Mom's FA says to sell IBM

[DrRoy]

I no longer believe in individual stocks. Too much random risk. Maybe an industry ETF, but I mostly just go for broad indexes these days. IBM has been mostly weak over the last two years vs the S&P500. It caught up early this year, and tumbled again. Over the 2 years it is down 9% with the S&P up 18%, both before dividends, but a slightly better dividend is not going to make up for that.

[FiveDriver]

My MIL is one of the original Buy-and-Hold Investors. She bought IBM when all they made was typewriters. She gifted me a single share one Christmas back in the early 80's and I added a little dinero to it now and then....I just looked up my split-adjusted cost is under $20. This past June 12th, Big Blue reinvested my Divi, and added some shares to my total, like they do every quarter.

I think I'll hold it a while longer.

[YVRRocketSurgery]

Quote:

Originally Posted by DrRoy I no longer believe in individual stocks. Too much random risk. Maybe an industry ETF, but I mostly just go for broad indexes these days. IBM has been mostly weak over the last two years vs the S&P500. It caught up early this year, and tumbled again. Over the 2 years it is down 9% with the S&P up 18%, both before dividends, but a slightly better dividend is not going to make up for that.

The S&P500 has done fairly well.
Comparatively, I would say the Canadian S&P TSX index has done rather poorly compared to blue chip dividend growers like financials, pipeline, utilities, and telecoms. It's kind of a judgement on the composition of the TSX though. That said, I think a number of them have done fairly well against the S&P500 since 2000 also with the caveat of past performance is not an indication of future performance.

[O2Bfree]

Well, I gave my mom the AARP article on what to ask an FA, and tried to talk to her about what to consider when an FA wants you to sell stock. She did not seem interested in either topic. I'm hoping she just needs some time to adjust to the idea of being wary of a finance professional. Or maybe she just wasn't in the mood to discuss investments that day.

I'll continue gently prying into the issue. Thanks everyone for your input!

[naux_one]

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.

[brett]

IBM is not a stock that I would want to hold. Poor performer over the past year, questionable management. There are many other better picks in the technology sector.

As others have said, I would focus on the recommended replacement if there is one.

[RobbieB]

My FA bought IBM on 8-21 for 140.19.

[aja8888]

Quote:

Originally Posted by RobbieB My FA bought IBM on 8-21 for 140.19.

Just curious, but what is his strategy for stepping into IBM?

[RobbieB]

I don't know. He's on autopilot and just buys and sells stuff all the time.

[Johanson]

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

[aja8888]

Quote:

Originally Posted by Johanson 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]

Quote:

Originally Posted by naux_one 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]

Quote:

Originally Posted by O2Bfree 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]

Quote:

Originally Posted by O2Bfree 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]

Quote:

Originally Posted by youbet 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]

Quote:

Originally Posted by Clone 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]

Quote:

Originally Posted by O2Bfree 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]

Quote:

Originally Posted by Spock 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.