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Mom's FA says to sell IBM
Old 07-25-2017, 02:13 PM   #1
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Mom's FA says to sell IBM

My mom's new FA is recommending that she sell her IBM stock. He told her it "wasn't doing anything for her". Apparently he said nothing about the >4% dividend because she didn't know anything about that. While it's true that IBM isn't doing too well these days, I'm naturally suspicious about this FA's advice, especially since he didn't mention the dividend.

I know the decision to sell may depend on other factors regarding her portfolio. I asked her how much IBM she had, how long she'd had it, and what the FA proposed she replace it with, and unfortunately she didn't know. Dad passed a few years ago, and she doesn't know much about her investments. She is 88 and in fair shape financially, with $4k/month coming in for another nine years from the sale of their business, and I think around $800K in investments, plus SS. She's not sure what her monthly expenses are, but I'd guess around $2100 or so, with rent and such.

IBM is off of recent highs right now, and opinions vary as to how their situation could change. I'm wondering if my mom should hang on for the dividend. Any thoughts on that?
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Old 07-25-2017, 02:29 PM   #2
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I have no opinion on IBM on way or the other, and it needs to be looked at in the 'big picture'. If you are going to help her review the FA reccs, you will need this info. Most would push for diversification, the kind you can get in a broad-based index fund.

Tax implications could be huge?

I'd say you are right to be suspicious of the FA. There's money involved after all.

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Old 07-25-2017, 02:33 PM   #3
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My mom's new FA is recommending that she sell her IBM stock. He told her it "wasn't doing anything for her". Apparently he said nothing about the >4% dividend because she didn't know anything about that. While it's true that IBM isn't doing too well these days, I'm naturally suspicious about this FA's advice, especially since he didn't mention the dividend.

I know the decision to sell may depend on other factors regarding her portfolio. I asked her how much IBM she had, how long she'd had it, and what the FA proposed she replace it with, and unfortunately she didn't know. Dad passed a few years ago, and she doesn't know much about her investments. She is 88 and in fair shape financially, with $4k/month coming in for another nine years from the sale of their business, and I think around $800K in investments, plus SS. She's not sure what her monthly expenses are, but I'd guess around $2100 or so, with rent and such.

IBM is off of recent highs right now, and opinions vary as to how their situation could change. I'm wondering if my mom should hang on for the dividend. Any thoughts on that?
Why dont you take over the investments?
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Old 07-25-2017, 02:34 PM   #4
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What company does this FA work for? Is this a new adviser in a company your folks have used for decades? Or at 88 has your mom signed up for a new adviser and broker? Are they pushing expensive products in place of IBM? What's it going to cost your mom to sell and buy? Lots of questions I would ask in your shoes.
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Old 07-25-2017, 02:42 PM   #5
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What company does this FA work for? Is this a new adviser in a company your folks have used for decades? Or at 88 has your mom signed up for a new adviser and broker? Are they pushing expensive products in place of IBM? What's it going to cost your mom to sell and buy? Lots of questions I would ask in your shoes.
I meant to comment on that as well. A new FA?

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Old 07-25-2017, 02:46 PM   #6
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I wouldn't worry about IBM's performance as much as I would be concerned about the new FA's intentions.
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Old 07-25-2017, 02:50 PM   #7
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The challenge with buying or selling individual stocks is always up for discussion.

The next question is- 'Is the FA starting a path of churning the account to create more commissions for himself?' My mother had a switch in FAs, and the new one was eager to do a lot of trading. My mom asked me what I thought, and I told her that he seemed to be recommending a lot of trading. I suggested that she agree with him, such that the next time he suggested selling- 'Sure, sell that stock. Then send me the check for the sales amount.' The phone calls stopped.

Following the sentiment of this board- Would she allow the accounts to be consolidated at a low cost brokerage, where the whole picture becomes more visible?
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Old 07-25-2017, 02:50 PM   #8
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Main reason to sell is if there's a better place for those funds. I can't say much about IBM's near-term prospects because I look more at long-term. My research says IBM has the lead currently in quantum computing. Quantum computers require special conditions to operate, ones best found in a lab setting rather than in a smartphone. That means whoever is first to an operational quantum computer will be able to sell computing services that no one else can provide. If that's IBM they could rake in the money. Quantum computing should be ready for practical applications within 5 to 10 years.
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Old 07-25-2017, 03:01 PM   #9
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Get a financial overview in order first. IBM is a nice trigger to do this. Whether or not IBM should be there is contingent on whether or not you should have stocks at all, let alone individual stocks.

That said, with little info given, I'd work with the hypothesis that the best option likely is to dump all individual stocks for an 88-year old who isn't in control.

But get that overview first, including tax, inheritance, other investments, healthcare, ..
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Old 07-25-2017, 03:14 PM   #10
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Tax implications could be huge?
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Right, another thing she needs to find out before making a decision.

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Why dont you take over the investments?
I've not suggested this to her outright because I'm not sure she trusts me. She and dad were always big spenders and impressed by "stuff", whereas I'm more the "millionaire next door" type, living modestly and not much into possessions. Always been that way. Never mind that I'm 33 years younger with a bigger portfolio than hers for myself, not counting what my husband has, whereas hers was for the both of them. I've mentioned my portfolio value to her as a hint that I could offer advice, but so far she hasn't taken it too seriously. Possibly she's thrown off by the small house and 15-year-old car!

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What company does this FA work for? Is this a new adviser in a company your folks have used for decades? Or at 88 has your mom signed up for a new adviser and broker? Are they pushing expensive products in place of IBM? What's it going to cost your mom to sell and buy? Lots of questions I would ask in your shoes.
Their business accountant used to handle their investments, which always seemed a little strange to me. Last year he let her know that he could no longer handle her investments due to some conflict of interests, and would hand them over to his nephew. I'm wondering if the new fudiciary rules that went into effect this year were behind that. Mom didn't like the nephew, so she signed on with an FA. I'm not sure how she got hooked up with this guy.

As I mentioned, she didn't say what the FA is pushing, but I'll be staying in touch with the situation as much as possible. I'm guessing load funds, though!
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Old 07-25-2017, 03:16 PM   #11
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I wouldn't worry about IBM's performance as much as I would be concerned about the new FA's intentions.
Yes, exactly!
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Old 07-25-2017, 03:22 PM   #12
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As I mentioned, she didn't say what the FA is pushing, but I'll be staying in touch with the situation as much as possible. I'm guessing load funds, though!
Based on my experience with FAs over the past 15 years, I would predict an entree of high commission funds and speculative stocks with perhaps a sauce of variable annuities ladled over the top!

Not that I have much of an opinion about FAs.
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Old 07-25-2017, 03:23 PM   #13
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Following the sentiment of this board- Would she allow the accounts to be consolidated at a low cost brokerage, where the whole picture becomes more visible?
It's probably too late for that. She made this move, THEN asked me what I thought!

I'd like to get access to her accounts online so we could look at them together. Problem is she doesn't use a computer and is somewhat mistrustful of going online.
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Old 07-25-2017, 03:40 PM   #14
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Right, another thing she needs to find out before making a decision.



I've not suggested this to her outright because I'm not sure she trusts me. She and dad were always big spenders and impressed by "stuff", whereas I'm more the "millionaire next door" type, living modestly and not much into possessions. Always been that way. Never mind that I'm 33 years younger with a bigger portfolio than hers for myself, not counting what my husband has, whereas hers was for the both of them. I've mentioned my portfolio value to her as a hint that I could offer advice, but so far she hasn't taken it too seriously. Possibly she's thrown off by the small house and 15-year-old car!



Their business accountant used to handle their investments, which always seemed a little strange to me. Last year he let her know that he could no longer handle her investments due to some conflict of interests, and would hand them over to his nephew. I'm wondering if the new fudiciary rules that went into effect this year were behind that. Mom didn't like the nephew, so she signed on with an FA. I'm not sure how she got hooked up with this guy.

As I mentioned, she didn't say what the FA is pushing, but I'll be staying in touch with the situation as much as possible. I'm guessing load funds, though!
Don't limit the concern with just loads. Things like deferred sales charges, 12-b1 fees, wraps and frequently churning funds or equities can all benefit an unscrupulous FA.

I agree with the majority of posters. Concern about the FA is warranted.
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Old 07-25-2017, 03:43 PM   #15
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Please make sure they are in a third party account like fidelity/schwab/ameritrade etc..

I am sure that they are but just brings me back to Bernie Madoff having "smart people" make checks out to him and kept in his "brokerage account" .....
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Old 07-25-2017, 05:57 PM   #16
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It's probably too late for that. She made this move, THEN asked me what I thought!

I'd like to get access to her accounts online so we could look at them together. Problem is she doesn't use a computer and is somewhat mistrustful of going online.
Would she let you join one of her meetings or a conference call with the FA so you could ask some questions? Also, is the FA at a major firm or an independent? Especially if he's independent, it would be a good idea for him to know that someone is looking over your Mom's shoulder. My parents and some of their friends lost quite a bit of money to an "independent" FA years ago. He fled the country while facing criminal charges, and I don't know if he's ever been caught, so I'm leery of putting too much trust in someone who has access to other people's money.

My 89 year old MIL is in somewhat of a similar situation to yours of having to manage a large portfolio at Schwab after FIL died last year. Other than writing checks as needed and signing tax forms and real estate paperwork when told to, she didn't know much at all about their finances and she really prefers it that way. Fortunately she's amenable to letting one of her daughters help out. The rest of us are immensely grateful to the SIL who has stepped in to assist her.
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Old 07-25-2017, 07:13 PM   #17
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I would not want to own IBM, or any individual technology stock. Technology changes too rapidly and a company such as Blackberry can own the market one year and be completely obliterated the next year by a better product.

Without knowing the tax implications of selling though, as well as the overall makeup of the portfolio, it's hard to give any meaningful advice specific to her situation.
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Old 07-25-2017, 07:21 PM   #18
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I wouldn't worry about IBM's performance as much as I would be concerned about the new FA's intentions.
This!

If she has been captured by one of the storefront brokers his next step will probably be to sell her a very expensive annuity or a mutual fund with a big front load and a 12b1 fee.

Lots of good advice in this thread. Just be very, very careful. If he really is trying to churn her into high commission products, maybe you can use the evidence of this to get her out of there.

Edit: If the FA did not ask about tax considerations then he/she is not a fiduciary, no matter what the bold print might say. Going to https://brokercheck.finra.org/ is also always a very good thing to do.
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Old 07-25-2017, 07:52 PM   #19
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I agree with the review the FA part as the key step but I only want to talk about IBM the stock.

I've held a small amount of IBM shares for about 20 years now.

From purely a dividend perspective and growing that dividend, I love it.

From a total return perspective, it's got some challenges. It's struggling to rejig its business. They're betting the farm on their Watson technology which I think is a great technology which allows people to interact with big data in a more intuitive, friendly way. They've just got to grow their revenue from it.

Yes it does have competitors like Google who has it's own AI technology but I think they can coexist. There's only going to be x number of big players in the AI space IMO.
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Old 07-25-2017, 08:31 PM   #20
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I agree with the review the FA part as the key step but I only want to talk about IBM the stock.

I've held a small amount of IBM shares for about 20 years now.

From purely a dividend perspective and growing that dividend, I love it.

From a total return perspective, it's got some challenges. ....
According to this Total Return chart (right click and set to ALL on the timeline bar), IBM has been bouncing around SPY, and currently lagging when measured from JAN1999. Has lagged Wellesley almost all the time:

PerfCharts | Free Charts | StockCharts.com

As far as their future, I have no clue.

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