Strange call from my broker
 

I received an odd call from my broker the other day, and wanted to get the opinion of someone more knowledgeable than me on the matter. This isn't really an active account, this is a rollover IRA from when I changed jobs 19 years ago, plus a taxable account with money I inherited when my mother passed away. I'm not adding anything to either account, I'm putting excess cash into the 401k at work.

He asked me if I was aware of the government mandated changes coming up in April 2017, and I'm not. 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. This would cost me 1.5% per year.

Now I've done some googling, and all I can see is regulations coming into place where they have to work to my benefit, not theirs, when making recommendations. This move doesn't seem to be to my benefit. Is he trying to pull a fast one on me? Time to find a new broker?

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What is the name of the company? It's not E J is it?

I don't know what you mean by " not an active account."

It sounds to me like he works for the company you have your investments with, but, in a not so smart decision, is going against all the compliance training he has taken. Maybe he is trying move you from his "inactive" cue, to get you onto active accounts so he can start making a commision, and show better year end results.........sounds fishy to me.

I'm not adding any more money to it, I'm not withdrawing anything from it, for the most part I'm not keeping track of things and buying and selling stocks or funds. I'll just occasionally use the dividends from a couple of the stocks to buy more of the same stocks.

It is not. It is an employee owned financial services firm, headquartered in Wisconsin.

possibly a self directed account which with a company like Scottrade charges no fee.

This is what he's talking about:

DOL Fiduciary Rule: Everything You Need to Know | Investopedia


Not sure how or if it applies to your relationship with him though. If he is your 'advisor' even though you haven't made any moves with it he might have an obligation to 'advise' you. Or something like that.

Sounds to me like he's just trying to get you into an actively managed situation though.

That sounds like a load of crap to me. I'd be tempted to transfer the stuff to somewhere else. That sounds like a desperate attempt at making a little money at the end of the year.

Any chance you could get him to send you an e-mail as to what he proposes and why?

Sounds like it is in the best interest of the broker, not you. And as was mentioned, probably illegal. I spent a good part of my life in sales, but there sure are some slimey sales people out there!

I agree. You should open a qualified self-directed retirement account, either an IRA or a Keogh, with a discount broker like Schwab. You should then and roll everything over into that account. Put it all into index funds with automatic dividend reinvestment and forget about it until you retire.

I'll ask him. He's not new to the company, but the broker I previously worked with left earlier this year, and I was reassigned to him. I've never met with him in their office. The other guy would call me, we'd talk a couple minutes and then he would email me if I wanted more info.

Gogar thanks for the link, reading it now.

I think this is what he is referring to as well. I just had a consult with my broker and it was a lengthy conversation that they took very serious about the "changes" to the law. I will have to move money as well.

Yes, this is due to the new fiduciary rule from the DOL...which Trump may throw out or delay.

The issue is that the investment firms are interpreting the new rule in different ways. Because of the rule some firms are making their clients move to advisory accounts. This is where they charge you the 1-1.5% annual fee on top any costs the investments have. For example, if he has you in mutual funds you would pay the funds managements fees as well as his 1.5% which could bring total fees to over 2%. I feel this sucks for the guy that is sitting in some A share mutual funds paying only .5% a year and now he has to move his money into an account that is charging him 2%. The logic is that now this rep has to look out for you, stay in touch and recommend changes to show he is doing his job. The sad part is that not everyone needs this. There is nothing wrong with just sitting in a good fund and leaving the money alone for decades.

Other firms are allowing clients to keep the money where it is and having the client sign a best interest contract (BIC). By signing this you are not forced into advisory accounts but some firms think the BIC is too expensive, burdensome and will just lead to a ton or law suits. That is how your current firm must think so they don't want to deal with it and are forcing you to the advisory account.

I feel the government thought they were helping people but at the end of the day all this will do is end up costing clients more money. People that were paying next to nothing will now end up paying around 2% a year. I'm finding that the companies that won't allow the BIC are telling their clients there is a new law and they have to move their money. They are not telling the entire truth that they could move their money to another firm and keep paying the lower fees. I get why they are doing that as they would likely lose a ton of their clients and be out of a job.

The sad thing is that Trump could throw out or change the entire thing but it won't much matter as companies have already spent billions getting ready for this new rule which starts in April. It is too late to go and change everything back now. Basically the Government has created a big mess and none of this was passed by congress...it is another Obama mandate. I get that the idea is popular because anyone that is paid to help you with your money is thought to be a crook and laws need to be passed to protect you from them. I just don't get why this standard isn't used for all the other perceived crooks (car dealer, insurance salesmen, plumbers, electricians, mechanics...). I mean all these guys get paid to help you and we all know they are just trying to charge us as much as they can get away with.

ding, ding, ding!! Winner!!

ding, ding, ding!! Winner!! X2 That's what you should have done a long time ago.

Beat me to it. Kindly say, "Thanks for the heads up, I appreciate you confirming I no longer require your services". Have Vanguard or a similar outfit help you with the transfer.

You don't need a broker. Can the guy. You sure don't need to be paying him 1.5% for this.

Lukeh in post 15 hit the nail on the head. Broker is not trying to screw the guy, just your Government at work for you passing new regs.