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Why You Should Be Wary of Your Stockbroker

Ugodre Obi-chukwubyUgodre Obi-chukwu
10 years ago
in Uncategorized
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This may sound rather rhetorical but do you really know why Stockbrokers want you to invest in the stock market? I know they can back up their advise with talks like the stock market currently generates the highest returns, it is very liquid, the are there to provide investment advice etc all for a modest and often negligible fee.

 

In Nigeria, Stockbrokers earn a ‘modest’ fee of 1.35% whether you buy or sell a stock. I repeat whether you BUY OR SELL A STOCK. Why is this so important, much so I had to make it a bold statement? When someone makes money off you regardless of whether you buy or sell a product then they are more or less profiting from your gains and/or losses. Only the government comes this close. Based on this it is important that you self determine the stock that you want to buy or sell even after receiving honest advice from your stockbrokers.

 

A stockbroker is simply a ‘broker’, a link between you and a market. He is not your Financial or Investment Advisor and really owes you no allegiance except carrying out your instruction on your behalf following which he is paid a fee. Unlike a Financial Advisor, he is not remotely liable to any instruction you give him that arrises in a loss of your investment. So whilst most complain about stockbrokers who give them wrong advise, you are basically out of line. It is not his job to advice you. He actually may be doing you a favour by advising you so do not think his fee is for the advise. Heck, he is even advicing you because whether you buy or sell he will make money.

 

So, when you deal with your Stockbroker and foster that good relationship with him or her always remember, he makes money off you whether you BUY OR SELL.

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