HE MAY NOT BE A FINANCIAL EXPERT
Do you feel your stock broker is a wizard? Don’t bet on it, for intelligent and informed as he might appear, he may not quite be the financial expert you think he is. A stock broker is, first and foremost, a sales guy. Now, how’ that?
Arthur Levitt, former chairman of the US securities Exchange Commission tells us in take on the street – how to fight for your financial future, “Brokers may seem like clever financial experts, but they are first and foremost sales people. Many brokers are paid a commission, or a service fee, on every transaction in accounts they manage. They want you to buy stocks you do., because that’s how they make money for themselves and their firms. They earn commissions even when you lose money.”
At times, they are just catering to your inherent need to look for answers on the way the market is moving. Adam Smith (not to be confused with the famous economist) writes in his book, The Money Game, “The investors who really follow the market, the ones who call up all the time, ninety percent of them really don’t care whether they make money or not. “If they make a little money, they’re happy, if they lose a little money, they’re not too unhappy. What they want to do is to call you up. They want to say, ‘How’s my stock? Is it up? Is it down” What about the earnings? What about the merger? What’s going on? And they want to do this everyday, they want a friend, they want someone on the telephone, they want to be a part of what’s going on,” he writes. Somehow, brokers always seem to have an answer to all these questions. Very few will tell you ‘I don’t know’.
Also, no broker ever made money by getting investors to hold on to their investments.
“They could put you in some stock that would go up ten times, but then they would starve to death. They only get commissions when you buy and sell. So they keep you moving, “writes Smith.
Levitt gives the examples of warren buffet to make much the same point. “Warren Buffett, the chairman and CEO of Berkshire Hathaway Inc and one of the smartest investor I have ever met, knows all about broker conflicts. He likes to point that any broker who recommended buying and holding Berkshire Hathaway stock from 1956 to now would have made his clients fabulously wealthy.
A single share of Berkshire Hathaway purchased for $12 in 1965 would be worth $71,000 as of April 2002. But, any broker who did that would have starved to death.”
Do you feel your stock broker is a wizard? Don’t bet on it, for intelligent and informed as he might appear, he may not quite be the financial expert you think he is. A stock broker is, first and foremost, a sales guy. Now, how’ that?
Arthur Levitt, former chairman of the US securities Exchange Commission tells us in take on the street – how to fight for your financial future, “Brokers may seem like clever financial experts, but they are first and foremost sales people. Many brokers are paid a commission, or a service fee, on every transaction in accounts they manage. They want you to buy stocks you do., because that’s how they make money for themselves and their firms. They earn commissions even when you lose money.”
At times, they are just catering to your inherent need to look for answers on the way the market is moving. Adam Smith (not to be confused with the famous economist) writes in his book, The Money Game, “The investors who really follow the market, the ones who call up all the time, ninety percent of them really don’t care whether they make money or not. “If they make a little money, they’re happy, if they lose a little money, they’re not too unhappy. What they want to do is to call you up. They want to say, ‘How’s my stock? Is it up? Is it down” What about the earnings? What about the merger? What’s going on? And they want to do this everyday, they want a friend, they want someone on the telephone, they want to be a part of what’s going on,” he writes. Somehow, brokers always seem to have an answer to all these questions. Very few will tell you ‘I don’t know’.
Also, no broker ever made money by getting investors to hold on to their investments.
“They could put you in some stock that would go up ten times, but then they would starve to death. They only get commissions when you buy and sell. So they keep you moving, “writes Smith.
Levitt gives the examples of warren buffet to make much the same point. “Warren Buffett, the chairman and CEO of Berkshire Hathaway Inc and one of the smartest investor I have ever met, knows all about broker conflicts. He likes to point that any broker who recommended buying and holding Berkshire Hathaway stock from 1956 to now would have made his clients fabulously wealthy.
A single share of Berkshire Hathaway purchased for $12 in 1965 would be worth $71,000 as of April 2002. But, any broker who did that would have starved to death.”
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