I am a licensed investment advisor whose fiduciary duty is to act in my client’s best interest. However, for 23 years I was registered as a stock broker, so I know the brokerage business first-hand. Let me tell you some things you need to know that your broker won’t tell you.
Your broker is not required to give you advice which is in your best interest. Too many brokers take this literally and sell products to clients with the highest commissions to the broker. This is perfectly legal because brokers do not have to act in their clients’ best interests. Brokers pay close attention to the end of their production month. Have you ever gotten a sales call from your broker near the end of the month? It’s not necessarily because the investment is timely for you. But, it may well be timely for the broker who is trying to make his monthly commission goal. Again, perfectly legal.
Some brokers accept money for marketing from mutual fund salespeople who are often peddling high-fee funds. This money is used to pay for lunch or dinner seminars, advertising inserts in the newspaper, and mass mailings targeted to gated communities. Your broker is happy not to pay for marketing expenses out of his pocket when a mutual fund rep will write the check. Brokerage firms call this financial support “non-cash compensation,” and the broker receives it tax-free.
Many brokers attend fully-paid “due diligence” trips sponsored by mutual fund companies. When I was a broker, I was invited to over twenty such trips, and I attended two. Due diligence trips teach brokers about the sponsor’s mutual fund products, while they stay in Ritz Carleton-type hotels and dine at the finest restaurants free of charge. Is it any surprise when a broker returns from a “due diligence” trip, he or she will recommend the company’s high-fee products? How many trusting clients were sold an investment because their broker went on a due diligence trip?
Twenty-five years ago, I was a twenty-something pharmaceutical rep for Pfizer. At that time, I invited doctors to attend lavish “due diligence” trips to learn about the company’s drugs. These marketing trips are now considered unethical due to the profound conflict of interest they create. Should not the standard applied today to doctors and pharmaceutical marketing practices be applied to those that care for your financial life?
At my investment advisory firm, I guard my clients from the conflicts of interest I have described above. Neither I, nor my firm, accept marketing dollars, seminar sponsorships, client entertainment money, or due diligence trips from mutual fund companies. We minimize conflicts of interest by not accepting compensation from any source other than our clients. This is one of the ways Price Wealth Management lives up to the fiduciary standard of doing what is in our client’s best interest.

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