High cost stock brokers make their linving by conducting trade on your behalf. They provide great support to investors when compared to discount stock brokers. Their research, their analysis, their tips on trading and professional assistance make them absolutely helpful in your trade. They have a wider knowledge about your trade. They give you regular reports on trade. They have a large network of firms. They provide personal service. You can just meet them up in the office and discuss about your trade. Unlike discount stock brokers, you maintain a long term relationship with high cost stock brokers. They are just another smooth way to tackle your problems in trade. It is not that you won’t have any problems at all. But you can just be sure that you won’t face them alone.
After seeing all the above mentioned reasons, one might ask if you really need high cost stock brokers. Well, that is a question something one really has to consider when it comes to real time investment. To tell the truth this is the most important issue that needs to be handled. Going for a high cost stock broker has lot of problems when not chosen in the right situation.
First of all, if you had planned to go for a full service stock broker, make sure you have plenty of money. The cost is going to be really high. They are very expensive. They provide advice and guidance. All the comforts in full service stock brokerage have a big price. You need to be ready for them.
Just so remember, brokers are professional marketers. They are great at sales. They would be chucked out of the firm if they don’t produce enough revenue for the firm. They had to work hard to enough fees from you. So basically, they are mostly money minded. Of course there do give service that is absolutely satisfactory but the costs they charge is highly on money making grounds.
When it comes to the talk of the costs of full service stock brokers, one term that often strikes our mind is, “Churning”.
Churning is the act of excessive trading done by the broker on behalf of the client just to generate large commissions from the client. This practice is illegal and against the rules of the SEC. Churning is not ethical and does not bring anything closer to the investors’ objectives. An investor can never be satisfied with the trade if churning is carried out. The investor may not even know about the churning. It is wholly beneficial to the stock broker. Churning always leads to heavy loss to the client. However, if it seems beneficial there is something called tax liability to watch out for. So anyhow, churning is highly dangerous to the client.
Though high cost stock brokers are helpful in some case, there are many cons that need to be considered too. When an investor has to decide between high cost stock brokers and low cost stock brokers he has to consider all the cost needs of the stock broker. He must also see if it is feasible. He must consider the returns too.
The above mentioned scenarios may seem to frighten the investor. But they only speak about the reality of today’s affair. It is basically an awareness. The point is not that high cost stock brokers are entirely bad. It is just that you need to be careful in choosing them. Not all of them come under the above mentioned stock brokers. You just need to be careful because this is about your investment. There should be no mistakes.