How to Select a Broker

If you'd like to invest in stocks or bonds, but aren't comfortable trading on your own, you may want to work with a stock broker. Read on to become comfortable with the process of how to select a broker.

A stockbroker purchases and sells securities on behalf of clients. Before selecting a broker to handle your transactions, you need to determine your investment needs. After you know what you're looking for, you can get recommendations and then research those brokers before deciding who will get your business.

• Stockbrokers all buy and sell stocks, but may offer additional services as well. Generally, a full-service broker will also get to know the client's investment goals and recommend specific securities. They may also provide general market information, and be able to provide detailed investment reports on companies and industry segments. A discount broker will execute trades, usually at a much lower commission than that charged by a full-service broker—but at the same time will not likely develop a personal relationship with the client.

• Ask friends and family who they use to trade securities. Check with your tax advisor, bookkeeper, and attorney for recommendations. When asking for a referral, make sure you explore how the person giving the referral uses the broker, and ask for specific examples of why they feel the broker provides good service.

• After developing a list of potential brokers, you need to do some research.

1. Check to ensure that a broker is licensed to do business in the state you'll be trading in, has several years of experience, and works for a brokerage firm with a good reputation.
2. You want to look for a firm that uses an independent custodian for the securities you are buying.
3. You'll also want to compare fees charged with the range of services offered.
4. If you are selecting a full-service broker, it's important to interview him or her.
5. During the interview, look for a good listener who can demonstrate that they understand your investment goals.

• After deciding on what you need from a broker, gathering recommendations, and researching the brokers who have been recommended to you, you should be able to select a broker who is a good fit for you and your investment objectives.

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The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here