Find out why your broker never returns your calls.

Your broker used to call you almost every day before you opened an account with him. Now he never returns your calls, even after your invested all your money with him.  What’s up?”

Well, what’s up is the game. It’s over, but you don’t know it yet.  Once you went “all in”—a poker term that indicates you’ve ante’d up every penny you have—your value as a client plummeted.  Aside from some minor sell-a-little/buy-a-little chump change, your account has been milked of any potential commissions.  The broker knows that you are unlikely to make major changes in your investments in the foreseeable future—so why bother with you? You have become the albatross around his neck. There’s no incentive to spend valuable time answering your questions when he could be busy snaring another investor—fresh blood that will pump more money to his (and his firm’s) bottom line.

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Over time, you’ll probably threaten to move your account. Fine with him—by now, he’s earned all the commissions. If someone else is left holding the bag—i.e., “servicing your account”—that’s no problem for him, and it’s usually your new broker.  Why? You are once again fresh meat. Your new broker sympathizes with you over how you were treated—and then declares your existing portfolio to contain more dogs than the American Kennel Club.  She makes an enthusiastic case for selling out all your positions now: “you have to bite the bullet and eat the penalties before it’s too late!” And of course, she has her own program of investments for you to buy into—and her own commissions to collect.  In most cases such as this, you’d be hard-pressed to find anything but a predator seeking your business. In such circumstances, an honest broker would decline to handle your account. He would tell you the sad truth: he cannot legitimately earn any fees from you. If he took on everybody in your situation, he would bankrupt himself. 

Ever wonder how the commission is divided at the average Wall Street retail brokerage house? It depends on a host of factors, including:

  • How long the broker has been in business (the longer he’s been in it the more is expected out of him in annual commissions)
  • His total commissions earned to date in the current year (the more he earns, the more he gets to keep)
  • Any contest that may have been running at the time, and
  • The type of investment you bought

With minor variations among the different brokerage houses, a broker will usually get from 25 percent to 50 percent of the total commission earned for his efforts. The balance goes to the brokerage house. It’s what pays for all the local-office expenses; the expensive local, regional, and national advertising campaigns that draw new business.