In this week’s Mullooly Asset Management video Tom and Brendan talk about how stock brokers get paid. Plenty of people enter into investment agreements each year without truly understanding this vital point. Most investors understand that stock brokers earn commission on each transaction they make for a client. However, what most people don’t know is how that commission is divided between the brokerage firm and the broker. Knowing this information can help investors discern how stock brokers get paid. Understanding how stock brokers, financial planners, and fee-only investment advisors get paid can help you make a more informed decision about where to invest your money.
In the video Tom explains how higher producing brokers earn more commission than lower producing ones do. Meaning the higher producers might take home 40% of the commission you pay, while the lower producer might only get 25%. Stock brokers are classified by their firms, and paid accordingly. This puts pressure on them to push sales, and may potentially cloud their judgement when it comes to your investments. In the eyes of brokerage firms the better broker is the one who makes them more money, not the one who makes their clients more money. Clients of stock brokers are also classified by brokerage firms. Many firms are beginning to send clients with under $100,000 to call centers for their investment advice.
Tom and Brendan touch on all of these points in their weekly video. Make sure to tune in to learn how stock brokers get paid.