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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

Content is the opinion of the author and does not represent the position of any other person or entity. Information is from sources believed to be reliable but cannot be guaranteed.

The author is paid for product endorsements and has an ownership or other financial interest in the businesses related to the topics covered.

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Broker compensation

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I read your article about undisclosed compensations from brokerage accounts but it sounds hard to believe. Why would anyone choose to pay higher fees and commissions?

A: Most investors do not understand the difference between Registered Investment Advisers and Registered Representatives (brokers). A survey of 1200 investors done by an independent firm in late 2004 revealed some surprising news. Most investors do not know that brokers are not required to disclose all types of compensation. Most investors do not know that a broker does not have a fiduciary responsibility to the investor. In fact, brokerage firms disclose in the fine print of their accounts that investment advice is "solely incidental" to the brokerage business. 80% of investors surveyed indicated that they would change from a stockbroker to an independent adviser if they had known So the issue seems to be primarily one of understanding the issue and secondarily, the fact that their are far more brokers than independent advisers, especially for investors with modest accounts.


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