AUM based Wells Fargo advisor making lots of small stock trades in IRA, why?

[Kings over Queens]

You are going to have to ask him to know for sure what's going on. There is no obvious answer, so nobody here can tell you what he's thinking.

this thread started on 9/16, today is 9/23...plenty of time to have made the phone call, asked the question, and gotten the answer.

Have to admit, I'm curious and looking forward to the explanation.

 

[RetiredHappy]

Unless the firm picks stocks because of dividends, AUMs should not be stock picking and making those day trading type activities. When ML managed our investments, the accounts all held ETFs, except for an account that was for dividend stocks.

 

[pb4uski]

What I would suggest is that the OP simply lay out her actual returns for YTD, 1, 3 and 5 year periods compared to returns of a 1, 2 or 3 ETF portfolio, perhaps with accumulated values as of now. The hypothetical portfolio can be from Portfolio Visualizer.

If the results don't convince her to make a change, then nothing will.

 

[jazz4cash]

I suspect for some people there’s a status claim to talk about having “a guy” that handles their money. I had a very slick and slimy engineering manager early in my career that did exactly this.

This ! I had a new manager that was bragging about ‘his guy’ that got him into an investment that paid 10% for 10 yrs, probably an annuity. It was not in my best interest to explain. From that point on I disregarded everything he said about finances.

 

[SecondCor521]

You are going to have to ask him to know for sure what's going on. There is no obvious answer, so nobody here can tell you what he's thinking. Have your Mom set up a meeting for the three of you. The advisor should be willing to explain it to both of you with her permission.

I agree with the idea but doubt that the advisor will give them the real reason. I suspect the real reason benefits the advisor or the advisor's firm and the answer given will sound like it benefits the OP and their Mom.

 

[silvor]

It's called churning.

Or, it’s a managed portfolio. And they simply rebalanced.

I know it’s hard for some to believe, but not every broker is out to screw you.

 

[yofi]

Or, it’s a managed portfolio. And they simply rebalanced.

I know it’s hard for some to believe, but not every broker is out to screw you.

Why wouldn't they just buy 2 shares of this stock for example? Also, how is buying and selling so few shares rebalancing anything? If so, it seems very little rebalancing is going on.

09/12/2024,TRAD IRA,Buy,34,UNH,"-$19,924.51"
09/13/2024,TRAD IRA,Sell,-32,UNH,"$19,051.15"

 

[Texas Proud]

I agree... buying only a couple of shares of ANYTHING is not called for if the assets are so low you only own so little... and no matter what the shares do it will not make a difference in the portfolio... a good MF would be much better...

But then again, you cannot make it look difficult to keep the client paying your fee...

 

[yofi]

I agree... buying only a couple of shares of ANYTHING is not called for if the assets are so low you only own so little... and no matter what the shares do it will not make a difference in the portfolio... a good MF would be much better...

But then again, you cannot make it look difficult to keep the client paying your fee...

The thing is, my mom doesn't care, nor is financially literate at all. As long as there is a little growth she's happy. He doesn't need to do anything at all apart from rolling over t-bills and she'd be perfectly fine with that. So there must be something else going on. I'm going to send an email about this and have her send it to her advisor to find out hopefully. I don't see how he can spin his way out of this from my perspective. Maybe I'm missing something else going on.

 

[yofi]

I got off with her advisor just now. He said this was for rebalancing reasons which is based on WF DSIP (Diversified Stock Income Plan) portfolio based on a set of individual companies (I guess slightly more conservative, focusing on dividends). The reason why the other purchases happened the next day is sometimes it's slightly out of balance and they have to manually go in to make it balance correctly. (I thought that was odd.) He also said there are no extra fees for trading.

He mentioned that due to the performance of the magnificent 7 in the SP500, he acknowledged it's not performing as well as the sp500 recently, but it's more stable and appropriate for a retired person.

Considering the 1% aum fee, and the fact that she has multiple pensions to support her spending, I'm going to encourage to switch to Fidelity using a few low-cost stock and bond indexes and t-bills for cash) although I'd prefer to do that when the market drops (so I don't get blamed if there is a drop after switching over).

 

[Katoslake]

I got off with her advisor just now. He said this was for rebalancing reasons which is based on WF DSIP (Diversified Stock Income Plan) portfolio based on a set of individual companies (I guess slightly more conservative, focusing on dividends). The reason why the other purchases happened the next day is sometimes it's slightly out of balance and they have to manually go in to make it balance correctly. (I thought that was odd.) He also said there are no extra fees for trading.

He mentioned that due to the performance of the magnificent 7 in the SP500, he acknowledged it's not performing as well as the sp500 recently, but it's more stable and appropriate for a retired person.

Considering the 1% aum fee, and the fact that she has multiple pensions to support her spending, I'm going to encourage to switch to Fidelity using a few low-cost stock and bond indexes and t-bills for cash) although I'd prefer to do that when the market drops (so I don't get blamed if there is a drop after switching over).

She may be able to transfer holdings in-kind (not sell anything). It’s worth looking into. I’ve done it with zero loss or tax implications

 

[joedila]

7% is terrible performance for this year. If she had invested all her money in Fidelity Balanced FBALX (60% stock/40% bonds), she would be up 13.45% year to date.

Was thinking the same thing -- my accounts are up around 15 percent of higher this year.....most in Fidelity funds (some index and long time good ones like Contra and Low Priced Stock.

 

[Texas Proud]

Was thinking the same thing -- my accounts are up around 15 percent of higher this year.....most in Fidelity funds (some index and long time good ones like Contra and Low Priced Stock.

I just checked my Schwab holdings and am up 17+%.... 7 is a disgrace...

Just do the math and see how much the FA is actually costing your mom... 10% of her holdings... even if not going to them it is less money to your mom...

 

[SecondCor521]

I initially noticed the "underperformance" too.

But OP mentioned that she is elderly. An elderly person with a low risk tolerance might only have 20% in equities or even less and that could be appropriate depending on the whole picture.

It's been easy this year to just have money in equities and do well. But for years like 2022, it hurt. And OP's Mom may not be able to or may not want to have high equities if/when we have our next 2022.

I think OP posted some stock trades but not the overall AA and whether that AA works well for OP's Mom.

 

[yofi]

I initially noticed the "underperformance" too.

But OP mentioned that she is elderly. An elderly person with a low risk tolerance might only have 20% in equities or even less and that could be appropriate depending on the whole picture.

It's been easy this year to just have money in equities and do well. But for years like 2022, it hurt. And OP's Mom may not be able to or may not want to have high equities if/when we have our next 2022.

I think OP posted some stock trades but not the overall AA and whether that AA works well for OP's Mom.

I previously mentioned that her Roth IRA performance was 17%, in 100% equities, which I noted was
>quite a bit worse than the sp500 26% growth.

She has a couple of pensions and SS so doesn't really withdraw anything other than paying for long term care insurance once a year.

 

[SecondCor521]

I previously mentioned that her Roth IRA performance was 17%, in 100% equities, which I noted was
>quite a bit worse than the sp500 26% growth.

She has a couple of pensions and SS so doesn't really withdraw anything other than paying for long term care insurance once a year.

Yes, you did. I had forgotten that post. I share ERD50's sentiments in his reply to you in post #31 (AUM based Wells Fargo advisor making lots of small stock trades in IRA, why?)

If I were investigating this, I'd really drill down to understand the difference between the 17% and the 26%. Could be dividends, could be slightly different start/end dates, could be the Mag 7 explanation you got, could be the dividend focus, could be all/some/none of the above.