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Dear Mr. Berko:

Dear W.L.:

You’re fortunate that you have a knowledgeable neighbor, because that free lunch might have cost you a large portion of your $250,000. I suggest that you check with www.finra.org and click FAQ (frequently asked questions) on the bottom left of the page. Another page will open on which you can inquire about that broker’s disciplinary record. And you’ll find that your young cad may not be as gracious as you think.

This flim-flam man has not been a good boy during the past decade. In fact, I’m amazed that this 37-year-old thief with a rap sheet as long as a rake handle hasn’t been shot, mauled or poisoned by angry investors.

Few people take the time to check out their broker’s past and are shocked when they discover irregularities in the way their accounts are managed. Every investor should check their broker’s record with www.finra.org before giving him or her access to managing their account.

The 10 different mutual funds he purchased for you last May are fine funds and have good management. However, I don’t think a 75-year-old widow should own three aggressive growth funds, three small cap funds, two emerging market funds and two high-yield income funds. Because each of the funds trades nicely above your cost, he wants to sell them and use the proceeds to purchase 10 brand-new mutual funds. This, dear lady, is called churning, and churning is one of this lad’s problems. You paid him $12,500 in commissions or 5 percent of $250,000 to buy the first 10 funds, which are now worth $335,000. Now he wants to nick you for another 5 percent commission on $335,000 or $16,750, to purchase 10 new funds. That’s a nice payday between May and November.

I agree with your broker that those funds should be sold, but they should be sold because they are not suitable investments for you. You will note that selling unsuitable investments is another one of this lad’s problems. Sell the funds as quick as a speeding bunny and do not reinvest a centime of those proceeds. Then write him a letter. Tell him to send you a check immediately and include a copy of this column with your letter. When you get the money, put it in a bank money-market account for a while. Cash gives you time to think.

I cannot tell you how to invest that money, because I don’t know enough about your situation.

I urge you to find a money manager with 25 to 35 years of experience, ask for client references and check his disciplinary record. Managing money is like playing chess: The longer one has been playing, the better one’s game becomes.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service