No. of Recommendations: 0
Original Message
Subject: Stuck with the Wise (Redux)
Author: JamieGuy Date: 1/6/98 12:52:13 AM (ET)

I'm fresh from the "Ask a Foolish Question" board with a piping-hot batch of tasty new questions. To wrap up my
situation: I'm about to join my company's SEP, which is with a dreaded full-service broker. Said broker has kindly
offered to stick me with some wilted mutual funds (or charge me an arm and three legs in stock commissions), but
naturally, I want to do things more Foolishly.

I am in nearly the same situation, except I can't
contribute to the plan. Basically, my employer puts
a certain percentage of my salary
(but on top of the salary)
into this full-service broker run plan. Thus, its all
'extra' money that I never see otherwise.
I'm still free to have my own IRA. That is the
nice feature.

However, this was my first experience with the
supremely Wise, and despite having had Foolish
preparation I was shocked at the arrogance of it all.

I met with
'my' broker when the first contribution was made.
First she asks me what I've been investing in.
I just started investing 1 1/2 years ago, and I told her
about a few of the mutual funds I had been
making monthly contributions to, and the DRIP's
that I was starting. She nearly snickered at my
cute, innocent way of investing (you see, she's
had 15 years of experience so I should just take
her advice - she actually said this!).

They don't sell no-load funds (even for a transaction
fee). She actually laughed at me and said "how would I
make any money if I sold you no-load funds?". Sheesh.
I didn't expect her to get nothing for it, I thought
they might have a fee like Schwab, etc.

So there's no way I can invest in an index fund since
there aren't any loaded index funds. that's what
puzzles me a bit about your SEP. What index fund are
they letting you buy?

She wouldn't even consider buying individual stocks
until I had at least $50,000 in the account.
I asked her what her commission would be and she
gave me some vague ansewer (1 - 5% or something).
SO I didn't press the issue. Next year I will insist.
One of the sleaziest things they do is hide their
fees - there's no document showign what everything
costs, what their commission schedule is, etc. At least
they don't give it to you freely.

So I agreed to put half the money in
her her fund choice, and half in a Dogs of the Dow
UIT. People on the Fool site are pretty down on this
investment vehicle, but it works well in this
situation. While the mutual fund had a 5% load (and, by the way,
its now down 20% for me. Thanks broker-woman!)
and nearly 2% annual expenses.
The UIT charges a 1% load, and 1.75% annual expenses.

So, while not ideal, its better than throwing 5%
down the drain for a sickly-performing mutual fund.

So, while this plan is great in that its all on top
of my salary and I make no contributions, it makes
me shudder to think what I could do with this pot
of money if the SEP was with Schwab or Fidelity and
I could buy whatever I wanted... Instead it
languishes at Condescending Wise Brokers, Inc.

--Justin Paola

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.