investmentsInvestor Protector is fortunate in having a distinguished veteran of the securities industry as an advisor. He has agreed to contribute on a periodic basis in hopes that more industry veterans will assist with their knowledge to level the playing field for investors.  The securities industry offers it’s brokers/advisors an array of investment products that are great for the industry bottom line, but may not necessarily be the best thing for the investor. Listed below are a few high commission investments that investors should be cautious about.

1.  Please be extremely cautious of a broker/ advisor that steers you toward investments in mutual funds that have the same name as the brokerage firm he or she represents.  ( As my industry expert states ” If the name on the door is the same as the product being sold be cautious! ” )  There are approximately 8,400 mutual funds available to invest in, always make sure to invest in the ones with the best long term track records and lowest fees.

2.  Annuities are an investment that all investors should be cautious about especially Variable Annuities.  These investments are an industry favorite and the reason is the high commissions received by the broker and his or her firm.  These commissions are impossible to detect because the insurance companies pay them directly to the brokerage firm. That doesn’t sound so bad does it?  Well try to get your money out before the term of your agreement ends and then you will find out who really pays the extremely high commission.  Always remember the longer the surrender period the higher the commission the broker and brokerage firm receive. Also be aware that you can invest in an annuity with no surrender period and the commission is only 1%.

3.  Complicated high commission options strategies promoted on the premise of protecting stock positions.

4.  Any investment or investment strategy offered during a free lunch or dinner. Always remember the old saying “there is no such thing as a free lunch.” Please audio tape all such meetings and contact Investor Protector.

5.  Mutual fund “B” & “C” shares. These shares include trailing commission fees as well as layers of hidden management fees, which can prove to be a nice little annuity for your broker/ advisor and his or her firm. Make sure your broker/ advisor discloses all fees in writing.

6.  Municipal Bonds sold by a brokerage firm. Most often there are several layers of mark up within the firm before getting into your account. Always be careful of the price you pay per bond and remember that price is always negotiable.

7.  Stocks bought and sold for you by a brokerage firm not only cost you a commission, but quite often have a hidden mark up because it is legal for a brokerage firm to ” FRONT RUN ” your order. ( Buy or sell a stock for the firm’s own account and mark up the price before putting it in your account.