Discount brokers act as an intermediary between you and a more prominent broker, so be sure to check them out more thoroughly before signing up. They’re usually cheaper and only execute your trading instructions once you’ve done the research. So you have to make all of your own decisions, although you may be able to seek advice from a broker for a fee.
- Shop and get recommendations
Look around and compare brokers and get referrals from people you trust so you don’t hire the first broker you find. When given a pick list of companies – or options – see if the broker’s style and service would suit you.
You must be able to get on with your broker and understand the advice received, but the broker should also be fully licensed by local regulators and registered (either individually or through their firm) with the securities authority.
You’ll also want to look at the types of services the broker is offering – and find out the cost of each. The “order takers” are cheaper, but only offer a barebone trading service and nothing else. The full service brokers may cost more, but they will regularly send you research notes or have websites full of information.
- Check costs carefully
Many investors only focus on the commission cost that brokers can charge for each trade. However, stockbrokers can charge a wide variety of fees that can get quite complex. Hence, it is hard to know what you are paying for, especially when dealing with a discount broker. Some may promise low prices but then charge high currency conversation costs or excessive account management fees. Check what interest rates your broker can charge on accounts and whether there are any fees for withdrawals. Also, be sure to read the fine print in account agreements and fee schedules so you know the various rules you may need to adhere to and what other fees you may have to pay – such as custody fees or fees for transferring funds, transferring assets, or closing accounts .