Agency Problem
You know how child actors in the 1980s always ended up getting their money stolen by their parents or by some unscrupulous manager? That's the agency problem in a nutshell.
The issue revolves around whether the client can trust his/her agent to act in the best interest of their clients, especially when a conflict of interest comes up. Namely the kind of conflict that can be summed up as "it would be in my client's interest to keep this money, but it would be in my interest to invest it in this deal where I'm the founder and get paid more than handsomely if that risky deal does well." But it doesn't just affect the cast of Diff'rent Strokes. It comes up in all sorts of large and small ways any time a person is given financial sway over another.
A common and relatively benign version comes up when financial advisors try to sell you mutual funds from their company first, before offering similar products from competing firms. Most of these funds are likely interchangeable on a basic level, but it just goes to show: you can't trust anyone. For other definitions that get dark, see American Experience Table.
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Finance: What is a Broker-Dealer?16 Views
Finance a la shmoop.. what is a broker-dealer? It's one of [Homeless guys holding help signs]
these guys who's making less than minimum wage right no that'd be a broke
dealer and you won't find too many of them in Lake Tahoe but yeah a broker is [Man talking about broker-dealers in Lake Tahoe]
just someone who takes a commission for selling stuff they live wherever there
are transactions in cars, boats, planes, homes and securities like stocks and
bonds so yeah it's a broker - dealer sort of like a writer-director
sexual deviant in Hollywood... Key takeaway here the broker dealer brokers
securities ie they take a commission and they deal in securities like they carry [People playing blackjack]
their own inventory of ten million shares of Amazon this week's selling
them for twelve hundred ninety dollars and 32 cents a share and buying them for
twelve hundred eighty eight dollars seventy nine cents a share making a
spread of...
equals a dollar fifty-three a share the dealer makes a spread of a buck fifty [Dealer and market transferring cash and stock]
three every time she trades a share of the Walmart killing behemoth yeah it's
sort of a Goliath slaying Goliath story there that Amazon Walmart thing we're
watching it so think about broker-dealer making money on both sides of the trades
that's the way to go if you're going to Wall Street make money no matter what [Man walking on Wall Street]
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