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April 22, 2008

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First contact the broker for an explanation, maybe it was a mistake or miscommunication. Hopefully this happened recently, it should be no problem to re-characterize it back. Make sure though that you keep good records of paperwork, discussions etc. If it was a mistake the broker should be able to change it back, to the way it was originally, and the broker should eat all costs including market loss. Secondly, I would determine if it makes complete financial sense to make a Roth conversion, it if is a good decision you may not want to go back. Get good tax advice first. If the broker doesn’t cooperate, ask to speak with his branch manager, or call the compliance hotline for the broker dealer to get full resolution to your satisfaction.

First, document the issue. If you don't have other reasons to care for the advisor, select a new one.

Then go see an attorney who specializes in tax law. The initial consultation should be free. The attorney should be able to tell you what your options are.

1) You have until the due date of the return for the year it happened (including extensions) to recharacterize it back to a regular IRA. But like Kent said, it might make sense to keep it in the Roth. If it happened in 2008 you have until April 15, 2009 to recharacterize.

2) Talk to the planner/broker and see why he did this without your knowledge or consent and how his company even let it happen. You may not get much out of a lawsuit against the guy, but it could be worth switching advisers if his explanation is not satisfactory to you. After all, if he does this without your knowledge, what else might he try? I sure wouldn't trust someone like this with my money.

@Kevin - "You may not get much out of a lawsuit against the guy"

Notwithstanding various punitive causes of action most likely found under the multiple financial statutes, if the IRA was a couple hundred grand are that is now taxable income for year 2009 - that could be mid-five digits and beyond.

Evan - I agree, but the fact that the IRA owner is asking this of a PF blogger indicates to me the value is probably not that large. If it were that large, a phone call to a lawyer would probably be step one, at least for me. And like I said, he/she has until 4/15/09 to "decide" if it is really income or not.

To switch from Regular IRA to Roth IRA, don't you have to sign papers? Did you get those papers and did you sign it? If you did get the papers, and you did sign it, then you are duped. If you did not get papers, ask the main office what the procedure is for the conversion. They might even have the account type classified incorrectly without the signatures.

Again, I am inexperienced about this, but just thought I will put this question in your mind.

Kenny

Very good advice from Kent and Kevin - also good insight that someone with a hefty IRA is not going to come to a blogger for advice, but would already have an accountant and a lawyer on retainer (my in-laws would have).

I agree with Kent in that you can usually get mistakes reversed, and if it is a chargeable transaction, fees paid by your broker/planner.

If you have a one-on-one relationship with this planner and (s)he is not part of a pool, then by all means, reexamine the relationship to see if you should find another (this is why they will bend over backwards to fix these kinds of mistakes).

Also, in some states (Ohio is one, I do not know of others), there is a 3-day cooling off period on all contracts and this should include these deals as well - it certainly worked on airline travel tickets booked as non-refundable and cancelled within 3 days.

Always the first line is to contact the apparently guilty party, explain what you saw happen and state what you had wanted, then let them explain. If they do not explain why what you wanted was not what you saw happen, then ask (but at that point, I would probably fire them after getting other satisfaction because they are not voluntarily answering your question, but requiring you to put them on the hot seat in order to get them to answer. I read that as guilt and immaturity on their part - not recognizing a problem and taking immediate steps to remedy it and make you happy.

Some companies out there - and some of them are my credit card companies - have extremely good customer service. I have found this at the brokerage services as well (full or discount, even more so at discount). Just speak rationally and state the facts only, not any emotional coloring of the facts. Write it down on a piece of paper first if you think that might help you remember them all in the conversation. Be sure to get the name (full name in this case) of whomever you speak to, the time and date of the conversation, and record a synopsis of what was said, as detailed as you think necessary. Remember to keep it as unemotional as possible. If they do not offer to do anything about this, ask them what they can do about this. Ask them specifically if they can reverse or delete any charges this may have caused, etc. Be specific if they are not. Some of these things they can take care of for you, they will not volunteer and that may be company policy/practice, but they will easily give it to you if you ask (no questions asked, and a "yes we can do that" response, but you may need to ask).

Just remember, it can't get any worse than it is :)

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