Discount Broker

2009-07-14T21:47:00.000-07:00

How do you invest? What do you really pay? At the end of the day, what are your real results? These are questions smart investors should be asking themselves (but usually don't). In this era of more fees, misc. charges, holding periods and back end redemptions, even at discount brokers, how are you really making out?

Working with a new client brought this all to my attention. I know what I found may not apply to everyone; however it will apply to many and very likely apply to you.

I need to preface this by saying that, unlike the majority of registered investment advisors, I have built my practice over the past 15 years by dealing with “small” investors. Many of them are first timers because my minimum account size is only $5,000.

I targeted this group because I enjoy the educational part of my business. A happy side benefit has been that by providing million dollar service to these so called “small” investors, they naturally refer me to parents, relatives, friends and business associates, often with considerably more assets than the original client. What a happy consequence.

Having set the stage, here's what happened with my new client who we will call John. John was 26, newly married with a one year old son. His wife was taking care of the child and John had a good full time job. After selling his house in California and moving to Florida he had $6,000 left for starting a long-term investment program.

Though he had been reading my newsletter for about a year, John decided to manage his 401k on his own. It was a noble effort but provided less than desirable results.

He then attempted to set up a brokerage account at a major discount broker. With his $6,000 he was told that the quarterly fee would be $45, and, of course, if he sold any mutual fund within the first 180 days, there would be an early redemption fee.