Investing 101

When My Broker Said This Word, I Ran

Editor’s Note: Today, Oxford Club Research Director Kristin Orman will share the story of the one word that led her to leave her broker.

Even before the markets tumbled last month, investors were often put under pressure by their brokers to trade quickly in an effort to stay one step ahead of the market.

But you should always stick to your guns when it comes to maintaining your investment strategy. And The Oxford Club is here to give you a lift when you need it.

Enjoy today’s insights!

– Kaitlyn Hopkins, Assistant Managing Editor

All brokers are schooled in the art of influencing people, no matter how “honest” they are. In fact, Dale Carnegie’s book How to Win Friends and Influence People is required reading for almost every newly minted broker.

That’s because a broker’s salary and livelihood are dependent on their ability to generate commissions. Successful brokers must convince their customers to buy or sell stocks, bonds and other securities in order to make a buck.

They are taught the art of psychological warfare in order to persuade clients one way or another. So you can imagine whose interest they are really serving. It’s almost never the client’s.

There’s one very dangerous expression in their arsenal. If you hear this word come out of your broker’s mouth, you should run for the hills. Your account is about to become a target.

The Greatest Forces in the World

Albert Einstein said that fear and greed are two of the three greatest forces in the world.

When it comes to investing, the word “opportunity” is a tricky one…

Admittedly, we use the word often here at The Oxford Club. After all, there are plenty of opportunities to profit from the market – even now.

That said, when you hear the word “opportunity” from your broker, more likely than not, your broker is pitching their own opportunity. Not yours.

A few years ago, I found myself in my own broker’s crosshairs.

Learning When to Pass

Readers may be surprised to learn that I kept one of my investment accounts with a broker. I met him through my grandfather. Since he had always done right by my grandfather, I gave him and his firm a chance.

I opened an account. I filled it with dividend stocks, set up the reinvestment plan and walked away.

Every month or so, I would log in to my account online, review my portfolio and make any necessary changes. In 2015, I didn’t make a single trade. It was a good deal for me, since it was a transaction-based account.

That means my broker was paid only when I bought or sold something.

Early on, my broker would call me, trying to convince me to diversify into more aggressive “age appropriate” growth stocks. Since I’m well-acquainted with the power of compounding, I declined. He accepted my investment strategy, and after that, we spoke once a year.

There was no reason for me to transfer the account and incur any unnecessary transfer fees.

Until things went south…

The Wrong End of the Gun Barrel

My broker retired. My account was handed off to another broker. I’ll call him “Jay.” Jay called a few weeks afterward with an “opportunity” for me. Yes, he used that exact word.

He said I was wasting my prime investing years with my “buy and hold” strategy. Apparently, in his 10 months as a licensed broker, Jay had figured out a way to increase my investment returns.

I didn’t listen to much of what he said. He lost me the second he said the word “opportunity.” All I know is that his strategy involved a lot of buying and selling.

It quickly became clear to me that there was only one opportunity he had in mind for me: to pay him a bunch of money in commissions.

I politely explained to Jay that I wasn’t interested. Moreover, I explained that I was perfectly happy with the way my account was managed before.

But Jay, a new broker being schooled in the art of persuasion, would not take “no” for an answer. The calls continued.

Eventually, I’d had enough.

Saying Good Riddance

Because of Jay’s behavior, I transferred my assets to an online brokerage account. I didn’t need Jay to babysit my holdings. And I certainly didn’t have time to hear about Jay’s opportunities to earn commissions. The transfer fees were well worth the peace and quiet.

And now that many online brokers offer zero-fee trading, there’s no reason you should let yourself become a target either.

Again, there are plenty of opportunities for you to make money in this market. But remember, any opportunity presented by a transaction-based broker is, first, an opportunity for them to book a commission. And there is no reason for you to let their fees eat into your returns.

If you feel pressured to make lots of trades in your portfolio, stop, take a step back and think about finding another broker. Better yet, consider handling your investments on your own.

No one cares more about your money than you do.

Good investing,


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