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Are You Safer with a Large or Small Brokerage Firm?
By JLP | June 5, 2006
There’s an interesting article today about which brokers are safer for investors. Here’s the main finding:
An extensive Dallas Morning News study of local brokerage firms found that brokers at small, locally based firms tend to have longer regulatory histories, such as investor complaints. But many of the events in question occurred when the brokers worked at larger firms.
“Some of the worst, most egregious conduct has been at big firms,” said Tracy Stoneman, a lawyer who represents disgruntled investors.
I find this interesting because a few years ago I read in a book by David Reiser that basically said that people should ONLY CONSIDER brokers from large firms because large firms were better at patrolling their advisors and that large firms were ethical. This book was published BEFORE the mutual fund and research scandals. Of course one would expect Mr. Reiser to say such a thing since he worked for one of those large firms.
Topics: Investing | 3 Comments »
June 5th, 2006 at 2:24 pm
Go will someone you can trust. Talk to your friends, you lawyer and your CPA.
June 5th, 2006 at 7:34 pm
Better then that, consider going with someone who is a fiduciary. Brokers aren’t. They must generate income, and lots of it, or do not stay employed. Go with someone who cares to the utmost about establishing and maintaining strong fiduciary pactices.
If they pitch you heavily commissioned stuff like limited partnerships, or controversial, again, heavily commissioned insurance-based stuff like equity-indexed annuities, you are not safe, no matter how safe the salesman makes you “feel”.
Ask them what their philosophy of investing is, if they have one. Then ask them if any “objective”, i.e. academic research exists (not sales literature,) to support the notion that their philosphy really works for you, or just for them. If they say yes, the objective research exists, say “show me the research”. If they cannot show you the research, do not buy, do not sign. Keep looking.
July 11th, 2006 at 8:56 am
JLP,
I found a new online discount broker this morning, and wrote a little bit about it on my blog. It’s called SogoInvest.com, and from what I’ve seen, they’ve got the lowest commissions out there ($3 or less).
It’s kind of a bare-bones trading site, but it does allow you to buy fractional shares and utilize an automatic investment system, allowing investors to automatically invest money every day, week, month, etc.
Check it out, as it could be something your readers could use.
-Grant
http://www.TheCornerOfficeBlog.com