October 8, 2010
Should I trust my Merrill Lynch advisor regarding his recommendations?
By Planet Wealth
I currently have a significant part of my account in individual preferred stocks. My Merrill Lynch advisor called me and told me about a preferred stock managed account that they oversee. The managers of this account also manage a similar preferred stock mutual fund (that has some differences). The mutual fund is ppsax. One website said that the mutual fund has fees tallying to about 1.4%. I did an analysis comparing the price movement of an average of my preferreds vs the price movement of the mutual fund and it looks like my preferreds beat it out over the 181 trading days i looked at it. I reckon switching to a managed fund reduces my flexibility..and makes more fees. I’d appreciate any comments especially from former advisors who aren’t biased by being affiliated with ML..
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5 Responses to “Should I trust my Merrill Lynch advisor regarding his recommendations?”
Comments
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October 8th, 2010 at 5:31 pm
Certainly you are right to be suspicious. The advisor is looking to generate income for his company and is truly not worried about you.
To offer you a loaded fund that lacks the performance of your current fund tells you something. He thinks you are an idiot. Find a new company
October 8th, 2010 at 5:31 pm
A managed account obviously does have fees. Did you question them what the management fee is? Another question to question is whether your are responsible for filing taxes on all the transactions. Generally the answer is yes and that can be not worth the effort involved. Advisors are in business of making money for the firm and for themselves. Getting you into a nice managed account with annual fees would be a benefit to them.
Personally, I do all of my preferred stock research using this internet site. It is brilliant. I also use an on line broker to keep the expenses down.
http://www.quantumonline.com/
October 8th, 2010 at 5:31 pm
I reckon this question is too complex for YA. You can never know now days if your money is safe. People are investing and losing what they invested all over the world. Ultimately, it has to be your choice.. How long have you been working with the advisor?
October 8th, 2010 at 5:31 pm
There is no question that advisors make their money from fees they generate from their clients. But, the excellent ones will be calling you every few months with legitimate investing thoughts that only Merrill can offer. If you only hear from your advisor once or twice a year, it’s time to either get a new one or go it alone.
October 8th, 2010 at 5:31 pm
If a broker calls you, run in the opposite direction. Brokers do not generally have an obligation to place your needs ahead of their needs or their firms. This doesn’t necessarily make their advice terrible or them evil, but if they call you it is nearly aways because they have found a way to increase their commissions.
The fund your lovely broker "recommended" to you is a perfect example — absolutely saturated with fees that go from your pocket to his. Morningstar despises it. And it has higher risk profile (concentrated in financials, nearly 30% below AA) than I would feel comfortable recommending. I hope this broker isn’t your brother-in-law.
My general advice to individuals (on the net) is that I do not recommend individual investments in stocks when your total investment portfolio is less than $100k. No individual bond investments (except Treasuries) for portfolios less than $1mm.
Personally, I reckon you would do better to scan for funds and ETF’s on your own and see if anything appeals to you. I use, but do not generally recommend to the public, convertible preferreds as a way to "juice up" my return profile. I take huge risks to play the market on the margin. In other words, I do not reckon they are excellent for generally investing and I wouldn’t built my retirement income port on them. The Calamos family are "kings" of the convertible preferreds. Vanguard also has an brilliant fund.
PFF, PGF, & PGX are the index-er ETF’s for preferreds…amusing that your broker didn’t mention PGX — it’s based on the Merrill Lynch Fixed Rate index…oh, thats right…how silly of me: it’s cheap and doesn’t pay a commission to the salesman.