<FOOLISH FOUR PORTFOLIO>
(With Your Broker) Is Hard To Do
by Barbara Eisner Bayer (TMF Venus)
WOODSTOCK, NY (August 3, 1999) -- Do you remember the last time you told a significant other that his or her significance in your life was kaput? Did you dread the moment of confrontation, continually putting it off until "the right time," but ultimately knowing that there weren't enough mops in K-Mart to quell the flood of tears that would ensue? After all, you were a nice guy and your partner-of-the-moment was a nice guy, but you had decided it was now time to be nice guys with new, even nicer guys.
Deciding to leave a full-service broker for a new and improved discount model can be equally difficult. Just this week someone wrote, "I'd like to know what excuse I can use to transfer my account without breaking my broker's heart (he is a good guy)."
Fools, a broker is in service to YOU! Not vice versa. S/he is supposedly making decisions in your best interest. You owe a broker nothing more than the commissions s/he makes from investing on your behalf. Sure, the person may be nice, but if s/he is averaging 8% a year investing your hard earned bucks when you could've been averaging upwards of 20% by using the Foolish Four approach, you better be looking for reasons NOT to leave.
When you become Foolish and decide to take over the helm of your investing sailboat, this change of course is necessary.
True, you might hurt your full-service broker's feelings (not to mention his/her ability to receive awards for being the highest-commission earner in the firm), but you need to look out for Numero Uno, the Big Cheese, the provider for your family, the big Kahuna -- i.e., YOU.
Another Fool writes:
"You folks should start a 'My Messy Divorce' site, detailing final conversations with full service brokers! I had a ditty yesterday, over the whomping $40,000 or so I have invested. What came back to me was the 'You'll be back. Let's see how you do versus how I do. Sure, why don't you go ahead and play your little games... buy 100 shares of Disney at 27 and watch it run up to 35 in five years. I prefer to make more money FOR YOU faster.' Etc., etc. Veiled as a nice conversation, this guy sort of went on the offensive."
This from a broker who was probably a "nice guy" at some point -- the point when he was earning high commissions from the letter writer's account. Successful sales people are usually successful because they know how to come across as "nice." When their livelihood is threatened, you find out just how real that persona is.
Once you master disconnecting from your broker emotionally, the physical part is a breeze. And you NEVER have to speak to your old broker if you don't want to. First, you have to decide which discount broker is right for you. That's the hardest part. With all the options out there, it's hard to get through all the information available. (For help, visit our Discount Brokerage Center.)
Once you have decided on a broker, fill out an Automated Customer Account Transfer (ACAT) form, which can usually be downloaded from your new broker's website. Or, if you still crave human contact, you can call and request one. You send it in with a copy of your last statement from the old brokerage house and possibly some additional proof of identity. The new broker handles everything from there.
In an ideal world, the transfer will be made within about 5-10 business days for regular accounts, and 10-15 business days for retirement accounts. But Caveat Investor -- some brokers can take up to 3-6 weeks to complete the transfer process. The actual transfer time depends on how quickly securities are released by the firm currently carrying your investments. Some may require a letter from you authorizing the release of your funds.
All brokers I polled guaranteed that you could buy and sell stocks after you've requested an account transfer. Your account would always be with someone -- either your old broker or your new one. Unfortunately, that means tracking down the whereabouts of your securities; and if you dread phoning your old broker, you may just decide to refrain from buying or selling stocks until your account is settled with your new broker.
One last, unFoolish fact. Some brokerage houses charge an "exit fee" as high as $50 to close IRA accounts. Boo. One broker even adds an additional $30 fee if your IRA account is under $10,000. Why does it take more money to transfer an account with less money?
On the other hand, sometimes your new brokers will reimburse you a fixed amount to cover those fees. Yay! Feel free to discuss this matter with your new broker BEFORE making any transfers.
Remember, no one cares more about your money than you do. And if you've decided that Foolishness is for you and you're ready to begin a Foolish Four approach, using a discount broker will probably be your best path.
No matter what anyone tells you, you CAN beat the market. And if your current relationship isn't working or is costing you too much, don't be afraid to venture out into the unknown sea. After all, your new broker might just be the partner of a lifetime -- someone to share a drink with on the yacht you buy thanks to your successful portfolio.
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Stock Change Last -------------------- CAT - 11/16 57.88 JPM + 13/16 127.31 MMM + 15/16 90.13 IP + 5/8 52.00
Day Month Year History FOOL-4 +0.35% 0.59% 23.63% 25.47% DJIA +0.29% 0.21% 17.08% 16.61% S&P 500 -0.44% -0.49% 8.14% 8.40% NASDAQ -1.36% -1.91% 18.03% 19.65% Rec'd # Security In At Now Change 12/24/98 24 Caterpillar 43.08 57.88 34.34% 12/24/98 14 3M 73.57 90.13 22.50% 12/24/98 9 JP Morgan 105.51 127.31 20.66% 12/24/98 22 Int'l Paper 43.55 52.00 19.40% Rec'd # Security In At Value Change 12/24/98 24 Caterpillar 1034.00 1389.00 $355.00 12/24/98 14 3M 1030.00 1261.75 $231.75 12/24/98 9 JP Morgan 949.62 1145.81 $196.19 12/24/98 22 Int'l Paper 958.12 1144.00 $185.88 Dividends Received $49.99 Cash $28.26 TOTAL $5018.81