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Full Service Stockbrokers

You can find full service stockbrokers at the most well-known and established companies,

including

Salomon Smith Barney

Morgan Stanley

Goldman Sachs

Merrill Lynch

For all their eminent reputations, however, brokerage firms use a substantially different track

for selling stock than the average investor would think. The company that uses the

expression about making money the old-fashioned way-earning it-isn't lying. They just

didn't specify for

whom they were making that old-fashioned money.

Bluntly put, stockbrokers have to make a living, too. And that lifestyle isn't cheap. Did I

mention that full service brokers also charge the highest commissions? I've heard of full

service brokers who charge up to $75 per transaction. Even though the average investor may

be aware of these commissions, what goes largely unsaid is the other ways in which

stockbrokers make money or further their business.

You should know upfront that in all fairness, full service brokers and brokerages have their

uses and place within investment. Many people, for a variety of reasons, do utilize the

services of full service brokers and brokerages and do very well by them.

For example, someone with enough money in the market to prohibit the time needed to

effectively keep track of investment trends (because the person is using all that time to make

the money that's being invested) would make a good candidate for a full service broker.

Also, someone who was planning to buy and/or sell on a daily basis is an example of

someone who might fare well using the services of a broker. Although this type of client,

however, would still do well to consider excessive service fees involved in these kinds of

services. In addition, most stockbrokers aren't dishonest and do play upfront with their

clients. After all, unhappy clients will leave sooner or later, so it's in the stockbroker's best

interest to keep them happy.

The average stockbroker, however, does have to make a living. So, for example, a

stockbroker with his or her huge wealth of knowledge tells you that purchasing stock in XYZ

Company is the single best thing you can do. You invest as the stockbroker tells you to; after

all, who are you to second-guess the stockbroker? You're a dentist with little or no knowledge

of how all this works, whereas the broker has years of experience and access to a substantial

amount of firm research- usually from within the brokerage house itself. So, the stockbroker

takes a commission for placing the purchase order. The stockbroker is happy; you're happy.

What could be wrong?

Did the stockbroker mention that the reason you should buy XYZ Company stock is also

because he or she needs to sell a certain amount of XYZ Company's stock in order to retain

his or her account, and the broker was running pretty close to the end of the month without

having reached that quota? Or did the stockbroker mention that the company is giving him or

her a cut of the sale out of the backside for each share the broker places with a client? The

stockbroker wasn't lying about XYZ Company stock being the best purchase you could make.

The broker just failed to mention that the payday was his or hers, not yours.

Also, the "research" that you thought would make a difference, and that went largely

unnoticed in this transaction was flawed anyway. The analysts who compile this research are

under extraordinary pressure from upper management as well as from the clients themselves

to back up the interests of the company. Not necessarily to lie, mind you, but to present the

information in its best-or in the case of the competitor, the worst-possible light.

CAUTION

A full service broker usually manages his or her client's account directly and charges

the highest commissions.

And finally, from personal experience, many people develop a good working relationship with

their brokers and a strong sense of loyalty keeps them as clients. Even in these situations,

however, be aware of the whole story.

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