Compromised Brokers

Morgan Stanley Smith Barney is now offering as much as 330% of a brokers annual production to join the firm.

With all the problems that big Wall Street firms caused for the global economy, it’s absolutely stunning that they would continue to behave in such a way. Apparently the company expects the brokers to generate even more revenue from their clients to rationalize such a huge bonus.

Arrangements like these put far too much pressure on the brokers to seek more and more revenue from their clients which may cause them to be unable to tell if they are acting in their clients best interests.  Most of the public does not realize that there is a huge range for a brokers’ commission depending on the product sold to a customer. For example, a $100,000 deposit could have a range as wide as $3000 to $10,000 in commissions.

This is not a new problem. In 1940, the Investment Advisors Act was enacted to draw a clear bright line between conflicted sales people and advisors who are required to act in their clients’ best interests.

Unfortunately since then the big Wall Street firms have worked diligently to blur the line.  In fact most of their brokers can put on one hat to tell customers that they are investment advisors, and then change hats and behave like a broker.

At Financial Symmetry we fully embrace the Advisors Act and strongly recommend that the public seek out those who act exclusively as Investment Advisors rather than brokers or hat switchers.

You can look up whether a firm is a Registered Investment Advisor at the SEC site here: Investment Advisor Public Disclosure, and you can weed out brokers as they will be listed here: FINRA BrokerCheck. Hat switchers will be listed in both places.

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