It’s hard to know who to trust when it comes to your money. Everyone has their hand out trying to grab a little piece. But you know at least you can trust your discount broker right?
The answer is unfortunately, no. An article in the Wall Street Journal this week talked about the extra fees discount broker employees can earn. If they talk to you about mutual funds, annuities or other products they have available, they have an axe to grind. Apparently depending on what they recommend, they could earn wildly different commissions and bonuses from the company. That gives them an incentive (which of course is the point) to suggest something that makes more money for their employer.
In the article, the Journal singled out Charles Schwab, Fidelity and TD Ameritrade. But all of them are suspect. The bad part? They feel no obligation to notify you that they are earning a much bigger commission on Fund A versus Fund B. Isn’t that nice?
The point is, you just have to make sure that you understand what the compensation is for that nice person across the desk. Whether it’s a broker, investment advisor, insurance salesperson, real estate broker, etc. Find out how they are being compensated, and if recommendations they make will benefit them more one way or another. Awkward? Yeah, sometimes. But it’s your money, you worked hard for it. You should at least understand the conflicts that nice broker may have in what they are recommending to you.