Ten Tips on Choosing a Stockbroker | Banking & Finance > Personal Finance from AllBusiness.com
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Ten Tips on Choosing a Stockbroker

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Many investors feel comfortable researching, selecting and buying their own stocks, especially with the ease of buying afforded by the Internet. However, if time is a factor and you do not feel comfortable making investment decisions on your own, you can seek help from a qualified stockbroker. If you elect to do so, here are some tips you should keep in mind.

1. Determine in advance whether you are seeking the help of a discount or full-service broker. Discount brokers get commissions on each purchase, but offer little advice, while a full-service broker will provide more investing assistance, but for a fee. Knowing what you are looking for will save you time.

2. Look for a broker who is easily accessible and, if he or she is not reachable, then find out who covers for them. On busy trading days, can you reach this broker? This can be very significant.

3. Shop around. Meet with several brokers and try to find one with whom you feel comfortable. The rapport you have with your broker is important. This individual will be handling and investing your money. Therefore, if you don’t feel comfortable or you feel intimidated, then you should look for someone else. Don’t get railroaded into using someone you don’t like.

4. Get referrals. It is always advisable to work with someone whom you have heard good things about. Ask around and find out which brokers other people use and why they selected a specific broker.

5. Look for a broker who understands your financial goals and needs. He or she should take the time to research the type of investments that will meet your needs and understand the type of investor you are — conservative, aggressive or somewhere in-between.

6. Check out the broker’s background and strategy. First, make sure he or she is properly licensed. Then find out about his or her experience, training and certifications. Next, determine how he or she approaches investing. What are his or her criteria for making an investment decision?

7. Do not use a broker that is steering you toward investments that he or she benefits from by receiving higher commissions. You need someone who has your interests in mind. If a broker has a "sure thing," be leery. After all, is there ever really a sure thing?

8. Find out how commissions are determined and how much they will be. Get a commission schedule that spells out when you will be paying. Keep in mind that an annual fee, rather than a transaction-based fee, can eliminate "churning," a practice whereby a broker is running up commissions by making unnecessary transactions.

9. Find out in advance all additional fees and charges you will be expected to pay.

10. Be careful with the "deep discount" brokers. Use only ones that you have heard (from people you know) are reliable. Read the fine print carefully.

Once you start working with someone, remember if you are not happy you can always make a change.

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