How to Select a Broker

Selecting a broker to handle your investment portfolio can be a nightmare. But it can also be easy.  Brokers want your money/business and most sincerely want to do a good job for you, but remember you need to choose an online investment broker that makes you feel comfortable and confident.

Every year, magazines like Kiplinger’s, and Money Magazine rate the various online brokers in categories like ease of use, cost, and other pertinent criteria.  The problem is that just because someone else recommends a broker, that doesn’t mean that he/she will work for you and your best financial interests.  I suggest you do a little homework of your own before you commit to any one broker.

How to select a broker…So where should you look?

Here are the web addresses for a few excellent online brokers.  Start here and then expand your search if necessary:

Fidelity investments – http://personal.fidelity.com

eTrade – http://us.etrade.com

TD Ameritrade – www.tdameritrade.com

Charles Schwab – www.schwab.com

Scottrade – www.scottrade.com

Of course, there are many more brokers than the ones listed here.  You can find potential brokers in magazines, books, and you can use suggestions from friends and family, but once you have a name, do the rest of your research on the internet to see what services they offer, the prices they charge, and what they have to offer you that other brokers do not.

What should you look for?

First, remember that the initial screen you see when visiting a broker’s website (called the “landing page”) is designed specifically to get your business – it’s a marketing tool used to “hook” customers.  You need to get to the heart of the brokers website, and you can do this by clicking on the icon for their home page.  From there, you will see a set of tabs (usually across the top or down the side of the screen) this allows you to move efficiently around their site.  Visit each of these tabs to gather information about the broker.

Second, remember that you are buying their services. They will be working for you, not the other way around.  You’ll want their site to be easy for you to navigate, easy to understand, and easy to use for the tasks you need to accomplish.

If you have a substantial amount of money to invest, and plan to trade frequently, you may want to look for a broker with an advanced “trading site”.  These sites are comprehensive, and geared to a more active investor-Fidelity calls their advanced trading site: Fidelity Active Trader Pro.

What else should you check?

  • The initial investment of dollars required to open an account. This amount is usually different (higher) for a regular account versus a retirement account. For example, Fidelity requires $2,500 to open a regular account, but they will waive the minimum deposit for retirement accounts if the investor sets-up regular, automatic contributions. Conversely, Scottrade only requires $500 to open an account.
  • Fees – what do the trades cost? This can be different for stocks, ETFs, and mutual funds. Fees are only one aspect of trading…and one factor to consider when choosing a broker. Don’t base your decision to hire a broker based on fees alone.
  • Screens and Reports-How easy is it to move around on the broker’s website and what kinds of reports will they provide for you? Is it easy to find the reports and other information you may need?
  • Are the ETFs, mutual funds, or stocks that you may be interested in available? Believe it or not, every ticker symbol is not always available, and some sites (brokers) may charge an extra fee for certain mutual funds or ETFs than other sites (brokers).
  • Send an email-asking the same questions of each of the brokers you are considering. See how long it takes each broker to respond, and what kind of response they send back: Are they prompt? Was the answer comprehensive?
  • Call with a question-How easy is it to actually talk with a real person?
  • Can you manage more than one account on a single screen? (Remember, I suggest that you maintain multiple savings accounts; and the same is true for investment accounts. Ideally, you should have a retirement, a wealth building account, and perhaps a vacation account). If you are married, can you manage your spouse’s account from your screen without having to log off and then log back on to his/her account? (HINT: this could be a good question for you to use for your email or phone call inquiry).
  • Does the broker maintain records for your tax purposes or do you have to track everything yourself?
  • Mutual Funds-if you plan on investing in mutual funds, what are the rules on round-trips and short-term trading fees? (Another potential query question).
  • How easy is it to get to the trading page?
  • How easy is it to put “stops” on your current holdings so you can minimize potential losses?

Brokers want your business.  But never lose sight of the fact that it is your money and you want a broker that will work for you and make you feel comfortable and confident.

Raymond M.F. Dominick is the author of “Invest Safely and Profitably” (Your Success Guide), available from Amazon.

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