A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Wednesday, March 02, 2005

Questions to Ask Your Broker Before You Buy a Load Fund

1. How much are you getting paid for this? How much am I being charged for this? This is a fair question. If the broker is on the up and up, he or she will tell you with no hesitation. If they hem and haw and act offended by your questions, find another broker. It's that simple.

2. How does this compare with industry averages? Once again, this a fair question. Make sure they tell you the average for the asset class you are purchasing. In one of my previous posts I talked about an article that was in the Wall Street Journal regarding mutual fund fees. It might help if you read it.

3. Is my purchase of this fund helping you win a trip or prize? Yes, mutual fund companies sponsor trips and prizes for brokers who put the most money with a particular company. I think this is a HUGE conflict of interest when this information is not shared with the customer. If this question causes your broker's face to turn red, find another broker!

4. Does your firm have a special relationship with this mutual fund family? Some brokerage firms enter into special arrangements with mutual fund companies, allowing the brokerage firm to earn extra money from the arrangement. Once again, this information is usually not passed on to the customer. Therefore, you have to ask.

It is much better to ask these questions before you invest your money than after the fact. It pays to know the right questions to ask.