An instructional article about choosing a stockbroker
Don't all investors wish they have one. While a few may get lucky in choosing their stockbrokers with minimal effort, the general rule is to flesh out your investment needs and do adequate research before hiring a broker. Picking a stockbroker is just as important as choosing your stocks. If you're going to entrust your money to these people, then you have to be certain that they have the intelligence, ability, and resources to do their job properly. Most importantly, make sure that they're not filthy felons who would run off with your money the first chance they get.
Stockbrokers can be classified into two types: the regular brokers and the broker-resellers. Regular brokers work for a brokerage firm and deal directly with investors while broker-resellers act as an intermediary between the investor and a larger broker or firm. The general opinion is that regular brokers are more reputable than broker-resellers since the latter may not have taken or passed all the necessary licensing examinations in order to qualify as a standard broker. This doesn't mean you should avoid all broker-resellers at all costs; you just have to be more careful in choosing resellers you'll be dealing with.
Regular brokers are further divided into two kinds: the full-service brokers and the discount brokers. If you want a more extensive array of services which includes financial advice, research and analysis, retirement planning, and investment tips, then a full-service broker is the one for you. These services will cost you a lot though; full-service firms charge higher commissions and fees than discount brokers. If you have the time and resources to do your own research on the stock market and you feel that you are fully capable of making intelligent investment decisions, then a discount broker should be enough to work for you. They simply execute your trades with no added frills and charge less than a full service brokerage.
In choosing a broker, it's better not to be content with any random person a brokerage firm assigns to you. Personally review his credentials. Choose someone with four to five years of experience and ask for a list of clients that you can contact for references. Check with regulation authorities if there have been complaints against him.
You also want a broker who doesn't have too many clients particularly if you decide to be an active trader. If your broker is too busy handling 300 other clients, you may often end up talking to a call center representative. There are instances, of course, when your concern can just as adequately be handled by a call center so don't abruptly close your account just because your broker wasn't able to answer all your calls. The point is, your broker should have sufficient time and focus to take care of your portfolio. However, if you're perfectly comfortable executing trades on your computer without having to talk to a human being, then you can pick out an online discount broker and execute your trading on the internet. Just make sure that the online broker has a competent customer service department to address your problems and concerns.
Finally, read the brokerage contract carefully and pay attention to the fine print. If the advertised fees seem to good to be true, look out for hidden costs or interests. Don't be afraid to ask questions especially if there's any part of the contract that's not clear to you. Remember, you're already taking on a considerable amount of risk by investing in stocks. You at least deserve to have a decent level of security in doing business with your broker.
In Search of the Perfect Stockbroker
