Comments on: Full Service Brokerages- Not a Good Idea http://toshuo.com/2006/full-service-brokerages-not-a-good-idea/ Chinese, Linguistics, Science, Cultural Observations and whatever else I feel like writing about Fri, 21 Nov 2008 14:43:16 +0000 http://wordpress.org/?v=2.6 By: Mark http://toshuo.com/2006/full-service-brokerages-not-a-good-idea/#comment-361 Mark Sun, 05 Feb 2006 10:16:09 +0000 http://toshuo.com/?p=102#comment-361 My original comment got lost due to the hostgator server problems. What I said was something like this: Charging a fee based on total account size is MUCH better than the traditional commision system. Under an account size-based fee, the brokerage's interests are aligned with those of the client. However, I still don't think it's a very good way to go. A 1%-2% fee is a huge drag over the long haul. In 30 years, $10,000 will grow to $228,923 at a 11% interest rate, but only to $132,676 at 9% interest rate. It would be much better to invest in a low expense ratio index fund like the Vanguard S&P500 fund and match the market, than to pay the 1%-2% per year for your brokerage to choose for you. My original comment got lost due to the hostgator server problems. What I said was something like this:

Charging a fee based on total account size is MUCH better than the traditional commision system. Under an account size-based fee, the brokerage’s interests are aligned with those of the client.

However, I still don’t think it’s a very good way to go. A 1%-2% fee is a huge drag over the long haul. In 30 years, $10,000 will grow to $228,923 at a 11% interest rate, but only to $132,676 at 9% interest rate. It would be much better to invest in a low expense ratio index fund like the Vanguard S&P500 fund and match the market, than to pay the 1%-2% per year for your brokerage to choose for you.

]]> By: Scott http://toshuo.com/2006/full-service-brokerages-not-a-good-idea/#comment-350 Scott Sat, 04 Feb 2006 20:19:42 +0000 http://toshuo.com/?p=102#comment-350 Hey there, interesting post. What do you think about full service brokerages that operate on a flat fee based schedule or an asset management fee, say they charge 1-2% a year of your total account size? I think it's preferable for people who don't want to manage their money themselves, and there is no incentive for the broker to overtrade their account. For my blog I was actually thinking about heading to a Merril Lynch or Morgan Stanley full-service office and see what they would tell a 24 year old to do with his money. Could make for a funny experience. Hey there, interesting post. What do you think about full service brokerages that operate on a flat fee based schedule or an asset management fee, say they charge 1-2% a year of your total account size? I think it’s preferable for people who don’t want to manage their money themselves, and there is no incentive for the broker to overtrade their account.

For my blog I was actually thinking about heading to a Merril Lynch or Morgan Stanley full-service office and see what they would tell a 24 year old to do with his money. Could make for a funny experience.

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