Strange call from my broker

[NoRush993/951]

Sounds like Merrill Lynch......

[wdfifteen]

Originally Posted by rockfan4

He said I had to move everything into actively managed funds, and I couldn't leave it in the stocks and funds it was currently in.
?

If this is what the broker told him, then the broker was indeed trying to screw him. The new rule does not mandate that your investments be kept in actively managed funds. It says your broker has to work in the client's best interest, which this broker clearly isn't doing.

[flatbutt]

you just gotta luv the PPOT brain trust!

[recycled sixtie]

Originally Posted by wdfifteen

If this is what the broker told him, then the broker was indeed trying to screw him. The new rule does not mandate that your investments be kept in actively managed funds. It says your broker has to work in the client's best interest, which this broker clearly isn't doing.

+1
Ask your broker if he knows what ethical means. Or conversely if you have an organization or broker who puts you first then you can give instructions to close out the old one. I have done that myself with an old broker. He likely has no idea what he did wrong and I am not telling him either. He has got to figure it out himself....

[fanaudical]

I've had the same discussion recently with my broker/financial adviser for a similar situation. We're sitting down and finalizing an approach next month. Incidentally, my broker is not happy with the new rules and also thinks this will cost people more money than necessary and reduce returns and is driven by the new fiduciary rules.

[wdfifteen]

The whole financial services industry just ticks me off.
Some shyster screwed my father out of a bunch of money - nothing illegal, just fees for this and fees for that and being put in a totally inappropriate investment. These guys try to make investing look like rocket science, charge ridiculous fees, and when they get something wrong they just shrug and send you an invoice.
I talked to a fee/commission based advisor a few years ago, before I educated myself. Even then I didn't get the impression that he know all that much more than I did. Over the years I may not have gotten the highest pre-fees return, but I'm sure my investments have netted more than I would have paying this guy 2% of my portfolio every year.
I go to a fee-only advisor once every two years now. She doesn't sell anything or make trades for me. She strictly advises. That is the only kind of advisor I trust.

[rick-l]

How do brokerage houses make money on accounts with stocks in them and there are never any transactions and no fees? The have to send out statements and resend the annual reports etc.

Do you think they are using this new law to move away from this?

[masraum]

Originally Posted by wdfifteen

If this is what the broker told him, then the broker was indeed trying to screw him. The new rule does not mandate that your investments be kept in actively managed funds. It says your broker has to work in the client's best interest, which this broker clearly isn't doing.

Originally Posted by recycled sixtie

+1
Ask your broker if he knows what ethical means. Or conversely if you have an organization or broker who puts you first then you can give instructions to close out the old one. I have done that myself with an old broker. He likely has no idea what he did wrong and I am not telling him either. He has got to figure it out himself....

Free book in PDF format from the financial guy that I read.

Get Smart or Get Screwed-Complimentary Download | Paul Merriman

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A little bit about the author and books.

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All profits from the sale of this series are donated to educational nonprofit organizations.
The first book in the series, FIRST-TIME INVESTOR: Grow and Protect Your Money, gives you easy-to-understand and follow steps necessary to start, build and maintain a successful investment portfolio for life that will lead to a secure retirement. If you have ever struggled to understand how to begin investing, or you want to know that you're on the right track, this is an essential read.
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A couple of excerpts from the book.

Many brokerage houses, hoping to win the confidence of clients, infuse their brokers with puffed-up credentials that are mostly meaningless. Sometimes they tell outright lies, though rarely in writing. Upon learning that someone is a “financial planner,” a prospective client may assume a level of expertise. But often, all that’s required to legally call yourself a financial planner is to file some registration forms with your state’s securities regulators.

Some advisors falsely state or imply that they are Certified Financial Planners, invoking a prestigious designation that can be obtained only by rigorous education and must pass not only a background check but work for at least three years under the tutelage of experienced CFPs.

In fact, there are only two absolutely critical distinctions that should separate who is on your list of candidates and who is not. I’m going to cover these in the next two chapters, but here’s a brief preview:

• First, some advisors have a strict legal responsibility to you, while others can fudge all sorts of things for their own benefit. You want the first kind.
• Second, the way that an advisor is paid matters enormously. You want one who is paid by you – and only you.

Hiring a CFP won’t necessarily give you somebody with good judgment. But it will give you somebody who has pledged to abide by a strict code of ethics. And ethics, as we shall see time and again in these pages, is at the heart of finding the right advisor for you.

[masraum]

Originally Posted by wdfifteen

The whole financial services industry just ticks me off.
Some shyster screwed my father out of a bunch of money - nothing illegal, just fees for this and fees for that and being put in a totally inappropriate investment. These guys try to make investing look like rocket science, charge ridiculous fees, and when they get something wrong they just shrug and send you an invoice.
I talked to a fee/commission based advisor a few years ago, before I educated myself. Even then I didn't get the impression that he know all that much more than I did. Over the years I may not have gotten the highest pre-fees return, but I'm sure my investments have netted more than I would have paying this guy 2% of my portfolio every year.
I go to a fee-only advisor once every two years now. She doesn't sell anything or make trades for me. She strictly advises. That is the only kind of advisor I trust.

Very good call. Basically what the guy that I read (and posted above) recommends. If you aren't paying an advisor, then someone is, and he'll have their best interest in mind not yours.

[masraum]

Originally Posted by rick-l

How do brokerage houses make money on accounts with stocks in them and there are never any transactions and no fees? The have to send out statements and resend the annual reports etc.

Do you think they are using this new law to move away from this?

If there are no transactions or fees, then they don't. But there are plenty of accounts that either have someone using an advisor or are making self-directed trades and paying transaction fees. They make plenty of money from those folks for those folks to cover the guys that aren't costing themselves money. I'm certain that they have enough folks making bad decisions and costing themselves tons of money, to cover the folks that aren't doing anything and just cost the firms money.

[lukeh]

Originally Posted by wdfifteen

I go to a fee-only advisor once every two years now. She doesn't sell anything or make trades for me. She strictly advises. That is the only kind of advisor I trust.

Could you please give more details on how this works?

Is it up to you to monitor your investments and then call her when you have questions or does she stay on top of your portfolio and make proactive calls to you? What if 3 months after your last meeting the fed starts raising rates and you should be moving from say long term bonds to short term bonds or floating rate funds? Is it up to you to be on top of changes in interest rates, the economy, changes in tax rates, changes in the law...and then call her with questions when these kinds of changes take place?

Does she advise you on specific investments or just in general. Does she say buy the S&P index fund or does she say you should have 60% in stocks, 30% in bonds and 10% in cash and it is up to you to pick the specific investment product and then track it over the next two years until you meet again?

Trust is the entire reason for the new DOL rule. If an advisor gets paid 1% per year to manage your money he has no incentive to put you in one investment over another. No matter what stock, bond, fund, UIT, ETF... he puts you in he gets paid the exact same amount. The conflict of interest over sales charges and commissions is gone. For the people that think all financial planners are crooks this should help ease their minds.

I've always found it interesting how a person has zero problems paying a high school kid 15-20% every single time they take the couple of minutes to take their order and bring them their burger. However, that same person is outraged that they pay a one time 3% commission or 1% annual fee to a certified financial planner that spends hours with them, has a degree, licenses, 25 years of experience and works with them on their investments, taxes and estate planning.

[Charles Freeborn]

Does sound fishy, but.... we just voluntarily moved our retirement accounts into an actively managed and traded one from a mutual fund based company.
The new political climate has introduced a high level of uncertainty into the mix, so we want someone with their finger on the trigger if any thing gets too stupid....

[tdw28210]

Originally Posted by lukeh

Could you please give more details on how this works?

Is it up to you to monitor your investments and then call her when you have questions or does she stay on top of your portfolio and make proactive calls to you? What if 3 months after your last meeting the fed starts raising rates and you should be moving from say long term bonds to short term bonds or floating rate funds? Is it up to you to be on top of changes in interest rates, the economy, changes in tax rates, changes in the law...and then call her with questions when these kinds of changes take place?

Does she advise you on specific investments or just in general. Does she say buy the S&P index fund or does she say you should have 60% in stocks, 30% in bonds and 10% in cash and it is up to you to pick the specific investment product and then track it over the next two years until you meet again?

Trust is the entire reason for the new DOL rule. If an advisor gets paid 1% per year to manage your money he has no incentive to put you in one investment over another. No matter what stock, bond, fund, UIT, ETF... he puts you in he gets paid the exact same amount. The conflict of interest over sales charges and commissions is gone. For the people that think all financial planners are crooks this should help ease their minds.

I've always found it interesting how a person has zero problems paying a high school kid 15-20% every single time they take the couple of minutes to take their order and bring them their burger. However, that same person is outraged that they pay a one time 3% commission or 1% annual fee to a certified financial planner that spends hours with them, has a degree, licenses, 25 years of experience and works with them on their investments, taxes and estate planning.

Start here: Fee-Only Financial Advisors Home - NAPFA - The National Association of Personal Financial Advisors

[wdfifteen]

Originally Posted by lukeh

I've always found it interesting how a person has zero problems paying a high school kid 15-20% every single time they take the couple of minutes to take their order and bring them their burger. However, that same person is outraged that they pay a one time 3% commission or 1% annual fee to a certified financial planner that spends hours with them, has a degree, licenses, 25 years of experience and works with them on their investments, taxes and estate planning.

Tipping is totally optional. I tip well for good service and don't tip for poor service. Under what circumstances is paying your CFP similarly optional?

[rick-l]

Back in the day when you bought stock in a company they issued you a certificate and they corresponded directly with you.

How hard would it be to convert back to this method if all the brokerage houses mandate directed accounts?

[lukeh]

Originally Posted by wdfifteen

Tipping is totally optional. I tip well for good service and don't tip for poor service. Under what circumstances is paying your CFP similarly optional?

Why did you delete and ignore my questions on how your relationship with a fee only planner works? If you feel it is too personal of a question just say so and I can respect that. Otherwise I'm genuinely interested in the process and your experience and I feel your answers would be a benefit to those posting here that are being told by their planners that they have to move to an advisory account. With this law change people need to know their options and you saying a fee based planner is the only one you would trust is a pretty strong endorsement. Help us out and give us some back round on your experience.

Tipping is totally optional and so is going to a CFP. Now that I think about it is tipping really optional? Sure, you don't have to tip but who does that unless the person is just a jerk to you. When you walk into a restaurant you come in with the expectation you will be giving the server 15-20% just like you expect to pay the CFP for their time. I guess I'm looking at this from a point of perspective.

For example, let's say you want to make a $5,000 IRA contribution and you have no idea if you should be in a ROTH or traditional IRA. Should you invest in stocks or bonds? What kinds of stocks and bonds... People in general seem to feel having to pay a 3% commission ($150) for the 1 hour meeting is robbery and rewarding a thief. Now if that same person spent that $5,000 on going out to eat that year it would cost him $750 - $1,000 in tips and the person would have zero issues with that. I feel the fact that you could say tipping is optional is irrelevant to my point which is paying $150 on $5,000 for financial advice is frowned upon while paying a minimum of $750 to have someone bring you your burger is considered perfectly acceptable.

[lukeh]

Originally Posted by rick-l

Back in the day when you bought stock in a company they issued you a certificate and they corresponded directly with you.

How hard would it be to convert back to this method if all the brokerage houses mandate directed accounts?

Nobody deals in certificates anymore and their is no reason to. However, with many companies you can still buy stock direct (you can search for a list) and the transfer agent will hold your shares in book entry form and it costs you nothing.

[rick-l]

Originally Posted by lukeh

Nobody deals in certificates anymore and their is no reason to.

currently no but I thought we were talking about the situation where the law gave an excuse to eliminate the no fee self directed accounts.

[lukeh]

Originally Posted by rick-l

currently no but I thought we were talking about the situation where the law gave an excuse to eliminate the no fee self directed accounts.

You can still have no fee self directed IRA accounts with the new rules. The issue is that some companies have eliminated them because they feel the new law make them not worth the hassle. If you look around you will be able to find an IRA account that will hold your stocks for little or no fee. Several years from now that may not be the case. More and more the government wants to be able to tell you what you can and cannot do with your money. Other countries have already gone down this road.