4/24/2013 6:30 PM ET|
When a broker might be worth hiring
Whether shopping for stocks, mortgages or homes, there are times when you can use help, and times when you should do it yourself.
Handling certain aspects of your own finances can be practical and even cost-effective, if done right. Other times, you're far better off hiring a professional.
The calculation can get dicey when you are trying to decide whether to use a broker.
Brokers can provide valuable access and advice, but they work on commission and typically aren't required to put your interests ahead of their own. So how do you know when a broker might leave you better or worse off?
Here are five situations when you might consider hiring a broker:
Hiring a full-service stockbroker hasn't been necessary since Charles Schwab opened his discount brokerage in 1975. Investment expert Jim Jubak fears that many people who use stockbrokers these days are wasting their money.
"You've got people with that title who are no more than order takers, who don't have an idea in their head except what the sales staff told them in the morning meeting," said Jubak, who writes for MSN Money and his own JAM Newsletter. "What you really want is someone who's been around awhile, who's cynical about his company because he's taken clients down the company path and burned them."
You're unlikely to find those with the appropriate amount of cynicism and experience at the big, full-service brokerages, he said, because most either "get kicked out" or quit to set up their own shops.
If you're content to match the market rather than try to beat it, you probably don't need a broker at all. Instead, you can invest in index funds and exchange-traded funds through a discount brokerage.
If you want to be an active investor, though, finding the right investment professional can be worth the effort. Jubak recommends looking for registered investment advisers, who have a fiduciary duty to put their clients' interests first, to act as sounding board.
To find one, start by asking other investors you respect. Some registered investment advisers are also financial planners, so you can check with the Financial Planning Association or the National Association of Personal Financial Advisors. Then check their background using FINRA's BrokerCheck, a free site run by the Financial Industry Regulatory Authority.
Conclusion: Brokers may be worthwhile for active investors.
Taking out a mortgage
If you're a first-time homebuyer or don't want the hassle of shopping for a home loan, you may be tempted to use a mortgage broker. These professionals can tap networks of mortgage lenders and guide you through the application process.
But you can't expect to get the best rates and terms if you talk to only one source, said real estate expert and author Ilyce Glink of ThinkGlink.com. That's because mortgage lenders, who may be paid commissions by the borrower or lender, are not required to put your interests ahead of their own.
"Nobody's a fiduciary to you," Glink warned. "Nobody's in your corner."
People who want a good mortgage deal need to shop hard, consulting a variety of sources and comparing offers. Even though most mortgages these days are sold to government-run agencies Fannie Mae and Freddie Mac, lenders might have different policies that can affect the cost and terms of the mortgage you're offered.
"It's not really (a choice between) doing it yourself and hiring a broker," Glink said. "There's a lot of work you need to do yourself regardless."
To make shopping easier, first decide what type of loan you want. The three most popular types include a 30-year fixed rate, a 15-year fixed rate and a 5/1 adjustable-rate mortgage, which is fixed for the first five years before becoming adjustable.
Then decide if you want to "buy down" the rate by paying points. People who expect to remain in the home (or keep the loan) for several years may opt to pay a percentage of the loan upfront as a fee to get a lower rate.
It will be easier to compare offers if you shop for just one type of loan -- say, a 30-year fixed rate with no points -- then try to compare different options.
Glink recommends anyone who's shopping for a home loan or refinance consult at least four of the following five sources:
- A mortgage broker (get a referral from the Upfront Mortgage Brokers Association).
- A big traditional bank, such as Wells Fargo, Chase or Bank of America.
- A regional bank, which may be more flexible in how they make loans.
- A credit union, many of which offer real estate loans at good rates.
- An online lender or broker, such as Quicken Loans, Discover, LendingTree or Zillow.
Conclusion: Shop around, even if you use a broker.
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Never - Never - Never hire a Broker or buy Mutual Funds - Unless of course you are a complete Moron and unable to do anything harder than wiping your own rear end !
Brokers don't do a single thing you can't do for yourself. They make money whether or not you make or lose money so they really could care less.
Investing is very simple - Buy stocks in Large Iconic (Products you know and use) that have a History of paying dividends. Re- Invest the dividends in more stock. Sit back, relax, and watch your investment grow - free and clear of leeches called Brokers and and "Financial Advisors" !
Wow, should I hire a broker?
About 10 years ago I wanted to invest in the stock market, I wanted to make some "easy money". So, I thought I would pick (as the old saying goes, the BEST of the industry), Merriell Lynch. I GOT LYNCHED ALRIGHT!!
My first investment with ML was $150k cash, and I added about $161k in the following year, totaling about $311k. Since I was green at the game, I thought it wise to let them do my picking and choosing. I kept an eye on it from time to time and it appeared they bought and sold stock daily/weekly that I never heard of, drawing a commission each time. If I recall correctly, they made several thousand commission for a couple years..
As I could see my investment going down and down, I called them and stopped by their office several times, each time they saying, it takes time, stay the course, don't give up. So as I recall after a couplke years I looked at my account and it was worth less than $100k. I called them and told them to send me what money I had left in my account and my stock cirtificates, they argued with me but I said the PARTY IS OVER, SEND ME MY STUFF. I think Im got about $7k cash and a stack of cirtificates, half of them already went south (they should have been printed on soft paper so I could had a use for them).
I then opened an account with a on line broker with $2k cash, and then sent them the cirtificates that had a little value left. Doing my own trading, I have got back the $200k +/- Merriell Lynch cost me, plus perhaps a couple hundred grand profit.
Bottom line, I could not believe what I heard a few years ago, BANK OF AMERICA BOUGHT MERRIELL LYNCH WHEN ML WAS FACING BANKRUPSEY. Sad, very sad.
Maybe ML will take BoA down the road of bankrupsey too, that would probably be too good for them.
Have a good day, you'all.
It's a good idea as long as you do your homework and get someone who is reputable. Somebody who is well credentialed, maybe has been on the board of the NASDAQ. Gives to all the charities and and is well respected in the community..
Maybe somebody like Bernie. Bernie what's his name again?...
I've been doing a lot of research and have a good idea on which companies I want to buy stock in. How do I buy and avoid the middle man. I just want to purchase and sit and watch my investment grow and trade when I get really nervous. Loss on mutuals after 911. I want to be able to do a one time buy in and not get hooked into monthly installmeny type plans. I'm basically poor white trash trying to catch up in life because I'm a looser. Any good advise out there???
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