Beginner's Guide to Brokers

Investigate the Broker's and the Firm's Integrity

Go to the FINRA BrokerCheck at brokercheck.finra.org. From there, read through and agree to the Terms and Conditions. You can then search on either an individual broker or a firm to receive a report listing any private or regulatory actions against them. If a "maybe" appears under "Disclosure Events" on the left hand side then click on "Deliver Report" on the top of the screen to request a copy by email.

While it isn't unusual for a broker to switch firms a few times in a career, frequent job hopping can be a sign of trouble.

Be On The Lookout: SIPC Members
Is the firm a member of the Securities Investor Protection Corporation (SIPC)? Almost all brokers are SIPC members. SIPC provides limited customer protection if a brokerage firm runs out of money. However, SIPC does not insure against losses if your stock declines in value. Also contact the Securities and Exchange Commission (www.sec.gov), which monitors the industry, to file a complaint.

If the broker has been involved in securities arbitrations, find links to state securities regulators by visiting www.nasaa.org, the site of the North American Securities Administrators Association. State regulators can send you Central Registration Depository (CRD) reports, which offer a more detailed disciplinary record than those NASD provides. Call the phone number listed at your state regulators' Web site to request a broker's CRD report. Unfortunately, states don't offer this information online. The report may take weeks to arrive, but it's usually worth waiting for. It often lists complaints that don't appear on the FINRA Web site.

Shop Around for the Best Commissions

Commission costs can have a dramatic impact on an investment's performance. Most investors often ignore or underestimate how much of an impact broker commissions can have on their final results. Avoid disaster simply by using a broker who charges you the average commission rate.

To give you a head start in selecting one that suits your needs, we've put together the Broker Comparison Checklist (below). Although commissions alone shouldn't be the only factor that you consider when selecting a firm, these costs certainly can be a very critical factor if you trade actively.

Make sure the broker trades the same types of securities you want to trade. For example, you may want to trade preferred stock, which not all brokerage firms trade.

Interview Your Broker

Read the "10 Questions to Ask Your Broker." These questions are businesslike and to the point. If you feel uncomfortable, print them out and send them to your broker in advance of meeting face to face.

Also, make sure your personality matches the broker's personality. Are you comfortable with the broker's style? Is he or she easy to reach? Is he or she knowledgeable and able to explain concepts clearly? Does the firm have a responsive customer service department so you can easily get answers to important questions and concerns?

Most important of all: Remember that the broker works for you. You are paying him or her through your trading commission. Therefore, he or she must satisfy your needs and requests. Do not be intimidated by your broker. If you feel uncomfortable or intimidated, change to another broker right away.

Be On The Lookout: Broker Check-Up
After selecting a broker, keep close tabs on what he or she is doing. Follow up within a day or two after making a trade to make sure your broker carried out your instructions properly. Also, check your monthly account statements carefully to make sure the transactions accurately reflect your orders. If there's an error, follow up immediately, first with your broker and then with the branch manager. If you get no satisfaction, go to the firm's compliance department. If the problem is still unresolved, file a formal complaint with the firm, the SEC, FINRA, and the stock exchanges to which the firm belongs.

Broker Comparison Checklist
	Broker #1	Broker #2	Broker #3
Name
Types of Services Offered:
Full-Service Brokerage
Discount Brokerage
Online Brokerage
Money Mgmnt./Fee-Based Accts.
Mutual Fund Trading
Annuities
IRA Retirement Planning
Other (like options trading)
Commission/Fee Information:
100 shares @ $10 per share:
Full-Service Trade	$_______________	$_______________	$_______________
Discount Trade	$_______________	$_______________	$_______________
Online Trade	$_______________	$_______________	$_______________
100 shares @ $100 per share:
Full-Service Trade	$_______________	$_______________	$_______________
Discount Trade	$_______________	$_______________	$_______________
Online Trade	$_______________	$_______________	$_______________
1,000 shares @ $20 per share:
Full-Service Trade	$_______________	$_______________	$_______________
Discount Trade	$_______________	$_______________	$_______________
Online Trade	$_______________	$_______________	$_______________
Additional Fees:
Inactivity Fee	$_______________	$_______________	$_______________
Account Minimum Fee	$_______________	$_______________	$_______________
Other fees	$_______________	$_______________	$_______________
Initial Minimum Investment	$_______________
Licensed to Operate in My State	Yes ____ No ____	Yes ____ No ____	Yes ____ No ____

« Previous Page

1 2 3

Next Page »