Posts Tagged ‘brokerage’

Ron Chernow: Broker Banker

Posted by admin on Wednesday, July 28, 2021

Ron Chernow Money Quote saying savings for the wealthy have become financialized by brokers who risk money, rather than save it. Ron Chernow said:
 
American savings, that money would find its way into the stock market, because the broker was someone with a much higher tolerance for risk than the banker Quote
 

“Once the brokerage house, rather than the bank, became the locus for American savings, that money would find its way into the stock market, because the broker was someone with a much higher tolerance for risk than the banker” — Ron Chernow

 

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In this quote, Ron Chernow is contrasting how banks and brokerage houses differently approached managing people’s savings and investments. He notes that historically, banks were more conservative places that took people’s deposits but did not encourage much risk-taking.

However, when brokerage houses became a major place for Americans to put their money aside, more of those savings would enter the stock market. This is because brokers generally have a “higher tolerance for risk” than bankers when allocating funds.

So in essence, Chernow is observing that brokerages steered savings towards the volatile but potentially lucrative stock market, while banks traditionally kept funds out of such risky territories. The quote examines how the rise of brokerages influenced growing investment in the stock sector.

Paul Tudor Jones: Brokerage Conflict

Posted by admin on Saturday, November 14, 2015

Paul Tudor Jones Money Quotation saying there would be a dramatic change in trading if market losses meant commensurate loss for brokers. Paul Tudor Jones said:
 
Paul Tudor Jones I got out of the brokerage business because I felt there was a gross conflict of interest: If you are charging a client commissions and he loses money, you aren’t penalized quote
 

“I got out of the brokerage business because I felt there was a gross conflict of interest: If you are charging a client commissions and he loses money, you aren’t penalized” — Paul Tudor Jones

 

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This quote from Paul Tudor Jones suggests there is an inherent conflict of interest in the traditional brokerage business model where clients are charged commissions. The best interpretation is that Jones felt it was unethical for brokers to profit from commissions whenever trades were made for clients, even if those trades resulted in the client losing money.

He implies it creates a motivation for brokers to focus on transactions and fees rather than the long-term performance and best interests of the client. By leaving the brokerage business, Jones was removing himself from a system where he could profit while clients suffered losses, a situation he viewed as unfair and not properly aligned with serving the client.

The quote cautions that business models where advisors are not impacted by client performance can compromise the quality of advice and priorities of the advisor.

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