On Sep 16, 4:15*pm, Michael <gen...[at]verizon.net> wrote:

- quote -

Your attitude is commendable. Sometimes it's wise to look back, but
it's always wise to look forward. The hard part is managing both, when
necessary.

I think you are right to transfer your securities. Regardless of fault
or even if there is no fault at all, you should definitely only work
with professionals that are on the same wavelength as you.

Don's earlier advice now becomes very pertinent. I would ask your new
advisor about entering into a fee-based arrangement. I am pretty sure
Morgan Stanley has such a platform. Your new advisor will collect a
fee based on your assets but you shouldn't be charged commissions for
the securities he buys. That way you can be confident he is serving
you (not himself). Hint, hint: sometimes the advisor has the authority
to negotiable fees down to 0.80% or so.

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- quote -

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On Sep 13, 7:04*pm, Michael <gen...[at]verizon.net> wrote:
- quote -

I think it's an uphill battle. The advisor might not have done a good
enough job of explaining to the possible risks involved with your
investments and deserves to be fired. Or, as very often is the case,
he thought he did but somewhere there was a breakdown in communication
between the two of you. Regardless, unless you have convinving
evidence that he neglected to detail the risks, it is unlikely that a
suit would be successful.

As for the investments themselves: Assuming they were highly rated at
the time of purchase, to call them "risky" now is akin to playing
"monday morning quarterback". You can't directly equate "loss" with
"risk" in single instances. Even seemingly safe investments can suffer
from unpredictably rare events or substantial and previously unknown
information. Fannie and Freddy were once consider extremely safe
(almost as much so as gov't bonds). From your reasoning a treasury
bill would be "high risk" if something extremely odd occurred and they
went belly up (that's a whole other story, I know).

Perhaps, we can best help by focusing on damage control instead of
speculating and finger pointing. Have you sold the preferreds or is
the loss still only on paper? Have any of them suspended their
dividends? Have any of them gone belly-up and been declared worthless?

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On Sep 14, 3:47*pm, Don <dwz...[at]telus.net> wrote:

- quote -

Agreed, but I don't think it would have changed anything in this
particular case.

For starters, I am convinced Michael needs professional financial
assistance. Perhaps, with a little reading, he could manage his own
investments in the future, but his lack of experience with the
different investment classes speaks volumes. [Michael I mean no
offense and you certainly shouldn't feel bad. I think your probably
way ahead of the general public, just not quite up to self-investing
YET].

Given that he needs a financial adviser, he can either go with a fee-
based "no-commission" adviser or a sales based adviser. I would always
go with the former but they are going to charge you 1%-1.5% also. So
fee/commission reduction isn't really an issue bases on the OPs
statements (it is even possible that he has a fee-based adviser).

The last concern is that IF he has a commission-based adviser, was the
adviser looking out for Michael's interest or his own. In my
experience, preferred stocks are not an area of investing in which an
adviser has a conflict of interest. Typically, any stock or closed-end
fund traded on an exchange has a "ticket charge" and "commission".
Sometimes the ticket charge can be waived or absorbed by the adviser.
The commission is set by the adviser or, more likely, their compliance
department. Regardless, the commission is not dependent on which stock
or CEF is purchased. In other words, an adviser doesn't make more
money buying WMT than he does TGT. It is loaded funds, annuities, life
insurance, and proprietary in-house funds (e.g. Ameriprise) that
usually have the potential conflicts of interest that you mention.

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"Michael" <gene.f[at]verizon.net> wrote
- quote -

What were the exact directions you gave the advisor? Did you
tell the advisor you were investing for the long or short
term? For immediate income or for principal growth?

Since even Warren Buffett was buying Bank of America before
it plummetted due to writedowns (meaning the very best were
duped), I doubt you have a case. More importantly, without
more information I cannot judge whether this was a bad move
or not. If you are invested for the long term, then it is
too early to say how well the advisor did, assuming these
preferreds were highly rated when the advisor bought them
for you.

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On Sep 14, 4:47*pm, Don <dwz...[at]telus.net> wrote:
- quote -

Preferreds will fluctuate with the market, and are subject to the
market manias. Recently, preferreds are down at least in part dues to
the Freddie and Fannie issues. It is never a good time to sell when
the market is in fear or liquidation mode - you just lock-in your
losses. Given two to three years most preferreds will recover their
value.

Without a list of the specific issues, it is really not possible to
evaluate the positions. Ask your advisor for specifics on the
preferreds, and ask for the last ten years of earnings history on each
company that you own the stock in - including the most recent quarters
and consensus earnings estimates. Get this info in print.

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On 2008-09-14 05:22:15 -0700, Michael <gene.f[at]verizon.net> said:

- quote -

You can get excellent financial products without paying anything like a
1 to 1 1/2% commission. Look into Vanguard and Fidelity. Think about
index funds. As far as your suspicions about your advisor are
concerned, you should look at whether or not the particular funds he
recommended to you have larger commissions than alternative products
that better meet your needs. But I still think the best approach of all
is a "no-commission" approach.

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On 2008-09-13 21:30:47 -0500, Don <dwzimm[at]telus.net> said:

- quote -

The advisor was with A.G. Edwards. In this account he was paid by
commission but not unreasonably so-between 1 to 1 1/2%. So it wasn't
that. Also, the rest of the investments were a combination of bonds and
closed-end funds. Other than the preferreds, I don't think there were
any overtly risky holdings. My question as to risk pertained strickly
to the preferreds.

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In article <2008091317380516807-genef[at]verizonnet> ,
Michael <gene.f[at]verizon.net> wrote:

- quote -

I suspect that at the time he sold you the preferred they were highly
rated. That they were all in finance and real estate was the bad
advice. They should have been more diversified.

The yield (in dollars) will remain constant unless the issuer goes belly
up.

- quote -

Probably poor. I wouldn't front money for a lawyer for this type of
lawsuit.

Even though you had an advisor you still have to take some
responsibility for educating yourself on what you are buying.

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On 2008-09-13 17:04:17 -0700, Michael <gene.f[at]verizon.net> said:

- quote -


I am very much in favor of punishment for unscrupulous advisors who
squander people's investment money in order to get higher commissions
for themselves. But there some things you should clear up first. Please
be more specific about what type of "advisor" did these things. Was it
someone in a brokerage? How was this advisor paid? Did he or she
receive a commission for the products recommended to you? It would help
your case if you could show that the risky products you mention were
ones with hefty commissions for the so-called advisor.

The second thing that is not clear is the kind of "risk" you are
talking about. Preferred stocks are generally less risky than common
stocks. So if 60-70% of your holdings were in preferreds, where was the
risk? Was the other 30-40% in extremely risky stocks, so risky that the
entire account was in danger?

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In article <2008091317380516807-genef[at]verizonnet> ,
Michael <gene.f[at]verizon.net> wrote:

- quote -

Preferred stock is like a combination between a common stock and a
bond. It is safer than a common stock because it is closer to the
front of the line than common stock holders if the company liquidates.
They usually pay a dividend rate, and it is often much better than
what you can get on bonds or CDs. But they do carry a market risk,
so the price will go up and down.

Some preferred stocks have fixed lifetimes. When you buy them, you
know the expiration date and the price that they company will pay
to buy them back. In that case, they will vary with the market,
but if you hold them, they act more like bonds in that you will
get paid the redemption value. Finally, some are set up as
convertables. That is, after a period of time, you can redeem them
for some combination of common stocks, bonds, and cash.

- quote -

If this was a bigger firm, they will have a person called a
"compliance officer". Talk with that person and let them know
that your broker was engaging in risky behavior without your
approval. The worst that can happen is that they deny it. Once
you get past this step, then post back and tell us what happened.

-john-

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I have recently left my advisor because he invested in riskier issues
than I initially asked for. I wanted a conservative account and desired
bonds and other safe investments. He juiced up the yield in the account
with preferreds. I had never heard of preferreds before so when he said
to think of preferreds like bonds I said okay. The account had between
60-70% preferreds. Most of these issues were in the financial and real
estate sectors so I've taken a large hit.

My question is this: what is the feasibility of a law suit. I've heard
that you can only get pennies back on the dollar and, frankly, I'm not
even sure if I have grounds for this action. Any thoughts?

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