Is Your Money Manager Really Listening?

No one cares as much about your money as you do! If a money manager doesn’t perform, they lose a client – you lose your money!

Most money managers have a genuine concern for their clients however, they can make mistakes. One of the worst mistakes is not listening and understanding the needs those nearing retirement.

In response to our article, “When The Music Stops, Who Gets Stuck With The Bad Loans?”, reader Rick G. wrote:

“…. My former money manager had several individual bonds in my portfolio. I looked at them and many don’t pay a rate more than a 2-3 year CD, with much more risk.

…several of these are BBB rated…. I don’t trust the bond-rating agency given what happened in 2008. I also don’t trust the insurance companies that are supposedly insuring these bonds against default.

In addition, he put me in several Closed End (CE) bond funds. He said they were good deals as they were selling at a discount to NAV.

Upon further research, these CE bond funds ALWAYS trade at a discount to NAV….

With the Fed raising rates, they now trade at an even higher discount to NAV. Even though the yield is higher than CD rates, the loss of principal is not covered by these higher yields.

…. Personally, I will take the more stable, lower CD rates. …. Maybe I am missing something.”

I asked Rick to share his experience.

DENNIS: Rick, thanks for helping our readers learn from your experience. I noted you said, “former money manager”. Buying individual bonds as opposed to CD’s with no substantial interest rate differential raised my eyebrows.

In your initial meeting, did you discuss your requirements and expectations?

RICK: I’m a risk taker. At one time I held 4 securities licenses, so I understand how most investments work.

I’m approaching retirement and need to preserve capital. Our current projections show I need more cash flow than originally anticipated.

I felt I needed a professional to help restructure my 100% equity portfolio into a balance of safety and fixed income. We had multiple discussions, talking for over 9 months before deciding. We agreed on an allocation. Their strategy was to buy individual equities and bonds – which is what I wanted.

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