Advice on Smith Barney

[setab]

I have a friend who suggests that I roll my TSP over to him at Smith Barney. Anybody had any experience with the firm? This guy handles some fairly influential accounts, so he must have something going for him, but I read all the advice here about elf investing. Thoughts? thanks.

setab

 

[youbet]

My stock option plan and employee stock purchase plan are administered for my former MegaCorp employer by Smith Barney.  Very, very high fees and commissions.      Fees and commissions are so high, in fact, it makes it expensive for me to dollar cost average out of my positions by exercising some shares monthly.

Perhaps this fee and commission structure is only due to the contract between my former employer and Smith Barney, but I'd check into it carefully.

 

[JohnP]

I retired under CSRS 3 years ago so I have a variety of accounts including the highly-desirable TSP.

Just my two cents worth - I had a taxable account and an IRA with Smith Barney for many years - more than 20 - Never heard from the advisor unless there was something risky that had a big commission attached to it -  I was busy... Had little time to think about what else to do with the accounts so I left them drift.  Typically, SB offered high ER funds that had front and back end loads - I just didn't like the territory!

Finally closed them out and moved all the SB accounts to Vanguard - should have done this years ago.

I'd recommend that you not move your TSP to SB - If you did, you'd find yourself paying 5.75% loads and 1.75% ER in addition to 0.25% 12b expenses yearly - or about 10 times the 0.20% yearly expenses of the TSP acct.  

JohnP

 

[shiny]

Smith Barney/Citigroup double reported some money we received from exercising stock options which caused us to get audited by the IRS. That is just the latest mishap with them. DH is very much looking forward to not having to deal with them once he quits.

Edit to add: dealing with the audit myself was one benefit of having an ERed lawyer around the house!

 

[brewer12345]

I highly recommend elf investing! Returns from Fairyland Funds have been as high as gshay%...

 

[Cal]

I highly recommend elf investing!  Returns from Fairyland Funds have been as high as gshay%...

Being a contrarian, I was thinking about shorting them.

 

[sgeeeee]

Being a contrarian, I was thinking about shorting them. 

Don't overlook small-caps.

 

[AltaRed]

Smith Barney/Citigroup double reported some money we received from exercising stock options which caused us to get audited by the IRS.  That is just the latest mishap with them.  DH is very much looking forward to not having to deal with them once he quits.

Must of been a sale on by SB for megacorp plans.  My megacorp had their stock option plan and profit sharing plans with SB as well.   Did not use SB for anything other than stock option exercises since I was not normally an American resident to begin with.  However, they didn't strike me as being terribly efficient (mostly a lot of bloat).

 

[setab]

 However, they didn't strike me as being terribly efficient (mostly a lot of bloat).

That has been my take on my buddy too. When I mention Vanguard, he says things like "Would you bet on a horse with no track record?" and "There is a reason why their fees are so low." When I ask what can you provide, he says things like "There is always risk; there are no guarantees." Shallow CYA stuff, mostly. Thanks for the response.

setab

 

[AltaRed]

That has been my take on my buddy too.  When I mention Vanguard, he says things like "Would you bet on a horse with no track record?" and "There is a reason why their fees are so low."  When I ask what can you provide, he says things like "There is always risk; there are no guarantees."  Shallow CYA stuff, mostly.  Thanks for the response.

setab

Your buddy has been asleep at the wheel if he hasn't heard or read about the efficiency of Vanguard, but more likely being very dishonest with you. Your buddy is clearly not serving your best interest but s/he is definitely serving his/her best interests.

 

[samclem]

setab,
I think you have your answer but let me pile on--your TSP funds are a a great, low-cost way to invest. Your buddy has nothing that can touch them. Expect that he'll continue to approach you with outstanding investments that "you missed out on" in retrospect because you didn't invest with him. You've been here awhile, so you recognize this as just BS.

 

[Scrooge]

This guy handles some fairly influential accounts, so he must have something going for him,

Er, that's not an assumption that I would make lightly 

but I read all the advice here about elf investing.

I'd say that some folks here (like Unclemick) give gnomic advice 

 

[setab]

I'd say that some folks here (like Unclemick) give gnomic advice 

Okay, I get the long and short of it. Thanks! This is a great place to validate and learn.

setab

 

[Surfdaddy]

Read Larry Swedroe's book "The Only Guide to a Winning Investment Strategy You'll Ever Need". You'll then understand why for any of these firms, you're a lot more valuable to them than they are to you.

 

[SaveSome]

I'd recommend that you not move your TSP to SB - If you did, you'd find yourself paying 5.75% loads and 1.75% ER in addition to 0.25% 12b expenses yearly - or about 10 times the 0.20% yearly expenses of the TSP acct.

I agree with JohnP, but I'd note that the expense ratios of the TSP funds are actually substantially less than .2 %. Currently, the expense ratios for TSP funds are .05% or .06% depending on the fund. It's tough to get a better deal than that.

I don't know anything about SB in particular, but using JohnP's figure of 2% expenses in SB funds, you'd be paying expenses at SB more than 30 times those of the TSP (and that doesn't include commissions, taxes, etc. paid by funds and not included in expense ratios but which would likely be greater in actively managed SB funds)

 

[Ed_The_Gypsy]

I have a friend who suggests that I roll my TSP over to him at Smith Barney.

Noooooooooo!!

Anybody had any experience with the firm?

Don't have to. (If I say what I want to say here, I could get sued.)

This guy handles some fairly influential accounts, so he must have something going for him,

Yeah. He is a good salesman. And there is a sucker born every minute.

What ever you want to do, you can do it yourself. Why let him lose your money when you could do it on your own?

Many folks (myself included) here gave up on trying to pick their own stocks. I don't know enough and I don't have the time to do it (although, I still have a gene that tells me, I can do this!--it is right next to the plumbing gene). What do you buy? When do you buy it? When do you sell it? Some folks can do this successfully; I can't.

We use mutual funds. Favored are no-load mutual funds (your friend wouldn't know about those). Most favored are no-load index funds, which, without a manager, outperform 85% of managed funds it has been said. By far, most of the returns from portfolios can be attributed to asset allocation than stock-picking. Asset allocation means what kind of stuff you have: growth stocks, value stocks, bonds, international stocks, etc., which can all be bought as no-load funds and often no-load index funds.

 

[Scrooge]

Many folks (myself included) here gave up on trying to pick their own stocks.  I don't know enough and I don't have the time to do it (although, I still have a gene that tells me, I can do this!--it is right next to the plumbing gene).

Oh! Now I know why never felt the need to pick my own stocks or do my own plumbing. Clearly, that whole chromosome segment got hosed in a little radiation accident in 1965 

 

[setab]

I know that keeping it in TSP is cost effective from an expense stand point, but if you want to withdraw part of it, it is difficult. On the other hand, maybe that's another good reason to leave it there.

setab

 

[unclemick]

Hmmm

1. I pick individual stocks (15% ).

2. I do my own plumbing.

? page 2 - as that old news guy used to say:

75% Target Retirement 2015 benchmark (have yet to beat my lead sled in aggregate over a 5-10 yr stretch).

Have the phone no. (and his nightime cell phone no.) of a licensed, bonded plumber - and his partners, and a sump pump in the basement and I know where the watermain shut off valve is.

It's a hormone thing - probably incurable.

heh heh heh

 

[jerryo]

I have about $600,00 (nearly 25% of my net worth) in a Smith Barney account, almost all holdings of individual stocks and bonds. Funds that I inherited about 10 years ago that I left with the original broker and that are now worth between 2 and 3 times their initial value.

I restructured the holdings shortly after inheriting them (and the broker gave me about a 50% discount on SB's rack rates), but since then have had very little activity...a couple of trades a year. Other than Smith Barney's rates being a bit high, I haven't had any problem with them. But then again, my broker learned quickly that I wasn't a very could customer for high-fee products.

A related question. My broker just left the firm, and my account is with one of their Flordia offices, so it seems a good time to move the holdings someplace more convenient (and with smaller fees). Can I just transfer all of the holdings to another brokerage (e.g., a discount brokerage near my home in DC) or to I have to buy and sell (and pay commissions) on all my positions. If I can move the account, what typically is the cost/fee for doing that? I currently have another (similarly sized) account with T. Rowe Price (primarily mutual funds), but am not sure that much money with one company (is that an issue)? Recommended alternatives?

Thanks

 

[Sarah in SC]

Jerry,
Most mutual funds can be moved "in-kind".
Get out of SB ASAP and save on those fees--they're not as bad as Ameriprise, but still a nightmare! We move a lot of stuff out of SB for our clients.
The discount broker of your choice can help you get the funds moved with just a few forms.
Sarah

 

[jerryo]

Not funds, but mostly holding in individual stocks, but I assume it would work the same.

Thanks

 

[ESRBob]

Yes, Jerry -- it is pretty easy to move. I got all my Mom and Dad's stuff moved from Merrill Lynch to Vanguard with one form and no hassle.

Setab: I had a SSB account for some years -- what you have to realize is that your friend will call you with 'trading ideas' every week or two, and your desire to be reasonable and friendly (and possibly make some money)will be the 3-in-1 Oil which gets you to make investments with him/her. Thereafter you'll be trading ina nd out of all kinds of neat stuff, leaving a few percent here and a few percent there in your broker's pocket. You might even make some money, too. The advice you'll get here is well-documented: Just don't go there. Get some good diversified long term index funds and keep your friendship with the SSB person strictly non-financial.

True Story re: SSB:

In 1999 had stock in a small public internet company which I'd received as payment for my first company. I used SSB to help me sell it in the Nasdaq (read clip joint/rigged) market.

I told my SSB broker I wanted to lock in a certain amount of profit, and I was prepared to sell some stock at decent intervals to do so, and we made a few trades.

He then came up with the bright idea/cold call one day that I should write call options on some of my remaining holdings, pocket some premium, and maybe the options would expire and I could do it again. To my shame, I agreed, pocketed 50k of premium - $1 per share - (he got about 3k commission and whatever the spread was on this option, which was no doubt significant)

If I had been thinking, I would have realized that what I really needed to be doing was buying put options (to lock in current prices), not selling call options (picking up premium and giving the other party the upside in the stock). Then again, if my SSB broker had been thinking, as he is supposed to do, he would have also come to the same conclusion.

6 months later, the options expired, and the buyer pocketed about $1.5 million in appreciation on his 50k option investment. In order to lock in profits, I had actually needed to sell another chunk of stock (I vaguely understood my mistake a few days after I'd sold the options, and so made the trade), so I missed out on the upside not only on the optioned shares, but on another similarly-sized batch as well.

It is all water under the bridge, and I never did anything except stop taking phone calls from the SSB broker, but it is a true story and should perhaps be a warning to you that these guys are not as bright as they are cracked up to be, and you should not rely on them. My broker was very fixated on earning his 3k commission, and as a result I did lose a significant sum of money following poor advice.

 

[wabmester]

He then came up with the bright idea/cold call one day that I should write call options on some of my remaining holdings, pocket some premium, and maybe the options would expire and I could do it again.  To my shame, I agreed, pocketed 50k of premium - $1 per share -  (he got about 3k commission and whatever the spread was on this option, which was no doubt significant)

If I had been thinking, I would have realized that what I really needed to be doing was buying put options (to lock in current prices), not selling call options (picking up premium and giving the other party the upside in the stock).  Then again, if my SSB broker had been thinking, as he is supposed to do, he would have also come to the same conclusion.

Your broker was half right.   The "standard" way to lock-in wealth with restricted stock is with a zero-cost collar.   You sell out-of-the-money calls and buy out-of-the-money puts with the proceeds, so your net cost is zero.   This will limit your downside while giving you some limited upside.

 

[ESRBob]

Wab,
He may have even mentioned the second half of the collar, but I didn't hear it our couldn't see it.

Anyway everyone was making and losing paper profits in 1999 so the story isn't unusual. And I look at the bright side: I still had enough to ER, and the shortfall gave me the conditions to 'discover' early semi-retirement and write a book about it!