Broker Mismanagement Of Retirement Funds

[Keller]

Sir:

When I retired I put my lump sum distribution into a Merrill Lynch IRA. From $890,000, my account lost $200,000 in 1999-2000. That was bad enough, but I have received almost 3 dozen notices of class action suits against companies I was invested in. Merrill Lynch told me to ignore these, but I am uneasy about having been in so many companies that ran into trouble. Does this sound right to you? Thanks, Terry ANSWER: Unless there are special circumstances in your case that toll, delay, or extend the time limits, it may be too late to file any claims that accrued in 1999 or 2000. However, especially if you are still invested in accordance with the advice you now question, I recommend that you have your account reviewed by a qualified independent advisor who has no conflict of interest. Among other things, this means someone who is not hoping to get your account.

---------- FOLLOW-UP ----------

Thanks for the prompt reply. Can you suggest a website that contains the names of qualified advisors?

[Craig]

The advice below is written from the standpoint of someone who is looking for a new broker or advisor, but you may find it helpful:

You can get an online report on certain regulatory actions and customer complaints(sometimes called a "CRD" report) relating to a stockbroker or a brokerage firm, as well as information about some registered investment advisors, starting the home page of the Financial Industry Regulatory Authority at www.finra.org

However, the industry regulators take the position that certain items should be non-public and non-disclosable and therefore withholds certain information.  You can sometimes get a more complete unexpurgated CRD report from your state's securities agency for which you can find contact information at http://www.nasdr.com/2340.htm

You can also get publicly available information about certain registered investment advisors by starting at the SEC's Investment Advisor Public Disclosure site at www.adviserinfo.sec.gov

You can get information about certified financial planners at the site of the Certified Financial Planner Board of Standards at www.cfpboard.org

Be aware that, no matter how thorough you are, the public records can be incomplete. For example, most of them rely on the registrant to file reports on themselves, which sometimes doesn't happen. Records are sometimes expunged as part of a settlement agreement or otherwise. Bad brokers or advisors can open up shop under a new name. Therefore, do not become complacent merely because a broker or firm appears to have a clean public record.

If you are looking for a stockbroker or investment advisor, you should also get a resume and references from long term customers of the broker you are considering.

Learn about responsible investing, then interview the candidates and see who seems to be saying the right things. Make sure you ask about commissions, fees, and other charges. Ask about risk, diversification, and asset allocation. If a broker or advisor starts talking to you about dealing in hot stocks, IPOs, stock picking, trading, currency, options, futures, margin, market timing, special opportunities, or large returns, or if he appears to be bragging about special abilities, inside knowledge, or a knowledge of which way the market or particular stocks are heading or how far, watch out!

The candidate should be able answer your questions so that you thoroughly understand them. Make sure that you are dealing directly with a financially responsible firm -- either a household name or one with proof of adequate errors and omissions insurance.  Any broker you use should have SIPC insurance, but that is not enough.

Consider the relative advantages and disadvantages of getting your advice from a stockbroker or investment advisor. When you have tentatively selected a broker or advisor, get a written investment plan. Pay for it if necessary. Then take it to your second choice and get a second opinion.

When you've hired a broker or advisor, pay attention to what he is doing. If you don't understand something, ask questions. If you don't get satisfactory answers, consult an outside professional. If you are still unsure or not happy, move your money elsewhere.