NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

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NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by abuss368 » Sat Aug 25, 2018 6:13 pm

Bogleheads -

I found this story from the New York Times unfortunate and startling:

https://www.nytimes.com/2018/08/24/busi ... ement.html

Best.
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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by GenXer » Sat Aug 25, 2018 7:13 pm

Thanks for posting this unsettling article. Definitely food for thought. Makes me wonder how many people have no idea what's happening to their or their parents' accounts. If the broker hadn't been so greedy, who knows whether the daughter would have begun her inquiries.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Ron Scott » Sat Aug 25, 2018 7:24 pm

It is disgraceful and there does not appear to be much interest in reigning this kind of behavior in. They should all rot.

I took over Mom's finances this year and while I have no story like that one I'm glad I did.
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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Nate79 » Sat Aug 25, 2018 7:43 pm

Crooks. Just a bunch of crooked advisors.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by gd » Sat Aug 25, 2018 8:05 pm

The most curious part of the story:
"Mr. Rahn, who still works at J.P. Morgan"

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by nedsaid » Sat Aug 25, 2018 8:22 pm

You never, ever should give an investment broker discretionary authority over an investment account. Clearly the broker in this article was doing good old fashioned churning, performing many trades with the sole purpose of generating commissions. This man took advantage of his elderly client.

If you have an Assets Under Management agreement with an investment firm, there should be an Investment Policy Statement on file. Furthermore, there should be a clear understanding of the fees that are involved with such an arrangement.

Be careful out there.
A fool and his money are good for business.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by desafinado » Sat Aug 25, 2018 9:28 pm

Another risk with a financial advisor arrangement is continuity risk. I'm dealing with this now - my parents have a financial advisor who they are happy with and is planning on retiring in the next few years. The current financial advisor is broadly fine aside from the 1% AUM fee, but I have no idea what they'll end up with if he sells his book of business to someone else. Hopefully I can figure out a good way to have the "hey, maybe you can just move everything to a large institution like vanguard" conversation with them when that's imminent.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Beat The Street » Sat Aug 25, 2018 9:38 pm

nedsaid wrote:
Sat Aug 25, 2018 8:22 pm
You never, ever should give an investment broker discretionary authority over an investment account. Clearly the broker in this article was doing good old fashioned churning, performing many trades with the sole purpose of generating commissions. This man took advantage of his elderly client.

If you have an Assets Under Management agreement with an investment firm, there should be an Investment Policy Statement on file. Furthermore, there should be a clear understanding of the fees that are involved with such an arrangement.

Be careful out there.
Disagree, many fee only advisors operate on a discretionary basis. The problem was this advisor did not have discretionary authority yet acted with discretion in a commission based account. He marked the trades as unsolicited.
“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.” -Taleb

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by nedsaid » Sat Aug 25, 2018 9:58 pm

Beat The Street wrote:
Sat Aug 25, 2018 9:38 pm
nedsaid wrote:
Sat Aug 25, 2018 8:22 pm
You never, ever should give an investment broker discretionary authority over an investment account. Clearly the broker in this article was doing good old fashioned churning, performing many trades with the sole purpose of generating commissions. This man took advantage of his elderly client.

If you have an Assets Under Management agreement with an investment firm, there should be an Investment Policy Statement on file. Furthermore, there should be a clear understanding of the fees that are involved with such an arrangement.

Be careful out there.
Disagree, many fee only advisors operate on a discretionary basis. The problem was this advisor did not have discretionary authority yet acted with discretion in a commission based account. He marked the trades as unsolicited.
Well, clearly if you have an Assets Under Management arrangement with an advisor, you are paying him to manage your portfolio, thus he has to have authority to manage the account. This is not, however, carte blanche to just trade at will. There should be an Investment Policy Statement and a clear agreement between client and advisor about what is involved. At a minimum, the advisor needs to rebalance the investments. An advisor could also sell an investment in order to replace it with a better one. But again, there should be objective criteria for making these kind of changes.

You are probably right about this case, I probably didn't read the article closely enough. I saw where the daughter trusted the broker because her father had. This implied to me pretty strongly that she had given him authority to manage the account. I was warning investors to not give up control of their accounts unless they are under an Assets Under Management agreement. In this case, the advisor was commissioned and was thus incentivized to churn the account. I don't believe that managing assets involves excessive trading.
A fool and his money are good for business.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Helo80 » Sun Aug 26, 2018 9:52 am

The "undisclosed settlement fee" is likely built into JP Morgan's cost of doing business budget. Invariably, these advisers and their management branch go home and sleep soundly every night. It kind of makes you want to tell your local Edward Jones and Northwestern Mutual advisers that they can go... (do something bad)...

Undoubtedly, there are other clients within the firm that are victim to the same shenanigans.

Disgusting all the way around...

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Helo80 » Sun Aug 26, 2018 9:55 am

Beat The Street wrote:
Sat Aug 25, 2018 9:38 pm
Disagree, many fee only advisors operate on a discretionary basis. The problem was this advisor did not have discretionary authority yet acted with discretion in a commission based account. He marked the trades as unsolicited.

I am sure for JP Morgan's internal general counsel, every single phone call, email, fax, etc. into and out of the building is recorded. If at very least, the metadata.... (to/from number and duration).

It would be interesting to see what turns up on discovery. My guess is that JP Morgan's quick move to an "undisclosed" settlement that things were not looking hot... and I'm sure the settlement has "this is by no means an admission of guilt" written 100x throughout the entire settlement packet.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Youndo » Sun Aug 26, 2018 2:57 pm

I'm sure most of you know about this valuable free resource to check on financial advisors' "shenanigans", but just as a reminder, here it is. I checked on the advisor from this great NYT article and it looks like he's still working in the field, out in Southern California. Beware!

https://brokercheck.finra.org/

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Fallible » Sun Aug 26, 2018 7:49 pm

It’s all so sadly familiar and there are so many, many more cases like this out there that will never surface.

Even more distressing, look what it took for this broker to get caught: an almost chance discovery by the client's daughter of “unusual” account activity and a comparison to her own account; the daughter’s having professional skills needed to sift through it all, persistence to contact the broker, his manager and the manager’s manager, and the smarts and wherewithal to hire a lawyer and work with a forensic consultant. How many clients have offspring that can right these wrongs? Probably nobody knows better than the broker, his manager, the manager’s manager, and FINRA.

Thanks for posting the article.
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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by daveydoo » Sun Aug 26, 2018 8:11 pm

Nate79 wrote:
Sat Aug 25, 2018 7:43 pm
Crooks. Just a bunch of crooked advisors.
Having been through this now after two parents, what impressed me most at every step of the way was the mind-boggling opportunities for theft and abuse. Advisor fees just come right off the top. They have complete authority. Different parties have a thumb in the pie and plot with each other behind your back. Saw evidence of this when we jettisoned one sleazy estate attorney and the document/correspondence file that was passed along had not been completely, uh, culled :D "If you do x, I'm gonna need a piece of this." Not illegal -- just really slimy. Even as executor, I'd get checks all the time that I could have just made disappear.

If you told me that 20% of all estate assets went missing in the industry sofa-cushions, I would not be surprised.
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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by elderwise » Mon Aug 27, 2018 2:41 pm

Youndo wrote:
Sun Aug 26, 2018 2:57 pm
I'm sure most of you know about this valuable free resource to check on financial advisors' "shenanigans", but just as a reminder, here it is. I checked on the advisor from this great NYT article and it looks like he's still working in the field, out in Southern California. Beware!

https://brokercheck.finra.org/
If we both checked the same guy, and assuming ( i guess so based on the dates - we can see the settlement amount) i could be wrong though if they are not the same person:

Allegations
Customer alleges that the number of transactions was unauthorized. Activity dates 08/2017-09/2017.
Damage Amount Requested
$5,000.00
Settlement Amount
$64,590.00

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by NotWhoYouThink » Mon Aug 27, 2018 3:23 pm

Sometimes the problems crop up when the FA retires, quits, or get promoted. An account that was managed ethically for decades might suddenly start seeing churn.

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Daughter discovers JP Morgan Churning Parents' retirement account

Post by CedarWaxWing » Sun Sep 02, 2018 1:57 pm

[Thread merged into here, see below. --admin LadyGeek]

As an FYI.

It appears that we are still to in the Wild West when it comes to personal investing through Chase and other so called "financial advisors". I would have thought this person should have had a criminal prosecution.

NYTimes:

In one year 2/3 of the funds were sold in small batches and then repurchased. This resulted in about 128 K in commissions on an account that was worth 1.3 million at the beginning of that year. This was at JP Morgan Chase. The most (all?) the trades were listed as initiated by the customer (designated at "unsolicited")

Her mother was 84 and had severe Alzheimer’s, so had to move into a care facility where the father, who had had two strokes, already lived.

https://www.nytimes.com/2018/08/24/busi ... ement.html


Reddit:

https://www.reddit.com/r/financialindep ... ts_broker/

It seems that this broker had already had disciplinary actions from the feds for prior problems on other accounts, and also had a huge debt problem.
It also appeared that Chase still has this person employed.

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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by columbia » Sun Sep 02, 2018 2:22 pm

Independent of the graft described above, the financial services industry relies on people believing that they have some special wisdom unavailable to Joe Sixpack. I wince every time I hear my boss mention going to a meeting with his Edward Jones advisor. I can’t imagine the drag that has and will have on his lifetime returns.

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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by DavidRoseMountain » Sun Sep 02, 2018 2:27 pm

Unconscionable that Chase would still keep this person employed.

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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by mouses » Sun Sep 02, 2018 2:34 pm

I am wondering if confidentiality clauses ought to be prohibited.

It takes a special type of scum to prey on the vulnerable, and an especially scummy company to continue to employ that individual.

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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by aspirit » Sun Sep 02, 2018 2:57 pm

Dr. William Bernstein’s suggestion?
“Act as if every broker, insurance salesman, mutual fund salesperson, and financial advisor you encounter is a hardened criminal.”

Looks like this one has created another revenue stream for their employer Chase, that is the question.
How much was the bank profiteering ?

They might get fined a single digit % of the profit, no big deal.
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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by daveydoo » Sun Sep 02, 2018 2:59 pm

Headline: "Dog bites man"
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Re: Daughter discovers JP Morgan Churning Parents' retirement account

Post by Gnirk » Sun Sep 02, 2018 3:40 pm

Similar thing happened to my mom, who was in the early stage of ALzheimer's. Her long-time advisor who was with WAMU, whom mom only used to purchase individual muni bonds, and maintain a muni ladder (which was appropriate for her) convinced my mom to transfer all of her Vanguard funds to WAMU. The advisor then immediately sold the Vanguard funds, and invested the money into WAMU mutual funds, 5% front-end load, high management fees, etc. And she always marked them as "unsolicited".

Needless to say, I found all this out after the fact, after I took over as DPOA. The advisor also churned some of those funds.I was familiar with my mom's long-time investing style: Buy only no-load funds, and then buy-and-hold. Her bond portion was always an individual muni bond ladder, of about $1 million. I wrote a letter to management, who turned it over to compliance. They found no issue because the trades were "unsolicited", and the advisor said that she was trying to harvest gains for my mom. In reality, she had initiated and convinced my mom to "consolidate" her investments with WAMU, which my mom would never have agreed to if she had all her faculties. My mom was far too compromised to be able to initiate anything like that, and would never knowingly have agreed to buy any funds with any kind of load. She had always preached to me that you only buy no-load mutual funds. The only good thing was that somehow she had missed transferring the Vanguard Health Care fund, which stayed with Vanguard and grew, and grew, and grew.

I immediately transferred all her investments to Vanguard, and reinvested in Vanguard funds.
BTW, this was all in TAXABLE accounts, and the sales triggered capital gains taxes.

The advisor retired soon afterward.

There is a special place in hell for these people.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by LadyGeek » Sun Sep 02, 2018 6:15 pm

I merged CedarWaxWing's thread into the on-going discussion.
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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by Minot » Sun Sep 02, 2018 7:02 pm

elderwise wrote:
Mon Aug 27, 2018 2:41 pm
Youndo wrote:
Sun Aug 26, 2018 2:57 pm
I'm sure most of you know about this valuable free resource to check on financial advisors' "shenanigans", but just as a reminder, here it is. I checked on the advisor from this great NYT article and it looks like he's still working in the field, out in Southern California. Beware!

https://brokercheck.finra.org/
If we both checked the same guy, and assuming ( i guess so based on the dates - we can see the settlement amount) i could be wrong though if they are not the same person:

Allegations
Customer alleges that the number of transactions was unauthorized. Activity dates 08/2017-09/2017.
Damage Amount Requested
$5,000.00
Settlement Amount
$64,590.00
I think you've got the right broker, but the wrong customer. The item you're showing was settled in 11/2017 and the NYT article says Ms Dewar's case was settled in June. I'm guessing that non-disclosed settlements don't show up in Finra, which would be an important consideration to these firms.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by cdu7 » Sun Sep 02, 2018 7:15 pm

What’s disturbing to me is that Chase didn’t seem to fire or even reprimand the advisor; sounds like they just gave a private payout to the woman and essentially with a wink and a nod told the advisor to keep ripping off his other clients.

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Re: NYT - Caring for Aging Parents, With an Eye on the Broker Handling Their Savings

Post by elderwise » Wed Sep 05, 2018 8:17 am

cdu7 wrote:
Sun Sep 02, 2018 7:15 pm
What’s disturbing to me is that Chase didn’t seem to fire or even reprimand the advisor; sounds like they just gave a private payout to the woman and essentially with a wink and a nod told the advisor to keep ripping off his other clients.
this indeed is very shocking, considering I bank with chase (not investment) and I am sure many others here do.

Just pathetic of them keeping this person employed, how is it even justifiable? w

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