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HTML <html> <head> <title>Widowed, Ripped Off, and Alone Part II</title> </head> <body> <h1>Widowed, Ripped Off, and Alone Part II</h1> <div class="info">Author: <a href="author_1_97119.html">Steve Hood</a></div><div class="body">We recap our story from Part I, based on a true life experience. It's about the woman married to the high level auto executive. They led a happy and successful life, raised a family, and assumed they would retire together and continue to live the good life, with homes in upper Michigan and sunny Florida. Unfortunately he died unexpectedly, and this is where the story continues.<br /> <br /> Sometime after the death of her husband she moved to Florida, purchased an upscale condo, and developed a new group of friends and activities. Because her pool of assets was ample she was able to draw income from her investments to help support her lifestyle. Her financial advisor, whom she had retained due to her husbands relationship, soon advised her to make changes in her portfolio, changes he said would be beneficial to her. Those changes, moving from a relatively conservative stock and bond portfolio to a high flying portfolio of technology load mutual funds, turned out to be her undoing.<br /> <br /> By the time I met her in late 2002, she was a nervous wreck, and didn’t know where to turn. Because of her new found distrust of financial advisors, she brought her son along to our meeting. After a lengthy discussion, I agreed to analyze her situation and in a second meeting, provide a full written report, including recommendations to help turn things around.<br /> <br /> Upon careful analysis, two glaring details jumped out at me. First, and most obvious, her investment portfolio was totally unsuitable for her needs and life situation. Her primary objectives were protection of capital and supplemental monthly income, but her portfolio consisted largely of technology and telecommunications stocks and mutual funds.<br /> <br /> But there was more. The costs of her portfolio were egregious! The financial advisor, and I use the term loosely in this case, had "diversified" her portfolio across six different front end load (commission) mutual fund companies, even though every company had dozens of its own branded funds. This had the unfortunate consequence of costing her far higher commissions than necessary. <br /> <br /> You see, load fund companies have what are called breakpoints at different investment levels. For example, the load might be 5% on the first $25,000 invested, 3% on the next $75,000, and only 1% over $100,000. By spreading her accounts over so many fund companies she did not receive the full benefits of these lower loads, therefore her total commission costs were much higher than necessary. Of course, her advisor benefited from these higher loads as his commissions were tied directly to them.<br /> <br /> As promised I returned to the client with my report and recommended course of action, which included radical adjustment of her portfolio to meet her needs for income and substantially lower risk. I presented our fee-based asset management program as an alternative, based on it’s objectives of capital preservation and income production.<br /> <br /> At this point her son interjected and declared another financial advisor was unnecessary and instead, he would help her. (This from an individual who had previously stated he had no specific financial expertise and had himself lost over 50% of his investments in the Bear Market). <br /> <br /> We parted company on good terms but I could only wonder what would become of this fine woman who had done so many positive things throughout her life, and was now dependent on the advice of an incompetent and unethical financial advisor, and a son who was well intentioned but as financially illiterate as she. <br /> </div> <div class="source">Article Source: <a href="http://www.articlealley.com/article_161580_28.html">http://www.articlealley.com/article_161580_28.html</a></div> <div class="author"> <div class="authorOccupation"><strong>Occupation:</strong> Investment Advisor</div> <div class="authorBio">Steve Hood is a financial advisor with more than a quarter century of experience, concentrating in pre and post retirement planning and investment management. He specializes in helping his clients find quality investment and insurance programs, and builds and manages "All Weather" investment portfolios. For further information contact Steve at LifePlan Financial Advisors, Inc. 541 549-1154 or http://www.allweatherinvestors.com </div> <div class="authorUrl"><a href="http://www.allweatherinvestors.com" target="_blank">http://www.allweatherinvestors.com</a></div></author> </body> </html>
Text Widowed, Ripped Off, and Alone Part II Author: Steve Hood We recap our story from Part I, based on a true life experience. It's about the woman married to the high level auto executive. They led a happy and successful life, raised a family, and assumed they would retire together and continue to live the good life, with homes in upper Michigan and sunny Florida. Unfortunately he died unexpectedly, and this is where the story continues. Sometime after the death of her husband she moved to Florida, purchased an upscale condo, and developed a new group of friends and activities. Because her pool of assets was ample she was able to draw income from her investments to help support her lifestyle. Her financial advisor, whom she had retained due to her husbands relationship, soon advised her to make changes in her portfolio, changes he said would be beneficial to her. Those changes, moving from a relatively conservative stock and bond portfolio to a high flying portfolio of technology load mutual funds, turned out to be her undoing. By the time I met her in late 2002, she was a nervous wreck, and didn’t know where to turn. Because of her new found distrust of financial advisors, she brought her son along to our meeting. After a lengthy discussion, I agreed to analyze her situation and in a second meeting, provide a full written report, including recommendations to help turn things around. Upon careful analysis, two glaring details jumped out at me. First, and most obvious, her investment portfolio was totally unsuitable for her needs and life situation. Her primary objectives were protection of capital and supplemental monthly income, but her portfolio consisted largely of technology and telecommunications stocks and mutual funds. But there was more. The costs of her portfolio were egregious! The financial advisor, and I use the term loosely in this case, had "diversified" her portfolio across six different front end load (commission) mutual fund companies, even though every company had dozens of its own branded funds. This had the unfortunate consequence of costing her far higher commissions than necessary. You see, load fund companies have what are called breakpoints at different investment levels. For example, the load might be 5% on the first $25,000 invested, 3% on the next $75,000, and only 1% over $100,000. By spreading her accounts over so many fund companies she did not receive the full benefits of these lower loads, therefore her total commission costs were much higher than necessary. Of course, her advisor benefited from these higher loads as his commissions were tied directly to them. As promised I returned to the client with my report and recommended course of action, which included radical adjustment of her portfolio to meet her needs for income and substantially lower risk. I presented our fee-based asset management program as an alternative, based on it’s objectives of capital preservation and income production. At this point her son interjected and declared another financial advisor was unnecessary and instead, he would help her. (This from an individual who had previously stated he had no specific financial expertise and had himself lost over 50% of his investments in the Bear Market). We parted company on good terms but I could only wonder what would become of this fine woman who had done so many positive things throughout her life, and was now dependent on the advice of an incompetent and unethical financial advisor, and a son who was well intentioned but as financially illiterate as she. Article Source: http://www.articlealley.com/article_161580_28.html About the Author: Steve Hood is a financial advisor with more than a quarter century of experience, concentrating in pre and post retirement planning and investment management. He specializes in helping his clients find quality investment and insurance programs, and builds and manages "All Weather" investment portfolios. For further information contact Steve at LifePlan Financial Advisors, Inc. 541 549-1154 or http://www.allweatherinvestors.com http://www.allweatherinvestors.com
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