My Guy

Mary Wells recorded the song "My Guy" in 1964 on the Motown label. It was written by Smokey Robinson of the Miracles and quickly rose to the top of the Billboard hot 100 singles by May of 1964. Wells became Motowns first female recording star but she never again reached the success that "My Guy" achieved. During the recording session, the studio musicians were having trouble getting the intro right and they decided to cobble together some rythms from other songs like "Canadian Sunset" to get the job done. They finished "My Guy" within their allotted studio time and the rest is history. The song returned to the Hot 100 list three more times: by Petula Clark in 1970, Amii Stewart & Johny Bristol in 1980, and Sister Sledge in 1982. As the end of tax season approaches, I am reminded of this song because I see a lot of brokerage statements from clients that I serve. Most of the clients that I serve are widows who lost their husbands many years ago and have a "guy" who manages their investment portfolio for them. This guy is usually an employee of a large national chain of wealth managers who simply executes a computerized program of trades during the year. Most of the investments are mutual funds with high management fees and a sales charge around 5%. After I input the dividends, interest, and capital gains into their tax return, I make it a point to ask if they have read their 1099 statement. The answer I usually get is "no, I wouldn't understand it anyway". I then proceed to show them the management fees they are charged and the "performance" those fees have generated. In almost every case the net result of all the excess trading done during the year is a net loss to the customer. Clients are also usually suprised when I show them how much they paid for such lousy investment returns. As an IRS certified tax counselor, I am not supposed to give clients investment advise, but I can point-out how badly they are getting screwed by their "guy". I understand that these wealth managers must make a living but I wonder why an actively managed mutual fund has to also be managed by some local guy who is just generating trades in the name of rebalancing. An actively managed mutual fund, as opposed to an index fund, is already being managed by a professional money manager. Why not just hold these mutual funds in a discount brokerage firm like Charles Schwab or Fidelity and save thousands in locally generated fees? Sometimes, clients consider these wealth managers their friends and are reluctant to confront them because they might be offended. Maybe the client is afraid to be left without someone to watch over their assets if they transferred their account. Having the fox protecting the hen house is never a good idea. Mutual funds are supposed to be a buy and hold investment and don't need to be constantly manipulated. Are all wealth managers just greedy opportunists sitting around waiting to steal your money? The answer is no. Just last week I had a client who had a very impressive portfolio and some nice gains for the year. I pointed out the fees he had paid and his reply was yes, he knew about them but the performance was worth it. I agreed and congratulated him for choosing a qualified money manager. The lesson here is that there are actually some good "guys" out there, you just have to find them. Don't be afraid to ask questions, ask for their qualifications, years of experience, performance history, education level and any certifications earned. If your not comfortable with their answers, look elsewhere. Any time you must hire someone to perform a task for you there is a cost. Car repairs, home repairs, yard maintenance, and money management. All are costly if you must hire it out. My point is simple, hire the best and monitor their performance to get the best "guy" for your money.