Charlie Munger on Commission-Based Brokers and Bankers

Jason Zweig and Nicole Friedman were lucky enough to have spent six hours talking with Charlie Munger over the dinner the other night and wrote it up for the Wall Street Journal this weekend.

This exchange, wherein Charlie perfectly echoes my own experience and opinions about transactional brokerage and banking really caught my attention. In a former life, I had lived this. Even wrote a whole book about it

Q: How should brokers and bankers be paid?

A: I’m afraid that salesmen do have a wonderful incentive. On the other hand, what a salesman will do is just awful, if you give a man a family to support, in the commission system. And the reason that the brokerage houses need such big compliance departments is that, without them, the salesman who needs the commission to live, maintain status, to pay the bills and so forth, if it gets to the end of the month, he would sell a blind man any goddamn thing to get the gross.

It’s disgusting. My dead wife had a relative, her mother’s cousin, who was a blind doctor. And he had two adopted children. And after he was blind, and he was living on the savings that he’d made from very hard working, he came late to medicine from pharmacy, and he worked hard and he’d saved some money, and that’s what he lived on—and this goddamn broker who was married to the adopted daughter, he just churned the old guy until he was broke. He was blind! He was his own father-in-law!

They just think if you need it enough, it’s OK to do. And it happens everywhere. And what happened at Wells Fargo was just another instance of that. You get the incentives too tough and too many people will yield.

The mistake [at Wells Fargo] was, when it blew up, they just started firing the people that did it and they fired thousands without changing the incentive system. It was insane but again a dumb bureaucracy, a pompous CEO.


Josh here, go read the whole Q&A, there’s a lot there from a brilliant man. Charlie once said something along the lines of incentives are everything. One of his exact quotes: “I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it.”

I feel the same way. Which is why, as entrepreneurs working in and running a business in the financial arena, we think so much about how we’re incentivizing our growing workforce. Barry, Kris, Michael and I have a very good idea of what we never want to become. It’s up to us to build what we do want to become, if such a thing even exists yet.


Charlie Munger, Unplugged (Wall Street Journal) 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Value of Time: 6 Time Value Of Money Examples - Fat Tailed and Happy commented on Jun 09

    […] We live an insane era where broad stock exposure costs minuscule expense ratios, but it wasn’t always this way. Wall Street used to charge 5% + a testicle for the privilege of investing in their boutique shitty funds which never matched the index. Some of these funds are still around, which annoys many to no end. […]

  2. fake rolex for sale commented on Sep 18

    … [Trackback]

    […] Here you can find 51123 additional Info to that Topic: […]

  3. Eat Verts commented on Sep 21

    … [Trackback]

    […] Info to that Topic: […]

  4. What is the Bitcoin loophole? commented on Sep 25

    … [Trackback]

    […] Read More Info here on that Topic: […]

  5. bitcoin que es y como funciona commented on Sep 29

    … [Trackback]

    […] Info on that Topic: […]

  6. commented on Oct 03

    … [Trackback]

    […] Read More on to that Topic: […]

  7. Smith and Wesson guns in stock commented on Oct 14

    … [Trackback]

    […] Here you can find 71772 more Info to that Topic: […]

  8. Digital Transformation consultant commented on Nov 04

    … [Trackback]

    […] Here you can find 76165 more Information on that Topic: […]