What Is Double Dipping?

Double dipping is an unethical practice. It describes a broker that places 澳洲幸运5开奖号码历史查询:commissioned products into a fee-based account to earn money from both sources. In this context, double dipping is rare and can lead to fines or suspensions from regulators for the offending broker or their firm. The practice is usuall🎃y done covertly, aided by a disengaged or otherwise unaware client.

Double dipping may take other forms, such as when employees covered by a state or munici💝pal pension retire, which triggers the start of pen✤sion payments, and then are rehired in the same role from which they retired a few days later with little more than a slight title change.

Understanding Double Dipping

Double dipping by a broker can take place in 澳洲幸运5开奖号码历史查询:managed accounts or 澳洲幸运5开奖号码历史查询:wrap accounts, in which a broker manages a client's account in exchange for a flat quarterly or annual fee, usually around 1% to 3% of 澳洲幸运5开奖号码历史查询:assets under management. The f🐎ee covers the cost of managing a portfolio, such as administrative costs and commissions.

An example of double dipping would be when a broker or financial adviser buys a 澳洲幸运5开奖号码历史查询:front-end-load mutual fund tha🐼t earns them a commission and then places it in a fee-based account where it will increase the fees they are paid. The ethical way to handle such a situation would be to credit the client's account by the amount of the commission. Not doing so is double dipping.

Double dipping, such as in the example above, are actionable by regulators such as the 澳洲幸运5开奖号码历史查询:Securities and Exchange Commission (SEC) and the 澳洲幸运5开奖号码历史查询:Financial🅠 Industry Regulatory Authority (FINRA). Either can bar a broker or advisor and fine them or their firm. In th💎e case of a brokerage firm, they can be fined for a lack of supervision.

Double Dipping: How to Avoid It

There are a few red flags that investors should watch out for to avoid double dipping. For example, clients should be alarmed if a broker charges a 澳洲幸运5开奖号码历史查询:management fee but suggests buying 澳洲幸运5开奖号码历史查询:mutual funds from the firm that employs the broker.

Brokers tend to receive a 澳洲幸运5开奖号码历史查询:commission for selling proprietary products, which could equate to double dipping. Clients should also pay close attention to statements regarding fees and commissions. When in doubt, or when a client feels a broker or advisor is not being entirely forthcoming, a lawyer should be enlisted to review any communications or 澳洲幸运5开奖号码历史查询:disclosures.

Double Dipping and Pensions

Double dipping involving public employees and pensions is a legal but frowned upon practice that exploits legal loopholes. In effect, it involves retirement that is on paper only. It allows public employees—such as police officers, state attorneys, firemen, school superintendents, and legislators—to retire from the♕ir jobs and start collecting retirement after serving enough years to earn full retirement benefits. Double dipping then allows them to be rehired into their public service jobs.

The end result is that the double dipping individual collects a pension cไheck and a paycheck simultaneously. Double dipping occurs in several states, notably New Jersey, New York, and California. One New Jersey 🍸law enforcement officer simultaneously collected $138,000 per year in pay for his duties as a county sheriff and $130,000 in pension payments from his previous employer, a municipality.