Continuing with basic financial training: Picking Your Broker

Early stock broker pushing the latest fad

We’ll talk some more about places to park your money and set up accounts in a later post, but we couldn’t pass this news story up since our topic today is “Time to Pick Your Broker.”

Are you looking to get “trusted financial” advice from your broker? Not if you follow IFO! Here’s a story that would be hilarious, except that real people lost real money. Still, from the Puget Sound Business Journal:

“An Enumclaw financial planning adviser who allegedly left a fake suicide note in his car … has been arrested and charged with stealing at least $2 million from his clients, including one client whose death he also allegedly faked to collect the man’s life insurance.”

The FBI’s special agent in charge of the case said, the perp’s suicide letter was signed “Travis the scam man.” Continuing,

“[The perp’s profile on his firm’s website] states that he has been a finance and insurance adviser for more than 10 years, is “passionate about his role as a trusted advisor,” and that he “delivers a creative solution and expert knowledge to produce the outcome the client is seeking.””

But wait, there’s more (edited):

Perp convinced a client, referred to only as D.B. to buy a life insurance policy that included a $2 million death benefit. Perp told D.B. that the new policy included a 20 percent bonus if he made an initial payment of $500,000. Perp then used the money to buy a different life insurance policy and made monthly payments  in D.B.’s name. Perp then submitted a death claim saying D.B. died of “acute cardioplelmonary arrest” (sic) on April 30, 2012. The insurance company agreed to pay the claim, but tried to reach D.B. to verify his death. According to the FBI report, D.B. responded that he was very much alive.

IFO realizes that this is a rare occurence among financial advisors. But still, if you’re going to lose money, surely you don’t also want to pay for the privilege? Also, we hate life insurance. Sorry, Dave Ramsey, we just do. Maybe if you are young and have a lot of debt, you might get some life insurance to cover you until you are out of debt, but even then…

We have a similar philosophy regarding mutual funds vs individual stocks, though we think there is far less fraud with funds, since some many people’s reputations depend on the proper functioning of the funds. Still, when the market goes down, mutual fund prices go down. So why pay somebody to churn the stocks in the fund and get fees for the transactions, when you can achieve the same result on your own.

Oh, right, we started out on “Picking Your Broker.” Our strong recommendation: get one of the excellent, tried and true, discount brokers. They don’t give advice. It’s part of their business model. You get to make fast, inexpensive trades based on your own investment research and philosophy.


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
This entry was posted in Basics, Lifestyle and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s