| Borrowing |
Contrary to what most people think, full
service brokerage firms (also known as financial
services firms) are in the business of saving
you time, not making you rich: only a small
percentage of brokers manage to earn more
for their clients than the market on average.
Rather, a full service broker's full-time
immersion in the world of investing can be
a useful source of ideas for people who are
unsure about investing and do not have the
time or inclination to learn about and follow
the stock, bond, and future markets.
There are two types of relationships with
full-service brokers:
- Discretionary Accounts - In these, the broker
can execute trades on your behalf without
first asking for your approval. This situation
is ripe for abuse, especially if you pay
commissions on each trade. The most responsible
financial services firms discourage such
relationships. You should be wary of them
also.
- Non-Discretionary Accounts - In these, the
broker must obtain your advance
approval
(or that of a third party to
whom you have
granted power of attorney,
such as a family
member) for every transaction,
usually by
phone. This is a wiser approach.
It also
gets you involved in the decision-making
process, thereby increasing
your investment
knowledge.
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Topic contents © Mark Kolakowski and CliqueFriends,
LLC, 2004 |
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