Know Your Broker
Deciding whether or not a broker meets your needs is just as important as figuring out if you meet the broker’s criteria for doing business. Important things you’ll want to know about a broker:
Can you walk into the broker’s office and get one-on-one help?
Does the broker even know what they’re doing?
How can you get money into your account?
These days, online discount brokers have become pretty universal in their acceptance — they’re convenient, their fees are lower, and you can get your information instantly. But for some people, being able to walk into a real office and talk to a real person is a big deal. If that’s the case for you, then a traditional “brick-and-mortar” or full-service broker might be worth looking at.
Remember, though, fees are usually much higher with full-service brokers, and unless your account has a pretty impressive balance, you probably won’t be getting a whole lot of face time with your broker.
Never fear, even discount brokers are now touting their hundreds of office locations and approachable brokers — a sign of the ever-shrinking customer service gap between the full-service brokers and the discount ones. However, even with a discount broker, expect to be charged considerably more for taking advantage of those broker-assisted trades.
|Discount Brokerage||Cost Per
|Scottrade||$7||$7 + $1.25||Scottrade Review|
|TradeKing||$4.95||$4.95 + $0.65||TradeKing Review|
|Firstrade||$6.95||$6.95 + $0.75||Firstrade Review|
|E*Trade||$9.99||$9.99 + $0.75||E*Trade Review|
|TD Ameritrade||$9.99||$9.99 + $0.75||TD Ameritrade Review|
|OptionsXpress||$8.95||$12.95 minimum; $1.25 per contract, for more than 10 (active trader rates, see site for other pricing).||OptionsXpress Review|
|OptionsHouse||$4.95||$4.95 + $0.50||OptionsHouse Review|
|ShareBuilder||$6.95||$6.95 + $1.50||ShareBuilder Review|
Make sure to look into professional affiliations. For stockbrokers, the independent governing body was the National Association of Securities Dealers, which became part of FINRA in 2007. You can find a wealth of information on your broker at the FINRA Web site.
Funding Your Account.
You’ll likely need a checking account to get money into your brokerage account. While cutting a check has been the method of choice for quite some time, paperless methods like electronic funds transfer are becoming an industry standard for getting cash into your account. For your opening deposit, they’ll likely still need a check. (Sorry, folks, no credit cards accepted here.)
Now, you’ve likely heard of a margin account. It’s essentially a way for you to borrow money (or securities) from your broker to invest. Buying on margin is not something that you’ll want to do until you’re pretty familiar with investing and understand the additional account restrictions related to margin (like a higher minimum balance).