This friend (we will call him Bob) has proven to be pretty savvy with investments and was asked by one of his clients, who is a long term client, to manage their investment account. We will call her Jill. Bob does not work in the finance sector, but he agreed to do it and he did it for free.

This arrangement began back in 2010. While Jill did make some small contributions over the years, they were small, so I will just add the contributions to the starting amount to make the math simpler. In 2010, the account was worth about $272,000. 10 years later, the account is currently worth $1,414,000. This amounts to an average annual return of 20%. If Jill had invested in an S&P Index fund, the return would have been just over 10% annually. If she had been paying a fiduciary 1% to manage her money during that timeframe, the difference in her earnings is very close to $400,000 by choosing Bob over an index fund managed by a fiduciary (EDIT: I originally put $800,000 - my math was wrong - Thanks Baron).

As Jill starts looking at the numbers, she realizes how well Bob has done and offers to give Bob a money gift. She doesn’t know how much to give so she asks Bob to name a fair amount.

If you were Bob, would you name an amount, and if so, how much would that amount be?

Since Bob can’t technically charge for this service (he isn’t a licensed money manager), he can just put it back on her and tell her she can gift whatever she wants.

If you were Jill, what would you gift Bob?

In other words, since they didn’t make any kind of agreement 10 years ago, there is absolutely zero responsibility on Jill’s part to send Bob anything. These are just two people who know each other well and they are thinking about a fair gift amount.

TIA