Retirees who trusted their broker

[samclem]

Loosechickens,
I'm glad you are happy with your broker and your FA. In the final anaylsis, that is what matters most.

Quote:

Originally Posted by loosechickens Our Merrill Lynch broker and his son who is a Certified Financial Planner made us wealthy, and have kept us wealthy.

Well, if you are wealthy, and if your broker and FA are honest, they'll be the first to tell you that you are the one most responsible for that outcome, not them. It was your capital that made this possible after all.

Quote:

Originally Posted by loosechickens I try to stay informed, and I discuss investments with our advisors, but I don't try to take out my own appendix, and I don't try to handle our portfolio by myself. I respect the fact that they do this all day every day. I don't WANT to spend my days comparing investment opportunities, running spreadsheets, doing comparisons, etc. That's what I pay them to do.

I think we all know how self-surgery would likely turn out, but managing a portfolio is nothing like that. Many folks who manage their own investments, I'd guess including the majority of people who frequent this board, are getting better results than if they were paying an advisor. That's a lot different than what would be expected from self-surgery.

Quote:

Originally Posted by loosechickens Not to denigrate those who prefer to do it themselves, but I hate to see brokers and planners treated as though they are just playing people for suckers. Many are nothing like that, and the fees they charge are well worth the results they achieve. I know ours are.

Here's the nub of the problem. The people who sell stocks and financial advice are often not working for you. Brokers are nearly ALWAYS the agent of their employer, not you--that means they are not legally bound to look out for your best interest (any more than a car salesman is). Financial advisors are slightly different, but many make their money by selling financial products with loads and fees--you can bet their customers never hear about the funds that could save them tens of thousands of dollars in fees. Some brokers and FAs have put their clients into terrible investments (annuities inside IRAs, high-load funds, products with inappropriate risk profiles, etc. Look at the stuff in this thread for instance) and have left them with insufficient funds for a secure retirement. In the end, the only way a client can know that they are not being fleeced is to learn about investments (it is not hard). And, once you learn that amount, it's not that hard to just do the whole thing yourself.

Anyway, perhaps you've found a FA and a broker who are doing this better than you could do yourself, even after their fees. If so, congratulations on your good luck.

[CybrMike]

There are few good brokers among a sea of sharks and crooks. Generally, I'd prefer to learn it myself so that if I screw up, I've got no one to blame but myself.

[bssc]

I find that a reasonably honest broker is better for some people just to get them started and keep them on track. Some people need to be nagged or don't want to think about retiring. I have friend who could have used one to put away some money when they were in their twenties instead of now in their forties.

That being said, I manage my own money and enjoy investing. I missed the tech bust because of Benjamin Graham and Al Frank.

[samclem]

And, sometimes eventhe charlatans and crooks perform a service. I started to think more about saving/retiring after hearing a pitch by a salesman (AJ Williams Company? Something like that) in the mid-80's. Their particular approach was to urge folks to exchange their expensive whole life policies, buy cheaper term insurance instead, and invest the difference. That's good advice, but the funds they pushed were very expensive, and the insurance was no bargain, either. Still, the color glossy material with graphs of historic market returns and really big accumulations after decades of doing this caught my eye and got me thinking. A made a few small wrong turns early in the game (when the lessons are cheapest), but eventually learned the ropes. Well, most of them. I'm still learning every day, mostly right here.

[FinanceDude]

Quote:

Originally Posted by samclem . Here's the nub of the problem. The people who sell stocks and financial advice are often not working for you. Brokers are nearly ALWAYS the agent of their employer, not you--that means they are not legally bound to look out for your best interest (any more than a car salesman is).

What about the Vanguard "advisor".........who are THEY working for??

[loosechickens]

really good points, samclem.......and I certainly don't disagree with the fact that should a person be so inclined, and enjoy managing their own investments, that it isn't rocket science, and one can learn to do a competent job of it. I agree that the "taking your own appendix out" was not a good example.

I think I just reacted to the attitude I see so often that the brokers and advisers are just suckering people, when there are certainly honest and competent professionals that do an excellent job for their clients. I just felt like I needed to stick up for our guys who have shepherded us so well over the years.

We were just lucky, I guess. Our broker DOES give us a lot of credit. We make his job a lot easier because we tend to live well below our means, giving him a good chunk of extra income to invest each year. He likes that. ;-)

Different strokes for different folks. My problem is that I try to stay informed in a general way, but the nitty gritty of comparing companies' performance, prospects, etc., just makes my eyes glaze over after an hour or two. I do best with reading general stuff, (and I've enjoyed reading over all the posts on this board), but I know I don't have the day to day interest to manage a complex portfolio competently. Too many distractions out here in this nomadic life..... <g>

each to his own, I guess..... LooseChickens

[FinanceDude]

Quote:

Originally Posted by samclem And, sometimes eventhe charlatans and crooks perform a service. I started to think more about saving/retiring after hearing a pitch by a salesman (AJ Williams Company? Something like that) in the mid-80's. Their particular approach was to urge folks to exchange their expensive whole life policies, buy cheaper term insurance instead, and invest the difference. That's good advice, but the funds they pushed were very expensive, and the insurance was no bargain, either. Still, the color glossy material with graphs of historic market returns and really big accumulations after decades of doing this caught my eye and got me thinking. A made a few small wrong turns early in the game (when the lessons are cheapest), but eventually learned the ropes. Well, most of them. I'm still learning every day, mostly right here.

Well, I would NOT refer to AL Williams reps as FA's...............

[samclem]

Quote:

Originally Posted by FinanceDude What about the Vanguard "advisor".........who are THEY working for??

The same holds true for Vanguard. Anybody who gives advice should be assumed to be working for whoever pays them, and to have that entity's best interest foremost in their minds. That's why (IMO) the best arrangement is for customers to pay the FA based on an hourly rate, fixed fee, or even % of assets and to specifically agree (in writing) that any fees paid to the advisor by MFs, brokerage houses, etc will be refunded to the customer. Even then--caveat emptor is good advice.

[FinanceDude]

Quote:

Originally Posted by samclem That's why (IMO) the best arrangement is for customers to pay the FA based on an hourly rate, fixed fee, or even % of assets and to specifically agree (in writing) that any fees paid to the advisor by MFs, brokerage houses, etc will be refunded to the customer. Even then--caveat emptor is good advice.

I am confused by this post..............the brokerage houses are the ONES who pay us, we are not allowed to take cash from customers directly for advice, all transactions are "arms-length"...............

[samclem]

Quote:

Originally Posted by FinanceDude I am confused by this post..............the brokerage houses are the ONES who pay us, we are not allowed to take cash from customers directly for advice, all transactions are "arms-length"...............

There are no fee-based FAs who perform services for customers for an hourly rate without compensation from others??

[saluki9]

Quote:

Originally Posted by samclem There are no fee-based FAs who perform services for customers for an hourly rate without compensation from others??

Sure there are. They need to be registered advisor, and not a broker.

Many firms take no outside compensations from fund families, banks, etc.

[Achiever51]

An interesting article from MSN Money
8 things your financial planner won't tell you
Literally anyone can claim to be a financial adviser. Even those with top credentials may not divulge everything you should know. Here’s how to dig up the facts on the person you're paying for financial advice.


http://articles.moneycentral.msn.com...ntTellYou.aspx

[Tracker]

I really feel for these people.

My father never signed a check until my mother died. He was 60 years old at the time.

[Achiever51]

Quote:

Originally Posted by Tracker I really feel for these people. My father never signed a check until my mother died. He was 60 years old at the time.

Ditto. But my dad was 74. Fortunately, he wasn't/isn't afraid to ask lots of questions before taking any action. Good thing, too. After my mom died, it was amazing how quickly the "experts" came calling -- e.g., on the afternoon of my mom's funeral, a realtor called to extend her condolences and to suggest he list his house for sale!

[FinanceDude]

Quote:

Originally Posted by samclem There are no fee-based FAs who perform services for customers for an hourly rate without compensation from others??

The term "fee-based" is interpreted differently by different folks. I look at it this way:

1)CFP, only charges an HOURLY fee for services, and does NOT RECOMMEND investments through his/her office.

2)FEE-BASED advisor, who is compensated based on a negotiated fee of the assets he/she manages.

So, the difference is BILLABLE time/hours versus a negotiated fee for assets managed.

[haha]

Quote:

Originally Posted by FinanceDude The term "fee-based" is interpreted differently by different folks. I look at it this way: 1)CFP, only charges an HOURLY fee for services, and does NOT RECOMMEND investments through his/her office. 2)FEE-BASED advisor, who is compensated based on a negotiated fee of the assets he/she manages. So, the difference is BILLABLE time/hours versus a negotiated fee for assets managed.

As a former sometime salesman with an ironical turn of mind, I am wondering if it isn't really hard to get paid upfront (i.e. by hours) for something which people think they can get for free. In my admittedly limited experience, and through my possibly warped way of looking at things it has always appeared to me that unless you have good pre-existing connections to wealthy people, you can only make money from the hoi polloi by getting compensated in ways that are not immediately obvious to the customer/client.

From your comments I take it that you belong in your category 1 above, CFP, and take no commissions or asset based or performance fees. Is this true?

If this is true, how do you compete with people who can advertise FREE!! ?

Ha

[FinanceDude]

Quote:

Originally Posted by HaHa As a former sometime salesman with an ironical turn of mind, I am wondering if it isn't really hard to get paid upfront (i.e. by hours) for something which people think they can get for free. In my admittedly limited experience, and through my possibly warped way of looking at things it has always appeared to me that unless you have good pre-existing connections to wealthy people, you can only make money from the hoi polloi by getting compensated in ways that are not immediately obvious to the customer/client. From your comments I take it that you belong in your category 1 above, CFP, and take no commissions or asset based or performance fees. Is this true? If this is true, how do you compete with people who can advertise FREE!! ? Ha

Not warped at all. In fact, I worked for a firm that did "free financial planning". The basis was that if the client like your proposal, they would let you make money by managing the assets. Then, Amerrprise decided there was MORE money to make, so they charge for the PLAN ($500-$3000) and THEN get paid on the assets..............

Unfortunately, the folks getting whacked the worst are the CFP's that ONLY do planning on a billable rate basis. You need a TON of clients to make money doing $1000 plans. As a matter of fact, I know two CFP's with loads of experience that shut down their firms because they ran out of clients......... :P The ones that are surviving have hired money managers that implement their plans for a fee.

I am working toward a CFP, and will take the test in November. I am a fee-based RIA, and my fee is negotiable. I do financial planning for clients, but do not charge for it, nor will I even when I am a CFP..................

Commissions, 12b-1 fees, etc, are not as transparent as they should be. However, quarterly management fees are printed right on the statements, so clients see them right away..........

[Helen]

My Mother emailed me last week to tell her the bank called and wanted her to move her emergency fund laddered CDs into an annuity because they said she could make more money that way.

They were comparing the 1st year rate of return of 6.5% to her 4.x% CDs. Of course after the first year the rate dropped to 4% but they didn't talk about that. The money also would have been tied up for a minimum of seven years.

I told my Mother not to do it. I think I'll sit down with the nice lady when I return home in May and have her explain to me how that is a better deal.

[FinanceDude]

Quote:

Originally Posted by Helen My Mother emailed me last week to tell her the bank called and wanted her to move her emergency fund laddered CDs into an annuity because they said she could make more money that way. They were comparing the 1st year rate of return of 6.5% to her 4.x% CDs. Of course after the first year the rate dropped to 4% but they didn't talk about that. The money also would have been tied up for a minimum of seven years. I told my Mother not to do it. I think I'll sit down with the nice lady when I return home in May and have her explain to me how that is a better deal.

Sorry to hear that.................... :P I'm sure the conversation went something like this:

You know, Mrs. XXX, we did a review of your account, and noticed you keep a large amount of cash in there which you never use. And since we're only paying 2% on that money, we FEEL BAD because you're not getting your fair share of the higher interest rates available today...........

What if we could show you how to get 6.5% on your money, which is more like 9% in your tax bracket, and, HERE'S THE GOOD PART, you don't PAY ANY TAXES :P :P :P :P AND< although it's not FDIC-insured like our bank accounts are, Southwestern Auto Reserve Life has NEVER not paid a claim in their 3 years as a going concern.........

Besides, if you REALLY need some money out of it, we can take 10% a year out............

[haha]

Quote:

Originally Posted by FinanceDude Unfortunately, the folks getting whacked the worst are the CFP's that ONLY do planning on a billable rate basis. You need a TON of clients to make money doing $1000 plans. As a matter of fact, I know two CFP's with loads of experience that shut down their firms because they ran out of clients......... :P The ones that are surviving have hired money managers that implement their plans for a fee.

Thanks F-Dude. This is pretty much what I would have expected to be the case.

Ha