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Oklahoma City retiree urged to focus on broker’s cautious advice
Dear Mr. Berko: I’ve just retired and will convert my 401(k) into an independent retirement account. As you can imagine, quite a few advisers have solicited me. I have narrowed my search down to two people. Broker A is a young man of 38. He has many impressive credentials on his business card and stationery, such as CPA, C.S.C., C.S.S., C.S.A., C.S.F.P., M.B.A., Ph.D, and B.S. His stock market plan for my $426,000 makes a lot of sense. I’m impressed with his approach to the stock market and his long-term goals, which will give me a 6.6 percent current income that will grow between 4 percent and 6 percent each year with very little risk. He’s been in business since 1998 and except for last year, when his accounts were only up 2.4 percent, all his accounts averaged better than 11 percent. Because he’s a certified public accountant, he will do my tax return as long as I remain his client. And there will be no charge except the 1.75 percent management fee on the money invested with him.
The second man, Broker B, is 58 and was recommended by two people in my company who use him as their broker. He’s been a broker-portfolio manager since 1985 and his advice now is to put 70 percent of my account into certificates of deposit at 3.5 percent for one year and put the other 30 percent in a money market account with his firm from which he would buy certain income issues including closed-end funds, convertible bonds and stocks only when they became "ripe.” He made sense but I need 6 percent on that $426,000 in order to be comfortable. Broker B said he can’t get me 6 percent without taking uncomfortable principal risks. He told me his accounts have average annual return of 8.1 percent since 1998, which includes last year when the market was down so drastically.
My wife likes Broker A because he can give us "at least 6.6 percent” and because he has so much professional schooling and education and degrees. I agree with her. But I also have a good feeling about Broker B, which I can’t explain. He will charge 1 percent and works for a very large, national brokerage firm. So I’m thinking of giving Broker A 50 percent of the account and Broker B 50 percent of the account. Can you offer any suggestions that will make the choice easier on my nerves in this market?
S.B., Oklahoma City
Dear S.
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