How Can I Compare Brokerage Firms?
Brokerage Firms are companies that handle your investments. One or more brokers work at the firm and provide several financial services, including buying and selling stocks and bonds and giving clients advice about handling money. When researching a brokerage firm, check its credentials, method of earning money, money transfer policies and history.
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Instructions
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Brokerage comparison tasks
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Brokers have varying levels of credentials. The basic financial advisor credential is offered by FINRA, the Financial Industry Regulatory Authority, also called the Series 7. Look up a broker on FINRAcheck to make sure they currently have this credential. Many brokers have several financial credentials; look their other credentials up, one of the more common financial credentials is the CFA, or Chartered Financial Analyst, provided by the CFA Institute. FINRA also has another page about brokers' other professional credentials.
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Check the balance requirements for opening an account. Most brokers will give you better trading terms if you invest a larger balance, and often require minimums for certain types of accounts. Be sure to check fees associated with various balance sizes, as well as penalties if the balance gets too low. The balance may also be invested in a money market fund if you haven't selected any investments, check to see if the broker offers this service.
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Find out how the broker earns income. Most brokers will charge a spread on trades, where they will buy at a certain price, sell at a certain price and the broker is paid the difference. Brokers may also charge additional fees, especially if a trade involves a small amount of shares or they provide other expert advice. Some brokers gain a commission if clients buy certain products; find out what portion of the broker's earnings is gained from commissions.
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Check money deposit and withdrawal policies. Because of security risks, the transfers can be time-consuming and expensive. Wire transfers, which can cost a percentage of the balance, may be required. Checks may be allowed; find out how long it takes for a check to be deposited at the brokerage and to be mailed out. Find out what information is required for identity verification procedures.
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Research the brokerage firm's history. Find out how long the brokerage firm has been in business. Ask other investors if the brokerage firm has a good reputation. Check news reports to see if any brokers have been disciplined and received fines or lost professional credentials. Find out if the brokerage firm is affiliated with other financial firms.
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References
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