurs that Jacob's kids were not fully aware of Jacob's approach to trading. I absolutely do not think that there is anything unusual about this when wealth needs to pass on. If anything, Jacob successfully sent all his kids through a local degree program. 

That is the more important thing. 

It will take some time to figure out Jacob's finances, the final outcome may not be dividends driven.  

But I won't count his kids out. 


  1. Hello Chris!

    I must give you a thumbs up!

    I had a good laugh over lunch with some cbox friends when we saw how Kyith has gone ballistic with your "trolling"... LOL!

    As a fellow "troll" of sorts, I must hand it to you... Not many can get Kyith all riled up like that!

    I personally think it's healthier for the community to engage in the Socratic method rather than it being just a big echo chamber of "yalor, yalor"...

    It's not about who's right or wrong, but more about which shoes fit whose feet better.

    And that readers can decide for themselves! Who knows our own feet better than ourselves???

    For readers who can't think for themselves and need to be "shepherd", well, that's where financial educators like you come in - for a small price of fleece or milk, of course. Wink, wink.

    But if you're cleaving pounds of meat off them, I'll take over CW's role and come poke you all over!

    P.S. You got kiss and make-up with Kyith? Please don't do it in front of the children ;)

  2. I just want to say that I'm so happy to see you here, SMOL. I hope things have been good with you. Let's have kopi together with some of the CBOX guys one day.