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Advisors and insurance
Old 11-13-2013, 05:53 AM   #1
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Advisors and insurance

I have been talking with a few advisors and I am just curious what type of insurance they have or should have? Just incase they disappear.
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Old 11-13-2013, 06:05 AM   #2
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I have been talking with a few advisors and I am just curious what type of insurance they have or should have? Just incase they disappear.
It depends on what you mean by advisor.
If your funds are, as they should be, custodied at a brokerage, then your assets can't be withdrawn without your consent.

Licensing varies by state and size of firm, and also by if they are considered fiduciaries for clients.
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Old 11-13-2013, 06:05 AM   #3
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Firms carry errors and omissions insurance in case they mess up and are sued. Other than that SIPC insurance is provided to all investors. Here's a blurb from the SIPC website...

What SIPC Covers... What it Does Not

The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.
Among the investments that are ineligible for SIPC protection are commodity futures contracts (unless defined as customer property under the Securities Investor Protection Act) and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses. For more information click here.
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Old 11-13-2013, 06:08 AM   #4
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I'm not totally sure what you are asking. I think you are worried about giving a check to your advisor and it disappears like Bernie Maddof. The answer is that the advisor should only be the advisor. Any funds should be in an account with a regulated investment company. See above for the SIPC description. You then get statements from them and not your advisor. In the Maddof case, he held the money (ok, he spent it) and put out phoney statements to the clients. Your advisor therefore does not need insurance but you should make sure the firm that is actually hold your money does.

Now, why do you feel you need an advisor? Even with 51 posts, you should have figured out that this forum does not look favorably on that approach. We encourage do-it-yourself investing with low cost index funds.
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500k to invest
Old 11-14-2013, 05:43 AM   #5
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500k to invest

I have been talking to advisors, not sure what to do. I am retired (65) and have cash not producing good income. I would like to safely invest it to produce a solid 20k or more of extra income. Any suggestions? So far advisor is suggesting a 4% return, which is not a lot, Vanguard cd pays 3.2%. Not to fond of annuities, not sure what I am really buying on those. At my age have no tolerance for losing all my money, imagine that. Going to meet with advisor next week to see his game plan. Not a savy investor and feel a good advisor might do better than I can do.
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Old 11-14-2013, 05:59 AM   #6
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Originally Posted by lynxville View Post
I have been talking to advisors, not sure what to do. I am retired (65) and have cash not producing good income. I would like to safely invest it to produce a solid 20k or more of extra income. Any suggestions? So far advisor is suggesting a 4% return, which is not a lot, Vanguard cd pays 3.2%. Not to fond of annuities, not sure what I am really buying on those. At my age have no tolerance for losing all my money, imagine that. Going to meet with advisor next week to see his game plan. Not a savy investor and feel a good advisor might do better than I can do.
You are the perfect target for a scammer.

The only guaranteed return would be with Cds covered by the FDIC. At present rates it would be difficult to keep up with inflation. The bottom line is that not being willing to take some risk is typically one of the highest risk choices you can make.

You didn't indicate what the advisor was going to invest in to get the 4%. If he just pulled a number out of the air, the 4% is the default amount a well balanced portfolio can generate based on historical studies. You will have money in equities that can and will go down in value but can and will go up. You might want to search the "4% Rule."

Read Andrew Hallam's Millionaire Teacher before meeting with the advisor. This book is an easy read and will tell you everything you need to know about index investing. If you use an advisor, it is likely that you will be paying him several thousand dollars per year out of your investment returns. Data show that index investing provides higher investment returns than an overwhelming percentage of managed accounts.
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