2.26.20 Discount brokerage consolidation; Check scam hitting millennials; Beware bad car-buying advice

The investment industry is going through consolidation that will lead to fewer players. Weakened mutual fund companies, stock brokerages and investment houses are merging. A small number of huge players will emerge. All this has come about because of the enormous strength of the big 3 discounters. Vanguard, Fidelity and Schwab have essentially demolished the competition. Traditionally, investors paid massive fees to bank investment arms or full commission stock brokers. Some still do but the movement is to lower costs. Full commission outfit Morgan Stanley is buying discounter E*Trade, ostensibly to sell E*Trade customers on their products. It’s important to know what you’re buying with any organization you invest with. Understand what you’re getting and what you’re paying.

The FTC warns the phony check scam is roaring back, now successfully targeting young adults – those in their 20s and 30s who have never been check writers. They’re less likely to suspect a check is bogus, especially if it clears. In addition to elder loved ones, make sure the young adults in your life know that if they get a UFO check with instructions to deposit, keep part of the money and do something else with the rest, they’re about to get scammed big time. The check that cleared will usually bounce in 4 to 6 weeks, and they’re liable for all that money.   

Right now there are various disasters associated with trading in a car. Simple rule: DON’T trade in a car that is not paid off. Around 30 – 40% of people are dumping cars they’re upside down in. Danger zone. There are dishonest car dealers that know they can’t get a loan to cover an upside down trade, so they’ll encourage the customer to buy a new car with a fresh loan, and just default on the vehicle they wanted to trade in, and turn it in to the lender. In the auto industry, this is called ‘kicking the trade’. These dealers are NOT telling people that allowing a repossession will ruin their credit for 7 years. The lender sells the vehicle at auction, and in most states you’re liable for the difference between what it sold for and your balance plus expenses. You no longer have the vehicle, your credit is ruined and you’re responsible for all the money the lender lost. This eats up your future. If you hate your car and owe on it, tough it out, keep driving it and pay off that loan. Get out of the cycle of owing more on vehicles than what they’re worth. Long loans leave you upside down, and paying way too much interest.

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