Q:

50% portfolio in single stock, JPM - appropriate for 80 year old?

I've recently taken a look at my 80-year old mother's finances, run by a money manager at  Morgan-Stanley.  Half of her $3.5M portfolio is in a single stock, namely JPM = J.P. Morgan.  This seems to me irregular both in terms of risk, lack of diversification, and potential conflict of interest (I assume J.P. Morgan and Morgan-Stanley are not unrelated?)  
Is this a suitable allocation of assets?  To me it looks like borderline mismanagement, but I'm willing to be convinced otherwise.  It is difficult to reallocate now without incurring cap. gains taxes.

A:

This seems to me irregular both in terms of risk, lack of diversification

Me too.

Is this a suitable allocation of assets?

Putting 50% in one stock is acceptable, I think, if that one stock is a highly diversified and well-run investment company like Berkshire-Hathaway.  (Apparently, half of Bill Gates' wealth is in B-H.)
Of course, a giant bank isn't B-H.
50% in the financial sector isn't terribly horrible, though.

To me it looks like borderline mismanagement

Signs of mismanagement would be:

churn: lots of buying and selling just to generate brokerage fees; you'd need to look for that, and
investing in poorly performing stocks.  JPM's stock value has increased almost 6x since it's Dec '08 low, so that would be a hard sell as "mismanagement".

I'd want to ask them:

why it's so weighted to one company, and
what they think her investment goals are, and
how long she's held the stock.  (Maybe her husband invested the money in JPM way back when it was "only" 20% of the portfolio and organic growth means that it's now 50%.)

A:

Yes, this is terrible in terms of lack of diversification and concentrated risk.
Conflict of interest?  No, because there's no benefit to Morgan Stanley if a client owns shares of JPM.
Mismanagement? Maybe, maybe not.  This might be a violation of FINRA's "Know Your Client Rule" which requires a broker to assess  each customer's financial situation, specifically in terms of  financial needs, investment experience, investment objectives,  liquidity needs, and risk tolerance. OTOH, if you mother (or father) insisted on purchasing this large block of JPM shares then there would be no hint of impropriety at all. 
There are ways to protect this large position but are very limited, perhaps not even viable, if there are large cap gains that you don't want to realize.  And I apologize for mentioning it but the reality is that there are also accelerated cost basis considerations when it comes to inheritance.  
You're a bit of in between a rock and a hard place.

A:

Given the capital gains basis on the stock, it would be practical for her to continue to hold it. It is potentially possible that JPM grow so much over the past 10 years that it went from a moderately weighted position (10-15%) to 50% and was not sold for tax reasons. With that in mind it is hard to tell if this is mismanagement as the adviser could be considering the tax implications. You should talk to mother about her specific goals and JPM could easily fit those objectives.

