How to Choose a Stockbroker

Plenty of investors buy stocks on their own. But if you prefer not to fly solo, it pays to know what sort of broker best fits your needs. You may want someone to actively plan your investments, or you may prefer someone who's available only if you need advice.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Rererrals

1. Determine the services you're looking for and your investment goals. Brokers offer varying degrees of services: Some may focus purely on investing, while others may place a greater emphasis on investor education and financial planning. See How to Choose a Financial Planner, too.

2. Compare discount and full-service firms. Discount brokers make securities purchases and sales at a lower commission, but offer little or no advice; full-service brokers will work with you on an investment strategy, but you'll pay more.

3. Ask friends and colleagues for referrals. Try to interview at least three candidates before making a choice.

4. Meet the prospective brokers in their offices and inquire about their investment philosophy and how they handle clients. Have them give you details about any special training or designations they may have. Ask how long they've been in business, and if they've ever been disciplined. (See Tip.)

5. Discuss compensation. Find out what the fee structures and minimum purchase requirements are. Ask about any special commission they might get for certain brands of mutual funds.

6. Find out how often your broker checks in with clients. If you only want to hear from a broker every few weeks, don't choose someone who prefers to strategize at every shift of the market.

7. Ask a broker for referrals to clients whose background and goals match your own. If the broker balks, look for someone else.

Tips & Warnings

• The National Association of Securities Dealers (nasd.com) has information on the required qualifications to be a broker. You can also get information about individual brokers' work history plus any disciplinary actions.
• Follow your gut feeling when meeting with potential brokers. Like any salesperson, brokers run the gamut from ultrapushy and aggressive to more relaxed. Work with someone whose style you feel comfortable with.