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Tuesday, December 30, 2014

Question About Mom's Broker...Help!

I know I usually write about thrift shopping, so the readers out there might not have any answers. But  you had such good advice about my dental woes (actually dentist office woes) that I am back with a bigger issue.

Backstory: After my father died unexpectedly in 2008, my mother gave her taxes to an 80 year old accountant recommended by a neighbor. (Note: the accountant is recently deceased. He understated my mother's income in 2012 by about 75%--less than the lowest social security--which has made her liable for huge penalties and interest fees.)

The accountant recommended his broker. Within a day, my mother had given the broker part of her money to manage. He now has 100%. At our initial (and only) meeting, he was very evasive about compensation etc.

I have been worried about this guy over the years since my mother has no idea what her holdings consist of, what her rate of return is, etc. I spoke to him on the phone last summer and asked him a few questions and he told me "Your ego is too involved." He didn't answer the questions.

Luckily, my brother who has been uninvolved now ways we should look over the broker's records. Since my mother likes and trusts men more than women (she says this! to me!), this is good.

So, with her permission, I sent the broker these questions.

1. What specifically are xxx 's holdings? For instance, there is a category TIAACREF[note, the broker had my mother remove her TIAA money; it is now under the broker's mangement)--what are the specific holdings under that rubric?

2. What is the asset allocation? 

3. For stock holdings: what percentage is in mutual funds and what percentage is in individual stocks?

4. What percentage of assets is in IRAs and similar pretax vehicles? What percentage is in post-tax?

5. What kind of turnover does her portfolio have? How many sells/buys have been engaged in?  What are her total transaction/investment expenses for 2014? 2013? 2012?

6. What is her total return for 2014? 2013? 2012?

Thank you for your attention. We look forward to hearing from you.

Here is the reply: Good questions.  I think it is time to reevaluate the portfolio.

Any suggestions about how I might reply to this? Anything I should do?


Gam Kau said...

Does your mother heed your or your brother's advice? (neither of my parents respect my advice, they only listen to my brother) If she does, I would strongly suggest to her she close her account with this broker and set up something easier to manage and track with Vanguard. At this point she should really be all in bonds in any case shouldn't she? Wellesley Fund maybe? Total Bond?
In any case, surely she doesn't need this broker managing her portfolio. I don't really believe in actively managed portfolio unless you have money to play with. In any case, this guy doesn't sound good at all.

Seattle Sews said...

I work with financial planners and advisors. What you want is someone who has fiduciary responsibility. Fiduciary is the important word and it means the highest level of responsibility, similar to a physician (for your health) or attorney. Brokers are only required to make sure your mother can afford their investments. You and your brother may want to hire a fiduciary to review your mother's holdings. This will cost several hundred dollars per hour and be worth it. One way to find a fiduciary is to look for CFP (Certified Financial Planner). The board which certifies CFPs is the industry gold standard and has very high standards. I have more to say but that is enough for now.

Kathy Niederkorn said...

Where are her monthly, yearly statements? He sounds really suspect. I would get answers and control as soon as possible.

Revanche said...

Is there any way your mother would give your brother power of attorney (since she apparently trusts him as a male...??)? I would start with getting the ability to compel the broker to cough up the records ASAP. His response may not signify anything if he simply doesn't believe he has to give you the information (and pardon me with that crack about your ego?? Who is he kidding?) but it raises all kinds of red flags to me that suggests he's been mishandling her money and who knows what's left after phony fees and so on.

If you already have such power I'd be cracking the whip over his head to demand the information but until then, you won't have much leverage with someone who sounds as shady as this guy does.

I'm crossing my fingers this has a decent result.

Duchesse said...

Kathy N. is right, broker should be sending her at least quarterly statements and annual summary of performance year to year.

At best broker is giving slipshod service, at worst, fraudulent. (His remark to you is unprofessional.) Or your mother is forgetting what she is sent.

Broker should provide immediate answers to your questions •to your mother•, his client, unless your brother gets POA, in which case info goes to him.

If broker does not comply with his client's request, get legal advice. Investment fraud is a real problem among the elderly.

At the same time, keep in mind that brokers see a lot of nasty business involving potential heirs and though that is not your intent, he doesn't know you.

The Frugal Shrink said...

Sweet sassy molassy. I would get brother to convince mother to pull the money from that broker and get it to another broker. This is very concerning. :( So sorry, FS.

tess said...

Sounds like a worrisome scam-type situation. Have your mom and brother close out the accounts and transfer someplace like Fidelity. Contact attorney general's office (?) if further unpleasantness/illegalities ensue.

Good that you and your brother are on this. Try to secure your mother's buy-in/permission to extract her savings.

Elderly people may feel embarrassed by being tricked and not admit to needing help. My aunt was scammed by a guy on the phone pretending to be her nephew (used real nephew's name) said he was in trouble and that he would send a "friend" to pick up the money. My aunt withdrew thousand of hard-earned dollars from the bank and handed them over to a stranger. He son raked her over the coals for it. So horrible.

There should double or triple penalties for stealing from the elderly. I sincerely hope that is not your mom's situation.

Anonymous said...

I like a lot of the advice that has been offered. It seems evident that your mom is not in a position to evaluate the returns on her investments or her fees, so she is very vulnerable. I agree that encouraging you or your brother to get power of attorney would be best. But the financial advisor may convince her that the elderly are often conned by their children who want inheritances and will not act in their best interests. So it could be tricky. I also agree that her investments should all be in low-to-no-risk instruments such as GICs and bond funds. Mutual funds, ETFs and individual stocks are not the way to go; she should be preserving capital and drawing it down gradually, not building wealth at this point. My two cents.

dotsybabe said...

Make that a durable power of attorney for bro, just in case something happens to Mom and she can't make decisions. Scary situation!

Shelley said...

Wow, that broker sounds like bad news! I wrote a post a few years ago about a 'financial advisor' I encountered just before retiring. Everything about him set off alarms in my head and I only did business with him for a couple of months (and the investments he made more me have been complete losers compared with my index linked funds). Bill forwarded a news article to me last week that this guy has been sent to prison for five years for fraud. Best news I've had in ages - my instincts were absolutely right! I do hope your brother can convince your Mom to get rid of this creep she's employed.

Kim said...

Hire an attorney that specializes in estate planning. My father hired an accountant, Ralph Estep, and after my father passed away we spent time and money in court and attorney fees to get the estate back. Estep appeared in chancery court and the state Supreme Court in delaware because he had assumed ownership of the estates of his clients. follow your instinct and good luck.

Atlantic said...

Get money out the broker's hands immediately and transfer to Vanguard.

Get documentation to ensure that you have actually been able to recover all the money--if not, threaten legal action before he has time to make it vaporise.

Vanguard has financial advisors that do not work on a commission basis. They are very reasonable and very helpful and will not scam you but suggest a reasonable allocation given the assets, risk tolerance and goals.

Do not wait. Nothing the broker says at this point would make me trust him.

Would get your brother to advise this and put it into action ASAP and consider power of attorney if appropriate but would not wait for that to move forward. Good luck.

Carol in Denver said...

Vanguard is highly regarded, especially their index funds. They have low management fees. T. Rowe Price has funds invested according to what year you did or want to retire and their returns are good. You and/or your brother should be on your mother's account with her so you can monitor what's going on. Get rid of that broker! He's hoping you'll leave him alone to do his dirty business.