Things to Look Out for Before Hiring A Broker!


When hiring a broker, there are many important things that you should consider and look out for. Here are just a few examples.

1. Is there a minimum balance for starting an account with the broker?

Some brokerages require clients to open an account with a minimum amount of money. This might be anywhere from $500-$1,000. It is important that you understand any of these conditions before doing business with a broker.

2. How difficult will it be to withdraw your money?

Before handing your money over to a broker, you should be aware of how easy or difficult it will be to withdraw your funds. Some brokers require a fee for withdrawing money or won’t let you take out any money that will cause your balance to drop below the account minimum.

3. How much experience does the broker have?

Another important question to consider when hiring a broker is how experienced he or she is. While the number of years the broker has under the belt is important, it is also important to know what kind of experience he or she has. Has the broker primarily worked with clients who have the goals as you or would he or she take you down a road you might not be comfortable with?

4. What is the broker’s track record?

If you know of anyone who has used the broker, inquire to them about his or her track record. Ask the reference about the broker’s overall philosophy as well as about his or her appetite for risk (or lack thereof.) Also be sure to check with regulatory agencies to be sure that the broker has operated in a legal and ethical fashion and has not been fined or reprimanded by any of the regulatory agencies.

5. What designations does the broker hold?

There are many designations a broker could obtain. It is important to be familiar with what designation a broker has, as well as what the designation means. Some of the more common designations include: Certified Financial Planner (CFP)-CFPs must complete at least 18-24 months study, pass an examination and work three years as a financial advisor or complete a two year apprenticeship with another CFP. Chartered Financial Analyst (CFA)-To become a CFA, brokers must pass three six-hour exams and have four years of experience.

6. What is the broker’s fee structure?

When selecting a broker, it is important that you understand how, and how much, he or she will be paid. Will the broker work by the hour or receive a commission? A combination of the two? Something much more complicated? Ask all of the right questions and make sure you understand how the fees work before deciding to work with a broker.

7. Is the brokerage considered “full-service” or “discount”?

The distinction between a full service brokerage and a discount brokerage is important. A full service brokerage offers many more services, such as research and one-on-one advice, than discount brokerages do. Naturally, you can expect to pay more for the assistance of a full service broker. A discount brokerage offers much less in terms of service, but is also much less expensive.

Leave a Reply