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Friday, January 16, 2015

"Answers" from Mom's Broker:?????

Finally got answers from the broker. I'm not sure if they are answers. They seem rather vague. The item that gives me pause is that he engaged in 188 trades in 2014. That seems excessive, no? Any purpose beyond generating fees?

Anyone with any expertise: I would appreciate advice. I tend to be a suspicious person. Still, one investment trade every two days. My mother mentioned that his trading "went down" this year.

Thanks for any help!

My initial questions:

1. What specifically are xxx 's holdings? For instance, there is a category TIAACREF--what are the specific holdings under that rubric?


1) TIAA Cref account is a moderate aggressive allocation which is composed of equities diversified across and within asset classes .
     Also diversified across sectors and industries . Many of the holdings have dividends of 2-5 percent to add to the total return. The account
     typically has 50k-150K set aside in order to buy stocks when the market drops abruptly while hedging the portfolio .
 Not very specific imo

2. What isxxx's asset allocation? 

 The overall asset allocation is a moderate allocation. Typically 20- 35 percent in cash . With the remaining portion in equities and
     closed end bond funds. The equity trading takes place in the IRA accounts for tax efficiency. The Taxable accounts are passively
     managed to avoid short term capital gains. Of the  65-75 percent invested in equities there is about 10-20 percent Fixed income or
     stocks with high yields.

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

4. What percentage of xxx's 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?

 2014 there were about 188 trades which was less than xx percent of the total portfolio or approx. 9,500.

This seems INSANE TO ME. Does this amount of trading constitute CHURNING?

6. What is her total return for 2014? 2013? 2012?
 2012 net return 12 percent. ( This includes xxxwithdrawn)
    2013 net return 14 percent ( This includes xxxx withdrawn)
    2014 net return 6  percent ( This includes xxx


irene paul said...

Sadly, I cannot help with this dilemma.
However I just want to say a comment about your last post- you must be very proud of your daughter! And Kudos to you for maintaining and developing her language skills. Its a gift that she will be able to pass on!!! Speaking different languages opens so many doors and the person grows.

SewingLibrarian said...

I read your blog to my husband. He says, get an accountant and get a lawyer. And get the money away from this broker. In my opinion, 188 trades in one year is too many! By the way, have you ever seen a monthly statement? Good luck.

Kathy Niederkorn said...

I second sewing librarian. Get him audited ASAP. An honest broker would welcome and audit, a scammer wouldn't.

Seattle Sews said...

I'm the one who works for a financial planner. I am qualified to make recommendations for portfolios though I don't do it professionally and won't here. The broker answered the questions quite well-if one understands the terminology.

The returns don't seem bad, either, although I can't say for sure without seeing the contents of the portfolio.

Having said the good news, the bad news is that the questions he didn't answer are cause to move the money. The number of trades are cause to move the money. But don't flee to one who isn't a fiduciary. And if you go to someone else, there will be either commissions to pay or, for a fee-only advisor, there will be high hourly fees or they will charge a percent of assets under management, usually 1% for 1 million or more or higher percent for less than 1 million.

Ronald Hough said...

University Accounting Instructor lending a helping hand

After my wife read your blog she asked me my opinion about your situation

a. Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIAA–CREF) is a Fortune 100 financial services organization that is the leading retirement provider for people who work in the academic, research, medical and cultural fields. TIAA–CREF serves 3.9 million active and retired employees participating at more than 15,000 institutions and has $2,667 billion[2] in combined assets under management (as of August 1, 2014).
2. What is asset allocation
a. Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame.[1]
3. 2014 there were about 188 trades which was less than xx percent of the total portfolio or approx. 9,500.
a. Total portfolio is in reference to whose portfolio
b. Each trade the broker receives a commission
i. Just to put this into perspective: if a broker fee of just $20 then the total broker fees for the 188 trades would $3,760.

Personal experience:
A university student of mine asked me to help explain her father’s broker’s financial statements – the short story: the father’s account beginning balance was 130,000 and when I reviewed the account for the first time, the last statement showed a balance of just under 7,000 which is a decline of 95% of his portfolio - note: the father never withdrew any funds from the brokerage account.

Depending on the state there may be a law that protects the elderly against this type of financial abuse

My suggestions:
1. I would seek an Attorney/CPA
2. Consider asking the Attorney about contacting the FTC link pertaining to “FTC complaint assistant”
a. The web link:

Frugal Scholar said...

@Irene--Thanks so much! Sadly, she doesn't know Serbian. And after many years of French study, she doesn't know much French. Language teaching in the US is ver poor--at least here (in a state proud of its French heritage). Go figure!

@SL--Thanks for your expert opinion. I have to tread carefully. My mother likes the guy and he's very manipulative. He is now going to do her taxes also. I'm supposed to be getting sttements--but I don't think he has any legal obligation to send them.

@KN--BTW, I knew someone in college w/ your last name--fellow named Mark. Now around 60 y.o. As above, my mother would have to choose to initiate something.

@SSews--I think the guy is doing trades to get up to a set percentage of the portfolio. Hopefully, the portfolio is what he claims.

@RH--Thanks--I myself have TIAA. My mother's TIAA was originally my father's account from his years of teaching. The broker talked my mother into putting the account under his control a few years ago. Formerly, half was under his control and the TIAA was separate. Not sure what the holdings are in the TIAA. Broker has right to make trades without consulting my mother. Broker's fees for 188 trades were about $10,000 last year.

Typing these responses makes me more terrified than I was previous!