Dear Mr. Berko: When my wife’s grandfather passed several years ago, he left us $16 million after taxes, legal fees, etc., from his businesses and real estate in California. We have a modest $260,000 joint account plus two IRAs worth $416,000 at Merrill Lynch and discussed this windfall with our Merrill Lynch broker. He recommended that we invest 30 percent in five annuities, 30 percent in a portfolio of mutual funds, 25 percent in a portfolio of government bond and GNMA funds and l5 percent in a portfolio of tax-free mutual funds.
We don’t need any of this money and will probably never touch it. Both of us are employed with good, secure jobs. Together, we earn $164,000 a year and have three kids. Frankly, we are quite comfortable — thank you very much — and we don’t want our lives to be changed by this inheritance. When we asked our broker if there was a better way to invest his money, he didn’t actually become upset but recommended that we could place some of this money with the U.S. Trust. We know they manage money for very wealthy people and have a good reputation.
We want to do this right for our children, grandchildren and great-grandchildren. We would appreciate your advice. –C.R., Illinois
Dear C.R.: You folks sound like you have it all together. I must be succinct because I have a lot to say, and there is not much room here to say it, so pay close attention.
I don’t like a single one of those l4 growth funds, and without going into detail, their five-year and 10-year performance records “sphinx.”
Your broker is a first-class fink. If you follow his advice, this fink will snaffle a 5 percent commission on $4.8 million ($240,000) and snicker all the way to the bank.
Now, I can’t fault this fink’s choice of annuity companies. He has selected five of the best, but you need these annuity products about as much as my mother-in-law needs a second tongue. And it really galls me that this fink has the stones to euchre a 6 percent commission of $288,000 from those annuities plus another $32,000 from the government bond and the municipal bond mutual funds. In other words, that scoundrel would squeeze nearly $900,000 in commissions from your $16 million. That’s a turnpike for thievery.
Drop that diddler like a dead rock. Yes, a dead rock. And don’t you dare consider his second recommendation to employ the U.S. Trust. U.S Trust is managed and owned by Bank of America/Merrill Lynch. Need I say more? Grrrrr.
But just up the pike from you is a marvelous institution called Northern Trust (NTRS, 52-week high of $60.84 as of Oct. 12), which, unlike U.S. Trust, has not debased itself to become part of Wall Street’s financial supermarket concept.
NTRS, founded in l898, is a private bank for the wealthy, as well as custodian for institutional investors. Almost half of its $3.8 billion in revenues derives from real old money, contemporary rich and recent rich such as you.
I know several folks who have used NTRS services for years (one whose family has been there for three generations), and their accounts have no semblance to that proposed by your broker.
The folks at NTRS don’t have a magic cape; you will not double your money in five years, but I know their advice is sound as a pound. And NTRS’ 120 years of managing people’s money and financial affairs certainly attests to that.
However, if you prefer the comfort of a hands-on professional with whom you can enjoy a personal relationship, I e-mailed two names whose knowledge, experience and wisdom have impressed me for more than a dozen years.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at email@example.com.