Always Question Commissioned Salesmen
The great Chief Joseph famously quipped, “Always look twice at a man with two faces.” This is very appropriate during a Presidential election process, but I would alter the statement to say always look twice at a commissioned salesman.
An article in the Wall Street Journal states that a large percentage of the subprime loans sold were to folks with strong credit scores. The mortgage brokers made a higher commission for these subprime loans so they pushed them on everyone, not just low credit borrowers.
Anytime we deal with commissioned salesmen, whether it is a mortgage broker or financial advisor, we must question, question, question. Just because these people are SUPPOSE to be experts does not mean you should trust blindly. In fact, I would go further and say you need to realize that when commissions are involved you are dealing with a salesman, not an expert. If they were experts, they wouldn’t have to sell product. Experts sell advice. I am biased as a fee-only financial planner, but the reason I became a fee-only planner was because I was hosed by a commission broker.
Filed under: Housing
Solid advice. I try to avoid “salesmen” at all costs. I may not be a professional money manager, but I know how to invest in an index fund and not a mutual fund with a 1.5% fee!
OK, I made that mistake once and paid for it, but I’ve learned my lesson!
Patrick,
Most people usually find index funds after having a bad experience with a brokerage house. I think more people would follow your lead if they truly understood how Wall Street worked and how Wall Street can’t top the benchmarks.
[…] Always Question Commissioned Salesmen. […]
[…] However, I have to totally disagree with PaineWebber’s stance. I think it is very important for clients to know how much they are being charged and HOW they are being charged, especially if commissions are involved. Why? Because there can be a huge conflict-of-interest involved when a broker recommends one product over another. Kirk, a fee-only financial planner and blogger, illustrates this point as it regards to the subprime mess. […]
Interesting article in WSJ.
I still have to mostly blame the borrowers however. They should have known what they are getting into, especially if they already know how to handle money (hence the good credit ratings).
Mike