Guide to Choosing a Stockbroker

Stockbrokers are trained professionals who execute financial transactions on behalf of a client. Typically these requests involve investment positions in and out of corporate shares but may also involve other financial instruments including but not limited to bonds, commodities and foreign exchange transactions.

Brokers often work for brokerage firms such Charles Schwab, T. Rowe Price, A.G. Edwards etc. and there are many types of brokerage firms. Due to the complexity of individual financial goals, risk tolerance and banking needs it is wise to assess a broker and brokerage firm carefully before investing through them. A few questions that may be of assistance when selecting a broker are the following:

Full Service or Discount: Depending on an investor's needs and requirements, a full service broker is more likely to offer financial advising services in addition to a wider range of banking products.

Financial History: Assessing a broker and brokerage firm's financial history is important. Investing money with a highly trained, knowledgeable, and licensed broker is just the start. A brokerage firm ideally has a decades long track record of success in managing people's money, is professional, sophisticated and astute in meeting client needs.

Corporate Fundamentals: Knowing the financial positioning of the brokerage through which one is investing might be worth considering because if an adverse economic event has an overly negative affect on a brokerage firm, the possibility exists they could go bankrupt. Understanding the brokerage firm's investment strategy as a company and its financial statements can help with this.

Asset Protection: Does the broker offer asset protection and guarantees in the event of fraud, theft or any other unforeseeable event not relating to one's investment decisions? Since not all accounts have the same kind of federal insurance typically associated with savings accounts, this type of asset protection may be worth considering.

Investment Strategy: If the broker is managing a whole portfolio or a limited amount of investment, can the broker tailor an investment strategy to suit your needs and risk tolerance? The best of the best can do this. If your broker can take an investment and grow it and prove this with the large majority of previous investments, he may be worth a second look.

Professionalism: How a broker treats their clients is of utmost importance. People's money is not some kind of trash that can be tossed around and neither are clients. How responsive a broker is, how respectful and understanding and how willing they are to spend time explaining and making a client feel comfortable is a sign of dedication.
Choosing a stockbroker may be something one sleeps over when they think a decision has been met. Sometimes investment ideas or questions that weren't asked of the broker during an introduction may have been overlooked or missed. Performing due diligence is not just a way to ensure a quality broker but also a way to assure the best management of one's money.
Some additional tips to consider when selecting a stockbroker include the following:
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- When choosing a full service broker, meet with them to discuss financial issues
- Visit each broker's Web site and ascertain functionality of online services
- Obtain and review discount and full service broker rankings
- Contact the Securities and Exchange Commission to assess the broker's financial ethics and/or perform a background check on any possible pending lawsuits.
- Try to obtain referrals from family and/or friends in addition to the above steps
The process of due diligence may be bypassed if one has complete trust in a broker. However, when investing a large amount of money trust may not always be prudent. A little or a lot of research may be justified depending on an investor's financial goals and objectives. While researching may not be fun, the return on investment capital that a good broker may facilitate could be well worth the time.