I have to say there are not many articles from the mainstream media that are worth reading, but an article from Bill Singer, who is a guest contributor at Forbes, really caught my attention. This is one of the best written and most important articles you will ever read. I promise you, just spend 5 minutes of your life to read this article. It will change your life.
If you are a customer of JP Morgan Chase, Bank or America, Merrill Lynch, Morgan Stanley etc…, if you have a stock broker from any of the major banks or companies, you must read this article.
If you don’t want to read it, let me summarize …
So Mr. Singer says what everyone in the industry knows, that is, your stockbroker and banker is stealing money from you everyday. Not only does a JP Morgan banker lift your money by charging super high fees to its customers, but in this case, a JP Morgan banker actually found a clients wallet that was lost in his bank and stole the money. He then used the credit card from the lost wallet. Wow, you can’t make this up. And you put your money with these people. You trust your kids money with these people.
But the most important point in the article is in the last paragraph:
“On modern-day Wall Street, there’s lots of what they call cross-selling: the guy at the bank is trying to sell you insurance and stocks; the gal at the brokerage firm is trying to get you to buy annuities and open a bank account at their affiliate.
So — be careful out there. When you walk by Citigroup, JP Morgan Chase, Wells Fargo, Bank of America, Morgan Stanley, what you see may not always be what you get. There are lots of strings and entanglements. Your stockbroker may be dipping into your bank accounts, and your banking playing around in your brokerage account — and, at times, no one seems to have a clue.”
Mr. Singer is absolutely right! I have told you on this blog before that your friendly neighborhood stock broker is not your friend. They charge you fees that you don’t even know about. They charge you commissions that are 10 times the industry standard. And some of them are illegally stealing your money without you even knowing out of your account. But yet you still put your money with these people, don’t you?
Consider this: These people get paid regardless of whether your account goes up or down. On the other hand, hedge funds only get paid if they make you money.
Think about that. Think about how those incentives differ.
Also, consider this: Stockbrokers are usually C students from mediocre schools, who have zero experience trading or doing real economic or equity research. They are salespeople … bottom line.
I know personally one of the highest producing stock brokers in the country. He works for Merrill Lynch and he/she has an associates degree from a community college. Do you think he/she could get a job at a fortune 500 company. The answer is no!!! But they can manage your precious retirement and kids money!!!
Think of good investing, like surgery. Would you want your brain surgeon to be a community college dropout? Or would you want a Harvard surgeon that has a proven record of achievement? I’m going with the latter.
The same approach should go with your money. Good investing, good money management takes work, skill, deep knowledge of finance, global economics, statistics and pschology … and a high level of integrity.
Perhaps most important though, the incentives have to be properly aligned to get the right outcome.
Stockbrokers charge as much as 5% in fees. Trust me on this. Many of these fees are hidden. That is $10,000 a year on a $200k account, regardless of whether you make money or not. And I guarantee you, most of them don’t know any more about investing than the average man on the street. Yet you still give them your money!
I charge you $299 a quarter and I let you piggyback off the world’s best and brightest Billionaire Hedge Fund Managers, people who graduated from Princeton, Yale, Harvard and Stanford. But here is the real difference, these people have become billionaires, not from skimming your account with fees, but from their own personal investing talents and trading. And guess what? I can tell you exactly what these genius ivy league billionaires are buying, so you get rich like them.
But no, you would rather get advice from a C student from a mediocre college who never made a dime trading or investing his own money. You don’t want to make triple digit returns and retire rich.. You want to make your friend, your stockbroker rich. Remember, he is sending his kids to college on your money! But your okay with that right?
So go ahead and be poor and have money siphoned out of your account by your “friendly neighborhood stockbroker.” You don’t want to know what the richest, smartest billionaire investors are buying at www.billionairesportfolio.com. No that would be too easy right? You would rather struggle, have your stockbroker and banker steal from you, and then blame the “crazy markets.”
Editor of the Billionaires Portfolio