Stockbroking is one of the many professionals that the modern world economics has churned out thanks to the new entrants of investors that are willing to try their hand in putting their money in stocks.
Human nature, as we all naturally know, are usually inclined to want the best value for anything in exchange for the cheapest price or the slightest effort. But then this tendency or mentality is not usually guaranteed to work in the stock market.
In fact, it is not even appropriate, to say the least. And this is the reason most investment professionals will confirm to you that newbie entrants in the stock market ( who are likely to apply the same tactic here ) are better off working with a stockbroker than burning their hard-earned money in the stock market.
The truth is that succeeding in the stock market takes study, effort, thought and undivided dedication. The sad reality is that most people – especially beginners – not only have limited financial skills but also don’t have the time for studying the complexities that surrounding trading stocks.
For instance, even before contemplating investing in a company, it is recommended that you go through annual reports meticulously, something that can be quite a chore to most people. That’s the reason stockbroking companies and individuals that like those listed in CMC Markets exist.
This also implies that finding a stockbroker is not exactly hard, but how do you choose the best among a pool of dozens if not hundreds? Well, here are some tips.
1. What are your investments goals?
The first step towards landing a good stockbroker is determining/identifying the type of stockbroking services that you are looking for. The reason here being different brokers usually offer varying types of services.
There are those that specialise in long-term investing and then there are those that are more versed in short-term financial planning and investor education. That means that you need to know what you want even before you start looking for a stockbroker.
2. Full-service firms vs. discount
Here, discount brokers are simply those that specialise in making security purchases and selling these at a lower commission. These types of brokers will typically offer very little or no advice to you at all.
On the other hand, full-service brokers prefer to work with a client one-on-one taking them along in their investment strategy and offering extensive financial advice on the same. In return, you will have to shell out more for this type of service.
3. Referral from colleagues and friends
One of the best tricks of landing a good, reliable stockbroker is asking for a referral from a trusted friend or relative who is already in the business. Chances are, they must have worked with a couple before finally settling for that one.
4. Interview a couple of them before settling for one
Invite all prospective brokers or meet them in their offices and inquire about their strategies and philosophies. This way, you can learn more about how their handle their clients and the type of training that they have undergone before placing your money on the stockmarket with them.
Additionally, you can ask each of them to give you a detailed report of the designation and any special training that they may have undergone in the course of their career. This will help you a lot in zeroing into one or two favourable candidates that you can work with.
5. Discuss the compensation
Stockbroking is not free. Before hiring any stockbroker, ensure that you have a rough idea of the nature of their fees structures and minimum purchase requirements that their demand from their clients. In similar tandem, also ask about any form of special commission that they can secure on your behalf for certain types of mutual funds.
6. Client-stockbroker relationship
How often does your prospective stockbroker check in with their client? If you are the type of client who would wish to leave everything in the hands of the stockbroker and only check in once or twice a month, then don’t hire a broker who prefers to call up their client and strategize at the end of every trading session.
The reverse is also true. This will help you save a lot of time in future by avoiding unnecessary conflict of interest as far as constant communication goes.