Is it normal for my broker to make over 50 trades in one year for one of my IRAs?
I don't know much about investing so I hired a broker with a well-known brand name. When looking at my account, I notice she sells and buys a lot every year. For instance, between March 2018 and March 2019, she sold and bought small shares (100) over 50 times in just one of my IRAs. Besides my minimum required distribution (I'm over 71 years old), there wasn't much growth in the account to show for it. Is she just making money on the trades and not performing with growth in the account? I don't know enough to understand and don't want to be unfair by moving the account without researching. It seems that other brokers always disparage what someone else is doing to get the business.
Although that does seem very excessive, without more evidence, it would be unfair for anyone here to suggest that your broker is squandering your returns by generetaing unnecessary trading commissions. Get an aggregate of all fees, commissions, and other costs for your account and compare to your accuont balance. If it is excessive (>1% of your balance), perhaps look elsewhere. Also, keep in mind that, besides simply generating fees, timing the market or turning over stocks/funds frequently to pursue outperformance is usually detrimental to your returns. Asset allocation and discipline in the long term can instead help your odds of success.
A fee only fiduciary investment advisor may be able to provide you with a second opinion. We work in the best interest of the client and get paid only by the client, never by commissions. This means that you are paying for our advice. Good luck.
Brokerage and money money management is a very competitive business so it is no surprise that you would get many different opinions.
In general, it would be important to see how your manager gets paid. This will let you know where their bias is in regards to your account.
Another thing to look at is the amount of trades relative to the holdings. For example, if you hold 200 positions, then 50 trades would not be that much but if you only hold 25 positions than you basically turned the portfolio over twice in one year.
Also you can calculate your trading costs by taking your total commisions for the year and dividing it by your average account value and multiplying by 100 to see what percentage the trading costs alone are costing your portfolio.
Lastly, make sure you have a good understanding of their investment process. You should know this already, but sometimes it can be unclear. In this instance communication is important. Our practice uses active management and there will be times when there is little trading such as 2017 and other times where trading is a little higher such as 2018. In either case, communication is important so that clients and investors understand not only what you are doing, but why you are doing it.
I hope this puts you on the right track to form an objective opinion on how your broker is doing.
It's challenging to say for certain from the outside looking in. I have a question first. Does your broker earn a commission every time she makes a trade? If she does, this could be an instance of churning, which is prohibited. Again, I don't know what she's doing so she could just be an active trader.
That said, the market, specifically the S&P 500 (SPY) only went up 3.5% for the time period you referenced. Not attempting to defend your broker or anything like that, just wanted to give you a figure for comparison.
At your age, it does not seem necessary to be that active in your IRA. Every broker/advisor has their own style and method for managing portfolios, and being active like that is not mine, so take my answer with a grain of salt.
One last question. How long have you been working with this broker? If it's been a few years, has she performed well in other years?
Good luck and I hope this helps!