On stock brokers

An entertaining Atlantic piece on why you should fire your broker.

I learned this lesson myself back in the 1990s. I inherited about 20K from my grandmother when I was in college. I put the money in an asset management account at Merrill Lynch; at the time, such accounts were exciting and new. In those days, the account came with an actual personal broker, my broker was a gorgeous young women, only a few years older than I was, with a habit of wearing smart business suits with very short skirts. I would drive or take the bus to downtown Seattle every few months to meet with her. She was actually a good broker in the sense that the REIT she had me put about half the money into has continued to pay a very nice dividend year after year through ups and downs. I still have it. She also did me the favor (as I learned later this is very much a discretionary favor) of letting me in on the Costco IPO. I made several thousand dollars on that in less than a week.

Sadly, she moved on to better things and was replace by someone I remember only as the frat boy broker. He was the sort of broker that the Atlantic piece is all about. He had me invest in something called Merrill Lynch's "emerging growth fund". During a several year period in the 80s when the market roughly tripled, the "emerging growth fund" grew by exactly zero. I suppose I should be happy that it did not go down! I got smart and learned my lesson at some point in the 90s and sold it and resolved never to deal with brokers again. I suppose I should be glad that this lesson cost me only (in opportunity cost) a few thousand dollars.

Economists worry about markets with information asymmetries for good reasons!