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The Five Ugly Truths Your Broker & Brokerage Firm Doesn’t Want to Tell You

1. It is legal for your broker & their firm to put their interests ahead of yours.

Brokers are held to the “suitability standard”. That means they have to recommend investments that are ‘suitable’ for you. That does not mean the investment has to be the best option. It only has to be suitable for a broker to recommend it.

2. Your broker might only offer you investments that pay the highest commission.

Brokers are paid on commission. They have an incentive to offer you investments that line their pockets. And the suitability standard does not prevent them from doing just that.

3. Your broker may sell you investments that are illiquid or risky.

Brokers are limited to their firms’ products. And having a short list of proprietary products to choose from limits the opportunities, and increases the risks, to your portfolio.

4. Your broker may use deceptive titles.

There is nothing to stop brokers from calling themselves ‘advisors’. Titles like ‘financial advisor’, ‘financial planner’ and ‘financial consultant’ are common…but unfortunately those words are nothing more than window dressing on a business card. A broker is a salesman. Changing their title doesn’t change their job or how they are paid.

5. There are better options.

A Fee-Only Registered Investment Advisor is the opposite of a broker. A Fee-Only RIA is paid directly by their clients in the form of management fees. They are not paid on commission. And Fee-Only RIAs are held to the fiduciary standard – meaning that advisor has a legal obligation to put your best interests first.

No doubt, if you are working with a broker, they have not mentioned any of these five ugly truths.


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