By: Zachary Bainter
Instead of writing about financial planning strategies or investment themes, I want to share a story about a client who recently came to me by way of referral. This story exemplifies why I love what I do because there is so much clients can learn from this experience. I will refer to my client as Tim.
Tim was referred to me by another client and called my firm asking to meet. On the phone he informed me that he currently has a financial advisor. However, since I came highly recommended he wanted to meet with me. We met that week and I quickly realized that he was being taken advantage of by his financial advisor.
In reviewing his finances, I recognized many areas of his portfolio that were troubling to me. For one, he was being over-charged. In a world where 1-1.5% is an average management fee, Tim was being charged 2% by his financial advisor. This was by far the highest management fee I had seen a client be charged. For reference, an account his size would be charged 1% by Gerber Kawasaki. Understanding that fees are only one aspect, I began analyzing the investments and performance. Tim came to me in December and at that point in time the stock market was well in the positive for the year. Shockingly, Tim’s portfolio was down significantly. This advisor had managed to lose Tim a lot of money! What made all of this worse was that Tim was not aware of his losses or that he was being overcharged. He felt he had a great relationship with this advisor and trusted him. I offered to call this advisor with Tim to ask about the high fee and underperformance. The advisor declined the call and told Tim in private that all of this was part of the advisor’s proprietary investment strategy. My client finally had enough. He transferred everything over and I began redesigning the portfolio to Tim’s needs.
Since then we have successfully planned his retirement and I am really happy Tim was referred to me. Many advisors take advantage of their clients by making recommendations in the best interest of the advisor, not the client. Besides working with an advisor who is independent and a fiduciary, it is important to ask about fees and benchmark them to other advisors. I would even go as far as to ask for client references. The best advisors have nothing to hide.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor and separate entity from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.