A balky brokerage in an estate settlement
We are working with our attorney on gathering the assets of an estate in order to reach an administrative settlement, and be done with it. One well known mid-sized brokerage firm has been particularly difficult to deal with. While not wanting to call it out explicitly but to give a clue to those who want to know, this firm absorbed Brown and Company years ago. Brown and Company was one of the brokerage firms that my in-laws dealt with. It was started as an arms length brokerage subsidiary of Chemical Bank, and for some reason Chemical Bank had been the preeminent major bank in New York's Chinatown for many years. There is a good reason that Buick in the past was the most desired car there, as that was the leading American luxury brand in China in the 1930's and 1940's, but Chemical Bank? Who knows, they must have known and hired the right people.
The general requirements for moving brokerage assets into an estate is to send the appropriate documents and full instructions to the firm with medallion signatures of the trustees. In this case, for Goldman Sachs and Fidelity it worked smoothly, but for this firm it was only the beginning. They did not respond promptly, and when our attorney called they said that one document was outdated and needed to be replaced. That just required getting transferred to a supervisor and pointing out that this was incorrect. Then a few days later they said that the instructions to liquidate the account must come over the phone, with a trustee physically present as they would not work with the attorney without the approval on the phone by the trustee. Over a week later a suitable time was determined for all and, after thorough identification of all, the firm proceeded to liquidate the securities one by one, and on each security they needed to hear K's voice say "agreed", and then "sell". That was in late January.
After three weeks with settlement dates long passed and no funds arriving for the estate, we became concerned and with our attorney called again. The initial call was with someone who would "try" to help us. That was not good enough. A second responder, now in the right area, also said that he would "try", in a situation that was completely obvious. We did the "speak to a supervisor" routine, I shut up, and our attorney was finally on the phone with a woman who seemed alert. He became more animated in tone that I have ever seen him and explained that his clients were putting pressure on him and could not understand why the funds were so late. He said he may be forced to call someone outside of the firm if this could not be resolved(he was just winging it as he had no idea who we would call. FINRA is an impotent facade created by the brokerage industry).
For whatever reason that got their attention, or maybe we had just found one of the few smart people in the firm. Within a few hours she called and apologized on behalf of the firm, and said that she would overnight the check, which means that it should arrive Monday. Seeing will be believing.
I once invested in this firm when a new management team that I knew well took over, but that was not a good investment. This was a case of timing is everything, the timing here was wrong. The former managers had tried to boost returns in the mid-2000's by investing some cash in mortgage backed securities, and that was not well disclosed. My friends stabilized it but after a two year agreement they chose to depart.
Today the firm has recovered from those dark days, but when one looks at the coverage of analysts, things don't look so great. One of my favorite research firms is evaDimensions, founded and run by Bennett Stewart, and a former business acquaintance. Using his methodology, the firm is rated a sell and they say "ETFC's pronounced volatility and vulnerability combine for a very high 98th percentile R score(R = risk)". 100 is the highest in Bennett's model, and in looking at the analysis by his firm over the years I do not remember ever seeing a 98.
One could wonder if this brokerage firm's behavior was intentional, and doing this over scores of accounts is aiding their liquidity. That's an explanation that may or may not be better than stupidity.
Postscript: to those who could easily identify the company discussed, funds received today.
The unnecessary effort and anxiety is over.
The general requirements for moving brokerage assets into an estate is to send the appropriate documents and full instructions to the firm with medallion signatures of the trustees. In this case, for Goldman Sachs and Fidelity it worked smoothly, but for this firm it was only the beginning. They did not respond promptly, and when our attorney called they said that one document was outdated and needed to be replaced. That just required getting transferred to a supervisor and pointing out that this was incorrect. Then a few days later they said that the instructions to liquidate the account must come over the phone, with a trustee physically present as they would not work with the attorney without the approval on the phone by the trustee. Over a week later a suitable time was determined for all and, after thorough identification of all, the firm proceeded to liquidate the securities one by one, and on each security they needed to hear K's voice say "agreed", and then "sell". That was in late January.
After three weeks with settlement dates long passed and no funds arriving for the estate, we became concerned and with our attorney called again. The initial call was with someone who would "try" to help us. That was not good enough. A second responder, now in the right area, also said that he would "try", in a situation that was completely obvious. We did the "speak to a supervisor" routine, I shut up, and our attorney was finally on the phone with a woman who seemed alert. He became more animated in tone that I have ever seen him and explained that his clients were putting pressure on him and could not understand why the funds were so late. He said he may be forced to call someone outside of the firm if this could not be resolved(he was just winging it as he had no idea who we would call. FINRA is an impotent facade created by the brokerage industry).
For whatever reason that got their attention, or maybe we had just found one of the few smart people in the firm. Within a few hours she called and apologized on behalf of the firm, and said that she would overnight the check, which means that it should arrive Monday. Seeing will be believing.
I once invested in this firm when a new management team that I knew well took over, but that was not a good investment. This was a case of timing is everything, the timing here was wrong. The former managers had tried to boost returns in the mid-2000's by investing some cash in mortgage backed securities, and that was not well disclosed. My friends stabilized it but after a two year agreement they chose to depart.
Today the firm has recovered from those dark days, but when one looks at the coverage of analysts, things don't look so great. One of my favorite research firms is evaDimensions, founded and run by Bennett Stewart, and a former business acquaintance. Using his methodology, the firm is rated a sell and they say "ETFC's pronounced volatility and vulnerability combine for a very high 98th percentile R score(R = risk)". 100 is the highest in Bennett's model, and in looking at the analysis by his firm over the years I do not remember ever seeing a 98.
One could wonder if this brokerage firm's behavior was intentional, and doing this over scores of accounts is aiding their liquidity. That's an explanation that may or may not be better than stupidity.
Postscript: to those who could easily identify the company discussed, funds received today.
The unnecessary effort and anxiety is over.
posted by John Borden at 5:37 PM
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