The Sad Truth About Brokers

In essence, brokers are our representatives in the market. They buy and sell in behalf of us and negotiate deals for us. In exchange for their services, they get commissions and fees. Much are expected of them because our money is entrusted to them. As such, assumptions are made of them. Majority believe that these brokers are professionals that are experts on their field. We believe that they always know what’s happening in the market and that clients’ have their full attention at all times. Well, the majority are simply wrong.

They are ordinary people like you and me
One thing that clients like to believe is that brokers are super human beings that have special licenses, accomplished awards, and advanced degrees. In truth, those are not requirements. To become a certified broker, aspirants need only pass a few exams before they can legally advise and represent you in the market. Most of the times, these certified brokers have no prior experience and sometimes even their collegiate degree doesn’t even relate to the field. Of course, not all brokerage apply this kind of screening. There are some who put up high requirements. If broker background is an issue for you, you can go ahead and research about brokers that have high standards.

They don’t know what will happen next to the market
An assumption that majority of market participants have is that brokers know more about future market movements than the average trader. This is simply not true. Just because they execute trades for you doesn’t mean they know what will happen next. As advisers as well, brokers are expected to have a better idea of what will go on in the market. The truth is that they know as much as the next person. The market is an unpredictable place and the best that your broker can do for you is speculate based from facts and other factors. So put faith in them to advise you well but ultimately, understand that nothing in this world is 100% sure.

They are brokers not because they represent you but because they are selling to you
The main appeal of brokers is that they are in the market to represent you. However, the truth is that brokers are essentially salesmen too. This may pose as a concern because the main goal of salesmen is to make a sell. Brokers are there to sell you their services. Whether you win or lose, they will profit. This may give rise to a conflict of interest for the broker and the client. Not to say that brokers are against you, but always be aware that business is business. What we’re saying is, get to know your broker if you can so you’ll know what you’re getting into.

We entrust so much to these brokers that we forget that they too are humans prone to mistakes just like us. While we don’t belittle the power of a good broker and adviser, it’s always best to have full control of your trades. Incorporate their wisdom and expertise but don’t let your assets go to waste. Be in the know. Get the best broker through extensive research and informed decisions. And remember, having a representative on the market doesn’t relieve you of your responsibility to take care of your assets yourself. After all, no one will care about you more than you, yourself.