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.B.: The choice is a no-brainer! Employ Broker B, who is "an honest as the day is long” professional. Then tell Broker A, who is probably one of the largest rinds in the compost heap, to stick a carrot in his ear. His business card has to be about 6 square inches to list that alphabet soup of trash designations, none of which gives him even a sub-atomic particle of credibility.

Any semi-literate man who can read a comic book can become a Certified Senior Consultant, or C.S.C., a Certified Senior Specialist, or C.S.S., a Certified Senior Advisor, C.S.A., or a Certified Senior Financial Planner, or C.S.F.P. If you check his resume, you should note that his M.B.A. and Ph.D were issued by diploma mills and can be purchased online for a couple grand each. His bachelor’s degree is legitimate and so is his certified public accountant designation. If you want to put his feet to the fire, ask him to explain the events that caused him to give up the accounting business in 1998. This should be a caution sign for investors: When some dork has a buffet of professional designations plastered on his stationery or business card, it’s time to run for the hills. This guy makes my tongue itch.

I like Broker B. He makes good sense, he’s cautious, patient, risk averse, has 23 years of solid experience, works for a respectable brokerage and he’s believable.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.

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