Who is really accountable?

It has been a fast 1st. quarter and a quicker tax season. As with many years in the past, I have had the opportunity to meet new individuals and couples during tax season to offer my advice to them. That advice is varied but it is specific to their needs.


One reoccurring theme I have seen this year is a larger number of people, who work with financial advisors or financial consultants, that don’t understand why their advisory account holdings have a complete change.

First of all, I inform people that they need to take responsibility for their investments. If they don’t understand what is going on, then they need to get an appointment with their financial professional and review their account and understand reasons as to why there needs to be a change. Many people tell me they don’t understand what their financial professional is telling them or people say this financial advisor “talks above my head”. If you don’t understand what a financial professional is telling you. Then you probability don’t need to be in that type of account or you need to work with someone who can answer your questions.

However, as financial professionals change jobs or broker/dealers, these financial professionals recommend changes based on the fact that what was offered at the previous broker/dealer isn’t offered at the new broker/dealer. Hence, this is the only reason for a change – “I have changed jobs and you need to change your account”. That in and of itself isn’t a reason to change investments. You can always stay where you are. You are not required to follow your financial professional to the new place of business. If you want to stay where you are, call the branch office and ask for the branch manager of the firm. He or she can help you. At least get a second opinion – you owe yourself that much.

Remember, you are responsible to maintain you cost basis in your investment account for federal and state income taxes. The new broker/dealer will not know this information; cost basis doesn’t transfer from one broker/dealer to another. Your financial professional doesn’t keep this information on your behalf when he or she changes a job. Why do you need to know this? You as a tax payer are responsible to report your realized gains and losses on your tax return. In a tax audit, you will have to provide this information.

I have seen a rise in the advisor fee for advisor accounts. What was common at 1.5% annually for advisory fees has risen to 1.75% annually. This is very true for advisory accounts at or near the minimum account levels. The advisory fee doesn’t always include transaction costs within the account itself or the mutual fund fees or expenses. So you could be paying fees in excess of 3% annually with no guarantee of success within the advisory account. Understand what you are paying for and get your money’s worth out of the professional relationship. Remember your financial advisor works for you, not the other way around.

Finally, is your IRA account RMD (Required Minimum Distribution) friendly? Not all accounts are and it is your responsibility to know if it is. A sales person or CSR may not know that answer or tell you in advance of the transaction or purchase. If the IRA account isn’t RMD friendly, you could incur additional withdrawal charges or penalties.

As with any of my blog entries if you have questions, please direct them to:



michael@personalfinancialplanninggroup.com