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YOUR MONEY | Money Talk

Are You Being Ignored? It Might Be Time to Break Up With Your Broker

October 25, 1998|LIZ PULLIAM

Q: You recently chided a reader who unfairly blamed her broker when the reader's investments lost value. I understand that all the recent stock market volatility is not my broker's fault, but I've lost money on some of my investments and I'd like to discuss my situation with her. Unfortunately, she has yet to return my phone calls. I understand she's probably busy with all the market chaos, but I'm starting to feel neglected. Should I?

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A: You're darned right you should.

Think of it like this: How would you feel if you went to a posh, white-linen restaurant for dinner, only to be ignored by your waiter? The food might be outstanding, but if you don't get the chance to discuss the house specialties or ask your waiter's advice on the wine to choose, you're not getting what you paid for. If you wanted the no-frills experience, you would have used the drive-through at Taco Bell.

The same holds for full-service brokerages. You're paying for your broker's advice and attention, as well as for access to the brokerage's research. If your broker notices you only when she's selling you something, she's not doing her job and you're not getting your money's worth.

Everybody connected with financial markets is busy right now, but good brokers are working overtime to contact their clients, answer their questions and discuss strategies. You may experience some delays in connecting with your broker, but to not even get a call back is inexcusable.

What makes this situation worse is that full-service brokers have long defended their commissions and fees by touting their value in a bad market. They boasted that they would hold their clients' hands and make sure they stayed the course even as do-it-yourselfers panicked and bolted from the markets. Unfortunately, some brokers are acting like waiters whose gratuity was paid upfront and see no financial incentive in providing the service they promised.

Give your broker one more call and see how she responds. If it's not to your liking, take your business elsewhere. Your new brokerage, full service or otherwise, will be delighted to help you transfer your accounts.

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Q: I just read something elsewhere in your publication that nearly made me spit out my Wheaties. A writer giving consumers advice about how to choose a car said we should make sure that our incomes are "at least twice" what the car cost. I have never in my life owned a car that cost that much. Is that really good advice?

A: That one made my head spin, too. I suppose if you have no kids, no hobbies, no desire to travel and no plans to retire--ever--buying cars that eat up half of your annual income might make sense. After all, you have to compensate yourself somehow for having no life.

For the rest of us, however, buying a too-expensive vehicle is taking the carpool lane to the poorhouse.

I'm a big fan of paying cash for cars, particularly used cars, and driving them until the wheels fall off. Auto companies hate that because they want us slavering after all the newest models and preferably financing them through the auto makers' lending arms.

A $20,000 loan is going to cost you nearly $11,000 in interest over five years. Do that enough times, and you can easily spend more than $100,000 in a lifetime just on financing auto loans. I don't know about you, but I've got better uses for that money.

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Q: I wanted to share something with you that my father shared with me. He came to this country almost penniless and started a successful drayage and trucking business with a single wagon. Many times he told me that in his first few business years, when he wanted something for the business or for himself, he would ask: "Do I want it? Do I really want it badly? Do I actually need it?" If he answered "Yes!" to these, he then asked himself the clincher, "Can I possibly get along without it?" This was, of course, during a period when any sort of credit was difficult to get. Cash in savings was king, and for many of your readers, it still is.

A: Thanks for taking the time to share your father's wise approach. We're fortunate to be living in an era when credit to expand a business, buy a home or educate a child is relatively easy to get, but for many people consumer credit has become a disease eating away at their financial well-being.

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Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles CA 90053.

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