When Your Broker Just Isn’t Cutting It…

By Charles Sizemore  |  September 12, 2018

Investing can be hard, so I really get a lot of pleasure out of watching my readers do well.

I can’t take credit for it, of course. While I can offer general recommendations, it’s ultimately up to them to figure out how those recommendations fit into their financial plans and how to act on them.

But all the same, I like to see it in action.

Well, one of my Peak Income readers, Rick P., has some nice comments I’d like to share.

This is his email in full:

Hi Charles,

My name is Rick and I became a subscriber about two years ago, along with about 20 other investment newsletters that I signed up for at the same time.

I read every one of them for two years before jumping into the market with a smallish heap of cash ($250k) that I was uncomfortable putting anywhere until I felt I had gained enough knowledge to manage it responsibly on my own.

I have another portfolio ($750k) with Morgan Stanley and a broker, who generally doesn’t seem to want to understand that I want to pursue INCOME, without such a single focus on GROWTH.

(I count on my real estate investments for growth and have done VERY well with that strategy for 30 years, since I was in my early 20s – growing that portion of my overall investment picture to over $5 million.)

Beyond that problem, because I have gravitated to income positions in directing [my broker] with my money, I get constant and annoying calls from their “Compliance Officer” because they don’t feel I am “Properly Diversified.” (Apparently, not understanding that I do not have all of my investments placed with them, despite telling them regularly).

Basically, I dragged her kicking and screaming into the MLP space 13 years ago, only to have her get on board a few years ago – she, like many of your readers seemed to shy away from the K-1 format, which I personally do not understand – it is SO simple to flow a K-1 to your personal tax return, but you do usually need to file a tax deadline extension as they can come in as late as mid-March.

All this to say that being fed up with using a traditional broker relationship and being pestered constantly by their “compliance officer,” I set out to do this on my own, but only if I knew what I was doing, with good guidance that I felt VERY comfortable with, and had vetted for some period of time.

Of all of the newsletters I subscribed to, I found yours to be the only one that balanced, education with laser sharp investing advice, AND with an excellent focus on income, while balancing the need for growth.

Most importantly, I read all these publications for two years, before feeling confident enough to manage my own portfolio through E-Trade.

If it weren’t for you and your publication Peak Income, I would not have that confidence.

I guess I just wanted to say how grateful I am to have found you, and your lucrative, yet solid and prudent investment advice that is delivered in an intelligent, yet easy to understand format!

I have unsubscribed to all but three of those newsletters – thank you!

No Rick, thank you.

I appreciate the confidence you – and all of my readers – place in me, and that is something I take very seriously.

I know that many of my readers depend on Peak Income to meet their retirement needs, and that is not a responsibility I take lightly.

You’re also not alone in your frustration with stock brokers.

It’s a relationship that is fundamentally flawed from inception because brokers are trained to view their clients as prey to poach for commissions rather than as partners.

It is shocking to me that the Department of Labor’s so-called “fiduciary rule,” which quietly died earlier this year, was so controversial.

The rule would’ve required all brokers who managed IRAs to act as fiduciaries, which in plain English means they have to put the clients’ needs ahead of their own.

They’d also need to fully disclose the fees and commissions earned from the client and any potential conflicts of interest.

Now, I’m as skeptical of government regulation as the next guy, but why would any of this possibly be controversial?

Doctors are expected to “do no harm” and to act in the best interests of their patients.

It would be considered wildly unethical for a doctor to recommend a surgical procedure that wasn’t in the patient’s best interests because it happened to be profitable for the doctor.

Why do we allow any less from financial advisors?

But not to throw all of them under the bus.

There are plenty of brokers and advisors out there that do put their clients’ needs first. But from the looks of things, you’ve done just fine managing your funds on your own.

Nicely done!

Now, About That Nest Egg…

Looking at your portfolio more broadly, I see you’ve taken a more active approach to investing.

You have a relatively small piece of your nest egg in passive investments like stocks with the bulk invested in real estate that you actively manage.

Now, I have to throw out the obligatory words of caution regarding mortgage-financed real estate.

Be sure that you’re comfortable with the levels of debt you may be carrying on those properties and that you’re confident you could continue to make loan payments through a major recession.

I don’t recommend that my readers invest in real property because, frankly, it’s a lot of work, and most people have no idea what they’re getting into when they buy that first property.

Most first-time property investors overestimate their revenues, underestimate their expenses and generally get in over their heads.

But if you’re willing to dedicate a good chunk of your nights and weekends to inspecting your properties and dealing with tenant needs, property can be an excellent investment vehicle.

As I wrote last year, it’s how my friend David made enough money to retire at 40.

Today, he collects thousands of dollars per month in rental income.

But Rome wasn’t built in a day.

While his friends watched football games and relaxed on the weekends, David replaced carpets and fixed toilets. It wasn’t easy work.

He was willing to get his hands dirty and really learn the business. He’d do some of the “handy man” work himself, and he knew enough to negotiate good prices from his contractors for the projects he outsourced.

Today, David isn’t buying any new properties. Rents haven’t kept pace with prices, so he’s sitting on his hands for now. In most markets, I believe that’s the right move today.

But the same principles still apply. If you want to do better than the 8% to 12% offered by the stock market (and even that looks doubtful over the next decade starting at today’s prices), you have to go out and hustle for it.

It’s not going to come to you on its own.

But for that cash you do want to invest passively, that’s why I write Peak Income.

My goal is to get you durable streams of income outside of the mainstream stock and bond markets.

And, as always, we love to hear from you.

Visit to send comments and questions to us, or message us on our Twitter and Facebook pages.

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR