How To Pick a Stock Broker

Real Clients, Real Results

Finding the right person to manage your investments is one of the most important financial decisions you’ll make. Your broker will have direct influence over your money, so it’s critical to choose someone who is both competent and trustworthy.

Choosing the right broker isn’t just about finding someone to buy and sell stocks for you—it’s about partnering with a professional who will put your best interests first.

The following five steps are designed to help you do that:

1. Shop Around. Meet With At Least Three Prospective Brokers.

Financial advisors and brokers have different levels of experience and expertise. You need to trust them and feel comfortable talking to them. There is no substitute for meeting them in person. Ask each of them about their investment ideas for you, and have them present some written information about how they would determine and meet your investment goals.

2. Ask Your Friends and Co-workers for Recommendations.

Sometimes (not always) a friend or co-worker may have an ongoing account with broker, and be very happy with him or her. While people may have different account goals, and different financial bases, a satisfied customer is an excellent beginning.

3. Ask whether a brokerage firm is a member of the SIPC?

SIPC is the Securities Investor Protection Corporation. SIPC provides limited financial backing if a brokerage firm becomes insolvent or bankrupt. You can ask if the firm has additional insurance to cover it for claims of its own negligence. While the SIPC does not insure against market losses, it can protect you, in a limited way, should the brokerage firm act wrongfully towards you and then become insolvent.

4. Find out how the broker is paid.

Most brokers are paid on a commission basis; some based on a amount of money in your account; and some advisers charge a flat fee. Also find out whether they get paid more to sell their own companies products? And how much more? Depending on your account needs and expected investments, a broker should be able to discuss how fees are charged, and what they will mean to your overall investment account.

5. Ask about discipline.

A Broker has an obligation to be honest with you, the customer. If prior customers have filed complaints about a broker, you deserve to know about it.

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