Financial adviser changing brokers

[Rustward]

Without knowing the reason for the change and whether it cost the investor anything, I don't see how some of these conclusions can be reached. Please be objective!

I switched brokerages six years ago with not one penny in fees. I also did not get two sets of 1099's -- just one that year.

I just think the general sentiment here is that anything close to fee for service is considered bad. I am sorry, but this group as a whole is just not objective.

Did anyone here ever work for money? Was your work seen as a ripoff by people who did not know the facts?

 

[Texas Proud]

I think you're probably wrong. All AUM agreements that I'm familiar with don't have the FA charging any extra fees. Trading fees, custodial fees, etc. are all covered by the FA and/or the broker (LPL). And with the specific nonprofit deal I'm familiar with, the FA is not allowed to buy any LPL products into the portfolio since that could be a breach of fiduciary duty. So I don't know how the backoffice firm could reach into the client's pocket. Never say never, of course.

The client may even benefit. The LPL monthly statements are generated with content and format that can be tailored to the client's wishes. For example, we asked for a quarterly analysis of the bond tranche's ratings (AAA, BBB, etc.) and it was a simple matter of the FA checking a box to have this section of the report generated. And one I like a lot is that we asked for and easily got total return numbers separately for the equity and the fixed-income portions of the portfolio. This makes benchmarking incredibly easy. Other reports I have seen (Schwab, Fido, Morgan Stanley, ... ) only give a total portfolio blended return, which is essentially useless for benchmarking.

Not all FA have a fiduciary duty, so throw that out for some...


I am with Bloom... it can be the fees... why dismiss this as an option?

 

[Kayzmum]

Thanks everyone for your replies and comments.

My husband is retired. I'm working a full-time and a very part-time jobs right now so the delay in responding myself. I know very little about investing, compared to all you fine folks. The electrical union my husband belonged to handled all that for him. I'm trying to learn as much as I can so we both continue to be okay as I invest myself. I'm almost 9 years younger than him so will, most likely, need more investing to take care of my myself in senior years.

Thanks again everyone!

 

[gauss]

Tough crowd. I surrender. It isn't about fees.

I have your back Bloom.

If the FA can't articulate to why this change is a benefit to you, the end customer, then the benefits are likely going to the FA despite the hassle imposed on the end customer.

Assuming the FA is not a Fiduciary, then I would recommend looking for one (ie RIA, Series 63 license, fee-only planner etc).

Fiduciaries will be required to place your interests above those of the FA which is not required for other types of advisers.

-gauss

 

[ducky911]

One thing I have learned about investing is that looking for higher returns equals looking for higher risk.
The safest way I have found to get higher returns is to lower fee/commissions.

I am looking to beat inflation by 4 plus percent annually with the least risk. If I add a FA at 1% I would have to increase my risk. My average for the past 10 years is just above 10% with inflation around 2%.

Never really met a FA or anyone that I thought new enough for me to let take control.

Funny: a consultant from Schwab want me to come in to look at my account. I researched him he had graduated from Chico state 3 years ago. I guess Chico is a ok school but having gone to UCD where they joke about them makes it tough to look up to anyone from there.

 

[Taxman59]

Just curious: What is your basis for making this assumption?

My BIL switched the back office he uses about once a year. He tells us its about better service for the trades. I looked into it after the first switch and I saw the new back office was providing incentives to the brokers who moved assets to them. IT IS ABOUT THE $$$!

 

[OldShooter]

My BIL switched the back office he uses about once a year. He tells us its about better service for the trades. I looked into it after the first switch and I saw the new back office was providing incentives to the brokers who moved assets to them. IT IS ABOUT THE $$$!

You're answering a question that was directed at someone else, whose post also recommended firing the advisor on the assumption that the switch would somehow cost the customer. IMO this is unlikely to be the case, because even if spiffs are paid it is unlikely to affect the FA's customers. Under most wrap agreements I don't think the customers pay trading fees so to the extent they are hurt by preferential order routing it is undetectable (and almost certainly minor) due to non-optimal executions.

That said, I would drop an FA (even a BIL) who switched back offices every year. This is a guy who is paying attention to feathering his own nest with time he should be spending working for his customers. Plus there is not an inexhaustible supply of good back offices and I have no interest in learning how to read new report formats every year. I would also consider @LOL!'s conjecture.

The slow adoption of restrictions like the EU's Mifid II will also reduce game-playing that hurts customers. The SEC's new appetite for investor protection, like elimination of the suitability rule in favor of fiduciary rules will also help with this. IMO it is slow but inexorable.

 

[Kelor]

I don't know of any broker/dealer that would pick up a FA that switched broker/dealers nearly every year. Let alone would even the lousiest bd's hand out incentives for someone that was doing so.

 

[MRG]

I don't know of any broker/dealer that would pick up a FA that switched broker/dealers nearly every year. Let alone would even the lousiest bd's hand out incentives for someone that was doing so.

+1

The financial services industry is very small. Everyone knows each other, some are kin.

It's the second most incestuous industry in the world.