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Brokerage Firms and Commission

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oedipus
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Brokerage Firms and Commission  Reply with quote  

The Morgan Stanley, Merrill Lynch, Charles Swabb, Janney Montgomery of the world - these brokerage firms have set fees and annual charges in their practice of doing business.
These fees and charges are not negotiable, as I understand it.

How about the Commission for the broker???
Can a broker waive any of their commission if they choose to?
My stock broker sister says NO! Her commission is included in the fees and she has to charge me for every trade and transaction. Basically she is telling me she cannot waive it (and she NEVER have) - not even for family.

In every other field/industry that I know where a sale is based on commissions, the seller can waive or negotiate part or all their own commission.
How can a securities broker NOT be able to waive their own???

Or is my sister just bullshitting???
Post Tue Jul 26, 2011 1:15 pm
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coaster
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The individual securities broker cannot waive or negotiate their commission because they don't set the commission; the commission is set by their principal - the organization which is responsible for them both toward their clients on the one side and to the regulators on the other side, and the commission is also an agreement between the principal and the principal's clearing firm. The only case in which a commission can be waived or negotiated is the case in which the principal and the broker are one in the same, and that's not and never is the case with any of the brokerage firms. Because of the capitalization requirements, it's very, very rare that an individual person is a principal and a broker and that a client deals with that principal/broker.

This information is based on my own experience as a Registered Representative and it's over 15 years old, so I don't guarantee it's completely accurate as some changes have been made in various financial reform laws; but I think the parts about the broker and the broker's principal are still valid, though the entities and their agreements may have changed.
Post Tue Jul 26, 2011 6:08 pm
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chrisgayle
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A discount broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading systems rather than by having an actual broker assist with the trade. Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this method of trading.
Post Fri Jul 29, 2011 9:22 am
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oedipus
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Is it me or is being employed as a financial advisor/stockbroker takes on a different meaning in life and everyone (including family) is fair game?!

I have a small side business building websites.
When many of my friends need a website - I build one for them at a much reduced price. When members of my family need a website - I don't charge them any fees (especially for immediate family). This is my general belief and attitude.

My sister (now ex-financial advisor and pathetic sibling) would be upset if I charged her for my services - and would be appaulled if I charged her full price.

Yet, she wants me to believe that in the financial market world of buying & selling trades - paying her fees & commission at full value is a common practice.

She knew every trade would cost me money and her firm's fees are very high (surpassing industry standard). But this did not deter her from making multiple trades on my retirement account and she did absolutely nothing to derail the fees onto me.

Warren Buffett has a First Rule of Investing = NEVER LOSE MONEY.

Are there any financial advisors out there who has family members as clients/customers - and would you apply Buffet's Rule of Investing for your relatives?
Post Sat Sep 17, 2011 2:47 pm
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coaster
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My personal opinion is that money gets in the way of personal relationships. So, as a general rule, I think it's a good idea to do all business (that includes lending and borrowing) at "arm's length": i.e. never with friends or relatives.

Buffett's rule should hold regardless of personal relationship. Unfortunately, the U.S. Congress sold out to big banks and the recent financial reform bill really wimps out on the fiduciary responsibility of financial advisors. In the case of brokers, basically there is none (unless a limited power of attorney is in effect).

~Tim~
Post Sat Sep 17, 2011 4:54 pm
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eastmn
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Should the $5 sells have been held? Who did she sell them to?
I had a similar situation, here (6k). I should have seen it coming.

...
Post Sat Sep 17, 2011 5:52 pm
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RichS
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I agree with Coaster. I am also a former financial advisor of 16 years turned financial writer. Most firms will not let the "stockbroker"/financial advisor waive the commissions in most cases. However, I have worked for some large brokerages and in "some" cases they allowed for a reduced commission charge to the client if I would eat the difference. Nothing is absolutely set in stone if you want to pay the price. Very Happy
Post Tue Sep 20, 2011 9:03 pm
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oedipus
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Even a "reduced" commission charge is respected.

@ Rich - did you have any close family members who were also clients?

If so, would you not limit the amount of trades you would recommend for them to buy and reduce risk and be conservative with their account?
Post Fri Sep 23, 2011 6:09 am
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RichS
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I did not have family members as clients for a variety of reasons.
Post Fri Sep 23, 2011 8:07 pm
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samurai
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Slightly out of topic, what are your opinions about just plunking down your money in a private bank? Personally, I feel insecure delegating my money to only a few investment companies, but it is commonly practiced in the US.
Post Sat Sep 24, 2011 3:20 am
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coaster
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Banks are no more secure than investment companies when it comes to investments, and considerably more expensive as they will only sell you investment products they can make a good commission on off of you, plus fees.

~Tim~
Post Sat Sep 24, 2011 5:33 am
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RichS
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I agree with Coaster. Banks are going to continue having many problems because they should have stayed in banking and not tried to be all financial things to all people. Look at the mess with Bank of America and their purchase of Merrill Lynch. What a mess.

If you want to invest you have to take "some" risk. Investment companies have insurance protection through the SIPC (Securties Investment Protection Corporation) which in my opinion is a lot more stable than the bank's FDIC program.

Nothing is going to protect you or anyone else about the ups and downs of the value of your investments regardless of where you invest. But the "insurance" does come into play if the bank or investment company goes out of business for a variety of reasons. I am being simplistic here but you get the idea.

I hope this helps. Very Happy
Post Sun Sep 25, 2011 4:09 pm
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samurai
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Thanks guys for the advise.
Post Mon Sep 26, 2011 6:49 am
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