The “I Know You’re 80 and Should be in a CD, But Let’s Put You in a Risky Investment” Advisor
This is the type of advisor that deserves more than just a punch—maybe an eye gouge, a knee to the groin, or even a "people’s elbow" from The Rock.
I had a client whose mother was doing business with another advisor a couple of towns over. The daughter had a funny feeling about the advisor, so she urged her mom to transfer to me. When her mom brought in her account statements, I couldn’t believe what I saw. I had asked both the daughter and the mother what the intent of their investments was, and both agreed that the safety of the principal was a major concern.
The mom had living expenses to meet, and she was going to need to cash in some of the investments in the not-too-distant future. When I hear an 80-year-old widow tell me that she’s worried about her principal and needs access to the money in a short amount of time, I immediately think of CDs, money market accounts, or a savings account.
Well, not this advisor. No, this advisor put most of her money into different preferred stocks and long-term bonds. One of the preferred stocks had a maturity date of 2040. Now, for those of you who don’t understand how preferred stocks work, they resemble a hybrid of a stock and a bond. So, they can fluctuate like a stock and pay interest like a bond.
Well, when the time came that the mother needed the money, interest rates were fluctuating, and in just a few months' time, she saw a 30% drop in principal on those preferred stocks. When she needed to cash out those investments to generate some cash, she was taking a huge loss in principal. Sure, her investments were paying a very high dividend at the time, but that was of little comfort after taking such a huge hit on her money.
Lesson learned: If you think you need to access the money in your investments short term, don’t let an advisor con you into buying anything other than a CD.
Related Horror Stories
How My Wife’s Financial Planner Mismanaged Her Investments for Years
Sounds like my wife’s ex financial planner. I warned her after meeting him once before she gave him her money but she trusted him because her dad uses him (btw her dad has less than 1% of his net worth with this guy). Took me five years of doing yearly reviews with her to finally pull the money and put in index funds.
They put her in an annuity, impossible to liquidate private reits and my favorite was summer of 2020 after qe was in full force they put a third of her money in bonds. The underperformance was insane. Had it just been 10% worse than an index fund I’d be so happy.
A Simple Mistake That Cost Me Thousands in Home Buying Benefits
When I was preparing to buy my home, my financial advisor who arranged the mortgage told me that the lender ‘didn’t accept’ help to buy ISA’s, so told me to transfer the money to my savings account and withdraw the full sum in bulk.
I later found out that’s not how it works…! I missed out on the government grant. I would have reported but I have no evidence as the advice was via email while I was using my work email address of a workplace many workplaces past!
Still bugs me when I pass his office 🙃
Is our financial advisor screwing us?
I feel like we may be getting shafted by our financial advisor and unsure what to do next.
Some background info: My brother and I inherited a $1 million that was put in a trust in 2018. Since my brother and I were young and dumb, my mom was appointed as the caretaker of the trust and she gave it to here trusted financial advisor to invest/manage until we wanted it transferred. He manages other family funds as well (529s), including her retirement. So we thought it was fine. This amount basically makes up all of our assets.
Cut to now, I’m in mid 20s, my brother is slightly younger, and it’s time to transfer and split the trust. We go to meet this financial advisor, and we were thinking, hey he probably didn’t preform as well as the market, but there should be some gains here. We both thought we were going to stay with him and maybe just tweak our portfolio. Then the meeting happened, and I feel like we’re getting f*cked. I’m not financially literate though, and so I would really appreciate others perspectives to see if I am being crazy.
Reasons why I think we may be getting reamed:
- Over 6 years our total gains on our $1 million principal is $100,000One of the main reasons it’s that low is because, for the last 6 years, the portfolio has consistently been 70 % CDs and 30 % no cost basis at & t stock my grandparents bought in the 80s.
- He has our money invested this way because he swears the market is going to crash. Yeah, he has been timing the market INCORRECTLY for 6 YEARS. I asked if he would do anything differently at this point and he said no b/c it’s going to crash this year. I asked him what would his investment strategy be if it doesn’t crash this year, and he said it will crash and did not give me a straightforward answer.
- When I asked him what commission he was getting off a portfolio like this, he tried to tell me none since it’s not a fund like ETFs(which he gets 1%). After some persistence he finally told me he gets commission from the bank for every CD he buys/sells. Idk if that’s normal so any insight here is great. My mom’s portfolio that he manages is diverse and is mainly stocks and index funds. She is about to retire, yet he puts her in a riskier portfolio than us. And for us, with longer outlooks, he puts all our funds in cds because he swears the market will crash. If he really thought the market will crash, why didn’t he push for my mom to reinvest more of her funds in cds as well? This really bothers me and maybe there is something I am missing here, as I know little about investing. So please let me know.
- He spent the whole meeting talking about how the market will crash, showing as data and graphs as proof. This data is all public info, and I understand where he could be drawing conclusions like this, but if you’re wrong for 6 years, you’re wrong for 6 years. He went on for 40 minutes before I had to push the conversation towards our actual portfolio. Idk why but this really rubbed me the wrong way.
There is maybe more, but this is what I have for now. I asked him to call me once the first cd is up so we can discuss what to do with it, and he called today. I honestly feel like I should just ask him to transfer the funds to me and I’ll put it in an index fund. But this puts us in a situation where every time a cd is up I’m slowly transferring. Idk what to do.
I understand I was an idiot for not taking agency in this situation earlier. But all I can do at this point is focus on the now. My brother is more financially illiterate than me and my mom gets defensive when I start asking questions. So, what do you make of this? Am I reading this wrong or is he screwing us? If he is screwing us, from a range of incompetent to malicious, how bad?
Share Your Story
Have you had a negative experience with a human financial advisor or other human “financial expert”? Share your story to help others avoid similar issues. Together, we can shed light on the importance of reliable, unbiased financial advice - its been a big motivator for us to build PortfolioPilot.
Global Predictions provides investment advice only through its internet-based application, PortfolioPilot, and only to individuals who are advisory clients of Global Predictions pursuant to written advisory Client Agreements ("Advisory Services"). The publicly available portions of the Platform (i.e., the sections of the Platform that are available to individuals who are not party to a Client Agreement - including globalpredictions.com and portions of portfoliopilot.com) are provided for educational purposes only and are not intended to provide legal, tax, or financial planning advice. To the extent that any of the content published on publicly available portions of the Platform may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Nothing on the publicly available portions of the Platform should be construed as a solicitation or offer, or recommendation, to buy or sell any security. All charts, figures, and graphs on the publicly available websites are for illustrative purposes only. Before investing, you should consider whether any investment, investment strategy, security, other asset, or related transaction is appropriate for you based on your personal investment objectives, financial circumstances, and risk tolerance. You are also encouraged to consult your legal, tax, or investment professional regarding your specific situation. Registration does not imply a certain level of skill or training. Investing involves risk. The value of your investment will fluctuate, and you may gain or lose money.
The contents of the Platform may contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about the financial industry, the economy, or Global Predictions itself. Forward-looking statements are not guarantees of the underlying expected actions or future performance and future results may differ significantly from those anticipated by the forward-looking statements. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.
Note: our use of the term AI refers to all artificial intelligence models used including large language models, proprietary economic models that incorporate regression or dynamic factors, and machine learning methods like supervised learning.
2. As of July 14, 2024
3. $20B Assets on Platform as of July 14, 2024. Aggregated across all plans (including the free plan). Assets on Platform represent the total value of connected and manually inputted accounts (including assets like real estate and private equity) and does not in any way represent Asset Under Management as Global Predictions does not manage any client funds.
8. Case studies presented are hypothetical scenarios and intended for illustrative purposes only. They do not represent an actual client, investment or experience, but rather are meant to provide an example of the intended investment process and methodology. An individual’s experience may vary based on his or her circumstances. There can be no assurance that the Firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the Firm’s investment advisory services. The information contained herein should not be construed as personal investment advice.