Archive for the ‘Conflict of Interest’ Category
“Avoid the fee-ing frenzy,” says David Swensen. 
Marion banks at Wachovia. When she needs to rollover her 401(k) into an IRA account, she naturally asks a Wachovia financial advisor for help. He helps her open an account and recommends she buy the Evergreen Asset Allocation Fund (EAAFX). Is there anything wrong with this picture? Plenty!
First, the fund has a sales charge (front-end load) of 5.75%. Her 401(k) balance is $100,000. This means, the advisor takes $5,750 just for the act of opening the account for her.
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The title is a question posted to me. The following is my answer.
The most important thing to look for in a broker is not the explicit commission rate it charges, but the quality of its execution. In the Celent’s execution ranking, there is a $0.3 per share difference between the best execution and the worst execution. If you buy 1000 shares of stocks, that adds up to $300 difference. My own company, MZ Capital, uses Fidelity. It ranked #2 in the chart. I wonder where would Zecco.com be in the chart? One way a zero commission broker can make money is to channel your trades to a particular market maker instead of finding you the best execution. It is possible Zecco.com is doing that. If that’s the case, then Zecco.com would save you a nickel upfront, but would cost you a bundle in the execution.
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