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:
 

 

“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

 

 

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.