Picking a stock broker or brokerage firm is one of the primary decisions you must make as a trader. This has nothing to do with the shares, stocks or securities you want to trade; it is all about the people and system. That is your trading platform.
How do you decide which brokerage company to work with? Whatever your criteria for choosing is, it is good if you evaluate and bear the pointers below in your mind.
What kind of a broker are you looking for?
With some firms, there are full-service brokers. Also known as advisory brokers, who engage the client through financial advice but leave the final decision making to the client. Discount brokers only execute their clients’ trading commands. If you are going to need advice and live support, make sure that you can afford it and it is a trustworthy company.
How frequent will you trade?
Getting a better rate is easier if you are a frequent trader. On the lower side, some firms are known to demand an inactivity fee for non-frequent traders. However, avoid extreme trading frequencies that may lead to trading addiction.
Ever tried to get help from a company and had to wait for minutes that eventually turned to hours? Sometimes, in online stock trading, one needs almost immediate help and support. Lack of that help may lead to mistakes when executing trade.
Understand your potential broker’s system
As expected, each broker has their own way of dealing with the stock market. Whether it is local or international stocks. While some stock brokers chose to trade via market makers, other firms will offer direct market access
Commission and cost
We are all human; getting attracted by the firm with the lowest commissions and operating costs is a potential weakness. It is sometimes unfortunate that the most affordable brokerage companies have only buying and selling services to offer and sometimes give delayed quotes. As much as you want to be within budget, ensure that you get valuable services from your investment.
The more flexible their service is, the better
When looking for a brokerage firm to work with, take a look to see what other services that they offer. Make sure that all the services you would like to get are within their range of products. Services like tax-advantaged trading platforms like Individual Savings Accounts (ISAs) or Self Invested Personal Pension (SIPPs).
If you plan to execute international trades, you might need an account with multi-currency as an added feature. If the stock broker you are planning to work with offers the service, make sure you are aware of how much they charge every time a client converts currency.
How fast and available is their site?
Imagine yourself (at a time when there is high volatility in the market), trying to refresh the site’s page repeatedly because it is either awfully slow or unavailable. That is a bad enough situation to send a stock trader in a state of panic.
To prevent that, log in to your potential brokerage company a few times during the day. More importantly, try browsing the stock broker’s site during peak hours. Consider their site loading speed and if all their links actually work.
The broker’s reputation
Unless you are the first client in a new brokerage firm (which would be taking the ultimate financial risk), check for information and reviews. Hearing about other investors’ experience regarding your potential broker.
We are not saying you cannot trade through a new brokerage company but age is gold and it applies to brokerage companies too. The more the experience, the more trustworthy the company is. For example, CMC Markets has existed for over two decades now. It is also possible to do a thorough check of previous fraud cases and scandals if the company has existed for a considerable amount of time.
At the end of the day, as the client, you need the best services you can afford to ensure that you achieve your trading goals and get value for your money. Deciding on which broker to use shouldn’t be so hard now!