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17 April, 14:43

Charles Schwab in 1971 was determined to build a stock brokerage firm that would be different. He cited that he was disturbed by the conflict of interest between the stockbrokers and their clients. Brokers were commonly known for convincing clients to make questionable transactions to increase their commissions. What did Charles Schwab see as a current issue in the stock brokering industry?

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  1. 17 April, 14:55
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    D) The Agency Problem

    Explanation:

    The agency problem refers to a conflict of interests between the principal and his/her agent. Agents have a fiduciary duty to act on the best interest of their principal, but sometimes agents place their own personal interest before the interests of their principal.

    in this case, the brokers should act on behalf of their clients to make them earn the largest possible profits, but instead they focus on convincing them about transactions that increased the broker's profit and not the clients'.
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