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Six Tips For Choosing A Brokerage And Opening Account

Six Tips For Choosing A Brokerage And Opening Account 

Here are some tips to help you choose a brokerage and open an account.

Full service or discount: If you have more than $500,000, you may want to consider a full service brokerage (Merrill Lynch, Goldman Sachs, Morgan Stanley, etc.) where the fees (relative to your transaction size) won’t be a problem and where you can get more professional help to manage your portfolio. Otherwise, you are likely to be more comfortable at a discount brokerage (Charles Schwab, Fidelity Investments, TD Ameritrade, etc.) where the fees are much lower and they generally won’t help you choose individual investments. You can get the benefit of professional advice at a discount brokerage by investing only in mutual funds—which are professionally managed. 

Location: Once you’ve decided whether to go with the full service broker or the discount broker, you may wish to let convenience be a guiding factor. Although all of the firms operate on the internet and offer toll-free numbers, there are some things that are more comfortably done sitting in the office.

Customer Service: Before opening the account, consider tasting the customer service by visiting the office or calling the toll-free number. They will never be more kind and patient than when you are opening a new account. If they aren’t kind enough to meet your standards, move along. 

Pricing: The most common pricing element will be the price of one stock transaction. At the discount brokers that ranges from about $6 to $2It may not be an important issue for you. If you take my advice and invest exclusively in mutual funds or ETFs that you can buy without paying a commission, the most important thing will the length of the list of funds you can buy without a commission. Look for the longest list of funds you can access without commissions.

Opening the Account: You can do it all on-line. If you are under 30, you probably can’t imagine doing it any other way. Go right ahead. I like to think I’m a web savvy guy (I publish five blogs, have three twitter accounts, two Facebook pages, etc.) and I would do this in the office. You’re likely to have questions and the people at the office will answer you in real time, help you complete the forms and get your account up and running. 

Funding the Account: You can generally connect your brokerage account to your bank account so that you can simply transfer money back and forth (for free with a two-day settlement). Let me encourage you to make that a one way street—cash goes into the brokerage account to stay until retirement. 

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Charles Schwab Goldman Sachs Merrill Lynch Morgan Stanley TD Ameritrade

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