You don’t expect your investment broker to play tricks on you—so it is possible that you haven’t noticed that the broker has been churning your account, needlessly buying and selling assets to generate trading fees at your expense.

Yes, this is something that happens, and in bull markets especially—it’s easier for brokers to get away with because in the face of healthy returns, investors tend to ask fewer questions and pay less attention to account statements and trade confirmations.

Brokers are not necessarily “fiduciaries,” so under the law, they may not be required to act in the client’s best interest—only to recommend investments that are “suitable.” Although brokerages had been shifting away from ­commission-based accounts and toward annual fees, that trend has halted and, in some cases, reversed. Self-defense…

If you don’t want your broker making any unilateral trading decisions, get written confirmation that your account is “nondiscretionary,” meaning that you must give at least verbal permission before any trade is made.

If you do allow your broker to make trading decisions, calculate your account’s “portfolio turnover ratio” each month to see if it’s high. To do this, look at your monthly statement and add up the total dollar value of purchases and sales, then ­divide this total by the average monthly balance of the account. For example, if your broker made $30,000 worth of trades in the course of a month and your average monthly balance was $10,000, your ratio is three. This might be all right in a given month, but courts have found that in a securities account for a conservative investor, an annualized portfolio turnover rate of two or higher is suggestive of churning.

If there is a high turnover ratio over several months, contact the broker and possibly his manager and, if you don’t get a good explanation, the firm’s compliance department. Ask for an explanation of the rationale for your account’s high trading activity given your investment objective. If the firm’s explanation does not seem reasonable, submit a complaint at FINRA.org.

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