Monday, March 13, 2017

Fiduciary Advice From Auntie Inga

[“Let Inga Tell You,” La Jolla Light, published March 15, 2017] ©2017
As you’ve probably been reading, the fiduciary rule – the one that says that financial advisors have to put the client’s interests first – may not go into effect in April after all. A recent article in US News reported that non-fiduciary advice costs Americans $17 billion a year.  And my response is: only $17 billion?
Welcome to Inga’s School of Fiduciary Failures. I’ve never had a single piece of good financial advice from a broker or a bank. You’d think that just once somebody would have sold me a product that inadvertently made money not just for them, but for me too.  But nope! Even in up years when people were routinely making 10-15%, I had investments that were losing that much.
In 1984, a year after becoming single, I invested a $6,000 inheritance with a broker at a downtown La Jolla brokerage with the hope of buying a new (used) car in two years. He invested it all into international currency bond funds. I was lucky to get $3,000 back. Important lessons: (1) Never ever invest in vehicles you don’t understand (2) do not buy investments from someone you’re dating.  (2) may in fact be even more important than (1).
My father always had a stock broker. People in my generation still think of it as a respectable profession. But we would be wrong. Now that there are virtually no more company pensions, we’ve all had to become investors, making our own retirement fund decisions.  We’re basically roadkill for the vultures who populate this industry.
After the brokerage fiasco, I tried to get my investment advice from “financial counselors” at my bank. But the turnover of those folks was higher than the swing shift at Jack in the Box. It didn’t help that my banks kept folding (the one on Pearl where the mattress store is now went down for fraud) or being swallowed up by bigger banks (all the rest of them).
At one of my myriad ex-banks (where US Bank is now) I took their free Finance for Women course which came with a complimentary financial consultation afterwards. I showed up with my check for $1,000 and said that after taking the course, I had targeted a particular fund that I thought suited my financial goals. Oh, no, says the investment counselor, she’d like to suggest a much better fund for me from the Pacific group of funds. Turns out that the ONLY funds they sold were Pacific Funds which obviously were hugely commission-driven for them. I’m embarrassed to report (I am such a slow learner) that I allowed myself to be convinced that the Pacific fund was the better investment, a sentiment I did not share a year later when it was worth $800 (in an up market!) and the investment lady was long gone.  (Soon after, so was the bank.) 
When we got a home equity loan to remodel our kitchen at the big red brick bank on Girard, their investment advisor attempted to get us to put our investments “under the umbrella” of their bank so they could “manage” them for us.  “Bwaaahahaha,” I said.  
I should note that along the way, I have had two excellent sources of financial advice. I had three dates with a really seedy boiler room guy.  (Those are the guys still swimming around the dating pool when you suddenly find yourself divorced at 35.)  No background in finance required in his biz. Arrest record OK. His company targeted mid-westerners who would send back a card from some publication where this company heavily advertised. The investments were total crap; the boiler room guy said they made 40% on every deal.  Why doesn’t word get around? I asked.  Because people only brag about making money, not losing it, he said.  Thank you, seedy boiler room guy.   
My second and definitely best source of financial advice was, of course, my second husband Olof.  Olof, who has always done his own investing, was horrified at the “investment” advice I had received. He convinced me that I could read a prospectus as well as anyone (a subject strangely absent in the Finance for Women course).  More to the point, the advantage I had over an “investment advisor” was that I was putting myself first in the profit equation. At my worst, I did better than I had done with “professional” advice.
I don’t want to suggest that all financial advisors should be painted with the same brush. In the absence of Olof, I would totally trust my financial advisor neighbor Bob but only because Bob knows me really really well. He is not confused that if he churned my account, his cruelly dismembered remains would be found in the ashes of his house. And that’s really the most important lesson I’ve learned in all this: whoever manages your money should be clear on your definition of “fiduciary.”


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