Your stock broker will make money off of your desire to invest in the market. Specifically from commissions of the stock transactions you’ve made while investing but also fees that are generated when asking for stock tips and advice as well as general portfolio management. It can be a well-paying career.
But if you’re shopping for a professional stock broker to help make trades, then it’s crucial you know exactly how he or she is getting paid. The less money that is used to pay for their services is more money that can be invested. That, in turn, will allow your portfolio to grow that much faster.
Your broker can be paid quite well which can mean their knowledge of the stock market is vast, they have a nice track record of identifying winning stocks so demand is high for their services, but it can also mean they just know how to milk money from their clients by selling financial products that earn them higher commissions. In keeping with being a wise investor, understanding what percentage your broker receives for every transaction while also comparing that information with other brokers is a great method to use before committing to a certain person.
In the early days of investing, many brokers would often make more trades than necessary. That is, they would engage in loads of different transactions with the intention of trying to ensure that they can actually get paid a decent amount of money. This is a practice that is often used to jack up one’s commissions. And surprisingly, a Bloomberg article investigated brokers who persuaded employees of major corporations to rollover their 401(k) plans into annuities which ended up being bad investments causing their funds to plummet hundreds of thousands of dollars yet earning the brokers sizable commissions.
Afterall, one of the main tenets to being successful as a broker is salesmanship. Because you have to sometimes sell certain financial products, like annuities, especially if you work for a brokerage firm or financial company that specializes in that product. Being a consumer, it’s a good idea to be aware that if your broker is pushing a certain product, it’s more than likely they are trying to sell you something that will generate higher commission for themselves.
The best brokers are ones that are professional and understand the needs their clients have. These brokers will often be up front with regards to how they are being paid, thus making it easier for them to get different transactions taken care of the right way. You need to see that your broker is being professional and that the person is willing to tell you about how that person got paid at some point. Honesty is crucial.
More importantly, it’s important to know how a broker is paid because it ensures that there will be some semblance of transparency between the two of you. That is, you will understand the ins and outs of whatever someone is doing. If you don’t have a transparent broker then that person is probably going to end up hiding some questionable activities from you, thus putting you at risk of losing more money than necessary. This is a real threat that can be harmful to you if you don’t get the support that you deserve.
Remember that your stock broker is a person who can really make a difference when it comes to getting your many financial transactions taken care of. Be sure that you talk with your broker about how he or she is getting paid to minimize cost. Check out more information on this subject at www.stockbrokersalary.biz.
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