My father received an “Account Profile Update form” in the mail from Ameritrade, asking for extremely personal info. He’s had this account for several years - he uses to trade stocks for his nestegg.
Besides basic demographic info, Ameritrade wants to know:
[ul]
[li]If he has any affiliations with a “Senior political figure” and details of this[/li][li]annual income[/li][li]approx net worth[/li][li]appox liquid net worth[/li][li]Investments not held in an Ameritrade account[/li][li]federal fax rate[/li][li]if he has any affiliation with a broker and that broker’s contact info[/li][/ul]
He is uncomfortable providing this extremely personal info and I agree. Would you complete this form? Why do they need this info ?( btw, the attached letter says “to serve your investment needs more effectively” but we are skeptical).
Pretty much all stuff that complies with trading requirements, and what any broker needs to know. Investing is not like banking - even Joe Q. Sixpack noodling around with his $1k day trading account has to report and comply with IRS, SEC and other regulations.
The net worth and “other broker” info is more likely internal marketing info. Anyone with a high net worth and no broker is very likely to start getting very ingratiating calls.
Taken at face value, many brokers will ask you those questions so they can recommend stocks and make offers.
If you don’t want to fill it out, toss it in the garbage, IME, if it’s not optional, they’ll send out another request before they do anything harsh like freeze the account.
If you’re worried, call them and ask them why they need it, but unless the letter says that it must be filled out, I think you’ll find that it’s optional.
There are legal justifications for asking these sorts of questions. FINRA has regulations regarding the suitability of investments that are recommended and ones that are entitled, “Know your customer”: “Every member shall use reasonable diligence, in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer.”
[INDENT]Practice Tip: The new rule raises the obvious question of what a firm should do with a prospective or current customer who refuses to provide “essential facts” – whether prior to a formal customer relationship or while the relationship is on-going. Should the firm ignore or terminate the potential customer? Not necessarily. However, as discussed further below, if the broker-dealer cannot meet the reasonable-basis obligation under FINRA’s new suitability rule due to an absence of necessary “essential facts” the broker-dealer may have no other option. Certainly, when the member and associated person must evaluate suitability under the new rule discussed below, such information may prove essential.
The best course of action is for the firm to carefully document the customer’s refusal to provide the “essential facts” requested and the firm’s efforts to obtain the “essential facts.” [/INDENT]
Yeah, it’s a mix of stuff they need to know for legal/reporting purposes, and stuff they want to know for marketing purposes. If your dad’s not comfortable answering, he can ignore it. Eventually someone will contact him about the stuff that’s actually necessary to make the tax people happy.
The net worth/liquid net worth can be used for appropriateness requirements. They can confirm - if there’s a problem - that they didn’t overly concentrate your father in any particular investment or type of investment. I have to ask for this.
The other accounts/other broker can be used to combine accounts for suitability, sure. But it’s really used to gather data about other assets.
A broker needs to know your marginal tax rate to choose the best investments in certain categories. For example, when choosing a money market account for cash, if tax rate is low, a normal (taxed) is best. If it’s high, a federally tax-free MM account will be better in the long run.
A broker has no need for that information, since all they do is buy and sell securities at your direction. A financial adviser or investment manager certainly would want that info though.
My experience with TD Ameritrade is that if you have a certain amount of wealth (and not even that much) in your account, they really start to upsell the “advice” services. The people who just use the brokerage services aren’t as high-margin clients.
Yes, he is choosing his own stocks, and there is no Ameritrade advisor involved. I was wondering if they will try to sell him new services.
**
Thanks to all of you for the helpful responses.**