Broker "misunderstands" business discussion

[PuckiTwo]

I hope you don’t mind that I share this story with CMF: We have been working with broker A from a bank brokerage. I am not going into details but it was fairly awful and the communication deteriorated until it came to a stop this summer (I have mentioned some of that in other posts before).

So, we decided to look elsewhere but give this brokerage a chance. The regional director we contacted thought he “had the right person for us”. The result was a clerk from our broker’s office called and suggested another broker (broker B) from the same office. We agreed to a meeting which took place very recently. .

We sent broker B an agenda what we wanted to discuss and asked him to look at the portfolio and what he would make of it. To us this was an interview, not more. Broker B presented his suggestions (mainly sales) of which we made notes. At the end he said that he would send us a proposal and that we should come back to him and “ok it”. My husband and I discussed the meeting and both decided that he would not be the right broker for us and that there was too much past baggage when staying with this brokerage.

Day after the meeting, broker B’s sends a proposal with the suggestions he had presented in the meeting. This email stated that he will sell certain investments which he had suggested. We did not respond as his email wasn’t read by us until later the next day just before the market closed (we do not always read emails at once, have no smartphone, etc.). Therefore, no response from us.

Never thought that he would put words into action without our consent. Before market closed yesterday we received an email from him confirming that he had sold 3 investments “which we had agreed to”.

I almost lost it. The investments he sold were not small amounts. Although we discussed selling those stks at one point, there was no urge to sell them now and we definitely had not told him to sell, and we had not even given him any indication that he would be our next broker. He simply sold!

In a phone call he said he misunderstood, he thought he had an agreement from us from the meeting. But we never do anything without written confirmation/consent/instruction, never signed anything, never told him that he would be now our broker. His office knows how we work. Even with his colleague (broker A), the one we want to replace, everything had a written back-up.

We are so shocked that somebody could decide over our money without our consent. I was angry beyond belief and wonder: Am I unreasonable?
Sorry about the rant and sorry about the long post. P.

[MoneyGal]

Don't apologize. Contact the branch manager. They should reverse the trades and restore your positions, including making good on any losses you incurred as a result, and fully refunding any commissions. There must not be ANY ambiguity about trading instructions in non-discretionary accounts and the broker is responsible to demonstrate that he has secured full approval before proceeding.

[stardancer]

I see a bank advisor (TD) and he has NO authority to sell without our permission. Likewise, I cannot trade over the net without his okay. Granted, it's not the brokerage arm of the bank, but he is 'in charge' of our portfolio. Actually, it's a good fit; after the initial awkwardness during the first year or two, we got to know each other quite well, and both of us are dedicated to taking care of my husband's and my retirement money.

Absolutely, get things reversed at no cost to you. Any blanket permission to trade should definitely be in writing, to protect both you and the broker.

[Cal]

I am sure that they will either reimburse/reverse the transactions, or will replace any lost $ b/c of the misunderstood trades.

I would also tell them to freeze your account until you transfer everything to another brokerage.

[humble_pie]

pucki yours is not an unreasonable rant, on the contrary it is the sort of thing cmf forum is good at. You can see moneyGal's response & that is exactly what should happen. The brokerage house has to restore your positions to the dollar amount & cancel the commissions.

i believe they will do this. It appears to be a broker subsidiary of a big 5 chartered bank, this will help. It's my further belief that all the full service brokers routinely have a fair number of incidents of this type; the managers are well used to smoothing up all these rough corners.

obviously you can't continue with this house. What i am wondering is whether any full-service broker - any at all - is going to work out. Would you not be better off going it 100% on your own.

putting myself in a broker's place, i would not want clients with part-DIY portfolios. I would not want their leftovers. There would be constant tension. I would feel that they (the DIY clients) were exploiting me for all the difficult navigation, while greedily helping themselves to easy goings at low cost at their ratty little old online shop ... theirs would be the last phone calls i would answer ... i would likely end up answering their Qs with fast, easy, stock answers. Nobody would be happy because for sure they would get the drift. This is why, if i were a financial advisor - which i certainly am not - i'd never take clients with serious DIY accounts.

for the investor himself or herself, the idea of having no advisor at all might seem shocking. But actually it is fine sailing. You do sound like a first-rate capable researcher yourself. All the information any investor needs is online & has been for years & years, just as GOB is saying in another thread.

this might sound a bit radical/shocking, but how about moving everything to discountland. Yes, cold turkey. IMHO you are a person who is not likely to get into trouble. Your existing accounts probably contain a fair amount of what i call Good Old Stuff, ie well-chosen securities that are resilient during market ups & downs.

you have already picked an excellent online broker with probably the best research offerings of any in canada. Your account(s) could sail on there for a year or 2 while you would a) be free from all the full-service worries, not to speak of the full-service fees, & b) be able to test out your wings as a committed DIY investor. I think you'll like it !

[Causalien]

Wow,

You are beyond nice even by Canadian Standards.

I would've cussed them out and let the branch manager have it as well. Then post their full name on this forum. It's not liebel if all the events are presented as facts without opinions.

I wish I could say, just let me manage and waste your money for you. But in this police state, there's too much regulatory headache to go through even for free money.

[PuckiTwo]

Thanks to everyone!

MoneyGal: As usual, good advice and to the point. The branch is managerless and the regional mgr did not seem too interested. I too thought that the broker should reverse the trades but didn’t really know my rights. In a sharp email we forced him to reverse the etf which was the larger part of the money and kept the two smaller equities sold. He actually asked the next day if he should reverse the two as well but we left it at that. We don’t want to have anything to do with this brokerage anymore and the faster we are out of it the better - and the move is already in progress. Btw, yr comments are on my regular reading list....learn a lot from you.

Cal, Stardancer: All and any authorizations in regards to the accounts the brokerage is holding were withdrawn immediately. And we would not give a blanket permission to trade anyway. Now, they lose the whole account.

Humble Pie: Thx for the encouragement. Btw, it’s not one of the big 5 but the next number down the line, branch has been in trouble before. I agree with all of your points, (discount brokerage vs broker-assisted investments; .....new broker not liking the little DiY on the side.....

Going independent has a lot of appeal to us and we discussed for weeks if we should. The BIG HOWEVER: I am light years away from understanding economist lingo, and that in a foreign language. Many terms I simply don’t know what they mean, I look them up, still don’t understand, then need to translate them, have lots of help from my husband - it is a very tedious process.

One can learn what EPS, payout ratios, P/B, P/S, etc.are from books but they will not teach you how to interpret figures and their relation to each other. When can I accept a dividend payout ratio of 300% and when not? How do I determine price entry and exit points? Assuming I can learn this, do I meanwhile jeopardize our retirement and move the whole portfolio to a discount brokerage? I would find that very scary.

You say that “the accounts could sail for a year or 2".... yes, but they haven’t been rebalanced for two years and I don’t know enough about it (yet). Most of the investments are at a very high price level and further portfolio growth looks very limited. We should trim some investments in order to buy when there is a dip but we need more experience to do this.

In the last few weeks we did research on the brokerage market. Usually not a fan of interim solutions we have decided on one: as of yesterday we have moved 1/3 of our portfolio to TDW discount brokerage and HISAs. For the core portfolio we are contracting a broker (commish on transaction) at one of the big 5.

He knows about the investment in TDW and has to live with it. You are right..... if I were the broker I would be suspicious too. If he doesn’t like it and treats us accordingly, we still have the option to move 100% to TDW. In the meantime I can learn and pester the forum with questions.

Causalien: I would like nothing more than go public with their names and raise fuss - but we want to get out and not drag the thing on. There are lots of ways not to promote a broker.

[GoldStone]

The BIG HOWEVER: I am light years away from understanding economist lingo, and that in a foreign language. Many terms I simply don’t know what they mean, I look them up, still don’t understand, then need to translate them, have lots of help from my husband - it is a very tedious process.

One can learn what EPS, payout ratios, P/B, P/S, etc.are from books but they will not teach you how to interpret figures and their relation to each other. When can I accept a dividend payout ratio of 300% and when not? How do I determine price entry and exit points?

You don't need to learn ANY of that stuff in order to follow the couch potato strategy. The model portfolios are readily available:

http://canadiancouchpotato.com/model-portfolios/

Pick a simple model portfolio.
Adjust bond/stock ratio to meet your risk profile.
Set up the portfolio.
Rebalance once a year.

It doesn't have to be more complicated than that. Research shows that high-priced brokers have hard time beating this simple strategy over a long run.

[MoneyGal]



Cal, Stardancer: All and any authorizations in regards to the accounts the brokerage is holding were withdrawn immediately. And we would not give a blanket permission to trade anyway. Now, they lose the whole account.

Just one point of clarification: the broker is prevented by regulation from trading without your explicit approval for EACH trade. Only brokers holding the portfolio manager license are permitted to make discretionary trades on a client account (that is, to trade without the client's explicit prior approval for the trade).

This isn't just a matter of "the broker misunderstood me" -- it's that he or she overstepped their securities registration. The branch needs to know and take action and even if there is no on-site branch manager, there is a branch manager *somewhere* responsible for that branch, not to mention a compliance department.

[PuckiTwo]

.........., there is a branch manager *somewhere* responsible for that branch, not to mention a compliance department.

Oh, i do plan to inform their superiors, don't let anybody get away with it even when i didn't react fast enough in the first place. Btw, the accounts weren't discretionary but on transactional basis. Thxs for excellent advice

You don't need to learn ANY of that stuff in order to follow the couch potato strategy. The model portfolios are readily available http://canadiancouchpotato.com/model-portfolios/
Pick a simple model portfolio.

Yeahhh. And while my brain rests i put my feet up, contract obesity and arteriosclerosis - and then? Goldstone, very nice of you to help, i have read some of your quotes and i hope i can learn from you. P.