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 my 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.