Choosing a Broker or a Brokerage Firm
Choosing a broker or brokerage firm can seem like a daunting task. Now, even more so than before, with all the advertisements and information on the internet, it seems like everyone is pulling potential clients in every direction. Plus, the industry is so competitive that it is difficult to filter through all the specials and discounts for new customers in an attempt to compare the offers. Companies are offering free trades and cashback, which can be very appealing, yet, at the same time extremely confusing.
Probably, the best way to help you choose the broker that is right for you is to provide you with our nine point checklist. By reviewing the most important aspects that will affect your decision making process, you should be happy with your choice in the future.
Our Nine Point List of Recommendations to Choosing a Broker or a Brokerage Firm:
- First, and foremost, decide what type of broker you require
For example, a real estate broker is not going to be able to help you with commodities trading. Likewise, you want to find someone experienced in the area in which you wish to invest. - Understand your goals and objectives
Write down what you want to accomplish and have a clear focus, so that you can communicate your wishes to the chosen broker. Be specific in how much you can realistically afford to invest, so that you are not tempted to spend more if the broker suggests a larger investment. This evaluation will also include whether you want to make your own decisions, or whether you need the assistance of a research department. If you can do everything yourself, then you may save some fees, and choose a different kind of brokerage house. - Depending on the type of investment consult your bank or other financial institute to determine whether any of their products meet your needs
This is particularly important if you do not wish to lose any principle. If you are looking for investments with guarantees, for example, then often those are found at the bank through term deposits, bonds and specialty funds. - Contact each and every available resource to determine whether the broker and/or brokerage firm is licensed, accredited or registered, and if there are any marks on past performance
Telephone numbers, website addresses, and search utilities are listed in our article "How can a consumer check out Investment Brokers". - Make a short list of brokers and start contacting them
Create a list of specific questions, even if you know the answers, so that you can compare responses, and gauge the attitudes and experiences of each broker. - Keep your ears open, and be alert for any red flags that might speak of future problems
For example, the broker trying to encourage you to buy into something you clearly cannot afford. Do not take these signs lightly. In fact, remove that broker from your list and move on. - Inquire about fees, commissions, and any other pertinent costs before you choose a broker, and definitely before you open the account
- Remember also that the broker can only make suggestions based on what you have told her/him
Be honest about your finances, so that you benefit from the proper advice. This is another reason why you should have your information and goals formulated before choosing a broker. - Once you have conducted your interviews, completed the fact-finding, and, all things appear to be equal, then you can make your decision on choosing a broker or a brokerage firm
But, if there is any doubt in your mind, just remove that broker or firm from your list. There are plenty out there, and you are better off spending the time upfront to make the right choice, as opposed to being unhappy down the road.