Brokers: Stock pushers or financial advisers?

There was an interesting story Wednesday in The New York Times about brokerage firms. The story posed a question that’s always troubled me: Are brokers really interested in their clients’ financial futures, or are they just interested in selling stocks and mutual funds that bring them lucrative commissions? I realize that’s an oversimplification, because I’m sure there are good and bad brokers, just like there are good and bad everything else. Still, I think it’s a question worth pondering.

I currently manage my own retirement investments online, not because I have any particular talent for it, but because I’ve become convinced that no broker will care as much about my money and my future as I do. I figure that my best attempt to pick the right investments is just as good as the average broker’s best attempt to sell me something. I’m fully willing to admit that maybe I just haven’t met the right broker. Maybe I’ll go back to letting someone else manage my retirment investments in the future. I don’t know.

In the meantime, I’ve found a lot to chew on in The New York Times story about this issue. Take this, for example:

… In interviews, former and current brokers said … their jobs depended less on giving advice and more on closing sales. The more money they brought in, the more they, and their firms, would earn.

“I learned a lot about being a good salesman at Merrill,” said David B. Armstrong, who left Merrill Lynch after 10 years and with partners started an advisory firm in Alexandria, Va. “The amount of training I sat through to properly evaluate investment opportunities was almost nonexistent relative to the training I got on how to sell them.”

And then there’s this mention of our own Sen. Tim Johnson:

While the issue of broker responsibility is not new, it has resurfaced as Congress has been considering financial overhaul legislation. In his original draft, Senator Christopher J. Dodd, chairman of the Senate Banking Committee, proposed requiring brokers to put their customers’ interests first — what is known as fiduciary duty — when providing investment advice. But in recent weeks, the chances of this proposal’s making it into the bill began to dim.

Senator Tim Johnson, a South Dakota Democrat on the Banking Committee, has proposed an 18-month study of the brokerage and investment advisory industries, an effort that would replace Senator Dodd’s provision.

To read the entire story, click here.

2 thoughts on “Brokers: Stock pushers or financial advisers?

  1. I think that those who did their own conservative investing had better results or at least lost less money the last few years. A broker does not make very much money pushing conservative investments in most cases. I have had brokers openly disgusted with me if I did not buy and sell stocks on a regular basis. Warren Buffet says not to buy a stock you would not own for 10 years.
    I think Sen. Johnson’s 18 month “study” will doom any efforts to establish controls on brokers.

  2. I thought lawyers got a bad rap because … but financial adventurers? pass out the whiskey and cocaine please.

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