Dear Mr. Berko: My wife and I are 73 and recently retired after being in the commercial, industrial and multifamily building business for 43 years. We’ve been conservative in business, and we’re comfortably retired, with a portfolio worth $3.6 million. We also own six income properties and several solid mortgages. I thought our stockbroker did a fair job managing our money, but since 2013, according to our new certified public accountant, the broker has earned $103,000 in commission on 326 trades. I hadn’t been paying attention. Our account went up by 4.7 percent between 2014 and 2015, but so far this year, it’s down 1.9 percent. Our CPA won’t recommend a broker. He says, “They and their bosses are all crooks.” He recommends that I use Northern Trust to manage our account. My wife knows several people at Northern Trust and says they’re “stuffy prudes.” We want to be able to establish a comfortable, personal relationship with the person who manages our account. Do you have any recommendations? If we decided to manage this account ourselves, what stocks would you recommend?
— G.S., Cleveland
Dear G.S.: Though I may not care for lots of stockbrokers, I don’t care for a CPA who claims they’re all crooks. Your broker probably meets that definition because there’s been a lot of trading and churning going on. But there are 381,734 brokers (give or take) in the U.S., and even I know a few good ones. There are thousands of class-act brokers whom I don’t know, but it’s the bad ones who make headlines.
Before they kicked me out of Cleveland’s Plain Dealer newspaper, I visited with some folks at Northern Trust who were delightful, knowledgeable and fun folks to know. Northern is a great institution. I’m sorry your wife’s experience has been disappointing. Cleveland Trust has a good reputation, too. So do KeyBank and PNC. Several readers I know have accounts at Northern Trust and Cleveland Trust and enjoy companionable relations with their representatives. Their only complaint is that their accounts are too conservatively managed. Sometimes that can be good, though. I have no personal knowledge of KeyBank or PNC, but I recommend that you interview them.
When working with a trust department at one of these companies, be mindful that your $3.6 million portfolio may be one of the department’s smaller accounts. Basically, you’re a small fish in a big lake. And though you’ll always get a fair shake, keep in mind that a fair shake can include average results. But average results are why most trust departments don’t lose accounts. If you, like many people, are satisfied with average results, such a trust department will get the job done. But if you want superior returns, you may have to search elsewhere. If you’re willing not to give up on your current broker altogether, he could recommend a modestly aggressive “off-site” money manager. Your account would remain where it is but would be managed by an off-site professional approved by the firm that employs your broker. It would probably cost you about 1.5 percent yearly, and the current broker would get a piece of the action. But be aware that you wouldn’t have conversational access to this manager; rather, your current broker would serve as an intermediary.
