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Wednesday, July 13, 2011

100% stocks for 64-year-old on the verge of retirement?

According to Bloomberg, Fisher Investments, headed by Kenneth Fisher, may be required to pay $376,075 in damages to Sharyn Silverstein for making inappropriate investments. Apparently Silverstein sent in for one free book (the "free" book turned out to be maybe the most expensive book of the year), was contacted several times, and eventually her counselor liquidated her bonds and put her all into stocks - despite her protests.

To me, it illustrates the difficulty of ensuring ethical practices in a large financial services firm. It would be interesting to know how the counselor was compensated. Putting a 64-year-old into stocks 100% when she was on the verge of drawing her portfolio down is not only clearly unsuitable it is plain stupid.

But it isn't impossible to impact values and ethics. For example, those in the financial services industry constantly hear good things about USAA, the financial services firm that services the military. People go on and on about the fact that real people answer the phone to address your questions - how rare is that today when financial service firms have taken a commodity approach to the business?

I often wondered about USAA's secret to success until I came across an interview of Bill Taylor (10 Questions with Noteworthy People) in the Journal of Financial Planning. He described USAA's so-called "surround sound" program that takes place over a person's career. The training takes place in San Antonio where employees eat ready-to-eat meals (just like the military in the field) and carry 65 pound backpacks when they walk across the campus. At the end of the day, they read letters from troops to their families. The whole experience gets employees to experience a bit of what their customers experience.

All of this brought memories back to me of the early 1980s. Fresh out of graduate school, I was an advisor at the United Mine Workers Health & Retirement Funds - a multi-employer Health & Welfare Fund in Washington D.C. The job, of course, was in well-appointed surroundings, complete with air conditioning, etc. Someone higher up decided that it would be worthwhile for the investment staff to trek to West Virginia and to actually go down in the mines with miners.

To make a long story short, it changed how I looked at the investments I was responsible for. I better understood the "Black Lung" fund and the hardships that miners endured.

As an aside, if you go to the Bloomberg link on the Fisher story, there very well may be an advertisement on the right hand side for a free investment guide from Fisher. I would think carefully before clicking on the link -:).


  1. Holy hell! I think the compensation is too little. The advisor should be barred for life for his greed.

    The story about USAA is fascinating! I too often wondered why people spoke so highly about that CU. Makes sense!

  2. Why didn't she just dismissed the bad advice and fire the "counselor"? If she didn't want to sell the bonds she shouldn't have let this bozo sell her bonds..... it's her money after all. These guys dishing out financial advice have less interest (and often times less knowledge) than the person they are managing money for. I'm glad she got a big settlement, but their are many who don't. People just need to say "no" when they are pushed to do something they don't think is right.

    Great story about USAA and your experience with the miners. Maybe all "investment advisors" should walk a mile in their client's shoes, instead of being commission hounds.

  3. re: MoneyCone I hope there are follow up stories. I agree that the counselor should probably be banned.
    re: The Grouch Good point on why she didn't take control. It is interesting to note that if stocks were up 30% there would have been no complaint.