Fun Facts About Brokers

If you are going to work with a broker, work with one who has been in the business for a while.

A study by Registered Rep magazine (a trade magazine for brokers) states that:
“Brokers with more experience — those with five or more years and higher levels of assets under management — tend to have significantly lower gross production/assets under management ratios than do new brokers. Our study found that novice brokers had a GP/AUM (Note: this is commissions divided by assets under management) ratio of closer to 1.4 percent, meaning they tended to generate more commissions per dollar under management. Brokerage management regards any ratio over one as a possible red flag for churning (unless the broker specializes in, say, options strategies, which by necessity require lots of trading). By comparison, seasoned producers (10 to 14 years experience) posted just 0.60 GP/AUM ratio.”

Therefore, statistically you can save 80 basis points, nearly 1% per year, simply by choosing a more experienced broker, who is more established and less inclined to milk your account for fees.
At Outsmart, we’re all about lowering costs and increasing returns.