Full Or Self Service?

The amount of help you need investing determines whether you'll need lots of advice or just a firm to clear your trades

trading costs will be lower and you won’t have to contend with sales pressures. If you’re ready to direct your own investment strategy, a discounter may be suitable. On the other hand, discounters provide minimal–if any–personal financial advice. If that’s what you want from a broker, you’ll need to go full-service. Just make sure you shop carefully so that you’ll get the guidance you’re paying for.

Since working with a full-service broker is essentially establishing a personal as well as professional relationship, it’s important that you’re comfortable with whomever you select.

Do your homework. It’s always a good first step to ask friends, relatives, business associates, etc., for referrals.

Meet with at least three prospective candidates. At each meeting, ask the broker what unique attributes he or she brings to the table. Chances are, you’ll find yourself responding positively to one of the candidates.

Ask potential brokers about their firms’ stock-picking skills. If you intend to invest in individual stocks, ask potential brokers about their firms’ stockpicking abilities. Third-party firms, such as Zacks Investment Research in Chicago, rate brokers in this area; insist upon seeing a recent report.

It’s OK to crawl before you walk. Invest a small portion of your money but keep most in reserve. If you’re happy with your relationship, you can allow it to expand. Otherwise, you can start over with a new broker.

Before deciding on a discounter, go through the following checklist:
Commissions. How much does a broker charge for the types of trades you execute?

Spreads. If you’re buying Nasdaq stocks, you’ll want some evidence that you’ll be buying lower than the asking price, selling for more than the bid price.

Margin loans. If you intend to buy stock with borrowed funds, find out what interest rate the broker will charge.

Mutual funds. How many funds are available, and at what cost?

Online trading. Most discounters offer electronic investing, but you should check first, then find out what other information you can access while online.

Statements. Ask to see samples so you can judge them for clarity and for help with tax preparation.

And remember. Discounters vary widely in the materials they’ll send to investors, from company research to tax guide. Find out the kind of help and advice the firm will give you. The trick is to pay for what you need and not pay extra for service you’ll never use.

Pages: 1 2 3 4 5