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Older Investors Still in the Dark on Commissions They Pay
According to an AARP survey, 77% of older people are unaware that full service brokers are paid according to the amount and type of investments they sell, and not on the quality of their advice or on how much their clients earn.
That finding and others indicate that there needs to be better disclosure. Other findings:
33% don't know that firms often have contests to promote the sale of certain products;
37% don't know that "load' refers to a sales charge;
64% don't know that riskier products usually carry higher commissions
Other findings include that while 76% believe that it is improper for brokers to receive incentives to sell certain products like firm proprietary products (e.g., Dean Witter's own mutual funds), and 89% consider it improper for brokers to be paid higher commissions to sell riskier products, only 12% had ever asked their brokers if they were receiving extra income to sell one product over another.
Source: Investors Business Daily, 4/28/98
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