My Broker's Recommendations

[firemediceric]

In my role as a registered professional guardian, I am responsible for the assets of my incapacitated clients. Most of them have more money than I will ever have. Recognizing that I am not real smart regarding money, the clients investments are managed by a financial adviser. While meeting with him today regarding client matters, I had him look at my plan to FIRE on 11/1/22. That plan is at http://www.early-retirement.org/forums/f26/t-minus-4-years-93246.html
He feels I'm solid but he suggests some small changes to my modest portfolio. I'm not sure I agree with him despite his knowledge versus mine.

He recommends I get rid of my S&P 500 index fund, the Schwab 1000 index fund, and a health care fund. He suggests I put that money into the Rational Dividend Capture Fund (HDCAX) Some of my concerns are the front load of 4.75% and the expense ratio of 1.64%. By comparison the S&P 500 index fund where most of my money is at has no front or back load and the expense ratio is only 0.03%

He does recommend I hang on to my International Index fund.

He also recommends I switch my Putnam Growth and Opportunities holdings for the Putnam Absolute Return 700 Multi-Strategies fund. I have no feeling regarding that one way or the other. I'm too ignorant to know which is better.

So what say you all? Do I follow the broker's advice?

I can tell you that in the 10+ years he's been managing my clients money he has always been conservative. He'd rather preserve the money even if it has meant allowing gains to pass by as the market has performed well.

 

[Clone]

I would say that you have aligned yourself with a first-rate thief who is accomplished at converting his clients money into his commissions.


It is obvious why he would like a 4.75% cut up front, because the performance of that fund really stinks! I am sure that he would have something else that he would recommend in a year that you could churn your money into.

 

[Another Reader]

He would be robbing you blind. If this is what he invests your clients' money in, he is robbing them blind as well. I am appalled at what I read. There are many very inexpensive ways of achieving the same or similar results.

You say you are "not real smart regarding money..." It's your job to be smart about money, to protect your clients. I am sorry to say this, but if you do not understand why this is robbery, you should not be responsible for other people's money. Please, do some basic reading and research to improve your investing knowledge so no one can take advantage of you or your clients.

 

[firemediceric]

These are not products he has any of my clients money invested in. Right now he's keeping the lion's share of client investments in CD's.
He doesn't make a dime from my personal investments as I don't go through him. My little bit of dabbling has been on my own without a broker. Nonetheless, obviously the brokerage house would be getting that money from me.

 

[Red Badger]

Holy s#!t!!!!! Run, and take very cent with you. What a slime ball.

And what Another Reader said. Wake the hell up. You are a danger to the people counting on you. Get good at what you do, or do something else for God's sake.

Okay, I exhaled. FA's that are both honest and competent are "rare as baptized rattlesnakes." Go read JLClollins blog. That's about all you need.

 

[firemediceric]

I'll take the client's portfolios to be looked over by a couple of other FA's to get their take, but they may be just a different denomination of rattlesnake.

Although the clients investments are first presented to me they go through an attorney and are presented to a judge for approval before any action is taken. Obviously those safeguards may not be enough.

You guys have made it crystal clear though that I should listen to my gut to stay the course I'm on rather than to take the broker's recommendations regarding my measly personal funds.

 

[flintnational]

IMO, you should only consider using a fee only FA that is a fiduciary. Here is an article by Clark Howard discussing this topic. Ideally the FA should invest in low cost index funds similar to those offered at Vanguard, Fidelity or Schwab.

 

[Another Reader]

A proper fiduciary should examine and consider the needs of the specific client. The needs of a 95 year old in a nursing home are very different than those of a disabled 12 year old. In your shoes, I would look for a true fiduciary with a strong track record of putting the client first and of managing trusts and similar accounts. That individual and their company should be presented to the court(s) as the best fiduciary for the needs of a broad client base.

 

[jjflyman]

This must be a joke. The OP is goofing on us. Nobody would sell the S&P index fund for the Rational Dividend Capture Fund. I am stunned and angered a FA would make such a suggestion.

 

[97guns]

I don’t trust ANYONE with my money but myself

 

[cathy63]

So what you got from the FA is the free advice that you asked for, and it's worth what you paid for it. (As is everything you read in this thread.)

As you say, he's not going to make any money off of you, so how much thought did he put into the recommendation? It seems from the fund names that he may be steering you towards an income portfolio instead of a growth portfolio. These are probably the products he's most familiar with and what he recommends to his other clients who may be in a different phase of life and have different goals and financial resources than you do. I wouldn't follow these recommendations, except possibly to get rid of the health care fund.

I don't think you should move your own money under his care, even if you decide to take his recommendations for some reason. That sounds like a conflict of interest since it would then be hard for you to recommend removing him from managing your clients' funds if it came to that.

 

[MRG]

These type of crooks should be jailed. Seriously, who pays a FE load in 2018? The 1980s are over.

It's sad these type of products still exist. In the 80s there was some reasons for part of a load to exist. Today it's nothing but a rip off of the consumer.

 

[davebarnes]

Right now he's keeping the lion's share of client investments in CD's [sic].

Awful.
Lots of better paying, capital preservation investments.
Not only is this guy a thief, he is also an idiot.

 

[kgtest]

RUN DON'T WALK! Do you want to partner? Seriously I think all of us on this forum can provide better thoughtful advice for you and your incapacitated clients.

I would love to help personally.

My expense ratio (Management fee for self managing like most on this forum) is currently .069% and will be lower when Vanguard eliminates some of my ETF fees to compete with other firms.

I have no front load fees and that includes all transactional costs for the year! I am up 19% this year on my returns, you can do better. Stick around here, hit the books and learn the best approach.

I personally use an Asset Allocation approach and rebalance. Everyones mileage will vary.

 

[kgtest]

There are like 60 starred users here saying if it looks like it and smells like it, it is.

This is a ton of experience weighing in btw...welcome!

 

[OldShooter]

Dump the crook like a hot rock!

 

[pb4uski]

+1 that fund has a horrible track record compared to VFINX.

https://www.portfoliovisualizer.com...cation1_1=100&symbol2=HDCAX&allocation2_2=100

 

[Bestwifeever]

Are you not a firefighter/paramedic? Is being a registered professional guardian a side gig? What credentials and experience are needed for that and where do the clients come from? Who picks the self-serving FA? I’m confused and hope I never need this service. But sure, help the nice FA out (or “my broker” as you call him, so you must already have a relationship with him) and let him enjoy your money too.

 

[target2019]

I'll take the client's portfolios to be looked over by a couple of other FA's to get their take, but they may be just a different denomination of rattlesnake.

Although the clients investments are first presented to me they go through an attorney and are presented to a judge for approval before any action is taken. Obviously those safeguards may not be enough.

You guys have made it crystal clear though that I should listen to my gut to stay the course I'm on rather than to take the broker's recommendations regarding my measly personal funds.

I am very shocked that an FA wants you to buy a product he will certainly benefit from. Actually, no I'm not.
Since you have no signed agreement, he will throw you a bone with string attached.

 

[iloveyoga]

I had to read the original post a third time, I still can't believe it. How sad for the incapacitated clients.

 

[traineeinvestor]

4.75% Front End Load?

That suggestion alone taints anything else he might have said.

 

[firemediceric]

It is certainly a side gig for me. At the time I got into this there was a need for professional guardians in my area. Typically my referrals come either from attorneys or occasionally Department of Children and Families.

When I’m assigned a client who needs help my first priority is to put that client in a safe environment so they come to no harm healthwise. My second priority is to secure their funds to stop any exploitation. Following that, the pieces start to be picked up.

Some good work has been done. In one case a frail woman in her 80s was kept in the closet of her home with a 5 gallon bucket for a toilet. Her grandson and his girlfriend supported their heroin addiction through her state retirement pension and Social Security. They also refinanced her home, having her sign documents which she had no clue what they were. Home subsequently went into foreclosure. DCF became aware from concerned neighbors and I was subsequently appointed the guardian. I got her out of that mess, stopped the exploitation although in some ways the well had already run dry, and got her into an assisted living facility that treats her well.

in another case a man with advanced dementia was transported to the hospital after neighbors found him on the ground outside of his home. Through an heir search I found two daughters and put them back in touch with their father. For the past 45 years they had thought that her father had died due to stories that their mother had told them. The reunion was a tearjerker.

I had one case where a stripper and her boyfriend took advantage of a gentleman who suffered a head injury. His subsequent diminished capacity allowed her to manipulate him so that she drained him of every dime. By the time his family got the court to intervene, she was hiding a Mercedes E-class he bought her on Indian property so it would be difficult to repossess despite the court order giving me authority to take possession. I secured a bench warrant for her arrest, she was finally found, she was held in contempt for over a week brought before the judge every morning. She finally relented and gave up the location of the car.

I’ve been threatened. I’ve had dogs turned loose on me. I’ve had guns pointed at me. All over me cutting off the purse strings of those exploiting the incapacitated.

The financial advisor who was brought in to handle the accounts of many of these people was recommended to me by an attorney who refered to me the greatest amount of clients. Not knowing any better, I thought it was a good recommendation. The 55+ page Envision plans he works up on the clients often cause my eyes to glaze over. I do have contacts with a couple other financial advisors who were taking care of client’s money before I was involved. In those cases, due to the personal relationships they had with the clients and their obvious genuine concern, I kept them in place for those respective clients. I plan to reach out to them and ask for their opinion on the work product of this peer/competitor of theirs .

 

[DFDubb]

Sounds like a stand up guy. Can I have his contact info? I've got way too much money and have been itching to throw some of it away.

 

[MRG]

OP the majority of FA's are no better than the people who you're protecting people from. Yeah, I w*rked around the industry and there are a whole bunch of lowlifes who want to make other people's money theirs.

ETA: While at Megacorp I had to help two large financial institutions out, they each had an assigned Megacorp associate. Both of these guys were absolutely clueless. I swear each carried a map to find their cubes!

No suprising both were among the first RIFed. Both are now FAs pulling in 6 figures annually. They don't have the brains to come in outa the rain and some people are trusting their future to these idiots.

 

[OldShooter]

@firemediceric, by virtue of what you do you are a fiduciary. Fiduciary duty cannot be delegated, so you are on the hook with the courts for everything that happens.

Personal referrals for a financial advisor, while they sound like a good idea, are flawed. The majority of people rate their FAs according to whether they are nice guys, whether they talk like experts, etc. but they are clueless about whether the FA is doing a good investment job for them. So while you did the natural thing, it may well have not produced the investment professionals that you, as a fiduciary, need to be dealing with.

There are no guarantees, but one way out of this is to talk to your lawyer and judge friends and attempt to identify investment professionals who are experienced in guardianship matters and who are respected by the court. Next, interview at least two or three with an ear for fiduciary and investment matters, not for whether the person would be a good friend. Like doctors for a serious illness, you want the most effective doctor whether his bedside manner is good or not.

Finally, insist on getting a letter signed by the FA and by his/her compliance officer confirming that he/she will perform in a fiduciary role in all matters related to your accounts and your clients' accounts. This "in all matters" language is important because under SEC and DOL rules, there are some chameleon-like tricks where an FA can be a fiduciary in some matters and not in others. With a high integrity FA you should not have to worry about this, but it's belts and suspenders to get the assurance. In your role as fiduciary, too, it's a good CYA.