So you don’t have to buy what they are selling. Wall Street has created dozens of investments that are highly complex and esoteric. Investments like non-traded REITs, collateralized debt obligations, collateralized mortgage obligations, equity indexed annuities, auction rate securities, straddles and strangles aren’t understood by most investors. If the investment can’t be explained in common-sense terms, it should not be purchased.
As salespeople, stockbrokers and financial advisers have a great financial incentive to recommend high-commission investments. That means doing your required due diligence before picking a broker. If dealing with a stockbroker at a firm like Merrill Lynch or Morgan Stanley, check to see whether there are listed customer complaints (through the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck at http://www.finra.org/Investors/ToolsCalculators/BrokerCheck or by contacting your state securities regulator (contact information for all 50 states is here http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm). Even one customer complaint should be a concern. A fine by a securities regulator or arbitration award against the broker should be a major red flag.