Should you Trust your Broker or Adviser?

To what extent does your broker or financial adviser have your best interests in mind when they recommend financial products?  A University of Toronto researcher suggests you be very skeptical. "A study published in the February 2013 issue of the Journal of Finance has found that mutual funds offering higher broker fees attract the most investments." "It also found these payments are linked to lower investment performance, especially when the fees come from one-time sales loads rather than ongoing payments.  It is the first such study to explicitly show how broker fees affect investments into funds and how they subsequently perform." "Brokers are typically compensated in two ways. If the fund is a front-end load, the investor pays a one-time charge, taken immediately off the top of their initial investment as a predetermined percentage. The broker receives the bulk of that charge." "Investors may also not realize how much their brokers continue to receive out of their investments, via ongoing "trailer fees." So if your adviser recommends that you stay in a mediocre fund... maybe they are making lots of money off of you. Be skeptical and ask your broker/adviser how they are compensated and how much money they will make if you buy the fund they recommend. Better yet,work with a fee-only financial planner. Read more: http://www.eurekalert.org/pub_releases/2013-01/uotr-bff013013.php