This is the latest in a series of video interviews in which Pat McKeough will give his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others will be comments on events that are affecting the markets and the economy. Today, he deals with a question we hear quite often from our readers: How can I tell if my stock broker is really on my side? Pat begins by suggesting a version of the old encyclopedia buyer’s trick. Below is the transcription of Pat’s comments. Do You Trust Your Broker? Q: Pat, here’s a question we hear a lot. How can I tell if my broker is really serving my interests? Pat McKeough: That’s a good question. We just dealt with that in a recent Inner Circle report. I think the best way to do that is to use what some people call the encyclopedia buyer’s trick. That is to figure out something that you know works for you—an investment that is bad for you, or that is particularly good for you. And ask your broker with an innocent look on your face, “Say, is such-and-such investment a good choice for me, Bob?” And just see what he says. And if he’s not particularly interested, and it doesn’t yield a lot of income to the broker—if he’s not interested but it’s a good choice for you—then you have to wonder. Does he know something you don’t know? Or is he just not particularly interested in something that doesn’t carry some extra value for him to sell to you.
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It’s unfortunate that many people have found at times over the years—I’m not going to say all of them, obviously not—there are brokers who are mainly thinking, how much can I make off of this transaction? And that’s not a good way to build your portfolio.
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