When Your broker Sells Your Account

Article Excerpt

The brokerage industry is organized in a way that makes it hard for investors to find a good broker. The industry mostly pays brokers on commission, and commissions vary with the type of investment. That arrangement gives brokers an incentive to trade. It also gives them an incentive to place their clients in new issues and in-house mutual funds, which are more profitable for the broker but expose you to above-average risk and below-average returns. Brokers may also get incentives for selling securities that their firm has in inventory and wants to dump. This situation naturally attracts individuals who are willing to abuse their clients for their own gain. The worst of these individuals rarely last long in the brokerage business. However, if you fail to choose a broker carefully, you can wind up dealing with a series of bad brokers over a period of years or even decades, at great cost to your finances. Some brokers distinguish themselves Of course, many brokers…

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