Financial Management Fees?

jane__nyNovember 27, 2010

We have met a financial advisor/broker who works independently and uses a brokerage house to manage the funds. She charges 1% to manage the portfolio but does the trading/buying through this large brokerage firm. She is not hired by this firm but uses them to do the trading.

We notice the brokerage firm charges fees and there are fees involved with buying and selling.

I do not understand any of this and if this is a normal way to do business. Some funds have load fees or charge transaction fees. I assume that is normal.

What has me confused is if it is costing us more to go with an independent broker than to work directly with the brokerage firm?

I hope this makes sense,


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I think you want an independent advisor who does not buy and sell funds on your behalf. What you want is an advisor who works on a flat fee, and will advise you on how to invest your money. A proper financial advisor will also look at other investments besides stocks/funds.

    Bookmark   November 28, 2010 at 1:05AM
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I am assuming you have done adequate research: 1) checked the broker complaint records, and 2) talked with at least three of this advisor’s clients who have been with him/her for at least three years, preferably five or more.

Is this professional truly certified as a CFP or registered as an RIA? Or do they merely have some meaningless, easy-to-obtain advisor title that does not require them to have fiduciary duty to you? They must be willing to state in writing that they have fidicuary responsibility to you, if you become a client.

A 1% fee is usually the third 'breakpoint'. Fees for portfolio mgmt usually start at 1.5%, drop to 1.25% at the second breakpoint, then to 1% or less as the total size of the assets increase. Most advisors will combine all family accounts to allow for lower fees.

Yes, the brokerage charges a fee. They do the back office administration and the paperwork. Because they hold the actual assets, you never make an investment check (e.g., money you want to have invested) to the advisor - it is always made out to the financial institution that holds the assets. There is a lot of SEC paperwork involved, especially with the new reform bill, and the customers have to foot the costs for it.

And yes, funds charge management fees also. This is why you'll want to use low-cost funds or ETFs whenever possible. It is perfectly acceptable to request your broker find you a fund similar in strategy, size, and risk profile, but as low in cost as possible.

I disagree, just a little, with sushipup. The trouble with using a flat-fee advisor is that many people are reluctant to go regularly. Without getting to know you and getting consistent feedback, a good CFP or RIA is fumbling in the dark trying to help you.

When I worked at an independent CFP's office, our clients came in four times a year, at the end of every quarter, to personally meet with everyone and discuss their financial affairs with the CFPs. Meetings were at least 90 minutes long and often much longer than that. We have sometimes spent over 2 hrs with my MIL's CFP - and she has a very simple set of accounts with a low/moderate risk profile.

OTOH, **if** you think all you need is investing advice, then yes, you can use a flat-fee CFP and deal with the brokerage house on your own. It is certainly the cheapest way to go. But if you have poor investing instincts (e.g., you panic when all the media screams the sky is falling); if you are under-insured and don't realize it; if you have not saved enough for retirement PLUS healthcare expenses PLUS potential disability PLUS unexpected life emergencies - then instead you might be better served by using a full-service, trained advisor who has full fiduciary responsibility to you, even if they do charge management fees.

The trouble with not working closely enough with a fiduciary advisor, is that s/he may never get to know you well enough to educate you on what you DON'T know - and as events have shown many Boomers, it’s what you don’t know that can really come back to haunt you.

Like others here, I handle all DH/my financial, legal and investment affairs myself. But there are not many people on any forum I frequent, who have access to six full-time independent CFPs at three different firms, to ask any questions I wish. Whether it’s insurance, or running a full Monte Carlo analysis, or getting a referral to a homecare services agency I can trust, they are an invaluable resource, and far better than asking questions on an anonymous Web forum.

I get access to their services for free....but I can tell you, if I had to pay them every time I had a question, I might not be so willing to spend a few hours discussing issues that are not strictly investment advice. Yet it is a great mistake, even if a common one, to think that your entire financial situation consists merely of what the ROI on your investible portfolio is.

There are many factors that go into successful “financial planning” (which is a phrase legally defined by the SEC). To be ignorant of those factors is to risk building your retirement house on sand. Using fiduciary professionals can really help - whether you pay a portfolio-based fee or an hourly fee.

    Bookmark   November 28, 2010 at 6:11PM
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Thank you jkom51 for the detailed explanation. It is very confusing. We like this person who has excellent credentials and began her own firm. She offered a lower fee to allow us time to trust/know her better. She uses a brokerage house which charges fees on anything she buys. It just seems it is costing us quite a bit to invest.

I wasn't sure if this was normal.


    Bookmark   November 28, 2010 at 10:30PM
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If you think it is costing a lot, that's a BIG red flag. Sounds like she is an excellent saleswoman. If you know what I mean.

Before you go farther, take a deep breath and do a LOT of research. Start with Bob Brinker's website.

If you have some money to invest, I'd start with his newsletter, cheap at the price, and give yourself 6 months to bring yourself up to speed. Please don't be overwhelmed or pressured.

I trust jkom51's advice completely, she knows her stuff. My advice is to take it slow right now.

Here is a link that might be useful: Bob Brinker

    Bookmark   November 29, 2010 at 12:17AM
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I think the question is, what are you looking for? Are you looking for someone who will assist you with not only investing money but also helping you reach your goals? Do you need help defining those goals and running an analysis to determine whether those goals are achievable within your income/savings/future situation?

If all you are looking for is a cheap way to invest and you have confidence in your own knowledge, then by all means, use a discount brokerage and do your own investing. Many people do this, although if you’ve looked at the median statistics it’s clear not many people can successfully invest for the long term.

If you are looking for investing advice, there are ways to get that without paying a portfolio-based fee. You could talk to an independent CFP or RIA who works on an hourly rate, pay them a few hundred dollars to do a basic analysis and risk profile on you, and see over the next five years if using that allocation (rebalancing as necessary, especially with any life-changing events), has worked for you.

A broker can’t afford, and generally will not, spend hours answering basic questions, especially about financial planning which they are legally forbidden to do without a CFP certification (which is why many brokers are getting such certification).

If, OTOH, you are in need of really in-depth, consistent, holistic financial planning, then you work with a CFP or RIA, not a broker (who has no legal obligation to you other than the shot-full-of-holes ‘suitability’ standard). Whether on a flat fee or portfolio-based percentage, they will be willing to spend literally hours with you to help you achieve your goals, whatever those goals may be.

You need to understand that you are paying fees to ANY broker/brokerage you use, whether directly or indirectly. In some cases, such as my MIL who prefers to remain as ignorant as possible, we consider it well worth the $9K/yr in fees to have someone knowledgeable and ethical she can depend on, if something happens to both of us.

For example, a lot of people focus on the "no/low trading fee" ads run by some discount brokerages, without realizing that doesn't mean the account itself is free:
- The broker may receive 12-b commissions from the funds he sells you.
- The brokerage may charge an annual account fee.
- The stock price of the funds is usually inflated over the Net Asset Value (NAV). Brokerages charge points for accounts that have less assets than whatever minimum the company might set for being able to buy at NAV.

When you use a brokerage directly, you still have an account manager, or broker. They will assign one to you automatically. If you are using E-trade or a similar service, you might not have an account mgr, however - I don't use either type so I'm not familiar with their administrative details.

If you need hand-holding, go with a full service certified financial planner, either flat hourly or portfolio based. There is nothing wrong with being one of those people! A lot of folks would be much better off if they admitted they are being penny-wise and pound-foolish, and that a true fiduciary professional might have done a lot better for them over the last 15 yrs than the amateurs themselves were able to accomplish.

Would I go with a broker? No. I would go with an independent CFP with a brokers (Series 7) license. Affiliation with a good brokerage is an asset, not a negative. A good CFP with a substantial book of business, gets favorable terms from any brokerage, and using an independent like Schwab or Associated Securites allows a wide choice of funds to purchase from, as well as saving back office costs and increasing efficiency.

Would I go with someone who could not show me at least 10 years, preferably 15 yrs, of achieving good long-term results despite the setbacks of the 2000-2002 recession and the chaos of 2008-2010? No, I wouldn’t. As our own personal advisor I can look over my records and see some declines, but excellent recovery and a consistent upward trend for a solid positive ROI.

But YMMV, just because you’re not like anyone else here. We all have unique situations...the trick is, figuring out what problems you can handle, and which ones you need professional assistance to solve. Only then do you do the research to decide which professional, on what basis, is going to be your best solution.

You don’t (I assume) go to just any doctor or nurse and take their advice on how to cure your body. You don’t just drop your car off at any repair place and assume they’ll do a great job fixing the erratic, sometimes-I-can-hear-it-but-right-now-I-can’t problem with your steering.

Your financial assets are all you have. You have worked hard to accumulate them. It is essential for you to do a considerable amount of research, thought, analysis, and reference checking, to find someone who will truly partner with you over the long-term, to allow you to increase those assets so you can achieve your goals. Just as you want your doctor to be familiar with your entire medical record, you want a financial professional to be committed to helping you succeed, not just trying to get the money for the newest model BMW.

    Bookmark   November 29, 2010 at 1:56PM
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Well, I guess you could say it is "normal" but that doesn't mean it is a good idea. A 1% fee per year for a lifetime could be an incredible drag on your financial future unless you are getting some major benefit from her advice. If she is just "picking funds", I would say you are wasting money. If she is actually providing a real service to you, then it might be worth it. However, if you have been using the same person for years and you don't understand their fee structure or the service they are providing, I would say they are failing in their main duty - helping YOU make good decisions with your money.

    Bookmark   November 29, 2010 at 7:47PM
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"Would I go with a broker? No. I would go with an independent CFP with a brokers (Series 7) license. Affiliation with a good brokerage is an asset, not a negative. A good CFP with a substantial book of business, gets favorable terms from any brokerage, and using an independent like Schwab or Associated Securites allows a wide choice of funds to purchase from, as well as saving back office costs and increasing efficiency."

She is a CFP and has been in the business for many years. She was recommended to us by our accountant who we trust.

We are seniors who lost a lot of our retirement money during the crash in 08. 'Once burned...' What is left we need to grow quickly to have enough to live off in the next few years.

After what happened to us in 08, I don't trust anyone. I don't think brokers saw what was happening and didn't act quickly enough to save investors life savings.

We are ignorant about how investing works. We have tried to educate ourselves, but we still don't understand how it all works. So we found we needed to 'trust' someone again. We have little time left to try to grow what is left of our retirement.

I appreciate your explanation as I am struggling to figure out how to keep an eye on what is happening with our money.

Thanks again,

    Bookmark   November 29, 2010 at 10:07PM
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OK, sorry to be so long-winded about my answers. But honestly, these are complicated issues, so bear with me:

>>She is a CFP and has been in the business for many years. She was recommended to us by our accountant who we trust....We are seniors who lost a lot of our retirement money during the crash in 08. 'Once burned...' What is left we need to grow quickly to have enough to live off in the next few years. >>>

Nobody, and I mean nobody, can guarantee that you will NEVER lose money with them acting as your financial advisor. But you can certainly get an advisor who can minimize your losses and reduce the volatility in your portfolio. You could do it yourself, of course. However, most people flee into Treasuries or CDs for safety, but at the expense of future growth.

There is no ‘silver bullet’. Not the greatest stock picker in the world has a winning record every year. If your proposed CFP didn’t see a loss in her clients’ portfolios in 4Q2008, she’s a genius who doesn’t need to offer discounts to anyone.

So the question is, how well have those client portfolios recovered in the last two years? This is far more important than any recommendation.

It actually doesn’t sound as if you’ve researched this person thoroughly. I may be wrong and if I am, I apologize. But before handing over your money to any advisor, you need to see at least three or four sample client reports, and have spoken to no less than three clients who have been with this CFP for at least three years and preferably five or more.

Even more important, when considering how a CFP’s client portfolios have done in the last two years against the 2008 losses, is comparing “apples to apples”. IOW, are you looking at the results of client portfolio allocations with a ***similar risk profile*** to yours? Obviously, the portfolio of a younger person who is willing to take on a higher-than-average market risk, should be different than someone who is more concerned with protecting principal.

Because you’re saying contradictory things in the statements above. You don’t want to be ‘burned again’, but if you want your portfolio to ‘grow quickly’, you are talking about taking on a much riskier investment profile. Are you comfortable with that? Even good professional advice can be wrong at times, but only hindsight is going to show the results.

Summing it up:
The reason I find your statements contradictory is that market history has shown that the greatest gains come immediately after the greatest losses. This has certainly been true in both massive market upheavals I have been in; namely, the dot-com bust of 2000 and the derivatives/CLO chaos of 2008.

I cannot tell you how many people, both in person and on Net forums, I encountered during those months, who were panicking and fleeing into cash or CDs at precisely the wrong times. In both cases, my DH asked if we wanted to change our allocation, and I said, “Absolutely not. The market will recover, and when it does, we’ll recoup most of the losses and can decide what to do from there.”

And of course, the market did exactly that. In the dot-com bust, we recovered and were back in positive territory within 18 months. In this most recent chaotic bounce, we recovered within 12 months.

However, even being on the high-end of a moderate-risk profile, we took our equity profits in 1Q2010 and have been in a defensive mode since. I’m quite happy with the 7% gain for 2010, although it pales beside the 26% gain we enjoyed in 2009.

Now compare this with my MIL’s portfolio with a CFP firm. She lost less than we did, on a percentage basis. But she has also gained back less than we did, percentage-wise, because she is in a low-to-moderate risk profile. We’re fine with this difference in volatility, due to her age (82).

If you are depending upon your portfolio for retirement, shifting now to a high-risk investing stance in equities is a lot more courageous than I am...and we don’t ever need to take any distributions from our portfolio! The ‘easy money’ has already been made, and now it’s an uphill slog to get high-digit returns.

Especially with the global markets so unsettled and the US standing alone in a Keynesian stimulus mode, Asia and South American fighting inflationary pressures, the EU falling apart as markets stop lending to the PIIGS, and the current currency disagreements in the G20. I don’t see how any advisor, even if it’s Warren Buffett or Bill Gross, could think they could achieve a very high return, very low risk ROI for you, over the next few years.

    Bookmark   November 30, 2010 at 4:47PM
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Just a note regarding using someone who is recommended by your accountant--DON'T just accept the person's word. We did and lost over 5000.00 in a very short time. Our tax accountant/lawyer recommended this person and yes it was risky, but did well for several years, BUT, when it started to fail, we were going to pull out our money, and the person talked us out of it, so in the long run, we did loose almost our entire investment. It wasn't stocks but something else, but I did ask someone else if it had been stocks would it make a difference, and that person said we would have lost anyway.
The people here have given you some excellent advice, read and investigate first. Please, you could save your retirement .

    Bookmark   December 1, 2010 at 10:35PM
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We found a financial planner through a friend who has the same conservative fiscal policy as us. The planner turned out to be one of the top 100 in the country (Forbes). He only changes $600 per year, and we have a large portfolio. We lost some in 2008, but it has come back up.

He is doing much better than when we were doing it ourselves, LOL!

    Bookmark   December 1, 2010 at 10:50PM
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Wow, thanks for all the advice. I'm sorry my story sounds contradictory but there are many details I didn't include. We lost a lot of money during the crash because the investment person had our money in the highest risk profile without our permission. We had signed a contract for 'conservative' and had no idea she changed it. We probably have cause for a law suit but she worked for a major bank and that is who would be held responsible. I don't think we'd live long enough to see any result from legal action.

Some important points were made and we should do further research. We are very comfortable with this person as we are with our accountant and trust him to guide us.

We are taking more risk as we don't have much time to make up what we lost. We agreed to a 50-50 portfolio but hope she keeps a close eye on market/global conditions.

Since 08, we have had our money sitting in regular savings accounts getting 1% or less. We had to do something but were so afraid to get back in. We have given her only 1% of our money. We do have some in Treasuries and corporate bonds and only get about 4%, which is still better than the banks.

We worked long and hard to save for retirement and lost almost 40% during the crash. If we hadn't insisted everything get sold we would have lost more. We can never make up all the years we lost, but I want to get the best return we can without too much risk. The economy seems so shaky but I do believe it is getting better.

Thanks again for the excellent advice,

    Bookmark   December 2, 2010 at 10:56PM
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Jane, good luck to you going forward! I'm sure you have all our best wishes as you work to recover your retirement plans.

Happy holidays to all, too.

    Bookmark   December 3, 2010 at 12:46AM
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Unless you sunk 100% of your money in these accounts at the end of 2007, presumably you had a run-up during 2003-2007 like everyone else. That is how risk works. You have to be willing to take a bigger loss if you want the upside of bigger gains. Everyone seems to want to calculate "losses" based on the highest vs the lowest point of their investment. That isn't how it works. You need to look at what you bought for and what you sold for. It is highly unlikely that your true losses were anything close to 40%.

Frankly, "We need more money to retire and we have to get it quick" is an absolutely horrible reason to take on more risk. Betting on short term market movements is just that - betting.

    Bookmark   December 3, 2010 at 9:20AM
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Investors cannot control the stock market, but that can and should pay very close attention to and control the expenses related to their investments. There is absolutely NO REASON WHY YOU SHOULD HAVE TO PAY A LOAD OF ANY KIND OF MUTUAL FUND. For the average "retail investor," someone with less than $10 million to invest, the best approach is to go with INDEX MUTUAL FUNDS. They have the lowest expenses, in the long run give the best returns, and are the most tax efficient (that means they don't trade a lot, because trading incurs income taxes.)

Go to the websites of the BIG THREE for index mutual fund investing and learn about them: Vanguard, T Rowe Price, and Fidelity. They also have investment advisors who, for a modest fee, will consult with you on your investment objectives (retirement, save for buying a house or to pay college tuition or to start a business, or whatever your plans are). They'll discuss your whole situation and come up with a plan. If you have a lot to invest, something like $500,000, the consultation is free.

We have all our retirement assets with Vanguard. We've done our independent research and we're moderately experienced in understanding the way markets work. We're convinced this is the way to go.

Your first step is to get away from brokers or advisors who charge you every time they do something in your account. That's picking your pocket.

    Bookmark   December 4, 2010 at 9:52PM
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Haus, you must be a follower of Bob Brinker, you certainly say the same things. I like the reading lists and the whole sense of empowerment that Brink provides.

My investments grow less stock-oriented as we get closer to retirement, and we have more invested in income funds. All thru Vanguard or similar no-load funds thru Schwab.

Brinker's reading list is outstanding. And I find that I like his movie lists, and the fun stuff as well. ;-)

Here is a link that might be useful: Bob Brinker's website

    Bookmark   December 4, 2010 at 10:06PM
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And again, I reiterate - not everyone enjoys or has the right instincts to be a good investor. I do, and I do it very well for DH and myself. But many people do not - and I have examples in both my family and our friends to prove it.

All the knowledge in the world WILL NOT HELP if you have poor investing instincts. We have a friend who is highly educated, a well paid professional, who is capable of and likes to read sophisticated investing articles. We share info all the time, in fact.

Despite this, he is one of the most awful investors I have ever known. He has put money with brokers and lost money; AND he has now managed his funds for over ten years and done a crappy job of it. Understanding options and stop-loss orders has not helped. He buys at the wrong time and sells at the wrong time. He is an emotional investor, the very worst type.

A good advisor with fiduciary responsibility spends a lot of time saying "No, you don't really want/need to do this" to clients. Our friend would be a LOT better off if he stopped trying to DIY and had used a good advisor.

I have to object when people say, "Oh, it's easy and you can learn to do it youself" to everybody. That just isn't true. Some people can, and some people can't. To make people feel bad because they aren't able to grasp all the nuances of complex subjects like investing and financial planning, isn't a good idea, nor is it fair.

These aren't simple subjects. They require not only research, but ongoing interest and involvement. If financial success was just ROI, retirement would be a simple 'shoot for the number.' But as many in the WWII and older Boomer generation have found, there are a lot of 'gotcha' issues that can trip one up.

For instance, many people on these forums appear to be good, reasonably successful investors....but how many of them are as knowledgeable about insurance? Yet insurance is important, and the more successful you are, the more risk mitigation you may require. Do you know when to talk to an agent, and when it's a waste of time? Do you know how to judge how much risk mitigation you need, without being dependent upon the sales pitch of someone who makes a living solely off policy commissions, and thus has no fiduciary duty to you?

The error most people make is simple - you can't plan for what you don't know about. And if you are close to retirement but have never really sat down to plan and run Monte Carlo scenarios, you're at a real disadvantage trying to do a crash course in educating yourself about the many things that can go wrong, all of which are just as important, if not more so, than what ROI your money earned last year.

A good professional can help by asking questions you have never thought about. A good fiduciary will spend time and effort to help you identify problems, achieve your goals, and plan properly. If that's the kind of help you need, then it is going to be worth paying for. If you honestly don't need it, that's great.

But if you do....then it is worth your financial security to get the right professional help you need. Because financial security is not just a number, nor is it a double-digit ROI. It is many things, and sometimes a neutral, unbiased, experienced, fiduciary professional's opinion can make a difference. No, it's not for everyone; but sometimes it IS the right decision.

    Bookmark   December 4, 2010 at 11:18PM
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Just be sure that you will get what you think you are paying for!

I had the unfortunate experience of putting my money with an advisor,(with S----- Financial Services) for the 1% fee also, who I discovered later simply used the stock in-house computer program for his "personalized recommendations"; there were trades and "rebalancing" etc that I had specifically instructed him not to make (ie I did not want any more money into two particular funds, although I did not want to sell my current shares) and cost me unneccesarily (in taxes too) by selling, then rebuying the shares at a higher price per share. When I called to find out why my instructions were not followed, I was told about the program and its automatic actions. There was in fact no oversight or review by this person once he had my account; it was all driven by the computer. Of course I was still paying each fund's yearly expenses too. His "management fee" was simply a way to skim profit from my earnings, nothing more.

    Bookmark   December 5, 2010 at 8:49PM
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raee, I'm curious as to whether your advisor was just a broker who had to meet the loose 'suitability' standard, or in fact a true fiduciary advisor. Had he been the latter, you should have reported him to the SEC for investigation and possible prosecution.

As I have said before in posting on other discussion threads, it is possible to get an ethical, responsible broker...but your chances of finding an ethical, responsible fiduciary advisor are simply, better.

    Bookmark   December 5, 2010 at 10:41PM
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You are right, jkom, mine was a broker/advisor. Still, a word to the wise to ask LOTS of questions.

I wondered if I had any basis to report him or his company for this, although I gather that this situation is rather the norm for "small potatoes" accounts at places such as morganstanley etc. I would think that the fact that I am paying him for "advice" would create a duty; but they say I was paying for "management" which they provided via the computer program even if it didn't actually act in my best interest or involve any human oversight.

    Bookmark   December 8, 2010 at 1:52PM
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First of all, I think it’s important to understand that everybody’s accounts are handled through computer programs. For example, much of today’s volatility is caused by stop-loss contracts and options. No broker can manage accounts by hand, so yes, the smaller the account (anything under $1M is generally ‘small’) means it is going to be slotted into a certain risk profile to attain a specific portfolio allotment.

That said, a good advisor, especially a fiduciary advisor, is going to spend more time finding out what is important to each client. If capital gains taxes are an issue for someone, this needs to be known and taken into account.

I can’t imagine any of the CFPs I’ve known ignoring a client’s expressed wishes, whether verbal or written. My ex-boss refused several potential clients while I was there, because they wanted to invest in areas of high risk, and as a fiduciary advisor he was not comfortable with doing such investments. A couple of clients had split their accounts, and kept a small part of their investible funds with a second advisor who was not a fiduciary, so they would accept handling a high-risk investment.

It is critical to understand precisely what 'suitability' means. This is an EXTREMELY loose standard and does not require the broker, at any time, to act in the client's best interest. As long as the investment fits your risk profile, it is considered ‘suitable’.

The dangerous part of ‘suitability’ is that if the broker calls you and says s/he has a hot new investment that carries ‘a little more risk’ than your usual portfolio indicates, and you DON’T stop to think it over but get snowed into saying “yes” - then you have given permission to expand the ‘suitability’ of this new investment into your risk profile.

You could, of course, re-establish a more conservative risk profile by writing a letter and putting the brakes on your broker....but almost nobody ever thinks to do this.

The Suitability standard from the NASB, which regulates brokers (and no matter what they call themselves, if they are not CFPs or RIAs, that fancy-sounding title is just an invented, virtually meaningless designation):

"A stated or implied requirement by a regulatory body that a broker or investment adviser must reasonably believe that a certain investment decision will benefit a client before making a recommendation to him/her. That is, the broker or investment adviser must act in good faith, and may not knowingly recommend bad investments. "

This last sentence is a landmine. A broker could claim he had no knowledge of Bernie Madoff being a crook, for example, so if he recommended it to someone in (his own view of) good faith, then he did nothing legally wrong even if that person lost all their money.

    Bookmark   December 8, 2010 at 10:34PM
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Bill, as a matter of fact that is what happened. My husband retired from his job of 30 yrs at the end of 07 and we were left with his 401 and didn't know what to do with it. His firm handled the fund during the 30 years and ended with his retirement. We had to roll over the fund to something. What we did was supposed to be temporary until we had time to research something. We knew nothing about investing.

We turned over 3/4 of the money to a financial investor at JP M ''. We had accounts there for many years and trusted their advice...big mistake. The rest we gave to a financial person recommended by a collegue. This person worked for Oppenheim...'(I'm not sure if I'm allowed to name the banks.

At that time (Nov 07) the IRA totaled approx. 1M. - Oct. 08 it totaled somewhere around $620,000. Largest amount lost was through JP M Cha..'

My husband had to go back to work (part-time) and is still working. He's in his late 70's.

Some of the funds we had money in, no longer exist. Some are no where near where they were in 07 when we bought them. I looked at one yesterday and saw we paid $25.00 a share in 07 and yesterday it was at $8.00 (52 week high).

This past year, we sold our home and didn't know what to do with that money so it sits in a savings bank collecting 1%.

We just don't trust anyone anymore to handle the money. We don't understand what many of these funds are. The person we gave a small amount to, put the money ($150,000) in 14 different funds. I never heard of most of them, but I know they are legitimate, 'emerging markets' and some bond funds. She's trying to grow and taking some risk to help make up some of what we lost. We don't know whether to give her anymore.

Today I hear the bond market is supposed to crash this week. Money invested in Bond Funds could loose your principal. Financial people on the news today are saying, take your retirement money out of bonds and into equities.

Who understands all this stuff? We don't, that's for sure. Under the mattress is sounding better and better!


    Bookmark   December 8, 2010 at 11:53PM
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Thanks, jkom, for your input & experience.
It is a shame that the broker/advisor/salesperson isn't upfront about what they are really selling your for that 1%.
All my funds have lost money, some more, some WAY more (ie the high risk funds that I requested no more investment into, knowing that things were teetering--but I also intended to sell a few months later before they crashed and didn't get around to it--my fault entirely).

Jane__NY, I share your sense of confusion and dread sometimes but I do go into investing knowing that the risk of loss is there. Sometimes, though, I wonder if it wouldn't be as good a retirement plan to take most of the money and buy some acres and livestock to provide for myself!

    Bookmark   December 9, 2010 at 1:21PM
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BTW, I apologize for the weird characters that kept showing up in my posting! I usually compose in Word and paste it in, but sometimes the apostrophe turns out garbled, when I've forgotten to compose in Courier instead of my default Arial font.

Mea culpa!

    Bookmark   December 10, 2010 at 12:04AM
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Thanks jkom, I wondered why those characters were there...thought it was my computer! I'm starting to think investing the money ourselves might be the safest and cheapest way to go. Just need to learn more about it.


    Bookmark   December 11, 2010 at 8:09PM
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"raee, I'm curious as to whether your advisor was just a broker who had to meet the loose 'suitability' standard, or in fact a true fiduciary advisor. Had he been the latter, you should have reported him to the SEC for investigation and possible prosecution."

Same thing happened with us. Our investment advisor at the trust office was a RIA/ broker at another location/branch of the company. That is how he was able to avoid 'fiduciary' responsibility. Not that this mattered in the long run.

We had told him to sell our proprietary stocks and this is when the shenanigans began. He put us in junk bonds, sold safe reliable things like Vanguard 500 index and said he wanted to sell a gas stock that had been doing well since inception (paid good dividends). He must have figured out that we were fed up with the answers we weren't getting (and on the way out) so he started playing games with our investments to punish us.

We didn't listen to anything he said, kept the holdings we wanted and transferred everything else in the fall of 2007. We also reported him to the state DOJ.

The supervisor at the securities division didn't seem to think that playing broker at one office and investment advisor at another was a problem.

Also called the SEC. They confirmed that our account was being churned but refused to give us any additional instructions on what to do about it other than to hire a lawyer.

That is when we realized that complaining to ANYONE probably wouldn't do a lick of good and that we would just be throwing good money after bad if we hired a lawyer to take it to arbitration.

Here are two sources of info that were quite helpful when we were trying to figure out what was going on. We contacted the authors of both books and they were very helpful in letting us know what our chances of redress were.

Links that might be useful:

Brokerage Fraud; What Wall Street Doesn't Want You to Know by Tracy Stoneman & Douglas Schulz

Errold F. Moody Jr.-PhD, MSFP, LLB, MBA, BSCE, Life and disablility insurance analyst, Registered investment advisor

    Bookmark   December 13, 2010 at 11:14AM
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>>I'm starting to think investing the money ourselves might be the safest and cheapest way to go. Just need to learn more about it. >>

Only if you have GOOD investing instincts. If you don't - and many people don't seem to, or they wouldn't be selling when everybody else is - it might be the cheapest but not necessarily the smartest.

If you need help, search an organization like the Garrett Planning Network, where you can find INDEPENDENT, pay-by-the-hour CFPs. And don't spare the cost of his/her time it takes to really educate yourself about your holistic financial situation. A good CFP can be an eye-opener about what goes into good financial planning; it was for me.

Good luck with whatever you choose to do.

    Bookmark   December 13, 2010 at 7:41PM
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"If you need help, search an organization like the Garrett Planning Network, where you can find INDEPENDENT, pay-by-the-hour CFPs."

We made an appointment to meet with a planner we found on the Garrett Planning Network list.

He had an MBA, a CPA and was a RIA. He sent us literature ahead of time to fill out for the first meeting. We filled out part of it but left out sensitive info (D.O.B.-SS#)

His office was in a building with other offices nearby. Even though we could hear people talking clearly in the next office, he didn't bother to close the door until we asked him to. This seemed to bother him. He became further annoyed when he discovered we hadn't completely filled out the sheets he sent.

We explained that we wanted to interview him and get a feel for a good working relationship as well as costs, etc, BEFORE sharing all our personal details with a stranger. The answers he gave us weren't satisfactory and we could tell he wanted a client who was less informed and needed more hand holding.

That was the first and last time we met.

As it is now, brokers, banks or RIA's can rob you blind and there is very little you can do about it.

Jkom has mentioned that she used to work for a financial planner. I recall her saying that he had never lost an arbitration suit. This may mean many things. Good and/or bad.

I'm sure some folks are very happy with their financial planner, but it has been our experience that most of the one's we have interviewed consider themselves wiser than us, and want to put us in mutual funds, annuities, etc.

I don't begrudge someone making a living. Just not more than I can expect to earn from my own savings.

    Bookmark   December 22, 2010 at 4:38PM
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>>Jkom has mentioned that she used to work for a financial planner. I recall her saying that he had never lost an arbitration suit

You may be thinking of someone else. I have never made such a statement. My former boss was and is, however, the area's leading expert witness for attorneys seeking to file suit against brokers for securities fraud. About half the time he had to tell the attorneys they had no case because the records showed the clients had in fact been advised of the investment risk and given their consent. Because of the loose 'suitability' standard, these people had lost considerable sums of money but had no recourse.

It isn't easy to find a good CFP. Unfortunately, a great many of them are concentrated on the high-end of the spectrum, so if you don't fall into that category, it's going to take considerable effort and time to find someone. It is a very individualized business, and to do a good job for someone takes a considerable amount of work - work that would have to be done whether the person had $50,000 to invest or $5,000,000 to invest.

As a result, most good planners concentrate on that upper end, because it's a better return of their time and effort.

You CAN find someone good and ethical. But it will take you time, and it still requires that you educate yourself. I happen to disagree with the blanket statement that "brokers, banks or RIA's can rob you blind and there is very little you can do about it."

No bank or insurer has ever robbed me; I pay them for services received and am free to take my business anywhere I choose. If I chose to use a broker, I would do so knowing what he can do for me and what he legally cannot; I would check every trade and every statement and question anything that deviates from my stated risk tolerance. This means I would not use a broker to do anything other than provide a standard computer program analysis of portfolio allocations, because if I want a truly customized allocation I'm going to have to pay for it, one way or another. Any fiduciary advisor had better have my best interests first and foremost because if not, they're going to get their a$$ reported to every authority and reporting board I can find.

What you can have to do is to research, read, and understand what your rights are. In some areas of financial services, consumers have extensive rights; in others, it's caveat emptor. Unfortunately, finding an advisor falls in the latter category.

If your portfolio is small and your investing needs are fairly simple, you can DIY with a basic portfolio allocation built on good discount funds or ETFs, like Vanguard or T. Rowe Price. But when you start getting into a bigger overall net worth, especially if you have a family, financial management and planning become a lot more complicated. A good fiduciary planner can make navigating today's complex financial world a lot easier - just be prepared to put in work to find that planner, and periodic time spent to develop a working partnership together.

    Bookmark   December 24, 2010 at 1:22AM
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"Any fiduciary advisor had better have my best interests first and foremost because if not, they're going to get their a$$ reported to every authority and reporting board I can find."

Good luck with that. Do you consider: filing a complaint with the trust company compliance officer, contacting the SEC, hiring a securities attorney and last but not least, talking to the head of the division of securities for the state the investments were registered in 'enough authority'? We did all this and it didn't didn't help. Our advisor sent fake statements, churned the $hit out of our portfolio, put us in high risk stocks and refused to send us any confirmations, annual statements, etc.

The legal authorities might as well have doused them with holy water for as much as they did in our regard. We had to get out before we were broke and it was our good fortune to exit right before the crash.

That is why the banks were able to extort TARP and Madoff and NUMEROUS other crooks have been able to get away with this kind of crime. The foxes are always watching the henhouse.

Which is why we trust no one but ourselves when it comes to our finances.

    Bookmark   December 26, 2010 at 7:54PM
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dreamgarden, you were the lucky one to get out before the crash. When the market started to drop, we couldn't reach this broker and was told by the bank that she was on vacation and no one else at the bank could sell the investments. This was my husbands IRA and we didn't know what to do. By October, my husband marched into the bank and told them he wanted his accounts closed. We never saw or heard from this investment person again. She just disappeared.


    Bookmark   December 26, 2010 at 11:55PM
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dreamgarden, what kind of references did your advisor have? Were you able to talk to at least three clients who had been with this advisor for a minimum 3-5 years, or even longer?

The four really good independent CFPs I know do very little 'hard' advertising. All of them have been in business for a minimum 25 years and can provide excellent references from clients, including families where two and three generations have been using their services.

I repeat, it is a 'caveat emptor' sector of financial services. Anyone who thinks we have too much big government needs to realize that it is ridiculous to expect 50 different states to establish consistent standards for legally regulating financial advisors. They should ALL be regulated, not just some of them.

At the current time, only Malaysia has a national licensing program for financial advisors. Ridiculous, no?

    Bookmark   December 27, 2010 at 4:05PM
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"dreamgarden, what kind of references did your advisor have? Were you able to talk to at least three clients who had been with this advisor for a minimum 3-5 years, or even longer?"

I hope you aren't inferring that it is OUR fault we were ripped off because WE weren't able to scratch deep enough to find what an infected boil of malfeasance our advisor was hiding.

Our advisor had excellent references. He managed our parents money. We spoke to an accountant who did taxes for some of his other clients. Our advisor was a master at obfuscating from giving any information that might be able to be used against him. Probably because of his past record.

We looked up his record at FINRA. There wasn't anything irregular. However when we contacted the State DOJ, the supervisor there mentioned two arrest records as well as other items that WEREN'T listed in his FINRA record.

Why wasn't this listed? Read on.

New York Times Exposes Deficiencies in FINRA's BrokerCheck Report
December 14, 2007

"“BrokerCheck gives you no assurance that you’re dealing with somebody who has a clean record,” said Pat Huddleston, a former branch enforcement chief at the Securities and Exchange Commission"

The Financial Industry Regulatory Authority ("FINRA") is in the middle of a media campaign touting themselves as the investor's friend. They urge people to check out their broker for free using FINRA's BrokerCheck report. Today, New York Times reporter Lynnley Browning reported that FINRA's BrokerCheck is worth what you pay for it - NOTHING.

The problem is that, up until 2004, and some say even after, brokers have been able to negotiate for expungement of their records as a condition of a confidential settlement of an arbitration case. While Browning quoted a source who said, ""the vast majority"" of expungement requests were legitimate," that has not been my experience. Through nearly twenty years of representing and protecting investors at the SEC and in private practice, I have found that most truly frivolous claims go to a hearing, whereas meritorious claims get settled, almost always with a provision in the settlement documents requiring the claimant to cooperate in wiping the broker's misconduct from the record.

So, imagine yourself as an investor curious as to whether your broker or prospective broker has survived past bear markets without any customer complaints. You could ask FINRA, and they may tell you that your broker is squeaky clean. In truth, your broker may be wearing several coats of whitewash........."

Do you think a broker should be allowed to expunge his record Jkom? Our broker was wearing many coats of whitewash. The State DOJ knew this and still wasn't helpful to us. People from his office had gone to work for them so I guess it was more important for him to protect his 'friends' at the trust company than an investor. Just goes to show that you get all the references you like and go to the top and STILL get jerked.

Until we get rid of arbitration, restore the Glass-Steagall Act and make broker fraud a felony crime (with all the penalties that Madoff is now enjoying), brokers, RIA's, etc, will continue to have a license to steal.

Links that might be useful:

    Bookmark   December 31, 2010 at 11:19AM
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No, I wasn't inferring that. There are a lot of very marginal advisors, and it can be really difficult to find a good one.

But there ARE good ones. I've been fortunate to work for, and with, such people. I'm sorry that you had the misfortune to get entangled with a bad one. I totally agree with you that brokers should NOT be allowed to whitewash their records, any more than businesses are able to do the equivalent with the Better Business Bureau, one of the more toothless organizations that supposedly protects the consumer.

But again, the advisors I know have 20+ yrs of working with clients, and are happy to let you talk to any number of them as a referral. They produce very clear, high-quality quarterly reports for all clients, and all accounts are non-discretionary, meaning approval for all trades has to come from the client.

Finding a good advisor is like finding a good auto mechanic - takes a considerable amount of time and effort, unless you're lucky and find one early on.

    Bookmark   January 1, 2011 at 4:13PM
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"There are a lot of very marginal advisors, and it can be really difficult to find a good one."

No kidding. Seems as if it would save time to just take some of the same courses they do. At least it would give you a clue how they work/make their money.

There is a person who posts here called "joyfulguy/ole joyful". He is a retired pastor/financial planner. He is always saying the best person to manage your money is yourself. Funny to hear this from one who was paid to watch other people's money.

    Bookmark   January 9, 2011 at 9:59AM
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We pay our financial advisor a flat fee of $500, and we have well over 1 mil invested with him. He is in Forbes top 100 financial advisors and has all the proper credentials. We were lucky, a good friend of mine from HS referred me to him. Since she is frugal like we are, we thought we'd try it. This was after we lost a bundle in the crash. My husband does not have the time to track our own investments and I don't have the stomach for it. We like being able to leave it with someone we can trust. I suspect it is easier to find someone in the large cities than in rural areas.

I agree with jkom that not everyone has the skills to decide on their own investments; I sure don't.

    Bookmark   January 16, 2011 at 6:51PM
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Ole Joyful has the training and instincts to be a good advisor. Most people don't.

If you have bad instincts and can be panicked by the media headlines, you are NOT going to be a good investor. You could have all the knowledge in the world, but your emotions will drive your decisions. You will probably buy high and sell low, the exact opposite of what you should do.

A lot of times a good advisor has to say "no" to clients. "No, you can't plan to withdraw 10% per year, your money will run out too fast." "No, being 100% in bonds and Treasuries is not a guarantee against losing money."

A good advisor positions his/her clients for the mid- to long-term, based on their risk profile. The reason for that has to do with logistics. Here's what's involved with trade decisions in the CFP office I used to work in:

1) Quarter ends (let's say it's 3/31/2011, sometimes written as 1Q11).

2) Reports from the brokerages don't come on-line to the advisor's office until 2-5 weeks after the quarter ends, or approximately 4/30/2011.

3) To generate individual reports for each client requires a massive back office op; it took 5 people (two CFPs, one analyst, three clerks) to produce reports for the 140 clients, as many had multiple accounts and a separate report is generated for each account. It took us a minimum of four weeks as this CFP liked to heavily customize his services. Some clients preferred to see a different set of benchmarks used; for example, one liked to have the Wilshire 5000 instead of the S&P 500, and another always wanted to see the Russell small cap index benchmark included.

So that 4 weeks now brings us to 5/31/2011, when we are stuffing envelopes and mailing the reports out to the clients. I'm sure some have by now switched to paperless, but that doesn't subtract more than a week and maybe one person, off the process. Let's be generous and say going paperless gets you your 3/31 quarterly report by 5/15.

4) You read your report, with its recommendations for any portfolio changes, the very next day, 5/16. You're so organized, you even already have your quarterly meeting date scheduled in advance, so you're going in to talk to the CFP the very next week.

This is unusual, most clients didn't schedule a meeting until they had their report in hand, so often we were scheduling July meetings to discuss that 3/31 report. Some clients would call and okay the portfolio changes, but most liked to come in and chat with the CFPs, because they were like family. Every meeting took at least 90 minutes, and some that were family accounts, were known for taking 2 to 2-1/2 hrs.

5) Once we got the client's okay, the analyst was given permission to execute whatever trades we had recommended for that client, on that 3/31 report.

Still with me? We're mostly through the second quarter, sometimes even shading into the third quarter, before we get the client's okay to change the portfolio.

Now, why does it take so long? Because the CFP is looking at those mid- to long-term trends, not the short-term 'next 3 months' that a commissioned broker is 100% focused on.

In almost two years of working at the CFP's office, and four years of working with another independent CFP who handles MIL's portfolio, NO TRADES ever take place without client permission or outside the routine quarterly reporting system.

There are no tips for "hot sectors" or "above average returns at little risk". This is why it's a whole different world, when you find an advisor who is worth working with. Because a good advisor will happily bend your ear for hours, teaching you as much as you want to know. A bad one never has enough time for you, unless he wants you to write a check!

    Bookmark   January 18, 2011 at 7:08PM
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Greetings Jane ny,

Since your original message was way back in Nov. ...

... and it's now down near the end of (granted, short month) Feb., this is almost as far out of date as jkom's employer's reports were.

"We have met a financial advisor/broker who works independently and uses a brokerage house to manage the funds. She charges 1% to manage the portfolio but does the trading/buying through this large brokerage firm. She is not hired by this firm but uses them to do the trading."

I haven't been around this thread much for a time, but I've been wondering whether, if your advisor was buying stocks, whether she was using a discount broker? I rather had the feeling that perhaps she was using a full-service broker, that claims to be offering a good deal of advice, thus charges larger commissions.

But that's what you were paying her for, and I think that she should have been able to arrange fees of $6.00 - 40 per trade, rather than the hundreds that it usually costs when using full-service brokers.

Perhaps she was doing that and I'm inferring more than is justified.

When you say on the one hand that your were badly burned a while ago and don't want that to happen again, want to preserve the reduced assets that you now have ...

... but that you want fast growth of those assets ...

... aren't you talking out of different sides of your mouth at the same time?

Those two goals aren't compatible, and if you asked me to be your advisor and gave me such guidelines, I'd want to have some long talks with you about what was to happen ... or not be willing to advise you (you note that I said" advise" not "act for" you?).

By the way - when I say that people should learn how to manage their money themselves, it's usually stated along with the claim that no one cares as much about your money as you ...with the addition, unless it's someone who desires to move some of it from your pocket into his/hers.

I've also said that learning how money works is an excellent hobby - that pays well.

Haven't suggested that people embark on such an adventure blindfolded.

When I began working as an advisor, I'd taken the course that stockbrokers take (much more complicated than the standards required of mutual funds' sales people) and it was with a mutual funds sales brokerage, i.e. they offered the products of many managmeent companies, not just one.

As I didn't sell enough to suit my "employer", I didn't continue, but have been interested in that type of business for some time and continued, but selling no products, which I said and say kept me from being in a conflict of interest.

While mutual funds' promoters/apologists tell a great story about their tremendous skills at investing, etc. to justify their fees ... how come about 85% of them don't produce better results than the segment of the markets in which they operate?

It seems to me that part of the reason is that, while the equity market in general has grown at 8% or so, long term, that when the managers in your country take 1.5% of the asset each year, and in my country 2.5% per year, a large portion of the growth is going into their pockets - and did their expertise justify the level of their compensation?

With many advisors, when they talk, it's a good idea to look carefully out of which side of their mouth they are talking - with advice that's good for you ... or advice that's good for them?

And don't forget who pays their wages - you may do it indirectly, but their employer is the one that pays them directly and to whom they are beholden.

Good wishes for increasing wisdom as you approach and implement your investment planning.

ole joyful

    Bookmark   February 25, 2011 at 3:31PM
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"With many advisors, when they talk, it's a good idea to look carefully out of which side of their mouth they are talking - with advice that's good for you ... or advice that's good for them?

And don't forget who pays their wages - you may do it indirectly, but their employer is the one that pays them directly and to whom they are beholden."

Wisdom never goes out of style.

Good to see you again ole joyful.

    Bookmark   February 26, 2011 at 11:01PM
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