Need an Excuse to Call a Client? Think Enron

Following the downfall of what was the nation's seventh-largest company and the demise of the 401(k) assets of its employees, there's good reason to phone investors. Diversification. We've been proactive if a client has too much in a company stock it shouldn't be more than 5 percent of their whole net worth, says Louis Stanasolovich, president of Legend Financial Advisors in Pittsburgh. It's a message

Following the downfall of what was the nation's seventh-largest company and the demise of the 401(k) assets of its employees, there's good reason to phone investors. Diversification.

“We've been proactive if a client has too much in a company stock — it shouldn't be more than 5 percent of their whole net worth,” says Louis Stanasolovich, president of Legend Financial Advisors in Pittsburgh.

It's a message many brokers want to bring home. One Pru rep says, “hopefully, companies will be more willing to do educational seminars for their employees, and take some liability off of [the client].”

Changing a client's portfolio isn't always easy. For one thing, the capital gains tax hit can be painful. Still, Stanasolovich says, “a 20 percent [tax] loss is better than an 80 percent or 100 percent loss.”

Legislation will likely soon be introduced in Congress to offer employees more protection, but even that won't overcome the problem of lockups during quiet periods. For now, though, brokers say they're trying to shield their clients from an Enron-type disaster by encouraging diversification.

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