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Finding a Broker and Brokerage Firm

The vast majority of brokers are honest, competent professionals, and there are organizations like FINRA to help make sure that the few who are not are identified and disciplined-sometimes even barred from the industry. But there is more to finding a broker than knowing which ones might not be trustworthy. The key is finding the broker and brokerage firm that make you feel comfortable and best meet your personal financial needs.

There are many different types of brokerage firms, and the costs for their services vary according to how much or how little they do for you. If you are a more experienced investor and have made up your own mind about the securities you want to buy or sell, you might consider a discount brokerage firm that charges a minimal fee for simply executing the transactions that you have selected. Online investing services are the latest trend in discount brokering-you do your own research, select your investment, and then trade online for a minimal fee. A full-service brokerage firm, on the other hand, charges a little more, but typically provides you with information, support, recommendations and investment advice, in addition to executing your transactions.

Whether you select a brokerage firm first and then choose a broker from among its associates, or find an individual broker and accept the firm at which he or she is employed, it is strictly up to you. Either way, when selecting a broker, you will want to take your time and do your homework.

You should also take time to understand how the broker is paid; ask for a copy of the firm's commission schedule. Firms generally pay brokers based on the amount of money you invest and the number of completed transactions in your account. More compensation may be paid if a broker is selling his or her firm's own investment products. Ask what the fees or charges are for opening, maintaining, and closing an account.

At the initial interview, obtain a copy of the account agreement, fee structure, and any other documents you would be asked to sign if you were to open an account with that broker. That way, you can take the paperwork home to read carefully at your own pace, and make comparisons if you are considering brokers at several firms. If the prospective broker pushes you too hard to open an account on the spot, this might be an indication that he or she will be overly aggressive in pushing you toward certain investment decisions in the future. In addition to the documents that you would need to sign, some brokerage firms have brochures or other informative material that would be helpful to you.

It's also a good idea to check the background of the broker and brokerage firm before you make a selection. Investors may obtain information on the disciplinary record, professional background, and registration and license statuses of any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck Program. FINRA makes BrokerCheck available at no charge to the public. Investors can access this service by linking directly to BrokerCheck at www.finra.org/brokercheck, or by calling (800) 289-9999.