Brokerage Firm Evaluation

Deciding on whether to use the services of a broker or not is a difficult step and one that depends on your individual needs. Once you have decided to open an account at a discount brokerage firm, we want you to consider the following measures to see whether you have made the right choice.

1. Trade Commission

   Here is one exception as regards the rule that cheaper is always better. If you pay too low trading commissions you risk not getting the adequate service on the part of the broker. On the other hand, a higher trading commission almost always guarantees you a perfect service. This means that the level of customer service is significantly influenced by the per trade price. You should not pay special attention to the trading commission if you are not concerned about the speed by which your trades are executed or you don't embark on too often stock trading.
2. Additional Fees

   Trading commissions are not the only fees that you will incur when dealing with a broker. Some of the fees that you are likely to be charged are as follows:

   • Transferring assets into account fees
   • Closing account fees
   • Wire transfer fees
   • IRA custodian fees
   • Annual fees
   • Account inactivity fees
   • Fees for not maintaining a minimum balance

   You should make a clear identification of your needs in order to avoid paying fees for services you don't need at all.

3. The amount of the initial deposit

   When opening an account with a discount brokerage firm you will be required to make an initial deposit. This amount is different for every firm. So, you have to make an initial research and choose the brokerage that best meets your financial capabilities.

4. The level of customer service

   The level of customer service should not be underestimated when deciding on a particular broker. If you are considering investing with a discount broker, you should make a careful browse through the website of the discount brokerage and see whether you can get the sufficient amount of information with the minimal amount of effort. You should also check for the speed of the website. Additionally, if you are one of those people for whom the human interaction is of extreme importance, you should check the phone service which the brokerage offers. You should also see for an office of the brokerage and how far it is from your place of residence. Finally, you should check for the way in which you are about to receive all documents and supplementary materials.

5. Banking services provided by the brokerage

   Before you open an account with a particular brokerage, see the banking services that are offered in addition to the main services. Some brokers offer check writing and bill payment possibilities. Additionally, some of them allow for money market sweeps and direct deposits. Others offer visa cards and ATM cards in addition to their main portfolio of offers.

   Generally, the savings accounts in a bank provides for lower interest rates than an account at a brokerage money market.

6. Brokerage market research

   Most brokerages provide their own market researches and they present them as a real plus to their other services. However, this market research should not be the only reason for signing with a brokerage firm, since you can make the market research on your own thanks to the tons of information offered by both online and offline resources.

7. Mutual Fund Implications

   Brokerage firms provide for the availability of many mutual funds in one place. Therefore, they facilitate the work of investors of having to browse through the many mutual funds scattered all around the stock market. However, no load mutual funds can be purchased directly from the mutual fund company, which eliminates the need of a broker. You should be aware of the fact that some brokers may charge you for the purchase of no load mutual fund. You should also be sure that your broker offers the mutual fund family you have selected.

8. Availability of other investment opportunities

   You should not confine yourself to only one or two types of investment. You should see whether the broker offers other investments different from equity mutual funds or stock traded on the major exchanges. You should check whether your broker offers over-the-counter (OTC) bulletin board stocks, if you are willing to take the risk of investing your money in them. You should also check for such investment opportunities as corporate or government bonds, which are not offered by all brokerages. You should clearly identify the type of investment course you want to follow in order to determine the mix of investments you are to construct.

9. Alternative means of trade execution

   You should check whether the brokerage provides for alternative means of executing the daily trades in case the Internet breaks down. You should consider the availability of touch-tone phone trading and its exact functions. What is more, the availability of a real time direct human interaction is sometimes preferred by many investors. If you are one of them, see if the brokerage allows for this type of trade execution.

10. Free money and other bonuses

    Some brokerage firms in their attempt to attract customers offer some free money and other bonuses. Even though they may provide you with additional conveniences, you should not base your choice mainly on such perks and freebies, since you may end up removing your account to another broker.

Final Piece of Advice: The most important factor in choosing a brokerage firm is the level of customer service. You should not pay attention to trading commissions in case you execute small numbers of transactions per year, let's say 5, 6 or 20 trades. What counts is how you are being served!

To get the most out of your money, whether you are interested in mutual funds, stocks, ETFs or options, you need two main things - the knowledge and the right trading platform. As for the trading platform, we can highly recommend you try Zecco and TradeKing.
Zecco offers free stock/etf trading, no account minimum, trading community, real time quotes, and is also protected and insured against loss by SIPC. Opening a Zecco account to take advantage of $0 stock trades allows you to save money, which you can reinvest instead of paying brokerage commissions. These fees can make really big difference for long-term investing options like retirement plans (Traditional IRA, Roth IRA, Rollover IRA - 401k).
TradeKing has been ranked #1 Discount Broker by the annual US broker survey of SmartMoney (the Wall Street Journal Magazine). It has been also awarded the highest ranking in Barron's annual survey of Best Browser-Based Online Brokers. Take advantage of the award winning platform features by opening a TradeKing account and get $50.

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