Printer Friendly

GOING FOR BROKER; FEES SURPRISE OLDER INVESTORS.

Byline: Marcy Gordon Associated Press

While most older investors know stock brokers are paid in commissions, they have a fairly limited understanding of the details of brokers' compensation and how that could affect the advice they get, a survey released Thursday shows.

The American Association of Retired Persons, which commissioned the survey, warned that older investors' lack of knowledge may leave them unaware of potential conflicts of interest that could make brokers work against them.

Women 50 and older in particular ``have serious gaps in their understanding of the (broker) compensation system,'' said a report on interviews with 827 people in that age group who have securities investments.

The survey came a few days after Arthur Levitt Jr., chairman of the Securities and Exchange Commission, threatened to clamp down on broker pay practices - such as higher commissions for higher-risk investments - that can create conflicts of interest.

Among the findings of the AARP survey:

More than one-third of older investors - 36 percent - do not know that higher-risk investments often carry higher commissions for brokers selling them.

More than one-third - 39 percent - do not know that their initial investment is reduced by the amount of the broker's commission. Nearly half the female investors polled - 47 percent - did not know this, and neither did 33 percent of the men.

More than one-third - 37 percent - do not know that the term ``load,'' when used by brokers, refers to a sales charge. For the women it was 53 percent; for the men, 25 percent.

Nearly half - 48 percent - do not know that the amount of commission a customer pays is negotiable. More than 6-in-10 female investors - 61 percent - did not know, and neither did 39 percent of the men.

Thirty-three percent do not know some firms use contests to promote the sale of a particular investment product within a specified period. Forty percent of women investors and 27 percent of men do not know.

WHAT TO WATCH

Recognize that your broker is a salesperson and that brokers make money from commissions even if you don't. Don't confuse a sales pitch with impartial investment advice.

Learn about commissions, of which there are many types, and which are subtracted from your initial investment. In general, the lowest-risk investments earn brokers the smallest commissions.

Always know what you are paying for your investments. You have the right to full disclosure of all investment costs, including commissions, markups and fees. Ask your broker.

Be aware of sales contests, special bonuses and other practices that may influence your broker's investment advice.

Read and understand your transaction confirmation slips.

Read and understand your monthly brokerage account statements.

Check out the training and disciplinary record of your broker or potential broker through the National Association of Securities Dealers or your state's securities agency. The NASD has a public disclosure line at (800) 289-9999. You can call the North American Securities Administrators Association at (888) 84-NASAA for the phone number of your state agency.

CAPTION(S):

box

Box: What to watch (see text)
COPYRIGHT 1998 Daily News
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Date:Apr 24, 1998
Words:500
Previous Article:BASEBALL BEAT: TUMULT STRIKES OFF-FIELD : ALLEN'S RETURN SHOULD BE HELP.
Next Article:MOTORCYCLIST INJURED IN A.V. CRASH.


Related Articles
Demystifying the role of the stockbroker.
Bytes to bucks: trading stocks on the Internet can save savvy investors a bundle.
Major new presence emerges in high-end residential market.
LOG ON AND PROFIT.
OFF LINE, OUT OF LUCK; NET TRADERS NEED BACK-UP PLAN WHEN WEB SERVICE DOESN'T CONNECT.
SECURITIES DEALERS INVEST IN ADS TO EDUCATE PUBLIC.
NEW INVESTMENT DIRECTION : BROKERS TURNING TO FLAT-FEE SERVICE TO MANAGE ASSETS FOR THEIR CLIENTS.
Gaining a piece of the action. (Trading).

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters