Does your broker have a conflict of interest? The answer, most likely, is yes. The traditional form of compensation received by brokers is a commission each time an investment is bought or sold in your brokerage account. This compensation structure gives your broker financial incentives that are not aligned with your own. By receiving a commission based upon the frequency of trades in your account, a broker has a financial incentive to engage in more trades, regardless of whether that is actually in your financial best interest. Under the commission-based compensation model, there is no direct link between the amount of the broker's compensation and the financial performance of your account.
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