I Must Be the Dumbest Financial Person on the Planet

[appelman]

From Wikipedia:

Frequent trading in fee-based accounts is not an example of churning, since no commissions are generated in those transactions. However, the practice of putting clients who trade infrequently into a fee-based brokerage account is known as "reverse churning", since clients are charged fees in accounts with few if any transactions.[1]

[1] http://nysbar.com/blogs/SecuritiesLi...t_w_baird.html

I've got 6-8 clients like the ones described. They all have one thing in common.

At some point in the past they have given their stockbroker a "green light" to invest their money as the broker sees fit. One elderly woman had a 1099-B with 700 transactions, ALL of them trading mutual funds, and a healthy portfolio fee for this "personal service".

If she thinks her broker made all of these transactions "just for her" they musta dribbled her down the hospital floor when she was a bouncing baby. All of these transactions were mandated by the folks upstairs at the brokerage firm and filtered down pro-ratum to each sucker [investor] and purporting to do all this for the sake of the investor.

I compress statements on the Sch D/8948, e-file, then mail in the statements on a transmittal. And I charge an arm and a leg, advising them of their folly and move on.

"The rich man writes the book of law, the poor man must defend
But the highest laws are written on the hearts of honest men" - George M Green

[taxxcpa]

Even the fee-only advisors can take a pretty steep cut from the client's portfolio. If you compare dividends, interest, and capital gains/losses (realized or unrealized) to the fee you will usually find that the advisor's fees exceed the results he achieved for the client. Also, it is highly likely that the results are negative.
I had one client whose $1 million + is down to less than my own somewhat-less-than-Warren Buffet's portfolio.

[DonPriebe]

Kill a tree for diversity

At one point I had a number of accounts with one of the big investment houses (regular taxable, Roth IRA, spouse IRA, etc.) A rep called me on the phone and invited me in to discuss my overall strategy and possible consolidations. Since I was 500 miles from his office, I declined his fine invitation. He then offered to do the analysis and send me his recommendations by mail. It would probably take a week or two. Sure - why not!

The next morning I received his recommendations by overnight mail. He had "analyzed" ONE of my accounts (a small Roth IRA) and split it up into over 100 mutual funds, none of which had over $1,000 allocated to it. That afternoon I received a large cardboard box with the printed prospectuses (prospecti?) for all the funds. He seemed upset that I did not go with his plan after all his hard work for me.

[In fairness, a different rep from the same company called me sometime later and we both had a good laugh about this. My new rep calls about every six months and gives me advice when I ask for it.]

[ATSMAN]

This could be a legal trap!

I stay away from discussing/reviewing with my client their investment portfolio etc., and just concern myself with the tax issues, 1099-B, 1099-Div, 1099-Int, K1 etc.

The reason is that if I get into an indepth discussion with a client about the portfolio and it leads them to doing some consolidation or selling based on my views and that causes undesirable effects I could be exposed to a lawsuit because a court may find that I engaged in investment advice and I am not a RIA or a stock broker and do not possess any securities licenses.

Believe me I have been asked countless times to review their brokerage statements and give my opinion.