Connecting the Dots: The Wall Street Raid on Your Piggy Bank

Friday, July 10, 2015
By Paul Martin

By: Tony Sagami
GoldSeek.com
Friday, 10 July 2015

Question: How do you get a $1 million portfolio?
Answer: Give $2 million to a stockbroker.

Don’t you hate phone solicitors?

Well, if you lived in western Washington during the 1980s, I may have very well interrupted your dinner with a “can’t miss” stock solicitation. I worked as a Merrill Lynch stockbroker in the 1980s, and we had mandatory work nights where everyone with less than five years of service cold-called everyone that lived in the best zip codes.

I made pretty good money as a stockbroker, but I didn’t like the business. There was intense pressure to push certain products, but that wasn’t all.

One of the greatest paradoxes of the investment industry was that the safest investments paid the lowest commissions while the riskiest investments paid the highest commissions.

Example #1: The commission on a CD was half of 1% while the commission for an illiquid oil/gas limited partnership was 8%.

I would have had to sell 16 times as many CDs to make as much as one of my dirt-bag co-workers who pushed little old ladies into oil & gas limited partnerships that locked up their money for six, seven, or eight years, or more.

Example #2: The commission on the sale of proprietary Merrill Lynch mutual funds was approximately 15% higher than on non-Merrill Lynch mutual funds.

Today’s commission payouts are different than they were in the 1980s, but that high-risk/high-commission paradox and the higher profits on proprietary products are still very much alive. And there’s no shortage of Wall Street dirt bags who are more interested in their paychecks than in your net worth.

The Rest…HERE

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