Stocks and Trading Thread - Channeling your inner Mono

[DGuller]

I had a meeting with a bank financial adviser at my local Chase bank.  I came armed with skepticism, but I was willing to hear him out.  I do think that financial advisers at the bank can help you with some things, especially if you're not particularly knowledgeable in the messy details of personal finance, even if you have to swat away a pitch or two for the proprietary financial products. 

It did not go well. 

At the beginning, he recommended that I dump my prior company's stock in my 401k, because it under-performed the market in the last five years.  I asked him what the beta of my company stock was.  He said it had to be at least 2, since a single stock is so risky.     I told him that we must not be thinking of the same concept when we talk about betas.  Just to put his statement in context because he wouldn't, I looked it up on my phone and it was actually 0.60.     Yes, it under-performed the market, but with a beta like that it would be expected to in the last five years, I would think.  It is risky to own a single stock, but the problem is diversification, not poor performance.  He probably lost me right there and then, but I continued hearing him out.

He then recommended that I move my funds out of my target retirement funds, and have Chase actively manage them for me.  The fee would be higher than the expense ratio of the target retirement fund, but it would be worth it, because active management means that Chase would give me better returns and reduce my risk.  A whole bunch of numbers were thrown at me all throughout.

I asked him about my options if I didn't believe in active management.  He said that in that case, Chase is not for me.     I was coming to that conclusion myself.  He did try to convince me that I was stupid for not wanting to get all those extra returns, and grew increasingly agitated when I wasn't budging, and was wondering out loud what the hell I wanted from him if I wasn't interested in getting better returns.  I said I wanted diversification with passive management, and he kept trying to convince me that active management is what will accomplish that.  Eventually he conceded that maybe target retirement funds are the best option for what I'm looking for, and I shouldn't do anything differently.

I was aware of the stereotype of financial adviser at the bank, but I expected it to be hyperbolic, and that reality would be less cynical.  I would have to say that my meeting confirmed the stereotype to the fullest.

[Habbaku]

At the beginning, he recommended that I dump my prior company's stock in my 401k, because it under-performed the market in the last five years.  I asked him what the beta of my company stock was.  He said it had to be at least 2, since a single stock is so risky.   

Time to run away screaming.

He then recommended that I move my funds out of my target retirement funds

Danger! Danger!

and have Chase actively manage them for me.  The fee would be higher than the expense ratio of the target retirement fund, but it would be worth it, because active management means that Chase would give me better returns and reduce my risk.

Holy shit. You met the stereotype of salesman-not-advisor.

I was aware of the stereotype of financial adviser at the bank, but I expected it to be hyperbolic, and that reality would be less cynical.  I would have to say that my meeting confirmed the stereotype to the fullest.

You made the right decision. 

[DGuller]

Are there any banks around that have financial advisors that actually help you with bullshit you can't possibly know, rather than try to sell you on shit so that they get to skim the fees?  Or is my experience pretty much par for the course?

[garbon]

UBS

[Admiral Yi]

IMO anyone who hands their money over to a wealth management guy is tossing 1% of their money out the window.  Every year.

[Admiral Yi]

BTW what is the expense ratio on your target retirement fund?

[DGuller]

BTW what is the expense ratio on your target retirement fund?

It's 0.50%.

[Admiral Yi]

And what is (are) the question you had for Salesman Dude, pray tell?

[DGuller]

And what is (are) the question you had for Salesman Dude, pray tell?

It started out as a different banking matter, not involving the 401k, or the financial advisor for that matter.  Had I known that active management was the only trick in his bag, and not just the first sales pitch for the suckers, I would've not wasted my time. 

I guess I also expected something like "here's what you're not doing, but you should be thinking about doing", about something I never thought about doing but is probably a good idea.  Given how complicated the world of finance is, and how intolerant I am of learning about the nitty gritty bullshit relating to this, I thought there was some potential of value add on his part.

[alfred russel]

DGuller, the problem is that you want:

a) a guy to not charge you an hourly or flat fee; which basically means a guy gets paid off commission;
b) a passive investment strategy that doesn't give the retail bank advisor space for commissions.

Also smart guy who is educated in finance enough to know about betas isn't going to be working at a local retail bank.

[Ed Anger]

I got butchered in the Nasdaq.

[crazy canuck]

Also smart guy who is educated in finance enough to know about betas isn't going to be working at a local retail bank.

Yeah, I think therein lies the problem.  If you walk into a retail space for advice, expect retail advice.

[crazy canuck]

I got butchered in the Nasdaq.

A sacrifice is needed from time to time.

[Ed Anger]

So hurtful.

[Ed Anger]

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