To Better Brokerages, Cut Out Commissions

As chief executive of one of the nation’s largest securities arbitration firms, and the only one managed by former securities industry executives, I am constantly appalled at the slipshod manner in which brokerages serve their clients, “Investors at Risk--the Dark Side of the Brokerage Business” (July 1).

Such brokerages have the attitude, and I write from firsthand experience, that they can hire a big producing broker, fully aware that he is a problem broker with a past record of complaints and arbitration awards against him.

Motivated by the problem broker’s commissions, instead of the customer’s welfare, they are all too willing to look the other way in order to show bigger bottom-line profits, despite customer complaints.

Big brokerages would better serve their customers if they would change the method of broker compensation from commissions to a “fee only” basis. Brokers would be paid a flat rate fee based on the assets invested by each customer.

To do this properly, brokers should be more carefully selected and superbly trained as investment advisers and financial planners rather than commission salespeople. If the big brokerages remove the commission structure, it would eliminate most of the problems. The result should be happier and more prosperous clients.

WILLIAM N. LEVINE

Woodland Hills

The writer is chief executive and chairman of the board of Investors Arbitration Services Inc.