Financial Consulting and Stock Churning


Brett Leach advertises himself as a financial consultant with SWS Financial Services. This means Brett Leach earns his living by advising others how to spend/invest their money. Some people certainly need financial advice. The question is how much should you pay for it. I hope the following words will help you to make sound decisions regarding the investing of your hard earned income or fixed income.

Many years back, I retained the services of a financial consultant/stock broker at Merrill Lynch. Initially, I was pretty happy with this brokers efforts and was certain he had my best financial interests at heart. I vividly recall the 29.95 I was charged every time my broker recommended I buy or sell a position. I mentioned this to ┬ámy father’s brother who gave me an earful on the the topic of Stock Churning. My uncle informed me that brokerage houses have inventories of stocks and bonds that they are pressured to sell.

Sometimes the richer clients will dump some under performing stock and the broker might try to sell those shares to the lower end clients that the broker services. Yes, stockbrokers sometimes sell you stock they really might not have a high opinion of. Churning is defined to be the frequent selling of stock to increase a broker’s commission even if the broker would not purchase the stock himself.

I am not saying that every financial consultant churns, but you should certainly do your due diligence prior to doing business with any financial consultant or brokerage house. I dropped Merrill Lynch for Charles Schwab long ago. Schwab has excellent free online research tools and only charges $8.95 per trade. They have an online bank that waives all ATM fees.

If you choose to go with an online brokerage firm like E-Trade or Ameritrade the only way you will ever be churned is by your own choice! If you are living on a fixed income, do not buy and sell individual stock. Diversify at the mutual fund level to stabilize your rate of return. The free financial tools available will help you to screen and filter out only the funds suitable with your risk level which you know much better than any financial consultant.


Accept Financial Advice with great caution
Accept Financial Advice with great caution

6 comments on “Financial Consulting and Stock ChurningAdd yours →

  1. John Waggoner writing for USA today money hints that financial advisers may be a costly and ineffective service. He does not use the word stock churning. There is no reliable proof that financial advisers are worth the fees they charge. Tread carefully!

    1. Does anybody have reliable information on the stock symbol STSI or Star Scientific? I got in at $1.91 a few days ago. I read they are investing considerable resources in a treatment or cure for Alzheimer’s disease. Jeff Reeves says they are into smokeless tobacco products but Schwab research says they discontinued that. Thanks.

    2. I had negative experiences with wealth manager Marshall Eichenauer Jr. when I lived in California. I think Marshall got wealthier than his customers. Indeed, he manages his wealth quite well.

  2. Noticed Edward Jones financial advisor ad for James G. McClelland in the RDR. He promises to “make sense of investing”. What makes sense is do your own investing free of charge at a place online like Charles Schwab. Mr McClelland will charge you fees and likely not get a rate of return any higher than if you just invested online.

    I still remember being fooled by a pic of a good looking smooth talking financial consultant in the paper. These guys really don’t know if market is going to go up or down. You are paying them for their guess basically.

    1. Pete Blackwell who maintains a blog called parenthetical remarks is a hoot. He was writing about an orthopedic diagnosis named cash-wallet ass syndrome in response to finger ailment old blackberry phone users were being diagnosed with. I guess his responsibilities as Edward Jones financial adviser pulled him away from his true love of social commentary blogging

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