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Need some input
Old 03-12-2013, 09:55 AM   #1
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Need some input

I currently do volunteer work preparing taxes for low income and the elderly. Yesterday an older lady came in with a 1099B and the associated paperwork detailing stock and mutual fund sales. In looking over the paperwork I noticed what I would consider an excessive amount of trading. I asked the lady why so much activity and she said she knows nothing about her finances and puts all of her trust in her broker/financial advisor. I also noticed she had a $90K loss that she has been carrying over for a number of years, and chunking away at it, at $3K a year. She did admit almost in tears that lately she thinks she is being taken advantage of but has no one to give her advice or guidance.


I didn't say anything to her but I have a sneaking hunch something stinks. Now I am not accusing her advisor of churning as I don't know all of the facts. I won't say I lost sleep over it last night but it was definitely on my mind. Just wonder if I do anything and if so, what pitfalls might be out there as I know, in some instances no good deed goes unpunished.

I appreciate any advice.
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Old 03-12-2013, 10:14 AM   #2
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Does she have any children or nieces/nephews who could intervene on her behalf? But even if she did, would they even know what to do?

But you're right, something doesn't seem right.

I have a similar issue with my aunt/uncle - not excessive trading or inappropriate investments to my knowledge, but more using a broker/FA vs just buying a low-cost mutual fund given the relatively small size of their portfolios. I have mentioned Wellesley as a good choice to them a couple times but then left it at that - not my place.
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Old 03-12-2013, 10:40 AM   #3
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My personal litmus test is if I could let it go and be able to look at myself in the mirror and sleep at night. YMMV.

Do you have any kind of supervisor/mentor person you could bounce it off of?

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Old 03-12-2013, 10:42 AM   #4
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I think all you could do would be to recommend a fee-based advisor from an approved list. Even then you seem somewhat at risk. However, the lady was already concerned about her finances.
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Old 03-12-2013, 11:08 AM   #5
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Wow, this is a tough one...

If the woman seems to be of good mind, I would think that I would just leave things alone..

If she seemed to be a bit senile, or some other issue, I would probably ask about relatives etc. that could help...

I do not know what I would do if she did not have anybody to help... probably just shake my head that there are people out there that take advantage of other people...
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Old 03-12-2013, 11:13 AM   #6
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Why not just give her a Vanguard phone number and say they have very low fees and some good basic advise too? Vanguard can then do the rest if she chooses to make a change in her life. They can move her accounts without her having to confront her advisor although the advisor will probably apply pressure on her.

Maybe Fidelity would work too.

Another way to start the conversation is, "This is what I do and it's worked well for me ... ". You are not giving specific investment advise.
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Old 03-12-2013, 11:42 AM   #7
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Why not just give her a Vanguard phone number and say they have very low fees and some good basic advise too? Vanguard can then do the rest if she chooses to make a change in her life. They can move her accounts without her having to confront her advisor although the advisor will probably apply pressure on her.

Maybe Fidelity would work too.

Another way to start the conversation is, "This is what I do and it's worked well for me ... ". You are not giving specific investment advise.
This seems like a good idea.
I do non-volunteer tax work. I have seen some churning but only one client expressed unhappiness about it. This is what brokers do. None were as extreme as Frayne's example.
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Old 03-12-2013, 01:11 PM   #8
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http://www.sec.gov/about/offices/oia...aze-042012.pdf

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As a fiduciary,an adviser must avoid conflicts of interest with clients and is prohibited from overreaching or taking unfair advantage of a client’s trust. A fiduciary owes its clients more than mere honesty and good faith alone. A fiduciary must be sensitive to the conscious and unconscious possibility of providing less than disinterested advice, and it may be faulted even when it does not intend to injure a client and even if the client does not suffer a monetary loss...
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Old 03-12-2013, 01:30 PM   #9
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Originally Posted by frayne View Post
I currently do volunteer work preparing taxes for low income and the elderly.....
Does your organization have guidelines for dealing with suspicious activity? I would definitely get them involved.
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Old 03-12-2013, 03:17 PM   #10
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Does your organization have guidelines for dealing with suspicious activity? I would definitely get them involved.
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Old 03-12-2013, 03:54 PM   #11
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Frayne, as a tax preparer, even a volunteer one, are you bound by any confidentiality agreements?

It sounds like she could use help, but people are very strange when talking about money. I would suggest you stay away from giving direct advice. If you gave advice (just about any advice), and someone acted on it any time in 2008, where would they have been in March 2009, and who would they likely have blamed for it?

If anything you could connect her with resources that educate people in these kinds of matters. Some church and senior organizations do it. Or she could have a different CFP review her portfolio; most will give the initial hour for free.

As you said, you don't know all the facts. I will say that I dislike the default vilification of just about any financial professional here.
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Old 03-12-2013, 05:49 PM   #12
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Stinks. I watched my MIL get churned for years. That said, no good deed goes unpunished.
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Old 03-12-2013, 06:41 PM   #13
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Originally Posted by frayne View Post
I currently do volunteer work preparing taxes for low income and the elderly. Yesterday an older lady came in with a 1099B and the associated paperwork detailing stock and mutual fund sales. In looking over the paperwork I noticed what I would consider an excessive amount of trading. I asked the lady why so much activity and she said she knows nothing about her finances and puts all of her trust in her broker/financial advisor. I also noticed she had a $90K loss that she has been carrying over for a number of years, and chunking away at it, at $3K a year. She did admit almost in tears that lately she thinks she is being taken advantage of but has no one to give her advice or guidance.


I didn't say anything to her but I have a sneaking hunch something stinks. Now I am not accusing her advisor of churning as I don't know all of the facts. I won't say I lost sleep over it last night but it was definitely on my mind. Just wonder if I do anything and if so, what pitfalls might be out there as I know, in some instances no good deed goes unpunished.

I appreciate any advice.
Wow, tough one... "If you think she's receptive to learning", maybe you could suggest that she take a course on investing (Investing 101) maybe at a local community college so she could understand what's going on and decide if she still wants to allow all the churn (cost).
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Old 03-12-2013, 09:20 PM   #14
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Do you have any kind of supervisor/mentor person you could bounce it off of?

Tyro
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Does your organization have guidelines for dealing with suspicious activity? I would definitely get them involved.
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Originally Posted by MBAustin View Post
+1
Agreed - talk to your supervisor or maybe some regional office? There seems to be a problem, you are concerned, but there may be legal issues. Best to find out the correct way to help.

And I think it is great that you are trying to help, good for you. Just be careful how you go about it.

-ERD50
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Old 03-12-2013, 10:23 PM   #15
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It appears she is being taken advantage of. I don't see anything wrong i n asking her why she prefers the high risk trading strategy to a less risky one at her age. No harm in giving her options. I like the idea of suggesting Vanguard.
I could not sleep at night knowing that she is being had and I did not at least try to help her find a way out.
If left unchecked, she could be conned out of all her savings
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Old 03-12-2013, 11:07 PM   #16
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If the lady has an attorney, perhaps a suggestion that she go for a consultation with her attorney about any PoA (limited to executing trades) associated with her account, and request that the PoA be reviewed by the attorney.
Tread carefully!
I applaud you for caring. Very impressed!
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