Mom's FA says to sell IBM

[kcowan]

My DW, then girl friend, followed the advice to do profit-taking and sold a stock. I immediately bought it because it was upward bound. I asked her what the FA recommended and it was an inferior holding. I asked her to treat it as a lesson. When we got together, she let me take over.

So ask the FA what they recommend to buy. This gets the focus where it belongs on the new investment. Ask her not to do anything until you review it.

 

[braumeister]

My folks have always been secretive about money, but yes I need to see if Mom will let me watch her back on this.

I hope you have good luck with this, but what I've sometimes seen is a reluctance to allow second-guessing based on "I have a Financial Advisor -- a professional. Since you're not a professional, how can you even offer an opinion on what my FA recommends?"

 

[haha]

My folks have always been secretive about money, but yes I need to see if Mom will let me watch her back on this. She may be amenable to at least letting me check out this FA online. She likes AARP magazine, and I found this FA quiz on their website, maybe she'll have a look at it:

https://assets.aarp.org/www.aarp.org_/articles/bulletin/money/financialquestionnaire.pdf

You would do everyone a favor, not least yourself, if you created a selection of 5 year CD ladders with all her money other than that needed for transactions until the ladder gets going. What does an 88 year old woman need with inflation protection? Just avoid selling securities that might incur big capital gains taxes and everybody can relax.

For example, Fidelity will sell you ladders of brokered CDs with pretty good interest rates and maintain the ladders according to your guidelines.

Ha

 

[ERD50]

I hope you have good luck with this, but what I've sometimes seen is a reluctance to allow second-guessing based on "I have a Financial Advisor -- a professional. Since you're not a professional, how can you even offer an opinion on what my FA recommends?"

Very good point. And understandable. Outside of people like most of us on this forum, people do expect that these 'professionals' are the experts. And will be far more effective than some man/women off the street who has learned about diversification and no-load, low-cost broad-based index funds from the Internet.

Ahhh, a possible solution! :

My folks have always been secretive about money, but yes I need to see if Mom will let me watch her back on this. She may be amenable to at least letting me check out this FA online. She likes AARP magazine, and I found this FA quiz on their website, maybe she'll have a look at it:

https://assets.aarp.org/www.aarp.org_/articles/bulletin/money/financialquestionnaire.pdf

I like it! Now she is hearing from a "professional", AARP, not you personally. I'd have her focus on Q #8:

Many brokers will not accept fiduciary responsibility. They may already have a fiduciary relationship with their brokerage firm that can conflict with their duty to you. That usually means you would truly be in a “buyer beware” relationship should you do business with this person, because you are then assumed to be knowledgeable enough to watch out for yourself when it comes to investments. If that’s the case, you should know upfront. Or, you may wish to work only with professionals who are always fiduciaries to you.

Hah! If you need to be "knowledgeable enough to watch out for yourself when it comes to investments.", then why are you paying someone to do it for you? Like we've often said around here.

-ERD50

 

[OldShooter]

You would do everyone a favor, not least yourself, if you created a selection of 5 year CD ladders with al her money other than that needed for transactions until the ladder gets going. What does an 88 year old woman need with inflation protection? Just avoid selling securities that might incur big capital gains taxes and everybody can relax.

For example, Fidelity will sell you ladders of brokered CDs with pretty good interest rates and maintain the ladders according to your guidelines.

Ha

With respect, I would say that this is not useful because you have no idea what the woman's financial situation is, what the family situation is, or what the estate plan looks like. (To be fair, this FA probably doesn't either.)

For example, if the estate is $10M and the estate plan creates generation-skipping trusts with long futures, converting everything to a bunch of CD ladders makes little sense.

At a minimum, the investments should probably be structured to maximize the basis step-up at death. This may mean hanging onto some things --- like the IBM.

Another example, if her income is high enough, muni bonds may net her more cash than taxable interest on CDs.

Basically, the old rule probably applies: To every complex problem there is a simple solution. Usually wrong.

Many brokers will not accept fiduciary responsibility. They may already have a fiduciary relationship with their brokerage firm that can conflict with their duty to you. That usually means you would truly be in a “buyer beware” relationship should you do business with this person, because you are then assumed to be knowledgeable enough to watch out for yourself when it comes to investments. If that’s the case, you should know upfront. Or, you may wish to work only with professionals who are always fiduciaries to you.

I'm not sure where this quotation came from but the complete and only sensible solution to the hypothetical problem raised in the first sentence is in the last sentence. Why would anyone do anything else?

 

[O2Bfree]

You would do everyone a favor, not least yourself, if you created a selection of 5 year CD ladders with al her money other than that needed for transactions until the ladder gets going. What does an 88 year old woman need with inflation protection? Just avoid selling securities that might incur big capital gains taxes and everybody can relax.

My Mom's in pretty good shape, she could make it to 100 or more. Her siblings are all gone, but they didn't take care of themselves, smoked and drank too much, and one succumbed to lupus. I do want to make sure she can afford some care if necessary so DH and I won't be totally on the hook for that, as my only sibling is estranged from the family.

 

[kgtest]

My father let me takeover his investments only after I myself was affluent enough, and when he realized I cared more about his future quality of care then he did.

It basically came down to "Ok, you can manage my money but I don't want to live in a nursing home."

Done.

fast fwd two years. When one rich guy gives you his money to manage...and word gets out...more rich guys start knocking on the door. Its the ole adage "I want what my neighbor Bob has, but better!"


3 yrs ago I was managing $40,000. Today I manage multi-millions.


Come at her with the Best Quality of Care argument. Then show her how you are doing better than Bob...she might start trusting some more.

 

[DatumPoint5]

Back to the OP's original question about selling/holding IBM, I offer Warren Buffet's take on IBM. He has increased holdings again and so far has made 1.7 trillion dollars in dividends. Buffet is still very positive on IBM stock.

Recent CNBC article
Buffett's big bet on Big Blue shows signs of life
Warren Buffett's IBM investment almost in the black

 

[Spock]

Back to the OP's original question about selling/holding IBM, I offer Warren Buffet's take on IBM. He has increased holdings again and so far has made 1.7 trillion dollars in dividends. Buffet is still very positive on IBM stock.

Recent CNBC article
Buffett's big bet on Big Blue shows signs of life
Warren Buffett's IBM investment almost in the black

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

 

[Totoro]

No, he isn't

Warren Buffett Explains Why He Sold a Third of His IBM Stake | Fortune.com

Warren Buffett Says He’s Sold a Third of His Stake in IBM

 

[JoeWras]

Back to the OP's original question about selling/holding IBM, I offer Warren Buffet's take on IBM. He has increased holdings again and so far has made 1.7 trillion dollars in dividends. Buffet is still very positive on IBM stock.

Recent CNBC article
Buffett's big bet on Big Blue shows signs of life
Warren Buffett's IBM investment almost in the black

That's from January. The situation has changed.

When we talk index funds, we look long term and would ignore that. However, this is an individual stock that currently is going opposite of the rest of the tech stocks. (Compare IBM vs XLK for 6 months.) The question is whether this is a long term trend or not.

EDIT: what Totoro said!

 

[haha]

With respect, I would say that this is not useful because you have no idea what the woman's financial situation is, what the family situation is, or what the estate plan looks like. (To be fair, this FA probably doesn't either.)

For example, if the estate is $10M and the estate plan creates generation-skipping trusts with long futures, converting everything to a bunch of CD ladders makes little sense.

And with equal respect, if anything of these things pertained would Mom be turned loose to deal with a new FA? Or any FA at all?

Let's attempt to stay real for a moment, or just admit that it is essentially useless to ask questions on an internet board.

Ha

 

[Spock]

Back to the OP's original question about selling/holding IBM, I offer Warren Buffet's take on IBM. He has increased holdings again and so far has made 1.7 trillion dollars in dividends. Buffet is still very positive on IBM stock.

Recent CNBC article
Buffett's big bet on Big Blue shows signs of life
Warren Buffett's IBM investment almost in the black

Read the more recent CNBC headlines from May 2017 where:
"IBM has lost the confidence of one of its biggest investors, ... 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."

 

[Newventurer]

Not sure it has been mentioned, but one thing to consider is that if the IBM stock was being held only in your fathers name, then maybe you get the advantage of the step up (or step down and a potential tax loss) of the basis to the date of his passing. That would make a big difference in capital gains potentially. Good luck! And good for you helping Mom out!

 

[Spock]

IBM revenue has declined for the last 21 quarters.
"In spite of massive stock buybacks, IBM Corp.'s ... shares have delivered a negative 14%, dividend-adjusted return over the last four years, compared with a 59% return for the S&P 500 and an 87% return for the Nasdaq."

IBM should be the market leader in cloud computing as "cloud" is just full cycle back to the mainframe model of "renting time on somebody elses hardware". Instead it got beat by a bookseller (Amazon's AWS) and is 4th place behind Amazon AWS, Google, Microsoft Azure (a late comer) and then IBM Cloud (and then only because IBM bought SoftLayer)

As a company (not a stock) its circling the drain unless/until something major shakes up the company, most likely splitting it into bits and pieces for the parts that it can actually sell... but last time it "sold" off a division it had to pay GlobalFoundries 1.5B to the chip division off of IBM's hands.

 

[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]

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]

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?