No. of Recommendations: 0
About a year ago I decided to open supplemental retirement plans in the US since I now live here. On the advice of a couple of friends, I opened a Traditional IRA account with a broker/financial advisor who works for a big investment firm that shall remain unnamed. Because I didn't know how good she was, or if indeed this would be a good idea at all, I only let her open and manage my IRA and no other account which disappointed her. I became very uneasy because:

1) She bought two funds that seemed to be continuously losing. At some point I was losing more than 10% even though the stock market had gone up. The funds in question were Franklin Growth Class A (FKGRX) and Franklin Rising Dividends Class A (FRDPX).

2) She only called me once a year, although she had said she would call every three months. She said she liked those two funds because we were in a financial crisis and people buy utilities. It is noteworthy that the stock market was up, we are out of the crisis, and the two funds were not utilities at all. She also blamed Obama for everything and said that if the Republicans won, all businesses would start hiring, the economy would boom, and all would be well! I calmly replied to that nonsense by bringing to her attention the real situation with the US and global economy and even told her about the impact of politics on the economic cycle since I happen to be a specialist. She obviously avoided the conversation and rang off.

3) Her mantra had always been that since I am a professor, I don't know finance and she does, and I shouldn't question her since she doesn't question me in my job!!

4) I did not quarrel with her at all and used this past year to a) learn as much as I could about retirement and investment and b) to invest myself in the stock market and self-manage my other retirement accounts. In the 6+ months of 2012, my 403b gained 24%, my stocks went up 25%, and my normal pension went up 8%. On the other hand, my IRA, managed by this professional, went down from 5-12%! During 2013 I've also been doing very well on all counts.

I waited until the two IRA funds would gain somewhat because of dividends etc., and as soon as the one year mark approached, transferred my money into a self-managed account at another financial firm that shall also remain unnamed. The fee she charged me for the transfer was $135. As soon as I began to manage the funds myself, they went up. In the meantime, I discovered that the two Franklin funds had actually gone up in the year this woman managed by money by about 10.5%, but she had chosen heavy load mutual funds with high fees etc. and with not such a great rating. At no point had she told me anything about how she gets paid (she was vague on this point), at no point did she consult me before buying the funds, and I never knew about the fees. The only correspondence I received from her were the statements showing the losses, which I had already seen online, and also her request that I cough up information about how much I am really worth and that I arrange for automatic transfers of funds from my bank account to my IRA for 2013.

The one friend who has been using her for years is very rich and sings her praises, but I don't really believe much of what she says because the numbers don't add up, plus I'm sure the broker "takes care" of her "rich" customers.

My questions to you are these:

1) Can I get her in trouble? I checked her FINRA report after the deed and discovered that a) she had already been investigated in the past for stealing customers from the firm that fired her more than 10 years ago, and b) some clients of hers had filed a complaint against her for doing what she did to me. In their case they lost more than $20,000, and I fortunately only lost a few hundred. At this point, my two funds are up by about 3.2%, which means she took most of my gains.

2) What should my steps be at this point? Would there be a possibility of recovering the losses? Is it worth taking her and her firm to Small Claims Court? And which court? In my state? In her state? In the brokerage's state?

3) Since I've been managing my IRA myself, I put the 2013 contributions to a third mutual fund which is going very well (FSTMX) and am thinking of replacing FKGRX with either VIGRX or VTSAX or VASGX and then replacing FRDPX with VDIGX. What do you guys think about this? Should I wait or should I do it now? Would I be losing a lot of money in fees? Are there any other funds you like more? I will obviously make the decision myself, so no blames there. :)

Any advice and suggestions are most welcome. :)
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.
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.