Friday, March 27, 2015

Beware of Brokers at the end of the month/quarter

For a lot of brokers, today was the last day of the quarter for sales to count in the first quarter. I'm sure there were lots of brokers pounding the phones today trying to get that one last sale to count towards first quarter goals. Hopefully you haven't had any interactions with brokers this week like one I heard about from today.

I talked to a friend today who had an interaction with a broker who was adamant that a particular transaction be funded TODAY! The broker had recommended the client sell certain investments to purchase new investments. Because of the settlement of the sales, the cash wouldn't be available to make the buys until next week. The client was indifferent as to whether the new investments were purchased today or next week, but the broker tried everything he could think of to make sure the purchases were made today. Ultimately, the broker was unsuccessful, so he won't get credit for the sales until next week, which is likely all included in 2Q even though April doesn't start until Wednesday.

If you ever find yourself on the client side of this type of interaction, you should probably ask yourself "Why is it so important that this happen TODAY?" I would always be wary of acting on a recommendation of a broker, especially towards the end of the year/quarter. The broker is going to get paid commission on a purchase no matter what quarter it happens in. Because there are often quarterly bonuses based on total sales, this sale could have been the difference between getting an additional bonus or not.

Sorry for not warning you earlier. Stay safe out there.

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