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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. :)
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Since it involves so little in terms of actual loss, I wouldn't do anything other than possibly, as in possibly tell her boss. I wouldn't talk with her again, nor would I report her outside of her business. You could be opening a can of worms that would only eat at your time and energy, with little or nothing to show for it. Just my two cents.
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Thanks for your reply. :)

I do not intend to badmouth her online because she'll sue me for defamation. However, I do have the right to file a complaint with FINRA that will stay on her record as a warning to others. However, if she has been violating any rules etc. I would like to know that and I'll see what I may or may not do about this.
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Sarah,

Just transfer the account to a different broker. No lawyers. No calls to supervisors. For a $200 loss, it is not worth a second thought.

One a separate note: If losing $200 is upsetting you, I would not invest in the stock market! Don't go into a fist fight and expect that you won't get a bloody nose. That is part of investing.

In the future, if you go with another broker to manage your funds: If they say they will put everything into just 2 funds, walk away and find another broker.

Why not manage it yourself?

Gene
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Thanks for your reply, Gene. I'm afraid I need to explain it again: :)

I didn't lose $200. I lost a lot more. This was my IRA account. The moment she opened it I was losing 4% in hidden fees. Then there were the hidden fees of the gains which should have been more than $1,000. There were also further hidden fees. I was never consulted. My loss overall because of her was in the hundreds of dollars but close to $1,000. This is money I wouldn't like to lose because of this crook.

Next, I believe I said that I've been self-managing all my accounts for a year, including the IRA as of the last week. And yes, I invest in the stock market, and yes, I have the stomach for it, and yes, my stocks are up 25% overall and my 403b about 24% only in 2012 and for ytd 10.4%. In other words, I chose good mutual funds after researching them, and I believe my strategy for stocks has paid off. I've proved to myself and others that I am more than competent.

My questions about the IRA fiasco are: is there something I can do about this broker? Is there a procedure I can follow? Would there be an outcome if I complain/sue/whatever about her deception? Does anyone have a similar experience and if so, what have you guys done? Has she done something illegal or unprofessional that might get her in trouble?
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SaraW946 writes,

I didn't lose $200. I lost a lot more. This was my IRA account. The moment she opened it I was losing 4% in hidden fees.

Are you sure the fees are hidden? It's likely there were disclosed in the 200 page long prospectus for the mutual funds she put you in. It's very easy for a financial advisor to "cheat" you and stay within the law.

That's why the best advice is to avoid them and manage your assets yourself.

intercst
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Thanks for your input, intercst. I'll check all the literature and other communications I received from the broker. The problem is that she never sent a detailed list of all fees involved, just told me of the minimal yearly fee of the unnamed brokerage firm. I guess that if any of that information is missing, I will be able to base my complaint on that? As I said, even if I get nowhere with this, my complaint will stay on record with FINRA.

I guess I've learned the semi-hard way, since I didn't lose excessive amounts of money, about the evils of brokers. But as I said, I was inexperienced and she took advantage of me, which should be documented somewhere.
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SaraW946 writes,

Thanks for your input, intercst. I'll check all the literature and other communications I received from the broker. The problem is that she never sent a detailed list of all fees involved, just told me of the minimal yearly fee of the unnamed brokerage firm. I guess that if any of that information is missing, I will be able to base my complaint on that? As I said, even if I get nowhere with this, my complaint will stay on record with FINRA.

</snip>


Here's a link to the Summary Prospectus for one of the Franklin Funds you mentioned. It lists a maximum sales charge of 5.75% for the Class A shares.

http://quote.morningstar.com/fund-filing/Summary-Prospectus/...

intercst
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"I waited until the two IRA funds would gain somewhat because of dividends". I am not sure what you mean by this. When there is a distribution (cap gains or dividends) the NAV of the fund goes down, but if you re-invest it stays the same, plus or minus any fluctuation of the day.

Also, you should know that part of any investment adviser's fee comes not just from what you pay directly, but also from some cut of the load. Therefore the adviser has an incentive to put you in a fund with a large load.

Bottom line is to stay away from such people.
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I guess I've learned the semi-hard way about the evils of brokers.
Um, no. You learned about the (how to say this politely??) non-optimal-ness of blindly giving your money to a stranger and hoping they'll make a profit for you.


even if I get nowhere with this, my complaint will stay on record with FINRA.
Which exactly zero people in the whole world will care about. Or even look at.
After all, even *you* didn't research this broker before you gave your money to her. And as somebody already said, all this was undoubtedly clearly spelled out in one of the 100+ page documents that you didn't read.

Drop it.
Get over it.
Put on your big-boy pants and move on.
Stop sweating the small stuff and concentrate on making money.

You got a cheap lesson. A lot of us have learned similar lessons along with a LOT more money than you lost.
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True, however, I am a foreigner, starting a pension fund in a foreign country. Trust me, I could research Europe in a heartbeat. At the time, I didn't know better and trusted a friend. However, if there is a way to do something about this broker, I'd like to know it. So: :)

Thanks for the advice about what I should do. My question is: is there something I can do? Complain, get it on record, potentially get some or all that money back? Go to Small Claims? According to this broker's FINRA report, she settled out of court with her previous job and offered a partial refund to the customers who lost more than $20,000. It is unclear whether she did this with FINRA.

Believe me, now I'm much more literate about all finances American. However, any assistance with the question I just asked will be greatly appreciated.
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Complain,

Anyone can file a complaint.

get it on record,

At best, a record no one will ever look at.

potentially get some or all that money back?

Probably not. Certainly not the losses due to market changes. At best, it would be the direct fees you paid. Which does not include any sales commissions you indirectly paid when purchasing the mutual funds. Those were almost certainly disclosed to you before you purchased the funds.

Go to Small Claims?

If you've got the spare time and filing fees. Still probably no money to you, though.

Brokers and registered representatives are very highly regulated in this country. Virtually all of them follow the letter of the law, allowing them to nickel and dime (and ten and twenty and hundred!!) your account to death quite legally.

If you really want to pursue this, you need to read all of the paperwork you more than likely glanced over when opening this account and identify the specific provision that was violated. Then you can present your complaint or case with the best possible chance of some recovery.

--Peter
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Wonderful, thanks for the info. Yes, I know I won't recover money due to market fluctuations, but I am concerned about the fees and the fact she appears to have taken two thirds of my gains. I am very sure that she did not disclose to me any fees early on. I just opened the account, gave her a check, and a few days later, she sent me a statement listing the funds she bought for me and the balance which was about 4% down. The statement gave only information on the balance and the funds, nothing else in terms of fees, apart from the annual fee for the brokerage, not the broker. Nothing on her compensation. I did read all her statements and, naturally, before doing anything, I will go over all the literature and correspondence that I keep in a neatly organized folder. :)

Whether anyone will read my recorded complaint is up to them. And even partial recovery of fees is important. I am not under the illusion that she'll lose her license as a result of any Quixotic moves on my part. :)
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In my experience, revenge is a dish best not served at all.


P.S. Sounds like you and my mother-in-law have the same financial adviser.
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I'm not discussing revenge here. I posed a number of questions about the situation and am only interested in the partial or full recovery of the exorbitant fees I paid.

I will update this thread if there is any change. Thanks again for all your answers.
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