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BERKO: Widow gets a free lunch and bad financial advice

Dear Mr. Berko: I’ve enclosed my check for you to review my portfolio. My husband passed away four years ago, and I’m now a 71-year-old widow. A lady friend and I attended an invitation-only lunch for seniors two weeks ago, which was very interesting. The speaker believes that in the coming years, we’re going to have a stock market crash and very high inflation that will last at least through the next two elections.
My daughter and I visited him at his office, and he recommended that I sell our nine stocks and two mutual funds, which my husband bought and have been in our account since he died. The stockbroker said that 20 percent of the proceeds should be invested in a floating-rate mutual fund, which would pay more each time interest rates go up. Then, he said, we should invest 30 percent in an annuity that guarantees against any loss and pays a guaranteed 6 percent. He wants the last 30 percent to go in a private real estate limited partnership that owns new Section 8 apartments. This real estate partnership would protect me against inflation and start paying an 8 percent dividend in three years. He advises that we leave the remaining 20 percent in a money market account.
Both my daughter and I think this makes good sense, and so does our accountant, who has known this broker for years. I’m close to my husband’s sister, who is a pharmacist and smart in business ways. She reads your column in Cleveland and told me to contact you before making any changes. — TB, Vancouver, Wash.
Dear TB: Beware of free “educational” lunches; they’re infrequently free and seldom educational. Rather, they’re a salesman’s decoy and an investor’s trap. And because of your profile — a widow with several million dollars and no financial experience — you’re defined as a “whale” (a big catch) by financial advisers.
Thank you for the $1,000 check, which I’ve returned. Your newspaper pays me well for my semiweekly advice. That your sister in-law told you to write to me suggests she’s a very smart lady. This adviser has the makings of a great sociopath who would steal the dimes from his dead mother’s eyes. I know many financial advisers like this cur. Their sweet spiels could persuade the devil to join a Baptist church. I urge you to contact the investment adviser who helped your husband five years ago. If he’s still in business, I believe that his advice would jibe with mine.
I can’t think of a reason to sell a single one of your nine stocks — Medtronic, Caterpillar, Boeing, Johnson & Johnson, Southern, American Express, Chevron, Home Depot and NextEra Energy. Those are nine stocks that you can keep for the rest and best of your life — and your daughter’s life, too. Nor would I, in my wildest dreams, ever consider selling your two mutual funds — Fidelity Growth Co. Fund and Dodge & Cox Stock Fund. They are managed darn well and have enviable long-term annual returns. Your husband had a fine adviser, who didn’t need those risible government rules and investment guidelines from Washington telling him how to invest your spouse’s money. Sadly, an increasing number of financial advisers have become so greedy and viscerally unscrupulous. Now the federal government finds it must enact laws requiring financial advisers to put the clients’ best interests first. The realization is that too many financial advisers are putting their best interest first and not the clients’, and that’s scary. It certainly describes the fellow who bought you lunch.
Your $2.8 million portfolio is a widow’s dream and a slick financial adviser’s Golconda. If you followed this creep’s advice, he would make an 8 percent commission on an $840,000 real estate limited partnership purchase. That would be a $67,200 payday. Next, he’d take a $17,000 commission on a $560,000 purchase of a floating-rate bond fund. Then he would scarf a 6 percent fee, or $50,040, on an $840,000 purchase of a 5 percent annuity. The total commission cost would be $134,600, and this rotter would pocket that money, which is just about what the average stockbroker makes in a year, in one afternoon. Meanwhile, your accountant may be in cahoots with this brokster and might share some of the commission.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected]. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at


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