Is Your Broker Worth The Expense?

In my last post, I examined the devastating impact mutual fund fees can have on your portfolio over a lifetime . This week I would like to introduce Part 1 of “Is your Broker Worth the Expense?” 

The answer to the question is actually not as complex as you might think. John F. Wasik, author of 13 books and a Morningstar columnist, recently wrote an insightful and related article entitled “Is it Time to Dump your Broker?”  Mr. Wasik suggests six guidelines to keep in mind, and his article makes some excellent points.

The fact of the matter is fees can significantly reduce your wealth over a lifetime, and therefore you must determine what you consider an acceptable rate of return.

 My first rule is “Don’t Lose Money,” and my acceptable rate of return is 15%. Quite often brokers try to determine the acceptable rate of return for you. Don’t allow him/her to tell you what an acceptable rate of return should be; he/she works for you.

Secondly, many brokers look to an index like the S&P, and believe their job is to beat the index. I don’t agree with that philosophy. If the S&P is down 40% and your portfolio is down 38%, 38% is not an acceptable rate of return. Finally, brokers get paid regardless of the outcome. 

I don’t believe anyone should be paid for losing your money. Do you?

Take some time and determine what an acceptable rate of return is for you. Then, let your broker know what you expect. Give them a chance to determine a plan and/or investment objective to reach that rate of return. If he/she comes back and says they cannot reach your rate of return, thank them for their honesty and either get a new broker or begin investing on your own.

If you are not sure how to determine your own acceptable rate of return, go to my website, www.TheDeGeorgeAgency.com, and let’s get a conversation started. 

The DeGeorge Agency is a “Family Helping Families.”