Although full-service brokers, with their seemingly limitless assistance, can make life easy for an investor, you need to remember some important points to avoid problems:
Broker and account reps are still salespeople. No matter how well they treat you, they still compenated base on their ability to produce revenue for the brokerage firm. They generate commissions and fees form you behalf of the company ( In other words, they are paid to sell you thing)
Whenever you rep makes a suggestion or recommendation, be sure to ask why and request a complete answer that includes the reasoning behind the recommendation. A good advisor is able to clearly explain the reasoning behind every suggestion. If you don’t fully understand and agree with the advice, don’t take it
Working with a full-service broker cost more than working with a discount broker. Discount broker are paid simply for performing the act of buying and selling stocks for you. Full-service brokers do that and more. Additionally they provide advice and guidance. Because of that, full-service brokers are more expensive. Also most full-service brokers expect you to invest at least $5000 to $10000 just to open an account.
Some broker engages in an activity called churning. Churning is basically buying and selling stocks for the sole purpose of generating commissions. Churning is great for brokers but bad for customers. If your account shows a lot of activity, ask for justification. Commissions, especially by full-service brokers, can take a big bite out of your wealth, so don’t tolerate churning or other suspicious activity.
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