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Fidelity planner moved to Soverign bank
Old 10-11-2012, 02:13 PM   #1
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Fidelity planner moved to Soverign bank

2-3 years ago this board helped me talk my sister into moving her money to fidelity and learning about investments. As it turns out she did move her money and used a fidelity planner to help.

She likes the planner and she did ok so she wants to keep using him. She called me today from his office.

Here is the problem. He has left fidelity and is working for best as I can tell so far Soverign Bank? She is in all cash right now , I suspect he advised her to do that so she could move her money to him

She is 53 retired, has approx 1 million in retirement accounts, probably another 100 or so in after tax.

She has paid company paid retirement benefits. Her expenses are running 5k per month and I told her that is high and suggested she either cut them or work part time for a while. She is single and has no children.

The planner is suggesting 700k go into a family of funds with a 2 percent load. The other 300k go into (here we go again) a variable annuity. He has her sold on the (guarenteed) floor of 20k per year at age 59. She called me from his office and put me on speaker.

I rather bluntly suggested she should not purchase the annuity or the funds, should go back to fidelity or vanguard or even to a fee only planner who I interviewed with her a few years ago. She is coming over tonight with the prospectus, I told the planner to give her the contract and wants me to explain to her why she should not do what he is telling her to.

I am relatively savvy with my own investments but I am not really qualified to tell her what to do. I suggested she at the least get a second opinion from a fee only planner before she pulls the trigger. I am not looking forward to studying a prospectus that I probably won't understand.

Do you agree with my suggestion that she run from this planner and find a good fee only since she is unable or unwilling to do it herself?

Or use another fidelity or vanguard planner? She seems to like the planner she has now and I think she really trusts him, though I do not. I also realize this is really not my business but she is asking for my advice, though I think she is leaning towards not taking it.

Sorry for the ramble, she just called me from his office and I am wound up.

thanks in advance for your advice,

Mike
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Old 10-11-2012, 02:22 PM   #2
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Chewy, take a look at this thread. It focuses on tax issues but also provides some good talking points and information to educate your sis on the pitfalls of buying a variable annuity. Pointing out someone with her best financial interest in mind would probably not try to sell her something with high fees - and high commissions - might help convince her to look elsewhere for advice.
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Old 10-11-2012, 02:24 PM   #3
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You did the right thing.
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Old 10-11-2012, 02:40 PM   #4
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I would NEVER be with a planner who PLANNED to take my money with him by having it moved all to cash to make it easy....

First, there has to be some taxes that should not have been paid....

Second, anybody who suggests a 2% load fund is getting a big kickback...

Third, anybody who suggests an annuity is getting a big fee...


I would scream at her and tell her this guy is NOT her friend and is NOT looking out for her interests.... he sees her a an easy mark and will likely milk her for all he can....


PS, I would not read the prospectus as it would be a waste of my time....
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Old 10-11-2012, 02:50 PM   #5
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Taking Fidelity clients with him is a BIG ethics violation. Fidelity can probably take him to court for this.
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Old 10-11-2012, 02:55 PM   #6
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My only advice is to point out the cost difference between a 0.xx% ER and a 2.0% ER on a portfolio the size of hers...
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Old 10-11-2012, 03:07 PM   #7
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Taking Fidelity clients with him is a BIG ethics violation. Fidelity can probably take him to court for this.
Ditto, I'm sure he signed some non compete post termination covenants that he is not honoring. I think you would be well within your rights and should confront the planner accordingly. If he is unethical in this arena there is no doubt he would gladly fleece your sister.
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Old 10-11-2012, 03:18 PM   #8
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Old 10-11-2012, 03:37 PM   #9
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2% load on $1mm can buy a LOT of fee-only CFP advice, without conflict of interest. I guess I'm not as concerned about her being in cash right now (depending on the tax ramifications) as I am about the commissions and (un)suitability of whatever products he is steering her toward.

(I have a relative who is under the spell of a double-dipping Svengali FA, so this story is raising the hairs on the back of my neck. )

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Old 10-11-2012, 04:00 PM   #10
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....She is in all cash right now , I suspect he advised her to do that so she could move her money to him...

The planner is suggesting 700k go into a family of funds with a 2 percent load. The other 300k go into (here we go again) a variable annuity. ....
Surely he could have put her into similar funds at Fidelity (with or without a 2 percent load)--why did he move her into cash first?

Has Fidelity assigned someone else to her account? Maybe you could tell her she at least "owes" that person a chance to talk to her too?

Stinks. You're a good brother.
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Old 10-11-2012, 04:28 PM   #11
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Mike,

First thing you should do is call his old Fidelity office and report him. I bet they act quickly and shut him down with legal action. I have had several Fidelity advisers move on to other jobs and none have tried to take me with them. I bet what he is doing is actionable by Fidelity. This will stop him cold. Then you can steer your sister onto a good path.

I've bought annuities and they are not something to be bought without undertaking a serious study. They should not be bought from the first seller. Plans have to be compared. They vary wildly. It took me a year to research and decide what I wanted to do. If she is unwilling or unable to evaluate the contracts herself then she should not buy them, period. No taking someone else's word for it or counting on you to read them. She needs to know the ins and outs or she could inadvertently make them worthless by not following the rules.

I second the idea of getting her back to a Fidelity or Vanguard adviser.
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Old 10-11-2012, 07:32 PM   #12
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Thanks for all the advice guys. A couple things. It turns out she was given a new financial advisor at fidelity who she did not like. She pursued the old advisor so I don't think it is a conflict of interest. Plus all of the money is in tax deferred accounts so I do not think there are any taxes involved.

My sister came over tonight to discuss. She is not going to do anything for now. She still likes the annuity idea however she agreed to wait a while. The funds he was putting her in are Pacific . They come with a 2 percent load , expense ratio of 1.5. they are standard funds of funds.

She was targeted towards the moderate risk option. It was easy for me to show her the fid2020 and vanguard 2020 funds in comparison. No load , comparable returns and much lower expenses. She called the "advisor" and he said he can't sell no load funds so if she wants them she needs to go to vanguard herself.

I wish she would take the iniative to do this herself but I don't think that is going to happen. I told her we could find a fee only planner to come up with a complete plan for less then she is paying this company. One that includes her 72t strategy she will need in a few years, tax planning etc. I believe I can come up with a good plan but I am uncomfortable with that, since I do not want to be responsible.

So, crisis averted for now. Now I have to find a fee only planner in NJ who will help her develop a plan. Preferably one who believes in low cost funds and perhaps an immediate annuity in the future.

I honestly think she could throw the whole thing in a target or balanced fund with a 60/40 or 50/50 allocation and let it ride for a while.

PS: It did get a little heated for a while. I apparently called the advisor a thief when I was on speaker phone and she was not happy since she likes him. I was unprepared when she called and all I heard was 2 percent load and variable annuity. It was unprofessional of me, I apologized to her for the language, but not the sentiment.
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Old 10-11-2012, 09:30 PM   #13
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Thanks for all the advice guys. A couple things. It turns out she was given a new financial advisor at fidelity who she did not like.
If she tells Fidelity that she doesn't care for the advisor they assigned to her, they might give the revolving door another spin and assign her a new one.

Far better to be dependent on your own skills or a fee-only advisor's occasional consult.
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Old 10-11-2012, 09:53 PM   #14
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He may actually be guiding her to the best stuff he has if he can't sell her anything without a load. But no way should she be getting into a 1.5% ER 2% load fund or a VA on his say so. I'd vote for one more Fidelity advisor (or figure out what she doesn't like about the current one and see if it's a valid concern).

I don't think you want to be too involved with her investments since it looks like she will be leaning on them fairly heavily.
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Old 10-11-2012, 10:12 PM   #15
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Chewy:
You did the right thing. Yes, she could do well investing on her own but given her lack of self confidence regarding investing it is best that she hire an advisor who is actively managing her account on an ongoing basis. She should be prepared to pay 1% of the portfolio as the annual management fee, anything more than that given the size of her account is rather high. The best thing the financial advisor will do in exchange for the 1% management fee is excercise discipline in the investment process which most individual lack specially during periods of high volatility and end up buying and selling at the wrong time. Fidelity or Vanguard would be preferable ofcourse but she should hire some who is competetent and treats the fiduciary responsibility of clients as the most important part of his/her job. Seems like the guys she likes lacks the key characteristics of the Financial Advisor in my opinion. All the best,
Rick
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Old 10-12-2012, 12:13 AM   #16
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The funds he was putting her in are Pacific . They come with a 2 percent load , expense ratio of 1.5. they are standard funds of funds.

She was targeted towards the moderate risk option. It was easy for me to show her the fid2020 and vanguard 2020 funds in comparison. No load , comparable returns and much lower expenses.
Another you might show her just for comparison is Vanguard Star (VGSTX). Balanced (60/40) fund of (managed) funds, no load, ER 0.34%, moderate risk.

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Old 10-12-2012, 12:56 AM   #17
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Chewy:
You did the right thing. Yes, she could do well investing on her own but given her lack of self confidence regarding investing it is best that she hire an advisor who is actively managing her account on an ongoing basis. She should be prepared to pay 1% of the portfolio as the annual management fee, anything more than that given the size of her account is rather high. The best thing the financial advisor will do in exchange for the 1% management fee is excercise discipline in the investment process which most individual lack specially during periods of high volatility and end up buying and selling at the wrong time. Fidelity or Vanguard would be preferable ofcourse but she should hire some who is competetent and treats the fiduciary responsibility of clients as the most important part of his/her job. Seems like the guys she likes lacks the key characteristics of the Financial Advisor in my opinion. All the best,
Rick
I really do not understand how someone can give away 1% in the low return environment of today. Doing this in a simplified "good enough" way takes almost no skill and almost no time. To me it is like brushing your teeth, exercising and using floss and learning to cook if you are alone. Except all of these things take more time and usually more skill than doing very basic but plenty good enough asset allocation at someplace like Vanguard. They will even tell her what to invest in for free. It isn't fun for many people, but they had better learn to do it or perhaps run out of money in retirement.

Ha
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Old 10-12-2012, 10:27 AM   #18
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I really do not understand how someone can give away 1% in the low return environment of today. Doing this in a simplified "good enough" way takes almost no skill and almost no time. To me it is like brushing your teeth, exercising and using floss and learning to cook if you are alone. Except all of these things take more time and usually more skill than doing very basic but plenty good enough asset allocation at someplace like Vanguard. They will even tell her what to invest in for free. It isn't fun for many people, but they had better learn to do it or perhaps run out of money in retirement.

Ha

I agree.... even a basic allocation given by Vanguard, either person or computer, it probably better than most FAs out there with a 1% wrap and high expense funds...

I bet even a single target fund would be better.... with the only decision being which year to pick....

I have steered many new investors to a target fund until they get their feet wet and feel comfortable with doing a bit more AA....
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Old 10-12-2012, 10:51 AM   #19
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I've hard little to no luck "helping" people with their financial decisions. It seems like they have too much invested emotionally in the thinking that got them there in the first place and when you point out (tactfully and carefully) the wasted money and /or flawed strategy, you get to be the bad guy.

I hope your luck is better than mine.
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Old 10-12-2012, 11:48 AM   #20
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Second, anybody who suggests a 2% load fund is getting a big kickback...
Can you elaborate?
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