Most investment firms are guilty of this.
Some, are simply better than others.
I’m talking about how they make an additional 50% commission by taking advantage of the little guy.
Have you ever heard this?
Financial Advisor: “Mr. client, today we have a unique opportunity to grab a fantastic bond yielding ___%. But our supply is limited. You need to act now or you’ll miss out.”
Your advisor gives you several other compelling reasons why this bond is the greatest thing since sliced bread.
You sense the urgency, like what you hear, and buy the bond.
You just bought the excess inventory of junk that the house wanted to unload.
Adding insult to injury your advisor made a 50% premium over what they would normally make on the same bond.
You see, when a bank/brokerage firm wants to move excess inventory (or garbage bonds) they pay their brokers an extra 50% commission.
Example: The commission paid on a bond (on average) can range from 1-2 points (1-2%). However, by giving the broker 3 points (3%) for selling the bond, they’ve increased their payout by 50%. (50% of 2 = 1—2 + 1 = 3). It’s one of the oldest tricks in the book.
You, the innocent investor, don’t notice any difference but your advisor does.
You don’t see the added mark-up because the commission is already included the price.
But then, you get your monthly statement and wonder why the $10,000 bond you bought is only worth $9,650.
Your broker’s response? “It’s just the market pricing on that day.”
Here’s the killer. If you try to sell it, you’ll end up getting roughly $9,500.
Don’t be a victim of these tactics.
Read “How to Find a Financial Advisor That’s Right for You.” (HERE)
It’s where you’ll learn how to separate the wheat from the chaff.