No Different Than Car Salesmen

So Paul met Victoria getting their hair cut in a Grove salon -- probably in the late 80s.  She was nice and smart and worked for a brokerage house, and Paul started doing business with her, and then referred me.

Over the years, she became the main financial adviser to Wifey and the Ds and me, though I would never trust any one person with our money, and as I made more, opened other accounts as well.

In December, we had out usual end of the year lunch with Victoria, and she told her her company now required all accounts to be switched to "managed" status -- meaning you pay an annual fee in exchange for expert advise, and in return whenever you made a trade, it was free.  No thanks -- I said -- I had another fellow, Pat, already earning a fee for that, and, frankly, I knew Victoria was essentially just a saleswoman for her company -- recommending buys and sells according to the bonus plans offered from company headquarters.

But something was worse.  The management fee, she said, was over 3% per year.  When I balked, she said, ok, she could go to 1%.  As supposed long time "friends," this soured us, especially Wifey, who naively thought we'd get treatment better than folks "off the street" since we had done business  for nearly three decades.

I switched my accounts to a discount house, and we tried to do the same with the Ds accounts, but then Bank of America made it absurdly tough.  They couldn't deal with the fact that D2 had two separate addresses: NYC, which she considers her long time but temporary home, and the 305, which she considers her permanent one.

So, in frustration, I told the Ds to just keep their accounts with Victoria, and I would over see them.

Last week, D1 met with Victoria, fiance in tow.  They explained that they were concerned about market volatility, and planned to buy a house in a year, and maybe the portfolio should be changed.  Victoria suggested some sales and purchases, and D1 thought these would be presented to her in an email and I could weigh in.  Not so fast, or rather, yes so fast.  I received confirmation that more than 15% of D1's stock was sold, including companies I thought she should have kept, like GE, and FPL, and Coca Cola.

And the worst part was the HUGE commissions -- equal to about 1/3 of the pay of my first job!

So I emailed Victoria, and followed with a call, saying that there had been a miscommunication, and please just cancel the transactions -- I noticed they weren't due to settle for another two days.

Of course, she replied, as long time customers, I want to keep you happy.  Ha. As if!  She essentially said -- sucks to be you -- I did what D1 asked, I will NOT reverse the transactions, and besides -- I TOLD you you could have switched to the management model, and the commissions would have been included.

So, now the Ds will do what I should have insisted they do last December -- switch to a discount broker.  The ones I started searching online pay nice "welcome" bonuses, and I will then take over the accounts for them -- I basically check them all the time, anyway.

Wifey loves to quote Maya Angelou -- listen when people talk, they'll tell you who they are.  We listened last December when Victoria revealed who she was -- I only really half listened.

Financial planners truly ARE the car salesmen of our time, for people with some money to invest.

One of my life heroes, Warren Buffet, said the same thing.  He explained that rich people are used to paying more and getting more.  A rich guy pays $1000 for a first class ticket while a regular guy flies for $299, and the rich guy correctly expects he'll get the bigger seat and better food.  Rich people assume the same about investing -- if they pay more for brokers, or "private bankers," or, worst of all, hedge fund managers, they assume they'll get much huger investment returns.

The problem is, as the Omaha Oracle points, out -- it doesn't work.  It'v VERY tough to beat the stock market -- better to simply go with index funds than try to pick stocks.

So -- lesson learned, finally.  The Ds will switch, and it'll be adios, in total, to Victoria.  I assume she's happy to kiss us off, anyway.  A few months ago, one of Wifey asked me about referring someone to her.  A neighbor's husband died, and the new widow needed help.  I would have referred her to Pat, but she felt more comfortable with a woman.  So I sent her to Victoria, and excitedly told Victoria a widow with an account worth millions would be calling her.

The friend reported to Wifey that they spoke briefly, and Victoria never followed up, so she assumed she really didn't want her business too much.  When I'm offered a case -- I GO for it.  I guess Victoria has a lot of very wealthy clients, and doesn't need to mess with mere millionaires any more.

Of course, ALL of this is a very nice kind of problem to have ---RWPP, as the Ds call them -- rich white peoples' problems.  I never for a second forget that.  I also need to remember to follow the wisdom of the late, great, Jerry Garcia, and his writing buddy Robert Hunter: cherish well your thoughts, keep a tight grip on your booze...