By Geoff Hafer, Spring 2017 Student Intern
You are about to open your first brokerage account. “Let’s make some money,” you think to yourself. As you are about to put pen to paper, several questions race through your mind. Did I pick the right broker? Who will be managing my account? Do I really know all the fees associated with my account? Am I picking the right account type for my needs? Did I ask the right questions? In this five-part series “Opening your first Brokerage Account”, I will address each of these questions in turn and hopefully better prepare you as an investor to come to the table confident and prepared.
So let’s begin first with the question, “Did I pick the right broker?” This is perhaps the most important question every investor must answer particularly young investors new to the game. Remember, a brokerage firm is a company that acts as the middleman between the investing public and actual investments. With brokerage accounts, you can buy and sell stocks, bonds, mutual funds, exchange-traded funds and other investment products. Traditional “full-service” brokers do more than just facilitate the buying and selling of a stock or bond. These brokers tend to offer a wide variety of services and products, including financial and retirement planning, investing and tax advice and regular portfolio updates. Discount or online brokerages on the other hand, will generally not offer investment advice and you can enter your trades yourself, wire money in and out of the account, access tax documents, and more or less go at it alone. The main difference between a “full service” broker and a “discount” broker is the level of hands- on contact they offer to clients. Ultimately, when it comes to choosing a brokerage, it really comes down to your personal needs and preferences, weighing the costs versus the benefits of each broker, and carefully comparing the level of services and features offered.
Whether you go with a “full service” broker or a “discount” broker make sure you check out their background before you open an account with them. Look up your broker and firm on FINRA Brokercheck by going to www.finra.org/Brokercheck. Checking out your broker in advance can help you make more of an informed decision.