How to choose a stock broker
First off understand the difference between a stock broker and an FSP. The former is an exchange member and gets protection and regulations from the exchange. An FSP is regulated by the FSCA (formerly the FSB) interview with Charles Savage on how this works.
It is very important that they are registered with a regulatory body. Even an offshore regulatory body is fine, but only if it is in a country in which you trust the laws. Avoid fly-by-nights registered in some second rate dodge country.
Also understand potential fees.
- Brokerage. What you pay when you transact, also check if there is a minimum brokerage rate.
- Admin fee charged monthly, quarterly or annually. Some brokers will waive this fee if certain number or value of trades is meet.
- Live prices / charts. Some brokers give limited live prices and above that you'll pay.
- Charting package. Many will have a 'lite' version included in admin fee with more advanced at additional cost.
Then what services do you want from your broker (using broker as generic term)?
- No or very few frills. Just buying and selling functionality. No; stop loss facility, live prices, data, detailed research etc. Should be cheapest.
- Frills for which you will incur higher fees (transaction and admin). Here's you'll likely get limited live prices, limit and @market orders, online charting, event invites, research and share data. This is the space most online brokers sit and the range of fees is wide so shop around.
- Trading broker. Offering derivatives (CFD, futures & FX), live charts (at an extra fee). These are often stand along brokers but in some cases coupled with traditional online brokers.
- Full service. This will include 'help' from the broker as to what you're buying selling. Here they'll usually want a large portfolio to make it worth their time.
- Managed portfolio which the broker manages your portfolio within the mandate you set for them. They have full discretion as to what to buy or sell and again they'll want a large portfolio to make it worth their time.
- Collective investment such as ETF or unit trust. You buy into the fund and they manage the money within the mandate, active (with different methodologies) or passive (again with different methodologies).
Do your research. Google the broker for reviews, check online forums and social media for complaints or praise. Ask others who they use and what they like / dislike about the broker. Take a trail to check out the user interface (if offered).
And before you all ask me, I use Standard OST and have done for almost 15 years. Not the cheapest but they meet all my needs.
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