Guide to Choosing a Stockbroker

You have worked hard to accumulate your savings and now you are going to put some of it into the hands of a stockbroker to make your money work for you. Therefore, it is essential that you chose the right stockbroker to protect your interests.

The first step is to find a broker who is properly qualified for the job and is registered with the securities regulator. The easiest way to ascertain this is to contact the North American Securities Administrator’s Association, who can provide you with details, through your state branch, of the registered stockbrokers in your area. After having made a list of the ones you consider to be most appropriate, because of location or any other criteria you have set yourself, make arrangements to interview those on the list so that you can begin the selection process.

As you prepare for these meetings, there are a couple of points to consider. Firstly, remember that you are the client and the stockbroker is providing a service. Whilst the stockbroker has the expertise, you need to remember they are essentially salespersons and inevitably will be trying to sell you themselves as a business and, once you join, the stocks and investments that will gain them the most commission. Do not allow yourself to be signed up by any particular firm or individual until you have completed your list of interviews and had a quiet time to consider your decision.

During the course of your interview there are a number of differing points that you need to clarify and questions to ask. However, in addition to these, equally important is the relationship. Do you feel comfortable with the person and do they inspire you with confidence? If so, that is in their favor. Hopefully, you are entering into a profitable relationship with the stockbroker and only you can know if the chemistry will work.

Next you will want to know about their business and how they operate with clients. The intention here is to ascertain their level of experience as this helps you to be confident the broker will be making decisions based upon your best interests. It will also reveal the level of their knowledge and give you a fair idea how much they value the client relationship. For example, it is imperative a stockbroker makes decisions based upon the characteristics and needs of an individuals portfolio requirements and, furthermore, that they take the time to explain to the client the reasons behind any decision. Only by this process can you be confident that you, the client, are being kept informed at all times.

Another example of the stockbroker’s level of expertise can be judged by whether they have deal access. This enables them to have access to large and special deals, the benefit of which is passed onto the client. However, they will have needed to build a trust within the market to be offered these opportunities.

Cost is essential aspect of the service that needs to be identified. Therefore, ask the broker to explain in detail how their cost structure works. It is impotrant to continue asking questions on this aspect until you are sure there will be no surprise hidden costs.

Finally you should ask to be able to speak to some of their existing clients. If a broker is not prepared to allow this, then walk away. Yes, they will want to maintain confidentiality, but like other professionals, they will be able to arrange this and recommendations are a good way of supporting the quality of service they provide.

Choosing a stockbroker is the same as choosing any other professional, such as a doctor or accountant. You need to be able to build a relationship with the person; know that they have the necessary expertise, and be confident they will perform a service that is specific to your needs and requirements at a reasonable cost comparable with the service offered.