This post was written by Marie. 

Do you use a full service broker? My friend does and now she is sorry!

Last January, one of my good friends made the decision to keep both her full service broker and open new accounts at Vanguard to hold her retirement funds. If you want to see the analysis she did to make that decision, read Deciding Where to Put Retirement Fund Distributions  on Family Money Values.

Recently she realized that she is no longer getting full service from her full service brokerage. Here is her new story.

The NO Service Full Service Broker Story

Back in July, the markets were higher and my friend had sworn to herself in 2008 that she would SELL when prices went up. In reviewing her portfolio, she realized that her oil stock shares were selling at a premium and she decided to enter a couple of open orders to sell them.

So, she called her broker to place the order. He was out for the day so she placed the order with his senior registered rep. My friend priced one open order at $106 a share and the other at $110. She requested that shares be sold by lot, selling the highest cost lots first. These are normal brokerage functions.

The senior rep was ‘unable’ to put the individual lots (there were 25 small lots) into the brokerage order system. She (the rep) suggested rolling up the lots to one big one, then she would go back and ‘fix’ the cost basis if the open order was met and the shares sold. During the conversation, the rep actually argued with my friend, trying to get her to use average cost instead of individual lots!

A full service brokerage should be looking out for their client’s best interest, not trying to make their own jobs easier!

The shares sold the very next day. The rep called my friend and stated that she ‘needed’ my friend to send her exactly which share lots should be used. Since the broker has always stored the cost basis for each lot, my friend didn’t understand why she needed to supply this information – after all the rep should already have access to it on the brokerage system.

However, in the interest of keeping taxes as low as possible, my friend supplied the information in an email, reiterating that the goal was to sell the shares with the HIGHEST cost basis first – to keep taxes lower.

A full service broker should have been able to enter the exact lots desired from the general statement – “sell the shares with the highest cost basis first”!

My friend received a confirmation of the sale, showing a commission fee of around $200, a transaction fee of a dollar or so and a processing fee of about $5. Cost basis information was not shown on the confirm.

When my friend received her monthly statement, she found that the cost basis information was incorrect – much lower than expected.

So she called the broker’s rep and asked why. The rep stuttered and sputtered and finally came out with, “Oh I just did the lots the way we always do – first in first out”. She again complained about how much work it was to enter the lots as directed, but finally said “Oh, alright – I’ll fix it for you – we’ll just roll up the shares remaining to one basis and roll up the shares sold to their basis”. She asked my friend to send those two figures to her! Just send me an email, she said.

My friend wanted to continue to track remaining shares by lot and said so. Instead of sending rolled up numbers, my friend took her last correct statement, copied it and indicated which shares SHOULD have been sold and directed that remaining shares should be left as is.

Composing another letter, scanning in the statement, sending the email and mailing the USPS letter took my friend another hour and a half.

A full service brokerage should have been able to handle this for the client, shouldn’t have needed the client to send the information at all and should have been able to do it right the first time!

After a few days, the rep called my friend back. The rep had just received the paper letter and took umbrage with the fact that my friend complained about the mishandling of the transaction. She admitted that she ‘made a mistake’ by using the wrong cost basis, stated that she had just been too busy to read the email when it came in, and that she wouldn’t have time to mess with making the correction in time for it to show up correctly on the next monthly statement.

She told my friend that she has to prioritize and this task just wasn’t a priority right now!

Can you imagine any worse customer service?

My friend is in the process of transferring her other full service brokerage accounts to Vanguard and will transfer the account in which the transaction occurred as soon as the rep confirms the correction of the cost basis for the sale of those shares.

Moral of the Story – Make sure You Get Your Money’s Worth from a Full Service Broker

The moral of this story is, if you are using a full service broker, make sure you are getting your money’s worth – there are a lot of other choices in today’s world to get your financial transactions processed. Know what services you should expect to get for the money you are paying and demand good customer service.

Do you use a full service broker? Do you get full service? Why should my friend pay huge brokerage fees when she is doing the work for the broker!