Should you trust a family member with your investments? Here is what the experts say 

Handing money to a relative without any formal agreement, proper authorization, or a clear plan can cost you far more than just the investment itself.

Many people feel comfortable trusting their relatives and think it’s a good idea to invest money with them. However, even with the best of intentions, it can create conflicts that are hard to resolve and might even damage your relationship. This is a situation many people face, yet they often hesitate to talk about it or address the issue.

Recently, a caller on The Ramsey Show raised a similar concern about his finances managed by a family member and asked for advice on how to handle it.

A man named Dan handed over $10,000 to his brother-in-law to invest for him a few years ago, but there was no official agreement or clear understanding of exactly what his money was being invested in. Most of the money has been invested in the S&P 500, and now, two and a half years later, the brother-in-law wanted to charge a hefty 20-25% fee on any gains over 10%, which the man found both surprising and concerning.

Hosts George Kamel and Rachel Cruze were quite shocked by this proposal. Kamel said, “This is highway robbery.” He explained that the industry standard for a managed investment fee sits around 1% of assets under management, sometimes a little more, but nowhere near what was being proposed. When he found out the brother-in-law wasn’t a registered investment adviser and was a DIY investor offering his services informally, he advised, “I would get your money away from this guy ASAP.”

Dan also admitted that he couldn’t clearly understand what his brother-in-law was doing with the money, saying, “He’s doing like some covered call type stuff, I think”. Rachel suggested that he carefully untangle this arrangement, recommending that he approach his brother-in-law by saying that he and his wife want to consolidate their finances with a licensed professional.

Many people shared their thoughts on Dan’s situation, with hundreds commenting and expressing their understanding. One person shared their own experience, saying, “Learned my lesson the hard way, that money, property, and family are like water and oil, they don’t even mix, otherwise you’re gonna burn the house.” Another person added, “Keep family and business separate. Always.”

Someone shared a valuable lesson that everyone can benefit from: “Valuable life skill: learn how to say ‘NO’.” If something doesn’t feel right to you, it’s okay to speak up and decline, regardless of what the other person would think. If Dan had set boundaries earlier and expressed his desire to manage his own finances, he might have avoided the issues he is now facing.

A better way to invest

If you’ve got money to invest and you’re wondering where to actually start, the hosts gave a pretty clear roadmap. According to The Ramsey Show, picking investments linked to the S&P 500, like those available through E-Trade, is something anyone can do on their own. It’s easy to open a brokerage account and invest in an index fund. The whole process usually takes about 20 minutes, with no extra fees. For most people, especially if you’re planning to invest for the long term, this is one of the best options.

If you prefer some help and want to avoid potential financial mistakes, make sure to work with a licensed professional who understands the market well. You can start by visiting SmartVestor Pro to find a registered financial advisor. Typically, you’ll pay about 1% of your total investment each year for a well-managed account. In return, you’ll get someone with the right qualifications and oversight who is legally required to act in your best interest. This is a very different arrangement from an informal deal with a relative operating out of a personal brokerage account.

It’s also important to know exactly where your money is invested and why. Never invest in something you can’t explain or understand. If you hear confusing terms like “covered calls” or “performance fees,” it might be time to pause and do more research before you invest. A good financial advisor should be able to clearly explain their strategies and the reasons behind them. If someone can’t provide that clarity, it’s best to walk away, no matter who they are to you.