Stockbrokers Are Salespeople First
Posted on March 11, 2010
Filed Under Personal InvestingAs Congress debates financial overhaul legislation, one phrase from my early days in this business keeps popping into my head.
“Fire Your Stockbroker!” was my mantra back in the early 1980’s. We kept telling anyone who would listen that brokers have a built-in conflict of interest – the more “product” they sold, the more money they earned.
And that was true regardless of how well or poorly the client did.
The March 4, 2010 issue of The New York Times showed me that little has changed.
The reporter, Tara Bernard, interviewed current and former brokers. She wrote, “All said their jobs depended less on giving advice and more on closing sales. The more money they brought in, the more they, and their firms, would earn.”
Anyone who doubts what we have been saying for all these years needs to read just this one quote from David B. Armstrong. He worked for Merrill Lynch for 10 years before leaving to set up his own firm with partners. He said, “I learned a lot about being a good salesman at Merrill.”
And then he admits, “The amount of training I sat through to properly evaluate investment opportunities was almost non-existent relative to the training I got on how to sell them.”
Almost non-existent. The next time you watch a warm and fuzzy TV commercial from a brokerage firm, remember that phrase.
Brokers are skilled at developing trust. They know how to connect with clients on a human level. They ask about your family, they keep notes about your kids, your interests, and your business. That’s all fine. But the only reason to invest is to meet your financial goals. With a myriad of choices for investments, some smart and appropriate and others dumb and dangerous, sharing your interest in the local basketball team pales compared to the ability to “properly evaluate investment opportunities.”
And by the way, you won’t come across anyone called a stockbroker anymore. These days they call themselves Investment Specialist or something similar.
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