Why Your Stockbroker Doesn't Like Cash

The way the brokerage business is set up now is not necessarily great for the individual investor.  

The reason is the way stockbrokers, financial advisors, etc get paid.  Unfortunately, the way it works now is that your financial guy gets paid in two ways;

• buying and selling in your account (commissions)
• as a percentage of your total assets (fees)

Neither is good for you, let me explain.

If you go the commission route, to be sure, there is a conflict of interest.  You can never be sure that when you get a call to buy or sell or move investments that it's in your best interest!

If you go the fee route (which is increasingly common), then your financial guy gets paid a percentage (usually 1-2%) of your invested assets.  That is a huge problem which is very under reported.  Bottom line is that your money has to be invested for him to collect a fee.  Now you know why your stockbroker doesn't like cash.  Do you think he'll ever call you to say its time to be conservative and go to cash?

So if you have ever wondered why you don't get a call to go to cash when times are tough, 2007 for example, now you know.  It is simply not in your financial guys best interest for you to be in cash!

2013 Brokerage Firm Stock Market Targets

So here are the 2013 S&P targets from the biggest banks and brokerage firms.  Lets see how this works out.

Somebody has to be right given the extreme ranges from 1390 (1% loss) all the way to 1615 (14% gain).

Problem is that your stockbroker or financial advisor that works at one of these firms doesn't have to heed any of the advice given to them from the guys that make these targets, not that they should either.

Brokerage firms are smart, they promise nothing and deliver less.  Your financial guy can invest your money pretty much as he or she sees fit and this is great for the brokerage firm because it smoothes out the edges and the commissions and fees keep coming in!

Just remember that it costs money to have someone 'watch' your money.  And even 1% adds up over time.  You can and should invest by yourself and for yourself.