I would say there’s been a theme to my experiences, and that’s the importance of an advisor taking a comprehensive, holistic view, as well as a fiduciary approach to specific investments. I’ve had both great experiences in that regard and the opposite.
I started investing on my own many years ago, when I was 29, setting up an IRA. I made a lot of good bets, so the portfolio grew. My big problem was that I could never pull the trigger to sell. I was too busy with my own career and raising a family.
In the 1980s, I put the vast majority of my assets in a major discount brokerage—my IRA and a taxable account or two. I was happy with their services, features and functions. But eight years later, I had a problem with my cash management account when they didn’t credit a deposit quickly enough to cover a check and they ended up charging me a fee. I objected, but they refused to give me a refund.
After that, I looked at wealth management firms, but the fees were too high. Then I had a good discussion with the folks at the local office of another discount brokerage firm. I decided to switch to them, but I set up some preconditions. For example, when they transferred my assets, there would be no fees. They put that in writing. And I told them I was interested in an organization that would help me with my selling discipline.
That move has worked out very well. The main portfolio management is done by the central office, and an advisor there is designated as my primary contact for strategy analysis, stock selections and recommendations. Over the past 20 years, there probably have been four advisors I’ve worked with. We schedule quarterly calls, and before the call they send a portfolio report with their recommendations.
I didn’t include my taxable accounts in the advisor program. But when they make recommendations, they analyze the entire portfolio, taxable and not taxable. A financial advisor should do more than just look at stocks, bonds, mutual funds and ETFs, in my opinion. There should be a much more holistic view. For example, about five years ago, one advisor asked to see my homeowners insurance policy. They came back to me and said, “You know, your personal liability coverage is way too low given your assets.” I called up my insurance broker, and he increased my coverage for peanuts. That’s thanks to the insights of an advisor who takes a big picture approach.
Another example: When I turned 66, the question of Social Security came up. The firm had a Social Security benefits expert get on the phone with my wife and me and explain the pros and cons of the spousal benefits program and recent changes to it. We weren’t aware of the details before. And the expert sent me a link to the actual code, highlighting information about the spousal benefit, so if we had trouble when we talked to someone at Social Security, we’d have the exact language and where it was.
But I had the opposite experience after my father-in-law passed away about five years ago. He relied on a wealth advisor at a large money center bank. We didn’t know what was in the accounts until my wife and her brother got access to them. When we reviewed the statements, I was appalled and requested a call with the advisor. He had my father-in-law in outrageously inappropriate investments for an elderly man in his 80s—a variety of munis, including a substantial number of Puerto Rican bonds that were very high risk.
I asked him why he hadn’t invested some of the assets in ETFs, and he said he didn’t believe in ETFs. Clearly that’s because he didn’t make any money off of them. I also assume my father-in-law was sold a lot of Puerto Rican bonds because the bank had inventory they wanted to unload.
We had one conversation and it was very clear this person was not behaving in a fiduciary manner. And the fees were outrageous. So we decided to transfer everything to our current brokerage firm.