The Essence of Retail Brokerage

Ever come across a simple, straightforward sentence or paragraph that perfectly captures everything you’re trying to convey about a given subject with only handful of words?  I did this morning.  It was written by Bruce Kelly, ace reporter at Investment News.

It is the very essence of retail brokerage:

“Shortly after Susan Fox bought a nontraded real estate investment trust for her IRA, the REIT started to show quarterly losses. But when she met with her broker to discuss her concern, he sold her a second nontraded REIT.”


For those unaware, a nontraded REIT is like a private placement real estate vehicle with huge internals fees to the broker who sells it and the firm that builds it.  It is illiquid and is predominantly broker-sold (because only an asshole would buy one of their own accord).  The primary selling point the broker makes when pitching a nontraded REIT is that “because its not private, its net asset value won’t fluctuate up and down in your account as much.”  Apparently this is enough for the broker to earn his 8% inside selling concession and to convince the client to waive their right to liquidity.

You already know where this story is going, but humor me and click over anyway.


Nontraded REITs: A cautionary tale (Investment News)

My book teaches you to watch out for this kind of stuff:

Backstage Wall Street on Amazon




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