Choosing a stock broker is not an easy task. For most people, financial security relies on saving money in the bank. Although this is a reliable method, it definitely isn’t the only one. Investing, especially in stocks, is an excellent way to make your money work for you.
However, before you start investing, it’s necessary to find a brokerage who will handle most of the process, at least at the beginning.
💡 Check our: Investment Platform Reviews.
Although choosing the best broker isn’t easy, there are some common attributes you should look for using a stock broker check list. Investing is serious business, so you want to find a broker who is trustworthy, reliable and understands your personal philosophy towards stock investments.
Types of Stock Brokers
To choose the stock broker that suits your requirements best, you first have to know the different types of brokers available.
- The regular broker works directly with the client
- A broker-reseller works as the bridge between the client and a bigger broker or brokerage firm.
Apart from these two types, you also have to consider the difference between the full-service broker and the discount broker:
- The full-service broker obviously offers more services. He or she will handle most of the investment process on behalf of you, the client. They will also provide analytical and financial advice.
The downside is that full-service brokers can be quite expensive. The alternative is the discount broker.
- A discount broker offers fewer services, and in some instances, the client will have to take on some of the investment responsibilities. Many investment rookies who don’t want to, or don’t have the budget to hire a full-service broker can go to a discount broker, particularly as the latter often offers online services.
Choosing a Stock Broker (Steps)
Now that you’ve managed to narrow down choosing a stock broker you’d like to work with, it’s time to get much more specific. Here is a simple yet effective check list to help you find the right broker for you:
1) Determine Your Investment Style
To choose a stock broker, start by figuring out your personal approach towards trading in stocks. If you’re looking for a quick return to your investment, you need a broker who takes big risks. If you want your investment to have steady returns over a long-term period, you need a broker who will help you maintain a mid-risk portfolio.
- Read more: Investing Styles: Find Your Best with 5 Key Questions.
- Dictionary: What is Risk Tolerance?
2) Get Recommendations
The fastest way to find a good broker is to ask people who you trust for their recommendations. Of course, the final choice is up to you. It’s just a good idea to have a pool of recommended candidates to choose from, and there’s nothing better than getting word-of-mouth referrals from those you can count on to give you the best advice.
- Read more: Best Stock Market Tips from Experts.
3) Do the Research
Read up, and not just about the prospective broker, but about the firm they belong to, as well. Make sure to dig up information on performance, reliability and customer relations. You can even visit the website of the National Association of Securities Dealers to determine the reputation of your broker candidates.
4) Narrow the Field
By now you should have a short list of stock broker candidates. Here are some tips that make it easy to narrow the field even further:
- Make a list of interview questions – Because investing is very personal, you are in the best position to find the right broker for you. Write down a number of questions that you think will help you determine if the broker is reliable and a suitable match for your investment strategy. Arrange to initial meeting and take your questions with you to ask them.
- Be clear with your financial goals – Don’t try to be savvy. Just tell your potential broker exactly what you want to achieve, and then let them tell you how they plan to help you attain them.
- Ask for work references – If you can, ask your potential broker for client references. This way, you can speak to previous or existing clients to find out the broker’s working style. Many brokerages post client testimonials on their websites, so be sure to look there, too.
- Take note of ease in communication – Is the broker easy to get in touch with whenever you need advice? This is one of the most crucial things to take note of, especially since clear communication is crucial in ensuring that your broker will act on your behalf.
- Find out about the minimum amount required – Some brokers, especially online discount brokers, will require a minimum amount for starting an account with the brokerage. The customary amount is approximately $500 to $1,000. This is an important number to know before you choose a stock broker, because you want to make sure they fall within your budget.
- Inquire about the ease of withdrawal – Find out the requirements that the brokerage demands for withdrawals. Some will require documentation, while others will have rules on maintaining a minimum amount in your account. It’s a wise move to ask before you sign up for anything, so there will be no surprises later.
- Look for honesty and trustworthiness – Some brokers will promise you heaven and earth. If they sound too good to be true, they probably are, so run in the opposite direction. The right broker for you won’t need to sugarcoat things, and they won’t try to paint a picture that’s so rosy, it’s unbelievable. The right broker will try to manage your expectations, and let you know exactly where you stand.
💡 Don’t forget to check our: Investment Platform Reviews.
Using this check list, you will be able to find the best stock broker for your needs. For even more helpful tips, read this article, “Top 50 Tips on How to Invest in the Stock Market for Beginners.” For a limited time, you can enroll in this free investing course, so you’ll have the confidence you need to be successful in the stock market.
