How To Pick A Stock Broker
The key to any relationship particularly when it comes to
money is choosing someone you can trust. A stock broker is
essentially your agent in charge of your money. The main role
of a stock broker is to provide the investor with timely good
advice on picking the right investment for you and your
A stock broker must be qualified to sell equities. In order
to be certified the stock broker must be educated and pass
state administered tests. Aside from the basic minimum
qualifications a stock broker has a track record in his or her
handling of stock portfolios.
A smart investor will ask the potential stock broker about
his accounts for the past five years. Questions that require
the stock broker candidate to discuss their investment
strategy. What stock picks has he or she made that turned a
profit. What stock picks did not show gains, but losses.
If the stock broker works for a brokerage house and most do,
ask about the clients of the firm.
The stock broker is like any professional you would hire to
perform a service. You are interviewing a candidate who will
not only advise you on stocks and other investments, but
someone who will take your personal welfare above all other
considerations. Have a discussion with several candidates on
the phone. The next step is to come up with a short list and
have a personal meeting with the candidate stock broker.
There are regulations and government entities that regulate
stock brokers in every state. There is arbitration remedies for
damages you may incur if the stock broker has acted negligently
in the handling of your account. These are bottom line
safeguards. You want to pick someone who will never place you
in that position.
In your selection process for a stock broker
keep in mind the following points:
- A referral from a friend for a stock broker is useful,
but not the final word.
- Hiring a friend that is a stock broker can be
problematic if a disagreement occurs.
- From the first contact with the stock broker does
he or she act attentive and return calls.
- Does the candidate stock broker ask you about
your comfort level in investing.
- Does the candidate stock broker provide you with
insight into his or her investment strategy.
- Does the candidate stock broker's investment strategy
coincide with your ideas about investing.
- Ask the stock broker candidate to explain limit orders
and other means of protecting your investment.
Is the candidate stock broker forthright in telling you of
in-house stock portfolios. Many brokerage houses have baskets
of stocks they promote under the firms name. How has the firm's
stock package done over the past four quarters.
When the candidate stock broker is speaking to you does he
or she gloss over information or do you get the impression it
is a sales pitch. Every stock broker is a sales person, but
there are limits in this field.
Finally, never make a decision on the spot. After your
meeting face-to-face go home or back to your office and
consider your choices. Pay particular attention to your gut
reaction after you have left the meeting. Is this someone you
trust to carry out your wishes and provide you with sound
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