Archive for June, 2009

A sad article from the New York Times about a financial advisor who ripped off their clients:

…the S.E.C. complaint paints a picture of a man set on aiming at the vulnerable. The complaint lists a roster of victims, including an elderly couple with compromised mental capabilities; a 24-year-old law student who had inherited $1 million from her parents; and Mr. Weitzman’s own father-in-law, who may be out $3 million.

Patricia Flinn, a Brewster, N.Y., resident and a former client of Mr. Weitzman’s, met him when her husband was told, six months after they had married, that he had cancer. “He told Matt that he wanted to be sure that his wife would be taken care of.”

As her husband, William Adcock, lay dying, however, Mr. Weitzman helped himself to Mr. Adcock’s money, including one withdrawal on the day that Mr. Weitzman served as a witness when Mr. Adcock changed his will, Ms. Flinn said. After he died, Mr. Weitzman began taking Ms. Flinn’s money instead, she recalled. According to the government charges, he usually used forms with forged signatures to wire money from client accounts at Charles Schwab to an account that he controlled.

Yet another reminder to pay attention to the 16 Golden Rules of Financial Safety. Especially Rule #8:

Make Your Own Decisions

Rule #8: Don’t let anyone make your decisions.

Many people lost their fortunes because they gave someone (a financial advisor or attorney) the authority to make their decisions and handle their money. The advisor may have taken too many chances, been dishonest, or simply incompetent. But, most of all, no advisor can be expected to treat your money with the same respect you do.

You don’t need a money manager. Investing is complicated and difficult to understand only if you’re trying to beat the market. You can preserve what you have with only a minimum understanding of investing. You can set up a worry-proof portfolio for yourself in one day — and then you need only one day a year to monitor it. Allowing the smartest person in the world to make your decisions for you isn’t nearly as safe as setting up a safe portfolio for yourself.

Above all, never give anyone signature authority over money that’s precious to you. If you should put money into an account for someone else to manage, it must be money you can afford to lose.

If you or a family member absolutely needs to use a financial advisor to run an account (say the person is not capable of making good decisions, etc.), I’d stick to Vanguard and use their financial planners. They are backed by a large and well run company, have insurance and controls to prevent fraud, plus they won’t do anything grossly negligent with your money as they tend to be conservative (and you can direct how the money is to be invested).

Or if you don’t want to use a financial planner, but don’t want to run a portfolio yourself, you could put the money into the Permanent Portfolio Fund and get one stop shopping that way.

In any event, my personal opinion is to never give anyone signature authority over your money in a way that they can directly access or withdraw it. If you have to use a financial advisor, make sure they are with a large firm so you have someone you can go after if fraud should happen.

But it’s better to avoid financial advisors altogether if you can do things yourself. This is easy to do if you keep things simple. I know not all financial advisors are crooked, but it’s just an unfortunate circumstance that some are. Nobody cares more about your own money than you do.