Worst Thing You've Seen By Another Broker

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Jun 22, 2007 7:05 pm

This could be interesting!


Yesterday we had a client in his mid-30's come in to talk about moving his $150,000 IRA to us.  We look at his statement and it is obvious to us that it is in an annuity.  He has had several 401(k) rollovers before starting his own business and they all went into the annuity.  He said when he met with the guy who did this, all he wanted was an IRA.  He was never told anything about an annuity.  Most of it is still in surrender as it was a 6 year product.


Even worse is that his wife's $10,000 IRA was also put into an annuity.


What are the worst things you have seen done by another broker?

Jun 22, 2007 7:18 pm

This guy came in the other day had an Edward Jones account, he came in saying he just bought all these funds last year and now his Eddie Jones guy is wanting him to get into some different funds.  So, I take a look at his statement (classic Ed Jones style) this guy has $400,000 in 4 different American Fund A-shares(classic Ed Jones).  I run the cusip on them and all of the top 10 holdings are exactly the same and the weights are the same.  On top of being anti-diversified the guy was hit with a 5.35% up-front and now his broker wants to pull them out a year later and hit him up for another front-load.  I quickly got the ACAT and explained to him what was going on.  How are these guys still in business?????????

Jun 22, 2007 7:43 pm

Have a client who has a pooled profit sharing plan.  The part I manage is in funds, etf, stocks, bonds  and a cash account, all with liquidity since at any time they may have to take some of the pooled funds for retiring employees.  They have about 20 employees


Their other broker (before he disappeared) put over 750k (about half of their total plan) into two equity indexed annuities that have to be annuitized to get the money out of the contracts, using the owners as the annuitants and the PS Plan as owner and beneficary.  A totally inappropriate product for a POOLED PROFIT SHARING PLAN.  Pocketing a cool 10 to 12 % commission by the way. 


Now that the contracts have reached the end of the surrender period we have annuitized over a 10 year period so they can transfer the money from the annuity to their brokerage account where we can invest at a better return and have the necessary liquidity.


Needless to say the customers were p/o ed when they found out that they had given up access to the money that didn't really even belong to them.

Jun 22, 2007 7:53 pm

wallstreeter-in my area of the country, I would say 50% of all IRA's I see are annuities.  Pretty sorry, but I see it all the time.  I have seen some ROTH annuities lately as well.

Jun 22, 2007 7:56 pm
wallstreeter:

This could be interesting!


Yesterday we had a client in his mid-30's come in to talk about moving his $150,000 IRA to us.  We look at his statement and it is obvious to us that it is in an annuity.  He has had several 401(k) rollovers before starting his own business and they all went into the annuity.  He said when he met with the guy who did this, all he wanted was an IRA.  He was never told anything about an annuity.  Most of it is still in surrender as it was a 6 year product.


Even worse is that his wife's $10,000 IRA was also put into an annuity.


What are the worst things you have seen done by another broker?



First, he's not your client. Second, you're pissed that you can't play with his money. Did you really think that noone would see through your bullsh*t?

Jun 22, 2007 8:09 pm

Worst thing was done by a guy in my office.  Client had all B shares from various families, about 1-2 years old.  Guy sells all B shares, client pays the CDSC, and then puts him into C shares so he can annuitize his business.

Jun 22, 2007 8:09 pm
BullBroker:

This guy came in the other day had an Edward Jones account, he came in saying he just bought all these funds last year and now his Eddie Jones guy is wanting him to get into some different funds.  So, I take a look at his statement (classic Ed Jones style) this guy has $400,000 in 4 different American Fund A-shares(classic Ed Jones).  I run the cusip on them and all of the top 10 holdings are exactly the same and the weights are the same.  On top of being anti-diversified the guy was hit with a 5.35% up-front and now his broker wants to pull them out a year later and hit him up for another front-load.  I quickly got the ACAT and explained to him what was going on.  How are these guys still in business?????????


Care to name the 4 funds so we can see if you're lying? Did you lie to the guy about only paying 2.5% up front? What are YOU going to do? Churn him out of the funds? Add a fee to what he already owns?


I think THIS may be the worst thing I've ever seen someone do to a client!

Jun 22, 2007 8:13 pm

Gotta agree with BH on this one.  American funds are pretty good about overlap.  There is a nice overlap chart they put out and I think the worst two funds have a 34% overlap.  Some have 1-2% overlap.



I think BullBroker is fibbing.

Jun 22, 2007 8:21 pm

Worse thing I see is what clients do to themselves without broker's help.

Jun 22, 2007 8:22 pm
Dust Bunny:

Have a client who has a pooled profit sharing plan.  The part I manage is in funds, etf, stocks, bonds  and a cash account, all with liquidity since at any time they may have to take some of the pooled funds for retiring employees.  They have about 20 employees


Their other broker (before he disappeared) put over 750k (about half of their total plan) into two equity indexed annuities that have to be annuitized to get the money out of the contracts, using the owners as the annuitants and the PS Plan as owner and beneficary.  A totally inappropriate product for a POOLED PROFIT SHARING PLAN.  Pocketing a cool 10 to 12 % commission by the way. 


Now that the contracts have reached the end of the surrender period we have annuitized over a 10 year period so they can transfer the money from the annuity to their brokerage account where we can invest at a better return and have the necessary liquidity.


Needless to say the customers were p/o ed when they found out that they had given up access to the money that didn't really even belong to them.



YOu probably screwed them up Babs. Annuities that have forced annuitization don't have surrender periods. Which one are you lying about? Annuitization or the 10 year surrender period. Duh, nice job.

Jun 22, 2007 8:29 pm

I'll tell you what I just did.  This old lady had a house fully paid for, worth about $250,000


I sold her a reverse mortgage.


Then I took the proceeds and put it in an 18 year Equity Index annuity.


We're taking out about 5% per year for her to lease a brand new Lexus.


She's taking another 3% to pay for dues at the local country club for her junky grandson who is unemployed.


You guys think this is okay?

Jun 22, 2007 8:40 pm

Seriously - do they do worse without us? - As in bad mistakes. Or do they fair worse with Free Lunch?


At least with bad brokers they seem to figure out they made a poor choice.


Jun 22, 2007 8:44 pm

I was kidding.  I don't think it could get much worse than that.

Jun 22, 2007 9:31 pm
wallstreeter:

Yesterday we had a client in his mid-30's come in to talk about moving his $150,000 IRA to us.  We look at his statement and it is obvious to us that it is in an annuity.  He said when he met with the guy who did this, all he wanted was an IRA.  He was never told anything about an annuity.  Most of it is still in surrender as it was a 6 year product. Even worse is that his wife's $10,000 IRA was also put into an annuity.


If this is the worst thing you've ever seen a broker do, then you must not have been in the business long . 

Jun 22, 2007 9:44 pm
BullBroker:

I take a look at his statement, this guy has $400,000 in 4 different American Fund A-shares....the guy was hit with a 5.35% up-front... 

  You do understand that A shares in one fund family, assuming mutual funds are the appropriate investment, would be the absolutely correct thing for the client with that amount to invest? 


If the investment was made a year ago, there is not a firm in the US where the client wouldn't have received the breakpoint automatically, Eddie Jones or no.  Just checked, the client only paid 2.5% on that amount invested. 


BullBroker:

 I run the cusip on them and all of the top 10 holdings are exactly the same and the weights are the same.

  How about sharing the names of these 4 funds?  Sure American has a lot of overlap, but I'm guessing you WAY overstated.


BullBroker:

How are these guys still in business?????????

  That's what I'm wondering about you after I read this post.  Care to enlighten us as to the swell advice you gave him after the ACAT?

Jun 22, 2007 10:40 pm
FreeLunch:

I'll tell you what I just did.  This old lady had a house fully paid for, worth about $250,000


I sold her a reverse mortgage.


Then I took the proceeds and put it in an 18 year Equity Index annuity.


We're taking out about 5% per year for her to lease a brand new Lexus.


She's taking another 3% to pay for dues at the local country club for her junky grandson who is unemployed.


You guys think this is okay?



You pretty much HAD to do that with your trailing 12 in the shambles that it is. Do whatever you have to do to keep Wachovia from tossing you out when they find out about you. They don't play with guys like you, unlike A.G. Edwards.

Jun 22, 2007 11:53 pm

That was a good one Bobby. 


Go sell some proprietary Annuities to some unsuspecting victims. 


And I'm just wondering, w.t.f do you do visiting the Rookie & Trainee sections anyway?  You aren't a rookie and you never offer advice....


U R A loser


I wrote that simply to see what you would say.  I love provoking your silly uneducated repetitive unconstructive criticism.  I can't wait to do some more.


Jun 23, 2007 12:12 am
Ferris Bueller:

Gotta agree with BH on this one.  American funds are pretty good about overlap.  There is a nice overlap chart they put out and I think the worst two funds have a 34% overlap.  Some have 1-2% overlap.



I think BullBroker is fibbing.



He's not fibbing Ferris.  He's a newb who doesn't realize just how ignorant he is.  I mean, how else can you explain someone who doesn't understand that if you're buying A-shares you have an ethical obligation to emphasize one fund family to get breakpoints?

Jun 23, 2007 12:19 am

I've never understood why overlap is a bad thing.


If two of your funds are overweight, say.....MO


What does that say about MO?  Or GOOG?


I mean, hell...If those are "the best" stocks in the opinion of the managers, let them run with it..


I know PLENTY of you disagree with me on this one, but even with a HUGE overlap you'll still never be overweight any 1 stock too much.

Jun 23, 2007 12:25 am
joedabrkr:



He's not fibbing Ferris.  He's a newb
who doesn't realize just how ignorant he is.  I mean, how else can
you explain someone who doesn't understand that if you're buying
A-shares you have an ethical obligation to emphasize one fund family to
get breakpoints?





Stuff I've seen that was bad.



1) New issue closed end funds, Issued at a 5% premium to NAV, now trading at a 10% discount .



2) Various long bonds, that were not appropriate for the clients.



3) Annuities of all sorts and stripes. Annuities are a zero sum game.
If they a profitable for the Insureco they are overpriced for you.



4) B-shares!, which give you the 1% kickback of C-shares, and if you lose the client you get an bonus from the exit fee.



5) Non-public REITs, no liquidity, lag from startup of operations, and questionable management teams/strategies.