Ask Colin

Am I sensible or paranoid in my reluctance to use a particular broker because of their lack of independence?

You must understand that a broker is a middleman. A broker's function is to facilitate trades for you. Full service brokers also give advice. About half the time their advice will turn out well and about half the time it will turn out badly. That is the nature of the investing and trading game.

The only time a broker is not independent is when you are being offered stocks that the broker is selling to you as principal and this must be disclosed to you. If in doubt - ask BEFORE you buy. The only other time is if you are buying financial products that may be marketed by an institution that owns or controls the broker.

There is one other tricky area - if the broker has "sponsored" a company onto the exchange or is the "house broker" for a company. Again, they may not be as objective as they might in these situations. If in doubt ask - BEFORE you buy.

These things apart, a broker is there to help you and most will. However, they can only help you if you know what you want. No broker is a "hand-holder" for "financial babes in the woods". Nor are they always going to give perfect advice - it is not possible and if they were that good, they would not need to work as client advisers!

The most important thing is to have a clear trading or investment plan you can convey to your broker, so they can advise you properly. Then to take responsibility for the decisions you make - do not accept blindly what the broker says. Do your own research and ask questions. If you do not have the skills yet to do this, use a fund manager while you get yourself the education.

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