Mom's FA says to sell IBM

[aja8888]

Didn't Warren Buffett just say his buying IBM was a mistake?

Exactly, that's why he sold most of it. IBM revenue is not rising due to maintaining legacy systems and no new blockbuster products to create more demand. The only thing that has been helping earnings is the lower dollar impact. IBM is one of the crowd that is marketing "blockchain" technology and is working with several European banks to develop a system, but has not signed any contracts for that technology implementation.

There is not a lot of good news for IBM's future.

 

[O2Bfree]

I think the FA is actually right. IBM isn't doing anything that is going to truly make you any real money, there are much better companies out there that would give a much better annual return. Buffett unloaded 10,477,282 shares in the second quarter this year of IBM. In the last 5yrs its performance -26% Not sure what there is to love about that.

IBM has a decent dividend, but yeah, there are better stocks out there. So selling it wouldn't be a totally bad move. I'm just hoping this FA won't be making himself a nice little income stream off commissions from churning my mom's investments.

 

[youbet]

IBM has a decent dividend, but yeah, there are better stocks out there. So selling it wouldn't be a totally bad move. I'm just hoping this FA won't be making himself a nice little income stream off commissions from churning my mom's investments.

Whether the FA is "churning" your mothers account is quick and easy to determine and monitor. Why are you just "hoping" he isn't churning rather than glancing at a few months of statements and determining whether he is or not? Or, since you say the FA is new to your mother, monitor monthly statements going forward to determine if "churning" is taking place. You're doing your mother a disservice by getting excited over a single, rather vanilla trade as opposed to understanding the financial/investment path she's on and how it's being executed.

Whether one particular trade is a good one or not is not nearly as important as what your mother is paying for FA services, what the FA's and your mother's shared goal is for your mother's portfolio and how ongoing results will be easily and effectively monitored.

 

[aja8888]

IBM has a decent dividend, but yeah, there are better stocks out there. So selling it wouldn't be a totally bad move. I'm just hoping this FA won't be making himself a nice little income stream off commissions from churning my mom's investments.

My MIL (when she was living) was having her account churned by her FA at Merrill Lynch. I had her take away his ability to make trades without her authorization and he darn near had a fit. We had him replaced.

One of my friends is with Ameriprise and won't change as he "thinks" his "guy" is doing him good. That guy even has my friend convinced he is not being charged any fees!! But he has a few million, so if he gets taken for a few hundred thousand he probably won't even know it.

 

[O2Bfree]

Whether the FA is "churning" your mothers account is quick and easy to determine and monitor. Why are you just "hoping" he isn't churning rather than glancing at a few months of statements and determining whether he is or not? Or, since you say the FA is new to your mother, monitor monthly statements going forward to determine if "churning" is taking place. You're doing your mother a disservice by getting excited over a single, rather vanilla trade as opposed to understanding the financial/investment path she's on and how it's being executed.

You bet I'm concerned and I want to understand her financial path, but except for mentioning the IBM stock, my mother is not sharing details about her investments with me. I have PoA, am on her checking account in case something happens to her, and she's told me roughly how much she has, but that's about it. I've asked her if she gets statements explaining what's going on with her money and how much is going towards fees and commissions, but so far she's just waved me off with, "Oh, I guess I do..." I'm hoping AARP will feature more articles on the pitfalls of using an FA, maybe that'd help open the lines of communication.

 

[Red Badger]

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.

+1.

And for dessert, let's add a high commission income rider to that annuity.

 

[flintnational]

While I don't normally follow individual stocks, I suspect net of fees, IBM will perform better than the FA.

I think your strategy to soft sell the risks with a FA is wise. Maybe she would allow you to attend a meeting with her and the FA to review his plan?

FN

 

[jazz4cash]

I'm hoping AARP will feature more articles on the pitfalls of using an FA, maybe that'd help open the lines of communication.

This month AARP features an interview of Jack Bogle. He does his typical job of explaining how fees impact your portfolio but he's not as influential as a commission driven FA.

 

[naux_one]

I don't understand why more people don't have a self directed account setup and do a little research. I work too hard for my money, to give it to some joker who doesn't truly care about my money. Technology has changed the game.

 

[Bir48die]

but even more recently: "IBM has lost the confidence of one of its biggest investors, ... Warren Buffett. Buffett, who owned about 81 million shares of IBM at the end of 2016, sold off about a third of that stake in the first and second quarters of 2017, he told CNBC."

http://www.cnbc.com/2017/05/04/warren-buffett-has-revalued-ibm-downward-cites-big-strong-competitors.html

Thanks for posting this. Whether people love or hate FA's (I fired mine after 6 months), it took 34 responses to actually shed light on the actual company. Which in my opinion is a sell.

 

[O2Bfree]

I don't understand why more people don't have a self directed account setup and do a little research. I work too hard for my money, to give it to some joker who doesn't truly care about my money. Technology has changed the game.

Well, my mom is 88 and has never used a computer. Dad always handled their finances but he died a few years ago. I've talked to my mom about how easy it is to deal with investments online these days, but she refuses to touch a computer and doesn't want me to help manage her investments. I've given her a few articles about what to watch for with FAs and how their fees impact your bottom line in the long run. Maybe she just needs time to digest the information.

I will at some point ask her if her statement shows fees and commissions. She's being somewhat evasive about this whole thing. Whether she doesn't want me to point out she's being taken or whether she doesn't trust my opinions, I'm not sure. Funny, mom and dad took many financial risks with my smooth-talking, substance-abusing brother, and lost a lot in the process. But they haven't much cared to hear advice from the quiet, millionaire-next-door-type daughter. Go figure.

 

[ERD50]

Thanks for posting this. Whether people love or hate FA's (I fired mine after 6 months), it took 34 responses to actually shed light on the actual company. Which in my opinion is a sell.

I think that's because "the actual company" has very, very little to do with it. OK, I just noticed this is in the "stock picking" sub-forum (I seldom notice, I start at the 'portal', which lists in chronological order), but still, there is a much bigger issue than what people think of the prospects of IBM (which would be reflected in it's stock price, so I'm not sure what else to say anyhow).

The big issue is, why should she be dealing with individual stocks? And what are the tax implications of a sell? Diversification? What is the FA doing that a couple set-and-forget broad-based index funds could not do, saving the fees (and probably out-performing as well)?

For a discussion of IBM as a stock, I think you'd get better responses without the "Mom" and "FA" and "Selling" interjected - just ask about IBM as an investment, period.

-ERD50

 

[naux_one]

Some of us did list some of IBM's performance, at least enough to go take a more thorough look into the company and its projections. As far as your mom being 88 years old and not wanting you involved with her investments, maybe she just doesn't want you to know what she is going to leave you when she is gone. Its hard for someone to make changes sometimes. If she is unwilling for you to setup an account for her then I guess the other option would be to leave her alone and let the FA run the show. And you can bet he is charging for his services, that's how they play.

One last approach would be to show her a trading account (TD Ameritrade, Schwab, etc.) and let her see how she can look at the performance of her stocks, bonds, mutual funds, etc. and check on this whenever she wanted. She might like to see her money in action, instead of getting a statement. Good Luck!

 

[ownyourfuture]

I'm not a financial, or technical analyst, but charts don't lie.

 

[aja8888]

I'm not a financial, or technical analyst, but charts don't lie.

Pretty much tells the story. How in the world would any FA recommend buying this stock?

 

[flintnational]

I think that's because "the actual company" has very, very little to do with it. -ERD50

Agreed. Sometimes people come here looking for advice on one topic and we spot a larger issue. In this case, I think the OP clearly is concerned about the FA.

Hypothetical OP - What should I do about my sick canary? Us - I would be more concerned about the cobra crawling up your leg!

FN

 

[OldShooter]

Pretty much tells the story. How in the world would any FA recommend buying this stock?

Part of any buying decision is the price. An ounce of gold at $1 is a buy, at $10,000 not so much.

I haven't researched IBM and have no interest in doing so, but for example it is possible that the revenue declines are the result of a business decision to ditch low margin product lines or subsidiaries. Making an investment judgment based on one scrap of data is naive at best. Maybe you have more information than you indicate but a single chart, good or bad, is not "the story."

Jeremy Siegel's Stocks for the Long Run is still a good read on this general subject. A good company can be a bad investment and vice-versa.

 

[RobbieB]

Pretty much tells the story. How in the world would any FA recommend buying this stock?

I'm up almost a grand.

 

[flintnational]

I rarely buy individual stocks. But, the YOY growth trend is improving , the PE is at 11, its a tech company and the dividend is 4.2%. Whats not to like.

FN

 

[JoeWras]

I rarely buy individual stocks. But, the YOY growth trend is improving , the PE is at 11, its a tech company and the dividend is 4.2%. Whats not to like.

FN

I do not work there, but know a bit about what it is like since they have a big site here, and I have friends and neighbors who used to work there.

As a short term play, aggressive cost cutting with little concern of the effect on employee engagement will work to raise the price. Play the stock near term.

As a long term play, there are real concerns that the workforce will have no heart.

 

[haha]

Well, my mom is 88 and has never used a computer. Dad always handled their finances but he died a few years ago. I've talked to my mom about how easy it is to deal with investments online these days, but she refuses to touch a computer and doesn't want me to help manage her investments. I've given her a few articles about what to watch for with FAs and how their fees impact your bottom line in the long run. Maybe she just needs time to digest the information.

I will at some point ask her if her statement shows fees and commissions. She's being somewhat evasive about this whole thing. Whether she doesn't want me to point out she's being taken or whether she doesn't trust my opinions, I'm not sure. Funny, mom and dad took many financial risks with my smooth-talking, substance-abusing brother, and lost a lot in the process. But they haven't much cared to hear advice from the quiet, millionaire-next-door-type daughter. Go figure.

To be direct, is your main concern for your inheritance or for her well being?

If it is for her well being, tell her that you cannot do this for her without complete information of what is going on. Then if she continues to be coy, cut her loose. Parents have no right to want services and help from their children then put blocks in the way of the son or daughter who is trying to help.

Ha

 

[ownyourfuture]

Making an investment judgment based on one scrap of data is naive at best. Maybe you have more information than you indicate but a single chart, good or bad, is not "the story."
.

I wasn't making an investment judgment on IBM. Just showing a chart.

And while revenues (top line) may be one 'single scrap of data' the fact that it has declined for 20 consecutive quarters can't be dismissed.

 

[O2Bfree]

To be direct, is your main concern for your inheritance or for her well being?

I'm concerned for her --my finances are in good shape, and I'm not counting on inheriting anything. She is 88, but the way she's going could live to be 105. The lady is a ball o'fire, mentally and physically. Her only health concern at this point, besides some arthritis, is high blood pressure, for which she takes medication. She could of course have a stroke or in some other way be incapacitated and need expensive care, and that is my main concern.

 

[naux_one]

I think at this point, I would track IBM for the next 6 months and if it continues to lose money, then you could maybe bring it to her attention and ask her to speak with her FA about finding some other options. By then the FA might have already sold off the shares because he realized what a stupid move it was to by in, or IBM has a miracle run and she made some money. I would not count on the second scenario though.

 

[RobbieB]

I'm up 6 bucks a share and collected $563 in dividends for a total profit of $2818.

Up 5% in 45 days. Way to go Merrill Lynch -